Document:

EX-10.19

 Exhibit 10.19 

 

					
	

	  	 STATE BOARD OF ADMINISTRATION
 OF FLORIDA
  
 1801 HERMITAGE BOULEVARD
 TALLAHASSEE, FLORIDA 32308

(850) 488-4406
  

POST OFFICE BOX 13300
 32317-3300
  
	  	 RICK SCOTT
 GOVERNOR
 AS CHAIRMAN

 
 JEFF ATWATER

CHIEF FINANCIAL OFFICER
 AS TREASURER
  
 PAM BONDI
 ATTORNEY GENERAL

AS SECRETARY
  

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

 REIMBURSEMENT CONTRACT 
 Effective: June 1, 2012 
 (Contract) 

between 

HOMEOWNERS CHOICE PROPERTY AND CASUALTY INSURANCE COMPANY 
 (Company) 
 NAIC # 12944 

and 
 THE
STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) 
 WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND
(FHCF) 
 PREAMBLE 
 The
Legislature of the State of Florida has enacted Section 215.555, Florida Statutes “Statute”, which directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing
the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each
Addenda unless specifically superseded by one of the Addenda. 
 In consideration of the promises set forth in this Contract, the parties agree
as follows: 
 ARTICLE I - SCOPE OF AGREEMENT 
 As a condition precedent to the SBA’s obligations under this Contract, the Company, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the
State of Florida, shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. 

The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain
circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in
force and in effect at the time of the Covered Event causing the loss, in excess of the Company’s Retention as a result of each Loss Occurrence commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

  
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 ARTICLE II - PARTIES TO THE CONTRACT 
 This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or any claimant against an insured of the Company, or any other third
party, have any rights under this Contract, except as provided in Article XIV. The SBA will only disburse funds to the Company, except as provided for in Article XIV of this Contract. The Company shall not, without the prior approval of the Office
of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums. 
 ARTICLE III - TERM 
 This Contract shall apply to Loss Occurrences which commence during the
period from 12:00:01 a.m., Eastern Time, June 1, 2012, to 12:00 midnight, Eastern Time, May 31, 2013 (Contract Year). 
 The Company
must designate a coverage level, make the required selections, and return this fully executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time,
March 1, 2012. Failure to do so may result in a referral to the Office of Insurance Regulation within the Department of Financial Services for administrative action. Furthermore, the Company’s coverage level under this Contract will be
deemed as follows: 
  

	(1)	For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same
NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed. 

 

	(2)	For Companies that are not a member of an NAIC. group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year
shall be deemed. 

  

	(3)	For New Participants, as that term is defined in Article V(21), that are a member of an NAIC group, the same coverage level selected by the other Companies of the same
NAIC group shall be deemed. 

  

	(4)	For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be
selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed. 

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration
or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be responsible for such Loss Occurrence in progress in the same manner and to the same extent it would have been
responsible had the Contract expired the day following the conclusion of the Loss Occurrence in progress. 
 ARTICLE IV - LIABILITY OF THE
FHCF 
  

	(1)	The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this
percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus 5% of the reimbursed losses for Loss Adjustment Expense Reimbursement.

  

	(2)	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XVIII. 

 

	(3)	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this Contract Year shall not exceed the limit set forth under
Section 215.555(4)(c)l., Florida Statutes. For specifics regarding loss reimbursement calculations, see section (3)(c) of Article X herein. 

  
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	(4)	Upon the occurrence of a Covered Event, the SBA shall evaluate the potential losses to the FHCF and the FHCF’s capacity at the time of the event. The initial
Projected Payout Multiple used to reimburse the Company for its losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s mandatory coverage. The SBA shall make adjustments to the
Projected Payout Multiple in order to reimburse the optional Temporary Increase in Coverage Limit (TICL) Options coverage based on the SBA’s ongoing evaluation of potential losses and capacity. If it appears that the Estimated Claims-Paying
Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.

  

	(5)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. 

 

	(6)	After the end of the calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and
October of each year, the SBA shall publish in the Florida Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of December 31.

  

	(7)	The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that
Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or through other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with
Section 215.555(4)(c)l., Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.). 

 ARTICLE V - DEFINITIONS 
  

	(1)	Actual Claims-Paying Capacity of the FHCF 

 This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of
revenue bonds, or through other means available by law to the SBA, up to the limit in accordance with Section 215.555(4)(c)l. and (6), Florida Statutes. 
  

	(2)	Actuarially Indicated 

This term means, with respect to Premiums paid by Companies for reimbursement provided by the FHCF, an amount determined in accordance
with the definition provided in Section 215.555(2)(a), Florida Statutes. 
  

	(3)	Additional Living Expense (ALE) 

 ALE losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential Structure or its contents based on the coverage provided in the policy. Fair rental value, loss of rents,
or business interruption losses are not covered by the FHCF. 
  

	(4)	Administrator 

 This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 8200 Tower, 5600
West 83rd Street, Suite 1100, Minneapolis, Minnesota
55437. The telephone number is (800) 689-3863, and the facsimile number is (800) 264-0492. 
  

	(5)	Authorized Insurer 

 This
term is defined in Section 624.09(1), Florida Statutes. 
  

	(6)	Borrowing Capacity 

 This
term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves. 

  
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	(7)	Citizens Property Insurance Corporation (Citizens) 

 This term means the entity formed under Section 627.351(6), Florida Statutes, and refers to both Citizens Property Insurance Corporation Coastal Account and Citizens Property Insurance Corporation
Personal Lines and Commercial Lines Accounts. 
  

	(8)	Contract 

 This term means
this Reimbursement Contract for the current Contract Year. 
  

	(9)	Covered Event 

 This term
means any one storm declared to be a hurricane by the National Hurricane Center which causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent
downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event. 

 

	(10)	Covered Policy or Covered Policies 

  

	 	(a)	Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance
that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure, as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida.

  

	 	(b)	Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual
statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s
statutory annual statement as: 

  

	 	1.	Fire 

  

	 	2.	Allied Lines 

  

	 	3.	Farmowners Multiple Peril 

  

	 	4.	Homeowners Multiple Peril 

  

	 	5.	Commercial Multiple Peril (non liability portion, covering condominiums and apartments) 

 

	 	6.	Inland Marine 

 Note that where
particular insurance exposures, e.g., mobile homes, are reported on an annual statement is not dispositive of whether or not the exposure is a Covered Policy. 
  

	 	(c)	This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE
coverage. 

  

	 	(d)	Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s
financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be
deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available. 

 

	 	(e)	See Article VI of this Contract for specific exclusions. 

  

	(11)	Deductible Buy-Back Policies 

 This term means a specific policy that provides coverage to a policyholder for some portion of the policyholder’s deductible under a policy issued by another insurer. 

 

	(12)	Estimated Claims-Paying Capacity of the FHCF 

 This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity
of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes. 

  
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	(13)	Excess Policies 

 This
term, for the purposes of this Contract, means a policy that provides insurance protection for large commercial property risks that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same
as a very large deductible. 
  

	(14)	Florida Department of Financial Services (Department) 

 This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida
Insurance Code. 
  

	(15)	Florida Insurance Code 

This term means those chapters identified in Section 624.01, Florida Statutes, which are designated as the Florida Insurance Code.

  

	(16)	Formula or the Premium Formula 

 This term means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which
leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula. The Formula, shall, pursuant to Section 215.555(5)(b), Florida Statutes, include a cash build-up factor in the amount
specified therein. 
  

	(17)	Fund Balance or Balance of the Fund as of December 31 

 These terms mean the amount of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract Year. 

 

	(18)	Insurer Group 

 For
purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the National Association of Insurance Commissioners (NAIC) for purposes of filing consolidated financial
statements. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group recognized by the NAIC. 

 

	(19)	Loss Occurrence 

 This
term means the sum of individual insured Losses incurred under Covered Policies resulting from the same Covered Event. “Losses” means all incurred losses under Covered Policies, including Additional Living Expenses not to exceed 40 percent
of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder, and excludes allocated or unallocated Loss Adjustment Expenses. 

 

	(20)	Loss Adjustment Expense Reimbursement 

  

	 	(a)	Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)l.,
Florida Statutes. 

  

	 	(b)	To the extent that loss reimbursements are limited to the Payout Multiple applied to each Company, the 5% Loss Adjustment Expense is included in the total Payout
Multiple applied to each Company. 

  

	(21)	New Participant(s) 

 This
term means all Companies which begin writing Covered Policies on or after the beginning of the Contract Year. A Company that removes exposure from either Citizens entity, as that term is defined in (7) above, pursuant to an assumption agreement
effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant. 
  

	(22)	Office of Insurance Regulation 

 This term means that office within the Department of Financial Services and which was created in Section 20.121(3), Florida Statutes. 

  
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	(23)	Payout Multiple 

 This
term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes, which is derived by dividing the single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the
FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.

  

	(24)	Premium 

 This term means
the same as Reimbursement Premium. 
  

	(25)	Projected Payout Multiple 

The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section 215.555(4)(d)2., Florida
Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s
Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year. 

 

	(26)	Reimbursement Premium 

This term means the Premium determined by multiplying each $1,000 of insured value reported by the Company in accordance with
Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C. 
  

	(27)	Residential Structures 

This term means dwelling units, including the primary structure and appurtenant structures insured under the same policy and any other
structures covered under endorsements associated with a policy covering a residential structure. Covered Residential Structures do not include any structures listed under Article VI herein or structures used solely for non-residential
purposes. 
  

	(28)	Retention 

 The
Company’s Retention means the amount of hurricane losses under Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF. 

 

	 	(a)	When the Company experiences covered losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the
Covered Events. 

  

	 	(b)	When the Company experiences covered losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each, of
the two Covered Events causing the largest covered losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered
Events. 

  

	 	1.	All reimbursement of covered losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments
to reflect a reduction to one-third of the full Retention shall be made on or after December 31 of the Contract Year provided the Company reports its losses as specified in this Contract. 

 

	 	2.	Adjustments to the Company’s Retention shall be based upon its paid and outstanding losses as reported on the Company’s Proof of Loss Reports but shall not
include incurred but not reported losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events, and the reduction to one-third of the full Retention shall
be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made by the SBA only if the quarterly loss reports reveal that loss development patterns have resulted in a change in
the order of Covered Events entitled to the reduction to one- third of the full Retention. 

  

	 	(c)	The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by
multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year. 

  
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	 	(d)	Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements. 

 

	(29)	Retention Multiple 

  

	 	(a)	The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2012/2013
Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2010/2011 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement
Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA. 

  

	 	(b)	The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as
follows: 

  

	 	1.	If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;

  

	 	2.	If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or

  

	 	3.	If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.

  

	(30)	Ultimate Net Loss 

  

	 	(a)	This term means all Losses of the Company under Covered Policies in force at the time of a Covered Event, as defined under (9) above, prior to the application of
the Company’s FHCF Retention, as defined under (28) above, and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI herein, arising from each Loss Occurrence during the Contract Year,
provided, however, that the Company’s Ultimate Net Loss shall be determined in accordance with the deductible level written under the policy sustaining the loss. 

 

	 	(b)	Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

  

	 	(c)	All salvages, recoveries or payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the
aforesaid settlement and all necessary adjustments shall be made by the parties hereto. 

  

	 	(d)	Nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.

  

	 	(e)	The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in
all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or
payment arising out of a Covered Event. 

 ARTICLE VI - EXCLUSIONS 
 This Contract does not provide reimbursement for: 
  

	(1)	Any losses not defined as being within the scope of a Covered Policy. 

  

	(2)	Any policy which excludes wind or hurricane coverage. 

  

	(3)	Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF. 

 

	(4)	Any policy for Residential Structures, as defined in Article V(27) herein, that provides a layer of coverage underneath an Excess Policy, as defined in Article V(13)
herein, issued by a different insurer. 

  

	(5)	Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption. 

  
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	(6)	Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d) herein. 

 

	(7)	Any reinsurance assumed by the Company. 

  

	(8)	Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes. 

 

	(9)	Any exposure for homeowner associations if no habitational structures are insured under the policy. 

 

	(10)	Any exposure for homes and condominium structures or units that are non-owner occupied and rented for six (6) or more rental periods by different parties during
the course of a twelve (12) month period. 

  

	(11)	Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational
structures that are not nursing homes will not be subject to this exclusion. 

  

	(12)	Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only
the pool of an apartment complex). 

  

	(13)	Personal contents in a commercial storage facility (including jewelry in an off-premises vault) covered under a policy that covers only those personal contents.

  

	(14)	Policies covering only Additional Living Expense. 

  

	(15)	Any exposure for barns or barns with apartments. 

  

	(16)	Any exposure for builders risk coverage or new Residential Structures still under construction. 

 

	(17)	Any exposure for recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing and written on a separate policy or endorsement.

  

	(18)	Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to,
amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of the coverage limits under the Covered Policy. 

 

	(19)	Any losses paid in excess of a policy’s hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building,
appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a waiver of an applicable deductible. This exclusion includes
overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit. 

  

	(20)	Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that
policy under the Data Call for the applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract Year). 

  

	(21)	Any losses for which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention
Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year. 

  

	(22)	Amounts paid to reimburse a policyholder for condominium association loss assessments or under similar coverages for contractual liabilities. 

 

	(23)	Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of
revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes. 

  

	(24)	Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an
executed assumption agreement between the Authorized Insurer and Citizens are covered by this Contract. 

  

	(25)	 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, howsoever denominated, established or governed, which provides for any assessment of or
payment 

  
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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. 

  

	(26)	Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm
that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or
remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss. 

  

	(27)	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water,
waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind. 

  

	(28)	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C. 

  

	(29)	Any losses under liability coverages. 

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES 
 The Company shall investigate and settle or defend all claims and losses. All payments of claims or losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies
shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIII relating to inspection of records and examinations. 
 ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS 
  

	(1)	Offsets 

 The SBA reserves
the right to offset amounts payable to the SBA from the Company, including amounts payable under any Contract Year and the Company’s full Premium for the current Contract Year (regardless of installment due dates), against any reimbursement or
advance amounts, or amounts agreed to in a commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA. 
  

	(2)	Reimbursement Adjustments 

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements
which have been paid to the Company along with interest thereon. Excess loss reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess loss reimbursements may
result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect
calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the
interest due thereon through the due date. The applicable interest rate for interest credits, and for interest charges for adjustments beyond the Company’s control, will be the average rate earned by the SBA for the FHCF for the first four
months of the Contract Year. The applicable interest rate for interest charges on excess loss reimbursements due to adjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%. All interest
will continue to accrue if not paid by the due date. 

  
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 ARTICLE IX - REIMBURSEMENT PREMIUM 

 

	(1)	The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated
in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2). 

  

	(2)	Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under
the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated
Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue
regarding any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional
Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also
accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest
shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate
for interest charges will accrue at this rate plus 5%. 

 ARTICLE X - REPORTS AND REMITTANCES 

 

	(1)	Exposures 

  

	 	(a)	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C.,
no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as
outlined in the annual reporting of insured values form, FHCF- D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA. 

 

	 	(b)	If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no
later than March 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of December 31 of the Contract Year as outlined in the Supplemental Instructions
for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA. 

 

	 	(c)	If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its
exposure data for the Contract Year to the SBA. 

  

	 	(d)	The requirement that a report is due on a certain date means that the report shall be in the physical possession of the FHCF’s Administrator in Minneapolis no
later than 5 p.m. Central Time on the due date. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal
holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Reports sent to the SBA in Tallahassee, Florida, will be returned to the sender.
Reports not in the physical possession of the FHCF’s Administrator by 5 p.m., Central Time, on the applicable due date are late. 

  
 10 

	 	(e)	Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to
Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. 

 

	(2)	Reimbursement Premium 

  

	 	(a)	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or
before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s
full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the
provisional Reimbursement Premium payment, on or before December 1 of the Contract Year. In addition, if control of the Company has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or
rehabilitator (referred to in the aggregate as “State action”), the full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable on August 1, or the date that such State action occurs
after August 1 of the Contract Year. Such acceleration will not apply when the receiver or rehabilitator provides a letter of assurance to the FHCF that the Company will have the resources to pay the premium in installments in accordance with
the contractual provisions. 

  

	 	(b)	A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional
Reimbursement Premium of $1,000 upon execution of this Contract. The Administrator shall calculate the Company’s actual Reimbursement Premium for the period based on its actual exposure as of December 31 of the Contract Year, as reported
on or before March 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the
provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium
payment is due no later than May 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Premium due as calculated above. 

 

	 	(c)	A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a
Reimbursement Premium of $1,000 upon execution of this Contract. 

  

	 	(d)	The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be in the physical possession of the FHCF no later than 2 p.m.,
Eastern Time, on the due date applicable to the particular installment. If remitted by check to the FHCF’s Post Office Box, the check shall be physically in the Post Office Box 100822, Atlanta, GA 30384-0822, as set out on the invoice sent to
the Company. If remitted by check by hand delivery, the check shall be physically on the premises of the FHCF’s bank in College Park, Georgia, as set out on the invoice sent to the Company. If remitted electronically, the wire transfer shall
have been completed to the FHCF’s account at its bank in Atlanta, Georgia, as set out on the invoice sent to the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately
following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Premium
checks sent to the SBA in Tallahassee, Florida, or to the FHCF’s Administrator in Minneapolis, Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical possession of the FHCF by 2 p.m., Eastern Time, on the
applicable due date are late. 

  
 11 

	 	(e)	Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon,
received in a given Contract Year will be used only to pay for losses attributable to Covered Events occurring in that Contract Year or for losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past
losses or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)l., Florida Statutes, Reimbursement Premiums and earnings thereon may be used for payments relating to revenue bonds in the event emergency assessments are
insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency
assessments or other legally available funds remain available after making payment relating to the revenue bonds and any other purposes for which emergency assessments were levied. 

 

	(3)	Claims and Losses 

  

	 	(a)	In General 

  

	 	1.	Claims and losses resulting from Loss Occurrences commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and
in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreements) with Citizens Property Insurance Corporation Coastal Account, Citizens and the
Company shall report only their respective portion of losses under the quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to pay for losses not to exceed the Actual
Claims-Paying Capacity of the FHCF, up to the limit in accordance with Section 215.555(4)(c)l., Florida Statutes, for any one Contract Year. 

  

	 	2.	If the Company is in non-compliance with Section 215.555, Florida Statutes for any Contract Year, including deadlines for sending in Contracts, addenda or
attachments to Contracts, Data Call submissions or resubmissions, loss reports, or in responding to SBA exam requirements, the SBA reserves the right to withhold any payments or advances until such time the Company becomes compliant.

  

	 	(b)	Loss Reports 

  

	 	1.	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence to provide information to the SBA in determining any
potential liability for possible reimbursable losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required
by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required. 

  

	 	2.	FHCF loss reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the
Contract Year under Rule 19-8.029, F.A.C. 

  

	 	a.	To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the
report. 

  

	 	b.	The Company must also submit a detailed claims listing (as outlined on the Proof of Loss Report) at the same time it submits its first Proof of Loss Report for a
specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request. 

 

	 	c.	 While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a Loss Occurrence, all Companies shall submit a
mandatory Proof of Loss Report for each Loss Occurrence no earlier than December 1 and no later than 

  
 12 

	 	
December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss
reimbursements or advances already received. Reports may be faxed only if the Company does not qualify for a reimbursement, 

  

	 	d.	For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and
4. below, the Company shall submit its Proof of Loss Reports by each quarter-end or year-end using the most current data available. However, the date of such data shall not be more than sixty days prior to the applicable quarter-end or year-end
date. 

  

	 	3.	Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged
including any adjustments to such losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred. Guidelines follow: 

 

	 	a.	Quarterly Proof of Loss Reports are due by March 31 from an insurer whose losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Loss
Occurrence(s). 

  

	 	b.	Quarterly Proof of Loss Reports are due by June 30 from an insurer whose losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Loss
Occurrence(s). 

  

	 	c.	Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from an insurer whose losses exceed, or are expected to exceed, its FHCF Retention
for a specific Loss Occurrence(s). 

 If the Company’s Retention must be recalculated as the result of an
exposure resubmission, and if the recalculated Retention changes the FHCF’s reimbursement obligations, then the Company shall submit additional Proof of Loss Reports for recalculation of the FHCF’s obligations. 

 

	 	4.	Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable,
using the most current data available. This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the commutation process described in
(3)(d) below or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries. 

 

	 	5.	The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due
based on losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent
determination of losses. 

  

	 	a.	The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant,
prior to the issuance of reimbursements. 

  

	 	b.	The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid losses
reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm losses, prior to the issuance of reimbursements. 

  

	 	c.	The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements submitted by Companies that have been placed under
regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator. 

  
 13 

	 	6.	All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review
the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4. above, Companies meeting these tests for reasonableness will be scheduled for
reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a
Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s Premium, Retention, and coverage for the Contract Year, will be required before
the Company’s request for reimbursement or an advance will be fully processed by the Administrator. 

  

	 	(c)	Loss Reimbursement Calculations 

  

	 	1.	In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the
FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after December 31 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention
adjustment. Each Company sustaining reimbursable losses will receive the amount of reimbursement due under the Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements
due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the
Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year. 

  

	 	2.	In determining reimbursements under this Contract, the SBA shall reimburse each of the Companies, including entities created pursuant to Section 627.351(6),
Florida Statutes, for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed for all Loss Occurrences, an amount equal to the Projected Payout Multiple or the Payout Multiple, as applicable, times
the individual Company’s Reimbursement Premium for the Contract Year. 

  

	 	3.	Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable losses are still being paid for a Covered Event in a previous Contract
Year, the SBA will establish a reserve for the outstanding reimbursable losses for the previous Contract Year, based on the length of time the losses have been outstanding, the amount of losses already paid, the percentage of incurred losses still
unpaid, and any other factors specific to the loss development of the Covered Events involved. 

  

	 	(d)	Commutation 

  

	 	1.	Not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the exception of
Companies having no reportable losses as described in paragraph (3)(d)l.a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in paragraph (3)(d)l.b. below. The Company and SBA may mutually agree to initiate commutation
after 36 months and prior to 60 months after the end of the Contract Year. The commutation negotiations shall begin at the later of 60 months after the end of the Contract Year or upon completion of the FHCF loss examination for the Company and the
resolution of all outstanding examination issues. 

  

	 	a.	 If the Company’s most recently submitted Proof of Loss Report(s) indicate that it has no losses resulting from a Loss Occurrence(s) during the
Contract Year, the SBA shall after 36 months request that the Company execute a final commutation agreement. The final commutation agreement shall constitute a complete and final release of all obligations of the SBA with respect to all claims and
losses. If the Company chooses not to execute a 

  
 14 

	 	
final commutation agreement, the SBA shall be released from all obligations 60 months following the end of the Contract Year if no Proof of Loss Report(s) indicating reimbursable losses have been
filed and the commutation shall be deemed concluded. However during this time, if the Company determines that it does have losses to report for FHCF reimbursement, the Company must submit an updated Proof of Loss Report(s) prior to the end of 60
months after the Contract Year and the Company shall be required to follow the commutation provisions and time frames otherwise specified in this section. 

  

	 	b.	If the Company has submitted a Proof of Loss Report(s) indicating that it does have losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA may
require the Company to submit within 30 days an updated, current Proof of Loss Report(s) for each Loss Occurrence during the Contract Year. The Proof of Loss Report(s) must include all paid losses as well as all outstanding losses and incurred but
not reported losses, which are not finally settled and which may be reimbursable losses under this Contract, and must be accompanied by supporting documentation (at a minimum an adjuster’s summary report or equivalent details) and a copy of a
written opinion on the present value of the outstanding losses and incurred but not reported losses by the Company’s certifying actuary. Failure of the Company to provide an updated current Proof of Loss Report(s), supporting documentation, and
an opinion by the date requested by the SBA may result in referral to the Office of Insurance Regulation for a violation of the Contract. Increases in reported paid, outstanding, or incurred but not reported losses on original or corrected Proof of
Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or commutation. 

  

	 	2.	Determining the present value of outstanding claims and losses. 

  

	 	a.	If the Company exceeds or expects to exceed its Retention, the Company and the SBA or their respective representatives shall attempt, by mutual agreement, to agree upon
the present value of all outstanding claims and losses, both reported and incurred but not reported, resulting from Loss Occurrences during the Contract Year. Payment by the SBA of its portion of any amount or amounts so mutually agreed and
certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA in respect of all claims and losses, both reported and unreported, under this Contract. 

 

	 	b.	If agreement on present value cannot be reached within 90 days of the FHCF’s receipt of the final Proof of Loss Report(s) and supporting documentation, the Company
and the SBA may mutually appoint an actuary, adjuster, or appraiser to investigate and determine such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such claims or
losses. 

  

	 	c.	If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, as provided in this paragraph. 

 

	 	i.	One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days, the
other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall
be made by drawing lots. 

  

	 	ii.	All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the
American Academy of Actuaries. 

  

	 	iii.	None of the actuaries shall be under the control of either party to this Contract. 

  
 15 

	 	iv.	 Each party shall submit its case to the panel in writing on the 30th day after the appointment of the third actuary. Following the submission of the case to the panel, the parties are
prohibited from providing any further information or other communication except at the request of the panel. Such responses to requests from the panel must be in writing and simultaneously provided to the other party and all members of the panel,
except that the panel may require the response to be provided in a meeting or teleconference attended by both parties and all members of the panel, 

  

	 	v.	The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties, 

 

	 	d.	The reasonable and customary expense of the actuaries and of the commutation (as a result of b. and c. above) shall be equally divided between the two parties. Said
commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA. 

  

	(4)	Advances 

  

	 	(a)	 In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make advances for loss reimbursements as defined herein, at market
interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the
Company’s paid and reported outstanding losses for Covered Policies (excluding all incurred but not reported [IBNR] losses) as reported on a Proof of Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the
FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under paragraph (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable
after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under subparagraphs (c) and (e) below. All
reimbursements due to a Company shall be offset against any;,
amount of outstanding advances plus the interest due thereon. 

  

	 	(b)	For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate
as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts.
In addition to the prime rate, an additional 5% interest charge will apply on excess advances. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the
Company’s Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursements) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue
on the outstanding balance of the advance(s) until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). Interest shall be billed on a periodic
basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company
reimburses the FHCF for the overpayment. 

  

	 	(c)	If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify
outstanding and incurred but not reported losses as reported on the applicable December Proof of Loss Report. 

  

	 	(d)	The specific type of advances enumerated in Section 215.555, Florida Statutes, follow. 

 

	 	1.	Advances to Companies to prevent insolvency, as defined under Article XIV of this Contract. 

 

	 	a.	Section 215.555(4)(e)l., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50
percent of the SBA’s estimate of the reimbursement due to the Company. 

  
 16 

	 	b.	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company
demonstrates it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information: 

 

	 	i.	Current assets; 

  

	 	ii.	Current liabilities other than liabilities due to the Covered Event; 

  

	 	iii.	Current surplus as to policyholders; 

  

	 	iv.	Estimate of other expected liabilities not due to the Covered Event; and Amount of reinsurance available to pay claims for the Covered Event under other reinsurance
treaties. 

  

	 	c.	The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the
circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event
in a timely manner. 

  

	 	2.	Advances to entities created pursuant to Section 627.351(6), Florida Statutes. 

 

	 	a.	Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90%
of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.

  

	 	b.	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6),
Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event. 

  

	 	3.	Advances to limited apportionment companies. 

 Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies. 

 

	 	(e)	In determining whether or not to grant an advance and the amount of an advance, the SBA: 

 

	 	1.	Shall determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its Obligations to other Companies prior
to granting an advance; 

  

	 	2.	Shall review and consider all the information submitted by such Companies; 

 

	 	3.	Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes; 

 

	 	4.	Shall consult with all relevant regulatory agencies to seek all relevant information; 

 

	 	5.	Shall review the damage caused by the Covered Event and when that Covered Event occurred; 

 

	 	6.	Shall consider whether the Company has substantially exhausted amounts previously advanced; 

 

	 	7.	Shall consider any other factors deemed relevant; and 

  

	 	8.	Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the
amount of advance requested. 

  

	 	(f)	Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event or Covered Events which have precipitated the
immediate need to continue to pay additional claims as they become due. 

  
 17 

	(5)	Delinquent Payments 

Failure to submit a payment when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. Interest on
late payments shall be due as set forth in Article VIII(2) and Article IX(2) of this Contract. 
  

	(6)	Inadequate Data Submissions 

 If exposure data or other information required to be reported by the Company under the terms of this Contract is not received by the FHCF in the format specified by the FHCF or is inadequate to the extent
that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination
report issued by the SBA, the first resubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission
shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance. 
  

	(7)	Delinquent Submissions 

Failure to submit an exposure submission, resubmission, loss report, or commutation documentation when due is a violation of the terms of
this Contract and Section 215.555, Florida Statutes. 
 ARTICLE XI - TAXES 
 In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Premium herein when making premium tax returns to the appropriate authorities.
Should any taxes be levied on the Company in respect of the Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes. 
 ARTICLE XII - ERRORS AND OMISSIONS 
 Any inadvertent delay, omission, or error on the part
of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made. 
 ARTICLE XIII - INSPECTION OF RECORDS 
 The Company shall allow the SBA to inspect, examine,
and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, losses, or legal proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure data or losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or loss
examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss reimbursement examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole
discretion of the SBA. If the FHCF Finance Corporation has issued revenue bonds and relied upon the exposure and loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to
require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured
values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records
retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition
(10)(d) of Article V herein, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage
for the dwelling in place under the lapsed homeowner’s policy. 

  
 18 

	(1)	Examination Requirements for Exposure Verification 

 The Company shall retain complete and accurate records, in policy level detail, of all exposure data submitted to the SBA in any Contract Year until the SBA has completed its examination of the
Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred losses until the completion of the loss reimbursement
examination for that Contract Year. The records to be retained shall include the exam file which supports the exposure reported to the SBA and any other information which would allow for a complete examination of the Company’s reported exposure
data. The exam file shall be prepared according to the SBA Exam File Specifications outlined in the Data Call. The Company must also have available, at the time of the examination, a copy of its underwriting manual, a copy of its rating manual, and
staff to respond to the questions of the SBA or its agents. The Company is also required to retain declarations pages and policy applications to support reported exposure. To meet the requirement that the application must be retained, the Company
may retain either the actual application or may retain the actual application in an electronic format. A complete list of records to be retained is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C. 

 

	(2)	Examination Requirements for Loss Reports 

 The Company shall retain complete and accurate records of all reported losses and/or advances submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable losses and
commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted
for the Contract Year under Rule 19-8.030, F.A.C. The Company must also retain the required exposure exam file for the Contract Year in which the loss occurred, and must have available any other information which would allow for a complete
examination of the Company’s losses. 
  

	(3)	Examination Procedures 

  

	 	(a)	The FHCF will send an examination notice to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements
of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF upon request. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

  

	 	(b)	The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the
FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is on site. Any records not required to be provided
to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported losses which are provided after the examiner has left the work-site will, at the SBA’s discretion, result in an
additional examination of exposure and/or loss records or an extension or expansion of the examination already in progress. All costs associated with such additional examination or with the extension or expansion of the original examination shall be
borne by the Company. 

  

	 	(c)	At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward
an examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations. 

  

	 	(d)	If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized
and the exam file closed. 

  
 19 

	 	(e)	If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.

  

	 	(f)	1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter
outlining the process for resubmission and including a deadline to resubmit. The resubmission will include a data file to be submitted to the FHCF’s Administrator and an exam file to be submitted to the offices of the SBA. The resubmission is
also required to be accompanied by a detailed written description of the specific changes made to the resubmitted data. Once the resubmission is received by the FHCF’s Administrator, the FHCF’s Administrator calculates a revised
Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the
resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed. 

 2. If the recommendation of the examiner is either to resubmit the Company’s exposure data for the Contract Year in question or giving the option to pay the estimated Premium difference, then the
FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company
chooses to resubmit, the same procedures outlined in Article XlH(3)(f)l. apply. 
  

	 	(g)	If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a
letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. The updated Proof of Loss Report(s) will be submitted to the FHCF’s Administrator with a copy of the Proof of Loss Report(s) and a
supporting detailed claims listing to be submitted to the offices of the SBA. The report is required to be accompanied by a detailed written description of the specific changes made. Once the Proof of Loss Report(s) is received by the FHCF
Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed or
contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed. 

 

	 	(h)	If the Company continues to dispute the examiner’s findings and/or recommendations and no resolution of the disputed matters is obtained through discussions
between the Company and FHCF management, then the process within the SBA is at an end and further administrative remedies may be pursued under Chapter 120, Florida Statutes. 

 

	 	(i)	The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the
Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be
reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF. 

 

	(4)	Costs of the Examinations 

The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive for a Company to delay preparations for
an examination, the SBA shall be reimbursed by the Company for any examination expenses incurred in addition to the usual and customary costs, which additional expenses were incurred as a result of the Company’s failure, despite proper notice,
to be prepared for the examination or as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate. The Company shall be notified of any administrative remedies which may be
obtained under Chapter 120, Florida Statutes. 

  
 20 

 ARTICLE XIV - INSOLVENCY OF THE COMPANY 
 Company shall notify the FHCF immediately upon becoming insolvent. Except as otherwise provided below, no covered loss reimbursements will be made until the FHCF has completed and closed its examination
of the insolvent Company’s losses, unless an agreement is entered into by the court appointed receiver specifying that all data and computer systems required for FHCF exposure and loss examinations will be maintained until completion of the
Company’s exposure and loss examinations. Except as otherwise provided below, in order to account for potential erroneous reporting, the SBA shall hold back 25% of requested loss reimbursements until the exposure and loss examinations for the
Company are completed. Only those losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolvent
insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of
competent jurisdiction. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and loss examinations to take
place immediately without the usual notice and response time limitations and allowing the FHCF to make loss reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed and before the
response time expires for claims filing by reinsurers and financial institutions, which have a priority interest in those funds pursuant to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the availability of the necessary
records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by reinsurers or financial institutions having a priority interest in these funds, that the funds
will be repaid to the FHCF by FIGA within a reasonable time. 
 ARTICLE XV - TERMINATION 

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules. 

ARTICLE XVI - VIOLATIONS 
 Pursuant to
the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of Florida. Pursuant to the provisions of Section 215.555(11),
Florida Statutes, the SBA is authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract. 

ARTICLE XVII - APPLICABLE LAW 
  

	(1)	Applicable Law: This Contract shall be governed by and construed according to the laws of the State of Florida in respect of any matter relating to or arising
out of this Contract. 

  

	(2)	Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the Uniform Rules of Procedure, codified as Chapters 28-101 through 28-111, F.A.C., a person
whose substantial interests are affected by a decision of the SBA regarding the FHCF may request a hearing within 21 days shall have-waived his or her right to a hearing. The hearing may be a formal hearing or an informal hearing pursuant to the
provisions of Sections 120.569 and 120.57, Florida Statutes. The petition must be filed (received) in the office of the Agency Clerk, General Counsel’s Office, State Board of Administration of Florida, P.O. Box 13300, Tallahassee, EL 32317-3300
or 1801 Hermitage Blvd., Suite 100, Tallahassee, FL 32308, within the 21 day period. 

  
 21 

 ARTICLE XVIII - REIMBURSEMENT CONTRACT ELECTIONS 

Reimbursement Percentage 
 For purposes of
determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company is a member of an NAIC
group, all members must elect the same reimbursement percentage, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same
reimbursement percentage as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90% reimbursement percentage. The Company shall not be permitted to change
its reimbursement percentage during the Contract Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the
issuance of revenue bonds, until the bonds have been fully repaid. 
  

			
	IMPORTANT NOTE:	  	 The FHCF has issued revenue bonds as a result of its liabilities for Covered Events under the Contract Year effective June 1,
2005. As those bonds have not been fully repaid, the Company may not select a Reimbursement Percentage that is less than its selection under the prior Contract Year effective June 1,2011.

 The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2011 was as
follows: Homeowners Choice Property and Casualty Insurance Company - 90% 
  

	(a)	NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group: 

 
 

 
  

	(b)	Reimbursement Percentage Election: The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time,
June 1, 2012, to 12:00 a.m., Eastern Time, May 31, 2013, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company):

  

											
	

	 	45%    OR	 	

	 	75%    OR	 	

	 	90%                

 Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and Commercial Non-Habitational
Exposure, Written on a Commercial Policy 
 This section is applicable to all Companies which either have exposure for single structures
with a mix of commercial habitational and commercial non-habitational exposure written under a Commercial Policy, or have the authority to write such policies. If the Company does not have the authority to write this type of exposure, this section
does not apply; initial the N/A box on the next page, which completes this ARTICLE. If the Company does write, or has the authority to write, this type of exposure, please read and complete the remainder of this ARTICLE.

 Commercial-Residential Class Code 
 If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial-residential class code (based on a classification plan on file with and reviewed by the
Administrator), the entire exposure for the structure should be reported to the FHCF under the Data Call, and the FHCF will reimburse losses for the entire structure as well. 
 Commercial Non-Residential/Business Class Code 
 If a single structure is used for
both habitational and non-habitational purposes and the structure has a commercial non-residential or business class code (based on a classification plan on file with and reviewed by the Administrator), the habitational portion of that structure
should be identified and reported to the FHCF under the Data Call. 
 However, in recognition of the unusual nature of commercial structures
with incidental habitational exposure and the hardship some companies may face in having to carve out such incidental habitational exposure, as well as the losses to such structures, the FHCF will accommodate these companies by allowing them to
exclude the entire exposure for the single structure from their Data Call submission, providing the following two conditions are met: 
  

	(1)	The decision to not carve out and report the incidental habitational exposure shall apply to all such structures insured by the Company; and 

 

	(2)	If the incidental habitational exposure is not reported to the FHCF, the Company agrees it shall not report losses to the structure and the FHCF shall not reimburse any
losses to the structure. 

 Initial the CARVING box below if the Company is able to carve out and report its incidental
habitational exposure, OR, if this requirement presents a hardship, the Company must communicate its decision to not carve out and to not report the incidental exposure by having the individual executing this Contract on behalf of the Company
placing his or her initials in the NOT CARVING box below. If the Company does not currently write such policies, but has the authority to write such policies after the start date of this Contract, the decision to carve or not carve out the
incidental habitational exposure must be indicated below. 
  

									
	

	 	OR	 	

	 	OR	 	

	CARVING	 		 	NOT CARVING	 		 	NA

 By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable decision for the
corresponding Contract Year Data Call submission and any subsequent resubmissions. 
  

	Important 	Note: Since this election will impact your Data Call submission, please share this decision with the individual(s)
           responsible for compiling your Data Call submission. 

Additional Living Expense (ALE) Written as Time Element Coverage 
 If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e., coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the
‘Yes – Time Element ALE’ box below. If your Company does not write time element ALE coverage, initial ‘No – Time Element ALE’ box below. 
  

									
		 	

	  	OR	  	

	  	
		 	 Yes – Time
 Element ALE
	  		  	 No – Time
 Elememnt ALE
	  	

  
 23 

 ARTICLE XIX - SIGNATURES 
 Approved by: 
 Florida Hurricane Catastrophe Fund 

By: State Board of Administration of the State of Florida 
  

							
	By:	 	 /s/ Ashbel C. Williams Date
	 		 	 6/14/12

		 	Ashbel C. Williams	 		 	Date
		 	Executive Director & CIO	 		 	
		 		 		 	

 Approved as to legality: 
  

 

							
	By:	 	

	 		 	 6/14/12

		 		 		 	Date
				
		 	  
	 		 	
		 	Homeowners Choice Property and Casualty Insurance Company	 	
			
		 	Paresh Patel	 	                     
               CED
		 	Typed/Printed Name and Title
		 		 		 	
	By:	 	 /s/ Paresh Patel
	 		 	 2/29/2012

		 	Signature	 		 	Date

  
 24EX-10.20

 Exhibit 10.20 

 
 

 
 ****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material
has been filed separately with the U.S. Securities and Exchange Commission 
 PER OCCURRENCE EXCESS OF LOSS REINSURANCE
CONTRACT 
 EFFECTIVE: JUNE 1, 2012 
 ISSUED TO 
 HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE
COMPANY 
 TAMPA, FLORIDA 
 Including any and all companies that are or may hereafter become affiliated therewith 
  

 

 

 
  

 PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT 

TABLE OF CONTENTS 
  

					
	 ARTICLE 1
	  			
	 BUSINESS COVERED
	  	 	4	  
	 ARTICLE 2
	  			
	 TERM
	  	 	5	  
	 ARTICLE 3
	  			
	 SPECIAL TERMINATION
	  	 	5	  
	 ARTICLE 4
	  			
	 TERRITORY
	  	 	6	  
	 ARTICLE 5
	  			
	 EXCLUSIONS
	  	 	6	  
	 ARTICLE 6
	  			
	 RETENTION AND LIMIT
	  	 	8	  
	 ARTICLE 7
	  			
	 REINSURANCE PREMIUM
	  	 	10	  
	 ARTICLE 8
	  			
	 DEFINITIONS
	  	 	10	  
	 ARTICLE 9
	  			
	 PROFIT COMMISSION
	  	 	14	  
	 ARTICLE 10
	  			
	 ADVANCES
	  	 	14	  
	 ARTICLE 11
	  			
	 COMMUTATION
	  	 	14	  
	 ARTICLE 12
	  			
	 WARRANTY
	  	 	16	  
	 ARTICLE 13
	  			
	 ACCESS TO RECORDS
	  	 	16	  
	 ARTICLE 14
	  			
	 ARBITRATION
	  	 	16	  
	 ARTICLE 15
	  			
	 CONFIDENTIALITY
	  	 	17	  
	 ARTICLE 16
	  			
	 CURRENCY
	  	 	19	  

  
 

 
  

			
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	 ARTICLE 17
	  			
	 ENTIRE AGREEMENT
	  	 	19	  
	 ARTICLE 18
	  			
	 ERROR AND OMISSIONS
	  	 	19	  
	 ARTICLE 19
	  			
	 FEDERAL EXCISE TAX
	  	 	19	  
	 ARTICLE 20
	  			
	 GOVERNING LAW
	  	 	20	  
	 ARTICLE 21
	  			
	 INSOLVENCY
	  	 	20	  
	 ARTICLE 22
	  			
	 LATE PAYMENTS
	  	 	21	  
	 ARTICLE 23
	  			
	 LIABILITY OF THE REINSURER
	  	 	23	  
	 ARTICLE 24
	  			
	 LOSS NOTICES AND SETTLEMENTS
	  	 	23	  
	 ARTICLE 25
	  			
	 NO ASSIGNMENT
	  	 	24	  
	 ARTICLE 26
	  			
	 NON-WAIVER
	  	 	24	  
	 ARTICLE 27
	  			
	 NOTICES AND AGREEMENT EXECUTION
	  	 	24	  
	 ARTICLE 28
	  			
	 OFFSET
	  	 	25	  
	 ARTICLE 29
	  			
	 OTHER REINSURANCE
	  	 	25	  
	 ARTICLE 30
	  			
	 SALVAGE AND SUBROGATION
	  	 	25	  
	 ARTICLE 31
	  			
	 SERVICE OF SUIT
	  	 	26	  
	 ARTICLE 32
	  			
	 SEVERABILITY
	  	 	27	  
	 ARTICLE 33
	  			
	 TAXES
	  	 	27	  
	 ARTICLE 34
	  			
	 THIRD PARTY RIGHTS
	  	 	27	  
	 ARTICLE 35
	  			
	 INTERMEDIARY
	  	 	27	  

  
 

 
  

			
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 PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT 

(hereinafter called the “Contract”) 
 EFFECTIVE: JUNE 1, 2012 
 issued to 

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY 

Including any and/or all companies that are or may hereafter become affiliated therewith 

(hereinafter called the “Reinsured”) 
 by 
 THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABLITIES
AGREEMENT 
 ATTACHED TO THIS CONTRACT 
 (hereinafter called, with other participants, the “Reinsurers”) 

ARTICLE 1 

BUSINESS COVERED 
 This Contract
is to indemnify the Reinsured in respect of the liability that may accrue to the Reinsured as a result of loss or losses under Policies classified by the Reinsured as Property, in force at the effective date of this Contract, or issued or renewed
during the Term of this Contract, by or on behalf of the Reinsured, subject to the terms, conditions and limitations set forth herein. 

“Policy” is further clarified to mean only that portion of a policy or contract of insurance that insures real or personal property located in
the State of Florida to the extent such policy insures a Residential Structure, as defined in the Definitions Article herein, or the contents of a Residential Structure, located in the State of Florida. In addition, Policy as used herein shall only
include, to the extent applicable, the first-party property section of a Policy pertaining strictly to the structure, its contents, appurtenant structures, and/or Additional Living Expense. Additional Living Expense losses covered by the Reinsurer
are not to exceed 40% of the insured value of a Residential Structure or its contents based on the coverage provided in the Policy. Fair rental value, loss of rents, or business interruption losses are not covered by the Reinsurer. 

  
 

 
  

					
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 ARTICLE 2 
 TERM 
  

	1.	This Contract shall become effective at 12:00:01 a.m., Eastern Time, June 1, 2012, with respect to losses arising out of Loss Occurrences which commence at or
after that time and date, and shall remain in force until 11:59:59 p.m., Eastern Time, May 31, 2015, unless earlier terminated in accordance with the provisions of the Special Termination Article herein. 

 

	2.	Pursuant to the terms of this Contract, the Reinsurer shall not be liable for Loss Occurrences which commence either prior to the effective time and date of this
Contract or after the effective time and date of expiration or termination. In the event a Loss Occurrence covered hereunder is in progress at the end of any Contract Year, the Reinsurer’s liability hereunder shall, subject to the other terms
and conditions of this Contract, be determined as if the entire Loss Occurrence had occurred prior to the end of such Contract Year, provided that no part of such Loss Occurrence is claimed in the subsequent Contract Year or against any renewal or
replacement of this Contract. 

 ARTICLE 3 
 SPECIAL TERMINATION 
  

	1.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving the Reinsured written notice, in the event the Reinsured has become insolvent or has
been placed into liquidation, receivership, supervision, administration, winding-up or under a scheme of arrangement or similar proceedings (whether voluntary or involuntary), or proceedings have been instituted against the Reinsured for the
appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations. 

 

	2.	Notwithstanding the provisions above, the Reinsured and Reinsurer may terminate this Contract upon the written agreement of both parties. 

 

	3.	In the event this Contract is terminated in accordance with the provisions above, the Reinsurer shall have no liability for losses arising out of Loss Occurrences
commencing after the effective date of termination. 

  
 

 
  

					
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 ARTICLE 4 
 TERRITORY 
 The territorial limits of this Contract shall be identical with those of
the Reinsured’s Policies issued in the State of Florida. 
 ARTICLE 5 

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

	1.	Any losses not defined as being within the scope of a Policy as used herein. 

 

	2.	Any losses which do not arise from a Covered Event. 

  

	3.	Any policy which excludes wind or hurricane coverage. 

  

	4.	Any Excess Policy or Deductible Buy-Back Policy, as defined in the Definitions Article herein, that requires individual ratemaking. 

 

	5.	Any policy for Residential Structures, as defined in the Definitions Article herein, that provides a layer of coverage underneath an Excess Policy issued by a different
insurer. 

  

	6.	Any liability of the Reinsured attributable to losses for fair rental value, loss of rent or rental income, or business interruption. 

 

	7.	Any collateral protection policy that does not meet the definition of Policy as used herein. 

 

	8.	Any reinsurance assumed by the Reinsured, unless by prior mutual agreement. 

 

	9.	Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes. 

 

	10.	Any exposure for homeowner associations if no habitational structures are insured under the Policy. 

 

	11.	Any exposure for homes and condominium structures or units that are non-owner occupied and rented for six or more rental periods by different parties during the course
of a 12-month period. 

  
 

 
  

					
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	12.	Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational
structures that are not nursing homes will not be subject to this exclusion. 

  

	13.	Any exposure under commercial Policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a Policy covering only
the pool of an apartment complex). 

  

	14.	Personal contents in a commercial storage facility (including jewelry in an off-premises vault) covered under a Policy that covers only those personal contents.

  

	15.	Policies covering only Additional Living Expense. 

  

	16.	Any exposure for barns or barns with apartments. 

  

	17.	Any exposure for builders risk coverage or new Residential Structures still under construction. 

 

	18.	Any exposure for recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing and written on a separate Policy or endorsement.

  

	19.	Any liability of the Reinsured for Extra Contractual Obligations or Loss in Excess of Policy Limits. 

 

	20.	Any losses paid in excess of a Policy’s hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building,
appurtenant structures, contents, and Additional Living Expense). This exclusion includes overpayments of a specific individual coverage limit even if total payments under the Policy are within the aggregate policy limit. 

 

	21.	Any losses paid under a Policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that
Policy under the data call for the applicable Contract Year (unless policy limits have changes after June 30 of the Contract Year). 

  

	22.	Any losses for which the Reinsured’s claim files do not adequately support. 

 

	23.	Any exposure for, or losses attributable to, loss assessment coverage. 

  
 

 
  

					
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	24.	Any liability assumed by the Reinsured from Pools, Associations, and Syndicates, with the exception of Policies assumed from Citizens under the terms and conditions of
an executed assumption agreement between the Reinsured and Citizens. 

  

	25.	All liability of the Reinsured 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, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the
Reinsured of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which have 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. 

  

	26.	Any liability of the Reinsured for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether
direct or indirect, proximate or remote, and regardless of any other cause of event contributing concurrently or in any other sequence to the loss. 

  

	27.	Coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal wave, overflow
of a body of water, storm surge, or spray from any of these, whether or not driven by wind. 

  

	28.	Specialized Fine Arts Risks. 

ARTICLE 6 

RETENTION AND LIMIT 
  

	1.	As respects business subject to this Contract, the Reinsured shall retain and be liable for the first combined amount of Ultimate Net Loss and Loss Adjustment Expense
Reimbursement as defined in the Definitions Article, equal to the applicable Reinsured’s Retention as defined in paragraph (4) of this Article, arising out of each Loss Occurrence. 

  
 

 
  

					
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 The Reinsurer shall then be liable for: 

 

	2.	The combined amount by which such Ultimate Net Loss and Loss Adjustment Expense Reimbursement exceeds the applicable Reinsured’s Retention, but the liability of
the Reinsurer shall not exceed the amount of the Reinsurer’s Per Occurrence Limit, as defined in paragraph (3) of this Article, as respects any one Loss Occurrence, nor shall it exceed the amount of Reinsurer’s Contract Year Limit, as
defined in paragraph (3) of this Article, as respects all loss or losses arising out of Loss Occurrences commencing during any one Contract Year, nor shall it exceed the amount of Reinsurer’s Contract Limit, as defined in paragraph
(3) of this Article, as respects all loss or losses arising out of Loss Occurrences commencing during the Term of this Contract; 

  

	3.	Per the provisions of paragraph (2) above, the reinsurance limits are as follows: 

 

	 	a.	“Reinsurer’s Per Occurrence Limit” shall be equal to $20,000,000. 

 

	 	b.	“Reinsurer’s Contract Year Limit” shall be equal to $40,000,000. 

 

	 	c.	“Reinsurer’s Contract Limit” shall be equal to $80,000,000. 

 

	4.	“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during any one Contract Year, shall equal the greater
of the following: 

  

	 	i.	$7,500,000; or 

  

	 	ii.	15% of the Reinsured’s Policyholders’ Surplus as of December 31 of the calendar year preceding the beginning of the then current Contract Year.

  

	5.	Notwithstanding the provisions above, no claim shall be made under the terms and conditions of this Contract in any one Loss Occurrence unless at least two risks
insured or reinsured by the Reinsured are involved in such Loss Occurrence. For purposes hereof, the Reinsured shall be the sole judge of what constitutes “one risk.” 

 

	6.	Recovery amounts shall not be reduced by reinsurance paid or payable to the Reinsured from other sources. 

 

	7.	Once the Reinsurer’s Contract Limit has been exhausted, the Reinsured will not be entitled to further recovery, however the Reinsured will remain liable for any
unpaid and remaining premium due the Reinsurer. 

  
 

 
  

					
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 ARTICLE 7 
 REINSURANCE PREMIUM 
  

	1.	The Reinsured shall pay the Reinsurer a deposit premium of $********* payable in three equal installments of $********* on July 1, 2012, July 1, 2013 and
July 1, 2014. 

  

	2.	In the event of termination in accordance with the provisions of the Special Termination Article, and notwithstanding any other provision in this Contract, reinsurance
premium shall be deemed earned in accordance with the deposit schedule defined in paragraph (1) of this Article, or in proportion to the exhaustion of the Reinsurer’s Contract Limit, whichever is greater. 

ARTICLE 8 

DEFINITIONS 
 DEDUCTIBLE BUY-BACK
POLICY 
 “Deductible Buy-Back Policy” shall mean a specific Policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a Policy issued by another insurer. 
 EXCESS POLICY 

“Excess Policy”, for the purposes of this Contract, shall mean a Policy that provides insurance protection for large commercial property risks
that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible. 
 RESIDENTIAL STRUCTURES 
 “Residential Structures” are used herein shall be defined as
dwelling units, including the primary structure and appurtenant structures insured under the same Policy and any other structures covered under endorsements associated with a Policy covering a residential structure. Covered Residential Structures do
not include any structures listed under the Exclusions Article herein or structures used solely for non-residential purposes. 

  
 

 
  

					
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 COVERED EVENT 
 “Covered Event” shall mean any one storm declared to be a hurricane by the National Hurricane Center, including any storm that is declared to be a hurricane and is subsequently downgraded while
in the State of Florida, which causes insured losses in Florida, regardless of whether the storm makes landfall as a hurricane. Furthermore, any storm, including a tropical storm, which does not become a hurricane, is not considered a Covered Event.

 LOSS OCCURRENCE 
 “Loss
Occurrence” shall mean the sum of all individual losses incurred under Policies directly resulting from any one disaster, accident or loss or series of disasters, accidents or losses occurring during any period of 96 consecutive hours arising
out of the same Covered Event. The Reinsured may choose the time and date when any such period of consecutive hours commences provided that it is not earlier than the time and date of the occurrence of the first recorded individual loss sustained by
the Reinsured arising out of that Covered Event provided that only one such period of 96 consecutive hours shall apply with respect to one Covered Event, regardless of the duration of the event. 

ULTIMATE NET LOSS 
 “Ultimate Net
Loss” as used herein shall be defined as the sum or sums (excluding Loss in Excess of Policy Limits, Extra Contractual Obligations and Loss Adjustment Expense, as hereinafter defined) paid or payable by the Reinsured in settlement of claims
arising from Covered Events 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 Reinsured’s Ultimate Net Loss has been ascertained. 
 LOSS
ADJUSTMENT EXPENSE REIMBURSEMENT 
 “Loss Adjustment Expense Reimbursement” are used herein shall mean 5% of the amount of claim and
loss paid by the Reinsurer under the terms and conditions of this Contract. Loss Adjustment Expense Reimbursement will be calculated by the Reinsured and submitted to the Reinsurer with any and all requests for claim and loss payment under the terms
and conditions of this Contract. 

  
 

 
  

					
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 LOSS ADJUSTMENT EXPENSE 
 “Loss Adjustment Expense” as used herein shall be defined as expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims,
regardless of how such expenses are classified for statutory reporting purposes. Loss Adjustment Expense shall include, but not be limited to: 
  

	1.	Court costs; 

  

	2.	Costs of supersedeas and appeal bonds; 

  

	3.	Monitoring counsel expenses; 

  

	4.	Legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions
(deemed to have been incurred by the Reinsured on the date of the actual or alleged loss giving rise to the action); 

  

	5.	Post-judgment interest; 

  

	6.	Pre-judgment interest, unless included as part of an award or judgment; 

  

	7.	Expenses and a pro rata share of salaries of Reinsured field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other
Reinsured employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; 

 

	8.	Subrogation, salvage and recovery expenses; 

  

	9.	Advertising or other extraordinary communication expenses incurred as a result of a covered Loss Occurrence. 

  
 

 
  

					
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 LOSS IN EXCESS OF POLICY LIMITS & EXTRA CONTRACTUAL OBLIGATIONS 

“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 any amount paid or payable by the Reinsured in excess of its Policy limits, but otherwise within the terms of its
Policy, such loss in excess of the Reinsured’s Policy limits having been incurred because of, but not limited to, failure by the Reinsured to settle within the Policy limits or by reason of the Reinsured’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 any punitive, exemplary, compensatory or consequential damages paid or payable by the Reinsured, 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 Reinsured to settle within the Policy limits or by reason
of the Reinsured’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. 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. 

CONTRACT YEAR 
 “Contract Year” as
used herein shall be defined as the period from 12:00:01 a.m., Eastern Time, June 1, 2012, through 11:59:59 p.m., Eastern Time, May 31, 2013, and each subsequent 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 to the effective time and date of termination. 
 TERM OF THIS CONTRACT 
 “Term of this Contract” as used herein shall be defined as the
period from 12:00:01 a.m., Eastern Time, June 1, 2012, through 11:59:59 p.m., Eastern Time, May 31, 2015. However, if this Contract is terminated, Term of this Contract as used herein shall mean the period from 12:00:01 a.m., Eastern Time,
June 1, 2012 to the effective time and date of termination. 

  
 

 
  

					
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 ARTICLE 9 
 PROFIT COMMISSION 
  

	1.	The Reinsurer shall pay the Reinsured a Profit Commission, if any, during the Term of this Contract based on the combined premiums and losses of this Contract as
computed as follows: 

  

	 	a.	100% of Deposit Premium paid, less 

  

	 	b.	The amount of Ultimate Net Loss ceded to this Contract in accordance with the Retention and Limit Article, less 

 

	 	c.	Loss Adjustment Expense Reimbursement, less 

  

	 	d.	$24,000,000. 

  

	2.	If the above computation yields a positive amount, such commission payment will be due within 30 days after all losses, if any, are paid or commuted. In any case, the
Profit Commission shall only be payable upon the release of the Reinsurer by the Reinsured and the Reinsured hold harmless of the Reinsurer, from any further loss or liability whatsoever under the terms and conditions of this Contract

 ARTICLE 10 
 ADVANCES 
 At the written request of the Reinsured, the Reinsurer may make advance
payments to the Reinsured which allow the Reinsured to continue to pay claims in a timely manner. Advances will be made based on the Reinsured’s paid and reported outstanding losses (excluding all incurred but not reported losses) as reported
per the provisions of the Loss Notices and Settlements Article, and shall include Loss Adjustment Expense Reimbursement. 

ARTICLE 11 

COMMUTATION 
  

	1.	Within 90 days of the effective date of expiration or termination of the Contract, outstanding losses, if any, will be commuted. 

  
 

 
  

					
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	2.	The present value of outstanding claims and losses will be determined as follows: 

 

	 	a.	If the Reinsured exceeds, or expects to exceed, the applicable Reinsured’s Retention, the Reinsured and the Reinsurer or their respective representatives shall
attempt, by mutual agreement, to agree upon the present value of all outstanding claims and losses, both reported and incurred but not reported, resulting from Loss Occurrences during each Contract Year. Payment by the Reinsurer of its portion of
any amount or amounts so mutually agreed and certified by the Reinsured’s certifying actuary shall constitute a complete and final release of the Reinsurer in respect of all claims and losses, both reported and unreported, under this Contract.

  

	 	b.	If agreement on present value cannot be reached within 90 days of the Reinsurer’s receipt of the final loss notice and supporting documentation, the Reinsured and
the Reinsurer may mutually appoint an actuary, adjuster, or appraiser to investigate and determine such claims or losses. If both parties then agree, the Reinsurer shall pay its portion of the amount so determined to be the present value of such
claims or losses. 

  

	 	c.	If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, one to be chosen by each party and the third by the two so chosen. If
either party does not appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two,
of whom the other shall decline one and the decision shall be made by drawing lots. All the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the
American Academy of Actuaries. None of the actuaries shall be under the control of either party to this Contract. Each party shall submit its case to its actuary within 30 days of the appointment of the third actuary. The decision in writing of any
two actuaries, when filed with the parties hereto, shall be final and binding on both parties. 

  

	 	d.	The reasonable and customary expense of the actuaries and of the commutation (as a result of subparagraphs (b) and (c) above) shall be equally divided between
the two parties. Said commutation shall take place in Tampa, Florida, unless some other place is mutually agreed upon by the Reinsured and the Reinsurer. 

  
 

 
  

					
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 ARTICLE 12 
 WARRANTY 
 It is warranted that Claddaugh Casualty Insurance Co., Ltd. will assume a
50% participation on this Contract. It is furthermore warranted that such line will be retained net and unreinsured by Claddaugh Casualty Insurance Co., Ltd. 
 ARTICLE 13 
 ACCESS TO RECORDS 

The Reinsurer or its designated representatives shall have access to the books and records of the Reinsured on matters relating to this reinsurance at all
reasonable times, and at the location where such books and records are maintained in the ordinary course of business, for the purpose of obtaining and making copies of information concerning this Contract or the subject matter thereof. Notification
of a request for inspection of records shall be sent to the Reinsured by the Reinsurer in written form. The Reinsurer’s right of audit and inspection shall continue as long as either party has a claim against the other arising out of this
Contract. 
 ARTICLE 14 
 ARBITRATION 
  

	1.	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 Reinsured, 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 Underwriters at Lloyd’s. 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, the two Arbiters shall request the American Arbitration Association to appoint the Umpire. If the American Arbitration Association fails to appoint the Umpire within 30 days after it has been requested to do so, either party may
request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the Umpire. 

  
 

 
  

					
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	2.	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.

  

	3.	If more than one reinsurer is involved in the same dispute, all such reinsurers shall, at the option of the Reinsured, constitute and act as one party for purposes of
this Article and communications shall be made by the Reinsured 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. 

  

	4.	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. 

 

	5.	Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract. Notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of the State of Florida. 

 ARTICLE 15 

CONFIDENTIALITY 
  

	1.	The Reinsurer hereby acknowledges that the terms and conditions of this Contract, any materials provided in the course of audit or inspection and any documents,
information and data provided to it by the Reinsured, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (hereinafter referred to as “Confidential Information”) are proprietary
and confidential to the Reinsured. Confidential Information shall not include documents, information or data that the Reinsurer can show: 

  

	 	a.	Are publicly available or have become publicly available through no unauthorized act of the Reinsurer; 

  
 

 
  

					
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	 	b.	Have been rightfully received from a third person without obligation of confidentiality; or 

 

	 	c.	Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality. 

 

	2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies
(except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except: 

 

	 	a.	When required by retrocessionaires subject to the business ceded to this Contract; 

 

	 	b.	When required by regulators performing an audit of the Reinsurer’s records and/or financial condition; 

 

	 	c.	When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; 

 

	 	d.	When required by attorneys in connection with an actual or potential dispute hereunder; or 

 

	 	e.	When required for the Reinsurer’s internal operations directly related to carrying out the terms and conditions of this Contract. 

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or
enforcement of its rights under this Contract. 
  

	3.	Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all
of the Confidential Information, the Reinsurer agrees to provide the Reinsured with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Reinsured in maintaining the confidentiality
provided for in this Article. 

  

	4.	The provisions of this Article shall extend to the officers, directors, shareholders and employees of the Reinsurer and its affiliates, and shall be binding upon their
successors and assigns. 

  
 

 
  

					
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 ARTICLE 16 
 CURRENCY 
  

	1.	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. 

  

	2.	Amounts paid or received by the Reinsured 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 Reinsured. 

 ARTICLE 17 

ENTIRE AGREEMENT 
 This Contract
and any related trust agreement, Letter of Credit and/or special acceptance, shall constitute 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 shall be null and void unless made by written amendment to this Contract and signed by a duly authorized officer of each of the parties hereto. 

ARTICLE 18 
 ERROR
AND OMISSIONS 
 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 19 

FEDERAL EXCISE TAX 
  

	1.	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. 

  
 

 
  

					
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	2.	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
Reinsured or its agent should take steps to recover the tax from the United States Government. 

 ARTICLE 20

 GOVERNING LAW 

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

ARTICLE 21 

INSOLVENCY 
  

	1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

  

	2.	In the event of the insolvency of one or more of the Reinsured’s companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator,
receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured or on the basis of claims files and allowed in the liquidation proceeding, whichever may be required by
applicable stature, without diminution because of the insolvency of the Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured 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 Reinsured 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 Reinsured solely as a
result of the defense undertaken by the Reinsurer. 

  
 

 
  

					
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	3.	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 Reinsured. 

  

	4.	It is further understood and agreed that, in the event of the insolvency of one or more of the Reinsured’s companies, the reinsurance under this Contract shall be
payable directly by the Reinsurer to the Reinsured 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 or other party as more specifically limited by any statute or regulation applicable hereto, of such reinsurance in the event of the insolvency of the Reinsured or (2) where the Reinsurer with the consent of the direct insured or insureds
has assumed such Policy obligations of the Reinsured as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Reinsured to such payees. However, the exceptions provided in (1) and
(2) above shall apply only to the extent that applicable statutes or regulations specifically permit such exceptions. 

 ARTICLE 22 
 LATE PAYMENTS 

 

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

 

	2.	In the event any premium, loss or other payment due either party is not received by the payment due date, the party to whom payment is due may 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: 

 

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

 

	 	b.	0.016%; times 

  

	 	c.	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 party to whom payment is due. 

  
 

 
  

					
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	3.	If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law or is held unenforceable by an arbitrator or a court of
competent jurisdiction, such interest rate shall be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated
in any way. 

  

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

 

	 	a.	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 of the initial billing for each such payment. 

 

	 	b.	Any claim or loss payment due the Reinsured hereunder shall be deemed due 30 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 30 days, interest will accrue on the payment amount overdue in accordance with paragraphs (2) and (3) above, from the date the proof of loss or demand for payment was transmitted to the
Reinsurer. 

  

	 	c.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs (a) and (b) of this paragraph, 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 following transmittal of written notification that the provisions of this Article
have been invoked. 

  

	5.	Nothing herein shall be construed as limiting or prohibiting a 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. 

  
 

 
  

					
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	6.	Interest penalties arising out of the application of this Article that are $1,000 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 23 

LIABILITY OF THE REINSURER 
  

	1.	The liability of the Reinsurer shall follow that of the Reinsured in every case and be subject in all respects to all the general and specific stipulations, clauses,
waivers, interpretations and modifications of the Reinsured’s Policies and any endorsements thereon. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

  

	2.	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 24 
 LOSS NOTICES AND SETTLEMENTS 
  

	1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the
right to participate in the adjustment of such losses at its own expense. Inadvertent omission in dispatching the aforementioned notices will in no way affect the obligation of the Reinsurer under this Contract, provided the Reinsured informs the
Reinsurer of such omission promptly upon discovery. 

  

	2.	All loss settlements made by the Reinsured, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay
all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured. Notwithstanding the foregoing, and subject to the provisions set forth under paragraph
(2) of the Exclusions Article, should any judicial, regulatory, or legislative entity having legal jurisdiction require that the Reinsured be liable for any amounts that are otherwise outside the terms of the Reinsured’s original Policies,
the Reinsurer agrees that such amounts shall be subject always to the terms and conditions of this Contract. 

  
 

 
  

					
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 ARTICLE 25 
 NO ASSIGNMENT 
 Neither party shall assign its rights or obligations hereunder to any
other entity, whether or not an affiliate, without the express written consent of the other party, and any purported assignment in violation of this provision shall be deemed to not have occurred for the purposes of this Contract. 

ARTICLE 26 

NON-WAIVER 
 The failure of the
Reinsured or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights or remedies contained herein nor prevent either party from thereafter demanding full and
complete compliance nor prevent either party from exercising such rights or remedies in the future. 
 ARTICLE 27

 NOTICES AND AGREEMENT EXECUTION 
  

	1.	Whenever a notice, statement, report or any other written communication is required by this Contract, unless otherwise specified, such notice, statement, report or
other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first
class mail is also acceptable. 

  

	2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto: 

 

	 	a.	Paper documents with an original ink signature; 

  

	 	b.	Facsimile or electronic copies of paper documents showing an original ink signature; and/or 

 

	 	c.	Electronic records with an electronic signature made via an electronic agent. For the purposes of this Contract, the terms “electronic record”,
“electronic signature” and “electronic agent” shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto. 

  
 

 
  

					
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	3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. 

ARTICLE 28 

OFFSET 
 The Reinsured and the
Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract, including any balance or amounts due under a previous Contract Year for the current Contract Year. The party asserting
the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise. 
 In the event
of insolvency, any unpaid premium due the Reinsurer can be offset against loss recoveries. 
 ARTICLE 29 

OTHER REINSURANCE 
 The Reinsured
shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Reinsured and be entirely disregarded in applying all of the provisions of this Contract. 

ARTICLE 30 

SALVAGE AND SUBROGATION 
 The
Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage 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 Reinsured for its primary loss. The Reinsured hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to
prosecute all claims arising out of such rights if, in the Reinsured’s opinion, it is economically reasonable to do so. 

  
 

 
  

					
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 ARTICLE 31 
 SERVICE OF SUIT 
 (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.) 
  

	1.	This Article will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This
Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract. 

 

	2.	In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of
the Reinsured, 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. The
Reinsurer, once the appropriate court is accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted
against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal. 

  

	3.	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 Reinsured or any beneficiary hereunder arising out of this Contract. 

  
 

 
  

					
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 ARTICLE 32 
 SEVERABILITY 
 If any provision of this Contract 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. 
 ARTICLE 33 
 TAXES 
 In consideration of the terms under which this Contract is issued, the
Reinsured 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 of the District of Columbia. 

ARTICLE 34 
 THIRD
PARTY RIGHTS 
 This Contract is solely between the Reinsured and the Reinsurer, and in no instance shall any other party have any rights
under this Contract except as expressly provided otherwise in the Insolvency Article. 
 ARTICLE 35 

INTERMEDIARY 
 Advocate
Reinsurance Partners, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, reports and statements) relating to this Contract will be transmitted
to the Reinsured or the Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street, Suite 1250, Dallas, Texas 75201. All payments (including but not limited to premium, return premium, commissions, taxes, losses, Loss Adjustment
Expense Reimbursement, salvages and loss settlements) under this Contract shall be made directly between the Reinsured and the Reinsurer. 

  
 

 
  

					
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