Document:

exv10w10

Exhibit 10.10

No. 1650-0067

PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT

between

LEBANON MUTUAL INSURANCE COMPANY

and

MUNICH REINSURANCE AMERICA, INC.

 

 

No.
1650-0067

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 
	 	 	 	 	 	 
	I

	 	BUSINESS COVERED
	 	 	1	 
	 
	 	 	 	 	 	 
	II

	 	EXHIBITS COVERED
	 	 	1	 
	 
	 	 	 	 	 	 
	III

	 	COMMENCEMENT AND TERMINATION
	 	 	2	 
	 
	 	 	 	 	 	 
	IV

	 	TERRITORY
	 	 	2	 
	 
	 	 	 	 	 	 
	V

	 	EXCLUSIONS
	 	 	2	 
	 
	 	 	 	 	 	 
	VI

	 	DEFINITIONS
	 	 	4	 
	 
	 	 	 	 	 	 
	VII

	 	ULTIMATE NET LOSS
	 	 	6	 
	 
	 	 	 	 	 	 
	VIII

	 	NET RETAINED LINES
	 	 	6	 
	 
	 	 	 	 	 	 
	IX

	 	LOSS NOTICES AND SETTLEMENTS
	 	 	7	 
	 
	 	 	 	 	 	 
	X

	 	SALVAGE AND SUBROGATION
	 	 	7	 
	 
	 	 	 	 	 	 
	XI

	 	OFFSET
	 	 	7	 
	 
	 	 	 	 	 	 
	XII

	 	ERRORS AND OMISSIONS
	 	 	8	 
	 
	 	 	 	 	 	 
	XIII

	 	ACCESS TO RECORDS
	 	 	8	 
	 
	 	 	 	 	 	 
	XIV

	 	TAXES
	 	 	8	 
	 
	 	 	 	 	 	 
	XV

	 	CURRENCY
	 	 	8	 
	 
	 	 	 	 	 	 
	XVI

	 	INSOLVENCY
	 	 	8	 

 

 

No.
1650-0067

	 	 	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 
	 	 	 	 	 	 
	XVII

	 	ARBITRATION
	 	 	9	 
	 
	 	 	 	 	 	 
	XVIII

	 	FEDERAL TERRORISM EXCESS RECOVERY
	 	 	10	 

 

 

No. 1650-0067

PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT

THIS AGREEMENT made and entered into by and between LEBANON MUTUAL INSURANCE COMPANY, Cleona,
Pennsylvania (hereinafter referred to as the “Company”) and the MUNICH REINSURANCE AMERICA, INC.,
a Delaware Corporation with Administrative Offices in Princeton, New Jersey (hereinafter referred
to as the “Reinsurer”).

WITNESSETH:

The Reinsurer hereby reinsures the Company to the extent and on the terms and conditions and
subject to the exceptions, exclusions and limitations hereinafter set forth and nothing
hereinafter shall in any manner create any obligations or establish any rights against the
Reinsurer in favor of any third parties or any persons not parties to this Agreement.

ARTICLE I 

BUSINESS COVERED 

A. By this Agreement the Reinsurer agrees to indemnify the Company in respect of the ultimate net
loss which may accrue to the Company as a result of losses occurring during the term of this
Agreement under policies in force at the inception of this Agreement or hereafter issued or renewed
and classified by the Company as Property, with respect to the following lines of business: Fire,
Allied Lines, Inland Marine, Personal and Commercial Automobile Physical Damage, Garagekeepers
Insurance, Farmowners Multiple Peril (Section I only), Homeowners Multiple Peril (Section 1 only)
and Commercial Multiple Peril (Section 1 only).

B. This Agreement is solely between the Company and the Reinsurer, and performance of the
obligations of each party hereto shall only be rendered to the other party. However, if the Company
becomes insolvent, the Reinsurer’s liability shall be modified to the extent set forth in the
INSOLVENCY Article. In no instance shall any insured of the Company or any claimant against an
insured of the Company have any rights under this Agreement.

ARTICLE II 

EXHIBITS COVERED 

The Company will reinsure with the Reinsurer and the Reinsurer shall accept reinsurance from the
Company as set forth in Exhibits A, B and C which are attached hereto and made a part of this
Agreement, such Exhibits being entitled for purposes of identification as follows:

EXHIBIT A — FIRST PROPERTY CATASTROPHE EXCESS OF LOSS

EXHIBIT B — SECOND PROPERTY CATASTROPHE EXCESS OF LOSS

EXHIBIT C — THIRD PROPERTY CATASTROPHE EXCESS OF LOSS

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No. 1650-0067

ARTICLE III 

COMMENCEMENT AND TERMINATION

A. This Agreement shall become effective at 12:01 a.m. Standard Time, January 1, 2008 and shall
continue in force until 12:01 a.m., Standard Time, January 1, 2009.

B. In the event that this Agreement expires while a loss occurrence covered hereunder is in
progress, the Reinsurer shall be liable for its share of the entire loss resulting from the loss
occurrence, subject to the other terms and conditions of this Agreement.

ARTICLE IV 

TERRITORY

This Agreement applies to risks located in the United States of America and its territories and
possessions, except that with respect to Inland Marine and Multiple Peril policies covered
hereunder, the territorial limits of this Agreement shall be those of the original policies when
such policies are written to cover risks primarily located in the United States of America and its
territories and possessions.

ARTICLE V

EXCLUSIONS 

No reinsurance indemnity will be afforded under this Agreement for:

1. All reinsurance assumed.

2. Excess of loss business.

3. Business derived from any Pools, Associations or Syndicates as per the “Pools,
Associations or Syndicates Exclusion Clause” attached hereto.

4. All loss, cost or expense directly or indirectly arising out of, resulting as a consequence of
or related to War. “War”, as utilized herein, shall mean war whether or not declared, civil war,
martial law, insurrection, revolution, invasion, bombardment or any use of military force, usurped
power or confiscation, nationalization or damage of property by any government, military or other
authority.

This exclusion shall apply whether or not there is another cause of loss which may have
contributed concurrently or in any sequence to a loss.

5. Nuclear risk, as per the “Nuclear Incident Exclusion — Physical Damage -Reinsurance Clause
(U.S.A.)” attached hereto.

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No. 1650-0067

6. Accident and health, aviation, casualty, boiler and machinery, ocean marine, fidelity, surety,
and any other lines or classes not specifically covered hereunder.

7. Financial guarantees, insolvency and credit business, or bankers blanket bond.

8. Flood when written as such.

9. Earthquake when written as such.

10. Mortgage impairment insurance and similar kinds of insurance, however styled, providing
coverage to an insured as respects its mortgagee interest in property or its owner interest in
foreclosed property.

11. Difference in conditions insurance.

12. Insurance on growing, standing or drying crops, and timber.

13. Inland marine policies covering railroad rolling stock, animal mortality, jewelers and furriers
block, and manufacturers’ output.

14. Products integrity or products tampering.

15. Underground mining.

16. Oil or gas drilling production rigs.

17. Space and space-related risks.

18. Contingency risks of any kind (e.g. share price, unemployment, computer crime, contract
frustration, legacy, confiscation or expropriation, recourse indemnity, extended warranties, kidnap
and ransom, residual value, equipment value, appraisal value, asset value or similar covers).

19. Seepage and/or pollution and/or contamination and/or debris removal per ISO or AAIS pollution
exclusion attached to the Company’s policies.

20. Insolvency or guaranty funds, as per the “Insolvency Funds Exclusion Clause” attached
hereto.

21. Transmission and Distribution lines.

22. All loss, cost or expense arising out of or related to, either directly or indirectly, any
“NBCR Terrorist Activity” as defined herein, and any action taken to hinder, defend against or
respond to any such activity. This exclusion applies regardless of any other cause or event that in
any way contributes concurrently or in any sequence to such loss, cost or expense.

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No. 1650-0067

1nNBCR Terrorist Activity” shall mean any deliberate, unlawful act that:

	 	a.	 	includes, involves or is associated with, in whole or in part, the use
or threatened use of, or release or threatened release of, any nuclear, biological,
chemical or radioactive agent, material, device or weapon except where the Company can
demonstrate to the Reinsurer that such activities or threats thereof were motivated solely
by personal objectives of the perpetrator that are unrelated, in whole or in part, to any
intention to

(1) promote, further or express opposition to any political, ideological,
philosophical, racial, ethnic, social or religious cause or objective; or

(2) influence, disrupt or interfere with any government related operations,
activities or policies; or

(3) intimidate, coerce or frighten the general public or any segment of the general
public; or

(4) disrupt or interfere with a national economy or any segment of a national
economy; or

	 	b.	 	includes, involves or is associated with, in whole or in part, the use
or threatened use of, or release or threatened release of, any nuclear, biological,
chemical or radioactive agent, material, device or weapon that is declared by any
authorized governmental official to be or to involve terrorism, terrorist activity or acts
of terrorism.

23. With respect to the Company’s commercial lines policies reinsured hereunder, this Agreement
shall exclude “Insured Losses”, as defined within and covered by the provisions of the Terrorism
Risk Insurance Act of 2005 and any subsequent amendment thereof or any regulations promulgated
thereunder. This exclusion applies regardless of any other cause or event that in any way
contributes concurrently or in any sequence to such loss, cost or expense.

24. The Company’s liability, including all loss, cost or expense, beyond
circumscribed policy provisions, including but not limited to, punitive, exemplary, consequential
or compensatory damages, resulting from a claim of an insured or an insured’s assignee against the
Company, its agent or employees.

25. Insurance or reinsurance loss portfolio transfers of any kind.

ARTICLE VI 

DEFINITIONS 

A. The term “policies” shall mean the Company’s policies, binders and contracts providing

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No. 1650-0067

insurance on the lines of business covered under this Agreement.

B. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by
any one disaster, accident or loss or series of disasters, accidents or losses arising out of one
event which occurs within the area of one state of the United States or province of Canada and
states or provinces contiguous thereto and to one another. However, the duration and extent of any
one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring
during any period of 168 consecutive hours arising out of and directly occasioned by the same event
except that the term “loss occurrence” shall be further defined as follows:

1. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and
water damage, all individual losses sustained by the Company occurring during any period of
72 consecutive hours arising out of and directly occasioned by the same event. However, the
event need not be limited to one state or province or states or provinces contiguous thereto.

2. As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company occurring during any period of 72
consecutive hours within the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned by the same event. The
maximum duration of 72 consecutive hours may be extended in respect of individual losses
which occur beyond such 72 consecutive hours during the continued occupation of an insured’s
premises by strikers, provided such occupation commenced during the aforesaid period.

3. As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the opening paragraph of this section B) and fire
following directly occasioned by the earthquake, only those individual fire losses which
commence during the period of 168 consecutive yours may be included in the Company’s “loss
occurrence.”

4. As regards “freeze,” only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be
included in the Company’s “loss occurrence.”

For all “loss occurrences,” the Company may choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company arising out of
that disaster, accident or loss, and provided that only one such period of 168 consecutive
hours shall apply with respect to one event, except for those “loss occurrences” referred to
in sub-paragraphs 1 and 2 above, where only one such period of 72 consecutive hours shall
apply with respect to one event, regardless of the duration of the event.

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No. 1650-0067

No individual losses occasioned by an event that would be covered by 72 hour clauses may be
included in any “loss occurrence” claimed under the 168 hours provision.

C. The term “loss adjustment expense” shall mean the Company’s expenses allocable to losses under
this Agreement, including court costs and allocated investigation, adjustment, (including
independent adjusters expense), and legal expenses. “Loss adjustment expenses” shall not include
office expenses and salaries of officials or employees of the Company (other than salary charges
and travel expenses of the Company’s staff adjusters, fieldmen or other employees while actually
engaged in the settlement of losses under this Agreement) or the Third Party Administrator acting
on behalf of the Company in the investigation, management and settlement of claims with respect to
the business covered hereunder.

ARTICLE VII 

ULTIMATE NET LOSS

A. The term “ultimate net loss” as used herein shall be understood to mean the sum or sums actually
paid by the Company in settlement of losses under policies covered hereunder, including loss
adjustment expenses, as defined in the DEFINITIONS Article. However, in the event of the insolvency
of the Company, “ultimate net loss” shall mean the amount of loss and expense which the Company has
incurred or for which it is liable, and payment by the Reinsurer shall be made to the liquidator,
receiver or statutory successor of the Company in accordance with the provisions of the INSOLVENCY
Article of this Agreement.

B. All salvages, recoveries (including amounts recovered under reinsurances, whether specific or
general, which inure to the benefit of this Agreement) and payments recovered or received
subsequent to loss settlement under this Agreement shall be applied as if recovered or received
prior to said settlement, and all necessary adjustments shall be made by the parties hereto.
Nothing, however, in this article shall be construed to mean that losses are not
recoverable hereunder until the Company’s ultimate net loss has been ascertained.

ARTICLE VIII

NET RETAINED LINES 

A. This Agreement applies only to that portion of any insurance which the Company retains for its
own account, and in calculating the amount of any loss hereunder and also in computing the amount
or amounts in excess of which this Agreement attaches, only loss or losses in respect of that
portion of any insurance which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability in respect of any loss or losses shall not be increased
by reason of the inability of the Company to collect from any other reinsurers, whether

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No. 1650-0067

specific or general, any amount which may have become due from them whether such inability arises
from the insolvency of such other reinsurers or otherwise.

ARTICLE IX

LOSS NOTICES AND SETTLEMENT

A. The Company shall advise the Reinsurer of all loss occurrences which, in the opinion of the
Company, may result in a claim hereunder and of all subsequent developments which, in the opinion
of the Company, may materially affect the position of the Reinsurer.

B. All loss settlements made by the Company, or by the Third Party Administrator on behalf of the
Company, provided they are within the terms of the Agreement, shall be unconditionally binding upon
the Reinsurer, who agrees to pay all amounts for which it may be liable immediately upon being
furnished by the Company with reasonable evidence of the amount due or to be due.

ARTICLE X 

SALVAGE AND SUBROGATION 

A. The Reinsurer shall be subrogated, as respects any loss for which the Reinsurer shall actually
pay or become liable, but only to the extent of the amount of payment by or the amount of liability
to the Reinsurer, to all the rights of the Company against any person or other entity
who may be legally responsible in damages for said loss. The Company hereby agrees to enforce such
rights, but in case the Company shall refuse or neglect to do so, the Reinsurer is hereby
authorized and empowered to bring any appropriate action in the name of the Company or its
policyholders, or otherwise to enforce such rights.

B. Any recoveries, salvages or reimbursements applying to risks covered under this Agreement shall
always be used to reimburse the excess carriers (from the last to the first, beginning with the
carrier of the last excess), according to their participation, before being used in any way to
reimburse the Company for its primary loss.

ARTICLE XI

OFFSET

The Company or the Reinsurer may offset any balance, whether on account of premium, commission,
claims or losses, loss adjustment expense, salvage, or otherwise, due from one party to the other
under this Agreement or under any other Agreement heretofore or hereafter entered into between
the Company and the Reinsurer.

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No. 1650-0067

ARTICLE XII

ERRORS AND OMISSIONS 

Inadvertent delays, errors or omissions made by the Company in connection with this Agreement
shall not relieve either party from liability that would have attached had such delay, error or
omission not occurred, provided that upon discovery by the Company, the Reinsurer is promptly
notified and immediate corrective action is taken by the Company.

ARTICLE XIII 

ACCESS TO RECORDS 

The Reinsurer shall have the right to inspect at any reasonable time, through its designated
representatives, all records of the Company that pertain in any way to this Agreement.

ARTICLE XIV

TAXES 

The Company shall pay all taxes on premiums ceded under this Agreement. If the Reinsurer is
obligated to pay any taxes on such premiums, the Company shall reimburse the Reinsurer;
however, the Company shall not be required to pay the same tax twice.

ARTICLE XV 

CURRENCY 

Wherever the word “Dollars” or the “$” sign appears in this Agreement, they shall be construed to
mean United States dollars.

ARTICLE XVI 

INSOLVENCY

In the event of the insolvency of the Company and the appointment of a conservator, liquidator or
statutory successor, the reinsurance provided by this Agreement shall be payable by the Reinsurer
directly to the Company or to its liquidator, receiver or statutory successor on the basis of the
liability of the Company under the contract or contracts reinsured. Subject to the right of offset
and the verification of coverage, the Reinsurer shall pay its share of the loss without diminution
because of the insolvency of the Company. The liquidator, receiver or statutory successor of the
Company shall give written notice of the pendency of each claim against the Company on a policy or
bond reinsured within a reasonable time after such claim is

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No. 1650-0067

filed in the insolvency proceeding. During the pendency of such claim, the Reinsurer may, at its
own expense, investigate such claim and interpose in the proceeding where such claim is to be
adjudicated any defense or defenses which it may deem available to the Company, its liquidator or
receiver or statutory successor. Subject to court approval, any expense thus incurred by the
Reinsurer shall be chargeable against the Company as part of the expense of liquidation to the
extent of such proportionate share of the benefit as shall accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. The reinsurance shall be payable as set forth
above except where this Agreement specifically provides for the payment of reinsurance proceeds to
another party in the event of the insolvency of the Company.

ARTICLE XVII 

ARBITRATION 

A. Disputes between the parties that cannot be resolved by compromise, including any controversy as
to the validity of this Agreement, shall be submitted to arbitration.

B. The board of arbitration shall consist of three arbitrators. One shall be appointed by each of
the two parties, and these arbitrators shall choose the third arbitrator. If the two arbitrators
cannot agree on the third arbitrator within 30 days after their appointment, each shall then
nominate three, of whom the other shall decline two, and the decision shall be made between the two
remaining candidates by drawing lots. If either party fails to choose an arbitrator within 30 days
after a written request by the other party to do so, the latter shall choose both arbitrators, who
shall then choose the third arbitrator.

C. The members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance companies. The arbitrators shall be relieved from all
judicial formalities and shall make their decision according to the rules of law and the custom and
usage of the insurance and reinsurance business only. The decision of the board shall be in writing
and shall be based upon a hearing in which oral or written testimony may be introduced without
following strict rules of evidence, but in which cross examination and rebuttal shall be allowed.
The board may request written briefs of the parties as required. The arbitration proceedings shall
be held at the times and places agreed upon by the arbitrators.

D. The majority decision of the board shall be final and binding upon the parties to the
proceedings and not subject to appeal.

E. Each party shall bear the expense of its own arbitrator and witnesses and shall jointly and
equally share with the other party the expense of the third arbitrator and of the proceedings.

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No. 1650-0067

ARTICLE XVIII

FEDERAL TERRORISM EXCESS RECOVERY 

As respects the Insured Losses of the Company for each Program Year, it is hereby agreed that to
the extent the Company’s total reinsurance recoverables for Insured Losses, whether collected or
not, combined with the financial assistance available to the Company under the Act exceeds the
aggregate amount of Insured Losses paid by the Company, less any other recoveries or
reimbursements, (the “Excess Recovery”), a share of the Excess Recovery shall be paid to the
Reinsurer. The payment of the Reinsurer’s share of such excess amounts shall be deemed to be an
amount equal to the proportion that the Reinsurer’s payment of Insured Losses under this Agreement
bears to the Company’s total collected reinsurance recoverables for Insured Losses.

The parties agree that the method set forth herein for determining an Excess Recovery is intended
to be consistent with the United States Treasury Department’s construction and application of
Section 103 (g)(2) of the Act and, to the extent it is inconsistent, it shall be amended to
conform with such construction and application.

“Act” as utilized herein shall mean the Terrorism Risk Insurance Act of 2002 and any subsequent
amendment thereof or any regulations promulgated there under. “Insured Losses” and “Program Year”
as utilized herein shall follow the definitions as provided in the Act.

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have
executed this Agreement this 17th day of January, 2008;

LEBANON MUTUAL INSURANCE COMPANY,

Rollin Rissinger        

And in Princeton, New Jersey, this 8th day of January, 2008.

	 	 	 	 	 
	 	MUNICH REINSURANCE AMERICA, INC.

 	 
	 	
 	 
	 	Vice President 	 

DATED: January 7, 2008

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No. 1650-0067

EXHIBIT A

LEBANON MUTUAL INSURANCE COMPANY

FIRST PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT

 Section 1

LIMIT AND RETENTION

A. The Company shall retain the first $600,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $1,805,000 (being 95%
of $1,900,000) ultimate net loss, each loss occurrence.

B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.

Section 2 

PREMIUM 

A. The premium for this Agreement shall be calculated at a rate of 2.27% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $131,000.

B. An annual deposit premium of $145,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $36,250 payable on January 1, April 1, July 1 and October 1, 2008.

C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.

E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.

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No. 1650-0067

Section 3 

REINSTATEMENT 

	A.	 	In the event of the whole or any portion of the liability under this Agreement
being exhausted by loss, the amount so exhausted shall be automatically reinstated from the
time of the occurrence of the loss.
	 
	B.	 	For each amount so reinstated, the Company agrees to pay an additional premium calculated at
pro rata of the premium paid hereunder as respects the fraction of the limit reinstated and
100% of the annual premium regardless of the unexpired term of this Agreement. Nevertheless,
the Reinsurer’s liability hereunder shall never exceed $1,805,000 (being 95% of $1,900,000)
with respect to each loss occurrence, nor $3,610,000 (being 95% of $3,800,000) with respect to
all loss occurrences during the term of this Agreement.
	 
	C.	 	If, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of
Section 2 — Premium hereinabove.

DATED: January 7, 2008

RG/rg

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No. 1650-0067

EXHIBIT B

LEBANON MUTUAL INSURANCE COMPANY

SECOND PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT

Section 1

LIMIT AND RETENTION 

A. The Company shall retain the first $2,500,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $2,375,000 (being 95%
of $2,500,000) ultimate net loss, each loss occurrence.

B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.

Section 2

PREMIUM 

A. The premium for this Agreement shall be calculated at a rate of 1.90% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $109,000.

B. An annual deposit premium of $121,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $30,250 payable on January 1, April 1, July 1 and October 1, 2008.

C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.

E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.

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No. 1650-0067

Section 3

REINSTATEMENT 

A. In the event of the whole or any portion of the liability under this Agreement being exhausted
by loss, the amount so exhausted shall be automatically reinstated from the time of the occurrence
of the loss.

B. For each amount so reinstated, the Company agrees to pay an additional premium calculated at pro
rata of the premium paid hereunder as respects the fraction of the limit reinstated and 100% of the
annual premium regardless of the unexpired term of this Agreement. Nevertheless, the Reinsurer’s
liability hereunder shall never exceed $2,375,000 (being 95% of $2,500,000) with respect to each
loss occurrence, nor $4,750,000 (being 95% of $5,000,000) with respect to all loss occurrences
during the term of this Agreement.

C. lf, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of Section 2
— Premium hereinabove.

DATED: January 7, 2008

RG/rg

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No. 1650-0067

EXHIBIT C

LEBANON MUTUAL INSURANCE COMPANY

THIRD PROPERTY CATASTROPHE EXCESS OF LOSS

REINSURANCE AGREEMENT

Section 1

LIMIT AND RETENTION 

A. The Company shall retain the first $5,000,000 of ultimate net loss, each loss occurrence. The
Reinsurer shall indemnify the Company for 95% of the amount by which the ultimate net loss exceeds
the Company’s retention, but the liability of the Reinsurer shall not exceed $1,425,000 (being 95%
of $1,500,000) ultimate net loss, each loss occurrence.

B. It is warranted that the Company shall retain net and unreinsured in any way, the remaining 5%
of excess ultimate net loss, each loss occurrence.

Section 2

PREMIUM

A. The premium for this Agreement shall be calculated at a rate of 0.71% of the Gross Net Written
Premium income accounted for by the Company during the term of this Agreement on all business the
subject matter of this Agreement, subject to a minimum premium of $41,000.

B. An annual deposit premium of $45,000 shall be paid to the Reinsurer by the Company in equal
quarterly installments of $11,250 payable on January 1, April 1, July 1 and October 1, 2008.

C. Within 60 days after December 31, 2008, the Company shall render to the Reinsurer a statement of
adjusted premium due hereon, calculated as provided in paragraph A. above, and any additional
premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. The term “Gross Net Written Premium Income” shall mean the Company’s gross written premiums less
return premiums and less premiums paid for reinsurance, if any, which inures to the benefit of the
Reinsurer under this Agreement.

E. 90% of the Company’s premiums under indivisible Farmowners Multiple Peril policies, 70% for
Businessowners policies and 90% of the Company’s premiums under Homeowners Multiple Peril policies
shall be allocated to the perils covered under this Agreement.

1

 

No. 1650-0067

Section 3

REINSTATEMENT 

A. In the event of the whole or any portion of the liability under this Agreement being exhausted
by loss, the amount so exhausted shall be automatically reinstated from the time of the occurrence
of the loss.

B. For each amount so reinstated, the Company agrees to pay an additional premium calculated at pro
rata of the premium paid hereunder as respects the fraction of the limit reinstated and 100% of the
annual premium regardless of the unexpired term of this Agreement. Nevertheless, the Reinsurer’s
liability hereunder shall never exceed $1,425,000 (being 95% of $1,500,000) with respect to each
loss occurrence, nor $2,850,000 (being 95% of $3,000,000) with respect to all loss occurrences
during the term of this Agreement.

C. lf, at the time of a loss claim hereunder, the adjusted premium is unknown, the
calculation for reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the adjusted premium is established in accordance with paragraph C. of Section 2
— Premium hereinabove.

DATED: January 7, 2008

RG/rg

2

 

No. 1650-0067

NUCLEAR INCIDENT EXCLUSION CLAUSE—PHYSICAL DAMAGE—REINSURANCE—NO. 2

     (1) This Reinsurance does not cover any loss or liability accruing to the Reassured,
directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or
Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

     (2) Without in any way restricting the operation of paragraph (1) of this Clause, this
Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage
(including business interruption or consequential loss arising out of such Physical Damage) to:

	 	I.	 	Nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories handling radioactive
materials in connection with reactor installations, and “critical facilities” as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for processing substantial
quantities of “special nuclear material,” and for reprocessing, salvaging, chemically
separating, storing or disposing of “spent” nuclear fuel or waste materials, or
	 
	 	IV.	 	Installations other than those listed in paragraph (2) III above using substantial
quantities of radioactive isotopes or other products of nuclear fission.

     (3) Without in any way restricting the operations of paragraphs (1) and (2) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or other nuclear installation
and which normally would be insured therewith except that this paragraph (3) shall not operate:

(a) where Reassured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or

(b) where said insurance contains a provision excluding coverage for damage to property
caused by or resulting from radioactive contamination, however caused. However on and
after 1st January 1960 this sub-paragraph (b) shall only apply provided the said
radioactive contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.

     (4) Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof,
this Reinsurance does not cover any loss or liability by radioactive contamination accruing to
the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.

     (5) It is understood and agreed that this Clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured
to be the primary hazard.

     (6) The term “special nuclear material” shall have the meaning given it in the Atomic
Energy Act of 1954 or by any law amendatory thereof.

1

 

No. 1650-0067

     (7) Reassured to be sole judge of what constitutes:

(a) substantial quantities, and

(b) the extent of installation, plant or site.

Note.—Without in any way restricting the operation of paragraph (I) hereof, it is understood
and agreed that:

(a) all policies issued by the Reassured on or before 31st December 1957 shall be free
from the application of the other provisions of this Clause until expiry date or 31st
December 1960 whichever first occurs whereupon all the provisions of this Clause shall
apply,

(b) With respect to any risk located in Canada policies issued by the Reassured on or
before 31st December 1958 shall be free from the application of the other provisions of
this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all
the provisions of this Clause shall apply.

12/12/57 — 014:00034

2

 

No. 1650-0067

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 insuring 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
Petrochemical 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).

(d) To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational Establishments,
Public Utilities (other than Railroad Schedules) and Builders Risks on the classes of risks
specified in this subsection (d) only.

SECTION C

NEVERTHELESS the Reinsurers specifically agree 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 INSURANCE UNDERWRITING ASSOCIATION

NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION SOUTH CAROLINA WINDSTORM AND HAIL

UNDERWRITING ASSOCIATION

 TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION

1

 

No. 1650-0067

and

     (2) All “Fair Plan” Business,

for all perils otherwise protected hereunder shall not be excluded, except that this
reinsurance does not include any increase in such liability resulting from:

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

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

NOTES: Wherever used-therein the terms:

“Company” shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever
other term is used in the attached reinsurance contract to designate the reinsured
company or companies.

“Agreement” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever
other term is used to designate the attached reinsurance document.

“Reinsurers” shall be understood to mean “Reinsurers,”

“Underwriters” or whatever other term is used in the attached reinsurance contract to
designate the reinsurer or reinsurers.

2

 

No. 1650-0067

INSOLVENCY FUND EXCLUSION

It is agreed that this Contract excludes all liability of the Company arising by contract,
operation of law, or otherwise, from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. “Insolvency Fund” includes any guaranty fund, insolvency
fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or
governed, which provides for any assessment of or payment or assumption by the Company of part or
all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or
assigns, which has been declared by any competent authority to be insolvent, or which is
otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in
part.

1exv10w11

Exhibit 10.11

WORKERS’ COMPENSATION FIRST EXCESS OF LOSS

REINSURANCE AGREEMENT

LEBANON MUTUAL INSURANCE COMPANY

Cleona, Pennsylvania

EFFECTIVE: January 1, 2008

EXPIRATION: January 1, 2009

 

 

WORKERS’ COMPENSATION FIRST EXCESS OF LOSS REINSURANCE AGREEMENT

	 	 	 	 	 	 	 
	ARTICLE	 	DESCRIPTION	 	PAGE
	1

	 	Business Covered
	 	 	1	 
	2

	 	Term
	 	 	1	 
	3

	 	Territory
	 	 	1	 
	4

	 	Exclusions
	 	 	2	 
	5

	 	Warranty
	 	 	3	 
	6

	 	Reinsurance Premium
	 	 	3	 
	7

	 	Retention and Limit
	 	 	4	 
	8

	 	Reinstatement
	 	 	4	 
	9

	 	Commutation
	 	 	5	 
	10

	 	Definition of Loss Occurrence
	 	 	6	 
	11

	 	Net Retained Lines
	 	 	6	 
	12

	 	Ultimate Net Loss
	 	 	6	 
	13

	 	Loss Notice and Settlement
	 	 	7	 
	14

	 	Taxes
	 	 	7	 
	15

	 	Federal Excise Tax
	 	 	8	 
	16

	 	Offset
	 	 	8	 
	17

	 	Currency
	 	 	8	 
	18

	 	Access to Records
	 	 	8	 
	19

	 	Errors and Omissions
	 	 	8	 
	20

	 	Insolvency
	 	 	8	 
	21

	 	Arbitration
	 	 	9	 
	22

	 	Service of Suit
	 	 	10	 
	23

	 	Unauthorized Reinsurance
	 	 	11	 
	24

	 	Choice of Law and Jurisdiction
	 	 	12	 
	25

	 	Original Conditions
	 	 	12	 
	26

	 	Entire Agreement
	 	 	13	 
	27

	 	Intermediary
	 	 	13	 

Attachments: 

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

 

 

WORKERS’ COMPENSATION FIRST EXCESS OF LOSS

REINSURANCE AGREEMENT

Issued to

LEBANON MUTUAL INSURANCE COMPANY

Cleona, Pennsylvania

(hereinafter referred to as the “Company”)

by

The REINSURERS executing

Interests and Liabilities Contracts

attached to this Agreement

(hereinafter referred to as the “Reinsurer”)

ARTICLE 1— BUSINESS COVERED

The Agreement is to indemnify the Company for statutory benefits paid or payable as a result of
Accidental Death, Dismemberment, Accidental Disability and Accidental Medical Expenses arising
under all policies, binders, contracts or agreements of insurance, whether written or oral as
intended to be covered hereunder (hereinafter called “Policies”) which are in force, written or
renewed by or on behalf of the Company during the term of this Agreement and classified by the
Company as Workers’ Compensation, subject to the terms and conditions herein contained.

ARTICLE 2 —TERM 

This Agreement shall take effect 12:01 a.m., Eastern Standard Time, January 1, 2008 and shall apply
to all losses occurring on and after this date, and shall remain in force until 12:01 a.m. Eastern
Standard Time, January 1, 2009.

If this Agreement expires while a Loss Occurrence covered hereunder is in progress, the Reinsurers
liability hereunder shall, subject to the other terms and conditions of this Agreement, be
determined as if the entire Loss Occurrence had occurred prior to the expiration of this Agreement,
provided that no part of such Loss Occurrence is claimed against any renewal or replacement of this
Agreement.

If any law or regulation of the federal or state or local government of any jurisdiction in which
the Company is doing business shall render illegal the arrangements made in this Agreement, the
Agreement can be terminated immediately insofar as it applies to such jurisdiction by the Company
giving notice to the Reinsurer to such effect.

ARTICLE 3 — TERRITORY

The liability of the Reinsurer under this Agreement shall be limited to losses in connection with
business underwritten within the United States of America, and shall apply to losses occurring
within the territorial limits of the Company’s original Policies, including incidental exposures as
covered in the Company’s original Policies.

1

 

ARTICLE 4 — EXCLUSIONS

This Agreement does not cover:

	1.	 	All reinsurance assumed by the Company howsoever styled or classified;
	 
	2.	 	Any liability of the Company arising from its participation or membership, whether voluntary
or involuntary, in any insolvency fund including any guarantee fund, association, pool, plan
or other facility which provides for the assessment of, payment by, or assumption by the
Company of a part or the whole of any claim, debt, charge fee or other obligations of an
insurer, or its successors or assigns, which has been declared insolvent by any authority
having jurisdiction;
	 
	3.	 	Nuclear incidents, in accordance with the Nuclear Incident Exclusion Clause — liability
—Reinsurance — U.S.A., attached hereto, such exclusion to be understood to apply equally to
so-called “hot testing” of nuclear plants;
	 
	4.	 	Liability in respect of loss or damage directly or indirectly occasioned by, happening
through or in consequence of war (whether war be declared or not), invasion, acts of foreign
enemies, hostilities, riot or civil commotion, civil war, rebellion, revolution, insurrection,
military or usurped power, or any act of terrorism;
	 
	5.	 	Aviation exposures as respects professional flight crews;
	 
	6.	 	Industrial Aid Aircraft;
	 
	7.	 	Exposures involving underground or subaqueous work on tunneling or mining operations;
	 
	8.	 	United States Longshoremen and Harbor Workers Compensation;
	 
	9.	 	Manufacture and/or production of:

	 	a.	 	Fireworks, fuse(s), cartridges, ammunition, powder, nitroglycerine or any explosives;
	 
	 	b.	 	Gases and/or air under pressure in containers;
	 
	 	c.	 	Butane, Methane, Propane and other liquefied gases;
	 
	 	d.	 	Toxic substances and toxic waste with inherent potential for catastrophic loss;

	10.	 	Amusement Parks, Carnivals, Circuses, Professional Athletes and Performers;
	 
	11.	 	Employers’ Liability, Jones Act and Maritime Act;
	 
	12.	 	Cumulative Trauma; the term “cumulative trauma” shall mean an injury that fulfills all of the
following conditions:

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

	13.	 	Extra Contractual Obligations and/or Excess of Policy Limits;
	 
	 	 	The terms “Extra Contractual Obligations and/or Excess of Policy Limits” are defined as those
liabilities not covered under any other provisions of this Agreement and which arise from the
handling of any claim on the policies reinsured hereunder, such liabilities including January 3,
2008
but not limited to compensatory, exemplary and punitive damages or fines or statutory penalties
which are awarded against the Company as a result of an act, error, omission, or

January 3, 2008

2

 

	 	 	course of conduct committed by or on behalf of the Company arising because of, but not limited
to the following: failure by the Company to settle within the policy limit or by reason of
alleged or actual negligence or bad faith in rejecting an offer of settlement or in the
preparation or prosecution of an appeal consequent upon such action.

ARTICLE 5 — WARRANTY

Notwithstanding item 4 of the Exclusions Article, this Agreement shall include coverage for
Terrorism as follows:

An act of terrorism is either (a) any act defined as such by the Federal government as
determined by the Federal Office of Homeland Security or other such Federal agency that may
hold jurisdiction over whether a given act is terrorist in nature, or in the absence of any
such federal determination, (b) any violent act within the United States causing damage to
property or injury to persons for which there is reasonable belief that the perpetrator
undertook such act for political or ideological reasons and that the perpetrator’s principal
purpose was to: (1) engender fear among American people for their safety; (2) disrupt any
segment of the American economy; or (3) influence governmental action or policy, provided,
however, that an act of terrorism for purposes of this definition shall not include any act
as described above perpetrated by an official, employee, or agent of a foreign state acting
for or on behalf of such state.

Notwithstanding any provision to the contrary within this Agreement or any endorsement
hereto, it is agreed that in no event will this Agreement provide coverage for loss, damage,
cost or expense directly or indirectly caused by, contributed to by, resulting from, or
arising out of or in connection with biological, chemical, radioactive or nuclear explosion,
pollution, contamination and/or fire following thereon.

ARTICLE 6 — REINSURANCE PREMIUM

The premium for the reinsurance afforded by this Agreement shall be calculated by applying a rate
of 2.200% to the Subject Gross Net Earned Premium Income accounted for by the Company on business
the subject matter of this Agreement for the term of this Agreement subject to a minimum premium of
$43,200.

A deposit premium of $48,000 shall be paid to the Reinsurer on January 1, 2008.

“Subject Gross Net Earned Premium Income” shall mean the gross earned premium for business the
subject matter of this Agreement less premium paid for reinsurance, recoveries under which would
inure to the benefit of Agreement.

As soon as practical, but no later than forty-five (45) days following the expiration of this
Agreement, the Company shall provide a report to the Reinsurer setting forth the premium due
hereunder, computed in accordance with the first paragraph, and any additional premium due the
Reinsurer or return premium due the Company shall be remitted promptly.

ARTICLE 7 — RETENTION AND LIMIT

January 3, 2008

3

 

The Reinsurer shall indemnify the Company in respect to loss(es) from each Loss Occurrence, for
100% of the Ultimate Net Loss in excess of $5,000,000 each Loss Occurrence.

The Reinsurer’s limit of liability in respect to each and every Loss Occurrence shall be 100% of
$2,500,000.

The Reinsurer’s limit of liability as respects all Loss Occurrences during the term of this
Agreement shall be limited 100% of $5,000,000.

ARTICLE 8 — REINSTATEMENT

In the event all or any portion of the reinsurance hereunder is exhausted by loss, the amount so
exhausted shall be reinstated immediately from the time the Loss Occurrence commences. For each
amount so reinstated the Company agrees to pay an additional premium equal to the product of the
following:

The percentage of the occurrence limit reinstated (based on the loss actually paid by the
Reinsurer); times

The earned reinsurance premium for the term of this Agreement (exclusive of reinstatement
premium).

Provisional statements of reinstatement premium due the Reinsurer (based on the estimated earned
reinsurance premium for this Agreement) shall be prepared by the Company and submitted to the
Reinsurer with each request for partial settlement of losses hereunder. Any reinstatement premium
shown to be due the Reinsurer (less prior payments, if any) shall be remitted by the Company with
each of its provisional statements or deducted from the loss payment(s) made by the Reinsurer.

Thereafter, provisional statements of reinstatement premium due the Reinsurer shall be prepared by
the Company and submitted to the Reinsurer periodically at the discretion of the Company or as
requested by the Reinsurer or when the Company calculates the earned reinsurance premium for this
Agreement. Any reinstatement premium shown to be due the Reinsurer (less prior payments, if any)
shall be remitted by the Company with its statement. Any return reinstatement premium shown to be
due the Company shall be remitted by the Reinsurer as promptly as possible after receipt and
verification of the Company’s final statement.

Notwithstanding anything stated herein, the liability of the Reinsurer hereunder shall not exceed
100% of $2,500,000 as respects loss or losses caused by any one occurrence, nor shall it exceed
100% of $5,000,000 in all during the term of this Agreement.

ARTICLE 9 — COMMUTATION 

Seven years after the expiry of this Agreement, the Company shall advise the Reinsurer of all
claims for said annual period, not finally settled which are likely to result in a claim under this
Agreement. No liability shall attach hereunder for any claim or claims not reported to the
Reinsurer within this seven-year period.

With respect to any claim under business covered hereunder, either the Reinsurer or the Company
may, after seven years from the date of occurrence of the claim, request commutation of the
Ultimate Net Loss hereunder.

4

 

Within eighty (80) days after receipt by either party of the request to commute the claim, the
Company shall submit a statement of valuation of the claim showing the elements considered
reasonable to establish the Ultimate Net Loss of the claim to be commuted. The Company and the
Reinsurer shall agree upon the capitalized value of such claim to the reinsured layer and the
Reinsurer shall pay to the Company the amount so determined. Payment by the Reinsurer to the
Company, of the amount as determined herein, shall release the Reinsurer of any further liability
in respect of such claim.

If the Company and the Reinsurer fail to agree on the capitalized value of such claim, then any
difference shall be settled by a panel of three Actuaries or Appraisers, one to be chosen by each
party and third by the two so chosen. If either party refuses or neglects to appoint an Actuary or
Appraiser within sixty (60) days after the request in writing that the difference be settled by a
panel of three Actuaries or Appraisers, the other party may appoint two Actuaries or Appraisers. If
the two Actuaries or Appraisers fail to agree on the selection of a third Actuary or Appraiser
within thirty (30) days of their appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All the Actuaries or Appraisers shall
be regularly engaged in the valuation of claims subject to the provisions of this Article. None of
the Actuaries or Appraisers shall be under the control of either party to this Agreement nor shall
they have any interest in the claim being commuted other than, that which is required to fulfill
their obligations hereunder.

Each party shall submit its case to its Actuary or Appraiser within thirty (30) days of the
appointment of the third Actuary or Appraiser. The decision in writing of any two Actuaries or
Appraisers, when filed with the Company and the Reinsurer, shall be final and binding on both
parties. The expense of the Actuaries or Appraisers and of the Commutation shall be equally divided
between the Company and the Reinsurer. Said Commutation shall take place in Cleona, Pennsylvania,
unless some other place is mutually agreed upon by the Company and the Reinsurer.

The term “Capitalized Value” as used herein shall mean, as respects losses exceeding the retention
hereunder, the total of all payments made hereunder up to the date of commutation plus the present
value of all future estimated payments hereunder, discounted at a rate of interest to be mutually
agreed upon, which together comprise the Ultimate Net Loss to be commuted hereunder.

ARTICLE 10 — DEFINITION OF LOSS OCCURRENCE 

The term “Loss Occurrence” shall mean any one accident, disaster, casualty or happening, or series
of accidents, disasters, casualties or happenings arising out of or caused by one event or one
causative agency.

Furthermore, it is understood and agreed that each case of an employee contracting any disease for
which the company may be held liable shall be considered as constituting a separate and distinct
Loss Occurrence, regardless of the date of disability.

ARTICLE 11 — NET RETAINED LINES (BRMA 32B)

This Agreement applies only to that portion of any Policy which the Company retains net for its

5

 

own account, and in calculating the amount of any loss hereunder and also in computing the amount
or amounts in excess of which this Agreement attaches, only loss or losses in respect of that
portion of any Policy which the Company retains net for its own account shall be included.

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

ARTICLE 12 — ULTIMATE NET LOSS

The term “Ultimate Net Loss” shall mean the actual sum paid or payable by the Company including
Claim Expenses, in settlement of losses, in payment of benefits, or in satisfaction of judgments or
awards for which it is liable including prejudgment interest included in the judgment (after making
deductions for all salvages, all recoveries and all claims made upon other reinsurances whether
collected or not). Nothing in this clause shall be construed to mean that losses under this
Agreement are not recoverable until the Company’s Ultimate Net Loss has been ascertained.

However, in the event of the insolvency of the Company, “Ultimate Net Loss” shall be in accordance
with the Insolvency Clause of the Agreement.

The term “Claim Expenses” shall mean court costs, interest upon judgments when not included in
judgments, allocated investigation, adjustment and legal expenses. Claim Expenses shall be included
herein as part of the Ultimate Net Loss but shall be subject to the limit of liability of this
reinsurance.

Neither Ultimate Net Loss nor Claim Expenses shall include ordinary overhead expenses of the
Company such as salaries, retainers, and other fixed expenses, but salaries and expenses of the
Company’s field employees while adjusting losses and expense of officials incurred in connection
with a loss shall be included.

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

Unless the Company and Reinsurer agrees to the contrary, the Company will enforce its right to
subrogation and will prosecute all claims arising out of such right. Should the Company refuse or
neglect to enforce this right, the Reinsurer is hereby empowered and authorized to institute
appropriate action in the name of the Company.

ARTICLE 13 — LOSS NOTICE AND SETTLEMENT

Prompt notice of any loss and any subsequent developments thereto, which, in the Company’s opinion,
may result in a claim under this Agreement shall be given by the Company to the Reinsurer. All loss
settlements made or agreed by the Company, provided they are within the terms and conditions of the
original Policies and of this Agreement, shall be payable promptly by the Reinsurer upon reasonable
evidence of the amount due or to be due being given by the

6

 

Company.

The Company shall immediately report, irrespective of any appointment of negligence, any occurrence
which involves serious bodily injury including but not limited to:

	a.	 	fatal injuries,
	 
	b.	 	brain injuries,
	 
	c.	 	spinal injury,
	 
	d.	 	paraplegia or quadriplegia,
	 
	e.	 	any other major permanent disability.

These serious injuries shall be reported when incurred by either an insured person, a third party
or both, regardless of the Company’s assessment of liability.

The Company agrees to investigate, defend and settle claims arising under Policies with respect to
which reinsurance is afforded by this Agreement and to keep the Reinsurer advised as to any
developments which may affect the cost of any such claim.

The Reinsurer shall have the right, at its own expense, to participate jointly with the Company in
the investigation, defense and settlement of claims to which, in the judgment of the Reinsurer, it
is or might become exposed.

ARTICLE 14 — TAXES (BRMA SOB)

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

ARTICLE 15 — FEDERAL EXCISE TAX (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers
exempt from Federal Excise Tax, who are domiciled outside the United States of America).

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

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

ARTICLE 16 — OFFSET (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on
account of premiums, claims and losses, loss expenses or salvages due from one party to the other
under this Agreement; provided, however, that in the event of the insolvency of a party hereto,
offsets shall only be allowed in accordance with applicable statutes and

7

 

regulations.

ARTICLE 17 — CURRENCY

All payments made under this Agreement shall be in currency of the United States of America.

ARTICLE 18 — ACCESS TO RECORDS (BRMA 1D) 

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

ARTICLE 19 — ERRORS AND OMISSIONS (BRMA 14C) 

Any inadvertent delay, omission or error shall not be held to relieve either party hereto from any
liability which would attach to it hereunder if such delay, omission or error had not been made,
provided such omission or error is rectified immediately upon discovery.

ARTICLE 20 — INSOLVENCY (BRMA 19B)

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

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 insolvent Company.

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

8

 

ARTICLE 21— ARBITRATION (BRMA 6E)

As a precedent to any right of action hereunder, if any differences shall arise between the
contracting parties with reference to the interpretation of this Agreement or their rights with
respect to any transaction involved, whether arising before or after termination of this Agreement,
such differences shall be submitted to arbitration upon the written request of one of the
contracting parties.

Each party shall appoint an arbitrator within thirty (30) days of being requested to do so, and the
two named shall select a third arbitrator before entering upon the arbitration. If either party
refuses or neglects to appoint an arbitrator within the time specified, the other party may appoint
the second arbitrator. If the two arbitrators fail to agree on a third arbitrator within thirty
(30) days of their appointment, each of them shall name three individuals, of whom the other shall
decline two, and the choice shall be made by drawing lots. All arbitrators shall be active or
retired disinterested officers of insurance or reinsurance companies or Underwriters at Lloyd’s,
London not under the control of either party to this Agreement.

Each party shall submit its case to its arbitrator within thirty (30) days of the appointment of
the third arbitrator or within such period as may be agreed by the arbitrators. All arbitrators
shall interpret this Agreement as an honorable engagement rather than as merely a legal obligation.
They are relieved of all judicial formalities and may abstain from following the strict rules of
law. They shall make their award with a view to effecting the general purpose of this Agreement in
a reasonable manner rather than in accordance with a literal interpretation of the language.

The decision in writing of any two arbitrators, when filed with the contracting parties, shall be
final and binding on both parties. Judgment upon the award rendered may be entered in any court
having jurisdiction thereof. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third arbitrator and of the
arbitration. In the event that two arbitrators are chosen by one party as above provided, the
expense of the arbitrators and the arbitration shall be equally divided between the two parties.
Any arbitration shall take place in the city in which the ceding Company’s Head Office is located
unless some other place is mutually agreed upon by the contracting parties.

ARTICLE 22 — SERVICE OF SUIT (BRMA 49E)

(This Article applies to Reinsurers domiciled outside the United States of America and/or
unauthorized in any state, territory, or district of the United States of America that has
jurisdiction over the Company and in which a subject suit has been instituted. This Article is not
intended to conflict with or override the parties’ obligation to arbitrate their disputes in
accordance with the Arbitration Article).

In the event any Reinsurer hereon fails to pay any amount claimed due hereunder, such Reinsurer, at
the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction
within the United States and shall comply with all requirements necessary to give that court
jurisdiction. 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

9

 

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. Service of process in such suit may be made upon
Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically
designated in the applicable Interests and Liabilities Agreement attached hereto. In any suit
instituted against it upon this Agreement, 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 is instituted.

Further, pursuant to any statute of any state, territory, or district of the United States that
makes provision therefor, the Reinsurer 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 its true and lawful attorney upon whom may be served any lawful process
in any action, suit, or proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Agreement, 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.

ARTICLE 23 — UNAUTHORIZED REINSURANCE (BRMA 55C)

(Applies only to a Reinsurer who does not qualify for full credit with any insurance regulatory
authority having jurisdiction over the Company’s reserves.)

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

When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to
the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank and
containing provisions acceptable to the insurance regulatory authorities having jurisdiction over
the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such
Letter of Credit shall be issued for a period of not less than one year, and shall be automatically
extended for one year from its date of expiration or any future expiration date unless thirty (30)
days (sixty (60) days where required by insurance regulatory authorities) prior to any expiration
date the issuing bank shall notify the Company by certified or registered mail that the issuing
bank elects not to consider the Letter of Credit extended for any additional period.

10

 

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

	(a)	 	to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under
the terms of this Agreement and which has not been otherwise paid;
	 
	(b)	 	to make refund of any sum which is in excess of the actual amount required to pay the
Reinsurer’s Obligations under this Agreement;
	 
	(c)	 	to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall
be held in an interest bearing account separate from the Company’s other assets, and interest
thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
	 
	(d)	 	to pay the Reinsurer’s share of any other amounts the Company claims are due under this
Agreement.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual
amount required for (a) or (c), or in the case of (d), the actual amount determined to be due, the
Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing
shall be applied without diminution because of insolvency on the part of the Company or the
Reinsurer.

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

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

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

11

 

ARTICLE 24 — CHOICE OF LAW AND JURISDICTION

This Agreement shall be governed by the laws of Pennsylvania and shall be subject to the
jurisdiction of the courts of the United States of America (subject to the provisions of the
Service of Suit Clause).

ARTICLE 25 — ORIGINAL CONDITIONS

All reinsurance under this Agreement shall be subject to the same terms, conditions,
interpretations, waivers, modifications, alterations, and cancellations as the respective Policies
of the Company to which this Agreement applies. However, in no event shall this be construed in any
way to provide coverage outside the terms and conditions set forth in this Agreement.

Nothing herein shall in any manner create any obligations or establish any rights against the
Reinsurer in favour of any third party or any persons not parties to this Agreement except as
provided in the Insolvency Article.

ARTICLE 26 — ENTIRE AGREEMENT (BRMA 74B)

This Agreement constitutes the entire agreement between the parties. In no event shall this
Agreement provide any guarantee of profit, directly or indirectly, from the Reinsurer to the
Company or from the Company to the Reinsurer, This Agreement may be clarified, amended or modified
only by written agreement signed by both parties. Such written agreement shall become part of this
Agreement.

ARTICLE 27 — INTERMEDIARY

BMS Intermediaries, Inc. is hereby recognized as the intermediary negotiating this Agreement for
all business hereunder. All communications (including, but not limited to notices, statements,
premiums, return premiums, commissions, taxes, losses, loss adjustment expenses, salvages and loss
settlements) relating thereto shall be transmitted to the Company or the Reinsurer through BMS
Intermediaries, Inc., 5005 LBJ Freeway, Suite 700, Dallas, Texas 75244. Payments by the Company to
the intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer
to the intermediary shall be deemed only to constitute payment to the Company to the extent that
such payments are actually received by the Company.

12

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE

U.S.A.

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

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

Limited Exclusion Provision.*

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to
(injury, sickness, disease, death or destruction (bodily injury or property damage with
respect to which an insured under the policy is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or
would be an insured under any such policy but for its termination upon exhaustion of
its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as described in II
above, whether new, renewal or replacement, being policies which either (a) become
effective on or after 1st May, 1960, or (b) become effective before that date and
contain the Limited Exclusion Provision set out above; provided this paragraph (2)
shall not be applicable to Family Automobile Policies, Special Automobile Policies, or
policies or combination policies of a similar nature, issued by the Reassured on New
York risks, until 90 days following approval of the Limited Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

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

Owners, Landlords and Tenants Liability,

Contractual Liability, Elevator Liability,

Owners or Contractors (including railroad)

Protective Liability, Manufacturers and

Contractors Liability, Product Liability,

Professional and Malpractice Liability,

Storekeepers Liability, Garage Liability,

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

Automobile Liability (including Massachusetts

Motor Vehicle or Garage Liability)

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

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

	I.	 	Under any Liability Coverage, to (injury, sickness, disease, death or destruction (bodily
injury or property damage

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

	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating
to (immediate medical or surgical relief, (first aid, to expenses incurred with respect to
(bodily injury, sickness, disease or death (bodily injury resulting from the hazardous
properties of nuclear material and arising out of the operation of a nuclear facility by any
person or organization.

	III.	 	Under any Liability Coverage to (injury, sickness, disease, death or destruction (bodily
injury or property damage resulting from the hazardous properties of nuclear material, if

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

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

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

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

	 	 	 	(With respect to injury to or destruction of property, the word “injury” or
“destruction” (“property damage” includes all forms of radioactive contamination
of property. (includes all forms of radioactive contamination of property.

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

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

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

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

			
	*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.

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

CONTRACT No. A8CFGX001

Please quote in all communications

LEBANON MUTUAL INSURANCE COMPANY

137 WEST PENN AVENUE

CLEONA, PENNSYLVANIA 17042-1322

FINAL SUMMARY OF REINSURANCE TERMS

In accordance with your instructions, we have effected the following. Please check this document
carefully and advise us immediately if it is not in accordance with your requirements or if the
security stated hereon is not acceptable. You are respectfully reminded of the ongoing importance
of disclosing all material information to Reinsurers/Insurers. Failure to do so could prejudice
your coverage under this Reinsurance/Insurance.

	 	 	 	 	 
	RISK DETAILS REINSURED

	 	:
	 	LEBANON MUTUAL INSURANCE COMPANY Cleona,
Pennsylvania
	 
	 	 	 	 
	PERIOD

	 	:
	 	This Agreement shall take effect 12:01 a.m.,
Eastern Standard Time, January 1, 2008 and
shall apply to all losses occurring on and
after this date, and shall remain in force
until 12:01 a.m. Eastern Standard Time,
January 1, 2009.
	 
	 	 	 	 
	TYPE

	 	:
	 	WORKERS’ COMPENSATION FIRST EXCESS OF LOSS
REINSURANCE AGREEMENT
	 
	 	 	 	 
	CLASS

	 	:
	 	The Agreement is to indemnify the Company for
statutory benefits paid or payable as a
result of Accidental Death, Dismemberment,
Accidental Disability and Accidental Medical
Expenses arising under all policies, binders,
contracts or agreements of insurance, whether
written or oral as intended to be covered
hereunder (hereinafter called “Policies”)
which are in force, written or renewed by or
on behalf of the Company during the term of
this Agreement and classified by the Company
as Workers’ Compensation, subject to the
terms and conditions herein contained.
	 
	 	 	 	 
	TERRITORY

	 	:
	 	The liability of the Reinsurer under this
Agreement shall be limited to losses in
connection with business underwritten within
the United States of America, and shall apply
to losses occurring within the territorial
limits of the Company’s original Policies,
including incidental exposures as covered in
the Company’s original Policies.
	 
	 	 	 	 
	RETENTION AND LIMIT

	 	:
	 	The Reinsurer shall indemnify the Company in
respect to loss(es) from each Loss
Occurrence, for 100% of the Ultimate Net Loss
in excess of $5,000,000 each Loss Occurrence.
	 
	 	 	 	 
	 

	 	 	 	The Reinsurer’s limit of liability in respect
to each and every Loss Occurrence shall be
100% of $2,500,000.

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

	 	 	 	 	 
	 

	 	 	 	The Reinsurer’s limit of liability as
respects all Loss Occurrences during the term
of this Agreement shall be limited 100% of
$5,000,000.
	 
	 	 	 	 
	REINSURANCE PREMIUM

	 	:
	 	The premium for the reinsurance afforded by
this Agreement shall be calculated by
applying a rate of 2.20% to the Subject Gross
Net Earned Premium Income accounted for by
the Company on business the subject matter of
this Agreement for the term of this Agreement
subject to a minimum premium of $43,200.
	 
	 	 	 	 
	 

	 	 	 	A deposit premium of $48,000 shall be paid to
the Reinsurer on January 1, 2008.

“Subject Gross Net Earned Premium Income”
shall mean the gross earned premium for
business the subject matter of this Agreement
less premium paid for reinsurance, recoveries
under which would inure to the benefit of
Agreement.
	 
	 	 	 	 
	 

	 	 	 	As soon as practical, but no later than
forty-five (45) days following the expiration
of this Agreement, the Company shall provide
a report to the Reinsurer setting forth the
premium due hereunder, computed in accordance
with the first paragraph, and any additional
premium due the Reinsurer or return premium
due the Company shall be remitted promptly.
	 
	 	 	 	 
	REINSTATEMENT

	 	:
	 	One (1) reinstatement at additional premium
calculated pro rata as to amount and 100% as
to time.
	 
	 	 	 	 
	LOSS EXPENSE

	 	:
	 	Included within the Ultimate Net Loss. 
	 
	 	 	 	 
	WARRANTY

	 	:
	 	Notwithstanding item 4 of the Exclusions
Article, this Agreement shall include
coverage for Terrorism as follows:
	 
	 	 	 	 
	 

	 	 	 	An act of terrorism is either (a) any act defined as such
by the Federal government as determined by the Federal
Office of Homeland Security or other such Federal agency
that may hold jurisdiction over whether a given act is
terrorist in nature, or in the absence of any such
federal determination, (b) any violent act within the
United States causing damage to property or injury to
persons for which there is reasonable belief that the
perpetrator undertook such act for political or
ideological reasons and that the perpetrator’s principal
purpose was to: (1) engender fear among American people
for their safety; (2) disrupt any segment of the American
economy; or (3) influence governmental action or policy,
provided, however, that an act of terrorism for purposes
of this definition shall not include any act as described
above perpetrated by an official, employee, or agent of a
foreign state acting for or on behalf of such state.

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

	 	 	 	 	 
	 

	 	 	 	Notwithstanding any provision to the contrary within this
Agreement or any endorsement hereto, it is agreed that in
no event will this Agreement provide coverage for loss,
damage, cost or expense directly or indirectly caused by,
contributed to by, resulting from, or arising out of or
in connection with biological, chemical, radioactive or
nuclear explosion, pollution, contamination and/or fire
following thereon.

	 
	 	 	 	 
	GENERAL CONDITIONS

	 	:
	 	See attached Contract wording. 
	 
	 	 	 	 
	WORDING

	 	:
	 	As attached.
	 
	 	 	 	 
	INFORMATION

	 	:
	 	2008 Estimated Subject Net Earned Premium:
	 

	 	 	 	USD2,185,246.

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

FINAL SUMMARY OF REINSURANCE TERMS

REINSURED: LEBANON MUTUAL INSURANCE COMPANY

CONTRACT: WORKERS’ COMPENSATION EXCESS OF LOSS REINSURANCE

EFFECTIVE: January 1, 2008

Federal Excise tax is not applicable.

EFFECTED WITH:

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Federal ID & NAIC #
	 	100.00	%	 	Catlin Underwriting Inc. for and on behalf of
SJC SYNDICATE 2003
Summit, New Jersey

	 	94-3094358
	 	 	 	 	 
	 	 
	 	100.00	%	 	TOTAL
	 	 

For and on behalf of

BMS Intermediaries, Inc.

	 	 	 
	/s/

	 	January 2, 2008
	 
	 	 
	Authorized Signature

	 	Date
	Authorized Signature
	 	 
	 
	 	 
	For and on behalf of

Lebanon Mutual Insurance Company
	 	 
	 
	 	 
	/s/ Rollin P. Rissinger

	 	January 2, 2008
	 
	 	 
	Authorized Signature

	 	Date
	Authorized Signature
	 	 

	 	 	 	 	 
	Memorandum of Changes 2007 to 2008_3106308
	 	Page 1 of 1
	 	
	ABCFGX001 — Lebanon WC 1st XOL program	 	 	 
	12/03/2007	 	 	 

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

MEMORANDUM OF CHANGES

LEBANON MUTUAL INSURANCE COMPANY

Workers’ Compensation First Excess of Loss Treaty

Effective January 1, 2008

The following changes have been made to the 2007 expiring wording (in addition to amending any
applicable dates, percentages and figures):

	 	 	 	 	 
	BUSINESS COVERED

	 	:
	 	Amended the language of this article to clarify the business being covered.
	 
	 	 	 	 
	REINSURANCE PREMIUM

	 	:
	 	(Previously entitled PREMIUM.)
	 
	 	 	 	 
	 

	 	 	 	In the third paragraph, deleted the phrase “less returns and cancellations and” as Net
Earned Premium is already net of these items.
In the fourth paragraph, added the word “premium” after the word “additional”.
	 
	 	 	 	 
	REINSTATEMENT 

PREMIUM

	 	:
	 	In the last paragraph, removed the phrase “any one person” to be consistent with the
LIMIT AND RETENTION article.
	 
	 	 	 	 
	COMMUTATION

	 	:
	 	In the fifth paragraph, amended “Princeton, New Jersey” to read “Cleona, Pennsylvania”.
	 
	 	 	 	 
	NET RETAINED LINES

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 32B.
	 
	 	 	 	 
	ULTIMATE NET LOSS

	 	:
	 	In the third paragraph, amended the word “occurrence” to read “Ultimate Net Loss”.
	 
	 	 	 	 
	LOSS NOTICE AND 

SETTLEMENT

	 	:
	 	In the last paragraph, amended the word “reinsurers” to its singular form and amended the
word “their” to “its”.
	 
	 	 	 	 
	TAXES

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 50B.
	 
	 	 	 	 
	OFFSET

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 36D.
	 
	 	 	 	 
	ACCESS TO RECORDS

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 1D.
	 
	 	 	 	 
	INSOLVENCY

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 19B.
	 
	 	 	 	 
	SERVICE OF SUIT

	 	:
	 	Expiring language was amended as we are using BRMA clauses whenever possible. The
language used is BRMA 49E.

	 	 	 	 	 
	Memorandum of Changes 2007 to 2008_3106308
	 	Page 1 of 2
	 	
	ABCFGX001 — Lebanon WC 1st XOL program	 	 	 
	12/03/2007	 	 	 

 

 

			
	CONTINUATION OF CONTRACT NO. A8CFGX001
	 	DATED 02 January 2008

	 	 	 	 	 
	CHOICE OF LAW AND 

JURISDICTION

	 	:
	 	(Previously entitled GOVERNING LAW.)
	 
	 	 	 	 
	 

	 	 	 	Amended language of Article to BMS standard language which includes reference to the
“Service of Suit” article.
	 
	 	 	 	 
	ORIGINAL CONDITIONS

	 	:
	 	This Article was added to the agreement.
	 
	 	 	 	 
	ENTIRE AGREEMENT

	 	:
	 	This Article was added to the agreement. The language used is BRMA 74B.
	 
	 	 	 	 
	INTERMEDIARY

	 	:
	 	Amended to read “BMS Intermediaries, Inc.” through the article.

PLEASE NOTE:

Article numbers have been changed from Roman numerals to Arabic numbers.

Punctuation and capitalization corrections have been made throughout the agreement.

Reference to BRMA article numbers have been added, where applicable.

	 	 	 	 	 
	Memorandum of Changes 2007 to 2008_3106308
	 	Page 2 of 2
	 	
	ABCFGX001 — Lebanon WC 1st XOL program	 	 	 
	12/03/2007

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