Document:

exv10w17

 

Exhibit 10.17

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

 

Table of Contents

	 	 	 	 	 
	Article	 	 	 	Page
	I
	 	Classes of Business Reinsured	 	  1
	II
	 	Commencement and Termination	 	  1
	III
	 	Territory (BRMA 51A)	 	  3
	IV
	 	Exclusions	 	  3
	V
	 	Special Acceptances	 	  7
	VI
	 	Retention and Limit	 	  7
	VII
	 	Definitions	 	  8
	VIII
	 	Annuities at Company’s Option	 	10
	IX
	 	Claims	 	11
	X
	 	Commutation	 	11
	XI
	 	Special Commutation	 	12
	XII
	 	Salvage and Subrogation	 	14
	XIII
	 	Reinsurance Premium	 	14
	XIV
	 	Late Payments	 	14
	XV
	 	Offset (BRMA 36A)	 	16
	XVI
	 	Access to Records (BRMA 1D)	 	16
	XVII
	 	Liability of the Reinsurer	 	16
	XVIII
	 	Net Retained Lines (BRMA 32E)	 	16
	XIX
	 	Errors and Omissions (BRMA 14F)	 	16
	XX
	 	Currency (BRMA 12A)	 	17
	XXI
	 	Taxes (BRMA 50B)	 	17
	XXII
	 	Federal Excise Tax	 	17
	XXIII
	 	Reserves and Letters of Credit	 	17
	XXIV
	 	Insolvency	 	19
	XXV
	 	Arbitration (BRMA 6J)	 	19
	XXVI
	 	Service of Suit (BRMA 49C)	 	20
	XXVII
	 	Entire Agreement	 	21
	XXVIII
	 	Governing Law (BRMA 71B)	 	21
	XXIX
	 	Agency Agreement	 	21
	XXX
	 	Intermediary (BRMA 23A)	 	21

 

 

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the

Interests and Liabilities Agreement(s)

Attached Hereto

(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the
Company under its policies, contracts and binders of insurance or reinsurance (hereinafter called
“policies”) in force at the effective date hereof or issued or renewed on or after that date, and
classified by the Company as Workers’ Compensation, Employers Liability, including coverage
provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and
General Liability business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

	A.	 	This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006,
with respect to losses arising out of occurrences commencing at or after that time and date,
and shall continue in force thereafter until terminated.

	B.	 	Either party may terminate this Contract at 12:01 a.m., Local Standard Time, on any January 1
by giving the other party not less than 90 days prior notice by certified or registered mail.

Page 1

 

	C.	 	Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing
Reinsurer’s percentage share in this Contract in the event any of the following circumstances
occur as clarified by public announcement for subparagraphs 1 through 6 below and upon
discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of
applicable public announcement or discovery to exercise the option to terminate a Subscribing
Reinsurer’s percentage share in this Contract. The effective date of special termination
shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice
of its election to specially terminate, unless mutually agreed otherwise:

	 	1.	 	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract
year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that
date; or
	 
	 	2.	 	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract
year has been reduced by more than 20.0% of the amount of surplus at the date of the
Subscribing Reinsurer’s most recent financial statement filed with regulatory authorities
and available to the public as of the beginning of the contract year; or
	 
	 	3.	 	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded
below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been
assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
	 
	 	4.	 	The Subscribing Reinsurer has become merged with, acquired by or controlled by any
other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s
operations previously; or
	 
	 	5.	 	A State Insurance Department or other legal authority has ordered the Subscribing
Reinsurer to cease writing business; or
	 
	 	6.	 	The Subscribing Reinsurer has become insolvent or has been placed into liquidation
or receivership (whether voluntary or involuntary) or proceedings have been instituted
against the Subscribing Reinsurer for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	7.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract
without the Company’s prior written consent; or
	 
	 	8.	 	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance
business.

	D.	 	Unless the Company elects that the Reinsurer have no liability for losses arising out of
occurrences commencing after the effective date of termination, and so notifies the Reinsurer
prior to or as promptly as possible after the effective date of termination, reinsurance
hereunder on business in force on the effective date of termination shall remain in full force
and effect until expiration, cancellation or next premium anniversary of such business,
whichever first occurs, but in no event beyond 12 months plus odd time (not exceeding 18
months in all) following the effective date of termination.

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Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s
policies.

Article IV — Exclusions

	A.	 	This Contract does not apply to and specifically excludes the following:

	 	1.	 	Lines of business not identified in the Classes of Business Reinsured Article.
	 
	 	2.	 	All excess of loss reinsurance assumed by the Company.
	 
	 	3.	 	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

	 	a.	 	Agency reinsurance where the policies involved are to be reunderwritten
in accordance with the underwriting standards of the Company and reissued as Company
policies at the next anniversary or expiration date; and
	 
	 	b.	 	Intercompany reinsurance between any of the reinsured companies under
this Contract.

	 	4.	 	Business written by the Company on a co-indemnity basis where the Company is not
the controlling carrier.
	 
	 	5.	 	Business written to apply in excess of a deductible of more than $25,000, and
business issued to apply specifically in excess over underlying insurance. However, if
the Company is required, by any state regulation, to provide a deductible of more than
$25,000, this exclusion shall not apply.
	 
	 	6.	 	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability -
Reinsurance (U.S.A.)” attached to and forming part of this Contract.
	 
	 	7.	 	As regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection,
military or usurped power, or martial law or confiscation by order of any government or
public authority. This War Exclusion Clause shall not, however, apply to interests which
at time of loss or damage are within the territorial limits of the United States of
America (comprising the Fifty States of the Union, the District of Columbia, and
including bridges between the United States of America and Mexico provided they are under
United States ownership), Canada, St. Pierre and Miquelon, provided such interests are
insured under policies containing a standard war or hostilities or warlike operations
exclusion clause.
	 
	 	8.	 	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or
Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.

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	 	9.	 	All liability of the Company arising by contract, operation of law, or otherwise,
from its participation or membership, whether voluntary or involuntary, in any insolvency
fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool,
association, fund or other arrangement, however denominated, established or governed,
which provides for any assessment of or payment or assumption by the Company of part or
all of any claim, debt, charge, fee or other obligation of an insurer, or its successors
or assigns, which has been declared by any competent authority to be insolvent, or which
is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in
whole or in part.
	 
	 	10.	 	Workers’ Compensation where the principal exposures, as defined by the governing
class code, include:

	 	a.	 	Operation of aircraft, but only if the annual estimated policy premium is
$250,000 or more;
	 
	 	b.	 	Railroad, subway or street railway operations;
	 
	 	c.	 	Operation or navigation of vessels or barges;
	 
	 	d.	 	Manufacture, production or refining of gas, natural or artificial fuel,
or other liquefied petroleum fuel, but only if the annual estimated policy premium
is $250,000 or more;
	 
	 	e.	 	Manufacturing, assembly, packing or processing of fireworks, fuses,
nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does
not apply to the assembly, packing or processing of explosives when the estimated
annual premium is under $250,000;
	 
	 	f.	 	Wrecking or demolition of structures, but only if the annual estimated
policy premium is $250,000 or more;
	 
	 	g.	 	Underground mining.

	 	11.	 	As respects Workers’ Compensation and Employers Liability only, unless otherwise
excluded as set forth above, the reinsurance provided under this Contract shall not apply
to any loss, cost or expense arising out of or related to, either directly or indirectly,
any “terrorist activity,” as defined herein, but this exclusion shall only apply when the
activity includes, involves or is associated with the use of any biological, chemical,
radioactive or nuclear agent, material, device or weapon, or when the predominant business
of the policyholder, as defined by the governing class code, is:

	 	a.	 	The operation of: airports and aircraft; flight schools; bridges, dams,
tunnels or locks; department stores; shopping malls; chain retail stores; casinos
and casino hotels; cruise lines; railroads; ports/public transit authorities;
security services; stadiums; convention/exhibition centers; or theme/amusement
parks;
	 
	 	b.	 	The manufacture and distribution of: automobiles; chemicals,
petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major
defense/aerospace products; or high-tech equipment, but only if the policyholder

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	 	 	 	employs more than 20 personnel at the location of a terrorist activity at the time
of its occurrence;
	 
	 	c.	 	The management or operation of the following type of structures, but only
if greater than 25 stories in height: apartments/condominiums/co-ops;
hotels/motels; or office buildings;
	 
	 	d.	 	Businesses primarily engaged in the entertainment, media or
transportation industry limited to the following: major media providers (NBC, FOX,
ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major
internet companies (AOL, Yahoo, etc.); professional sports teams; major
telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental
companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common
carriers (J.B. Hunt, Red Arrow, etc.);
	 
	 	e.	 	Policyholders primarily located in, or predominantly doing business as:
hospitals; universities; nuclear facilities; financial institutions; or governmental
buildings and national landmarks.

	 	 	 	“Terrorist activity” shall mean any deliberate, unlawful act that:

	 	a.	 	Is declared by any authorized government official to be or to involve
terrorism, terrorist activity or acts of terrorism; or
	 
	 	b.	 	Includes, involves, or is associated with the use or threatened use of
force, violence or harm against any person, tangible or intangible property, the
environment, or any natural resources, where the act or threatened act is intended,
in whole or in part, to:

	 	i.	 	Promote or further any political, ideological, philosophical,
racial, ethnic, social or religious cause or objective of the perpetrator or
any organization, association or group affiliated with the perpetrator; or
	 
	 	ii.	 	Influence, disrupt or interfere with any government related
operations, activities or policies; or
	 
	 	iii.	 	Intimidate, coerce or frighten the general public or any segment of
the general public; or
	 
	 	iv.	 	Disrupt or interfere with a national economy or any segment of a
national economy; or

	 	c.	 	Includes, involves, or is associated with, in whole or in part, any of
the following activities, or the threat thereof:

	 	i.	 	Hijacking or sabotage of any form of transportation or
conveyance, including but not limited to spacecraft, satellite, aircraft,
train, vessel or motor vehicle;
	 
	 	ii.	 	Hostage taking or kidnapping;
	 
	 	iii.	 	The use of any bomb, incendiary device, explosive or firearm;

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	 	iv.	 	The interference with or disruption of basic public or commercial
services and systems, including but not limited to the following
services or systems: electricity, natural gas, power, postal,
communications, telecommunications, information, public
transportation, water, fuel, sewer or waste disposal;
	 
	 	v.	 	The injuring or assassination of any elected or appointed
government official or any government employee;
	 
	 	vi.	 	The seizure, blockage, interference with, disruption of, or
damage to any government buildings, institutions, functions, events, tangible
or intangible property or other assets; or
	 
	 	vii.	 	The seizure, blockage, interference with, disruption of, or
damage to tunnels, roads, streets, highways, or other places of public
transportation or conveyance.

	 	d.	 	Any of the activities listed in subparagraph c, above, shall be
considered terrorist activity, except where the Company can demonstrate to the
Reinsurer that the foregoing activities or threats thereof were motivated solely by
personal objectives of the perpetrator that are unrelated, in whole or in part, to
any intention to:

	 	i.	 	Promote or further any political, ideological, philosophical,
racial, ethnic, social or religious cause or objective of the perpetrator or
any organization, association or group affiliated with the perpetrator;
	 
	 	ii.	 	Influence, disrupt or interfere with any government-related
operations, activities or policies;
	 
	 	iii.	 	Intimidate, coerce or frighten the general public or any segment of
the general public; or
	 
	 	iv.	 	Disrupt or interfere with a national economy or any segment of a
national economy.

	 	12.	 	As respects General Liability policies, exposures, other than those identified below,
as included in the General Liability section of the Company’s Commercial Lines Manual:

	 	a.	 	Class 97111 — Logging;
	 
	 	b.	 	Class 58873 — Sawmill;
	 
	 	c.	 	Class 59984 — Woodyard and Drivers;
	 
	 	d.	 	Class 95410 — Grading of Land;
	 
	 	e.	 	Class 45819 — Lumber Yard;
	 
	 	f.	 	Class 10073 — Repair Shops and Drivers;

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	 	g.	 	Class 43822 — Timber Cruiser;
	 
	 	h.	 	Class 99793 — Truckmen Not Otherwise Classified;
	 
	 	i.	 	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
	 
	 	j.	 	Class 49452 — Vacant Land.

	B.	 	Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived
automatically when, in the opinion of the Company, the exposure excluded therein is incidental
to the principal exposure on the risk in question.

	C.	 	If the Company is bound, without the knowledge and contrary to the instructions of the
Company’s supervisory underwriting personnel, on any business falling within the scope of one
or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the
exclusion shall be suspended with respect to such business until the Company has the first
opportunity to cancel the policy in compliance with governmental requirements.

	D.	 	If the Company is required to accept an assigned risk which conflicts with one or more of the
exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for
the difference between the Company’s retention and the minimum limit required by the
applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set
forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside
the scope of the provisions set forth in this Contract. If each Subscribing Reinsurer whose share
in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special
acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to
their respective shares. If such agreement is not achieved, such special acceptance shall be made
to this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer
who agrees to the special acceptance. In the event a reinsurer becomes a party to this Contract
subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically
accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

	A.	 	The Company shall retain and be liable for the first $1,000,000 of ultimate net loss
arising out of each occurrence. The Reinsurer shall then be liable (subject to the provisions
of paragraph B below) for the amount by which such ultimate net loss exceeds the Company’s
retention, but the liability of the Reinsurer shall not exceed $1,000,000 as respects any one
occurrence, nor shall it exceed an annual aggregate limit of 2.500% of net earned premium for
the contract year.

	B.	 	Notwithstanding the provisions of paragraph A above, no claim shall be made under this
Contract during any contract year unless and until cumulative subject excess losses paid from
losses arising out of occurrences commencing during the contract year (being losses which
would be recoverable from the Reinsurer under paragraph A above were it not for the

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	 	 	provisions of this paragraph) exceed an annual aggregate retention of 5.000% of net earned
premium. The Company shall retain and be liable for such annual aggregate retention in
addition to its initial loss retention stipulated in paragraph A above.

	C.	 	As respects any loss or losses arising out of terrorist activity, the liability of the
Reinsurer shall not exceed $1,000,000 each contract year. Terrorism losses that apply to the
annual aggregate deductible will also reduce the liability of the Reinsurer as respects the
aggregate terrorism limit.

	D.	 	The Company shall be permitted to carry quota share and excess reinsurance, recoveries under
which shall inure solely to the benefit of the Company and be entirely disregarded in applying
all of the provisions of this Contract.

	E.	 	The Company shall purchase or be deemed to have purchased inuring excess facultative
reinsurance to limit its ultimate net loss under any one coverage, any one policy (exclusive
of loss in excess of policy limits or extra contractual obligations) to $2,000,000 each
occurrence as respects General Liability and Employers Liability business subject hereto.

	F.	 	The Company shall be permitted to carry excess of loss reinsurance applying to Workers’
Compensation risks in the State of Minnesota, recoveries under which shall inure to the
benefit of this Contract.
	 
	 	 	Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance
Association. It is understood that the liability of the Reinsurer for Minnesota Workers’
Compensation risks is not released.
	 
	 	 	In the event the Company accrues liability that is not provided by any inuring reinsurance, for
whatever reason, the Reinsurer agrees to reinsure such excess liability.

Article VII — Definitions

	A.	 	“Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess
of policy limits, extra contractual obligations and any loss adjustment expense, as
hereinafter defined) paid or payable by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after deduction of all salvage,
all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not.
Nothing herein shall be construed to mean that losses under this Contract are not recoverable
until the Company’s ultimate net loss has been ascertained.

	B.	 	“Loss in excess of policy limits” and “extra contractual obligations” as used herein shall be
defined as follows:

	 	1.	 	“Loss in excess of policy limits” shall mean 90.0% of any amount paid or payable by
the Company in excess of its policy limits, but otherwise within the terms of its policy,
such loss in excess of the Company’s policy limits having been incurred because of, but
not limited to, failure by the Company to settle within the policy limits or by reason of
the Company’s alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of an action against its
insured or reinsured or in the preparation or prosecution of an appeal consequent upon
such an action.

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	 	2.	 	“Extra contractual obligations” shall mean 90.0% of any punitive, exemplary,
compensatory or consequential damages paid or payable by the Company, not covered by any
other provision of this Contract and which arise from the handling of any claim on
business subject to this Contract, such liabilities arising because of, but not limited
to, failure by the Company to settle within the policy limits or by reason of the
Company’s alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action against its
insured or reinsured or in the preparation or prosecution of an appeal consequent upon
such an action. An extra contractual obligation shall be deemed, in all circumstances,
to have occurred on the same date as the loss covered or alleged to be covered under the
policy.

	 	 	If any provision of this Article shall be rendered illegal or unenforceable by the laws,
regulations or public policy of any state, such provision shall be considered void in such
state, but this shall not affect the validity or enforceability of any other provision of this
Contract or the enforceability of such provision in any other jurisdiction.
	 
	 	 	Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess of
policy limits or any extra contractual obligation incurred by the Company as a result of any
fraudulent and/or criminal act by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any claim covered hereunder.

	C.	 	“Occurrence” as used herein is defined as an accident or occurrence or a series of accidents
or occurrences arising out of or caused by one event, except that:

	 	1.	 	As respects General Liability policies where the Company’s limit of liability for
Products and Completed Operations coverages is determined on the basis of the insured’s
aggregate losses during a policy period, all such losses proceeding from or traceable to
the same causative agency shall, at the Company’s option, be deemed to have been caused
by one occurrence commencing at the beginning of the policy period, it being understood
and agreed that each renewal or annual anniversary date of the policy involved shall be
deemed the beginning of a new policy period;
	 
	 	2.	 	Each occupational or industrial disease case or cumulative trauma case contracted
by an employee of an insured shall be deemed to have been caused by a separate
occurrence, commencing on:

	 	a.	 	The date of disability for which compensation is payable if the case is
compensable under the Workers’ Compensation Law;
	 
	 	b.	 	The date disability due to the disease actually began if the case is not
compensable under the Workers’ Compensation Law;
	 
	 	c.	 	The date of cessation of employment if claim is made after employment has
ceased.

	 	3.	 	Notwithstanding the provisions of subparagraph 2 above, as respects losses
resulting from occupational or industrial disease or cumulative trauma suffered by
employees of

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	 	 	 	an insured for which the employer is liable, as a result of a sudden and accidental event
not exceeding 72 hours in duration, all such losses shall be considered one occurrence
and may be combined with losses classified as other than occupational or industrial
disease or cumulative trauma which arise out of the same event and the combination of
such losses shall be considered as one occurrence within the meaning hereof.

	D.	 	“Occupational or industrial disease” is any abnormal condition that fulfills all of the
following conditions:

	 	1.	 	It is not traceable to a definite compensable accident occurring during the
employee’s past or present employment.
	 
	 	2.	 	It has been caused by exposure to a disease producing agent or agents present in
the workers’ occupational environment.
	 
	 	3.	 	It has resulted in disability or death.

	E.	 	“Cumulative trauma” is an injury that fulfills all of the following conditions:

	 	1.	 	It is not traceable to a definite compensable accident occurring during the
employee’s past or present employment.
	 
	 	2.	 	It has occurred from and has been aggravated by a repetitive employment related
activity.
	 
	 	3.	 	It has resulted in disability or death.

	F.	 	“Loss adjustment expense” as used herein shall mean expenses allocable to the investigation,
defense and/or settlement of specific claims, including litigation expenses, interest on
judgments, declaratory judgment expenses or other legal expenses and costs incurred in
connection with coverage questions and legal actions connected thereto, and salaries and
expenses of salaried adjusters associated with claims covered under policies of the Company
reinsured hereunder but not including office expenses or salaries of the Company’s regular
employees.

	G.	 	“Contract year” as used in this Contract shall mean the period from January 1, 2006 to
December 31, 2006, both days inclusive, and each respective 12-month period thereafter that
this Contract continues in force. However, if this Contract is terminated, the final contract
year shall be from the beginning of the then current contract year through the date of
termination if this Contract is terminated on a “cutoff” basis, or the end of the runoff
period if this Contract is terminated on a “runoff” basis.

Article VIII — Annuities at Company’s Option

	A.	 	Whenever the Company is required, or elects, to purchase an annuity or to negotiate a
structured settlement, either in satisfaction of a judgment or in an out-of-court settlement
or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall
be deemed part of the Company’s ultimate net loss.

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	B.	 	The terms “annuity” or “structured settlement” shall be understood to mean any insurance
policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a
lump sum by the Company in settlement of any or all future liabilities which may attach to it
as a result of an occurrence.

	C.	 	In the event the Company purchases an annuity which inures in whole or in part to the benefit
of the Reinsurer, it is understood that the liability of the Reinsurer is not released
thereby. In the event the Company is required to provide benefits not provided by the annuity
for whatever reason, the Reinsurer shall pay its share of any loss.

Article IX — Claims

	A.	 	Whenever a claim is reserved by the Company for an amount greater than 50.0% of its
retention hereunder and/or whenever a claim appears likely to result in a claim under this
Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the
Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage,
brain damage, blindness or extensive burns, regardless of liability, if the policy limits or
statutory benefits applicable to the claim are greater than the Company’s retention hereunder.
The Reinsurer shall have the right to participate, at its own expense, in the defense of any
claim or suit or proceeding involving this reinsurance.

	B.	 	All claim settlements made by the Company, provided they are within the terms of this
Contract (including but not limited to ex-gratia payments), shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt
of satisfactory evidence of the amount paid by the Company.

Article X — Commutation

	A.	 	Upon mutual agreement, the Company may commute the contract year.

	B.	 	Unless otherwise mutually agreed, the calculation for the commutation shall be calculated in
accordance with the following formula:

	 	1.	 	The net reinsurance premium earned (i.e., the gross reinsurance premium earned less
the ceding commission allowed) for the contract year; less
	 
	 	2.	 	The Reinsurer’s paid losses and loss adjustment expense on losses arising out of
occurrences commencing during the contract year; less
	 
	 	3.	 	The Reinsurer’s margin at 25.0% of the net reinsurance premium earned (i.e., the
gross reinsurance premium earned less the ceding commission allowed) for the contract
year; equals
	 
	 	4.	 	The Company’s net profit.

	C.	 	Payment to the Company of the Company’s net profit will result in a full and final
commutation of all known and unknown losses and shall constitute a complete and final release
of the Reinsurer and the Company in respect of any and all liabilities on business covered
under this Contract during the contract year commuted.

Page 11

 

	D.	 	Should the calculation be zero or negative, no payment shall be made and the Company shall
have the option to provide a full and final commutation of all known and unknown losses, which
shall constitute a complete and final release of the Reinsurer and the Company with respect to
any and all liabilities on business covered under this Contract during the contract year
commuted.

Article XI — Special Commutation

	A.	 	In the event a Subscribing Reinsurer meets the following conditions, the Company may
require a commutation of that portion of any excess loss hereunder represented by any
outstanding claim or claims, including any related loss adjustment expense.

	 	1.	 	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded
below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been
assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
	 
	 	2.	 	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty
treaty reinsurance business.

	 	 	“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed
yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply
unless the outstanding claim or claims is for an amount not less than $5,000.

	B.	 	If the Company elects to require commutation as provided in paragraph A above, the Company
shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of
the month immediately preceding the month in which the Company elects to require commutation,
as determined by the Company. Such Statement of Valuation shall include the elements
considered reasonable to establish the excess loss and shall set forth or attach the
information relied upon by the Company and the methodology employed to calculate the excess
loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days
of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional
information from the Company to assess the Company’s Statement of Valuation or contests such
amount.

	C.	 	If the Subscribing Reinsurer needs additional information from the Company to assess the
Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer
shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of
Valuation. The Company shall supply any reasonably requested information to the Subscribing
Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of
the date of the notification or of the receipt of the information, whichever is later, the
Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the
outstanding claim or claims as of the last day of the month immediately preceding the month in
which the Company elects to require commutation, as determined by the Subscribing Reinsurer.
Such Statement of Valuation shall include the elements considered reasonable to establish the
excess loss and shall set forth or attach the information relied upon by the Subscribing
Reinsurer and the methodology employed to calculate the excess loss.

Page 12

 

	D.	 	In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or
claims is viewed as unacceptable to the Company, the Company may either abandon the
commutation effort, or may seek to settle any difference by using an independent actuary
agreed to by the parties.

	E.	 	If the parties cannot agree on an acceptable independent actuary within 15 calendar days of
the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint
an actuary as party arbitrators for the limited and sole purpose of selecting an independent
actuary. If the actuaries cannot agree on an acceptable independent actuary within 15
calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company
shall supply the Subscribing Reinsurer with a list of at least three proposed independent
actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.

	F.	 	Upon selection of the independent actuary, both parties shall present their respective
written submissions to the independent actuary. The independent actuary may, at his or her
discretion, request additional information. The independent actuary shall issue his or her
decision within 45 calendar days after the written submissions have been filed and any
additional information has been provided.

	G.	 	The decision of the independent actuary shall be final and binding. The expense of the
independent actuary shall be equally divided between the two parties. For the purposes of
this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary
who satisfies each of the following criteria:

	 	1.	 	Is regularly engaged in the valuation of claims resulting from lines of business
subject to this Contract; and
	 
	 	2.	 	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of
Actuaries; and
	 
	 	3.	 	Is disinterested and impartial regarding this commutation.

	H.	 	Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no
longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this
commutation may continue on a mutually agreed basis.

	I.	 	Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B,
C or F above, shall release the Subscribing Reinsurer from all further liability for
outstanding claim or claims, known or unknown, under this Contract, which shall release the
Company from all further liability for payments of salvage or subrogation amounts, known or
unknown, to the Subscribing Reinsurer under this Contract.

	J.	 	In the event of any conflict between this Article and any other Article of this Contract, the
terms of this Article shall control.

	K.	 	This Article shall survive the termination of this Contract.

Page 13

 

Article XII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by
the Company, less the actual cost, excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or
subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or
subrogation thereon shall always be used to reimburse the excess carriers in the reverse order of
their priority according to their participation before being used in any way to reimburse the
Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or
subrogation where it is economically reasonable in the judgment of the Company, relating to any
loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out
of such rights.

Article XIII — Reinsurance Premium

	A.	 	As premium for the reinsurance provided hereunder during each contract year, the Company
shall pay the Reinsurer 0.600% of its net earned premium.

	B.	 	Within 30 days after the end of each month, the Company shall report its net earned premium
for the month. The premium due the Reinsurer, at the rate shown in paragraph A, shall be paid
by the Company with its report. In the event this Contract is terminated in accordance with
paragraph C of the Commencement and Termination Article, no payments shall be due as respects
each Subscribing Reinsurer after the effective date of termination.

	C.	 	Within 60 days after the end of each contract year, the Company shall provide a report to the
Reinsurer setting forth the premium due hereunder for the contract year, computed in
accordance with paragraph A, and any additional premium due the Reinsurer or return premium
due the Company shall be remitted promptly.

	D.	 	“Net earned premium” as used herein is defined as the Company’s gross earned premium
collected on the classes of business subject to this Contract, less only the earned portion of
premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this
Contract and less dividends incurred.

Article XIV — Late Payments

	A.	 	The provisions of this Article shall not be implemented unless specifically invoked, in
writing, by one of the parties to this Contract.

	B.	 	In the event any premium, loss or other payment due either party is not received by the
intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the
“Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying
the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to
pay, an interest penalty on the amount past due calculated for each such payment on the last
business day of each month as follows:

	 	1.	 	The number of full days which have expired since the due date or the last monthly
calculation, whichever the lesser; times

Page 14

 

	 	2.	 	1/365ths of the sum of 400 basis points plus the six-month United States Treasury
Bill rate as quoted in The Wall Street Journal on the first business day of the month for
which the calculation is made; times
	 
	 	3.	 	The amount past due, including accrued interest.

	 	 	It is agreed that interest shall accumulate until payment of the original amount due plus
interest penalties have been received by the Intermediary.

	C.	 	The establishment of the due date shall, for purposes of this Article, be determined as
follows:

	 	1.	 	As respects the payment of routine deposits and premiums due the Reinsurer, the due
date shall be as provided for in the applicable section of this Contract. In the event a
due date is not specifically stated for a given payment, it shall be deemed due 30 days
after the date of transmittal by the Intermediary of the initial billing for each such
payment.
	 
	 	2.	 	Any claim or loss payment due the Company hereunder shall be deemed due 45 days
after the proof of loss or demand for payment is transmitted to the Reinsurer. If such
loss or claim payment is not received within the 45 days, interest will accrue on the
payment or amount overdue in accordance with paragraph B above, from the date the proof
of loss or demand for payment was transmitted to the Reinsurer.
	 
	 	3.	 	As respects any payment, adjustment or return due either party not otherwise
provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10 days following
transmittal of written notification that the provisions of this Article have been
invoked.

	 	 	For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon
receipt by the Intermediary.

	D.	 	Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from
contesting the validity of any claim, or from participating in the defense of any claim or
suit, or prohibiting either party from contesting the validity of any payment or from
initiating any arbitration or other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or other proceeding, then any
interest penalties due hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the amount determined to
be due hereunder shall be calculated in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party advances payment of any amount it
is contesting, and proves to be correct in its contestation, either in whole or in part, the
other party shall reimburse the debtor party for any such excess payment made plus interest on
the excess amount calculated in accordance with this Article.

	E.	 	Interest penalties arising out of the application of this Article that are $100 or less from
any party shall be waived unless there is a pattern of late payments consisting of three or
more items over the course of any 12-month period.

Page 15

 

Article XV — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other
under this Contract or any other contract heretofore or hereafter entered into between the Company
and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall
not be affected by the insolvency of either party to this Contract.

Article XVI — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to
all records of the Company which pertain in any way to this reinsurance.

Article XVII — Liability of the Reinsurer

	A.	 	The liability of the Reinsurer shall follow that of the Company in every case and be
subject in all respects to all the general and specific stipulations, clauses, waivers and
modifications of the Company’s policies and any endorsements thereon.

	B.	 	Nothing herein shall in any manner create any obligations or establish any rights against the
Reinsurer in favor of any third party or any persons not parties to this Contract.

Article XVIII — Net Retained Lines (BRMA 32E)

	A.	 	This Contract applies only to that portion of any policy which the Company retains net for
its own account (prior to deduction of any underlying reinsurance specifically permitted in
this Contract), and in calculating the amount of any loss hereunder and also in computing the
amount or amounts in excess of which this Contract attaches, only loss or losses in respect of
that portion of any policy which the Company retains net for its own account shall be
included.

	B.	 	The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not
be increased by reason of the inability of the Company to collect from any other reinsurer(s),
whether specific or general, any amounts which may have become due from such reinsurer(s),
whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XIX — Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or any
transaction hereunder shall not relieve either party from any liability which would have attached
had such delay, error or omission not occurred, provided always that such error or omission is
rectified as soon as possible after discovery.

Page 16

 

Article XX — Currency (BRMA 12A)

	A.	 	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be
construed to mean United States Dollars and all transactions under this Contract shall be in
United States Dollars.

	B.	 	Amounts paid or received by the Company in any other currency shall be converted to United
States Dollars at the rate of exchange at the date such transaction is entered on the books of
the Company.

Article XXI — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim
a deduction in respect of the premium hereon when making tax returns, other than income or profits
tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXII — Federal Excise Tax

	A.	 	The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the
applicable percentage of the premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

	B.	 	In the event of any return of premium becoming due hereunder the Reinsurer will deduct the
applicable percentage from the return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States Government.

Article XXIII — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance
regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated
“B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is
or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

	A.	 	As regards policies or bonds issued by the Company coming within the scope of this Contract,
the Company agrees that when it shall file with the insurance regulatory authority or set up
on its books reserves for losses covered hereunder which it shall be required by law to set
up, it will forward to the Reinsurer a statement showing the proportion of such reserves which
is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect
of known outstanding losses that have been reported to the Reinsurer and allocated loss
adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the
Company but not recovered from the Reinsurer, plus reserves for losses incurred but not
reported, as shown in the statement prepared by the Company (hereinafter referred to as
“Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The
Reinsurer shall have the option of determining the method of funding provided it is acceptable
to the insurance regulatory authorities having

Page 17

 

	 	 	jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should
the Reinsurer be downgraded, the method of funding shall be mutually agreed.

	B.	 	When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely
delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a
bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of
Credit and containing provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of
said reserves. Such Letter of Credit shall be issued for a period of not less than one year,
and shall contain an “evergreen” clause, which automatically extends the term for one year
from its date of expiration or any future expiration date unless 30 days (60 days where
required by insurance regulatory authorities) prior to any expiration date the issuing bank
shall notify the Company by certified or registered mail that the issuing bank elects not to
consider the Letter of Credit extended for any additional period.

	C.	 	The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant
to the provisions of this Contract may be drawn upon at any time, notwithstanding any other
provision of this Contract, and be utilized by the Company or any successor, by operation of
law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or
conservator of the Company for the following purposes, unless otherwise provided for in a
separate Trust Agreement:

	 	1.	 	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is
due under the terms of this Contract and which has not been otherwise paid;
	 
	 	2.	 	To make refund of any sum which is in excess of the actual amount required to pay
the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
	 
	 	3.	 	To fund an account with the Company for the Reinsurer’s Obligations. Such cash
deposit shall be held in an interest bearing account separate from the Company’s other
assets, and interest thereon not in excess of the prime rate shall accrue to the benefit
of the Reinsurer;
	 
	 	4.	 	To pay the Reinsurer’s share of any other amounts the Company claims are due under
this Contract.

	 	 	In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual
amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the actual amount
determined to be due, the Company shall promptly return to the Reinsurer the excess amount so
drawn. All of the foregoing shall be applied without diminution because of insolvency on the
part of the Company or the Reinsurer.

	D.	 	The issuing bank shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives of the
Company.

	E.	 	At annual intervals, or more frequently as agreed but never more frequently than quarterly,
the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole
purpose of amending the Letter of Credit, in the following manner:

Page 18

 

	 	1.	 	If the statement shows that the Reinsurer’s Obligations exceed the balance of
credit as of the statement date, the Reinsurer shall, within 30 days after receipt of
notice of such excess, secure delivery to the Company of an amendment to the Letter of
Credit increasing the amount of credit by the amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Reinsurer’s Obligations are less than the
balance of credit as of the statement date, the Company shall, within 30 days after
receipt of written request from the Reinsurer, release such excess credit by agreeing to
secure an amendment to the Letter of Credit reducing the amount of credit available by
the amount of such excess credit.

Article XXIV — Insolvency

	A.	 	In the event of the insolvency of one or more of the reinsured companies, this reinsurance
shall be payable directly to the company or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of the company without diminution because of
the insolvency of the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of the company
shall give written notice to the Reinsurer of the pendency of a claim against the company
indicating the policy or bond reinsured which claim would involve a possible liability on the
part of the Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem available to
the company or its liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against
the company as part of the expense of conservation or liquidation to the extent of a pro rata
share of the benefit which may accrue to the company solely as a result of the defense
undertaken by the Reinsurer.

	B.	 	Where two or more reinsurers are involved in the same claim and a majority in interest elect
to interpose defense to such claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been incurred by the company.

	C.	 	It is further understood and agreed that, in the event of the insolvency of one or more of
the reinsured companies, the reinsurance under this Contract shall be payable directly by the
Reinsurer to the company or to its liquidator, receiver or statutory successor, except as
provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the event of the insolvency of the
company or (2) where the Reinsurer with the consent of the direct insured or insureds has
assumed such policy obligations of the company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the company to such
payees.

Article XXV — Arbitration (BRMA 6J)

	A.	 	As a condition precedent to any right of action hereunder, in the event of any dispute or
difference of opinion hereafter arising with respect to this Contract, it is hereby mutually

Page 19

 

	 	 	agreed that such dispute or difference of opinion shall be submitted to arbitration. One
Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active or
retired disinterested executive officers of insurance or reinsurance companies or Lloyd’s
London Underwriters. In the event that either party should fail to choose an Arbiter within 30
days following a written request by the other party to do so, the requesting party may choose
two Arbiters who shall in turn choose an Umpire before entering upon arbitration. If the two
Arbiters fail to agree upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of
whom the other shall decline, and the decision shall be made by drawing lots.

	B.	 	Each party shall present its case to the Arbiters within 30 days following the date of
appointment of the Umpire. The Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they are relieved of all judicial
formalities and may abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree, they shall call in
the Umpire and the decision of the majority shall be final and binding upon both parties.
Judgment upon the final decision of the Arbiters may be entered in any court of competent
jurisdiction.

	C.	 	If more than one reinsurer is involved in the same dispute, all such reinsurers shall
constitute and act as one party for purposes of this Article and communications shall be made
by the Company to each of the reinsurers constituting one party, provided, however, that
nothing herein shall impair the rights of such reinsurers to assert several, rather than
joint, defenses or claims, nor be construed as changing the liability of the reinsurers
participating under the terms of this Contract from several to joint.

	D.	 	Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with
the other the expense of the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire
and the arbitration shall be equally divided between the two parties.

	E.	 	Any arbitration proceedings shall take place at a location mutually agreed upon by the
parties to this Contract, but notwithstanding the location of the arbitration, all proceedings
pursuant hereto shall be governed by the law of the state in which the Company has its
principal office.

Article XXVI — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not
authorized in any State, Territory or District of the United States where authorization is required
by insurance regulatory authorities)

	A.	 	It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due
hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States. Nothing in this Article constitutes
or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action
in any court of competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court as permitted by the
laws of the United States or of any state in the United States.

Page 20

 

	B.	 	Further, pursuant to any statute of any state, territory or district of the United States
which makes provision therefor, the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named therein, the Superintendent,
Commissioner or Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract.

Article XXVII — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect
to the business being reinsured hereunder, and there are no understandings between the parties
hereto other than as expressed in this Contract. Any change or modification to this Contract will
be made by amendment to this Contract and signed by the parties.

Article XXVIII — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of
Louisiana.

Article XXIX — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named
company shall be deemed the agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any party.

Article XXX — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all
business hereunder. All communications (including but not limited to notices, statements, premium,
return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements)
relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc.
Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer.
Payments by the Reinsurer to the Intermediary shall be deemed to

Page 21

 

constitute payment to the Company only to the extent that such payments are actually received by
the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as
of the date undermentioned at:

DeRidder,
Louisiana, this
   day of
 
in the year  .

	 	 	 
	 
	 

	 	 
	 

	 	American Interstate Insurance Company
	 

	 	American Interstate Insurance Company of Texas
	 

	 	Silver Oak Casualty, Inc.

Page 22

 

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)

(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

	(1)	 	This reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.

	(2)	 	Without in any way restricting the operation of paragraph (1) of this Clause it is understood
and agreed that for all purposes of this reinsurance all the original policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II of this
paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):
	 
	 	 	Limited Exclusion Provision.*

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to

          (injury, sickness, disease, death or destruction

          (bodily injury or property damage

with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be
an insured under any such policy but for its termination upon
exhaustion of its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or
policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated
above, such as the Comprehensive Dwelling Policy and the applicable
types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Limited Exclusion
Provision set out above;

	 	 	 	provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special
Automobile Policies, or policies or combination policies of a similar nature, issued by
the Reassured on New York risks, until 90 days following approval of the Limited Exclusion
Provision by the Governmental Authority having jurisdiction thereof.

	(3)	 	Except for those classes of policies specified in Clause II of paragraph (2) and without in
any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed
that for all purposes of this reinsurance the original liability policies of the Reassured
(new, renewal and replacement) affording the following coverages:

	 	 	 	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners
or Contractors (including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle
or Garage Liability)

	 	 	shall be deemed to include, with respect to such coverages, from the time specified in Clause V
of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

	 	 	Broad Exclusion Provision.*
	 
	 	 	It is agreed that the policy does not apply:

	 	I.	 	Under any Liability Coverage to

          (injury, sickness, disease, death or destruction

          (bodily injury or property damage

	 	(a)	 	with respect to which an insured under the policy is also an insured under
a nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this policy not been issued would be, entitled to
indemnity from the United States of America, or any agency thereof, under any
agreement entered into by the United States of America, or any agency thereof, with
any person or organization.

 

 

	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to

          (immediate medical or surgical relief

          (first aid,

to expenses incurred with respect to

          (bodily injury, sickness, disease or death

          (bodily injury

resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any
person or organization.
	 
	 	III.	 	Under any Liability Coverage to

          (injury, sickness, disease, death or destruction

          (bodily injury or property damage

resulting from the hazardous properties of nuclear material, if

	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or operated
by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
	 
	 	(b)	 	the nuclear material is contained in spent fuel or waste at any time
possessed, handled, used, processed, stored, transported or disposed of by or on
behalf of an insured; or
	 
	 	(c)	 	the

          (injury, sickness, disease, death or destruction

          (bodily injury or property damage

arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the
United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to

          (injury to or destruction of property at such nuclear facility

          (property damage to such nuclear facility and any property thereat.

	 	IV.	 	As used in this endorsement:

“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material,
special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material”
have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means
any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of
any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear
facility” means

	 	(a)	 	any nuclear reactor,
	 
	 	(b)	 	any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling
processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste, and includes the site on which any of the foregoing
is located, all operations conducted on such site and all premises used for such
operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material;

(With respect to injury to or destruction of property, the word “injury”
or “destruction,”

(“property damage” includes all forms of radioactive contamination of property,

(includes all forms of radioactive contamination of property.

	 	V.	 	The inception dates and thereafter of all original policies affording coverages
specified in this paragraph (3), whether new, renewal or replacement, being policies
which become effective on or after 1st May, 1960, provided this paragraph (3) shall not
be applicable to

	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New
York risks, or
	 
	 	(ii)	 	statutory liability insurance required under Chapter 90,
General Laws of Massachusetts, until 90 days following approval of the Broad
Exclusion Provision by the Governmental Authority having jurisdiction thereof.

	(4)	 	Without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that paragraphs (2) and (3) above are not applicable to original
liability policies of the Reassured in Canada and that with respect to such policies this
Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by
the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

 

			
	*NOTE. 	The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion
Provision shall apply only in relation to original liability policies which include a Limited
Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67

N.M.A. 1590

 

 

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

	 	 	 
	Reinsurers	Participations
	Hannover Ruckversicherungs-Aktiengesellschaft
	 	25.0%
	 
	 	 
	Through Benfield Limited
	 	 
	Lloyd’s Underwriters and Companies
Per Signing Schedule(s)
	 	50.0
	 
	 	 
	Total
	 	75.0% part of
	 
	 	100% share in the
	 
	 	interests and
	 
	 	liabilities of the
	 
	 	“Reinsurer”

 

 

Interests and Liabilities Agreement

of

Hannover Ruckversicherungs-Aktiengesellschaft

Hannover, Germany

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 25.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the
attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed
this Agreement as of the date undermentioned at:

Hannover, Germany, this
   day of
 
in the year  .

	 	 	 
	 
	 

	 	 
	 

	 	Hannover Ruckversicherungs-Aktiengesellschaft

 

 

Interests and Liabilities Agreement

of

Certain Insurance Companies

shown in the Signing Schedule(s) attached hereto

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the
attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

 

 

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s

shown in the Signing Schedule attached hereto

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.exv10w18

 

Exhibit 10.18

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

 

 

Table of Contents

	 	 	 	 	 	 	 
	Article	 	 	 	Page
	I

	 	Classes of Business Reinsured
	 	 	1	 
	II

	 	Commencement and Termination
	 	 	1	 
	III

	 	Territory (BRMA 51A)
	 	 	3	 
	IV

	 	Exclusions
	 	 	3	 
	V

	 	Special Acceptances
	 	 	7	 
	VI

	 	Retention and Limit
	 	 	8	 
	VII

	 	Definitions
	 	 	9	 
	VIII

	 	Annuities at Company’s Option
	 	 	11	 
	IX

	 	Claims
	 	 	11	 
	X

	 	Commutation
	 	 	12	 
	XI

	 	Special Commutation
	 	 	12	 
	XII

	 	Salvage and Subrogation
	 	 	14	 
	XIII

	 	Reinsurance Premium
	 	 	15	 
	XIV

	 	Late Payments
	 	 	15	 
	XV

	 	Offset (BRMA 36A)
	 	 	17	 
	XVI

	 	Access to Records (BRMA 1D)
	 	 	17	 
	XVII

	 	Liability of the Reinsurer
	 	 	17	 
	XVIII

	 	Net Retained Lines (BRMA 32E)
	 	 	17	 
	XIX

	 	Errors and Omissions (BRMA 14F)
	 	 	18	 
	XX

	 	Currency (BRMA 12A)
	 	 	18	 
	XXI

	 	Taxes (BRMA 50B)
	 	 	18	 
	XXII

	 	Federal Excise Tax
	 	 	18	 
	XXIII

	 	Reserves and Letters of Credit
	 	 	18	 
	XXIV

	 	Insolvency
	 	 	20	 
	XXV

	 	Arbitration (BRMA 6J)
	 	 	21	 
	XXVI

	 	Service of Suit (BRMA 49C)
	 	 	22	 
	XXVII

	 	Entire Agreement
	 	 	22	 
	XXVIII

	 	Governing Law (BRMA 71B)
	 	 	23	 
	XXIX

	 	Agency Agreement
	 	 	23	 
	XXX

	 	Intermediary (BRMA 23A)
	 	 	23	 

 

 

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the

Interests and Liabilities Agreement(s)

Attached Hereto

(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the
Company under its policies, contracts and binders of insurance or reinsurance (hereinafter called
“policies”) in force at the effective date hereof or issued or renewed on or after that date, and
classified by the Company as Workers’ Compensation, Employers Liability, including coverage
provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and
General Liability business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

	A.	 	This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006,
with respect to losses arising out of occurrences commencing at or after that time and date,
and shall continue in force thereafter until terminated.

Page 1

 

	B.	 	Either party may terminate this Contract at 12:01 a.m., Local Standard Time, on any January 1
by giving the other party not less than 90 days prior notice by certified or registered mail.

	C.	 	Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing
Reinsurer’s percentage share in this Contract in the event any of the following circumstances
occur as clarified by public announcement for subparagraphs 1 through 6 below and upon
discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of
applicable public announcement or discovery to exercise the option to terminate a Subscribing
Reinsurer’s percentage share in this Contract. The effective date of special termination
shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice
of its election to specially terminate, unless mutually agreed otherwise:

	 	1.	 	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract
year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that
date; or
	 
	 	2.	 	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract
year has been reduced by more than 20.0% of the amount of surplus at the date of the
Subscribing Reinsurer’s most recent financial statement filed with regulatory authorities
and available to the public as of the beginning of the contract year; or
	 
	 	3.	 	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded
below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been
assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
	 
	 	4.	 	The Subscribing Reinsurer has become merged with, acquired by or controlled by any
other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s
operations previously; or
	 
	 	5.	 	A State Insurance Department or other legal authority has ordered the Subscribing
Reinsurer to cease writing business; or
	 
	 	6.	 	The Subscribing Reinsurer has become insolvent or has been placed into liquidation
or receivership (whether voluntary or involuntary) or proceedings have been instituted
against the Subscribing Reinsurer for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	7.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract
without the Company’s prior written consent; or
	 
	 	8.	 	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance
business.

	D.	 	Unless the Company elects that the Reinsurer have no liability for losses arising out of
occurrences commencing after the effective date of termination, and so notifies the

Page 2

 

	 	 	Reinsurer prior to or as promptly as possible after the effective date of termination,
reinsurance hereunder on business in force on the effective date of termination shall remain in
full force and effect until expiration, cancellation or next premium anniversary of such
business, whichever first occurs, but in no event beyond 12 months plus odd time (not exceeding
18 months in all) following the effective date of termination.

Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s
policies.

Article IV — Exclusions

	A.	 	This Contract does not apply to and specifically excludes the following:

	 	1.	 	Lines of business not identified in the Classes of Business Reinsured Article.
	 
	 	2.	 	All excess of loss reinsurance assumed by the Company.
	 
	 	3.	 	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

	 	a.	 	Agency reinsurance where the policies involved are to be reunderwritten
in accordance with the underwriting standards of the Company and reissued as Company
policies at the next anniversary or expiration date; and
	 
	 	b.	 	Intercompany reinsurance between any of the reinsured companies under
this Contract.

	 	4.	 	Business written by the Company on a co-indemnity basis where the Company is not
the controlling carrier.
	 
	 	5.	 	Business written to apply in excess of a deductible of more than $25,000, and
business issued to apply specifically in excess over underlying insurance. However, if
the Company is required, by any state regulation, to provide a deductible of more than
$25,000, this exclusion shall not apply.
	 
	 	6.	 	Nuclear risks as defined in the “Nuclear Incident
Exclusion Clause — Liability — Reinsurance (U.S.A.)” attached to and forming part of this Contract.
	 
	 	7.	 	As regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection,
military or usurped power, or martial law or confiscation by order of any government or
public authority. This War Exclusion Clause shall not, however, apply to interests which
at time of loss or damage are within the territorial limits of the United States of
America (comprising the Fifty States of the Union, the District of Columbia, and
including bridges between

Page 3

 

	 	 	 	the United States of America and Mexico provided they are under United States ownership),
Canada, St. Pierre and Miquelon, provided such interests are insured under policies
containing a standard war or hostilities or warlike operations exclusion clause.

	 	8.	 	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or
Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.
	 
	 	9.	 	All liability of the Company arising by contract, operation of law, or otherwise,
from its participation or membership, whether voluntary or involuntary, in any insolvency
fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool,
association, fund or other arrangement, however denominated, established or governed,
which provides for any assessment of or payment or assumption by the Company of part or
all of any claim, debt, charge, fee or other obligation of an insurer, or its successors
or assigns, which has been declared by any competent authority to be insolvent, or which
is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in
whole or in part.
	 
	 	10.	 	Workers’ Compensation where the principal exposures, as defined by the governing
class code, include:

	 	a.	 	Operation of aircraft, but only if the annual estimated policy premium is
$250,000 or more;
	 
	 	b.	 	Railroad, subway or street railway operations;
	 
	 	c.	 	Operation or navigation of vessels or barges;
	 
	 	d.	 	Manufacture, production or refining of gas, natural or artificial fuel,
or other liquefied petroleum fuel, but only if the annual estimated policy premium
is $250,000 or more;
	 
	 	e.	 	Manufacturing, assembly, packing or processing of fireworks, fuses,
nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does
not apply to the assembly, packing or processing of explosives when the estimated
annual premium is under $250,000;
	 
	 	f.	 	Wrecking or demolition of structures, but only if the annual estimated
policy premium is $250,000 or more;
	 
	 	g.	 	Underground mining.

	 	11.	 	As respects Workers’ Compensation and Employers Liability only, unless otherwise
excluded as set forth above, the reinsurance provided under this Contract shall not apply
to any loss, cost or expense arising out of or related to, either directly or indirectly,
any “terrorist activity,” as defined herein, but this exclusion shall only apply when the
activity includes, involves or is associated with the use of any biological,

Page 4

 

	 	 	 	chemical, radioactive or nuclear agent, material, device or weapon, or when the
predominant business of the policyholder, as defined by the governing class code, is:

	 	a.	 	The operation of: airports and aircraft; flight schools; bridges, dams,
tunnels or locks; department stores; shopping malls; chain retail stores; casinos
and casino hotels; cruise lines; railroads; ports/public transit authorities;
security services; stadiums; convention/exhibition centers; or theme/amusement
parks;
	 
	 	b.	 	The manufacture and distribution of: automobiles; chemicals,
petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major
defense/aerospace products; or high-tech equipment, but only if the policyholder
employs more than 20 personnel at the location of a terrorist activity at the time
of its occurrence;
	 
	 	c.	 	The management or operation of the following type of structures, but only
if greater than 25 stories in height: apartments/condominiums/co-ops;
hotels/motels; or office buildings;
	 
	 	d.	 	Businesses primarily engaged in the entertainment, media or
transportation industry limited to the following: major media providers (NBC, FOX,
ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major
internet companies (AOL, Yahoo, etc.); professional sports teams; major
telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental
companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common
carriers (J.B. Hunt, Red Arrow, etc.);
	 
	 	e.	 	Policyholders primarily located in, or predominantly doing business as:
hospitals; universities; nuclear facilities; financial institutions; or governmental
buildings and national landmarks.

	 	“Terrorist activity” shall mean any deliberate, unlawful act that:

	 	a.	 	Is declared by any authorized government official to be or to involve
terrorism, terrorist activity or acts of terrorism; or
	 
	 	b.	 	Includes, involves, or is associated with the use or threatened use of
force, violence or harm against any person, tangible or intangible property, the
environment, or any natural resources, where the act or threatened act is intended,
in whole or in part, to:

	 	i.	 	Promote or further any political, ideological, philosophical,
racial, ethnic, social or religious cause or objective of the perpetrator or
any organization, association or group affiliated with the perpetrator; or
	 
	 	ii.	 	Influence, disrupt or interfere with any government related
operations, activities or policies; or

Page 5

 

	 	iii.	 	Intimidate, coerce or frighten the general public or any segment of
the general public; or
	 
	 	iv.	 	Disrupt or interfere with a national economy or any segment of a
national economy; or

	 	c.	 	Includes, involves, or is associated with, in whole or in part, any of
the following activities, or the threat thereof:

	 	i.	 	Hijacking or sabotage of any form of transportation or
conveyance, including but not limited to spacecraft, satellite, aircraft,
train, vessel or motor vehicle;
	 
	 	ii.	 	Hostage taking or kidnapping;
	 
	 	iii.	 	The use of any bomb, incendiary device, explosive or firearm;
	 
	 	iv.	 	The interference with or disruption of basic public or commercial
services and systems, including but not limited to the following
services or systems: electricity, natural gas, power, postal,
communications, telecommunications, information, public
transportation, water, fuel, sewer or waste disposal;
	 
	 	v.	 	The injuring or assassination of any elected or appointed
government official or any government employee;
	 
	 	vi.	 	The seizure, blockage, interference with, disruption of, or
damage to any government buildings, institutions, functions, events, tangible
or intangible property or other assets; or
	 
	 	vii.	 	The seizure, blockage, interference with, disruption of, or
damage to tunnels, roads, streets, highways, or other places of public
transportation or conveyance.

	 	d.	 	Any of the activities listed in subparagraph c, above, shall be
considered terrorist activity, except where the Company can demonstrate to the
Reinsurer that the foregoing activities or threats thereof were motivated solely by
personal objectives of the perpetrator that are unrelated, in whole or in part, to
any intention to:

	 	i.	 	Promote or further any political, ideological, philosophical,
racial, ethnic, social or religious cause or objective of the perpetrator or
any organization, association or group affiliated with the perpetrator;
	 
	 	ii.	 	Influence, disrupt or interfere with any government-related
operations, activities or policies;
	 
	 	iii.	 	Intimidate, coerce or frighten the general public or any segment of
the general public; or

Page 6

 

	 	iv.	 	Disrupt or interfere with a national economy or any segment of a
national economy.

	 	12.	 	As respects General Liability policies, exposures, other than those identified below,
as included in the General Liability section of the Company’s Commercial Lines Manual:

	 	a.	 	Class 97111 — Logging;
	 
	 	b.	 	Class 58873 — Sawmill;
	 
	 	c.	 	Class 59984 — Woodyard and Drivers;
	 
	 	d.	 	Class 95410 — Grading of Land;
	 
	 	e.	 	Class 45819 — Lumber Yard;
	 
	 	f.	 	Class 10073 — Repair Shops and Drivers;
	 
	 	g.	 	Class 43822 — Timber Cruiser;
	 
	 	h.	 	Class 99793 — Truckmen Not Otherwise Classified;
	 
	 	i.	 	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
	 
	 	j.	 	Class 49452 — Vacant Land.

	B.	 	Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived
automatically when, in the opinion of the Company, the exposure excluded therein is incidental
to the principal exposure on the risk in question.

	C.	 	If the Company is bound, without the knowledge and contrary to the instructions of the
Company’s supervisory underwriting personnel, on any business falling within the scope of one
or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the
exclusion shall be suspended with respect to such business until the Company has the first
opportunity to cancel the policy in compliance with governmental requirements.

	D.	 	If the Company is required to accept an assigned risk which conflicts with one or more of the
exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for
the difference between the Company’s retention and the minimum limit required by the
applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set
forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside
the scope of the provisions set forth in this Contract. If each Subscribing Reinsurer whose share
in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special

Page 7

 

acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to
their respective shares. If such agreement is not achieved, such special acceptance shall be made
to this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer
who agrees to the special acceptance. In the event a reinsurer becomes a party to this Contract
subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically
accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

	A.	 	The Company shall retain and be liable for the first $2,000,000 of ultimate net loss
arising out of each occurrence. The Reinsurer shall then be liable (subject to the provisions
of paragraph B below) for the amount by which such ultimate net loss exceeds the Company’s
retention, but the liability of the Reinsurer shall not exceed $3,000,000 as respects any one
occurrence, nor shall the liability of the Reinsurer exceed $39,000,000 in all for the
contract year.

	B.	 	Notwithstanding the provisions of paragraph A above, no claim shall be made under this
Contract during any contract year unless and until cumulative subject excess losses paid from
losses arising out of occurrences commencing during the contract year (being losses which
would be recoverable from the Reinsurer under paragraph A above were it not for the provisions
of this paragraph) exceed an annual aggregate retention of 2.500% of net earned premium. The
Company shall retain and be liable for such annual aggregate retention in addition to its
initial loss retention stipulated in paragraph A above.

	C.	 	As respects any loss or losses arising out of terrorist activity, the liability of the
Reinsurer shall not exceed $3,000,000 each contract year. Terrorism losses that apply to the
annual aggregate deductible will also reduce the liability of the Reinsurer as respects the
aggregate terrorism limit.

	D.	 	The Company shall be permitted to carry quota share and excess reinsurance, recoveries under
which shall inure solely to the benefit of the Company and be entirely disregarded in applying
all of the provisions of this Contract.

	E.	 	The Company shall purchase or be deemed to have purchased inuring excess facultative
reinsurance to limit its ultimate net loss under any one coverage, any one policy (exclusive
of loss in excess of policy limits or extra contractual obligations) to $2,000,000 each
occurrence as respects General Liability and Employers Liability business subject hereto.

	F.	 	The Company shall be permitted to carry excess of loss reinsurance applying to Workers’
Compensation risks in the State of Minnesota, recoveries under which shall inure to the
benefit of this Contract.
Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance
Association. It is understood that the liability of the Reinsurer for Minnesota Workers’
Compensation risks is not released.

	 
	 	 	Such coverage shall be provided through the Minnesota
Workers’ Compensation Reinsurance Association. It is understood
that the liability of the Reinsurer for Minnesota Workers’
Compensation risks is not released.

Page 8

 

	 	 	In the event the Company accrues liability that is not provided by any inuring reinsurance, for
whatever reason, the Reinsurer agrees to reinsure such excess liability.

Article VII — Definitions

	A.	 	“Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess
of policy limits, extra contractual obligations and any loss adjustment expense, as
hereinafter defined) paid or payable by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after deduction of all salvage,
all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not.
Nothing herein shall be construed to mean that losses under this Contract are not recoverable
until the Company’s ultimate net loss has been ascertained.

	B.	 	“Loss in excess of policy limits” and “extra contractual obligations” as used herein shall be
defined as follows:

	 	1.	 	“Loss in excess of policy limits” shall mean 90.0% of any amount paid or payable by
the Company in excess of its policy limits, but otherwise within the terms of its policy,
such loss in excess of the Company’s policy limits having been incurred because of, but
not limited to, failure by the Company to settle within the policy limits or by reason of
the Company’s alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of an action against its
insured or reinsured or in the preparation or prosecution of an appeal consequent upon
such an action.
	 
	 	2.	 	“Extra contractual obligations” shall mean 90.0% of any punitive, exemplary,
compensatory or consequential damages paid or payable by the Company, not covered by any
other provision of this Contract and which arise from the handling of any claim on
business subject to this Contract, such liabilities arising because of, but not limited
to, failure by the Company to settle within the policy limits or by reason of the
Company’s alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action against its
insured or reinsured or in the preparation or prosecution of an appeal consequent upon
such an action. An extra contractual obligation shall be deemed, in all circumstances,
to have occurred on the same date as the loss covered or alleged to be covered under the
policy.

	 	 	 	If any provision of this Article shall be rendered illegal or unenforceable by the laws,
regulations or public policy of any state, such provision shall be considered void in such
state, but this shall not affect the validity or enforceability of any other provision of this
Contract or the enforceability of such provision in any other jurisdiction.
	 
	 	 	 	Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess of
policy limits or any extra contractual obligation incurred by the Company as a result of any
fraudulent and/or criminal act by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any other

Page 9

 

	 	 	 	organization or party involved in the presentation, defense or settlement of any claim covered
hereunder.

	C.	 	“Occurrence” as used herein is defined as an accident or occurrence or a series of accidents
or occurrences arising out of or caused by one event, except that:

	 	1.	 	As respects General Liability policies where the Company’s limit of liability for
Products and Completed Operations coverages is determined on the basis of the insured’s
aggregate losses during a policy period, all such losses proceeding from or traceable to
the same causative agency shall, at the Company’s option, be deemed to have been caused
by one occurrence commencing at the beginning of the policy period, it being understood
and agreed that each renewal or annual anniversary date of the policy involved shall be
deemed the beginning of a new policy period;

	 	2.	 	Each occupational or industrial disease case or cumulative trauma case contracted
by an employee of an insured shall be deemed to have been caused by a separate
occurrence, commencing on:

	 	a.	 	The date of disability for which compensation is payable if the case is
compensable under the Workers’ Compensation Law;
	 
	 	b.	 	The date disability due to the disease actually began if the case is not
compensable under the Workers’ Compensation Law;
	 
	 	c.	 	The date of cessation of employment if claim is made after employment has
ceased.

	 	3.	 	Notwithstanding the provisions of subparagraph 2 above, as respects losses
resulting from occupational or industrial disease or cumulative trauma suffered by
employees of an insured for which the employer is liable, as a result of a sudden and
accidental event not exceeding 72 hours in duration, all such losses shall be considered
one occurrence and may be combined with losses classified as other than occupational or
industrial disease or cumulative trauma which arise out of the same event and the
combination of such losses shall be considered as one occurrence within the meaning
hereof.

	D.	 	“Occupational or industrial disease” is any abnormal condition that fulfills all of the
following conditions:

	 	1.	 	It is not traceable to a definite compensable accident occurring during the
employee’s past or present employment.
	 
	 	2.	 	It has been caused by exposure to a disease producing agent or agents present in
the workers’ occupational environment.
	 
	 	3.	 	It has resulted in disability or death.

	E.	 	“Cumulative trauma” is an injury that fulfills all of the following conditions:

Page 10

 

	 	1.	 	It is not traceable to a definite compensable accident occurring during the
employee’s past or present employment.
	 
	 	2.	 	It has occurred from and has been aggravated by a repetitive employment related
activity.
	 
	 	3.	 	It has resulted in disability or death.

	F.	 	“Loss adjustment expense” as used herein shall mean expenses allocable to the investigation,
defense and/or settlement of specific claims, including litigation expenses, interest on
judgments, declaratory judgment expenses or other legal expenses and costs incurred in
connection with coverage questions and legal actions connected thereto, and salaries and
expenses of salaried adjusters associated with claims covered under policies of the Company
reinsured hereunder but not including office expenses or salaries of the Company’s regular
employees.

	G.	 	“Contract year” as used in this Contract shall mean the period from January 1, 2006 to
December 31, 2006, both days inclusive, and each respective 12-month period thereafter that
this Contract continues in force. However, if this Contract is terminated, the final contract
year shall be from the beginning of the then current contract year through the date of
termination if this Contract is terminated on a “cutoff” basis, or the end of the runoff
period if this Contract is terminated on a “runoff” basis.

Article VIII — Annuities at Company’s Option

	A.	 	Whenever the Company is required, or elects, to purchase an annuity or to negotiate a
structured settlement, either in satisfaction of a judgment or in an out-of-court settlement
or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall
be deemed part of the Company’s ultimate net loss.

	B.	 	The terms “annuity” or “structured settlement” shall be understood to mean any insurance
policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a
lump sum by the Company in settlement of any or all future liabilities which may attach to it
as a result of an occurrence.

	C.	 	In the event the Company purchases an annuity which inures in whole or in part to the benefit
of the Reinsurer, it is understood that the liability of the Reinsurer is not released
thereby. In the event the Company is required to provide benefits not provided by the annuity
for whatever reason, the Reinsurer shall pay its share of any loss.

Article IX — Claims

	A.	 	Whenever a claim is reserved by the Company for an amount greater than 50.0% of its
retention hereunder and/or whenever a claim appears likely to result in a claim under this
Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the

Page 11

 

	 	 	Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage,
brain damage, blindness or extensive burns, regardless of liability, if the policy limits or
statutory benefits applicable to the claim are greater than the Company’s retention hereunder.
The Reinsurer shall have the right to participate, at its own expense, in the defense of any
claim or suit or proceeding involving this reinsurance.

	B.	 	All claim settlements made by the Company, provided they are within the terms of this
Contract (including but not limited to ex-gratia payments), shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt
of satisfactory evidence of the amount paid by the Company.

Article X — Commutation

	A.	 	Upon mutual agreement, the Company may commute the contract year.
	 
	B.	 	Unless otherwise mutually agreed, the calculation for the commutation shall be calculated in
accordance with the following formula:

	 	1.	 	The net reinsurance premium earned (i.e., the gross reinsurance premium earned less
the ceding commission allowed) for the contract year; less
	 
	 	2.	 	The Reinsurer’s paid losses and loss adjustment expense on losses arising out of
occurrences commencing during the contract year; less
	 
	 	3.	 	The Reinsurer’s margin at 25.0% of the net reinsurance premium earned (i.e., the
gross reinsurance premium earned less the ceding commission allowed) for the contract
year; equals
	 
	 	4.	 	The Company’s net profit.

	C.	 	Payment to the Company of the Company’s net profit will result in a full and final
commutation of all known and unknown losses and shall constitute a complete and final release
of the Reinsurer and the Company in respect of any and all liabilities on business covered
under this Contract during the contract year commuted.

	D.	 	Should the calculation be zero or negative, no payment shall be made and the Company shall
have the option to provide a full and final commutation of all known and unknown losses, which
shall constitute a complete and final release of the Reinsurer and the Company with respect to
any and all liabilities on business covered under this Contract during the contract year
commuted.

Article XI — Special Commutation

	A.	 	In the event a Subscribing Reinsurer meets the following conditions, the Company may
require a commutation of that portion of any excess loss hereunder represented by any
outstanding claim or claims, including any related loss adjustment expense.

Page 12

 

	 	1.	 	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded
below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been
assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
	 
	 	2.	 	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty
treaty reinsurance business.

	 	“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed
yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply
unless the outstanding claim or claims is for an amount not less than $5,000.

	B.	 	If the Company elects to require commutation as provided in paragraph A above, the Company
shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of
the month immediately preceding the month in which the Company elects to require commutation,
as determined by the Company. Such Statement of Valuation shall include the elements
considered reasonable to establish the excess loss and shall set forth or attach the
information relied upon by the Company and the methodology employed to calculate the excess
loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days
of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional
information from the Company to assess the Company’s Statement of Valuation or contests such
amount.

	C.	 	If the Subscribing Reinsurer needs additional information from the Company to assess the
Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer
shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of
Valuation. The Company shall supply any reasonably requested information to the Subscribing
Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of
the date of the notification or of the receipt of the information, whichever is later, the
Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the
outstanding claim or claims as of the last day of the month immediately preceding the month in
which the Company elects to require commutation, as determined by the Subscribing Reinsurer.
Such Statement of Valuation shall include the elements considered reasonable to establish the
excess loss and shall set forth or attach the information relied upon by the Subscribing
Reinsurer and the methodology employed to calculate the excess loss.

	D.	 	In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or
claims is viewed as unacceptable to the Company, the Company may either abandon the
commutation effort, or may seek to settle any difference by using an independent actuary
agreed to by the parties.

	E.	 	If the parties cannot agree on an acceptable independent actuary within 15 calendar days of
the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint
an actuary as party arbitrators for the limited and sole purpose of selecting an independent
actuary. If the actuaries cannot agree on an acceptable independent actuary within 15
calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company
shall supply the Subscribing Reinsurer with a list of at least three proposed

Page 13

 

	 	 	independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from
that list.

	F.	 	Upon selection of the independent actuary, both parties shall present their respective
written submissions to the independent actuary. The independent actuary may, at his or her
discretion, request additional information. The independent actuary shall issue his or her
decision within 45 calendar days after the written submissions have been filed and any
additional information has been provided.

	G.	 	The decision of the independent actuary shall be final and binding. The expense of the
independent actuary shall be equally divided between the two parties. For the purposes of
this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary
who satisfies each of the following criteria:

	 	1.	 	Is regularly engaged in the valuation of claims resulting from lines of business
subject to this Contract; and
	 
	 	2.	 	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of
Actuaries; and
	 
	 	3.	 	Is disinterested and impartial regarding this commutation.

	H.	 	Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no
longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this
commutation may continue on a mutually agreed basis.

	I.	 	Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B,
C or F above, shall release the Subscribing Reinsurer from all further liability for
outstanding claim or claims, known or unknown, under this Contract, which shall release the
Company from all further liability for payments of salvage or subrogation amounts, known or
unknown, to the Subscribing Reinsurer under this Contract.

	J.	 	In the event of any conflict between this Article and any other Article of this Contract, the
terms of this Article shall control.

	K.	 	This Article shall not apply to a Subscribing Reinsurer which is rated “A+” or better by A.M.
Best at the beginning of any Contract year.

	L.	 	This Article shall survive the termination of this Contract.

Article XII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by
the Company, less the actual cost, excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or
subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or
subrogation thereon shall always be used to reimburse the excess

Page 14

 

carriers in the reverse order of their priority according to their participation before being used
in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its
rights to salvage or subrogation where it is economically reasonable in the judgment of the
Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to
prosecute all claims arising out of such rights.

Article XIII — Reinsurance Premium

	A.	 	As premium for the reinsurance provided hereunder during each contract year, the Company
shall pay the Reinsurer 4.286% (3.000% net) of its net earned premium.
	 
	 	 	The Reinsurer shall allow the Company a 30.0% commission on all premiums ceded to the Reinsurer
hereunder. The Company shall allow the Reinsurer return commission on return premiums at the
same rate.

	B.	 	Within 30 days after the end of each month, the Company shall report its net earned premium
for the month. The premium due the Reinsurer, at the rate shown in paragraph A, shall be paid
by the Company with its report. In the event this Contract is terminated in accordance with
paragraph C of the Commencement and Termination Article, no payments shall be due as respects
each Subscribing Reinsurer after the effective date of termination.

	C.	 	Within 60 days after the end of each contract year, the Company shall provide a report to the
Reinsurer setting forth the premium due hereunder for the contract year, computed in
accordance with paragraph A, and any additional premium due the Reinsurer or return premium
due the Company shall be remitted promptly.

	D.	 	“Net earned premium” as used herein is defined as the Company’s gross earned premium
collected on the classes of business subject to this Contract, less only the earned portion of
premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this
Contract and less dividends incurred.

Article XIV — Late Payments

	A.	 	The provisions of this Article shall not be implemented unless specifically invoked, in
writing, by one of the parties to this Contract.

	B.	 	In the event any premium, loss or other payment due either party is not received by the
intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the
“Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying
the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to
pay, an interest penalty on the amount past due calculated for each such payment on the last
business day of each month as follows:

	 	1.	 	The number of full days which have expired since the due date or the last monthly
calculation, whichever the lesser; times

Page 15

 

	 	2.	 	1/365ths of the sum of 400 basis points plus the six-month United States Treasury
Bill rate as quoted in The Wall Street Journal on the first business day of the month for
which the calculation is made; times

     3. The amount past due, including accrued interest.

	 	 	 	It is agreed that interest shall accumulate until payment of the original amount due plus
interest penalties have been received by the Intermediary.

	C.	 	The establishment of the due date shall, for purposes of this Article, be determined as
follows:

	 	1.	 	As respects the payment of routine deposits and premiums due the Reinsurer, the due
date shall be as provided for in the applicable section of this Contract. In the event a
due date is not specifically stated for a given payment, it shall be deemed due 30 days
after the date of transmittal by the Intermediary of the initial billing for each such
payment.
	 
	 	2.	 	Any claim or loss payment due the Company hereunder shall be deemed due 45 days
after the proof of loss or demand for payment is transmitted to the Reinsurer. If such
loss or claim payment is not received within the 45 days, interest will accrue on the
payment or amount overdue in accordance with paragraph B above, from the date the proof
of loss or demand for payment was transmitted to the Reinsurer.
	 
	 	3.	 	As respects any payment, adjustment or return due either party not otherwise
provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10 days following
transmittal of written notification that the provisions of this Article have been
invoked.

	 	 	 	For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon
receipt by the Intermediary.

	D.	 	Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from
contesting the validity of any claim, or from participating in the defense of any claim or
suit, or prohibiting either party from contesting the validity of any payment or from
initiating any arbitration or other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or other proceeding, then any
interest penalties due hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the amount determined to
be due hereunder shall be calculated in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party advances payment of any amount it
is contesting, and proves to be correct in its contestation, either in whole or in part, the
other party shall reimburse the debtor party for any such excess payment made plus interest on
the excess amount calculated in accordance with this Article.

Page 16

 

	E.	 	Interest penalties arising out of the application of this Article that are $100 or less from
any party shall be waived unless there is a pattern of late payments consisting of three or
more items over the course of any 12-month period.

Article XV — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other
under this Contract or any other contract heretofore or hereafter entered into between the Company
and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall
not be affected by the insolvency of either party to this Contract.

Article XVI — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to
all records of the Company which pertain in any way to this reinsurance.

Article XVII — Liability of the Reinsurer

	A.	 	The liability of the Reinsurer shall follow that of the Company in every case and be
subject in all respects to all the general and specific stipulations, clauses, waivers and
modifications of the Company’s policies and any endorsements thereon.

	B.	 	Nothing herein shall in any manner create any obligations or establish any rights against the
Reinsurer in favor of any third party or any persons not parties to this Contract.

Article XVIII — Net Retained Lines (BRMA 32E)

	A.	 	This Contract applies only to that portion of any policy which the Company retains net for
its own account (prior to deduction of any underlying reinsurance specifically permitted in
this Contract), and in calculating the amount of any loss hereunder and also in computing the
amount or amounts in excess of which this Contract attaches, only loss or losses in respect of
that portion of any policy which the Company retains net for its own account shall be
included.

	B.	 	The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not
be increased by reason of the inability of the Company to collect from any other reinsurer(s),
whether specific or general, any amounts which may have become due from such reinsurer(s),
whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Page 17

 

Article XIX — Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or any
transaction hereunder shall not relieve either party from any liability which would have attached
had such delay, error or omission not occurred, provided always that such error or omission is
rectified as soon as possible after discovery.

Article XX — Currency (BRMA 12A)

	A.	 	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be
construed to mean United States Dollars and all transactions under this Contract shall be in
United States Dollars.

	B.	 	Amounts paid or received by the Company in any other currency shall be converted to United
States Dollars at the rate of exchange at the date such transaction is entered on the books of
the Company.

Article XXI — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim
a deduction in respect of the premium hereon when making tax returns, other than income or profits
tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXII — Federal Excise Tax

	A.	 	The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the
applicable percentage of the premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

	B.	 	In the event of any return of premium becoming due hereunder the Reinsurer will deduct the
applicable percentage from the return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States Government.

Article XXIII — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance
regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated
“B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is
or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

	A.	 	As regards policies or bonds issued by the Company coming within the scope of this Contract,
the Company agrees that when it shall file with the insurance regulatory authority

Page 18

 

	 	 	or set up on its books reserves for losses covered hereunder which it shall be required by law
to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves
which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in
respect of known outstanding losses that have been reported to the Reinsurer and allocated loss
adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the
Company but not recovered from the Reinsurer, plus reserves for losses incurred but not
reported, as shown in the statement prepared by the Company (hereinafter referred to as
“Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The
Reinsurer shall have the option of determining the method of funding provided it is acceptable
to the insurance regulatory authorities having jurisdiction over the Company’s reserves with
regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of
funding shall be mutually agreed.

	B.	 	When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely
delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a
bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of
Credit and containing provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of
said reserves. Such Letter of Credit shall be issued for a period of not less than one year,
and shall contain an “evergreen” clause, which automatically extends the term for one year
from its date of expiration or any future expiration date unless 30 days (60 days where
required by insurance regulatory authorities) prior to any expiration date the issuing bank
shall notify the Company by certified or registered mail that the issuing bank elects not to
consider the Letter of Credit extended for any additional period.

	C.	 	The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant
to the provisions of this Contract may be drawn upon at any time, notwithstanding any other
provision of this Contract, and be utilized by the Company or any successor, by operation of
law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or
conservator of the Company for the following purposes, unless otherwise provided for in a
separate Trust Agreement:

	 	1.	 	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is
due under the terms of this Contract and which has not been otherwise paid;
	 
	 	2.	 	To make refund of any sum which is in excess of the actual amount required to pay
the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
	 
	 	3.	 	To fund an account with the Company for the Reinsurer’s Obligations. Such cash
deposit shall be held in an interest bearing account separate from the Company’s other
assets, and interest thereon not in excess of the prime rate shall accrue to the benefit
of the Reinsurer;
	 
	 	4.	 	To pay the Reinsurer’s share of any other amounts the Company claims are due under
this Contract.

	 	 	 	In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual
amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the

Page 19

 

	 	 	 	actual amount determined to be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn. All of the foregoing shall be applied without diminution because of
insolvency on the part of the Company or the Reinsurer.

	D.	 	The issuing bank shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives of the
Company.

	E.	 	At annual intervals, or more frequently as agreed but never more frequently than quarterly,
the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole
purpose of amending the Letter of Credit, in the following manner:

	 	1.	 	If the statement shows that the Reinsurer’s Obligations exceed the balance of
credit as of the statement date, the Reinsurer shall, within 30 days after receipt of
notice of such excess, secure delivery to the Company of an amendment to the Letter of
Credit increasing the amount of credit by the amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Reinsurer’s Obligations are less than the
balance of credit as of the statement date, the Company shall, within 30 days after
receipt of written request from the Reinsurer, release such excess credit by agreeing to
secure an amendment to the Letter of Credit reducing the amount of credit available by
the amount of such excess credit.

	F.	 	This Article shall not apply to a reinsurer which satisfies both of the following conditions:

	 	1.	 	Qualifies for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves; and
	 
	 	2.	 	Is rated “A+” or better by A.M. Best at the beginning of any contract year.

Article XXIV — Insolvency

	A.	 	In the event of the insolvency of one or more of the reinsured companies, this reinsurance
shall be payable directly to the company or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of the company without diminution because of
the insolvency of the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of the company
shall give written notice to the Reinsurer of the pendency of a claim against the company
indicating the policy or bond reinsured which claim would involve a possible liability on the
part of the Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem available to
the company or its liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the

Page 20

 

	 	 	approval of the Court, against the company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.

	B.	 	Where two or more reinsurers are involved in the same claim and a majority in interest elect
to interpose defense to such claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been incurred by the company.

	C.	 	It is further understood and agreed that, in the event of the insolvency of one or more of
the reinsured companies, the reinsurance under this Contract shall be payable directly by the
Reinsurer to the company or to its liquidator, receiver or statutory successor, except as
provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the event of the insolvency of the
company or (2) where the Reinsurer with the consent of the direct insured or insureds has
assumed such policy obligations of the company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the company to such
payees.

Article XXV — Arbitration (BRMA 6J)

	A.	 	As a condition precedent to any right of action hereunder, in the event of any dispute or
difference of opinion hereafter arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be submitted to arbitration. One
Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active or
retired disinterested executive officers of insurance or reinsurance companies or Lloyd’s
London Underwriters. In the event that either party should fail to choose an Arbiter within
30 days following a written request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration. If
the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of
whom the other shall decline, and the decision shall be made by drawing lots.

	B.	 	Each party shall present its case to the Arbiters within 30 days following the date of
appointment of the Umpire. The Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they are relieved of all judicial
formalities and may abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree, they shall call in
the Umpire and the decision of the majority shall be final and binding upon both parties.
Judgment upon the final decision of the Arbiters may be entered in any court of competent
jurisdiction.

	C.	 	If more than one reinsurer is involved in the same dispute, all such reinsurers shall
constitute and act as one party for purposes of this Article and communications shall be made
by the Company to each of the reinsurers constituting one party, provided, however, that
nothing herein shall impair the rights of such reinsurers to assert several, rather than

Page 21

 

	 	 	joint, defenses or claims, nor be construed as changing the liability of the reinsurers
participating under the terms of this Contract from several to joint.

	D.	 	Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with
the other the expense of the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire
and the arbitration shall be equally divided between the two parties.

	E.	 	Any arbitration proceedings shall take place at a location mutually agreed upon by the
parties to this Contract, but notwithstanding the location of the arbitration, all proceedings
pursuant hereto shall be governed by the law of the state in which the Company has its
principal office.

Article XXVI — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not
authorized in any State, Territory or District of the United States where authorization is required
by insurance regulatory authorities)

	A.	 	It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due
hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States. Nothing in this Article constitutes
or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action
in any court of competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court as permitted by the
laws of the United States or of any state in the United States.

	B.	 	Further, pursuant to any statute of any state, territory or district of the United States
which makes provision therefor, the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named therein, the Superintendent,
Commissioner or Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract.

Article XXVII — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect
to the business being reinsured hereunder, and there are no understandings between the parties
hereto other than as expressed in this Contract. Any change or modification to this Contract will
be made by amendment to this Contract and signed by the parties.

Page 22

 

Article XXVIII — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of
Louisiana.

Article XXIX — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named
company shall be deemed the agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any party.

Article XXX — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all
business hereunder. All communications (including but not limited to notices, statements, premium,
return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements)
relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc.
Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer.
Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company
only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as
of the date undermentioned at:

DeRidder,
Louisiana, this
   day of
 
in the year  .

American Interstate Insurance Company

American Interstate Insurance Company of Texas

Silver Oak Casualty, Inc.

Page 23

 

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)

(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

	(1)	 	This reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.

	(2)	 	Without in any way restricting the operation of paragraph (1) of this Clause it is understood
and agreed that for all purposes of this reinsurance all the original policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II of this
paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):

     Limited Exclusion Provision.*

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to

(injury, sickness, disease, death or destruction

(bodily injury or property damage

	 	 	 	with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be
an insured under any such policy but for its termination upon
exhaustion of its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or
policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated
above, such as the Comprehensive Dwelling Policy and the applicable
types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Limited Exclusion
Provision set out above;
provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special
Automobile Policies, or policies or combination policies of a similar nature, issued by
the Reassured on New York risks, until 90 days following approval of the Limited Exclusion
Provision by the Governmental Authority having jurisdiction thereof.

	(3)	 	Except for those classes of policies specified in Clause II of paragraph (2) and without in
any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed
that for all purposes of this reinsurance the original liability policies of the Reassured
(new, renewal and replacement) affording the following coverages:

	 	 	 	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners
or Contractors (including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle
or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V
of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

     Broad Exclusion Provision.*

     It is agreed that the policy does not apply:

	 	I.	 	Under any Liability Coverage to

	 	 	 	(injury, sickness, disease, death or destruction

(bodily injury or property damage
	 
	 	(a)	 	with respect to which an insured under the policy is also an insured under
a nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this policy not been issued would be, entitled to
indemnity from the United States of America, or any agency thereof, under any
agreement entered into by the United States of America, or any agency thereof, with
any person or organization.

 

 

	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to

	 	 	 	(immediate medical or surgical relief
(first aid,

	 	
to expenses incurred with respect to

	 	 	 	
bodily injury, sickness, disease or death

(bodily injury
	 	
resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any
person or organization.

	 	III.	 	Under any Liability Coverage to

	 	 	 	(injury, sickness, disease, death or destruction

(bodily injury or property damage
	 	

resulting from the hazardous properties of nuclear material, if
	 
	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or operated
by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
	 
	 	(b)	 	the nuclear material is contained in spent fuel or waste at any time
possessed, handled, used, processed, stored, transported or disposed of by or on
behalf of an insured; or
	 
	 	(c)	 	the
	 	 	 	          (injury, sickness, disease, death or destruction

          (bodily injury or property damage

arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the
United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to

          (injury to or destruction of property at such nuclear facility

          (property damage to such nuclear facility and any property thereat.

	 	IV.	 	As used in this endorsement:

“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material,
special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material”
have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means
any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of
any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear
facility” means

	 	(a)	 	any nuclear reactor,
	 
	 	(b)	 	any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling
processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste, and includes the site on which any of the foregoing
is located, all operations conducted on such site and all premises used for such
operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material;

(With respect to injury to or destruction of property, the word “injury”
or “destruction,”

(“property damage” includes all forms of radioactive contamination of property,

(includes all forms of radioactive contamination of property.

	 	V.	 	The inception dates and thereafter of all original policies affording coverages
specified in this paragraph (3), whether new, renewal or replacement, being policies
which become effective on or after 1st May, 1960, provided this paragraph (3) shall not
be applicable to

	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New
York risks, or
	 
	 	(ii)	 	statutory liability insurance required under Chapter 90,
General Laws of Massachusetts, until 90 days following approval of the Broad
Exclusion Provision by the Governmental Authority having jurisdiction thereof.

	(4)	 	Without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that paragraphs (2) and (3) above are not applicable to original
liability policies of the Reassured in Canada and that with respect to such policies this
Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by
the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

 

			
	*NOTE.	 	The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion
Provision shall apply only in relation to original liability policies which include a Limited
Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67

N.M.A. 1590

 

 

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

	 	 	 	 	 
	Reinsurers                        	 	Participations
	Hannover Ruckversicherungs-Aktiengesellschaft
	 	 	30.0	%
	Partner Reinsurance Company of the U.S.
	 	 	25.0	 
	 
	 	 	 	 
	Through Benfield Limited (Placement Only)
	 	 	 	 
	AXA RE
	 	 	10.0	 
	 
	 	 	 	 
	Through Benfield Limited
	 	 	 	 
	Lloyd’s Underwriters and Companies
Per Signing Schedule(s)
	 	 	35.0	 
	 
	 	 	 	 
	Total
	 	 	100.0	%

 

 

Interests and Liabilities Agreement

of

Hannover Ruckversicherungs-Aktiengesellschaft

Hannover, Germany

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the
attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed
this Agreement as of the date undermentioned at:

Hannover, Germany, this
   day of
 
in the year  .

	 	 	 
	 
	 

	 	 
	 

	 	Hannover Ruckversicherungs-Aktiengesellschaft

 

 

Interests and Liabilities Agreement

of

AXA RE

Paris, France

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 10.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed
this Agreement as of the date undermentioned at:

Paris, France, this
   day of
 
in the year  .

	 	 	 
	 
	 

	 	 
	 

	 	AXA RE

 

 

Interests and Liabilities Agreement

of

Certain Insurance Companies

shown in the Signing Schedule(s) attached hereto

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the
attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached

 

 

Interests and Liabilities Agreement

of

Partner Reinsurance Company of the U.S.

New York, New York

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 25.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed
this Agreement as of the date undermentioned at:

Greenwich, Connecticut, this
   day of
 
in the year  .

	 	 	 	 	 
	 
	 	 	 	 	 
	 

	 	 

Partner Reinsurance Company of the U.S.
	 	 

 

 

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s

shown in the Signing Schedule attached hereto

(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company

DeRidder, Louisiana

American Interstate Insurance Company of Texas

Austin, Texas

Silver Oak Casualty, Inc.

DeRidder, Louisiana

and

any other insurance companies which are now or

hereafter come under the ownership, control or management of

Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 15.0% share in the interests and liabilities of the
“Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and
shall continue in force until terminated in accordance with the provisions of the attached
Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the
shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the Subscribing Reinsurer shall in no event participate in the interests and
liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the
attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

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