Document:

Exhibit 10.53

MANAGEMENT AGREEMENT

between

CastlePoint Insurance Company

and

Tower Risk Management Corp.

                This Agreement,
entered into as of June , 2007 (the “Agreement”) by and between CASTLEPOINT INSURANCE
COMPANY, a property and casualty insurance company domiciled in New York (the “Company”),
and TOWER RISK MANAGEMENT CORP., a New York corporation (“Manager”), each
having offices located at 120 Broadway, New York, N.Y. 10271.

PREAMBLE

                WHEREAS, Company
desires to appoint Manager as its manager for performing underwriting and
claims and other services with respect to certain business as set forth in this
Agreement; and

                WHEREAS, Manager
desires to perform such responsibilities;

                NOW,
THEREFORE, Company and Manager, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, agree as follows:

1.             Appointment.

                Company
does hereby nominate, constitute, and appoint Manager as non-exclusive manager
for: (i) the soliciting, underwriting, quoting, binding, issuing, and servicing
of such of the  Company’s insurance
policies as the Company determines for time-to-time on Exhibit A  (such insurance and any policies, contracts,
binders, endorsements, certificates, agreements, or evidence of insurance,
individually and collectively, will be referred to as “Policy” or “Policies”
hereunder).

2.             Authority.  Manager is authorized to:

                2.1           Issue,
or direct Company to issue, Policies subject to: (i) the scope and limits granted
in Exhibit A attached hereto; (ii) the terms and conditions (including
exclusions) of forms of Policies prescribed by Company; (iii) applicable state
insurance laws, rules, and regulations; (iv) the underwriting guidelines
approved by Company; (v) Company’s ultimate right to veto the solicitation,
underwriting, quoting, binding, and issuing of any Policy by Manager; (vi)
Company’s ultimate right to cancel any Policy subject to applicable
governmental regulatory requirements for cancellation and non-renewal; (vii)
Company’s ultimate right to veto the appointment by Manager of any agent,
broker or producer, and the ultimate power of Company to cancel any such agency
pursuant to Section 2.4; (viii) Company’s right to approve all advertising with
respect to the Policies in which Company’s name is used.

                2.2           Collect,
account, receipt for, and remit premiums on Policies that Manager writes on
behalf of Company in accordance with Section 2.1 and to retain its provisional
management fee and policy billing fees, if any,  out of premiums so collected.  Manager agrees to pay all costs and expenses
of collection from insureds where premiums to be received by Manager pursuant
to this Agreement are not paid in full by the insured.  Manager agrees that all premiums, including
return premiums received by Manager, are Company’s property and will be paid
over to the Company.

                2.3           Secure
or obtain agents and producers to produce business.  Company appointments will follow upon Manager
providing evidence that the agents and producers are lawfully licensed to
transact the type of insurance they are expected to write, are not serving on
Company’s or Manager’s board of directors and complete Company’s appointment
process.  The agents and producers must
meet the applicable compliance regulations for licensure.

                2.4           Terminate
agents and producers.

                2.5           Investigate
and settle claims as provided in Section 10 below and establish reserves for
such claims.

                2.6           Purchase
and maintain in effect treaty and facultative reinsurance to limit Company’s
exposure on the Policies to the net amounts outlined in Exhibit A.  Company shall pay to Manager Company’s
proportionate share (up to 15%) of catastrophe reinsurance costs attributable
to the business written by it.

3.             Performance.

                3.1           Manager hereby accepts the foregoing appointment and
agrees faithfully to perform the duties thereof in a professional manner as an
agent of Company and to obey promptly such reasonable instructions as it may
receive from time to time from Company in accordance with this Agreement.

                3.2           If Manager commits a material breach of this Agreement,
Company may, as one remedy but not as an exclusive remedy, require its own
employees or designated representatives to carry out Manager’s duties
hereunder.  Manager shall reimburse
Company for Company’s reasonable expenses, including salaries, incurred for
having Company’s employees or representatives perform such duties or, at
Company’s option, Manager shall pay such employees or representatives
directly.  Such reimbursement or direct
payments shall be made by Manager within five (5) days after Manager’s receipt
of invoices of such expenses.

4.             Fees.

                 Manager shall receive a management fee quarterly
for the foregoing services (“Management Fees”) during each calendar year of this
agreement (or part thereof) equal to (A) the management fee percentage for such
year (as set forth below) (the “Management Fee Percentage”) times (B) the
amount of Subject  Written Premium on
Policies managed by Manager for Company, net of return premiums. “Subject  Written Premium” shall mean  direct written premium net of  specific, aggregate and property catastrophe
excess of loss reinsurance costs. It is expressly agreed that the Management
Fee Percentage payable to the manager shall be 

 

 

 

 

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reduced
by any expenses attributable to boards, bureaus and taxes that are required to
be paid by Company. The provisional Management Fee Percentage shall be 34%.

 

                Such Management
Fee Percentage shall be subject to adjustment until all losses for a given year
have been settled (or deemed settled as set forth below).  Within sixty (60) days following the end of
each year, Company shall calculate the Net Loss Ratio for each year that remains
open and shall forward copies of such calculations to Manager. The Management
Fee Percentage shall be increased nine-tenths of a percentage point for every
percentage point by which the Net Loss Ratio is below 61% up to a maximum
Management Fee Percentage of 36%, and decreased nine-tenths of a percentage
point for every percentage point by which the Net Loss Ratio exceeds 61%,
subject to a minimum Management Fee Percentage of 31% as follows:

	
   

  	
   

  	
  Net Loss Ratio

  	
   

  	
  Management Fee Percentage

  	
   

  
	
   

  	
   

  	
  64.33% or higher

  	
   

  	
  31.0

  	
   

  
	
   

  	
   

  	
  64

  	
   

  	
  31.3

  	
   

  
	
   

  	
   

  	
  63

  	
   

  	
  32.2

  	
   

  
	
   

  	
   

  	
  62

  	
   

  	
  33.1

  	
   

  
	
   

  	
   

  	
  61

  	
   

  	
  34.0

  	
   

  
	
   

  	
   

  	
  60

  	
   

  	
  34.9

  	
   

  
	
   

  	
   

  	
  59

  	
   

  	
  35.8

  	
   

  
	
   

  	
   

  	
  58.78 or lower

  	
   

  	
  36.0

  	
   

  

 

The parties will settle amounts due within ten (10) days
thereafter.  The Net Loss Ratio for each
year shall be deemed to be finalized six (6) years following the close of such
year or at any time before six (6) years by mutual agreement of the parties.

                For the purposes
of this paragraph 4, “Net Loss Ratio” shall mean, for any period of time, the
ratio of Net Losses incurred during such period to Net Premium Earned for such
period, where “Net Losses” means, for any period of time, any and all amounts
that the Company is required to pay to or on behalf of insureds for insurance
claims made under its Policies including loss adjustment expenses, after the
application of any applicable reinsurance.

5.             Territory.

                Manager’s
authority to solicit, quote, underwrite, bind, issue, or service Policies
extends only to insureds or prospective insureds located in the states
specified in Exhibit A attached hereto, subject to: (i) the applicable
licensing authority of Company, (ii) Company having made and received approval
of all necessary regulatory filings and (iii) Manager obtaining licenses if
required for activities conducted by Manager pursuant to this Agreement.

6.             Representations and Warranties of Manager.  On the effective date hereof,
during the term of this Agreement, and for any period described in Section 14.5,
Manager hereby represents and warrants to Company as follows:

 

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                6.1           Laws
and Licenses.  Manager has complied
and will comply with all applicable laws, rules, and regulations.  Manager shall provide current copies of
Manager’s licenses, which will be maintained in Company’s records.  Company will appoint Manager in all
applicable states.  Manager will obtain
and maintain at its own expense all licenses required for it to perform this
Agreement.

                6.2           No
Breach.  This Agreement is a valid
and binding obligation of Manager.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein will not breach or conflict with Manager’s
by-laws or certificate of incorporation, nor with any agreement, covenant, or
understanding (oral or written) to which Manager is bound, and will not adversely
affect the application for issuance or the validity of any license of Manager.

                6.3           Status.  Manager is a duly organized and validly
existing corporation in the State of New York.

                6.4           Authorization.  The execution, delivery, and performance of
this Agreement by Manager have been duly and properly authorized by it.

7.             Representations
and Warranties of Company.  On the effective date hereof, during the term
of this Agreement, and for any period described in Section 14.5, each Company
hereby represents and warrants to Manager as follows:

                7.1           Laws
and Licenses.  Company has complied
and will comply with all applicable laws, rules and regulations and shall,
whenever necessary, obtain and maintain at its own expense all licenses
required for it to perform this Agreement.

                7.2           No
Breach.  This Agreement is a valid
and binding obligation of Company.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein will not breach or conflict with Company’s
by-laws or articles of incorporation, nor with any agreement, covenant, or
understanding (oral or written) to which Company is bound, and will not
adversely affect the application for issuance or the validity of any license of
Company.

                7.3           Status.     
Company is a duly organized and validly existing corporation in the
State of New York.

                7.4           Authorization.  The execution, delivery, and performance of
this Agreement by Company have been duly and properly authorized by it.

8.             Duties and Responsibilities.
 Subject to Company’s supervision
and instructions, Manager agrees to perform the following duties and services
in addition to those otherwise enumerated in this Agreement with regards to
Policies it manages hereunder:

                8.1           Solicit,
underwrite, quote, bind, issue, secure proper countersignature when required by
applicable laws, and service Policies on behalf of Company.

 

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                8.2           Cancel
Policies issued or underwritten by Manager in accordance with the terms of the
Policies and applicable state regulations.

                8.3           Issue
Policies only on forms approved by Company and filed with and approved by
regulatory authorities wherever such filing and approval is required.

                8.4           Underwrite
and issue Policies in accordance with the premium rates and underwriting
criteria and guidelines as approved by Company.

                8.5           Investigate
and settle claims as provided in Section 10 below and establish reserves for
such claims.

                8.6           Maintain
at Manager’s expense data processing systems and equipment, an office or
offices and a staff of employees sufficient in number and qualifications to
perform the duties set forth in this Agreement.

                8.7           Pay
to Company any fines imposed by regulatory authorities, taxation authorities,
and their agents for data collection and advisory organizations, due to late
filing or poor quality of data provided by Manager.

                8.8           Pay
to Company any fines imposed by regulatory authorities upon Company due to the
use of unapproved forms or rates by Manager or due to other market conduct
violations caused by Manager’s willful misconduct.

                8.9           Maintain
separately for Company and each other insurer with which Manager does business,
complete and current records and accounts, including underwriting files, which
Manager shall retain in accordance with Section 12 and any applicable laws.

                8.10         Refund
within sixty (60) days of the end of each calendar month, return commissions on
Policy cancellations or premium reduction, in each case at the same rate at
which such commissions were originally retained.

                8.11         Collect,
account and receipt for  premiums on
Policies that Manager writes on behalf of Company in accordance with Section
2.1, and return premiums to policyowners, as necessary.  Manager shall promptly remit premiums
collected on Company’s behalf, less return premium, reinsurance costs and
Management Fees, to Company.

                8.12         Hold
all monies, including premiums, return premiums, and monies received by
Manager, in a fiduciary capacity for Company. Except as otherwise authorized by
this Agreement, Manager shall maintain such monies in a separate and segregated
bank account in a bank that is a member of the Federal Reserve System and is
insured by the Federal Deposit Insurance Corporation. This account shall not be
used for any purpose other than payments to or on behalf of Company. Any
investment income produced from this bank account is the property of Manager.

                8.13         Comply
with all regulatory requirements including, but not limited to, the
cancellation, non-renewal, or conditional renewal of policies.

 

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                8.14         Return
upon demand after termination of this Agreement, all unused Policies, forms,
and other property furnished to Manager by Company. Such items remain the
property of Company. Manager shall fully cooperate with and assist Company in
recovering such items from third parties, if any.

                8.15         Exercise
Manager’s authority through authorized employees of Manager or its affiliates.

                8.16         Exercise
exclusive and independent control of Manager’s time and conduct.

9.             Limitations of Authority.

                Notwithstanding the foregoing, all underwriting
services provided to Company by Manager shall be based upon the written
criteria, standards and guidelines of Company which shall retain the final
authority over underwriting decisions including, but not limited to, acceptance,
rejection, cancellation and termination of risks.

10.          Claims.

 

                10.1         Manager shall or shall arrange to
investigate, negotiate, and settle all Policy claims or losses on behalf of
Company; however, Manager shall obtain the prior approval of Company before
handling and settling any Policy claim or loss which is in excess of One
Hundred  Thousand Dollars ($100,000)
gross incurred loss.  Manager shall
determine coverage for claims; however, Manager shall obtain the prior written
approval of Company for the handling of litigation in which the Company is
named as a defendant or claims in which Manager seeks declaratory relief on
behalf of Company.  All claims or losses
shall be reported in monthly statements pursuant to Section 11 below.  In addition, Manager shall immediately notify
Company in writing of any claim or loss as Company requests upon receiving
notice or knowledge of: (i) any Policy claim or loss in excess of Two Hundred
Fifty Thousand Dollars ($250,000) gross incurred loss; or (ii) any loss
regardless of incurred dollar amount involving the following: fatalities; brain
stem/brain damage injuries; spinal cord injuries; heart attacks; severe,
non-accumulative hearing loss; severe, non-accumulative vision loss; amputation
of major body part; paraplegia; quadriplegia; serious burns (i.e. second or
third degree and/or burns over 50% of the body); non-union, compound,
comminuted, serious fractures; injury to the spine or pervasive nerve damage;
class action suits; allegations of criminal conduct by an insured or
allegations of criminal conduct by an insured or allegations of criminal
conduct on the insured’s premises; bad faith claims or suits; demands in excess
of policy limits; actual or alleged violations of the Deceptive Trade Practices
Act; actual or alleged violations of the applicable State Insurance Codes;
actual or alleged violation of law by Manager; or litigation naming Company as
a defendant.  In determining gross
incurred loss, Manager shall consider the facts and circumstance of the claim
or loss, Manager’s analysis of the insured’s liability for the claim or loss,
Manager’s analysis of damages resulting from the claim or loss and Manager’s
analysis of the applicability of coverage for the claim or loss.  These individually reported claims or losses
should be updated semi-annually and more frequently upon the occurrence of any
material change in any claim or loss or any information previously reported to
Company.  Company shall be immediately
notified if Manager is closing a file on a reported claim or loss and of the
reason for this file closure.  Failure to
promptly notify Company of claims under this Section 10.1 shall 

 

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be considered a material breach of this Agreement
and subject to all the remedies provided herewith.

                10.2         Whenever Manager shall deem it prudent to engage
legal counsel or loss adjusters to protect Company’s interest regarding claims
or losses, such services shall be provided only by qualified attorneys-at-law
and/or licensed loss adjusters selected by Manager, who have substantial
experience in the handling of claims litigation of the type involved. Upon
execution of this Agreement, Manager shall submit to Company for approval a list
of the attorneys and loss adjusters it intends to use. Such list shall be
considered approved unless Company objects to any of such firms or individuals
within fourteen (14) days after receipt of such list. Any provision hereof to
the contrary notwithstanding, it is agreed that, with respect to any claim or
loss of any amount, Manager shall promptly furnish Company, or its designee,
any additional claim or loss information requested by Company with respect to a
claim or loss pertaining to any Policy covered by this Agreement, and it is
further agreed with respect to any claim or loss of any amount as follows:

                                                                a.             Company may assign an attorney of its own choice to
assume the defense of any claim or loss reported to Company and, in the event
an attorney has already been employed by Manager, the service of such attorney
which has already been employed by Manager shall be terminated by Manager
forthwith and Manager shall waive any conflict of interest that may have been
created by such attorney’s employment by Manager.

                                                                b.             In the event that Company is named as a defendant in any
lawsuit, Manager shall, as soon as it has notice or knowledge of such lawsuit,
immediately give written notice thereof to Company accompanied by a copy of the
complaint and any court papers related to such lawsuit.

                10.3         All claims services provided to Company by Manager
shall be based upon the written criteria, standards and guidelines of Company
which shall retain the final authority over claims decisions including, but not
limited to, payment and non-payment of claims.

                10.4    The
Company will establish a bank account to fund claim payments on its policies
managed by Manager.  Manager shall be made
an authorized signatory on, and shall pay claims out of such account.  Manager shall not be obligated to pay claims
unless such account is sufficiently funded by the Company.

 

11.          Accounting and
Reporting Procedures.  Manager
shall:

                Within thirty (30)
days after the end of each month, remit to Company all premiums collected on
Policies issued under the terms of this Agreement, less the provisional
management fee due to Manager in accordance with Exhibit A attached hereto.  Manager may not offset balances due to
Company hereunder against balances due Manager under any other contract with Company;

                On behalf of
Company supply accounting, underwriting, and claim bordereaux with copies to
Company, pursuant to these terms and conditions;

 

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                With regard to
business placed by Manager with Company hereunder, furnish to Company, in
electronic format, within thirty (30) days after the end of each quarter a
report of  written, earned, and unearned
premiums; losses and loss adjustment expenses paid and outstanding; loss and
loss adjustment expenses incurred; commissions earned by Manager;

                Provide detail and
summary reports, in an electronic or printed medium, as are required to meet
all reporting requirements of state regulatory or taxation authorities, their
managers for data collection, and advisory organizations including but not
limited to:

                a.             Within thirty (30) days of the close of the calendar
quarter:  direct premiums (written and
earned); in force premiums; policy counts (written and in force); direct losses
and loss adjustment expenses including subrogation (paid and reserved); number
of claims open, closed with payment, and closed without payment; as prescribed
by state regulatory authorities.

                b.             Within thirty (30) days of the close of the calendar
quarter:  direct written premium, losses,
and loss adjustment expense including subrogation (paid and reserved)
transaction data as prescribed by advisory organizations providing loss cost
and policy forms.

                c.             Thirty (30) days prior to the prescribed deadline:  the reports of direct premiums (written and
earned), losses, and loss adjustment expenses including salvage and subrogation
(paid and reserved) as required by state regulatory data collection agents,
including but not limited to financial calls, unit statistical data, summary
statistical data, and detailed claim information for National Council on
Compensation Insurance (NCCI), Insurance Services Office (ISO), and National
Association of Independent Insurers (NAII), and various state-specific
reporting requirements as necessary.

                By the first business
day of February of each year, Manager shall provide Company with any
information Company may require in order to complete its statutory financial
statements for the prior year. Company shall notify Manager of the material
information required by December 31 of the prior year.

12.          Books
and Records.

 

                Manager shall keep
such books and records as may be (i) reasonably requested by Company; or (ii)
required by law, rulings, or orders of the insurance departments of the states
having jurisdiction over: (a) Manager or Manager’s business or (b) any
Policies.  Manager shall make such books
and records available for examination, audit, and copying by the insurance
departments of such states and by Company, or by their authorized representatives.  Company shall have the right to examine and
review at any reasonable time all books, records, files, and papers, including,
but not by way of limitation, claim files and underwriting files maintained and
kept by Manager which relate to this Agreement and the Policies.  Manager shall institute and maintain
retention and disposal systems for claim files and underwriting files in
accordance with procedures and requirements as prescribed by law. All books and
records of Manager shall be maintained at the principal place of business of
Manager and shall be complete, accurate, and up-to-date, and shall reflect all
monies paid or received by Agent and all transactions of Manager 

 

8

pursuant to this Agreement. Anything to the contrary notwithstanding,
all of the books, records, files, and papers maintained and kept by Manager
relating to underwriting and claims matters involving this Agreement or the
Policies, shall be and remain the sole and exclusive property of Company except
that upon termination of this Agreement, all right, title, and interest in and
to all Policy renewals or expirations and all records with respect to renewals
and expirations shall automatically and irrevocably transfer to and vest in
Manager provided Manager has accounted for and has made payments of all amounts
due Company and continues to do so.

13.          IndemnificationTitle.

                13.1         Manager shall indemnify and hold
harmless Company from and against all losses, damages, costs, expenses, claims,
fines, penalties, or liabilities of any description suffered by Company with
respect to Manager on any Policies issued or underwritten by Manager,
including, without limitation, any attorney’s fees, in connection with or
arising out of: (i) any violations by Manager of laws, rules, or regulations to
which it is subject; (ii) any material breach of any warranty or representation
of Manager made in this Agreement or any other material breach of this
Agreement by Manager; or (iii) any willful misconduct, gross negligence, or misrepresentation,
of Manager or of it officers, directors, employees, agents, sub-producers, or
independent contractors.

                13.2         Company shall indemnify and hold
harmless Manager from and against all losses, damages, costs, expenses, claims,
fines, penalties, or liabilities of any description suffered by Manager with
respect to Company on any Policies issued or underwritten by Company,
including, without limitation, any attorney’s fees, in connection with or
arising out of: (i) any violations by Company of laws, rules, or regulations to
which it is subject; (ii) any breach of any warranty or representation of
Company made in this Agreement or any other breach of this Agreement by
Company; or (iii) any alleged or actual misconduct, negligence, misrepresentation,
or other acts or failures to act of Company or of it officers, directors,
employees, agents, sub-producers, or independent contractors.

14.          Termination
of Agreement.

 

14.1         This Agreement shall continue until
terminated in accordance with Sections 14.2 through 14.5 below.

14.2         This Agreement may be terminated
immediately by either party upon giving written notice to the other party via
electronic, certified or registered mail in the event of:

                a.             The misappropriation by either party of any funds or
property belonging to the other party;

                b.             The fraud, gross negligence, or willful misconduct of
the other party;

                c.             The license or certificate of authority of the other
party in their state of domicile is canceled, non-renewed or suspended by any
public authority;

                d.             An assignment by the other party for the benefit of
creditors; the dissolution or liquidation of the other party; the appointment
of a conservator, receiver, or 

 

9

liquidator
for a substantial part of the other party’s property; the institution of
bankruptcy, insolvency, or similar proceedings by or against the other party;

                e.             Material breach by the other party of any provision of
this Agreement;

                f.              If any law or regulation of the federal, state, or
local government of any jurisdiction in which the other party is doing business
shall render illegal or invalid any transaction contemplated by this Agreement,
or any term of this Agreement, this Agreement may be terminated insofar as it
applies to such jurisdiction by either party giving notice to the other party
to such effect or by either party giving notice to the other party to such
effect;

                g.             Change in ownership of ten percent (10%) or more of the
outstanding voting stock of the other party, sale or transfer of the other
party’s assets, merger of the other 
party, or change or resignation of any principal officer or director of
the other party;

                h.             The licenses required of the other party for it to
perform under this Agreement expire, are terminated, or are not valid pursuant
to the law of the State in which the other party is transacting business on
behalf of either party.

                i.              Reinsurance covering the business under this agreement
is cancelled, terminated or expired.

14.3         This Agreement may be terminated at any
time by mutual written agreement, or upon sixty (60) days prior written notice
by either Company or Manager.

14.4         If at any time either party sends
notice of termination to the other party as provided in Section 14.2 above or
the Agreement is otherwise terminated as provided herein, the Manager shall not
solicit, underwrite, quote, bind, or issue any Policies or renew any existing
Policies for which the inception date or renewal date falls after the effective
date of termination of this Agreement, nor shall Manager cancel and rewrite any
existing Policies.

14.5         Unless otherwise indicated by this
Agreement or either party otherwise notifies the other party in writing,
Manager’s duties and responsibilities under this Agreement shall survive
termination of this Agreement until such time as all Policies issued,
underwritten, or serviced by Manager pursuant to this Agreement have expired
and all known losses under such Policies have been paid or settled, have run
off or otherwise have been disposed of in the judgment of Company, all incurred
but not reported loss reserves have been reduced to zero, and any amounts owed
to Company by others has been paid. The only compensation Manager shall receive
for its performance of its duties hereunder (both during and after the term of
this Agreement) is set forth in Section 4.

14.6         Upon termination of the Agreement, Manager
shall, unless notified in writing to the contrary by Company:

a.             Continue to
represent Company for the purpose of servicing Policies placed by Manager with
Company which are in force on, or renewed at Company’s 

 

10

election,
or as required by law, after the date of termination of this Agreement, and
Manager shall continue to receive its normal compensation for such services.

b.             Issue and
countersign appropriate endorsements on Policies in force, provided that
without prior written approval of Company, such endorsement shall not increase
nor extend Company’s liability nor extend the term of any Policy.

c.             Collect and receipt
for premiums and retain commissions out of premiums collected as full
compensation.

14.7         Any notice issued pursuant to this
Section shall be effective on the day after it is received by Manager.

15.          Suspension
of Manager’s Authority.

 

15.1         In lieu of terminating this Agreement,
Company may give written notice to Manager that Company is immediately
suspending Manager’s authority in its entirety or in any particular state to
bind new or renewal business, change any existing Policy and/or settle any
claim during the pendency of any of the following events:

a.             Manager is
delinquent in payment of any monies due Company;

b.             Any dispute exists
between Manager and Company regarding the existence of any of the events listed
in Section 14.2;

15.2         Such suspension shall remain in effect
until such delinquency is cured or dispute is resolved and Manager receives
written notification from Company to that effect. If such delinquency is not
cured within fifteen (15) days from the date of receipt of written notification
by Manager of such delinquency, Company may exercise its right to terminate
this Agreement under Section 14.2.

15.3          Unless otherwise notified in writing
to the contrary by Company, Manager’s obligation under this Agreement shall
continue during the suspension of Manager’s authority under this Agreement.

15.4          Any notice of suspension issued
pursuant to this Section shall be effective immediately.

16.          Ownership
of Expirations.

 

                The use and
control of expirations of the Policies will remain the property of Manager; and
Company will not, without consent of Manager, (a) refer or communicate to any
other agent or broker, Company’s records of insureds, expiration dates and
other material information relating to specific risks except for loss or claims
information specifically requested by the insured or the insured’s authorized
representative nor (b) use such material information relating to specific risks
for purposes of solicitation.

17.          Mediation;
Arbitration and Injunctive Relief.

 

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                17.1         If any dispute arises between Company
and Manager with reference to the interpretation, performance, or breach of
this Agreement (whether the dispute arises before or after termination of this
Agreement) such dispute, if not resolved by the parties, must be submitted to
non-binding mediation.  If such dispute
is not resolved by non-binding mediation within sixty (60) days it will then be
submitted for decision to a panel of three arbitrators.  Notice requesting arbitration will be in
writing and sent certified or registered mail, return receipt requested.

                17.2         One arbitrator shall be chosen by each
party and the two arbitrators shall, before instituting the hearing, choose an
impartial third arbitrator who shall preside at the hearing.  If either party fails for any reason to
appoint its arbitrator within thirty (30) days after being requested to do so
by the other party, the latter, after ten (10) days notice by certified or
registered mail of its intention to do so, may appoint the second
arbitrator.  If the two arbitrators are
unable to agree upon the third arbitrator within thirty (30) days of their
appointment, the third arbitrator shall be selected from a list of six
individuals (three named by each arbitrator) by a judge of the United States
District Court having jurisdiction over the geographical area in which the
arbitration is to take place, or if that court declines to act, the state court
having general jurisdiction in such area.

                17.3         All arbitrators shall be active or
retired disinterested officials of insurance or reinsurance companies not under
the control or management of either party to this Agreement and will not have
personal or financial interests in the result of the arbitration.

                17.4         Within thirty (30) days after notice of
appointment of all arbitrators, the panel shall meet and determine timely
periods for briefs, discovery procedures, and schedules for hearings.

                17.5         The panel shall be relieved of all
judicial formality and shall not be bound by the strict rules of procedure and
evidence.  Arbitration shall take place
in New York, New York.  Insofar as the
arbitration panel looks to substantive law, it shall consider the law of the
State of New York.  The decision of any
two arbitrators when rendered in writing shall be final and binding.  The panel is empowered to grant interim
relief as it may deem appropriate.

                17.6         The panel shall interpret this
Agreement as an honorable engagement rather than merely a legal obligation and
shall make its decision considering the custom and practice of the applicable
insurance and reinsurance businesses within sixty (60) days following the
termination of the hearing unless the parties consent to an extension.  Judgment upon the award may be entered in any
court having jurisdiction thereof.

                17.7         Punitive damages will not be
awarded.  The arbitrators may, however,
at their discretion award such other costs and expenses as they deem
appropriate, including but not limited to attorneys’ fees, the cost of arbitration,
and arbitrators’ fees, to the extent permitted by law.

                17.8         It is understood and agreed that in the
event of any breach or threatened breach, Company may apply to a court of
competent jurisdiction for, and shall be entitled to, injunctive relief from
such court, without the requirement of posting a bond or proof of damages,
designed 

 

12

to cure existing breaches and to prevent a future occurrence or
threatened future occurrence of like breaches on the part of Manager.  It is further understood and agreed that the
remedies and recourses herein provided shall be in addition to, and not in lieu
of, any other remedy or recourse which is available to Company either at law or
in equity in the absence of this paragraph including without limitation the
right to damages.

18.          Miscellaneous.

 

18.1         This Agreement may be revised by mutual
agreement of Manager and Company and such revision shall be evidenced by a
written agreement duly executed by authorized representatives of Manager and
Company, which specifies the effective date thereof.

18.2         Manager shall not have authority to
represent Company on any exclusive basis with respect to any policy form, line,
or class or subclass of business, unless otherwise authorized in writing by
Company.

18.3         Manager shall not
commit Company to any expenses or obligations not specifically provided for
herein without the prior written permission of Company.  Company shall reimburse Manager for expenses
and costs incurred by Manager which are not in the ordinary course of business
and which Company has specifically approved.

18.4         Company shall have
the right to oversee and supervise the operation of this Agreement, including
but not limited to the right at all reasonable times to have access to and to
copy at Company’s expense Manager’s books and records as they relate to this
Agreement, which rights shall survive the termination or expiration of this
Agreement. The director or commissioner of insurance of any state where Manager
issues Policies on behalf of Company shall have at all reasonable times the
right of access to all books, records, and bank account of Manager in a form
usable by such official.

18.5         During the term of
this Agreement, Manager shall obtain and maintain in full force and effect, at
its expense, fidelity insurance with a minimum policy limit of $1,000,000,
errors and omissions insurance with a minimum policy limit of $2,000,000,
directors and officers insurance with a minimum policy limit of $2,000,000, and
general liability insurance with a minimum policy limit of $1,000,000 and on
such terms as are reasonably acceptable to Company.  Manager shall furnish Company with copies of
the certificates of insurance for such insurance, and shall not cancel or amend
any such insurance without Company’s prior written consent.

18.6         Manager shall provide
to Company, copies of its quarterly financial reports and annual audited
financial reports.

18.7         If Manager fails in
any respect to fulfill its duties and responsibilities under this Agreement,
then the expense incurred by Company in order to fulfill Manager’s duties and
responsibilities under this Agreement will be fully reimbursed by Manager.

18.8         This Agreement may
not be directly or indirectly assigned by either party in whole or in part, nor
may Manager appoint a sub managing general Manager.

 

13

18.9         Any provision of this
Agreement which conflicts with applicable law or regulation will be amended to
the minimum extent necessary to effectuate compliance with such law or
regulation.

18.10       Manager is an
independent contractor, not an employee of Company, and nothing in this
Agreement shall be construed to create an employer/employee relationship
between Company and Manager.

18.11       This Agreement shall
be construed in accordance with the laws of the State of New York.

18.12       Neither Company nor
Manager shall disclose material details of this Agreement and the Policies
without the prior consent of the other party. 
However, this restriction will not apply to disclosures made by Company
or Manager to its agents, producers, shareholders, policyholders, auditors,
accountants, arbitrators, legal counsel, or other third parties as required in
the ordinary course of business, nor to disclosures required by arbitration
panels, governmental agencies, regulatory authorities, or courts of law.

18.13       Failure of either
party to enforce compliance with any term or condition of this Agreement shall
not constitute a waiver of such term or condition.  No waiver of any breach or default hereunder
shall be valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.

18.14       Manager acknowledges
and agrees that it will benefit from this Agreement and that a breach by it of
the covenants contained herein would cause Company irreparable damages that
could not adequately be compensated for only by monetary compensation.  Manager shall notify Company in writing via
electronic, certified or registered mail, within five (5) days if there is a
change in ownership of ten percent (10%) or more of the outstanding voting
stock of Manager, sale or transfer of all Manager’s assets, merger of Manager,
or change of any principal officer or director of Manager including, but not
limited to, resignation.

18.15       Any notice or other
communications required or permitted hereunder shall be sufficiently given if
sent by electronic, certified or registered mail, postage prepaid, if to
Company, addressed to Tower Risk Management Corp., 120 Broadway, 31st Floor,
New York, New York, 10271, Attention: Stephen Kibblehouse, General Counsel, and
if to Company addressed to CastlePoint Insurance Company., 120 Broadway, 30th Floor,
New York, NY 10271, Attention: General Counsel or such other address as
notified by either party to the other.

18.16       Notwithstanding any
other provisions of this Agreement, the business and affairs of Company shall
be managed by its board of directors, and, to the extent delegated by the
board, by its appropriately authorized officers. The board of directors and
officers of Manager shall not have any management prerogatives with respect to
the business affairs and operations of the Company.

 

14

IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed as of the date first written
above.

	
   

  	
  TOWER RISK MANAGEMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CASTLEPOINT INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

15

EXHIBIT A

SCHEDULE OF AUTHORITY

Manager is only authorized
to accept or bind business, as defined in Section A below, subject to the
amounts and stipulations indicated below. 
Amounts in excess of the authorized limits or classifications must be
referred to Company for review and approval prior to binding.

 

A.            GROSS NET WRITTEN PREMIUM LIMIT.   A maximum of $100,000,000 unless Manager
obtains the prior written consent of Company. 
Gross Net Written Premium shall mean gross written premium of Company
less returned premium for cancellations and reductions.

B.            POLICY LIMITS, COVERAGE CLASSIFICATIONS AND MAXIMUM NET
LINES (after treaty and facultative reinsurance).

 

	
  Coverage

  	
   

  	
  Limit

  	
   

  	
  Maximum Net Lines

  
	
  Property

  (including Equipment Breakdown)

  	
   

  	
  $50
  Million or TBA

  	
   

  	
  $1
  Million per risk/per occurrence

  
	
  General
  Liability and Auto Liability

  	
   

  	
  $1
  Million per Occurrence / $2 Million Aggregate

  	
   

  	
  $1
  Million per occurrence

  
	
  Workers’
  Compensation

  Employer’s Liability

  	
   

  	
  Statutory

  $1 Million

  	
   

  	
  $1
  Million per occurrence

  
	
  Excess
  and Umbrella Liability

  	
   

  	
  $10
  Million

  	
   

  	
  $250,000
  per occurrence

  

 

The above coverages are
provided on ISO forms and on certain independent manuscript forms to be agreed.

Other classifications of
insurance may be written on Company’s insurance policies subject to Company’s
prior approval.

C.            TERRITORIAL LIMITATIONS.   Manager shall not issue any policy in any
jurisdiction other than the authorized states defined as those states in which
Company is licensed and has filed and approved rates and policies.  Company at its own discretion may limit or
revoke Manager’s authority as regards any particular state.

 

16Exhibit 10.54

CastlePoint Insurance
Company as Reinsured

Tower Insurance Company of New York as Reinsurer

 

AGGREGATE
EXCESS OF LOSS

AGREEMENT

Effective
July 1, 2007

 

	
  ARTICLE

  	
   

  	
   

  	
   

  	
  PAGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  BUSINESS COVERED

  	
   

  	
  2

  	
   

  
	
  2

  	
   

  	
  COMMENCEMENT AND
  TERMINATION

  	
   

  	
  2

  	
   

  
	
  3

  	
   

  	
  TERRITORY

  	
   

  	
  3

  	
   

  
	
  4

  	
   

  	
  EXCLUSIONS

  	
   

  	
  3

  	
   

  
	
  5

  	
   

  	
  COVERAGE

  	
   

  	
  4

  	
   

  
	
  6

  	
   

  	
  NET RETAINED LINES

  	
   

  	
  4

  	
   

  
	
  7

  	
   

  	
  REINSURANCE PREMIUM

  	
   

  	
  4

  	
   

  
	
  8

  	
   

  	
  ACCOUNTS AND LOSS
  SETTLEMENTS

  	
   

  	
  4

  	
   

  
	
  9

  	
   

  	
  CURRENCY

  	
   

  	
  5

  	
   

  
	
  10

  	
   

  	
  TAXES

  	
   

  	
  5

  	
   

  
	
  11

  	
   

  	
  RESERVES

  	
   

  	
  6

  	
   

  
	
  12

  	
   

  	
  OFFSET

  	
   

  	
  10

  	
   

  
	
  13

  	
   

  	
  ERRORS AND OMISSIONS

  	
   

  	
  10

  	
   

  
	
  14

  	
   

  	
  ACCESS TO RECORDS

  	
   

  	
  10

  	
   

  
	
  15

  	
   

  	
  INSOLVENCY

  	
   

  	
  10

  	
   

  
	
  16

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  11

  	
   

  
	
  17

  	
   

  	
  ARBITRATION

  	
   

  	
  11

  	
   

  
	
  18

  	
   

  	
  SERVICE OF SUIT

  	
   

  	
  12

  	
   

  
	
  19

  	
   

  	
  GOVERNING LAW

  	
   

  	
  13

  	
   

  
	
  20

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  13

  	
   

  

 

 

AGGREGATE
EXCESS OF LOSS

AGREEMENT

 

(Hereinafter referred to as the “Agreement”)

 

Between

 

CASTLEPOINT
INSURANCE COMPANY

 

 (Hereinafter referred to
as the “Company”)

 

And

 

TOWER
INSURANCE COMPANY OF NEW YORK

New
York, New York

 

(Hereinafter referred to as the “Reinsurer”)

 

 

 

ARTICLE 1 - BUSINESS COVERED

 

The Reinsurer shall indemnify the Company,
subject to the terms, conditions and exclusions set forth in this Agreement,
for the net liability in respect of Ultimate Net Loss and Loss Adjustment
Expenses on the Company’s new and renewal Brokerage Business underwritten and
produced on behalf of the Company by Tower Risk Management.  Brokerage Business shall mean  broad classes of business that are
underwritten on an individual policy basis by an insurance company’s
underwriting staff through wholesale and retail agents, and for which most or
all of the services provided by the insurance company as part of the overall
product offering.

 

ARTICLE 2 — COMMENCEMENT AND
TERMINATION

 

A.            This
Agreement is initially effective for a six month period from 12:01 a.m., Eastern
Standard Time, July 1, 2007, (the “Effective Date”) to December 31, 2007.  Either party may terminate the Agreement as
of December 31, 2007 by giving 60 days written notice by certified or
registered mail. After the initial period, this Agreement will be effective for
12 month periods and each party will have the option to cancel at any December
31 by giving 90 days written notice to the other party by certified or
registered mail.

 

B.            The
Company and the Reinsurer may agree to terminate this Agreement or some portion
of the Subject Business on a cut-off basis. 
Upon such termination, the Reinsurer shall incur no liability for losses
occurring or claims made subsequent to the effective date of termination and
the Reinsurer shall return to the Company its unearned premium reserve.

 

C.            Either
the Company or the Reinsurer may terminate this Agreement at any time by the
giving of thirty (30) days prior written notice to the other party upon the
happening of any one of the following circumstances:

 

 

2

 

 

(a)           A
State Insurance Department or other legal authority orders the other party to
cease writing business, or;

 

(b)           The
other party has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary), or there has been instituted
against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, or trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or control of its operations,
or

 

(c)           The
other party’s statutory policyholders’ surplus has been reduced by either 50%
of the amount of surplus at the inception of this Agreement or 50% of the
amount at the latest anniversary, whichever is greater, or has lost any part
of, or has reduced its paid-up capital, or

 

(d)           The
other party has become merged with, acquired or controlled by any company,
corporation, or individual(s) not controlling the party’s operations
previously, or

 

(e)      The
other party has reinsured its entire liability under this Agreement without the
terminating party’s prior written consent, or

 

(f)            The
Company ceases to retain any of the risks of the Business Covered.

 

The Company may terminate this Agreement upon
thirty (30) days notice if the A.M. Best Rating of the Reinsurer falls below “A-”.

 

In the event of such termination under (c) or
(d), the liability of the Reinsurer shall be terminated in accordance with the
termination provisions set forth in Paragraph C. above.  However, if the terminating party is the
Company, the Company shall have the right, by the giving of prior written
notice, to terminate this Agreement on a cut-off basis as provided in Paragraph
B. above.

 

ARTICLE 3 - TERRITORY

 

This Agreement shall follow the territorial
limits of the Company’s policies.

 

ARTICLE 4 - EXCLUSIONS

 

This Agreement shall not apply to and
specifically excludes:

 

1.             Nuclear
Incident, in accordance with the following clauses attached hereto:

                                                                                                Nuclear
Incident Exclusion Clause — Physical Damage — Reinsurance — U.S.A. — NMA 1119;

                                                                                                Nuclear
Incident Exclusion Clause — Liability — Reinsurance — U.S.A. — NMA 1590;

 

2.                                       War Risks, in
accordance with the War Risks Exclusion Clause appearing in the original
Policies;

 

3.                                       Insolvency, in
accordance with the Insolvency Funds Exclusion Clause attached hereto;

 

3

 

	
  4.

  	
   

  	
  Liability
  assumed by the Company as a member of any pool, association or syndicate, in
  accordance with the Pools, Associations and Syndicates Exclusion Clause
  attached hereto;

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Earthquake,
  when written as such;

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Liability
  arising out of ownership, maintenance or use of any aircraft or flight
  operations;

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Professional
  Liability, when written as such, however not to exclude when written as part
  of a package policy or when written in conjunction with other policies issued
  by the Company;

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Insolvency
  Risks and Financial Guarantee;

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Asbestos
  liabilities of any nature;

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Pollution
  liabilities of any nature;

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Assumed
  reinsurance with the exception of inter-affiliate reinsurance.

  

 

 

ARTICLE 5 - COVERAGE

 

The Reinsurer shall indemnify the Company for
85% of the paid portion of all Ultimate Net Loss and Loss Adjustment Expenses
arising out of the Company’s Brokerage Business on a provisional basis adjusted
to the actual percentage of the Reinsurer’s Brokerage Business over the total
Brokerage Business written by the Company and companies of the Tower Group Inc.
collectively, as calculated within 30 days from each December 31, in excess of 52.5%
of the Company’s Net Earned Premium as defined in Article 8.

 

ARTICLE 6 - NET RETAINED LINES

 

This Agreement applies only to that portion
of Business Covered which the Company retains net for its own account after
recoveries from specific excess reinsurance, property catastrophe reinsurance
and facultative reinsurance, if any.

 

ARTICLE 7 - REINSURANCE PREMIUM

 

The Company shall pay the Reinsurer a
quarterly flat reinsurance premium equal to $750,000 payable within 30 days
from the end of each quarter.

 

ARTICLE 8 - ACCOUNTS AND LOSS
SETTLEMENTS

 

A.            Within
30 (thirty) days following the end of each calendar quarter, the Company shall
report to the Reinsurer, the amount of:

 

1.             Net Earned Premium;

 

2.             Ultimate Net Loss and Loss Adjustment Expenses paid;

 

 

4

 

3.             Ultimate Net Loss and Loss Adjustment Expenses
outstanding (including IBNR).

 

For the purpose of this Agreement, Net Earned
Premium shall be defined as the Company’s gross Brokerage premium less premiums
paid for specific excess reinsurance, property catastrophe reinsurance and
facultative reinsurance, if any, which inure to the benefit of this Agreement,
and before any cessions to quota share reinsurance.

 

If the ratio of 2. over 1. exceeds 52.5%, the
Reinsurer shall pay the Company the difference no later than 15 (fifteen) days
following receipt of the quarterly report by direct wire transfer.

 

Reports shall continue until final settlement
of all ceded Ultimate Net Loss and Loss Adjustment Expenses hereunder.

 

Notwithstanding the above, the Company shall
advise the Reinsurer promptly of all Ultimate Net Losses, which, in the opinion
of the Company, may result in a claim hereunder and of all subsequent
developments thereto which, in the opinion of the Company, may materially
affect the position of the Reinsurer. 
Inadvertent omission or oversight in dispatching such advises shall in
no way affect the liability of the Reinsurer. 
However, the Company shall notify the Reinsurer of such omission or
oversight promptly upon its discovery.

 

B.            All
Ultimate Net Loss settlements made by the Company on Business Covered, whether
under policy terms and conditions or by way of compromise, shall be in the sole
discretion of the Company and shall be unconditionally binding on the
Reinsurer. Upon satisfactory proof of loss, the Reinsurer shall pay or allow,
as applicable, its proportional share of each such settlement in accordance
with this Agreement.

 

ARTICLE 9 - CURRENCY

 

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

 

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 10 - TAXES

 

In consideration of the terms under which
this Agreement is issued, the Company undertakes not to claim any deduction of
the Reinsurance Premium hereon when making Canadian tax returns or when making
tax returns other than Income or Profits Tax returns, to any State or Territory
of the United States of America or to the District of Columbia.

 

5

 

ARTICLE 11 — RESERVES

 

A.            If
any Reinsurer is unauthorized or otherwise unqualified in any state or other
United States jurisdiction, and if, without such security, a financial penalty
to the Company would result on any statutory statement or report it is required
to make or file with insurance regulatory authorities or a court of law in the
event of insolvency, the Reinsurer will timely secure the Reinsurer’s share of
Obligations under this Agreement in a manner, form, and amount acceptable to
the Company and to all applicable insurance regulatory authorities in
accordance with this Article.

 

B.            The
Reinsurer shall secure such Obligations by either:

 

1.                                       Clean,
irrevocable, and unconditional evergreen letter(s) of credit (“Letter(s) of
Credit”) meeting the requirements of New York Regulation 133; and/or

 

2.             A trust account meeting the requirements of New York
Regulation 114.

 

C.            The
“Obligations” referred to herein means the then current (as of the end of each
calendar quarter) sum of:

 

1.                                       The amount of
the ceded unearned premium reserve for which the Reinsurer is responsible to
the Company;

 

2.                                       The amount of
Losses and Loss Adjustment Expenses and other amounts paid by the Company for
which the Reinsurer is responsible to the Company but has not yet paid;

 

3.                                       The amount of
ceded reserves for Losses and Loss Adjustment Expenses (including, ceded
reserves for losses incurred but not reported) for which the Reinsurer is
responsible to the Company; and

 

4.                                       The amount of
return and refund premiums paid by the Company for which the Reinsurer is
responsible to the Company but has not yet paid.

 

D.            To
the extent that the Reinsurer elects to provide Letter(s) of Credit, the
following shall apply:

 

1.                                       Each Letter of
Credit 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.

 

2.                                       The Letter of
Credit must be issued or confirmed by a bank which is authorized to issue
letters of credit, which is either a member of the Federal Reserve System or is
a New York State chartered bank, and which in all other respects satisfies the
definition of a “Qualified Bank” under Section 79.1(e) of New York Insurance
Regulation 133.  If the Letter of Credit
is issued by a bank authorized to issue letters of credit but which is not such
a “Qualified Bank”, then the Letter of Credit must be

 

6

 

confirmed by such a bank and
the Letter of Credit must meet all of the conditions set forth in Section 79.4
of New York Insurance Regulation 133.

 

3.                                       The Reinsurer
and the Company agree that the Company may draw upon the Letter(s) of Credit at
any time, notwithstanding any other provisions in the Agreement, provided such
assets are applied and utilized by the Company or any successor of the Company
by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company, without diminution
because of the insolvency of the Company or the Reinsurer, only for the
following purposes:

 

(i)
                                  to reimburse
the Company for the Reinsurer’s share of premiums returned to the owners of
policies reinsured under this Agreement on account of cancellations of such
policies;

 

(ii)
                               to reimburse
the Company for the Reinsurer’s share of surrenders and benefits or losses paid
by the Company under the terms and provisions of the policies reinsured under
this Agreement;

 

(iii)
                            to fund an
account with the Company in an amount at least equal to the deduction, for
reinsurance ceded, from the Company’s liabilities for policies ceded under this
Agreement.  Such amount shall include,
but not be limited to, amounts for policy reserves for claims and losses
incurred (including losses incurred but not reported), loss adjustment
expenses, and unearned premiums; and

 

(iv)
                           to pay any
other amounts the Company claims are due under this Agreement.

 

4.                                       The Company
shall immediately return to the Reinsurer any amounts drawn down on the Letter
of Credit that are subsequently determined not to be due.

 

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

 

E.             To
the extent that the Reinsurer elects to establish a trust account, the
following shall apply.

 

1.                                       It is agreed
that the Reinsurer shall enter into a trust agreement (the “Trust Agreement”)
in a form acceptable to the Company and establish a trust account (the “Trust
Account”) for the sole benefit of the Company with a trustee (the “Trustee”),
which shall be at the time the Trust is established, and shall continue to be,
either a member of the Federal Reserve System or a New York state chartered
bank and which shall not be a parent, subsidiary or affiliate of the Reinsurer
or the Company.

 

7

 

2.                                       The Reinsurer
agrees to deposit and maintain in said Trust Account assets to be held in trust
by the Trustee for the benefit of the Company as security for the payment of
the Reinsurer’s Obligations to the Company under the Agreement.  Such assets shall be maintained in the Trust
Account by the Reinsurer as long as the Reinsurer continues to remain liable
for such Obligations.

 

3.                                       The Reinsurer
agrees that the assets deposited into the Trust Account shall be valued
according to their current fair market value and shall consist only of currency
of the United States of America, certificates of deposit issued by a United
States bank and payable in United States legal tender, and investments of the
types specified in paragraphs (1), (2), (3), (8) and (10) of Section 1404(a) of
the New York Insurance Law, provided such investments are issued by an
institution that is not the parent, subsidiary or affiliate of either the
Grantor or the Beneficiary (“Authorized Investments”).

 

4.                                       The Reinsurer,
prior to depositing assets with the Trustee, shall execute all assignments and
endorsements in blank, and shall transfer legal title to the Trustee of all
shares, obligations or any other assets requiring assignments, in order that
the Company, or the Trustee upon direction of the Company, may whenever
necessary negotiate any such assets without consent or signature from the
Reinsurer or any other entity.

 

5.                                       All settlements
of account under the Trust Agreement between the Company and Reinsurer shall be
made in cash or its equivalent.

 

6.                                       The Reinsurer
and the Company agree that the assets in the Trust Account may be withdrawn by
the Company at any time, notwithstanding any other provisions in the Agreement,
provided such assets are applied and utilized by the Company or any successor
of the Company by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the Company, without
diminution because of the insolvency of the Company or the Reinsurer, only for
the following purposes:

 

(i)                                     to reimburse
the Company for the Reinsurer’s share of any Losses and Loss Adjustment
Expenses paid by the Company but not received from the Reinsurer or for
unearned premiums due to the Company but not otherwise paid by the Reinsurer
under the Agreement; or

 

(ii)                                  to make payment
to the Reinsurer of any amounts held in the Trust Account that exceed 102% of
the Reinsurer’s Obligations (less the balance of credit available under any
Letter(s) of Credit) hereunder; or

 

(iii)                               where the
Company has received notification of termination of the Trust Account, and
where the Reinsurer’s entire Obligations under the Agreement remain
unliquidated and undischarged ten (10)

 

8

 

days prior to such
termination, to withdraw amounts equal to such Obligations (less the balance of
credit available under any Letter(s) of Credit) and deposit such amounts in a
separate account, in the name of the Company, in any United States bank or
trust company, apart from its general assets, in trust for such uses and
purposes specified in sub-paragraphs (i) and (ii) above as may remain executory
after such withdrawal and for any period after such termination.

 

7.                                       The Reinsurer
shall have the right to seek the Company’s approval to withdraw all or any part
of the assets from the Trust Account and transfer such assets to the Reinsurer,
provided that the withdrawal conforms to the following requirements:

 

(i)
                                  the Reinsurer
shall, at the time of withdrawal, replace the withdrawn assets with other
Authorized Investments having a market value equal to the market value of the
assets withdrawn,

 

(ii)                                  after such
withdrawal and transfer, the market value of the Trust Account is no less than
102% of the Reinsurer’s Obligations (less the balance of credit available under
any Letter(s) of Credit).

 

In the event that the
Reinsurer seeks the Company’s approval hereunder, the Company shall not
unreasonably or arbitrarily withhold its approval.

 

8.                                       In the event
that the Company withdraws assets from the Trust Account for the purposes set
forth in Paragraph (6)(i) above in excess of actual amounts required to meet
the Reinsurer’s Obligations to the Company (less the balance of credit
available under any Letter(s) of Credit), or in excess of amounts determined to
be due and under Paragraph (6)(iii) above, the Company will return such excess
to the Reinsurer.

 

9.                                       The Company
will prepare and forward at annual intervals or more frequently as determined
by the Company, but not more frequently than quarterly to the Reinsurer a
statement for the purposes of this Article, showing the Reinsurer’s share of
Obligations as set forth above.  If the
Reinsurer’s share thereof exceeds the then existing balance of the security
provided, the Reinsurer will, within fifteen (15) days of receipt of the
Company’s statement, but never later than December 31 of any year, increase the
amount of the letter of credit, or Trust Account to the required amount of the
Reinsurer’s share of Obligations set forth in the Company’s statement, but
never later than December 31 of any year. 
If the then existing balance of the security provided exceeds an amount
equal to 100% of the Reinsurer’s share thereof, the Company will release the
excess thereof to the Reinsurer upon the Reinsurer’s written request.

 

F.             The
Reinsurer will take any other reasonable steps that may be required for the
Company to take full credit on its statutory financial statements for the
reinsurance provided by this Agreement.

 

9

 

ARTICLE 12 - OFFSET

 

The Company and the Reinsurer shall have the
right to offset any balance or amounts due from one party to the other under
the terms of this Agreement.  The party
asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise. In the event of
insolvency of any of the parties of this Agreement that is a New York domestic
insurer, offsets shall be allowed strictly as provided for and in accordance
with the provisions of Section 7427 of the New York Insurance Law.

 

ARTICLE 13 - ERRORS AND OMISSIONS

 

Inadvertent delays, errors or omissions made
by the Company in connection with this Agreement shall not relieve the
Reinsurer from any liability which would have attached had such delay, error or
omission not occurred, provided always that such delay, error or omission shall
be rectified as soon as possible after discovery by the Company’s home office.

 

ARTICLE 14 - ACCESS TO RECORDS

 

The Company shall place at the disposal of
the Reinsurer at all reasonable times, and the Reinsurer shall have the right
to inspect through their designated representatives, during the Term of this
Agreement and thereafter, all books, records and papers of the Company in
connection with any reinsurance hereunder, or the subject matter hereof.

 

ARTICLE 15 - INSOLVENCY

 

A.            In
the event of insolvency and the appointment of a conservator, liquidator, or
statutory successor of the Company, the portion of any risk or obligation
assumed by the Reinsurer shall be payable to the conservator, liquidator, or
statutory successor on the basis of claims allowed against the insolvent
company by any court of Company having authority to allow such claims, without
diminution because of that insolvency, or because the conservator, liquidator,
or statutory successor has failed to pay all or a portion of any claims.  Payments by the Reinsurer as set forth in
this subdivision shall be made directly to the Company or to its conservator,
liquidator, or statutory successor, except where, to the extent permitted by
law, (a) this Agreement of reinsurance specifically provides another payee of
such reinsurance in the event of the insolvency of the ceding insurer or (b)
the Reinsurer with the consent of the direct insured(s) has assumed the 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, or (c) except as provided by applicable law and regulation (such
as subsection (a) of section 4118 of the New York Insurance laws) in the event
of the insolvency of the Company.

 

B.            In
the event of the insolvency of the Company, 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 insolvent Company on the
Policy or Policies reinsured within a reasonable time after such claim is filed
in the insolvency proceeding and during the pendency of such claim any
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 which
it may deem available to the Company or its

 

10

 

liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable subject to court approval against the insolvent Company as part of
the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.  Where two
or more Reinsurers are involved in the same claim and a majority in interest
elect to interpose defense to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense had been
incurred by the Company.

 

C.            Neither
a claimant, original insured nor the policyholder shall have any rights against
the Reinsurer which are not specifically set forth in this Agreement, or in a
specific agreement between the Reinsurer and the original insured or
policyholder.

 

ARTICLE 16 - CONFIDENTIALITY

 

The parties acknowledge there may be portions
of this Agreement, the Reinsurance Agreement submission or the marketing
package that may contain confidential, proprietary information of the
Company.  The Reinsurer shall maintain
the confidentiality of such information concerning the Company and its business
and shall not disclose it to any third person without prior approval; provided,
however, that the Reinsurer may be required and is permitted under this
Agreement to disclose such information in answers to interrogatories, subpoenas
or other legal/arbitration processes, or in response to requests by
governmental and regulatory agencies.  In
addition, the Reinsurer may disclose such information to its accountants and to
its outside legal counsel as may be necessary.

 

ARTICLE 17 - ARBITRATION

 

Any dispute or other matter in question
between the Company and the Reinsurer arising out of, or relating to, the
formation, interpretation, performance or breach of this Agreement, whether
such dispute arises before or after termination of this Agreement, shall be
settled by arbitration.  Arbitration
shall be initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable time after the
dispute has arisen.

 

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

 

Each party shall appoint an individual as
arbitrator and the two so appointed shall then appoint a third arbitrator.  If either party refuses or neglects to
appoint an arbitrator within 60 (sixty) days, the other party may appoint the
second arbitrator.  If the two
arbitrators do not agree on a third arbitrator within 60 (sixty) days of their
appointment, either party may petition the American Arbitration Association to
appoint a third arbitrator.  The
arbitrators shall be active or former officers of insurance or reinsurance
companies or Lloyd’s Underwriters; the arbitrators shall not have a personal or
financial interest in the result of the arbitration.

 

11

 

The arbitration hearings shall be held in New
York, New York. Each party shall submit its case to the arbitrators within 60
(sixty) days of the selection of the third arbitrator or within such longer period
as may be agreed by the arbitrators.  The
arbitrators shall not be obliged to follow judicial formalities or the rules of
evidence except to the extent required by governing law, that is, the state law
of the situs of the arbitration as herein agreed; they shall make their
decisions according to the practice of the reinsurance business.  The decision rendered by a majority of the
arbitrators shall be final and binding on both parties.  Such decision shall be a condition precedent
to any right of legal action arising out of the arbitrated dispute which either
party may have against the other. 
Judgment upon the award rendered may be entered in any court having
jurisdiction thereof.

 

Each party shall pay the fee and expenses of
its own arbitrator and one-half of the fee and expenses of the third
arbitrator.  All other expenses of the
arbitration shall be equally divided between the parties.

 

Except as provided above, arbitration shall
be based, insofar as applicable, upon the procedures of the American Arbitration
Association.

 

ARTICLE 18 - SERVICE OF SUIT

 

(This Article only applies to reinsurers
domiciled outside the United States and/or unauthorized in any state, territory
or district of the United States having jurisdiction over the Company.)

 

It is agreed that in the event of the failure
of the Reinsurer hereon to pay any amount claimed to be due hereunder, the
Reinsurer hereon, at the request of the Company, shall 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 right 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.  It is further agreed
that service of process in such suit may be made upon Mendes and Mount, 750
Seventh Avenue, New York, New York 10019-6829, and that in any suit instituted,
the Reinsurer shall abide by the final decision of such court or of any
Appellate Court in the event of an appeal.

 

The above-named are authorized and directed
to accept service of process on behalf of the Reinsurer in any such suit and/or
upon the request of the Company to give a written undertaking to the Company
that they shall enter a general appearance upon the Reinsurer’s behalf in the
event such a suit shall be instituted.

 

Further, pursuant to any statute of any
state, territory or district of the United States which makes provision
therefor, the Reinsurer hereon hereby designates 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 their 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 Agreement of reinsurance, and hereby designates
the above-named as the person to whom the said officer is authorized to mail
such process or a true copy thereof.

 

12

 

ARTICLE 19 - GOVERNING LAW

 

This Agreement shall be governed as to
performance, administration and interpretation by the laws of the State of New
York, exclusive of that state’s rules with respect to conflicts of laws, except
as to rules with respect to credit for reinsurance in which case the rules of
all applicable states shall apply.

 

ARTICLE 20 - MISCELLANEOUS

 

A.            All
notices required to be given hereunder shall be deemed to have been duly given
by personally delivering such notice in writing or by mailing it, Certified
Mail, return receipt requested, with postage prepaid.  Any Party may change the address to which
notices and other communications hereunder are to be sent to such Party by
giving the other Party written notice thereof in accordance with this
provision.

 

B.            This
Agreement shall be binding upon the Parties hereto, together with their
respective successors and permitted assigns. 
Neither party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other party.

 

C.            This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

D.            This
Agreement is the entire agreement between the parties and supersedes any and
all previous agreements, written or oral, and amendments thereto with respect
to the subject matter hereof.

 

E.             This
Agreement may be amended, modified or supplemented only by a written instrument
executed by all Parties hereto.

 

F.             A
waiver by the Company or the Reinsurer of any breach or default by the other
party under this Agreement shall not constitute a continuing waiver or a waiver
by the Company or the Reinsurer of any subsequent act in breach or of default
hereunder.

 

G.            Headings
used in this Agreement are for reference purposes only and shall not be deemed
a part of this Agreement.

 

H.            The
Parties hereto intend all provisions of this Agreement to be enforced to the
fullest extent permitted. Accordingly, should a court of competent jurisdiction
or arbitration panel determine that the scope of any provision is too broad to
be enforced as written, the Parties intend that the court or arbitration panel
should reform the provision to such narrower scope as it determines to be
enforceable under present or future law; such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision were never a part hereof; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance.

 

13

 

In Witness Whereof, the parties hereto have
caused this Agreement to be executed in duplicate by their duly authorized representatives:

 

 

 

Signed this                                    day
of                                                ,
2007,

 

For and on behalf of CastlePoint Insurance
Company in confirmation of the terms, conditions and Reinsurer hereon

 

	
  By:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print
  Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

 

 

Signed this                                    day
of                                                ,
2007,

 

For and on behalf of Tower Insurance Company
of New York for a 100% (one hundred percent) participation of the terms and
conditions hereon

 

	
  By:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print
  Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

14

 

NUCLEAR
INCIDENT EXCLUSION CLAUSE

PHYSICAL DAMAGE — REINSURANCE — USA

 

 

1.             This Contract 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 Contract 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 Contract 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 the
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

 

15

 

Contract 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.               The 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.

 

16

 

NUCLEAR
INCIDENT EXCLUSION CLAUSE

LIABILITY
— REINSURANCE — U.S.A.

 

 

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

 

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

 

Limited Exclusion Provision*

 

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

(injury, sickness, disease, death or destruction

(bodily
injury or property damage

with
respect to which an insured under the policy is also an insured under a nuclear
energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limits of liability.

 

II.                                     Family
Automobile Policies (liability only), Special Automobile Policies

(private
passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated above, such as
the Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.

 

III.                                 The inception
dates and thereafter of all original policies as described in II above, whether
new, renewal or replacement, being policies which either

 

(a)                                  become
effective on or after 1st May, 1960, or

 

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

 

3.                                       Except for
those classes of policies specified in Clause II of paragraph (2) and without
in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that for all purposes of this Agreement the original
liability

 

17

 

policies
of the Cedent (new, renewal and replacement) affording the following coverages:

 

 

Owners,
Landlords and Tenants Liability, Contractual Liability,

Elevator
Liability, Owners or Contractors (including railroad),

Protective
Liability, Manufacturers and Contractors Liability,

Product
Liability, Professional and Malpractice Liability,

Storekeepers
Liability, Garage Liability, Automobile Liability

(including
Massachusetts Motor Vehicle or Garage Liability)

 

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

 

Broad
Exclusion Provision*

 

It is agreed that the policy
does not apply:

 

I.                                         Under any
Liability Coverage, to

(injury,
sickness, disease, death or destruction

(bodily
injury or property damage

 

(a)                                  with respect to
which an insured under the policy is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance Association,
Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its termination
upon exhaustion of its limit of liability; or

 

(b)                                 resulting from
the hazardous properties of nuclear material and with respect to which (1) any
person or organization is required to maintain financial protection pursuant to
the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the
insured is, or had this policy not been issued would be, entitled to indemnity
from the United States of America, or any agency thereof, under any agreement
entered into by the United States of America, or any agency thereof, with any
person or organization.

 

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

(immediate
medical or surgical relief,

(first
aid,

to
expenses incurred with respect to

(bodily
injury, sickness, disease or death

(bodily
injury

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

 

III.                                 Under any
Liability Coverage, to

 

18

 

(injury,
sickness, disease, death or destruction

(bodily
injury or property damage

resulting
from the hazardous properties of nuclear material if

 

(a)                                  the nuclear
material (1) is at any nuclear facility owned by, or operated by or on behalf
of, an insured or (2) has been discharged or dispersed therefrom;

 

(b)                                 the nuclear
material is contained in spent fuel or waste at any time possessed, handled,
used, processed, stored, transported or disposed or by or on behalf of an
insured; or

 

(c)                                  (the
injury, sickness, disease, death or destruction

(the
bodily injury or property damage

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

(injury
to or destruction of property at such nuclear facility

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

 

IV.                                 As used in this
endorsement:

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

 

(a)                                  any nuclear
reactor,

 

(b)                                 any equipment
or device designed or used for (1) separating the isotopes of uranium or
plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing
or packaging waste,

 

(c)                                  any equipment
or device used for the processing, fabricating or alloying of special nuclear
material if at any time the total amount of such material in the custody of the
Insured at the premises where such equipment or device is located consists of
or contains more than 25 grams of plutonium or uranium 233 or any combination
thereof, or more than 250 grams of uranium 235,

 

(d)                                 any structure,
basin, excavation, premises or place prepared or used for the storage or
disposal of waste,

 

19

 

and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such operations; “nuclear
reactor” means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material;

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

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

(includes
all forms of radioactive contamination of property.

 

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

 

(i)                                     Garage and
Automobile Policies issued by the Cedent on New York risks, or

 

(ii)                                  Statutory
liability insurance required under Chapter 90, General Laws of Massachusetts,
until 90 days following approval of the Board Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

 

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

 

 

 

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

 

20

 

WAR
RISK EXCLUSION CLAUSE (REINSURANCE)

 

 

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

 

This War Exclusion Clause
shall not, however, apply to interest which at time of loss or damage are
within the territorial limits of the United States of America (comprising the
fifty States of the Union and the District of Columbia, its territories and
possessions, including the Panama Canal Zone and the Commonwealth of Puerto
Rico and including Bridges between the United States of America and Mexico
provided they are under United States ownership), Canada, St. Pierre and
Miquelon, provided such interests are insured under original policies,
endorsements or binders containing a standard war or hostilities or warlike
operations exclusion clause.

 

Nevertheless, this clause shall not be construed to apply to loss or
damage occasioned by riots, strikes, civil commotion, vandalism, malicious
damage, including acts committed by agents of any government, party or faction
engaged in war, hostilities or other warlike operation, provided such agents
are acting secretly and not in connection with any operations of military or
naval armed forces in the country where the interests insured are situated.

 

21

 

INSOLVENCY
FUND EXCLUSION CLAUSE 

 

 

This Agreement excludes all liability of the
Ceding 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
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the Ceding 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.

 

22

 

POOLS,
ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE

 

 

Section A:

 

Excluding:

 

(a)                                  All business
derived directly or indirectly from any Pool, 
Association, or Syndicate which maintains its own reinsurance
facilities.

 

(b)                                 Any Pool or
Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the
purpose of insurance property whether on a country-wide basis or in respect of
designated areas.  This exclusion shall
not apply to so-called Automobile Insurance Plans or other Pools formed to
provide coverage for Automobile Physical Damage.

 

 

Section B:

 

It is agreed that business written by the
Company for the same perils, which is known at the time to be insured by, or in
excess of underlying amounts placed in the following Pools, Associations or
Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

 

                Industrial
Risk Insurers,

                Associated
Factory Mutuals Improved Risk Mutuals

                Any
Pool, Association or Syndicate formed for the purpose of writing

                Oil,
Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

                United
States Aircraft Insurance Group, Canadian Aircraft Insurance Group,

                Associated
Aviation Underwriters, American Aviation Underwriters

 

Section B does not apply:

 

(a)                                  Where the Total
Insured Value over all interests of the risk in question is less than
$250,000,000.

 

(b)                                 To interests
traditionally underwritten as Inland Marine or stock and/or contents written on
a blanket basis.

 

(c)                                  To Contingent
Business Interruption, except when the Company is aware that the key location
is known at the time to be insured in any Pool, Association, or Syndicate named
above other than as provided for under Section B(a).

 

23

 

(d)                                 To risks as
follows:

 

Offices, Hotels, Apartments,
Hospitals, Educational Establishments, Public Utilities, (other than railroad
schedules) and builder’s risks on the classes of risks specified in this
subsection (d) only.  Where this clause
attaches to Catastrophe Excesses, the following Section C is added:

 

 

Section C:

 

Nevertheless the Reinsurer specifically
agrees that liability accruing to the Company from its participation in:

 

(1)                                  The following
so-called “Coastal Pools”:

 

Alabama Insurance
Underwriting Association

Florida Windstorm
Underwriting Association

Louisiana Insurance
Underwriting Association

Mississippi Windstorm
Underwriting Association

North Carolina Insurance
Underwriting Association

South Carolina Windstorm and
Hail Underwriting Association

Texas Catastrophe Property
Insurance Association

 

                                                                                AND

 

(2)                                  All “Fair Plan”
and “Rural Risk Plan” business for all perils otherwise protected hereunder
shall not be excluded, except, however, that this reinsurance does not include
any increase in such liability resulting from:

 

(i)                                     The inability
of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural
Risk Plan” to meet its liability.

 

(ii)                                  Any claim
against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” or any
participant therein, including the Company, whether by way of subrogation or
otherwise, brought by or on behalf of any insolvency fund (as defined in the
Insolvency Fund Exclusion Clause incorporated in this Contract).

 

24

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