Document:

exhibit103

21\F7V1116      Excess Catastrophe Reinsurance Contract  Effective:  March 1, 2021    FedNat Insurance Company  Sunrise, Florida   and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana                                                                      _______________________    Certain identified information has been omitted from this exhibit because it is not material and  would be competitively harmful if publicly disclosed.  Redactions are indicated by [***].  

 

21\F7V1116      Table of Contents      Article Page   1 Classes of Business Reinsured 1   2 Commencement and Termination 1   3 Territory 3   4 Exclusions 3   5 Retention and Limit 4   6 Florida Hurricane Catastrophe Fund 5   7 Other Reinsurance 5   8 Reinstatement 5   9 Definitions 6   10 Loss Occurrence 7   11 Loss Notices and Settlements 8   12 Cash Call 8   13 Salvage and Subrogation 8   14 Reinsurance Premium 9   15 Sanctions 9   16 Late Payments 9   17 Offset 10   18 Severability of Interests and Obligations 11   19 Access to Records 11   20 Liability of the Reinsurer 11   21 Net Retained Lines (BRMA 32E) 12   22 Errors and Omissions (BRMA 14F) 12   23 Currency (BRMA 12A) 12   24 Taxes (BRMA 50B) 12   25 Federal Excise Tax (BRMA 17D) 12   26 Reserves 13   27 Insolvency 14   28 Arbitration 15   29 Service of Suit (BRMA 49C) 16   30 Severability (BRMA 72E) 16   31 Governing Law (BRMA 71B) 16   32 Confidentiality 16   33 Non-Waiver 17   34 Agency Agreement (BRMA 73A) 18   35 Notices and Contract Execution 18   36 Intermediary 18    Schedule A   

 

21\F7V1116  Page 1    Excess Catastrophe Reinsurance Contract  Effective: March 1, 2021    entered into by and between     FedNat Insurance Company  Sunrise, Florida  and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana   (hereinafter collectively referred to as the "Company" except  to the extent individually referred to)    and    The Subscribing Reinsurer(s) Executing the  Interests and Liabilities Agreement(s)  Attached Hereto  (hereinafter referred to as the "Reinsurer")        Article 1 - Classes of Business Reinsured  By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the  Company under its policies in force at the effective time and date hereof or issued or renewed at  or after that time and date, and classified by the Company as Property business, including but  not limited to, Dwelling Fire, Inland Marine, Mobile Home, Commercial and Homeowners  business (including any business assumed from Citizens Property Insurance Corporation),  subject to the terms, conditions and limitations set forth herein and in Schedule A attached  hereto.      Article 2 - Commencement and Termination  A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, March 1, 2021,  with respect to losses arising out of loss occurrences commencing at or after that time and  date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2021.    B. Notwithstanding the provisions of paragraph A above, the Company may terminate a  Subscribing Reinsurer's percentage share in this Contract at any time by giving written  notice to the Subscribing Reinsurer in the event any of the following circumstances occur:     1. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the  Subscribing Reinsurer's accounting system) at the inception of this Contract has been  reduced by 20.0% or more of the amount of surplus (or the applicable equivalent)  12 months prior to that date; or  

 

21\F7V1116  Page 2       2. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the  Subscribing Reinsurer's accounting system) at any time during the term of this  Contract has been reduced by 20.0% or more of the amount of surplus (or the  applicable equivalent) at the date of the Subscribing Reinsurer's most recent financial  statement filed with regulatory authorities and available to the public as of the  inception of this Contract; or     3. The Subscribing Reinsurer's A.M. Best's rating has been assigned or downgraded  below A- and/or Standard & Poor's rating has been assigned or downgraded below  BBB+; or     4. The Subscribing Reinsurer has become, or has announced its intention to become,  merged with, acquired by or controlled by any other entity or individual(s) not  controlling the Subscribing Reinsurer's operations previously; or     5. A State Insurance Department or other legal authority has ordered the Subscribing  Reinsurer to cease writing business; or     6. The Subscribing Reinsurer has become insolvent or has been placed into liquidation,  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 Subscribing Reinsurer 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; or     7. The Subscribing Reinsurer has reinsured its entire liability under this Contract without  the Company's prior written consent; or     8. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty  treaty reinsurance business; or     9. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is  compensated on a contingent basis or is otherwise provided with financial incentives  based on the quantum of claims paid; or     10. The Subscribing Reinsurer has failed to comply with the funding requirements set forth  in the Reserves Article.    C. The "term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern  Standard Time, March 1, 2021 to 12:01 a.m., Eastern Standard Time, June 1, 2021.   However, if this Contract is terminated, the "term of this Contract" as used herein shall  mean the period from 12:01 a.m., Eastern Standard Time, March 1, 2021 to the effective  time and date of termination.    D. If this Contract is terminated or expires while a loss occurrence covered hereunder is in  progress, 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  

 

21\F7V1116  Page 3    termination or expiration of this Contract, provided that no part of such loss occurrence is  claimed against any renewal or replacement of this Contract.      Article 3 - Territory  The territorial limits of this Contract shall be identical with those of the Company's policies.      Article 4 - Exclusions  A. This Contract does not apply to and specifically excludes the following:     1. Reinsurance assumed by the Company under obligatory reinsurance agreements,  except business assumed by the Company from Citizens Property Insurance  Corporation.     2. Hail damage to growing or standing crops.     3. Business rated, coded or classified as Flood insurance or which should have been  rated, coded or classified as such.     4. Business rated, coded or classified as Mortgage Impairment and Difference in  Conditions insurance or which should have been rated, coded or classified as such.     5. Title insurance and all forms of Financial Guarantee, Credit and Insolvency.     6. Aviation, Ocean Marine, Boiler and Machinery, Fidelity and Surety, Accident and  Health, Animal Mortality and Workers Compensation and Employers Liability.     7. Errors and Omissions, Malpractice and any other type of Professional Liability  insurance.      8. Loss and/or damage and/or costs and/or expenses arising from seepage and/or  pollution and/or contamination, other than contamination from smoke.  Nevertheless,  this exclusion does not preclude payment of the cost of removing debris of property  damaged by a loss otherwise covered hereunder, subject always to a limit of 25.0% of  the Company's property loss under the applicable original policy.     9. Loss or liability as excluded under the provisions of the "War Exclusion Clause"  attached to and forming part of this Contract.     10. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause - Physical  Damage - Reinsurance (U.S.A.)" attached to and forming part of this Contract.     11. Loss or liability excluded by the Pools, Associations and Syndicates Exclusion Clause  (Catastrophe) attached to and forming part of this Contract and any assessment or  similar demand for payment related to the FHCF or Citizens Property Insurance  Corporation.    

 

21\F7V1116  Page 4     12. Loss or liability of the Company arising by contract, operation of law, or otherwise,  from its participation or membership, whether voluntary or involuntary, in any  insolvency fund.  "Insolvency fund" includes any guaranty fund, insolvency fund, plan,  pool, association, fund or other arrangement, however denominated, established or  governed, which provides for any assessment of or payment or assumption by the  Company of part or all of any claim, debt, charge, fee or other obligation of an insurer,  or its successors or assigns, which has been declared by any competent authority to  be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge,  fee or other obligation in whole or in part.     13. Losses in the respect of overhead transmission and distribution lines other than those  on or within 150 meters (or 500 feet) of the insured premises.     14. Mold, unless resulting from a peril otherwise covered under the policy involved.     15. Loss or liability as excluded under the provisions of the "Terrorism Exclusion" attached  to and forming part of this Contract.     16. All property loss, damage, destruction, erasure, corruption or alteration of Electronic  Data from any cause whatsoever (including, but not limited to, Computer Virus) or loss  of use, reduction in functionality, cost, expense or whatsoever nature resulting  therefrom, unless resulting from a peril otherwise covered under the policy involved.      "Electronic Data" as used herein means facts, concepts and information converted to  a form usable for communications, interpretation or processing by electronic and  electromechanical data processing or electronically-controlled equipment and includes  programs, software and other coded instructions for the processing and manipulation  of data or the direction and manipulation of such equipment.       "Computer Virus" as used herein means a set of corrupting, harmful or otherwise  unauthorized instructions or code, including a set of maliciously-introduced,  unauthorized instructions or code, that propagate themselves through a computer  system network of whatsoever nature.      However, in the event that a peril otherwise covered under the policy results from any  of the matters described above, this Contract, subject to all other terms and  conditions, will cover physical damage directly caused by such listed peril.      Article 5 - Retention and Limit  As respects each excess layer of reinsurance coverage provided by this Contract, the Company  shall retain and be liable for the first amount of ultimate net loss, shown as "Company's  Retention" for that excess layer in Schedule A attached hereto, arising out of each loss  occurrence.  The Reinsurer shall then be liable, as respects each excess layer, for the amount  by which such ultimate net loss exceeds the Company's applicable retention, but the liability of  the Reinsurer under each excess layer shall not exceed the amount, shown as "Reinsurer's Per  Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss  occurrence.    

 

21\F7V1116  Page 5    Article 6 - Florida Hurricane Catastrophe Fund  The Company has purchased 90.0% of the FHCF mandatory layer of coverage and shall be  deemed to inure to the benefit of this Contract. Loss adjustment expense recoveries paid by the  FHCF in excess of the actual loss adjustment expense paid by the Company shall inure to the  benefit of the Company and shall not reduce the amount of ultimate net loss hereunder.   Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in  accordance with the FHCF reimbursement contract at the full payout level set forth therein and  will be deemed not to be reduced by any reduction or exhaustion of the FHCF's claims-paying  capacity as respects the mandatory FHCF coverage.      Article 7 - Other Reinsurance  The Company shall be permitted to carry other reinsurance, recoveries under which shall inure  solely to the benefit of the Company and be entirely disregarded in applying all of the provisions  of this Contract.      Article 8 - Reinstatement  A. As respects the First Excess Layer, in the event all or any portion of the reinsurance under  such excess layer of reinsurance coverage provided by this Contract is exhausted by  ultimate net loss, the amount so exhausted shall be reinstated immediately from the time  the loss occurrence commences hereon.  For each amount so reinstated the Company  agrees to pay additional premium equal to the product of the following:     1. The percentage of the occurrence limit for the excess layer reinstated (based on the  ultimate net loss paid by the Reinsurer under that excess layer); times     2. The earned reinsurance premium for the excess layer reinstated for the term of this  Contract (exclusive of reinstatement premium).    B.  As respects the Second Excess Layer, in the event all or any portion of the reinsurance  under such excess layer of reinsurance coverage provided by this Contract is exhausted by  ultimate net loss, the amount so exhausted shall be reinstated immediately from the time  the loss occurrence commences hereon.  For each amount so reinstated the Company  agrees to pay additional premium equal to the product of the following:     1. The percentage of the occurrence limit for the excess layer reinstated (based on the  ultimate net loss paid by the Reinsurer under that excess layer); times     2. 150% of the earned reinsurance premium for the excess layer reinstated for the term  of this Contract (exclusive of reinstatement premium).    C. Whenever the Company requests payment by the Reinsurer of any ultimate net loss under  any excess layer hereunder, the Company shall submit a statement to the Reinsurer of  reinstatement premium due the Reinsurer for that excess layer.  If the earned reinsurance  premium for any excess layer for the term of this Contract has not been finally determined  as of the date of any such statement, the calculation of reinstatement premium due for that  

 

21\F7V1116  Page 6    excess layer shall be based on the amount, shown as "Annual Deposit Premium" for that  excess layer in Schedule A attached hereto, and shall be readjusted when the earned  reinsurance premium for that excess layer for the term of this Contract has been finally  determined.  Any reinstatement premium shown to be due the Reinsurer for any excess  layer as reflected by any such statement (less prior payments, if any, for that excess layer)  shall be payable by the Company concurrently with payment by the Reinsurer of the  requested ultimate net loss for that excess layer.  Any return reinstatement premium shown  to be due the Company shall be remitted by the Reinsurer as promptly as possible after  receipt and verification of the Company's statement.    D. Notwithstanding anything stated herein, the liability of the Reinsurer for ultimate net loss  under any excess layer of reinsurance coverage provided by this Contract shall not exceed  either of the following:     1. The amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in  Schedule A attached hereto, as respects loss or losses arising out of any one loss  occurrence; or     2. The amount, shown as "Reinsurer's Term Limit" for that excess layer in Schedule A  attached hereto, in all during the term of this Contract.      Article 9 - Definitions  A. "Loss adjustment expense," regardless of how such expenses are classified for statutory  reporting purposes, as used in this Contract shall mean all costs and expenses allocable to  a specific claim that are incurred by the Company in the investigation, appraisal,  adjustment, settlement, litigation, defense or appeal of a specific claim, including court  costs and costs of supersedeas and appeal bonds, and including a) pre-judgment interest,  unless included as part of the award or judgment; b) post-judgment interest; c) legal  expenses and costs incurred in connection with coverage questions and legal actions  connected thereto, including Declaratory Judgment Expense; and d) expenses and a pro  rata share of salaries of the Company field employees, and expenses of other Company  employees who have been temporarily diverted from their normal and customary duties and  assigned to the field adjustment of losses covered by this Contract.     Loss adjustment expense as defined above does not include unallocated loss adjustment  expense.  Unallocated loss adjustment expense includes, but is not limited to, salaries and  expenses of employees, other than in (d) above, and office and other overhead expenses.    B. "Loss in excess of policy limits" and "extra contractual obligations" as used in this Contract  shall mean:     1. "Loss in excess of policy limits" shall mean 90.0% of any amount paid or payable by  the Company in excess of its policy limits, but otherwise within the terms of its policy,  such loss in excess of the Company's policy limits having been incurred because of,  but not limited to, failure by the Company to settle within the policy limits or by reason  of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer  of settlement or in the preparation of the defense or in the trial of an action against its  insured or reinsured or in the preparation or prosecution of an appeal consequent  

 

21\F7V1116  Page 7    upon such an action.  Any loss in excess of policy limits that is made in connection  with this Contract shall not exceed 25.0% of the actual catastrophe loss.     2. "Extra contractual obligations" shall mean 90.0% of any punitive, exemplary,  compensatory or consequential damages paid or payable by the Company, not  covered by any other provision of this Contract and which arise from the handling of  any claim on business subject to this Contract, such liabilities arising because of, but  not limited to, failure by the Company to settle within the policy limits or by reason of  the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of  settlement or in the preparation of the defense or in the trial of 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.  Any extra contractual obligations that are made in  connection with this Contract shall not exceed 25.0% of the actual catastrophe loss.     Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess  of policy limits or any extra contractual obligation incurred by the Company as a result of  any fraudulent and/or criminal act by any officer or director of the Company acting  individually or collectively or in collusion with any individual or corporation or any other  organization or party involved in the presentation, defense or settlement of any claim  covered hereunder.    C. "Policies" as used in this Contract shall mean all policies, contracts and binders of  insurance or reinsurance.    D. "Ultimate net loss" as used in this Contract shall mean the sum or sums (including loss in  excess of policy limits, extra contractual obligations and loss adjustment expense, as  defined herein) paid or payable by the Company in settlement of claims and in satisfaction  of judgments rendered on account of such claims, after deduction of all salvage, all  recoveries and all claims on inuring insurance or reinsurance, whether collectible or not.   Nothing herein shall be construed to mean that losses under this Contract are not  recoverable until the Company's ultimate net loss has been ascertained.      Article 10 - Loss Occurrence  A. The term "loss occurrence" shall mean severe convective storms and any ensuing losses  during any period of 144 consecutive hours arising out of, caused by, occurring during,  occasioned by or resulting from the same event.  However, the event need not be limited to  one state or province or states or provinces contiguous thereto.    B. For all loss occurrences hereunder, the Company may choose the date and time when any  such period of consecutive hours commences, provided that no period commences earlier  than the date and time of the occurrence of the first recorded individual loss sustained by  the Company arising out of that disaster, accident, or loss or series of disasters, accidents,  or losses.  Furthermore, only one such period of consecutive hours shall apply with respect  to one event, regardless of the duration of the event.      

 

21\F7V1116  Page 8    C. It is understood that losses arising from a combination of two or more perils as a result of  the same event may be considered as having arisen from one loss occurrence.   Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded  as respects the applicable perils, and no single loss occurrence shall encompass a time  period greater than 144 consecutive hours.       Article 11 - Loss Notices and Settlements  A. Whenever losses sustained by the Company are reserved by the Company for an amount  greater than 50.0% of the Company's respective retention under any excess layer  hereunder and/or appear likely to result in a claim under such excess layer, the Company  shall notify the Subscribing Reinsurers under that excess layer and shall provide updates  related to development of such losses.  The Reinsurer shall have the right to participate in  the adjustment of such losses at its own expense.    B. All loss settlements made by the Company, provided they are within the terms of this  Contract and the terms of the original policy (with the exception of loss in excess of policy  limits or extra contractual obligations coverage, if any, under 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 by the Company.      Article 12 - Cash Call  Notwithstanding the provisions of the Loss Notices and Settlements Article, upon the request of  the Company, the Reinsurer shall pay any amount with regard to a loss settlement or  settlements that are scheduled to be made (including any payments projected to be made)  within the next 20 days by the Company, subject to receipt by the Reinsurer of a satisfactory  proof of loss.  Such agreed payment shall be made within 10 days from the date the demand for  payment was transmitted to the Reinsurer.      Article 13 - Salvage and Subrogation  The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by  the Company, less the actual cost, excluding salaries of officials and employees of the  Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making  such recovery) 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 Company  for its primary loss.  The Company 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 Company's opinion, it is economically reasonable to  do so.      

 

21\F7V1116  Page 9    Article 14 - Reinsurance Premium  A. As premium for reinsurance coverage provided by this Contract, the Company shall pay an  amount, shown as "Reinsurance Premium" for that excess layer in Schedule A attached  hereto payable in installments, shown as the "First Premium Installment,", payable at the  inception of this Contract, and the "Second Premium Installment," payable on May 31,  2021, for that excess layer in the Schedule A attached hereto.    B. In the event there are no losses paid by the Subscribing Reinsurer during the term of this  Contract, the Second Premium Installment for each excess layer shall not be due to the  Subscribing Reinsurer.    Article 15 - Sanctions  Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under  this Contract if it would result in a violation of any mandatory sanction, prohibition or restriction  under United Nations resolutions or the trade or economic sanctions, laws or regulations of the  European Union, United Kingdom or United States of America that are applicable to either party.      Article 16 - Late Payments  A. The provisions of this Article shall not be implemented unless specifically invoked, in  writing, by one of the parties to this Contract.    B. In the event any premium, loss or other payment due either party is not received by the  intermediary named in the Intermediary Article (hereinafter referred to as the  "Intermediary") by the payment due date, the party to whom payment is due may, by  notifying the Intermediary in writing, require the debtor party to pay, and the debtor party  agrees to pay, an interest charge on the amount past due calculated for each such payment  on the last business day of each month as follows:     1. The number of full days which have expired since the due date or the last monthly  calculation, whichever the lesser; times     2. 1/365ths of the six-month United States Treasury Bill rate as quoted in The Wall Street  Journal on the first business day of the month for which the calculation is made; times     3. The amount past due, including accrued interest.     It is agreed that interest shall accumulate until payment of the original amount due plus  interest charges have been received by the Intermediary.    C. The establishment of the due date shall, for purposes of this Article, be determined as  follows:     1. As respects the payment of routine deposits and premiums due the Reinsurer, the due  date shall be as provided for in the applicable section of this Contract.  In the event a  due date is not specifically stated for a given payment, it shall be deemed due 30 days  

 

21\F7V1116  Page 10    after the date of transmittal by the Intermediary of the initial billing for each such  payment.     2. Any claim or loss payment due the Company hereunder shall be deemed due 10 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 10 days, interest will accrue on the  payment or amount overdue in accordance with paragraph B above, from the date the  proof of loss or demand for payment was transmitted to the Reinsurer.     3. As respects a "cash call" made in accordance with the Cash Call Article, payment  shall be deemed due 10 days after the demand for payment is transmitted to the  Reinsurer.  If such loss or claim payment is not received within the 10 days, interest  shall accrue on the payment or amount overdue in accordance with paragraph B  above, from the date the demand for payment was transmitted to the Reinsurer.     4. As respects any payment, adjustment or return due either party not otherwise  provided for in subparagraphs 1, 2, and 3 of this paragraph C, the due date shall be as  provided for in the applicable section of this Contract.  In the event a due date is not  specifically stated for a given payment, it shall be deemed due 10 days following  transmittal of written notification that the provisions of this Article have been invoked.     For purposes of interest calculations only, amounts due hereunder shall be deemed paid  upon receipt by the Intermediary.    D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from  contesting the validity of any claim, or from participating in the defense of any claim or suit,  or prohibiting either party from contesting the validity of any payment or from initiating any  arbitration or other proceeding in accordance with the provisions of this Contract.  If the  debtor party prevails in an arbitration or other proceeding, then any interest charges due  hereunder on the amount in dispute shall be null and void.  If the debtor party loses in such  proceeding, then the interest charge on the amount determined to be due hereunder shall  be calculated in accordance with the provisions set forth above unless otherwise  determined by such proceedings.  If a debtor party advances payment of any amount it is  contesting, and proves to be correct in its contestation, either in whole or in part, the other  party shall reimburse the debtor party for any such excess payment made plus interest on  the excess amount calculated in accordance with this Article.    E. Interest charges 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 17 - Offset  The Company and the Reinsurer may offset any balance or amount due from one party to the  other under this Contract or any other contract heretofore or hereafter entered into between the  Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.  The  provisions of this Article shall not be affected by the insolvency of either party.      

 

21\F7V1116  Page 11    Article 18 - Severability of Interests and Obligations  The rights, duties and obligations set forth below shall apply as if this Contract were a separate  contract between the Subscribing Reinsurers and each named reinsured company:     A. Balances payable by any Subscribing Reinsurer to or from any reinsured party under the  Contract shall not serve to offset any balances recoverable to, or from, any other reinsured  party to the Contract and balances payable shall be separated by named reinsured  company and paid directly to the appropriate named reinsured company's bank account.    B. Balances recoverable by any Subscribing Reinsurer to or from any reinsured party under  the Contract shall not serve to offset any balances payable to, or from, any other reinsured  party to the Contract.    C. Reports and remittances made to the Reinsurer in accordance with the applicable articles  of the Contract are to be in sufficient detail to identify both the Reinsurer's loss obligations  due to each named reinsured company and each named reinsured company's premium  remittance under the report.     D. In the event of the insolvency of any of the parties to the Contract, offset shall be only  allowed in accordance with the laws of the insolvent party's state of domicile.    E. Nothing in this Article shall be construed to provide a separate retention, Reinsurer's limit of  liability any one loss occurrence or Reinsurer's annual limit of liability for each named  reinsured company.      Article 19 - Access to Records  The Reinsurer or its designated representatives shall have access at any reasonable time to all  records of the Company which pertain in any way to this reinsurance, provided the Reinsurer  gives the Company at least 15 days prior notice of request for such access.  However, a  Subscribing Reinsurer or its designated representatives shall not have any right of access to the  records of the Company if it is not current in all undisputed payments due the Company.   "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not  contested in writing to the Company specifying the reason(s) why the payments are disputed.        Article 20 - Liability of the Reinsurer  A. The liability of the Reinsurer shall follow that of the Company in every case and be subject  in all respects to all the general and specific stipulations, clauses, waivers and modifications  of the Company's policies and any endorsements thereon.  However, in no event shall this  be construed in any way to provide coverage outside the terms and conditions set forth in  this Contract.    B. Nothing herein shall in any manner create any obligations or establish any rights against  the Reinsurer in favor of any third party or any persons not parties to this Contract.      

 

21\F7V1116  Page 12    Article 21 - Net Retained Lines (BRMA 32E)  A. This Contract applies only to that portion of any policy which the Company retains net for its  own account (prior to deduction of any underlying reinsurance specifically permitted in this  Contract), and in calculating the amount of any loss hereunder and also in computing the  amount or amounts in excess of which this Contract attaches, only loss or losses in respect  of that portion of any policy which the Company retains net for its own account shall be  included.    B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not  be increased by reason of the inability of the Company to collect from any other  reinsurer(s), whether specific or general, any amounts which may have become due from  such reinsurer(s), whether such inability arises from the insolvency of such other  reinsurer(s) or otherwise.      Article 22 - Errors and Omissions (BRMA 14F)  Inadvertent delays, errors or omissions made in connection with this Contract or any transaction  hereunder shall not relieve either party from any liability which would have attached had such  delay, error or omission not occurred, provided always that such error or omission is rectified as  soon as possible after discovery.      Article 23 - Currency (BRMA 12A)  A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they shall be  construed to mean United States Dollars and all transactions under this Contract shall be in  United States Dollars.    B. Amounts paid or received by the Company in any other currency shall be converted to  United States Dollars at the rate of exchange at the date such transaction is entered on the  books of the Company.      Article 24 - Taxes (BRMA 50B)  In consideration of the terms under which this Contract is issued, the Company will not claim a  deduction in respect of the premium hereon when making tax returns, other than income or  profits tax returns, to any state or territory of the United States of America or the District of  Columbia.      Article 25 - Federal Excise Tax (BRMA 17D)  A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the  applicable percentage of the premium payable hereon (as imposed under Section 4371 of  the Internal Revenue Code) to the extent such premium is subject to the Federal Excise  Tax.    

 

21\F7V1116  Page 13    B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct  the applicable percentage from the return premium payable hereon and the Company or its  agent should take steps to recover the tax from the United States Government.      Article 26 - Reserves  A. The Reinsurer agrees to fund its share of amounts, including but not limited to, the  Company's ceded unearned premium and outstanding loss and loss adjustment expense  reserves (including all case reserves plus any reasonable amount estimated to be  unreported from known loss occurrences) (hereinafter referred to as "Reinsurer's  Obligations") by:     1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if  confirmation is required by the insurance regulatory authorities involved, by a bank or  banks meeting the NAIC Securities Valuation Office credit standards for issuers of  letters of credit and acceptable to said insurance regulatory authorities; and/or     2. Escrow accounts for the benefit of the Company; and/or     3. Cash advances;     if the Reinsurer:     1. Is unauthorized in any state of the United States of America or the District of Columbia  having jurisdiction over the Company and if, without such funding, a penalty would  accrue to the Company on any financial statement it is required to file with the  insurance regulatory authorities involved; or     2. Has an A.M. Best Company's rating equal to or below B++ at the inception of this  Contract.     The Reinsurer, at its sole option, may fund in other than cash if its method and form of  funding are acceptable to the insurance regulatory authorities involved.    B. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of  credit will be in a form acceptable to insurance regulatory authorities involved, will be issued  for a term of at least one year and will include an "evergreen clause," which automatically  extends the term for at least one additional year at each expiration date unless written  notice of non-renewal is given to the Company not less than 30 days prior to said expiration  date.  The Company and the Reinsurer further agree, notwithstanding anything to the  contrary in this Contract, that said letters of credit may be drawn upon by the Company or  its successors in interest at any time, without diminution because of the insolvency of the  Company or the Reinsurer, but only for one or more of the following purposes:     1. To reimburse itself for the Reinsurer's share of unearned premiums returned to  insureds on account of policy cancellations, unless paid in cash by the Reinsurer;    

 

21\F7V1116  Page 14     2. To reimburse itself for the Reinsurer's share of losses and/or loss adjustment expense  paid under the terms of policies reinsured hereunder, unless paid in cash by the  Reinsurer;     3. To reimburse itself for the Reinsurer's share of any other amounts claimed to be due  hereunder, unless paid in cash by the Reinsurer;     4. To fund a cash account in an amount equal to the Reinsurer's share of amounts,  including but not limited to, the Reinsurer's Obligations as set forth above, funded by  means of a letter of credit which is under non-renewal notice, if said letter of credit has  not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;     5. To refund to the Reinsurer any sum in excess of the actual amount required to fund  the Reinsurer's share of amounts, including but not limited to, the Reinsurer's  Obligations as set forth above, if so requested by the Reinsurer.     In the event the amount drawn by the Company on any letter of credit is in excess of the  actual amount required for B(1), B(2) or B(4), or in the case of B(3), the actual amount  determined to be due, the Company shall promptly return to the Reinsurer the excess  amount so drawn.      Article 27 - Insolvency  A. In the event of the insolvency of the Company, this reinsurance shall be payable directly to  the Company or to its liquidator, receiver, conservator or statutory successor on the basis of  the liability of the Company without diminution because of the insolvency of the Company or  because the liquidator, receiver, conservator or statutory successor of the Company has  failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver,  conservator or statutory successor of the Company shall give written notice to the  Reinsurer of the pendency of a claim against the Company indicating the policy or bond  reinsured which claim would involve a possible liability on the part of the Reinsurer within a  reasonable time after such claim is filed in the conservation or liquidation proceeding or in  the receivership, and that during the pendency of such claim, the Reinsurer may investigate  such claim and interpose, at its own expense, in the proceeding where such claim is to be  adjudicated, any defense or defenses that it may deem available to the Company or its  liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the  Reinsurer shall be chargeable, subject to the approval of the Court, against the Company  as part of the expense of conservation or liquidation to the extent of a pro rata share of the  benefit which may accrue to the Company solely as a result of the defense undertaken by  the Reinsurer.    B. Where two or more Subscribing Reinsurers are involved in the same claim and a majority in  interest elect to interpose defense to such claim, the expense shall be apportioned in  accordance with the terms of this Contract as though such expense had been incurred by  the Company.    C. It is further understood and agreed that, in the event of the insolvency of the Company, the  reinsurance under this Contract shall be payable directly by the Reinsurer to the Company  or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of  

 

21\F7V1116  Page 15    the New York Insurance Law or except (1) where this Contract specifically provides another  payee of such reinsurance in the event of the insolvency of the Company or (2) where the  Reinsurer with the consent of the direct insured or insureds has assumed such policy  obligations of the Company as direct obligations of the Reinsurer to the payees under such  policies and in substitution for the obligations of the Company to such payees.      Article 28 - Arbitration  A. As a condition precedent to any right of action hereunder, in the event of any dispute or  difference of opinion hereafter arising with respect to this Contract, it is hereby mutually  agreed that such dispute or difference of opinion shall be submitted to arbitration.  One  Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall  be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active  or retired disinterested executive officers of insurance or reinsurance companies or Lloyd's  London Underwriters.  In the event that either party should fail to choose an Arbiter within  30 days following a written request by the other party to do so, the requesting party may  choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration.  If  the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their  appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of  whom the other shall decline, and the decision shall be made by drawing lots.    B. Each party shall present its case to the Arbiters within 30 days following the date of  appointment of the Umpire.  The Arbiters shall consider this Contract as an honorable  engagement rather than merely as a legal obligation and they are relieved of all judicial  formalities and may abstain from following the strict rules of law.  The decision of the  Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the  Umpire and the decision of the majority shall be final and binding upon both parties.   Judgment upon the final decision of the Arbiters may be entered in any court of competent  jurisdiction.    C. If more than one Subscribing Reinsurer is involved in the same dispute, all such  Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party  for purposes of this Article and communications shall be made by the Company to each of  the Subscribing Reinsurers constituting one party, provided, however, that nothing herein  shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint,  defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers  participating under the terms of this Contract from several to joint.    D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with  the other the expense of the Umpire and of the arbitration.  In the event that the two  Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the  Umpire and the arbitration shall be equally divided between the two parties.    E. Any arbitration proceedings shall take place at a location mutually agreed upon by the  parties to this Contract, but notwithstanding the location of the arbitration, all proceedings  pursuant hereto shall be governed by the law of the state in which the Company has its  principal office.      

 

21\F7V1116  Page 16    Article 29 - Service of Suit (BRMA 49C)  (Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not  authorized in any State, Territory or District of the United States where authorization is required  by insurance regulatory authorities)    A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due  hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a  court of competent jurisdiction within the United States.  Nothing in this Article constitutes or  should be understood to constitute a waiver of the Reinsurer's rights to commence an  action in any court of competent jurisdiction in the United States, to remove an action to a  United States District Court, or to seek a transfer of a case to another court as permitted by  the laws of the United States or of any state in the United States.    B. Further, pursuant to any statute of any state, territory or district of the United States which  makes provision therefor, the Reinsurer hereby designates the party named in its Interests  and Liabilities Agreement, or if no party is named therein, the Superintendent,  Commissioner or Director of Insurance or other officer specified for that purpose in the  statute, or his successor or successors in office, as its true and lawful attorney upon whom  may be served any lawful process in any action, suit or proceeding instituted by or on  behalf of the Company or any beneficiary hereunder arising out of this Contract.      Article 30 - Severability (BRMA 72E)  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 31 - Governing Law (BRMA 71B)  This Contract shall be governed by and construed in accordance with the laws of the State of  Florida.      Article 32 - Confidentiality  A. The Reinsurer hereby acknowledges that the documents, information and data provided to  it by the Company, whether directly or through an authorized agent, in connection with the  placement and execution of this Contract, including all information obtained through any  audits and any claims information between the Company and the Reinsurer, and any  submission or other materials relating to any renewal (hereinafter referred to as  "Confidential Information") are proprietary and confidential to the Company.      B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any  Confidential Information to any third parties, including but not limited to the Reinsurer's  subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates,  

 

21\F7V1116  Page 17    underwriting agencies, research organizations, any unaffiliated entity engaged in modeling  insurance or reinsurance data, and statistical rating organizations.      C. Confidential Information may be used by the Reinsurer only in connection with the  performance of its obligations or enforcement of its rights under this Contract and will only  be disclosed when required by (1) retrocessionaires subject to the business ceded to this  Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial  condition, (3) external auditors performing an audit of the Reinsurer's records in the normal  course of business, or (4) the Reinsurer's legal counsel; provided that the Reinsurer  advises such parties of the confidential nature of the Confidential Information and their  obligation to maintain its confidentiality.  The Company may require that any third-party  representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article  or by a separate written confidentiality agreement, containing terms no less stringent than  those set forth in this Article.  If a third-party representative of the Reinsurer is not bound, in  writing, by this Confidentiality Article or by a separate written confidentiality agreement, the  Reinsurer shall be responsible for any breach of this provision by such third-party  representative of the Reinsurer.    D. 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 Company with written notice of same at  least 10 days prior to such release or disclosure, to the extent legally permissible, and to  use its best efforts to assist the Company in maintaining the confidentiality provided for in  this Article.    E. Any disclosure of Non-Public Personally Identifiable Information shall comply with all state  and federal statutes and regulations governing the disclosure of Non-Public Personally  Identifiable Information.  "Non-Public Personally Identifiable Information" shall be defined as  this term or a similar term is defined in any applicable state, provincial, territory, or federal  law.  Disclosing or using this information for any purpose not authorized by applicable law is  expressly forbidden without the prior consent of the Company.    F. The parties agree that any information subject to privilege, including the attorney-client  privilege or attorney work product doctrine (collectively "Privilege") shall not be disclosed to  the Reinsurer until, in the Company's opinion, such Privilege is deemed to be waived or  otherwise compromised by virtue of its disclosure pursuant to this Contract.  Furthermore,  the Reinsurer shall not assert that any Privilege otherwise applicable to the Confidential  Information has been waived or otherwise compromised by virtue of its disclosure pursuant  to this Contract.      G. The provisions of this Article shall extend to the officers, directors and employees of the  Reinsurer and its affiliates, and shall be binding upon their successors and assigns.      Article 33 - Non-Waiver  The failure of the Company or Reinsurer to insist on compliance with this Contract or to exercise  any right, remedy or option hereunder shall not:  (1) constitute a waiver of any rights contained  in this Contract, (2) prevent the Company or Reinsurer from thereafter demanding full and  

 

21\F7V1116  Page 18    complete compliance, (3) prevent the Company or Reinsurer from exercising such remedy in  the future, nor (4) affect the validity of this Contract or any part thereof.      Article 34 - Agency Agreement (BRMA 73A)  If more than one reinsured company is named as a party to this Contract, the first named  company shall be deemed the agent of the other reinsured companies for purposes of sending  or receiving notices required by the terms and conditions of this Contract, and for purposes of  remitting or receiving any monies due any party.      Article 35 - Notices and Contract Execution  A. 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.    B. The use of any of the following shall constitute a valid execution of this Contract or any  amendments thereto:     1. Paper documents with an original ink signature;     2. Facsimile or electronic copies of paper documents showing an original ink signature;  and/or     3. 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.    C. This Contract may be executed in one or more counterparts, each of which, when duly  executed, shall be deemed an original.      Article 36 - Intermediary  Aon Benfield Inc., or one of its affiliated corporations duly licensed as a reinsurance  intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business  hereunder.  All communications (including but not limited to notices, statements, premiums,  return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss  settlements) relating to this Contract will be transmitted to the Company or the Reinsurer  through the Intermediary.  Payments by the Company to the Intermediary will be deemed  payment to the Reinsurer.  Payments by the Reinsurer to the Intermediary will be deemed  payment to the Company only to the extent that such payments are actually received by the  Company.      

 

21\F7V1116  Page 19    In Witness Whereof, the Company by its duly authorized representatives has executed this  Contract as of the dates specified below:    This         30th                  day of         March                                       in the year    2021             .    FedNat Insurance Company    /s/ Michael Braun           This         30th                  day of         March                                       in the year    2021             .    Monarch National Insurance Company    /s/ Michael Braun           This         30th                  day of         March                                       in the year    2021             .    Maison Insurance Company    /s/ Douglas Raucy           

 

21\F7V1116  Schedule A      Schedule A  Excess Catastrophe Reinsurance Contract  Effective:  March 1, 2021    FedNat Insurance Company  Sunrise, Florida  and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana      First  Excess  Second  Excess Reinsurer's Retention [***] [***] Reinsurer's Per Occurrence Limit [***] [***] Reinsurer's Term Limit [***] [***] Reinsurance Premium [***] [***] First Premium Installment [***] [***] Second Premium Installment [***] [***]   The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess  layer as expressed in its Interests and Liabilities Agreement attached hereto.  

 

21\F7V1116    War Exclusion Clause        As regards interests which at time of loss or damage are on shore, no liability shall attach hereto  in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of  foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or  confiscation by order of any government or public authority.    

 

21\F7V1116    Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)      1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as  Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear  Energy risks.    2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss  or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance  against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage)  to:     I. Nuclear reactor power plants including all auxiliary property on the site, or     II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with  reactor installations, and "critical facilities" as such, or     III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear  material," and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or  waste materials, or     IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes  or other products of nuclear fission.    3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any  loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or  Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear  installation and which normally would be insured therewith except that this paragraph (3) shall not operate     (a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or     (b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting  from radioactive contamination, however caused.  However on and after 1st January 1960 this sub-paragraph (b)  shall only apply provided the said radioactive contamination exclusion provision has been approved by the  Governmental Authority having jurisdiction thereof.    4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any  loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or  Reinsurer, when such radioactive contamination is a named hazard specifically insured against.    5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the  nuclear exposure is not considered by the Reassured to be the primary hazard.    6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law  amendatory thereof.    7. Reassured to be sole judge of what constitutes:     (a) substantial quantities, and     (b) the extent of installation, plant or site.    Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that     (a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the  other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the  provisions of this Clause shall apply.     (b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958  shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960  whichever first occurs whereupon all the provisions of this Clause shall apply.    12/12/57  N.M.A. 1119  BRMA 35B  

 

21\F7V1116  Page 1 of 2    Pools, Associations and Syndicates Exclusion Clause  (Catastrophe)      It is hereby understood and agreed that:    A. This Contract excludes loss or liability arising from:     1. Business derived directly or indirectly from any pool, association, or syndicate which  maintains its own reinsurance facilities.  This subparagraph 1 shall not apply with  respect to:     a. Residual market mechanisms created by statute.  This Contract shall not extend,  however, to afford coverage for liability arising from the inability of any other  participant or member in the residual market mechanism to meet its obligations,  nor shall this Contract extend to afford coverage for liability arising from any  claim against the residual market mechanism brought by or on behalf of any  insolvency fund (as defined in the Insolvency Fund Exclusion Clause  incorporated in this Contract).  For the purposes of this Clause, the California  Earthquake Authority shall be deemed to be a "residual market mechanism."     b. Inter-agency or inter-government joint underwriting or risk purchasing  associations (however styled) created by or permitted by statute or regulation.     2.  Those perils insured by the Company that the Company knows, at the time the risk is  bound, to be insured by or in excess of amounts insured or reinsured by any pool,  association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical  plants; oil or gas drilling rigs; and/or aviation risks.  This subparagraph 2 shall not  apply:     a. If the total insured value over all interests of the risk is less than $250,000,000.     b. To interests traditionally underwritten as Inland Marine or Stock or Contents  written on a blanket basis.     c. To Contingent Business Interruption liability, except when it is known to the  Company, at the time the risk is bound, that the key location is insured by or  through any pool, association or syndicate formed for the purpose of insuring oil,  gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks; unless  the total insured value over all interests of the risk is less than $250,000,000.    B. With respect to loss or liability arising from the Company's participation or membership in  any residual market mechanism created by statute, the Company may include in its ultimate  net loss only amounts for which the Company is assessed as a direct consequence of a  covered loss occurrence, subject to the following provisions:     1. Recovery is limited to perils otherwise protected hereunder.     2. In the event the terms of the Company's participation or membership in any such  residual market mechanism permit the Company to recoup any such direct  

 

21\F7V1116  Page 2 of 2    assessment attributed to a loss occurrence by way of a specific policy premium  surcharge or similar levy on policyholders, the amount received by the Company as a  result of such premium surcharge or levy shall reduce the Company's ultimate net loss  for such loss occurrence.     3. The result of any rate increase filing permitted by the terms of the Company's  participation or membership in any such residual market mechanism following any  assessment shall have no effect on the Company's ultimate net loss for any covered  loss occurrence.     4. The result of any premium tax credit filing permitted by the terms of the Company's  participation or membership in any such residual market mechanism following any  assessment shall reduce the Company's ultimate net loss for any covered loss  occurrence.     5. The Company may not include in its ultimate net loss any amount resulting from an  assessment that, pursuant to the terms of the Company's participation or membership  in the residual market mechanism, the Company is required to pay only after such  assessment is collected from the policyholder.     6. The ultimate net loss hereunder shall not include any monies expended to purchase or  retire bonds as a consequence of being a member of a residual market mechanism  nor any fines or penalties imposed on the Company for late payment.     7. If, however, a residual market mechanism only provides for assessment based on an  aggregate of losses in any one contract or plan year of said mechanism, then the  amount of that assessment to be included in the ultimate net loss for any one loss  occurrence shall be determined by multiplying the Company's share of the aggregate  assessment by a factor derived by dividing the Company's ultimate net loss (net of the  assessment) with respect to the loss occurrence by the total of all of its ultimate net  losses (net of assessments) from all loss occurrences included by the mechanism in  determining the assessment.     8/1/2012        

 

21\F7V1116    Terrorism Exclusion  (Property Treaty Reinsurance)        Notwithstanding any provision to the contrary within this Contract or any amendment thereto, it  is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused  by, contributed to by, resulting from or arising out of or in connection with any act of terrorism,  as defined herein, regardless of any other cause or event contributing concurrently or in any  other sequence to the loss.    An act of terrorism includes any act, or preparation in respect of action, or threat of action  designed to influence the government de jure or de facto of any nation or any political division  thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public  or a section of the public of any nation by any person or group(s) of persons whether acting  alone or on behalf of or in connection with any organization(s) or government(s) de jure or  de facto, and which:     1. Involves violence against one or more persons, or     2. Involves damage to property; or     3. Endangers life other than the person committing the action; or     4. Creates a risk to health or safety of the public or a section of the public; or     5. Is designed to interfere with or disrupt an electronic system.    This Contract also excludes loss, damage, cost or expense directly or indirectly caused by,  contributed to by, resulting from or arising out of or in connection with any action in controlling,  preventing, suppressing, retaliating against or responding to any act of terrorism.    Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this  Contract, in respect only of personal lines, this Contract will pay actual loss or damage (but not  related cost and expense) caused by any act of terrorism provided such act is not directly or  indirectly caused by, contributed to by, resulting from or arising out of or in connection with  radiological, biological, chemical, or nuclear pollution or contamination.    

 

21\F7V1116    The Interests and Liabilities Agreements, constituting 5 pages in total, have been omitted from  this exhibit because such agreements are not material and would be competitively harmful if  publicly disclosed.exhibit104

21\F7V1117        Excess Catastrophe Reinsurance Contract  Effective:  March 1, 2021    FedNat Insurance Company  Sunrise, Florida  and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana                                                                        _______________________    Certain identified information has been omitted from this exhibit because it is not material and  would be competitively harmful if publicly disclosed.  Redactions are indicated by [***].  

 

21\F7V1117        Table of Contents      Article Page   1 Classes of Business Reinsured 1   2 Commencement and Termination 1   3 Territory 3   4 Exclusions 3   5 Retention and Limit 4   6 Florida Hurricane Catastrophe Fund 5   7 Other Reinsurance 5   8 Definitions 5   9 Loss Occurrence 6   10 Loss Notices and Settlements 8   11 Cash Call 9   12 Salvage and Subrogation 9   13 Reinsurance Premium 9   14 Sanctions 9   15 Late Payments 10   16 Offset 11   17 Severability of Interests and Obligations 11   18 Access to Records 12   19 Liability of the Reinsurer 12   20 Net Retained Lines (BRMA 32E) 12   21 Errors and Omissions (BRMA 14F) 12   22 Currency (BRMA 12A) 13   23 Taxes (BRMA 50B) 13   24 Federal Excise Tax (BRMA 17D) 13   25 Reserves 13   26 Insolvency 15   27 Arbitration 15   28 Service of Suit (BRMA 49C) 16   29 Severability (BRMA 72E) 17   30 Governing Law (BRMA 71B) 17   31 Confidentiality 17   32 Non-Waiver 18   33 Agency Agreement (BRMA 73A) 18   34 Notices and Contract Execution 18   35 Intermediary 19    Schedule A   

 

21\F7V1117  Page 1      Excess Catastrophe Reinsurance Contract  Effective: March 1, 2021    entered into by and between     FedNat Insurance Company  Sunrise, Florida  and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana   (hereinafter collectively referred to as the "Company" except  to the extent individually referred to)    and    The Subscribing Reinsurer(s) Executing the  Interests and Liabilities Agreement(s)  Attached Hereto  (hereinafter referred to as the "Reinsurer")        Article 1 - Classes of Business Reinsured  By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the  Company under its policies in force at the effective time and date hereof or issued or renewed at  or after that time and date, and classified by the Company as Property business, including but  not limited to, Dwelling Fire, Inland Marine, Mobile Home, Commercial and Homeowners  business (including any business assumed from Citizens Property Insurance Corporation),  subject to the terms, conditions and limitations set forth herein and in Schedule A attached  hereto.      Article 2 - Commencement and Termination  A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, March 1, 2021,  with respect to losses arising out of loss occurrences commencing at or after that time and  date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2021.    B. Notwithstanding the provisions of paragraph A above, the Company may terminate a  Subscribing Reinsurer's percentage share in this Contract at any time by giving written  notice to the Subscribing Reinsurer in the event any of the following circumstances occur:     1. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the  Subscribing Reinsurer's accounting system) at the inception of this Contract has been  reduced by 20.0% or more of the amount of surplus (or the applicable equivalent)  12 months prior to that date; or  

 

21\F7V1117  Page 2         2. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the  Subscribing Reinsurer's accounting system) at any time during the term of this  Contract has been reduced by 20.0% or more of the amount of surplus (or the  applicable equivalent) at the date of the Subscribing Reinsurer's most recent financial  statement filed with regulatory authorities and available to the public as of the  inception of this Contract; or     3. The Subscribing Reinsurer's A.M. Best's rating has been assigned or downgraded  below A- and/or Standard & Poor's rating has been assigned or downgraded below  BBB+; or     4. The Subscribing Reinsurer has become, or has announced its intention to become,  merged with, acquired by or controlled by any other entity or individual(s) not  controlling the Subscribing Reinsurer's operations previously; or     5. A State Insurance Department or other legal authority has ordered the Subscribing  Reinsurer to cease writing business; or     6. The Subscribing Reinsurer has become insolvent or has been placed into liquidation,  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 Subscribing Reinsurer 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; or     7. The Subscribing Reinsurer has reinsured its entire liability under this Contract without  the Company's prior written consent; or     8. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty  treaty reinsurance business; or     9. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is  compensated on a contingent basis or is otherwise provided with financial incentives  based on the quantum of claims paid; or     10. The Subscribing Reinsurer has failed to comply with the funding requirements set forth  in the Reserves Article.    C. The "term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern  Standard Time, March 1, 2021 to 12:01 a.m., Eastern Standard Time, June 1, 2021.   However, if this Contract is terminated, the "term of this Contract" as used herein shall  mean the period from 12:01 a.m., Eastern Standard Time, March 1, 2021 to the effective  time and date of termination.    D. If this Contract is terminated or expires while a loss occurrence covered hereunder is in  progress, 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  

 

21\F7V1117  Page 3      termination or expiration of this Contract, provided that no part of such loss occurrence is  claimed against any renewal or replacement of this Contract.      Article 3 - Territory  The territorial limits of this Contract shall be identical with those of the Company's policies.      Article 4 - Exclusions  A. This Contract does not apply to and specifically excludes the following:     1. Reinsurance assumed by the Company under obligatory reinsurance agreements,  except business assumed by the Company from Citizens Property Insurance  Corporation.     2. Hail damage to growing or standing crops.     3. Business rated, coded or classified as Flood insurance or which should have been  rated, coded or classified as such.     4. Business rated, coded or classified as Mortgage Impairment and Difference in  Conditions insurance or which should have been rated, coded or classified as such.     5. Title insurance and all forms of Financial Guarantee, Credit and Insolvency.     6. Aviation, Ocean Marine, Boiler and Machinery, Fidelity and Surety, Accident and  Health, Animal Mortality and Workers Compensation and Employers Liability.     7. Errors and Omissions, Malpractice and any other type of Professional Liability  insurance.      8. Loss and/or damage and/or costs and/or expenses arising from seepage and/or  pollution and/or contamination, other than contamination from smoke.  Nevertheless,  this exclusion does not preclude payment of the cost of removing debris of property  damaged by a loss otherwise covered hereunder, subject always to a limit of 25.0% of  the Company's property loss under the applicable original policy.     9. Loss or liability as excluded under the provisions of the "War Exclusion Clause"  attached to and forming part of this Contract.     10. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause - Physical  Damage - Reinsurance (U.S.A.)" attached to and forming part of this Contract.     11. Loss or liability excluded by the Pools, Associations and Syndicates Exclusion Clause  (Catastrophe) attached to and forming part of this Contract and any assessment or  similar demand for payment related to the FHCF or Citizens Property Insurance  Corporation.    

 

21\F7V1117  Page 4       12. Loss or liability of the Company arising by contract, operation of law, or otherwise,  from its participation or membership, whether voluntary or involuntary, in any  insolvency fund.  "Insolvency fund" includes any guaranty fund, insolvency fund, plan,  pool, association, fund or other arrangement, however denominated, established or  governed, which provides for any assessment of or payment or assumption by the  Company of part or all of any claim, debt, charge, fee or other obligation of an insurer,  or its successors or assigns, which has been declared by any competent authority to  be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge,  fee or other obligation in whole or in part.     13. Losses in the respect of overhead transmission and distribution lines other than those  on or within 150 meters (or 500 feet) of the insured premises.     14. Mold, unless resulting from a peril otherwise covered under the policy involved.     15. Loss or liability as excluded under the provisions of the "Terrorism Exclusion" attached  to and forming part of this Contract.     16. All property loss, damage, destruction, erasure, corruption or alteration of Electronic  Data from any cause whatsoever (including, but not limited to, Computer Virus) or loss  of use, reduction in functionality, cost, expense or whatsoever nature resulting  therefrom, unless resulting from a peril otherwise covered under the policy involved.      "Electronic Data" as used herein means facts, concepts and information converted to  a form usable for communications, interpretation or processing by electronic and  electromechanical data processing or electronically-controlled equipment and includes  programs, software and other coded instructions for the processing and manipulation  of data or the direction and manipulation of such equipment.       "Computer Virus" as used herein means a set of corrupting, harmful or otherwise  unauthorized instructions or code, including a set of maliciously-introduced,  unauthorized instructions or code, that propagate themselves through a computer  system network of whatsoever nature.      However, in the event that a peril otherwise covered under the policy results from any  of the matters described above, this Contract, subject to all other terms and  conditions, will cover physical damage directly caused by such listed peril.      Article 5 - Retention and Limit  A. As respects each excess layer of reinsurance coverage provided by this Contract, the  Company shall retain and be liable for the first amount of ultimate net loss, shown as  "Company's Retention" for that excess layer in Schedule A attached hereto, arising out of  each loss occurrence.  The Reinsurer shall then be liable, as respects each excess layer,  for the amount by which such ultimate net loss exceeds the Company's applicable  retention, but the liability of the Reinsurer under each excess layer shall not exceed the  amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A  attached hereto, as respects any one loss occurrence, nor shall the liability of the Reinsurer  

 

21\F7V1117  Page 5      under each excess layer exceed the amount, shown as "Reinsurer's Term Limit" for that  excess layer in Schedule A attached hereto in all for the term of this Contract.    B. Notwithstanding the provisions above, no claim shall be made hereunder as respects  losses arising out of loss occurrences commencing during the term of this Contract unless  at least two risks insured or reinsured by the Company are involved in such loss  occurrence.  For purposes hereof, the Company shall be the sole judge of what constitutes  "one risk."      Article 6 - Florida Hurricane Catastrophe Fund  The Company has purchased 90.0% of the FHCF mandatory layer of coverage and shall be  deemed to inure to the benefit of this Contract. Loss adjustment expense recoveries paid by the  FHCF in excess of the actual loss adjustment expense paid by the Company shall inure to the  benefit of the Company and shall not reduce the amount of ultimate net loss hereunder.   Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in  accordance with the FHCF reimbursement contract at the full payout level set forth therein and  will be deemed not to be reduced by any reduction or exhaustion of the FHCF's claims-paying  capacity as respects the mandatory FHCF coverage.      Article 7 - Other Reinsurance  The Company shall be permitted to carry other reinsurance, recoveries under which shall inure  solely to the benefit of the Company and be entirely disregarded in applying all of the provisions  of this Contract.      Article 8 - Definitions  A. "Loss adjustment expense," regardless of how such expenses are classified for statutory  reporting purposes, as used in this Contract shall mean all costs and expenses allocable to  a specific claim that are incurred by the Company in the investigation, appraisal,  adjustment, settlement, litigation, defense or appeal of a specific claim, including court  costs and costs of supersedeas and appeal bonds, and including a) pre-judgment interest,  unless included as part of the award or judgment; b) post-judgment interest; c) legal  expenses and costs incurred in connection with coverage questions and legal actions  connected thereto, including Declaratory Judgment Expense; and d) expenses and a pro  rata share of salaries of the Company field employees, and expenses of other Company  employees who have been temporarily diverted from their normal and customary duties and  assigned to the field adjustment of losses covered by this Contract.     Loss adjustment expense as defined above does not include unallocated loss adjustment  expense.  Unallocated loss adjustment expense includes, but is not limited to, salaries and  expenses of employees, other than in (d) above, and office and other overhead expenses.    

 

21\F7V1117  Page 6      B. "Loss in excess of policy limits" and "extra contractual obligations" as used in this Contract  shall mean:     1. "Loss in excess of policy limits" shall mean 90.0% of any amount paid or payable by  the Company in excess of its policy limits, but otherwise within the terms of its policy,  such loss in excess of the Company's policy limits having been incurred because of,  but not limited to, failure by the Company to settle within the policy limits or by reason  of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer  of settlement or in the preparation of the defense or in the trial of an action against its  insured or reinsured or in the preparation or prosecution of an appeal consequent  upon such an action.  Any loss in excess of policy limits that is made in connection  with this Contract shall not exceed 25.0% of the actual catastrophe loss.     2. "Extra contractual obligations" shall mean 90.0% of any punitive, exemplary,  compensatory or consequential damages paid or payable by the Company, not  covered by any other provision of this Contract and which arise from the handling of  any claim on business subject to this Contract, such liabilities arising because of, but  not limited to, failure by the Company to settle within the policy limits or by reason of  the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of  settlement or in the preparation of the defense or in the trial of 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.  Any extra contractual obligations that are made in  connection with this Contract shall not exceed 25.0% of the actual catastrophe loss.     Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess  of policy limits or any extra contractual obligation incurred by the Company as a result of  any fraudulent and/or criminal act by any officer or director of the Company acting  individually or collectively or in collusion with any individual or corporation or any other  organization or party involved in the presentation, defense or settlement of any claim  covered hereunder.    C. "Policies" as used in this Contract shall mean all policies, contracts and binders of  insurance or reinsurance.    D. "Ultimate net loss" as used in this Contract shall mean the sum or sums (including loss in  excess of policy limits, extra contractual obligations and loss adjustment expense, as  defined herein) paid or payable by the Company in settlement of claims and in satisfaction  of judgments rendered on account of such claims, after deduction of all salvage, all  recoveries and all claims on inuring insurance or reinsurance, whether collectible or not.   Nothing herein shall be construed to mean that losses under this Contract are not  recoverable until the Company's ultimate net loss has been ascertained.      Article 9 - Loss Occurrence  A. The term "loss occurrence" shall mean the sum of all individual losses directly occasioned  by any one disaster, accident or loss or series of disasters, accidents or losses arising out  of one event which occurs within the area of one state of the United States or province of  

 

21\F7V1117  Page 7      Canada and states or provinces contiguous thereto and to one another.  However, the  duration and extent of any one "loss occurrence" shall be limited to all individual losses  sustained by the Company occurring during any period of 168 consecutive hours arising out  of and directly occasioned by the same event, except that the term "loss occurrence" shall  be further defined as follows:     1. As regards a named storm, all individual losses sustained by the Company occurring  during any period (a) from and after 12:00 a.m. Eastern Standard Time on the date a  watch, warning, advisory, or other bulletin (whether for wind, flood or otherwise) for  such named storm is first issued by the National Hurricane Center ("NHC") or its  successor or any other division of the National Weather Service ("NWS"),  (b) continuing for a time period thereafter during which such named storm continues,  regardless of its category rating or lack thereof and regardless of whether the watch,  warning, or advisory or other bulletin remains in effect for such named storm and  (c) ending 96 hours following the issuance of the last watch, warning or advisory or  other bulletin for such named storm or related to such named storm by the NHC or its  successor or any other division of the NWS.  "Named storm" shall mean any storm or  storm system that has been declared by the NHC or its successor or any other  division of the NWS to be a named storm at any time, which may include, by way of  example and not limitation, hurricane, wind, gusts, typhoon, tropical storm, hail, rain,  tornados, cyclones, ensuing flood, storm surge, water damage, fire following, sprinkler  leakage, riots, vandalism, and collapse, and all losses and perils (including, by way of  example and not limitation, those mentioned previously in this sentence) in each case  arising out of, caused by, occurring during, occasioned by or resulting from such storm  or storm system, including by way of example and not limitation the merging of one or  more separate storm(s) or storm system(s) into a combined storm surge event.   However, the named storm need not be limited to one state or province or states or  provinces contiguous thereto.     2. As regards storm or storm systems that are not a named storm, including, by way of  example and not limitation, ensuing wind, gusts, typhoon, tropical storm, hail, rain,  tornados, cyclones, ensuing flood, storm surge, fire following, sprinkler leakage, riots,  vandalism, collapse and water damage, all individual losses sustained by the  Company occurring during any period of 144 consecutive hours arising out of, caused  by, occurring during, occasioned by or resulting from the same event.  However, the  event need not be limited to one state or province or states or provinces contiguous  thereto.     3. As regards riot, riot attending a strike, civil commotion, vandalism and malicious  mischief, all individual losses sustained by the Company occurring during any period  of 96 consecutive hours within the area of one municipality or county and the  municipalities or counties contiguous thereto arising out of and directly occasioned by  the same event.  The maximum duration of 96 consecutive hours may be extended in  respect of individual losses which occur beyond such 96 consecutive hours during the  continued occupation of an assured's premises by strikers, provided such occupation  commenced during the aforesaid period.     4. As regards earthquake (the epicenter of which need not necessarily be within the  territorial confines referred to in the introductory portion of this paragraph) and fire  following directly occasioned by the earthquake, only those individual fire losses which  

 

21\F7V1117  Page 8      commence during the period of 168 consecutive hours may be included in the  Company's loss occurrence.     5. As regards freeze, only individual losses directly occasioned by collapse, breakage of  glass and water damage (caused by bursting frozen pipes and tanks) may be included  in the Company's loss occurrence.     6. As regards firestorms, brush fires and any other fires or series of fires, irrespective of  origin (except as provided in subparagraphs 3 and 4 above), all individual losses  sustained by the Company which commence during any period of 168 consecutive  hours within the area of one state of the United States or province of Canada and  states or provinces contiguous thereto and to one another may be included in the  Company's loss occurrence.    B. For all loss occurrences hereunder, the Company may choose the date and time when any  such period of consecutive hours commences, provided that no period commences earlier  than the date and time of the occurrence of the first recorded individual loss sustained by  the Company arising out of that disaster, accident, or loss or series of disasters, accidents,  or losses.  Furthermore:     1. For all loss occurrences other than those referred to in subparagraphs A.1., A.2., and  A.3. above, only one such period of 168 consecutive hours shall apply with respect to  one event.     2. As regards those loss occurrences referred to in subparagraphs A.1. and A.2., only  one such period of consecutive hours (as set forth therein) shall apply with respect to  one event, regardless of the duration of the event.       3. As regards those loss occurrences referred to in subparagraph A.3. above, if the  disaster, accident, or loss or series of disasters, accidents, or losses occasioned by  the event is of greater duration than 96 consecutive hours, then the Company may  divide that disaster, accident, or loss or series of disasters, accidents, or losses into  two or more loss occurrences, provided that no two periods overlap and no individual  loss is included in more than one such period.    C. It is understood that losses arising from a combination of two or more perils as a result of  the same event may be considered as having arisen from one loss occurrence.   Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded  as respects the applicable perils, and no single loss occurrence shall encompass a time  period greater than 168 consecutive hours, except as regards those loss occurrences  referred to in subparagraphs A.1., A.4. and A.6. above.      Article 10 - Loss Notices and Settlements  A. Whenever losses sustained by the Company are reserved by the Company for an amount  greater than 50.0% of the Company's respective retention under any excess layer  hereunder and/or appear likely to result in a claim under such excess layer, the Company  shall notify the Subscribing Reinsurers under that excess layer and shall provide updates  

 

21\F7V1117  Page 9      related to development of such losses.  The Reinsurer shall have the right to participate in  the adjustment of such losses at its own expense.    B. All loss settlements made by the Company, provided they are within the terms of this  Contract and the terms of the original policy (with the exception of loss in excess of policy  limits or extra contractual obligations coverage, if any, under 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 by the Company.      Article 11 - Cash Call  Notwithstanding the provisions of the Loss Notices and Settlements Article, upon the request of  the Company, the Reinsurer shall pay any amount with regard to a loss settlement or  settlements that are scheduled to be made (including any payments projected to be made)  within the next 20 days by the Company, subject to receipt by the Reinsurer of a satisfactory  proof of loss.  Such agreed payment shall be made within 10 days from the date the demand for  payment was transmitted to the Reinsurer.      Article 12 - Salvage and Subrogation  The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by  the Company, less the actual cost, excluding salaries of officials and employees of the  Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making  such recovery) 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 Company  for its primary loss.  The Company 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 Company's opinion, it is economically reasonable to  do so.      Article 13 - Reinsurance Premium  As premium for reinsurance coverage provided by this Contract, the Company shall pay an  amount, shown as "Reinsurance Premium" for that excess layer in Schedule A attached hereto  payable at the inception of this Contract.      Article 14 - Sanctions  Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under  this Contract if it would result in a violation of any mandatory sanction, prohibition or restriction  under United Nations resolutions or the trade or economic sanctions, laws or regulations of the  European Union, United Kingdom or United States of America that are applicable to either party.      

 

21\F7V1117  Page 10      Article 15 - Late Payments  A. The provisions of this Article shall not be implemented unless specifically invoked, in  writing, by one of the parties to this Contract.    B. In the event any premium, loss or other payment due either party is not received by the  intermediary named in the Intermediary Article (hereinafter referred to as the  "Intermediary") by the payment due date, the party to whom payment is due may, by  notifying the Intermediary in writing, require the debtor party to pay, and the debtor party  agrees to pay, an interest charge on the amount past due calculated for each such payment  on the last business day of each month as follows:     1. The number of full days which have expired since the due date or the last monthly  calculation, whichever the lesser; times     2. 1/365ths of the six-month United States Treasury Bill rate as quoted in The Wall Street  Journal on the first business day of the month for which the calculation is made; times     3. The amount past due, including accrued interest.     It is agreed that interest shall accumulate until payment of the original amount due plus  interest charges have been received by the Intermediary.    C. The establishment of the due date shall, for purposes of this Article, be determined as  follows:     1. As respects the payment of routine deposits and premiums due the Reinsurer, the due  date shall be as provided for in the applicable section of this Contract.  In the event a  due date is not specifically stated for a given payment, it shall be deemed due 30 days  after the date of transmittal by the Intermediary of the initial billing for each such  payment.     2. Any claim or loss payment due the Company hereunder shall be deemed due 10 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 10 days, interest will accrue on the  payment or amount overdue in accordance with paragraph B above, from the date the  proof of loss or demand for payment was transmitted to the Reinsurer.     3. As respects a "cash call" made in accordance with the Cash Call Article, payment  shall be deemed due 10 days after the demand for payment is transmitted to the  Reinsurer.  If such loss or claim payment is not received within the 10 days, interest  shall accrue on the payment or amount overdue in accordance with paragraph B  above, from the date the demand for payment was transmitted to the Reinsurer.     4. As respects any payment, adjustment or return due either party not otherwise  provided for in subparagraphs 1, 2, and 3 of this paragraph C, the due date shall be as  provided for in the applicable section of this Contract.  In the event a due date is not  specifically stated for a given payment, it shall be deemed due 10 days following  transmittal of written notification that the provisions of this Article have been invoked.    

 

21\F7V1117  Page 11       For purposes of interest calculations only, amounts due hereunder shall be deemed paid  upon receipt by the Intermediary.    D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from  contesting the validity of any claim, or from participating in the defense of any claim or suit,  or prohibiting either party from contesting the validity of any payment or from initiating any  arbitration or other proceeding in accordance with the provisions of this Contract.  If the  debtor party prevails in an arbitration or other proceeding, then any interest charges due  hereunder on the amount in dispute shall be null and void.  If the debtor party loses in such  proceeding, then the interest charge on the amount determined to be due hereunder shall  be calculated in accordance with the provisions set forth above unless otherwise  determined by such proceedings.  If a debtor party advances payment of any amount it is  contesting, and proves to be correct in its contestation, either in whole or in part, the other  party shall reimburse the debtor party for any such excess payment made plus interest on  the excess amount calculated in accordance with this Article.    E. Interest charges 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 16 - Offset  The Company and the Reinsurer may offset any balance or amount due from one party to the  other under this Contract or any other contract heretofore or hereafter entered into between the  Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.  The  provisions of this Article shall not be affected by the insolvency of either party.      Article 17 - Severability of Interests and Obligations  The rights, duties and obligations set forth below shall apply as if this Contract were a separate  contract between the Subscribing Reinsurers and each named reinsured company:     A. Balances payable by any Subscribing Reinsurer to or from any reinsured party under the  Contract shall not serve to offset any balances recoverable to, or from, any other reinsured  party to the Contract and balances payable shall be separated by named reinsured  company and paid directly to the appropriate named reinsured company's bank account.    B. Balances recoverable by any Subscribing Reinsurer to or from any reinsured party under  the Contract shall not serve to offset any balances payable to, or from, any other reinsured  party to the Contract.    C. Reports and remittances made to the Reinsurer in accordance with the applicable articles  of the Contract are to be in sufficient detail to identify both the Reinsurer's loss obligations  due to each named reinsured company and each named reinsured company's premium  remittance under the report.     D. In the event of the insolvency of any of the parties to the Contract, offset shall be only  allowed in accordance with the laws of the insolvent party's state of domicile.  

 

21\F7V1117  Page 12        E. Nothing in this Article shall be construed to provide a separate retention, Reinsurer's limit of  liability any one loss occurrence or Reinsurer's annual limit of liability for each named  reinsured company.      Article 18 - Access to Records  The Reinsurer or its designated representatives shall have access at any reasonable time to all  records of the Company which pertain in any way to this reinsurance, provided the Reinsurer  gives the Company at least 15 days prior notice of request for such access.  However, a  Subscribing Reinsurer or its designated representatives shall not have any right of access to the  records of the Company if it is not current in all undisputed payments due the Company.   "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not  contested in writing to the Company specifying the reason(s) why the payments are disputed.        Article 19 - Liability of the Reinsurer  A. The liability of the Reinsurer shall follow that of the Company in every case and be subject  in all respects to all the general and specific stipulations, clauses, waivers and modifications  of the Company's policies and any endorsements thereon.  However, in no event shall this  be construed in any way to provide coverage outside the terms and conditions set forth in  this Contract.    B. Nothing herein shall in any manner create any obligations or establish any rights against  the Reinsurer in favor of any third party or any persons not parties to this Contract.      Article 20 - Net Retained Lines (BRMA 32E)  A. This Contract applies only to that portion of any policy which the Company retains net for its  own account (prior to deduction of any underlying reinsurance specifically permitted in this  Contract), and in calculating the amount of any loss hereunder and also in computing the  amount or amounts in excess of which this Contract attaches, only loss or losses in respect  of that portion of any policy which the Company retains net for its own account shall be  included.    B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not  be increased by reason of the inability of the Company to collect from any other  reinsurer(s), whether specific or general, any amounts which may have become due from  such reinsurer(s), whether such inability arises from the insolvency of such other  reinsurer(s) or otherwise.      Article 21 - Errors and Omissions (BRMA 14F)  Inadvertent delays, errors or omissions made in connection with this Contract or any transaction  hereunder shall not relieve either party from any liability which would have attached had such  

 

21\F7V1117  Page 13      delay, error or omission not occurred, provided always that such error or omission is rectified as  soon as possible after discovery.      Article 22 - Currency (BRMA 12A)  A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they shall be  construed to mean United States Dollars and all transactions under this Contract shall be in  United States Dollars.    B. Amounts paid or received by the Company in any other currency shall be converted to  United States Dollars at the rate of exchange at the date such transaction is entered on the  books of the Company.      Article 23 - Taxes (BRMA 50B)  In consideration of the terms under which this Contract is issued, the Company will not claim a  deduction in respect of the premium hereon when making tax returns, other than income or  profits tax returns, to any state or territory of the United States of America or the District of  Columbia.      Article 24 - Federal Excise Tax (BRMA 17D)  A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the  applicable percentage of the premium payable hereon (as imposed under Section 4371 of  the Internal Revenue Code) to the extent such premium is subject to the Federal Excise  Tax.    B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct  the applicable percentage from the return premium payable hereon and the Company or its  agent should take steps to recover the tax from the United States Government.      Article 25 - Reserves  A. The Reinsurer agrees to fund its share of amounts, including but not limited to, the  Company's ceded unearned premium and outstanding loss and loss adjustment expense  reserves (including all case reserves plus any reasonable amount estimated to be  unreported from known loss occurrences) (hereinafter referred to as "Reinsurer's  Obligations") by:     1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if  confirmation is required by the insurance regulatory authorities involved, by a bank or  banks meeting the NAIC Securities Valuation Office credit standards for issuers of  letters of credit and acceptable to said insurance regulatory authorities; and/or     2. Escrow accounts for the benefit of the Company; and/or    

 

21\F7V1117  Page 14       3. Cash advances;     if the Reinsurer:     1. Is unauthorized in any state of the United States of America or the District of Columbia  having jurisdiction over the Company and if, without such funding, a penalty would  accrue to the Company on any financial statement it is required to file with the  insurance regulatory authorities involved; or     2. Has an A.M. Best Company's rating equal to or below B++ at the inception of this  Contract.     The Reinsurer, at its sole option, may fund in other than cash if its method and form of  funding are acceptable to the insurance regulatory authorities involved.    B. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of  credit will be in a form acceptable to insurance regulatory authorities involved, will be issued  for a term of at least one year and will include an "evergreen clause," which automatically  extends the term for at least one additional year at each expiration date unless written  notice of non-renewal is given to the Company not less than 30 days prior to said expiration  date.  The Company and the Reinsurer further agree, notwithstanding anything to the  contrary in this Contract, that said letters of credit may be drawn upon by the Company or  its successors in interest at any time, without diminution because of the insolvency of the  Company or the Reinsurer, but only for one or more of the following purposes:     1. To reimburse itself for the Reinsurer's share of unearned premiums returned to  insureds on account of policy cancellations, unless paid in cash by the Reinsurer;     2. To reimburse itself for the Reinsurer's share of losses and/or loss adjustment expense  paid under the terms of policies reinsured hereunder, unless paid in cash by the  Reinsurer;     3. To reimburse itself for the Reinsurer's share of any other amounts claimed to be due  hereunder, unless paid in cash by the Reinsurer;     4. To fund a cash account in an amount equal to the Reinsurer's share of amounts,  including but not limited to, the Reinsurer's Obligations as set forth above, funded by  means of a letter of credit which is under non-renewal notice, if said letter of credit has  not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;     5. To refund to the Reinsurer any sum in excess of the actual amount required to fund  the Reinsurer's share of amounts, including but not limited to, the Reinsurer's  Obligations as set forth above, if so requested by the Reinsurer.     In the event the amount drawn by the Company on any letter of credit is in excess of the  actual amount required for B(1), B(2) or B(4), or in the case of B(3), the actual amount  determined to be due, the Company shall promptly return to the Reinsurer the excess  amount so drawn.      

 

21\F7V1117  Page 15      Article 26 - Insolvency  A. In the event of the insolvency of the Company, this reinsurance shall be payable directly to  the Company or to its liquidator, receiver, conservator or statutory successor on the basis of  the liability of the Company without diminution because of the insolvency of the Company or  because the liquidator, receiver, conservator or statutory successor of the Company has  failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver,  conservator or statutory successor of the Company shall give written notice to the  Reinsurer of the pendency of a claim against the Company indicating the policy or bond  reinsured which claim would involve a possible liability on the part of the Reinsurer within a  reasonable time after such claim is filed in the conservation or liquidation proceeding or in  the receivership, and that during the pendency of such claim, the Reinsurer may investigate  such claim and interpose, at its own expense, in the proceeding where such claim is to be  adjudicated, any defense or defenses that it may deem available to the Company or its  liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the  Reinsurer shall be chargeable, subject to the approval of the Court, against the Company  as part of the expense of conservation or liquidation to the extent of a pro rata share of the  benefit which may accrue to the Company solely as a result of the defense undertaken by  the Reinsurer.    B. Where two or more Subscribing Reinsurers are involved in the same claim and a majority in  interest elect to interpose defense to such claim, the expense shall be apportioned in  accordance with the terms of this Contract as though such expense had been incurred by  the Company.    C. It is further understood and agreed that, in the event of the insolvency of the Company, the  reinsurance under this Contract shall be payable directly by the Reinsurer to the Company  or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of  the New York Insurance Law or except (1) where this Contract specifically provides another  payee of such reinsurance in the event of the insolvency of the Company or (2) where the  Reinsurer with the consent of the direct insured or insureds has assumed such policy  obligations of the Company as direct obligations of the Reinsurer to the payees under such  policies and in substitution for the obligations of the Company to such payees.      Article 27 - Arbitration  A. As a condition precedent to any right of action hereunder, in the event of any dispute or  difference of opinion hereafter arising with respect to this Contract, it is hereby mutually  agreed that such dispute or difference of opinion shall be submitted to arbitration.  One  Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall  be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active  or retired disinterested executive officers of insurance or reinsurance companies or Lloyd's  London Underwriters.  In the event that either party should fail to choose an Arbiter within  30 days following a written request by the other party to do so, the requesting party may  choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration.  If  the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their  appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of  whom the other shall decline, and the decision shall be made by drawing lots.    

 

21\F7V1117  Page 16      B. Each party shall present its case to the Arbiters within 30 days following the date of  appointment of the Umpire.  The Arbiters shall consider this Contract as an honorable  engagement rather than merely as a legal obligation and they are relieved of all judicial  formalities and may abstain from following the strict rules of law.  The decision of the  Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the  Umpire and the decision of the majority shall be final and binding upon both parties.   Judgment upon the final decision of the Arbiters may be entered in any court of competent  jurisdiction.    C. If more than one Subscribing Reinsurer is involved in the same dispute, all such  Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party  for purposes of this Article and communications shall be made by the Company to each of  the Subscribing Reinsurers constituting one party, provided, however, that nothing herein  shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint,  defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers  participating under the terms of this Contract from several to joint.    D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with  the other the expense of the Umpire and of the arbitration.  In the event that the two  Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the  Umpire and the arbitration shall be equally divided between the two parties.    E. Any arbitration proceedings shall take place at a location mutually agreed upon by the  parties to this Contract, but notwithstanding the location of the arbitration, all proceedings  pursuant hereto shall be governed by the law of the state in which the Company has its  principal office.      Article 28 - Service of Suit (BRMA 49C)  (Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not  authorized in any State, Territory or District of the United States where authorization is required  by insurance regulatory authorities)    A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due  hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a  court of competent jurisdiction within the United States.  Nothing in this Article constitutes or  should be understood to constitute a waiver of the Reinsurer's rights to commence an  action in any court of competent jurisdiction in the United States, to remove an action to a  United States District Court, or to seek a transfer of a case to another court as permitted by  the laws of the United States or of any state in the United States.    B. Further, pursuant to any statute of any state, territory or district of the United States which  makes provision therefor, the Reinsurer hereby designates the party named in its Interests  and Liabilities Agreement, or if no party is named therein, the Superintendent,  Commissioner or Director of Insurance or other officer specified for that purpose in the  statute, or his successor or successors in office, as its true and lawful attorney upon whom  may be served any lawful process in any action, suit or proceeding instituted by or on  behalf of the Company or any beneficiary hereunder arising out of this Contract.    

 

21\F7V1117  Page 17        Article 29 - Severability (BRMA 72E)  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 30 - Governing Law (BRMA 71B)  This Contract shall be governed by and construed in accordance with the laws of the State of  Florida.      Article 31 - Confidentiality  A. The Reinsurer hereby acknowledges that the documents, information and data provided to  it by the Company, whether directly or through an authorized agent, in connection with the  placement and execution of this Contract, including all information obtained through any  audits and any claims information between the Company and the Reinsurer, and any  submission or other materials relating to any renewal (hereinafter referred to as  "Confidential Information") are proprietary and confidential to the Company.      B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any  Confidential Information to any third parties, including but not limited to the Reinsurer's  subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates,  underwriting agencies, research organizations, any unaffiliated entity engaged in modeling  insurance or reinsurance data, and statistical rating organizations.      C. Confidential Information may be used by the Reinsurer only in connection with the  performance of its obligations or enforcement of its rights under this Contract and will only  be disclosed when required by (1) retrocessionaires subject to the business ceded to this  Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial  condition, (3) external auditors performing an audit of the Reinsurer's records in the normal  course of business, or (4) the Reinsurer's legal counsel; provided that the Reinsurer  advises such parties of the confidential nature of the Confidential Information and their  obligation to maintain its confidentiality.  The Company may require that any third-party  representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article  or by a separate written confidentiality agreement, containing terms no less stringent than  those set forth in this Article.  If a third-party representative of the Reinsurer is not bound, in  writing, by this Confidentiality Article or by a separate written confidentiality agreement, the  Reinsurer shall be responsible for any breach of this provision by such third-party  representative of the Reinsurer.    D. 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 Company with written notice of same at  least 10 days prior to such release or disclosure, to the extent legally permissible, and to  

 

21\F7V1117  Page 18      use its best efforts to assist the Company in maintaining the confidentiality provided for in  this Article.    E. Any disclosure of Non-Public Personally Identifiable Information shall comply with all state  and federal statutes and regulations governing the disclosure of Non-Public Personally  Identifiable Information.  "Non-Public Personally Identifiable Information" shall be defined as  this term or a similar term is defined in any applicable state, provincial, territory, or federal  law.  Disclosing or using this information for any purpose not authorized by applicable law is  expressly forbidden without the prior consent of the Company.    F. The parties agree that any information subject to privilege, including the attorney-client  privilege or attorney work product doctrine (collectively "Privilege") shall not be disclosed to  the Reinsurer until, in the Company's opinion, such Privilege is deemed to be waived or  otherwise compromised by virtue of its disclosure pursuant to this Contract.  Furthermore,  the Reinsurer shall not assert that any Privilege otherwise applicable to the Confidential  Information has been waived or otherwise compromised by virtue of its disclosure pursuant  to this Contract.      G. The provisions of this Article shall extend to the officers, directors and employees of the  Reinsurer and its affiliates, and shall be binding upon their successors and assigns.      Article 32 - Non-Waiver  The failure of the Company or Reinsurer to insist on compliance with this Contract or to exercise  any right, remedy or option hereunder shall not:  (1) constitute a waiver of any rights contained  in this Contract, (2) prevent the Company or Reinsurer from thereafter demanding full and  complete compliance, (3) prevent the Company or Reinsurer from exercising such remedy in  the future, nor (4) affect the validity of this Contract or any part thereof.      Article 33 - Agency Agreement (BRMA 73A)  If more than one reinsured company is named as a party to this Contract, the first named  company shall be deemed the agent of the other reinsured companies for purposes of sending  or receiving notices required by the terms and conditions of this Contract, and for purposes of  remitting or receiving any monies due any party.      Article 34 - Notices and Contract Execution  A. 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.    

 

21\F7V1117  Page 19      B. The use of any of the following shall constitute a valid execution of this Contract or any  amendments thereto:     1. Paper documents with an original ink signature;     2. Facsimile or electronic copies of paper documents showing an original ink signature;  and/or     3. 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.    C. This Contract may be executed in one or more counterparts, each of which, when duly  executed, shall be deemed an original.      Article 35 - Intermediary  Aon Benfield Inc., or one of its affiliated corporations duly licensed as a reinsurance  intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business  hereunder.  All communications (including but not limited to notices, statements, premiums,  return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss  settlements) relating to this Contract will be transmitted to the Company or the Reinsurer  through the Intermediary.  Payments by the Company to the Intermediary will be deemed  payment to the Reinsurer.  Payments by the Reinsurer to the Intermediary will be deemed  payment to the Company only to the extent that such payments are actually received by the  Company.      In Witness Whereof, the Company by its duly authorized representatives has executed this  Contract as of the dates specified below:    This         30th                  day of         March                                       in the year    2021             .    FedNat Insurance Company    /s/ Michael Braun           This         30th                  day of         March                                       in the year    2021             .    Monarch National Insurance Company    /s/ Michael Braun         

 

21\F7V1117  Page 20      This         30th                  day of         March                                       in the year    2021             .    Maison Insurance Company    /s/ Douglas Raucy           

 

21\F7V1117  Schedule A        Schedule A  Excess Catastrophe Reinsurance Contract  Effective:  March 1, 2021    FedNat Insurance Company  Sunrise, Florida  and  Monarch National Insurance Company  Sunrise, Florida  and  Maison Insurance Company  Baton Rouge, Louisiana      Second  Excess Reinsurer's Retention [***] Reinsurer's Per Occurrence Limit [***] Reinsurer's Term Limit [***] Reinsurance Premium [***]   The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess  layer as expressed in its Interests and Liabilities Agreement attached hereto.  

 

21\F7V1117      War Exclusion Clause        As regards interests which at time of loss or damage are on shore, no liability shall attach hereto  in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of  foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or  confiscation by order of any government or public authority.    

 

21\F7V1117      Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)      1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as  Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear  Energy risks.    2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss  or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance  against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage)  to:     I. Nuclear reactor power plants including all auxiliary property on the site, or     II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with  reactor installations, and "critical facilities" as such, or     III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear  material," and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or  waste materials, or     IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes  or other products of nuclear fission.    3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any  loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or  Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear  installation and which normally would be insured therewith except that this paragraph (3) shall not operate     (a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or     (b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting  from radioactive contamination, however caused.  However on and after 1st January 1960 this sub-paragraph (b)  shall only apply provided the said radioactive contamination exclusion provision has been approved by the  Governmental Authority having jurisdiction thereof.    4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any  loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or  Reinsurer, when such radioactive contamination is a named hazard specifically insured against.    5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the  nuclear exposure is not considered by the Reassured to be the primary hazard.    6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law  amendatory thereof.    7. Reassured to be sole judge of what constitutes:     (a) substantial quantities, and     (b) the extent of installation, plant or site.    Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that     (a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the  other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the  provisions of this Clause shall apply.     (b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958  shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960  whichever first occurs whereupon all the provisions of this Clause shall apply.    12/12/57  N.M.A. 1119  BRMA 35B  

 

21\F7V1117  Page 1 of 2      Pools, Associations and Syndicates Exclusion Clause  (Catastrophe)      It is hereby understood and agreed that:    A. This Contract excludes loss or liability arising from:     1. Business derived directly or indirectly from any pool, association, or syndicate which  maintains its own reinsurance facilities.  This subparagraph 1 shall not apply with  respect to:     a. Residual market mechanisms created by statute.  This Contract shall not extend,  however, to afford coverage for liability arising from the inability of any other  participant or member in the residual market mechanism to meet its obligations,  nor shall this Contract extend to afford coverage for liability arising from any  claim against the residual market mechanism brought by or on behalf of any  insolvency fund (as defined in the Insolvency Fund Exclusion Clause  incorporated in this Contract).  For the purposes of this Clause, the California  Earthquake Authority shall be deemed to be a "residual market mechanism."     b. Inter-agency or inter-government joint underwriting or risk purchasing  associations (however styled) created by or permitted by statute or regulation.     2.  Those perils insured by the Company that the Company knows, at the time the risk is  bound, to be insured by or in excess of amounts insured or reinsured by any pool,  association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical  plants; oil or gas drilling rigs; and/or aviation risks.  This subparagraph 2 shall not  apply:     a. If the total insured value over all interests of the risk is less than $250,000,000.     b. To interests traditionally underwritten as Inland Marine or Stock or Contents  written on a blanket basis.     c. To Contingent Business Interruption liability, except when it is known to the  Company, at the time the risk is bound, that the key location is insured by or  through any pool, association or syndicate formed for the purpose of insuring oil,  gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks; unless  the total insured value over all interests of the risk is less than $250,000,000.    B. With respect to loss or liability arising from the Company's participation or membership in  any residual market mechanism created by statute, the Company may include in its ultimate  net loss only amounts for which the Company is assessed as a direct consequence of a  covered loss occurrence, subject to the following provisions:     1. Recovery is limited to perils otherwise protected hereunder.     2. In the event the terms of the Company's participation or membership in any such  residual market mechanism permit the Company to recoup any such direct  

 

21\F7V1117  Page 2 of 2      assessment attributed to a loss occurrence by way of a specific policy premium  surcharge or similar levy on policyholders, the amount received by the Company as a  result of such premium surcharge or levy shall reduce the Company's ultimate net loss  for such loss occurrence.     3. The result of any rate increase filing permitted by the terms of the Company's  participation or membership in any such residual market mechanism following any  assessment shall have no effect on the Company's ultimate net loss for any covered  loss occurrence.     4. The result of any premium tax credit filing permitted by the terms of the Company's  participation or membership in any such residual market mechanism following any  assessment shall reduce the Company's ultimate net loss for any covered loss  occurrence.     5. The Company may not include in its ultimate net loss any amount resulting from an  assessment that, pursuant to the terms of the Company's participation or membership  in the residual market mechanism, the Company is required to pay only after such  assessment is collected from the policyholder.     6. The ultimate net loss hereunder shall not include any monies expended to purchase or  retire bonds as a consequence of being a member of a residual market mechanism  nor any fines or penalties imposed on the Company for late payment.     7. If, however, a residual market mechanism only provides for assessment based on an  aggregate of losses in any one contract or plan year of said mechanism, then the  amount of that assessment to be included in the ultimate net loss for any one loss  occurrence shall be determined by multiplying the Company's share of the aggregate  assessment by a factor derived by dividing the Company's ultimate net loss (net of the  assessment) with respect to the loss occurrence by the total of all of its ultimate net  losses (net of assessments) from all loss occurrences included by the mechanism in  determining the assessment.     8/1/2012        

 

21\F7V1117      Terrorism Exclusion  (Property Treaty Reinsurance)        Notwithstanding any provision to the contrary within this Contract or any amendment thereto, it  is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused  by, contributed to by, resulting from or arising out of or in connection with any act of terrorism,  as defined herein, regardless of any other cause or event contributing concurrently or in any  other sequence to the loss.    An act of terrorism includes any act, or preparation in respect of action, or threat of action  designed to influence the government de jure or de facto of any nation or any political division  thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public  or a section of the public of any nation by any person or group(s) of persons whether acting  alone or on behalf of or in connection with any organization(s) or government(s) de jure or  de facto, and which:     1. Involves violence against one or more persons, or     2. Involves damage to property; or     3. Endangers life other than the person committing the action; or     4. Creates a risk to health or safety of the public or a section of the public; or     5. Is designed to interfere with or disrupt an electronic system.    This Contract also excludes loss, damage, cost or expense directly or indirectly caused by,  contributed to by, resulting from or arising out of or in connection with any action in controlling,  preventing, suppressing, retaliating against or responding to any act of terrorism.    Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this  Contract, in respect only of personal lines, this Contract will pay actual loss or damage (but not  related cost and expense) caused by any act of terrorism provided such act is not directly or  indirectly caused by, contributed to by, resulting from or arising out of or in connection with  radiological, biological, chemical, or nuclear pollution or contamination.    

 

21\F7V1117      The Interests and Liabilities Agreements, constituting 11 pages in total, have been omitted from  this exhibit because such agreements are not material and would be competitively harmful if  publicly disclosed.

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