Document:

EX-10.1

 Exhibit 10.1 
 AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
 issued to 

AFFIRMATIVE INSURANCE COMPANY 
 Burr Ridge, Illinois 
 AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT

 (the “Contract”) 
 issued to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the “Company”) 
 by 

THE SUBSCRIBING REINSURER(S) IDENTIFIED 
 IN THE INTERESTS AND LIABILITIES AGREEMENT(S) 
 ATTACHED TO AND FORMING
PART OF THIS CONTRACT 
 (the “Reinsurer”) 
 ARTICLE 1 
 BUSINESS COVERED 

 

	A.	This Contract is to indemnify the Company in respect of the liability accruing to the Company as a result of loss or losses under Policies classified by the Company as
Private Passenger Automobile Physical Damage and Liability issued by or on behalf of the Company, in force at the inception of this Contract, or written or renewed during the term of this Contract, subject to the terms and conditions herein
contained. The subject Policies shall include business assumed by the Company as 100.0% quota share reinsurance from US Agencies Casualty Insurance Company. 

	B.	It is understood that the business reinsured under this Contract is deemed to include coverages extended for non-resident drivers under the Motor Vehicle Financial
Responsibility Law or the Motor Vehicle Compulsory Insurance Law, or any similar law of any state or province, following the provisions of the Company’s Policies when they include or are deemed to include so called “out of state
insurance” provisions. 

 ARTICLE 2 
 TERM 
  

	A.	This Contract shall take effect on March 31, 2013, applying to losses occurring on or after that date and shall remain in force for an indefinite period but may be
terminated on any January 1, by either party giving to the other party 75 days’ prior written notice. 

  

	B.	At termination of this Contract, the Reinsurer shall return the ceded unearned premium, net of provisional ceding commission, as of the date of termination, on business
in force at that date, and shall be released from liability for losses occurring after termination. 

  

	C.	Notwithstanding the above, in the event that no approval is obtained from the Illinois Department of Insurance by May 15, 2013, this Contract shall be null and
void at inception and any amounts previously paid either party shall be returned. 

 ARTICLE 3 

RETENTION AND LIMIT 
  

	A.	The Company shall cede, and the Reinsurer shall accept as reinsurance, a 40.0% quota share with respect to losses occurring during the term of this Contract.

  

	B.	The Reinsurer shall pay to the Company the Reinsurer’s quota share of losses under the Policies, Extra Contractual Obligations and Loss in Excess of Policy Limits
covered under this Contract. However, the Reinsurer’s liability for Extra Contractual Obligations, Loss in Excess of Policy Limits and losses arising from class action suits, combined, from losses occurring during any one Contract Year shall
not exceed 3.0% of Net Premiums Earned as respects that Contract Year. 

  

	C.	Notwithstanding the above, the Reinsurer’s liability shall not exceed its quota share of the following: 

 

	 	1.	as respects Casualty business, $100,000 any one claim; 

  

	 	2.	as respects Property business, $3,000,000 any one Catastrophe Loss Occurrence, and, as respects all such losses occurring during any one Contract Year, an amount equal
to 3.0% of Gross Net Earned Premium Income as respects that Contract Year. 

  

	D.	The Reinsurer’s liability for all losses subject hereto shall not exceed an amount equal to 109.0% of Net Premiums Earned. 

	E.	It is agreed that the ceded Gross Net Earned Premium Income for Policies subject to this Contract shall not exceed a “Premium Cap” equal to $100,000,000 as
respects the first Contract Year hereunder and $120,000,000 as respects each Contract Year thereafter, unless accepted and approved in writing by the Reinsurer. In the event the Premium Cap would apply as respects any Contract Year, the quota share
cession under paragraph A above shall be reduced to the same proportion that the Premium Cap bears to the Company’s Gross Net Earned Premium Income for such Contract Year that exceeds the Premium Cap. 

ARTICLE 4 
 MAXIMUM
LIMITS OF LIABILITY 
  

	A.	The limits of liability of the Company with respect to any one Policy shall be deemed not to exceed: 

 

					
	 Bodily Injury Liability
	  	$	100,000 each person	  
		
		  	$	300,000 each occurrence	  
		
	 Property Damage Liability
	  	$	100,000 each occurrence	  
		
	 Comprehensive/Collision Coverage
	  	$	70,000 per vehicle	  
		
	 Uninsured/Underinsured Motorists Coverage
	  	$	100,000/$300,000/$100,000	  
		
	 Personal Injury Protection (PIP)/Property Protection Insurance (PPI)/Residual Liability Insurance
	  	 	Statutory limits	  
		
	 Medical Payment
	  	$	10,000	  

  

	B.	The amounts shown above shall be extended to follow the liability of the Company in the event of the stacking of Policy limits, or if the company is required by
statute, regulation or by an order of an insurance department to increase the minimum coverage limits. 

ARTICLE 5 
 SPECIAL
TERMINATION 
  

	A.	The Company may terminate a Subscribing Reinsurer’s share in this Contract at any time by giving not less than 30 days’ prior written notice to the
Subscribing Reinsurer, or the Subscribing Reinsurer may terminate this Contract by giving not less than 30 days’ prior written notice to the Company in the event any of the following circumstances occur: 

 

	 	1.	the other party has experienced a Change in Control; or 

  

	 	2.	failure of the other party to make payment of any undisputed balance under this Contract when due, and failure to remit the overdue payment within 30 days of the due
date; or 

  

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

 

	 	4.	a State Insurance Department or other legal authority orders the other party to cease writing business. 

	B.	The Company may terminate this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:

  

	 	1.	the Subscribing Reinsurer’s A.M. Best’s rating is assigned or downgraded below “A-”; or 

 

	 	2.	the Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or 

 

	 	3.	the Subscribing Reinsurer ceases assuming new and renewal property and casualty treaty reinsurance business. 

 

	C.	The Subscribing Reinsurer may terminate this Contract at any time by giving written notice to the Company in the event any of the following circumstances occur:

  

	 	1.	the Company’s Risk Based Capital ratio falls below 225.0% as reported on a quarterly basis during the term of this Contract; or 

 

	 	2.	the Company’s Risk Based Capital ratio is below 300.0% as reported on a quarterly basis during the term of this Contract and the Company’s policyholders’
surplus, as reported in the financial statements of the Company, has been reduced by greater than 12.0% of the amount thereof from calendar quarter to quarter or the policyholders’ surplus has been reduced by more than 20.0% of the amount
thereof as of December 31, 2012; or 

  

	 	3.	the Company is in breach of Illinois Reserve Requirement (215 ILCS 5/126.22) at any quarter end and such breach is not rectified within the greater of 60 days after the
filing due date for the Company’s quarterly or annual statement, or such longer timeframe as approved in writing by the Illinois Department of Insurance, with such written approval to be provided to the Subscribing Reinsurer.

  

	D.	Should any of the circumstances in paragraphs A and C above be triggered and the Reinsurer elects in writing to terminate this Contract, the Reinsurer shall have the
option to appoint a third party administrator (“TPA”) to handle all outstanding claims. If after electing to terminate this Contract, the Reinsurer exercises the option to appoint a TPA to handle all outstanding claims or if the Illinois
Department of Insurance pursuant to a validly issued order takes over all claims handling from the Company, the Company shall pay to the Subscribing Reinsurer 7.0% of the ceded Gross Net Earned Premium Income for the 12 months prior to termination,
as a claims management fund. 

  

	E.	For purposes of this Article, a “Change in Control”, as respects a party to this Contract, means: 

 

	 	1.	that a Person has entered into an agreement to purchase, sell or otherwise obtain (whether by stock or asset purchase, bulk reinsurance, merger, consolidation or
otherwise, in one or a series of transactions), or has so purchased, sold or otherwise transferred or obtained, a controlling interest in the party. Without limiting the foregoing, a Person shall be deemed to have a controlling interest in the party
if such Person owns, controls or holds an ownership interest in the party of at least 51.0%; 

  

	 	2.	any Person makes a valid Form A filing with the Illinois Department of Insurance seeking approval for acquisition of control of the Company; or

	 	3.	for the purposes of this paragraph, a “Person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated
entity or governmental entity. 

  

	F.	If this Contract is terminated in accordance with either paragraph A, B or C above, this Contract shall terminate on a cut-off basis as set forth in the Term Article.
The reinsurance premium due the Subscribing Reinsurer hereunder shall be pro rated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess premium received.

 ARTICLE 6 
 TERRITORY 
 The territorial limits of this Contract shall be identical with those of the
Company’s Policies. However, coverage under this Contract shall be limited to Policies issued in the states of Alabama, Illinois, Louisiana and Texas. 
 ARTICLE 7 
 EXCLUSIONS 

 

	A.	This Contract shall not cover and specifically excludes: 

  

	 	1.	Loss or damage that is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law
or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the fifty
States of the Union, the District of Columbia, and including bridges between the U.S.A. and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under Policies containing a
standard war or hostilities or warlike operations exclusion clause. 

  

	 	2.	Business excluded by the following attached Nuclear Incident Exclusion Clauses: a. Nuclear Incident Exclusion Clauses—Liability—Reinsurance—U.S.A.;

  

	 	b.	Nuclear Incident Exclusion Clauses—Physical Damage—Reinsurance—U.S.A. 

 

	 	3.	Pools, Associations and Syndicates, except as provided in the Assignments Article. 

 

	 	4.	Mortgage Impairment Insurance or other similar covers, however styled. 

  

	 	5.	Products Liability, Professional Malpractice Liability, Directors’ & Officers’ Liability, Securities and Exchange Commission Liability, Workers’
Compensation and Employers Liability. 

	 	6.	Loss arising out of the ownership, maintenance or use of any vehicle, the principal use of which is as: 

 

	 	a.	a public or livery conveyance; 

  

	 	b.	an emergency vehicle; 

  

	 	c.	a drive-yourself motor vehicle available for leasing periods of less than six months; 

 

	 	d.	an automobile used in speed contests and races; 

  

	 	e.	a motorcycle; 

  

	 	f.	a vehicle used in hauling goods for others; 

  

	 	g.	a vehicle used in hauling hazardous chemicals or radioactive substances; 

  

	 	h.	a vehicle operating under time constraints, including messenger or delivery service. 

 

	 	7.	Reinsurance assumed, except for business assumed from affiliated companies and agency reinsurance. 

 

	 	8.	Losses arising from seepage and pollution as per the Company’s original Policies and any amendments attached thereto. This exclusion will not apply, however, when
the judicial entity having legal jurisdiction invalidates the Company’s pollution exclusion when such liability was intended to be excluded from coverage. 

 

	 	9.	Acts of Terrorism that involve the use, release, or escape of nuclear, biological or chemical materials, or directly or indirectly result in nuclear reaction or
radiation or radioactive contamination; and it appears that the purpose of the terrorism was to release such materials. “Acts of Terrorism” means an act, including but not limited to the use of force or violence and/or the threat thereof,
of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to
put the public, or any section of the public, in fear. 

 This exclusion shall not be construed to apply to loss
occasioned by riots, strikes, civil commotion, vandalism or malicious damage as those terms have been interpreted by United States Courts to apply to insurance policies. 

 

	 	10.	Loss arising from exposure to asbestos, to the extent excluded in the Company’s Policy. 

 

	 	11.	Any penalties, late fees, litigation expenses, arbitration fees or costs incurred as a result of late payment of PIP benefits. 

 

	 	12.	Flood, when written as such. 

  

	 	13.	Earthquake, landslide or other earth movement, when written as such. 

  

	 	14.	Loss Adjustment Expenses sustained in connection with losses subject hereunder. 

	B.	If the Company inadvertently issues a Policy falling within the scope of exclusion A(6) above, such Policy shall be covered hereunder, provided that the Company issues,
or causes to be issued, the required notice of cancellation within 30 days after a member of the Company’s executive or managerial staff becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling
said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel. 

 

	C.	Business which is beyond the terms, conditions or limitations of this Contract may be submitted to the Reinsurer for special acceptance hereunder and such business, if
accepted by the Reinsurer in writing, shall be subject to all of the terms, conditions and limitations of this Contract except as modified by the special acceptance. 

ARTICLE 8 

ASSIGNMENTS 
 The provisions of this
Contract shall apply to risks assigned to the Company under any Assigned Risk Plan or similar plan if, in the opinion of the Company, such risks were assigned to the Company because of the business written and reinsured hereunder. 

ARTICLE 9 
 OTHER
REINSURANCE 
 The Company may maintain physical damage catastrophe excess of loss reinsurance and casualty excess of loss reinsurance,
recoveries under which shall inure to the benefit of this Contract. 
 ARTICLE 10 

PREMIUM 
 As premium for the reinsurance
provided hereunder, the Company shall cede to the Reinsurer 40.0% of the unearned portion of its Gross Net Written Premium Income applicable to Policies in force at inception of this Contract, and 40.0% of its Gross Net Written Premium Income
thereafter. 
 ARTICLE 11 
 PROVISIONAL CEDING COMMISSION 
  

	A.	The Reinsurer shall allow the Company a provisional ceding commission of 29.50% of the Gross Net Written Premium Income ceded hereunder. The Company shall allow the
Reinsurer return commission on return premiums at the same rate. 

  

	B.	It is expressly agreed that the ceding commission allowed the Company includes provision for all dividends, commissions, taxes, assessments and all other expenses of
whatever nature. 

 ARTICLE 12 
 COMMISSION ADJUSTMENT 
  

	A.	The provisional commission allowed the Company shall be adjusted at the end of each Contract Year in accordance with the provisions set forth herein. The adjusted
commission rate shall be calculated as follows and be applied to Net Premiums Earned for the Contract Year under consideration: 

  

	 	1.	if the ratio of Losses Incurred to Net Premiums Earned is 72.00% or greater, the adjusted commission rate for the Contract Year under consideration shall be 22.00%;

  

	 	2.	if the ratio of Losses Incurred to Net Premiums Earned is less than 72.00%, but not less than 59.33%, the adjusted commission rate for the Contract Year under
consideration shall be 22.00%, plus 100.00% of the difference in percentage points between 72.00% and the actual ratio of Losses Incurred to Net Premiums Earned; 

 

	 	3.	if the ratio of Losses Incurred to Net Premiums Earned is 59.33% or less, the adjusted commission rate for the Contract Year under consideration shall be 34.67%.

  

	B.	Within 30 days after the end of each calendar quarter, beginning with the calendar quarter ending 12 months after the end of each Contract Year, until all losses
subject hereto have been finally settled, the Company shall calculate and report the adjusted commission on Net Premiums Earned. Each calculation shall be based on cumulative transactions hereunder from the beginning of the Contract Year under
consideration through the date of adjustment. If the adjusted commission on Net Premiums Earned for the Contract Year as of the date of adjustment is less than commissions previously allowed by the Reinsurer on Net Premiums Earned for the same
Contract Year, the Company shall remit the difference to the Reinsurer with its report. However, such report and remittance shall be made by the Company to the Reinsurer starting with any quarter prior to 12 months after the end of each Contract
Year if the ratio of paid Losses Incurred to Net Premiums Earned for that Contract Year exceeds 64.50%. If, for any calculation more than 24 months after expiration of each Contract Year, the adjusted commission on Net Premiums Earned is greater
than commissions previously allowed by the Reinsurer on Net Premiums Earned for the same Contract Year, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report.

 ARTICLE 13 
 PROFIT SHARING 
  

	A.	Simultaneously with commutation of each Contract Year, a profit commission calculation shall be prepared by the Company, based on cumulative transactions hereunder from
the beginning of the Contract Year under consideration through the date of calculation, including the commutation amount, all as respects the Contract Year under consideration. The Reinsurer shall pay to the Company a profit commission of 25.00% of
the amount, if any, by which 59.33% of Net Premium Earned exceeds Losses Incurred as respects the Contract Year under consideration. 

  

	B.	The profit commission payment shall be equal to: 

  

	 	1.	100.00% of the profit commission, if the losses under the Contract Year under consideration are commuted within 24 months after the end of that Contract Year;

	 	2.	50.00% of the profit commission, if losses under the Contract Year under consideration are commuted more than 24 months after the end of that Contract Year but not more
than 30 months after the end of that Contract Year; 

  

	 	3.	0.00% of the profit commission, if the Contract Year under consideration is commuted 30 months or more after the end of that Contract Year. 

In the event the commutation amount is determined by actuarial opinion, in accordance with paragraph B of the Commutation Article, the
date of commutation shall be deemed to be the “as of” date of the Company’s submission of valuation of its reserves. 
 ARTICLE 14 
 REPORTS AND REMITTANCES 

 

	A.	Within 30 days following the end of each month, the Company shall furnish the Reinsurer with a report, separately for each Contract Year, summarizing:

  

	 	1.	Gross Net Written Premium Income during the month; 

  

	 	2.	reinsurance premium on Gross Net Earned Premium Income during the month; 

  

	 	3.	the provisional ceding commission on (2) above; 

  

	 	4.	ceded loss paid during the month; and 

  

	 	5.	ceded subrogation, salvage, or other recoveries during the month. 

 If the balance of (2) less (3) less (4) plus (5) above is positive for any month, the Company shall remit the amount due within 50 days after the close of the month. If said balance is
negative, the Reinsurer shall remit the amount due within 15 days after receipt of the account. 
  

	B.	This account will also bear a notation advising of the outstanding case loss reserves, and the unearned premium reserve at the end of the month. Should loss
attributable to a Catastrophe Loss Occurrence be involved, the account shall bear a notation showing the PCS number(s) and the applicable paid and outstanding loss. 

 

	C.	As promptly as possible after inception of this Contract, the Company shall report to the Reinsurer the unearned premium for subject business in force as of
March 31, 2013. 

  

	D.	An accounting reconciliation between collected Gross Net Written Premium Income and actual Gross Net Written Premium Income as respects each Contract Year shall be
performed by the Company within 90 days after the end of each Contract Year, and any difference shall be remitted to the Reinsurer with the report. 

  

	E.	In addition to the above, the Company shall advise the Reinsurer promptly of all losses that, in the opinion of the Company, may result in a claim of at least $100,000
and of all subsequent developments thereto that may materially affect the position of the Reinsurer. 

  

	F.	The Company shall also provide the Reinsurer with such other information as may be required by the Reinsurer for completion of its financial statements.

 ARTICLE 15 
 DEFINITIONS 
  

	A.	“Catastrophe Loss Occurrence” means an event that is a Property Claims Service numbered event. 

 

	B.	“Loss Adjustment Expense” means costs and expenses incurred by the Company in connection with the investigation, appraisal, adjustment, settlement,
litigation, defense or appeal of a specific claim or loss, or alleged loss, including but not limited to: 

  

	 	1.	court costs; 

  

	 	2.	costs of supersedeas and appeal bonds; 

  

	 	3.	monitoring counsel expenses; 

  

	 	4.	legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;

  

	 	5.	post-judgment interest; 

  

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

  

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

 

	 	8.	subrogation, salvage and recovery expenses. 

 “Loss Adjustment Expense” does not include office and other overhead expenses, nor salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above.

  

	C.	“Contract Year” means the nine-month period from March 31, 2013 to January 1, 2014, and each respective 12-month period thereafter that this
Contract continues in force shall be a separate Contract Year. If this Contract is terminated, however, the final Contract Year shall be from the beginning of the then current Contract Year through the date of termination. 

 

	D.	“Gross Net Written Premium Income” means gross written premium of the Company for the classes of business reinsured hereunder, less return premiums, and less
written premiums ceded by the Company for reinsurance that inures to the benefit of this Contract. 

	E.	“Gross Net Earned Premium Income” means the earned portion of Gross Net Written Premium Income. 

 

	F.	“Net Premiums Earned” means ceded Gross Net Written Premium Income less the unearned portion thereof as of the effective date of calculation.

  

	G.	“Losses Incurred” means ceded losses (including Extra Contractual Obligations and Loss in Excess of Policy Limits) paid as of the effective date of
calculation, plus the ceded loss reserves outstanding, including loss incurred but not reported, as of the same date as respects each Contract Year. 

	H.	“Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the
Company. 

 ARTICLE 16 
 EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS 
  

	A.	This Contract shall cover Extra Contractual Obligations, as provided in the Retention and Limit Article. “Extra Contractual Obligations” shall be defined as
those liabilities not covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities 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, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the
preparation or prosecution of an appeal consequent upon such action. 

  

	B.	This Contract shall cover Loss in Excess of Policy Limits, as provided in the Retention and Limit Article. “Loss in Excess of Policy Limits” shall be defined
as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement
or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. 

 

	C.	An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s
Policy, and shall constitute part of the original loss. 

  

	D.	For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “Loss” shall mean any amounts for which the Company would have been
contractually liable to pay had it not been for the limit of the original Policy. 

  

	E.	However, this Article shall not apply where the loss has been incurred due to fraud of a member of the Board of Directors or a corporate officer of the Company acting
individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. 

 

	F.	Recoveries from any insurance that protects the Company against claims which are the subject matter of this Article shall be deducted in determining the amount of any
Extra Contractual Obligations or Loss in Excess of Policy Limits subject to this Contract. 

  

	G.	In no event shall coverage be provided to the extent not permitted under law. 

 ARTICLE 17 
 NET RETAINED LIABILITY 

 

	A.	This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the
benefit of the Company). 

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

ARTICLE 18 
 ORIGINAL
CONDITIONS 
 All reinsurance under this Contract shall be subject to the same rates, terms, conditions, waivers and interpretations, and to
the same modifications and alterations as the respective Policies of the Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract. 

ARTICLE 19 
 NO THIRD
PARTY RIGHTS 
 This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third
party have any rights under this Contract except as may be expressly provided otherwise herein. 
 ARTICLE 20 

LOSS SETTLEMENTS 
  

	A.	When so requested in writing, the Company shall afford the Reinsurer or its representatives an opportunity to be associated with the Company, at the expense of the
Reinsurer, in the defense of any claim, suit or proceeding involving this Contract, and the Company and the Reinsurer shall cooperate in every respect in the defense of such claim, suit or proceeding. 

 

	B.	As respects losses subject to this Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, and any Extra
Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement in accordance with this Contract.

 ARTICLE 21 
 COMMUTATION 
  

	A.	As respects all losses, known or unknown, that may cause a claim under this Contract, the Company may request, in writing, that the losses as respects a Contract Year
are to be commuted at the end of any calendar quarter on or after 24 months following the end of the Contract Year to be commuted. Within 30 days after such date, the Company shall submit a statement of valuation of the outstanding claim or claims
showing the elements considered reasonable to establish the commutation amount, and, if the Reinsurer concurs with the Company’s calculation, the Reinsurer shall promptly pay the amount requested. 

	B.	In the event the Company and the Reinsurer cannot agree on the commutation value, the Reinsurer and the Company shall mutually appoint an independent actuary who shall
investigate and determine the commutation value. In the event the Reinsurer and the Company cannot reach an agreement on an independent actuary, each party shall appoint an actuary within 30 days after receipt of the written request for commutation.
Upon such appointment, the two actuaries shall appoint a third actuary. If the two actuaries fail to agree on the selection of a third actuary within 30 days of their appointment, each of them shall name three individuals, of whom the other shall
decline two, and the decision shall be made by drawing lots. The actuaries shall then investigate and determine the commutation value of such losses. All actuaries shall be fellows of the Casualty Actuarial Society or the American Academy of
Actuaries, and shall be disinterested in the outcome of the commutation. 

  

	C.	If the Company or the Reinsurer does not agree with the commutation value determined by the actuaries per paragraph B above, the Company or the Reinsurer shall have no
obligation to commute. 

  

	D.	The Reinsurer’s proportion of the amount determined in paragraph A or B above shall be considered the Reinsurer’s total liability for the losses, and the
Reinsurer shall pay the commutation amount promptly after execution by both parties of a commutation and release agreement. The Reinsurer’s payment of the commutation amount and any amount due under the provisions of the Profit Sharing Article,
and acceptance of that payment by the Company, shall constitute a complete release of both parties from all further liability as respects that Contract Year. 

 ARTICLE 22 
 OFFSET 
 Each party to this Contract together with their successors or assigns shall have and may exercise, at any time, the right to offset any balance or balances due the other (or, if more than one, any other).
Such offset may include balances due under this Contract and any other contracts heretofore or hereafter entered into between the parties regardless of whether such balances arise from premiums, losses, or otherwise, and regardless of capacity of
any party, whether as assuming insurer and/or ceding insurer, under the various contracts involved, provided, however, that in the event of insolvency of a party hereto, offsets shall only be allowed in accordance with any applicable law, statute or
regulation governing such offset shall apply. 
 ARTICLE 23 
 SALVAGE AND SUBROGATION 
  

	A.	Salvages and all recoveries (including amounts due from all reinsurances that inure to the benefit of this Contract, whether recovered or not), shall be first deducted
from any loss to arrive at the amount of liability attaching hereunder. 

  

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

 ARTICLE 24 
 CURRENCY 
  

	A.	Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars. 

 

	B.	For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be
converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books. 

 ARTICLE 25 
 UNAUTHORIZED REINSURANCE 

 

	A.	This Article applies only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the
Company’s reserves. 

  

	B.	The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets
up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:

  

	 	1.	unearned premium (if applicable); 

  

	 	2.	known outstanding losses that have been reported to the Reinsurer; 

  

	 	3.	losses paid by the Company but not recovered from the Reinsurer; 

  

	 	4.	losses incurred but not reported; 

  

	 	5.	all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer. 

 

	C.	The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). 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. 

  

	D.	When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause”
attached hereto. When funding by an LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a qualified financial institution and in the form of the LOC attached hereto
as Exhibit A – Letter of Credit Template – in an amount equal to the Reinsurer’s Obligations. Such LOC 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 30 days (or such other time period as may be 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 LOC extended for any additional period. 

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

  

	 	1.	to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

  

	 	2.	to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the
Reinsurer’s Obligations, if funding is provided by a Trust Agreement); 

  

	 	3.	to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the
Company’s other assets, and interest thereon shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess
of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer; 

 

	 	4.	to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract. 

 

	F.	If the amount drawn by the Company is in excess of the actual amount required for E(1) or E(3), or in the case of E(4), the actual amount determined to be due, the
Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer. 

 

	G.	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. 

  

	H.	Quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in
the following manner: 

  

	 	1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC as of the statement date, the Reinsurer shall, within 30 days after receipt
of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above,
increase such funding by the amount of such difference. 

  

	 	2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less
than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an
amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.
If the Company does not comply with a request for a reduction to the funding, the Company shall reimburse the Reinsurer for all funding costs. 

 ARTICLE 26 
 TAXES 
  

	A.	In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction 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 to the District of Columbia. 

  

	B.     1.	Each Subscribing 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 the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax. 

  

	 	2.	In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the
return, and the Company or its agent should take steps to recover the Tax from the U.S. Government. 

 ARTICLE
27 
 ACCESS TO RECORDS 

The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify the
books and records of the Company relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the
expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the records of the Company if it is not current in all undisputed payments due the Company. 

ARTICLE 28 

CONFIDENTIALITY 
  

	A.	The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection
with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:

  

	 	1.	are publicly known or have become publicly known through no unauthorized act of the Reinsurer; 

 

	 	2.	have been rightfully received from a third person without obligation of confidentiality; or 

 

	 	3.	were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality. 

	B.	Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies,
except: 

  

	 	1.	when required by retrocessionaires as respects business ceded to this Contract; 

 

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

 

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

 

	 	4.	when required by attorneys or arbitrators in connection with an actual or potential dispute hereunder. 

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

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

  

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

 ARTICLE 29 
 INDEMNIFICATION AND ERRORS AND OMISSIONS 
  

	A.	The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge
as to: 

  

	 	1.	what shall constitute a claim or loss covered under any Policy; 

  

	 	2.	the Company’s liability thereunder; 

  

	 	3.	the amount or amounts that it shall be proper for the Company to pay thereunder. 

 

	B.	The Reinsurer shall be bound by the judgment of the Company as to the obligation(s) and liability(ies) of the Company under any Policy. 

 

	C.	Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability
that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery, provided neither party has been prejudiced by the error, omission or delay.

 ARTICLE 30 
 INSOLVENCY 
  

	A.	If more than one reinsured company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to
each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the
domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail. 

  

	B.	In the event of the insolvency of the Company, this reinsurance (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall
be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation
proceeding, whichever may be required by applicable statute, 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 that may accrue to the
Company solely as a result of the defense undertaken by the Reinsurer. 

  

	C.	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 reinsurance Contract as though such expense had been incurred by the Company. 

  

	D.	As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Reinsurer to
the Company or to its liquidator, receiver, conservator or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New York Insurance Law, provided the conditions of 1114(c) of such law have been met, if New York law applies)
or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, or (2) where the Reinsurer, with the consent of the direct insured or insureds, has assumed such Policy obligations of the
Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of
assumption on New York risks by the Superintendent of Financial Services of the State of New York, or with the prior approval of such other regulatory authority as may be applicable, is entirely released from its obligation and the Reinsurer shall
pay any loss directly to payees under such Policy. 

	E.	Notwithstanding the above, in the event of insolvency of those reinsured companies domiciled in the State of Illinois, the Reinsurer under this Contract shall have
rights, as more fully set forth in Section 173.2, 173.3, and 173.4 of Illinois Insurance Code, as amended. 

ARTICLE 31 

ARBITRATION 
  

	A.	Except as provided in the Commutation Article, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, including its
formation and validity, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to binding arbitration. An arbitration shall be initiated when either party provides a written arbitration demand to the other, which
shall set forth the general nature of the claim. One arbitrator shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbitrators before the arbitrators enter upon arbitration, all of whom shall be
active or retired disinterested executive officers of insurance or reinsurance companies or intermediaries with at least 10 years of experience in insurance and reinsurance. In the event that a party should fail to choose an arbitrator within 30
days of receipt of an arbitration demand, the demanding party shall nominate three candidates within 10 days thereafter, two of whom the recipient party shall decline, and the third of whom shall be selected as an arbitrator. In the event that the
arbitrators should fail to agree upon an umpire within 10 days of the appointment of the last arbitrator, each party shall nominate three candidates within 10 days thereafter, two of whom the other shall decline, and the decision shall be made by
drawing lots. 

  

	B.	Unless mutually agreed to in writing by both parties, each party shall be required to present its case to the arbitrators at a hearing within 180 days following the
appointment of the umpire. Unless otherwise agreed to by both parties, the hearing shall be held on consecutive days. The arbitrators shall render their written decision within 21 days following the day on which the hearing concludes.

  

	C.	The parties may, however, mutually agree to present their respective cases solely in writing, without the necessity of a formal hearing. In the event the parties so
elect, the parties shall submit initial briefs concurrently. Within 10 days of submission of the initial briefs, each party shall be entitled but not required to submit a response brief. The arbitrators shall render their written decision within 21
days after receipt of any response briefs. 

  

	D.	Notwithstanding the provisions of paragraphs A, B and C above, in the event that either party demands arbitration of a dispute between the Company and the Reinsurer,
and the amount in dispute is less than $250,000, unless the arbitration notice includes a demand for rescission of this Contract, the dispute shall be resolved by a sole arbitrator and the following procedures shall apply: 

 

	 	a.	The sole arbitrator shall be chosen by mutual agreement of the parties within 15 business days after the demand for arbitration. If the parties have not chosen an
arbitrator within the 15 business days after the receipt of the arbitration notice, the arbitrator shall be chosen in accordance with the Neutral Arbitrator Selection Procedure modified for a single arbitrator, established by the AIDA Reinsurance
and Insurance Arbitration Society – U.S. (ARIAS) and in force on the date the arbitration is demanded. The nominated arbitrator must be available to read any written submissions and hear testimony within 60 calendar days of being chosen.

	 	b.	Within 10 business days after the arbitrator has been appointed, the parties shall be notified of deadlines for the submission of briefs and documentary evidence, as
determined by the arbitrator. There shall be no discovery or hearing unless the parties agree to engage in limited discovery and/or a hearing. Also, the arbitrator can determine, without the consent of the parties, that a limited hearing is
necessary. 

  

	E.	The parties desire that any arbitration proceed expeditiously. To that end, any written and/or oral discovery shall be conducted within the time limits set forth
herein. To the extent the parties wish to conduct discovery, the parties shall in good faith attempt to negotiate and agree on reasonable discovery. If the parties are unable to agree on the extent of any reasonable discovery to be conducted, the
issue of what, if any, discovery to be conducted shall be presented to the arbitrators. In that event, the arbitrators may allow reasonable discovery consistent with the parties’ desire to proceed expeditiously and within the time limits set
forth herein. 

  

	F.	The arbitrators shall consider this Contract as an honorable engagement rather than merely as a legal obligation; however, in resolving any dispute between the parties,
the arbitrators shall first attempt in all instances to give effect to the plain meaning of the language set forth in the written agreement. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider
underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract; however, such information may not be used to alter the terms of this Contract
or the parties’ obligations hereunder. The decision of the arbitrators shall be final and binding on both parties; but failing to agree, the arbitrators shall call in the umpire and the decision of the majority of the arbitrators and the umpire
shall be final and binding upon both parties. Judgment upon the final decision of the arbitrators may be entered in any court having competent jurisdiction. 

 

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

  

	H.	Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. In the event
that one party or both parties fails to choose an arbitrator, as above provided, the expense of the arbitrators, the umpire and the arbitration shall be equally divided between the two parties. 

 

	I.	Unless otherwise agreed to by both parties, any arbitration proceedings shall take place at Burr Ridge, Illinois. 

ARTICLE 32 
 SERVICE
OF SUIT 
  

	A.	This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district
of the United States of America where authorization is required by insurance regulatory authorities. 

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

 

	C.	In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a
court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is
selected, whether such court is the one originally chosen by the Company and accepted by Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court
jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal. 

 

	D.	Service of process in such suit may be made upon Messrs. Kerns, Frost and Pearlman, 70 West Madison Street, Suite 5350, Chicago, Illinois, 60602. The above-named are
authorized and directed to accept service of process on behalf of the Reinsurer in any such suit. 

  

	E.	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 Contract, 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 33 
 GOVERNING LAW 
 This Contract shall be governed as to performance, administration and
interpretation by the laws of the State of Illinois, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply. 

ARTICLE 34 
 ENTIRE
AGREEMENT 
 This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all
prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. 

 ARTICLE 35 
 INTERMEDIARY 
 Guy Carpenter & Company, LLC, is hereby recognized as the
Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, salvages, and loss settlements) relating thereto shall be transmitted to the
Company or the Reinsurer through Guy Carpenter & Company, LLC, 3600 Minnesota Drive, Suite 400, Edina, Minnesota 55435-7902. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to
the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company. 
 ARTICLE 36 
 MODE OF EXECUTION 

 

	A.	This Contract may be executed by: 

  

	 	1.	an original written ink signature of paper documents; 

  

	 	2.	an exchange of facsimile copies showing the original written ink signature of paper documents; 

 

	 	3.	electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a
manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed,
such signature is invalidated. 

  

	B.	The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed
in one or more counterparts, each of which, when duly executed, shall be deemed an original. 

 IN WITNESS
WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s) this
28th day of March, in the year 2013. 

AFFIRMATIVE INSURANCE COMPANY 
                                 /s/
Michael J.
McClure                                        
 
 AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

 NUCLEAR INCIDENT EXCLUSION CLAUSE—PHYSICAL DAMAGE— 

REINSURANCE—U.S.A. 
  

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

  

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

 

	 	I.	Nuclear reactor power plants including all auxiliary property on the site, or 

 

	 	II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical
facilities” as such, or 

  

	 	III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material”, and for reprocessing, salvaging,
chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or 

  

	 	IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

  

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

  

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

 

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

 

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

 

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

  

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

	7.	Reassured to be sole judge of what constitutes: 

  

	 	(a)	substantial quantities, and 

  

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

Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that 

 

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

  

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

  

	NOTES:	Wherever used herein the terms: 

  

	 	“Reassured”	shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document 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 document to designate the
reinsurer or reinsurers. 

 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, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability) 

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

It is agreed that the policy does not apply: 
  

	 	I.	Under any Liability Coverage, to 

injury, sickness, disease, death or 
 destruction bodily injury or property damage 

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

 

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

  

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

immediate medical or surgical relief 
 first aid, 
 to expenses incurred with respect to 

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

	 	III.	Under any Liability Coverage, to 

injury, sickness, disease, death or destruction 
 bodily injury or property damage 
 resulting from the hazardous properties of
nuclear material, if 
  

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

  

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

  

	 	(c)	the 

 injury, sickness,
disease, death or destruction 
 bodily injury or property damage 

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

	 	IV.	As used in this endorsement: 

“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means
source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954
or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1)
containing byproduct material other than the tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content and (2) resulting from the operation by any
person or organization of any nuclear facility included under the first two paragraphs of the definition of nuclear facility; “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” includes all forms of
radioactive contamination of property. “property damage” includes all forms of radioactive contamination of property. 
  

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

  

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

 

	 	(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, 

until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof. 

 

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

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

  

	NOTES:	Wherever used herein the terms: 

  

	 	“Reassured”	shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document 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 document to designate the
reinsurer or reinsurers. 

 TRUST AGREEMENT REQUIREMENTS CLAUSE 

 

	A.	Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust
Agreement, the Reinsurer shall ensure that the Trust Agreement: 

  

	 	1.	Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover; 

 

	 	2.	Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal
tender), certificates of deposit (issued by a United States bank and payable in United States legal tender), and investments of the types permitted by the regulatory authorities having jurisdiction over the Company’s reserves, or any
combination of the three, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company; 

 

	 	3.	Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all
shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other
entity; 

  

	 	4.	Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and 

 

	 	5.	Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the
Reinsurer. 

	B.	If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust
Agreement, the Reinsurer shall ensure that the Trust Agreement: 

  

	 	1.	Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States
dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any
combination of the above. 

  

	 	2.	Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not
exceed 5% of total investments. 

  

	 	3.	Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all
shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer
or any other entity. 

  

	 	4.	Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or
the Reinsurer. 

  

	C.	If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean
the individual ceding insurer’s domestic regulator. 

 EXHIBIT A – LETTER OF CREDIT TEMPLATE

 We have established this clean, irrevocable, and unconditional Letter of Credit in your favor as beneficiary for drawings up to
U.S.$            , effective immediately. This Letter of Credit is issued, presentable and payable at the office of our servicer,
            , or such other office as we may advise from time to time and expires with our close of business on             .
Except when the amount of this Letter of Credit is increased, this Credit cannot be modified or revoked without your consent. 
 The term
“Beneficiary” includes any successor by operation of law of the named Beneficiary, including, without limitation, any liquidator, rehabilitator, receiver, or conservator. Drawings by any liquidator, rehabilitator, receiver or conservator
shall be for the benefit of all of the Beneficiary’s policyholders. 
 We hereby undertake to promptly honor your sight draft(s) drawn on
us, indicating our Credit number             , for all or any part of this Credit upon presentation of your draft drawn on us at our office specified in paragraph one, or such other office
as we may advise from time to time, on or before the expiration date hereof, or any automatically extended expiry date. 
 Except as expressly
stated herein, this undertaking is not subject to any agreement, requirement or qualification. The obligation of             under this Credit is the individual obligation of
            , and is in no way contingent upon reimbursement with respect thereto, or upon our ability to perfect any lien, security interest or any other reimbursement. 

 This Letter of Credit is deemed to be automatically extended without amendment for 12 months from the
expiration date or any future expiration date, unless at least thirty (30) days prior to such expiration date, we notify you by registered mail that this Letter of Credit will not be renewed for any such additional period. 

This Letter of Credit is subject to and governed by the Laws of the State of Illinois and the ICC Uniform Customs and Practice for Documentary Credits
(ICC Publication No. 600, July 2007, 1212 Avenue of the Americas, New York, NY 10036 (no later amendments or additions) and, in the event of any conflict, the Laws of the State of Illinois will control. If this Credit expires during an
interruption of business as described in Article 36 of said Publication 600, the Bank hereby specifically agrees to effect payment if this credit is drawn against within thirty (30) days after the resumption of our business. 

 INTERESTS AND LIABILITIES AGREEMENT 

(the “Agreement”) 
 of 
 GREENLIGHT REINSURANCE, LTD. 

(the “Subscribing Reinsurer”) 
 as respects the 
 AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

Effective: March 31, 2013 
 (the “Contract”) 
 issued to and executed by 

AFFIRMATIVE INSURANCE COMPANY 
 Burr Ridge, Illinois 
 (the “Company”) 

The Subscribing Reinsurer’s share in the interests and liabilities of the Reinsurer as set forth in the Contract shall be 100.0%. 

The share of the Subscribing Reinsurer in the interests and liabilities of the Reinsurer in respect of the Contract shall be separate and apart from the
shares of other subscribing reinsurers, if any, of the Contract. The interests and liabilities of the Subscribing Reinsurer shall not be joint with those of such other subscribing reinsurers and in no event shall the Subscribing Reinsurer
participate in the interests and liabilities of such other subscribing reinsurers. 
 This Agreement shall become effective on March 31,
2013 and shall be subject to the provisions of the Term Article and the Special Termination Article and all other terms and conditions of the Contract. 
 Premium and loss payments made to Guy Carpenter shall be deposited in a Premium and Loss Account in accordance with Section 32.3(a)(1) of Regulation 98 of the New York Insurance Department. The
Subscribing Reinsurer consents to withdrawals from said account in accordance with Section 32.3(a)(3) of the Regulation, including interest and Federal Excise Tax. 
 Brokerage hereunder is 1.0% of ceded Gross Net Earned Premium Income. 
 IN WITNESS WHEREOF, the
Subscribing Reinsurer has caused this Agreement to be executed by its duly authorized representative(s) as follows: 
 this
20th day of December, in the year 2012. 

 GREENLIGHT REINSURANCE, LTD. 

 

					
	/s/ Jim Ehman	 		  	/s/ Brendan BarryEX-10.2

 Exhibit 10.2 
 ADDENDUM NO. 1 
 to the 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
 Effective: March 31, 2013 
 (the “Contract”) 

issued to 

AFFIRMATIVE INSURANCE COMPANY 
 Burr Ridge, Illinois 
 (the “Company”) 

by 
 THE
SUBSCRIBING REINSURER(S) IDENTIFIED 
 IN THE INTERESTS AND LIABILITIES AGREEMENT(S) 

ATTACHED TO AND FORMING PART OF THE CONTRACT 
 (the “Reinsurer”) 
 RECITALS 

 

	A.	The Company and the Reinsurer entered into the Contract effective March 31, 2013. 

 

	B.	The Company provided 100% quota share reinsurance to Old American County Mutual Fire Insurance Company (“OACM”) for business produced by Affirmative Insurance
Services, Inc. (“MGA”) covering policies produced by MGA up to and including December 31, 2012. 

  

	C.	The Company has ceded to the Reinsurer a portion of the risks assumed by the Company from OACM, under the terms of the Contract up to and including December 31,
2012. 

  

	D.	The Company and OACM requested that the Reinsurer assume reinsurance directly from OACM effective January 1, 2013 for business produced on and after
January 1, 2013 by MGA. 

  

	E.	Effective January 1, 2013, the Reinsurer entered into a 100% quota share reinsurance agreement with OACM covering business produced by MGA (the “Underlying
Agreement,” a copy of which is attached and forms part of this Addendum). 

  

	F.	The Company and the Reinsurer mutually agree that certain risks and benefits assumed by the Reinsurer pursuant to the Underlying Agreement are risks and benefits that
were assumed and retained by the Company up to December 31, 2012, and the Parties intend that these risks and benefits shall continue to be retained by the Company pursuant to this Addendum. 

 

	G.	The Company and the Reinsurer hereby agree that proper consideration has been received by both parties for entering into this Addendum. 

 AMENDMENT 
 Effective March 31, 2013, the Contract shall be amended as follows: 
  

	1.	Paragraphs B, C, D and E of Article 3 – Retention and Limit – shall be deleted and replaced with the following paragraphs B, C and D:

  

	 	B.	The Reinsurer shall pay to the Company the Reinsurer’s quota share of loss under the Policies for Extra Contractual Obligations and Loss in Excess of Policy Limits
covered under this Contract. 

  

	 	C.	Notwithstanding the above, the Reinsurer’s liability shall not exceed its quota share of the following: 

 

	 	1.	as respects Extra Contractual Obligations, Loss in Excess of Policy Limits and losses arising from class action suits, combined, from losses occurring during any one
Contract Year, an amount equal to 3.0% of Combined Net Premium Earned as respects that Contract Year. 

  

	 	2.	as respects Casualty business, $100,000 any one claim from Business Covered under this Contract plus such losses from Business Reinsured under the Underlying Agreement;

  

	 	3.	as respects Property business, $3,000,000 any one Catastrophe Loss Occurrence for such losses from Business Covered under this Contract plus such losses from Business
Reinsured under the Underlying Agreement, and, as respects all such losses occurring during any one Contract Year, an amount equal to 3.0% of Combined Net Premium Earned as respects that Contract Year; 

 

	 	4.	The Reinsurer’s liability for all losses shall not exceed an amount equal to 109% of Combined Net Premium Earned during any one Contract Year.

 However, the Reinsurer’s respective limits for such losses hereunder, as stated above, shall be reduced by
any amounts paid for such losses under the Underlying Agreement. Further, any payments in excess of such limits made by the Reinsurer under the terms of the Underlying Agreement shall be reimbursed by the Company. 

 

	 	D.	It is agreed that the Combined Net Premium Earned for Policies subject to this Contract and the Underlying Agreement shall not exceed a “Premium Cap” equal to
$100,000,000 as respects the first Contract Year hereunder and $125,000,000 as respects each Contract Year thereafter, unless accepted and approved in writing by the Reinsurer. In the event the Premium Cap would apply as respects any Contract Year,
the quota share cession under paragraph A above shall be reduced to the same proportion that the Premium Cap less ceded Net Earned Premium under the Underlying Agreement bears to the Company’s Combined Net Premium Earned for such Contract Year.

  

	2.	Article 12 – Commission Adjustment – shall be amended to read: 

  

	 	A.	The provisional commission allowed the Company under this Contract and the ceding commission allowed under the Underlying Agreement shall be adjusted at the end of each
Contract Year in accordance with the provisions set forth herein. The adjusted commission rate shall be calculated as follows and be applied to Combined Net Premium Earned for the Contract Year under consideration: 

 

	 	1.	if the ratio of Combined Losses Incurred to Combined Net Premium Earned is 72.00% or greater, the adjusted commission rate for the Contract Year under consideration
shall be 22.00%; 

	 	2.	if the ratio of Combined Losses Incurred to Combined Net Premium Earned is less than 72.00%, but not less than 59.33%, the adjusted commission rate for the Contract
Year under consideration shall be 22.00%, plus 100.00% of the difference in percentage points between 72.00% and the actual ratio of Combined Losses Incurred to Combined Net Premium Earned; 

 

	 	3.	if the ratio of Combined Losses Incurred to Combined Net Premium Earned is 59.33% or less, the adjusted commission rate for the Contract Year under consideration shall
be 34.67%. 

  

	 	B.	Within 30 days after the end of each calendar quarter, beginning with the calendar quarter ending 12 months after the end of each Contract Year, until all losses
subject to this Contract and the Underlying Agreement have been finally settled, the Company shall calculate and report the adjusted commission on Combined Net Premium Earned. Each calculation shall be based on cumulative transactions hereunder from
the beginning of the Contract Year under consideration through the date of adjustment. If the adjusted commission on Combined Net Premium Earned for the Contract Year as of the date of adjustment is less than commissions previously allowed by the
Reinsurer on Combined Net Premium Earned for the same Contract Year, the Company shall remit the difference to the Reinsurer with its report. However, such report and remittance shall be made by the Company to the Reinsurer starting with any quarter
prior to 12 months after the end of each Contract Year if the ratio of paid Losses Incurred to Net Premiums Earned for that Contract Year exceeds 64.50%. If, for any calculation more than 24 months after expiration of each Contract Year, the
adjusted commission on Combined Net Premium Earned is greater than commissions previously allowed by the Reinsurer on Combined Net Premium Earned for the same Contract Year, the Reinsurer shall remit the difference to the Company as promptly as
possible after receipt and verification of the Company’s report. 

  

	3.	The defined term for “Contract Year” shall be amended and the following defined terms shall be added as paragraphs I and J to Article 15 – Definitions
– and shall read: 

  

	 	C.	“Contract Year” means the nine-month period from March 31, 2013 to December 31, 2013 under this Contract and the 12-month period from
January 1, 2013 to December 31, 2013 under the Underlying Agreement, and each respective 12-month period thereafter that this Contract and the Underlying Agreement continue in force shall be a separate Contract Year. If this Contract or
the Underlying Agreement is terminated, however, the final Contract Year shall be from the beginning of the then current Contract Year through the date of termination. 

 

	 	I.	“Combined Net Premium Earned” means the sum of Net Premiums Earned under this Contract plus ceded Net Earned Premium under the Underlying Agreement.

  

	 	J.	“Combined Losses Incurred” means ceded losses (including Extra Contractual Obligations and Loss in Excess of Policy Limits) paid as of the effective date of
calculation, plus the ceded loss reserves outstanding, including loss incurred but not reported, as of the same date, under this Contract; plus, the ceded loss, judgments and all interest on said judgments, including Losses in Excess of Policy
Limits and Extra Contractual Obligations under the Underlying Agreement, all respects each Contract Year. 

	4.	Article 22 – Offset – shall be amended to read: 

  

	 	A.	Each party to this Contract together with their successors or assigns shall have and may exercise, at any time, the right to offset any balance or balances due the
other (or, if more than one, any other). Such offset may include balances due under this Contract and any other contracts or agreements heretofore or hereafter entered into between the parties regardless of whether such balances arise from premiums,
losses, or otherwise, and regardless of capacity of any party, whether as assuming insurer and/or ceding insurer, under the various contracts or agreements involved, provided, however, that in the event of insolvency of a party hereto, offsets shall
only be allowed in accordance with any applicable law, statute or regulation governing such offset shall apply. 

  

	 	B.	The Reinsurer together with its successors or assigns shall have and may exercise, at any time, the right to offset, against balances due under this Contract, any
balance or balances that arise pursuant to the Underlying Agreement from the following: 

  

	 	1.	Net Written Premium minus Net Written Premium collected, as defined in subparagraph (2) of Article 2 – Definitions – of the Underlying Agreement;

  

	 	2.	Costs associated with the appointment of a third party to administer the business in accordance with the terms and conditions of the Underlying Agreement and associated
MGA Agreement, as outlined in subparagraph (5) of Article 5 – Term and Cancllation – of the Underlying Agreement; 

  

	 	3.	The amount of any default by the MGA to settle contingent commission adjustments, as outlined in subparagraph (3) of Article 9 – Ceding Commission, Fronting
Fees and Premium Taxes – of the Underlying Agreement; 

  

	 	4.	Costs and assessments, as outlined in Article 16 – Assessments and Assignments – of the Underlying Agreement. 

All other terms and conditions of the Contract shall remain unchanged. 
 IN WITNESS WHEREOF, the Company has caused this Addendum to be executed by its duly authorized representative(s) this 28th day of March, in the year 2013. 
 AFFIRMATIVE INSURANCE COMPANY 

                       
 /s/ Michael J. McClure                         

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

 Quota Share Reinsurance Agreement 

Number AFFIRMATIVE – 2013 – 001 
 Table of Contents 
  

					
	Article 1	 	 Recitals
	  	
			
	Article 2	 	 Definitions
	  	
			
	Article 3	 	 Business Reinsured
	  	
			
	Article 4	 	 Obligatory Agreement
	  	
			
	Article 5	 	 Term and Cancellation
	  	
			
	Article 6	 	 Consideration
	  	
			
	Article 7	 	 Loss and Loss Adjustment Expense
	  	
			
	Article 8	 	 Reports and Remittances
	  	
			
	Article 9	 	 Ceding Commission, Fronting Fees and Premium Taxes
	  	
			
	Article 10	 	 Errors and Omissions
	  	
			
	Article 11	 	 Inspection of Records
	  	
			
	Article 12	 	 Offset Clause
	  	
			
	Article 13	 	 Arbitration
	  	
			
	Article 14	 	 Honorable Undertaking
	  	
			
	Article 15	 	 Salvage and Subrogation
	  	
			
	Article 16	 	 Assessments and Assignments
	  	
			
	Article 17	 	 Conservation, Liquidation or Insolvency
	  	
			
	Article 18	 	 Regulatory Matters
	  	
			
	Article 19	 	 Loss in Excess of Policy Limits/Extra Contractual Obligations
	  	
			
	Article 20	 	 Savings Clause
	  	
			
	Article 21	 	 Unauthorized (Non-Admitted) Reinsurance
	  	

					
	Article 22	 	 Federal Excise Tax
	  	
			
	Article 23	 	 Program Review
	  	
			
	Article 24	 	 Service of Suit (BRMA 49C)
	  	
			
	Article 25	 	 Intermediary
	  	
			
	Article 26	 	 Exclusions
	  	
			
	Article 27	 	 Miscellaneous
	  	

 QUOTA SHARE REINSURANCE AGREEMENT 

NUMBER AFFIRMATIVE – 2013 – 001 
 This Agreement is made and entered into by and between OLD AMERICAN COUNTY MUTUAL FIRE INSURANCE COMPANY (hereinafter referred to as the “Company”) and GREENLIGHT REINSURANCE LTD.
(hereinafter referred to as the “Reinsurer”). 
 THE COMPANY AND REINSURER HEREBY AGREE AS FOLLOWS:

 ARTICLE 1—RECITALS 
 1.1 The Company and Reinsurer hereby wish to enter into a reinsurance arrangement to indemnify the Company in respect of the liability that may accrue to the Company as a result of loss or losses under
Policies issued or renewed at or after the effective time and date hereof, and classified by the Company as Private Passenger Automobile Liability and Private Passenger Automobile Physical Damage business, produced and underwritten by AFFIRMATIVE
INSURANCE SERVICES, INC., Dallas, Texas (hereinafter the “MGA”), for and on behalf of the Company, subject to the terms and conditions herein contained. 
 1.2 The Company and Reinsurer hereby agree that the full consideration provided by the Company in exchange for the fees set forth herein, is to permit the Policies as defined herein to be issued in the
name of the Company and reinsured one hundred percent (100%) under this Agreement. 
 1.3 It is understood and agreed that neither the
Company nor the Reinsurer is obligated by any representations or warranties made by any of the parties involved in this transaction unless such representations and warranties are formally included in writing, in this Agreement. 

 1.4 All business reinsured hereunder shall be produced by MGA, in accordance with the terms and conditions
of the MGA Agreement originally effective January 1, 2013 and any subsequent amendments or addenda (MGA Agreement) between the MGA and the Company, a copy of said Agreement is attached hereto and fully incorporated herein. 

1.5 This Agreement sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous
or written agreements with respect to matters referred to in this Agreement. This Agreement may not be modified, amended or changed except by an agreement in writing signed by both parties. 
 ARTICLE 2—DEFINITIONS 
 2.1 “Policies” is defined as all policies,
endorsements, certificates, contracts, agreements and binders of insurance issued or renewed by MGA or its designated representatives on or after the effective date of this Agreement on behalf of the Company. 

2.2 “Net Written Premium” is defined as the gross premium on all original and renewal Policies written by the MGA or its designated
representatives on behalf of the Company, less return premium and cancellations. “Net Earned Premium” is defined as Net Written Premium less “Net Unearned Premium” which is defined as the amount applicable to the unexpired
portion of Net Written Premium. “Net Collected Premium” is the actual amount of Net Written Premium collected. 
 2.3 “Loss in
Excess of Policy Limits” (XPL) is defined as any amount which the MGA or its designated representatives pay or would have been contractually held liable to pay on behalf of the Company had it not been for the limit of the original Policy.

 2.4 “Extra Contractual Obligation” (ECO) is defined as those liabilities not covered under any other provision of this Agreement
which arise from the handling of any claim on business covered hereunder, because of, but not limited to, failure by the MGA or its designated representatives on behalf of the Company to settle within the Policy limit, or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such
action. The date on which any ECO is incurred by the MGA or its representatives on behalf of the Company shall be deemed, in all circumstances, to be the date of the original disaster and/or casualty. 

2.5 “Loss Adjustment Expense” shall mean expenditures by the MGA or its designated representatives on behalf of the Company that are not part
of the indemnity under the original Policy (i.e. which do not contribute to exhaustion of the original Policy limit), made in connection with the disposition of a claim, loss or legal proceeding (including investigation, negotiation, cost of bonds,
court costs, statutory penalties, prejudgment interest or delayed 

 
damages, and interest on any judgment or award and legal expenses of litigation) and the MGA’s or its designated representatives’ on behalf of the Company’s defense costs and legal
expenses incurred in direct connection with legal actions (including, but not limited to, Declaratory Judgment actions) brought to determine the Company’s defense and/or indemnification obligations that are allocable only to Policies and claims
under Policies subject to this Contract. Any Declaratory Judgment action expenses shall be deemed to have been fully incurred on the same date as the original loss (if any) giving rise to the action. Loss Adjustment Expense does not include office
and other overhead expenses, nor salaries and expenses of the Company’s or MGA’s employees. 
 2.6 “Prejudgment Interest” or
“Delayed Damages” shall mean interest or damages added to a settlement, verdict, award or judgment based on the amount of time prior to the settlement, verdict, award or judgment whether or not made part of the settlement, verdict, award
or judgment. 
 ARTICLE 3—BUSINESS REINSURED 
 3.1 The Reinsurer hereby reinsures the Company for a one hundred percent (100%) quota share reinsurance participation in respect of all liability, including, but not limited to, losses under Policies
as classified by the Company in the attached Schedule of Business. 
 3.2 It is understood that the classes of business reinsured under this
Agreement are deemed to include coverages required for non-resident drivers under the motor vehicle financial responsibility law or the motor vehicle compulsory insurance law or any similar law of any state or province, following the provisions of
the Company’s policies when they include or are deemed to include so-called “Out of State Insurance” provisions. 
 3.3 All
insurance under this Agreement shall be subject to the same rates, terms, conditions and waivers, and to the same modifications and alterations as the respective Policies of the Company. 
 ARTICLE 4—OBLIGATORY AGREEMENT 
 4.1 The Company agrees to cede to the
Reinsurer, and the Reinsurer agrees to accept from the Company, a one hundred percent (100%) quota share reinsurance participation under all Policies effective on or after the effective date hereof by the Company covering risks situated in
Texas. The liability of the Reinsurer shall commence obligatorily and simultaneously with that of the Company subject to the terms, conditions and limitations set forth in this Agreement. 

 4.2 Business ceded hereunder shall include every original Policy, renewal or extension (whether before or
after the termination of this Agreement) required by statute or by rule or regulation of the Texas Department of Insurance, or other authority having competent jurisdiction, of any policy of insurance originally ceded hereunder by the Company to the
Reinsurer, unless such Policy, renewal or extension is reinsured under a subsequent reinsurance agreement. 
 4.3 The parties understand and
intend that the MGA and the Company will agree on the rates to be charged under this program. Rate changes agreed upon by the Company, and as may be requested from time to time by the Reinsurer, shall be incorporated into the rate filing by the MGA.

 ARTICLE 5—TERM AND CANCELLATION 
 5.1 This Agreement shall become effective 12:00:01 a.m. (Central Standard Time) on the first (1st) day of January, 2013, as respects losses arising under Policies effective on or after such date, and shall
remain continuously in force until its termination, subject to the runoff provisions. 
 5. 2 In addition to the provisions set forth in Article
5.1 herein; this Agreement may be terminated at any time in accordance with the following terms and conditions: 
  

	a.	After thirty (30) calendar days written notice by Company to the Reinsurer, or by the Reinsurer to the Company in the event that either the Reinsurer or the
Company: 

 (i) Is acquired and/or merged by or in any manner becomes under the control of any other company or
corporation; 
 (ii) Changes a majority of its officers or board of directors; or 

(iii) Is the subject of a filing or petition or initiation of any proceeding for supervision, rehabilitation, conservation or liquidation,
or any other proceedings for the protection of the Company’s or the Reinsurer’s creditors. 
  

	b.	By the Company, immediately and automatically, without prior written notice should the Texas Department of Insurance require cancellation. 

 

	c.	After fifteen (15) calendar days written notice by the Reinsurer or the Company, in the event of breach of conditions, fraud or default by either party under the
terms and conditions of the Agreement. In the event of such a breach of condition, fraud or default, the party who had committed the breach of condition, fraud or default shall be given notice of the other party’s intent to terminate, and shall
be given 10 calendar days to cure the breach of condition, fraud or default. 

  

	d.	On the effective date of any termination of the MGA Agreement. 

  

	e.	By the Reinsurer at the effective date of when the Reinsurer no longer provides quota share reinsurance to Affirmative Insurance Company. 

 

	f.	By the Company or the Reinsurer at any time by providing ninety (90) calendar days written notice. 

 5.3 When the Agreement terminates for any reason, reinsurance hereunder shall continue to apply to the
business in force at the time and date of termination until expiration or cancellation of such business. The parties understand and agree that any Policies with effective dates prior to the termination date, but issued after the termination date,
are covered under this Agreement. Additionally, the reinsurance hereunder shall continue to apply as to Policies that must be issued or renewed, as a matter of state law or regulation or because an agent (appointed by the Company at the request of
the Reinsurer) has not been timely canceled, or non-renewed, until the expiration dates on said Policies. 
 5.4 Upon termination of this
Agreement for any reason, the Reinsurer and the Company shall not be relieved or released from any obligation that relate to outstanding insurance business created by or under this Agreement. The parties hereto expressly covenant and agree that they
will cooperate with each other in the handling of all such run-off insurance business until all Policies have expired and all outstanding losses and Loss Adjustment Expenses have been settled. 

5.5 If, for any reason, the MGA or its agent fails, or is unable, to administer the Policies reinsured hereunder (whether the Agreement is still in
effect or the business is being run-off), the Company shall appoint a third party, subject to the Reinsurer’s approval, which shall not be unreasonably withheld, to administer the business in accordance with the terms and conditions of this
Agreement and the MGA Agreement. Such costs shall be borne consistent with other costs of this Agreement. The Company agrees to cooperate with the Reinsurer and the third party administrator in the run-off of the business. 

5.6 Notices hereunder shall be provided in accordance with Article 24.2, hereof. 
 ARTICLE 6—CONSIDERATION 
 In consideration of the acceptance by the Reinsurer of
one hundred percent (100%) of the Company’s liability on insurance business reinsured hereunder, the Reinsurer is entitled to one hundred percent (100%) of the Net Written Premium plus any Unearned Net Premium as of the effective date
of this Agreement produced by the MGA and/or agent on Policies reinsured less the ceding commission allowed to the Company, which includes fronting fees and premium taxes on Policies subject to reinsurance hereunder, as set forth in Article 9.

 ARTICLE 7—LOSS AND LOSS ADJUSTMENT EXPENSE 
 7.1 All loss settlements, judgments and all interest on said judgments, including Losses in Excess of Policy Limits (XPL) and Extra Contractual Obligations (ECO) made by the Company or the Company’s
designee under the terms of this Agreement, whether under strict Policy conditions or by way of compromise, shall be unconditionally binding upon the Reinsurer. 

 7.2 The Company has agreed that claims handling shall be accomplished by the MGA or its designated
representative (“Claims Agent”) pursuant to the MGA Agreement and whose designation is subject to the Company’s and the Reinsurer’s continuing approval and shall not be inconsistent with the terms and conditions of this
Agreement.  
 7.3 The Reinsurer’s share of losses and recoveries shall be carried into the monthly account for which
provision is hereinafter made; however, when the amount of loss paid by the Company under insurance subject to this Agreement exceeds the balance due the Reinsurer pursuant to Article 8, the Reinsurer will, at the option and the demand of the
Company, reimburse the Company by special remittance within five (5) business days. The Reinsurer shall retain the right to deduct from any such special remittance any overdue balance due the Reinsurer by the Company. 

ARTICLE 8—REPORTS AND REMITTANCES 
 8.1 Within thirty-five (35) calendar days after the end of each calendar month, or as soon as practicable after receipt of this information from the MGA, the Company shall provide the Reinsurer a net
monthly account of the following: 
  

	a.	Ceded net written and earned premium; 

  

	b.	Ceded net collected premium for the month; 

  

	c.	Ceding commission on net collected premium as provided in Article 9.1; 

  

	d.	Ceded losses, minus salvage and subrogation received, paid during the month; 

 

	e.	Ceded earned and unearned premium at the end of the month; 

  

	f.	Ceded outstanding losses; and 

  

	g.	Inception to date ceded uncollected premium. 

8.2 The Company will immediately settle with the Reinsurer upon receipt of funds from the MGA, any and all sums due to the Reinsurer, on a Net Collected
Premium basis, pursuant to this Agreement (8.1, b-c-d). The Company will remit Unearned Net Premium as of the effective date of this Agreement to the Reinsurer within five (5) days of executing this Agreement. 

8.3 The Reinsurer shall remit balances due directly to the Company via wire transfer within five (5) business days after receipt and verification of
the monthly account, or as soon as commercially feasible if the net monthly account results in an amount due to the Company, or if during the month, there are no funds to pay losses, and the Company submits additional reports reflecting an amount
due to the Company. 
 8.4 Failure by the Company to provide the monthly net accounts specified in Article 8.1 shall not excuse the Reinsurer
from any of its obligations under this Agreement. 

 8.5 Company shall annually furnish to the Reinsurer the following summary information paid during the year
in such form as to enable the Reinsurer to record such information in its annual statement: 
  

	 	a.	Gross loss paid; 

  

	 	b.	Net Salvage 

  

	 	c.	Subrogation; and 

  

	 	d.	Adjusting expenses. 

 ARTICLE
9—CEDING COMMISSION, FRONTING FEES AND PREMIUM TAXES 
 9.1 The Reinsurer will allow the Company a Ceding Commission of twenty-nine
and one half percent (29.5%), which includes fronting fees and taxes, and which shall be calculated on the basis of all Net Written Premium reinsured hereunder. 
 9.2 The Company will be liable for remitting state premium taxes based on Net Written Premium and net Policy fees charged. If service fees charged on any Policy covered by this Agreement are deemed
taxable for premium tax purposes, then such service fees should be added to the Net Written Premium and net Policy fees charged to determine the amount subject to premium taxes and fronting fees. . 

9.3 The Company may pay a contingent commission based upon the terms of the MGA Agreement. Accordingly, if such amounts flow through the Company, the
Company agrees to forward such amounts to the other party. Moreover, the MGA shall be required to return any contingent commission in excess of any commissions actually earned. In the event that the MGA defaults on its obligation to settle
contingent commission adjustments, the Reinsurer shall remain fully liable to the Company for all amounts otherwise due, and shall independently seek recovery from the MGA. The Reinsurer acknowledges that the Company is not responsible for any
contingent commission adjustment. 
 ARTICLE 10—ERRORS AND OMISSIONS 
 Inadvertent delays, errors or omissions made in connection with this Agreement or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay,
error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery. 
 ARTICLE
11—INSPECTION OF RECORDS 
 11.1 All records pertaining to Policies issued on behalf of the Company subject to this Agreement shall
be made available, upon providing five (5) business days advance written notice, to the Reinsurer or their representative or any duly appointed examiner for any State within the United States; and these records shall be kept in the State of
Texas. The Reinsurer’s access to any records is conditioned, however, upon the Reinsurer’s fulfillment of its obligation to pay all undisputed amounts billed by the Company in a timely manner. Further, any refusal or delay by the Company
in permitting the Reinsurer access to or inspection of records shall not excuse the Reinsurer’s other obligations under this Agreement. Notwithstanding the foregoing, the Reinsurer is authorized to maintain duplicate working files of all such
records outside the State of Texas. 

 11.2 The Company and the Reinsurer agree that neither will destroy any such records in their possession
without the prior written approval of the other, except that the Company shall not be required to retain files longer than required by the guidelines set by the Texas Department of Insurance. 
 ARTICLE 12—OFFSET CLAUSE 
 12.1 The Company or the Reinsurer shall have the
right to offset any balance or amounts due from one party to the other under the terms of this Agreement, with the exception of settling balances due to either the Reinsurer or the MGA from contingent commissions as set forth in Article 9.3. The
party asserting the right of offset may exercise such right at any time whether the balances due are on account of premiums or losses or otherwise. 
 12.2 The Reinsurer and the Company shall not offset obligations arising under this Agreement with obligations arising under any other agreement except to the extent permitted under state law and/or
regulations. 
 ARTICLE 13—ARBITRATION 
 13.1 Unless both parties mutually agree to waive arbitration with respect to a particular dispute, the parties to this Contract hereby agree that binding arbitration shall be the sole remedy for any and
all dispute(s) arising between them with reference to any transactions, terms, or conditions under this Contract including its formation and validity. Arbitration proceedings brought hereunder shall be referred for final determination to the
majority decision of a Panel of three disinterested arbitrators. Notice of demand for arbitration shall be made in writing and shall be served via certified or registered mail, return receipt requested, on the Respondent to the Arbitration at the
Respondent’s current address. The notice requesting arbitration shall identify the contract(s) involved in the dispute, the issues to be resolved in the view of the Petitioner, and the arbitrator selected by the Petitioner. 

13.2 The Respondent shall appoint an arbitrator within 30 calendar days of receiving a request by the Petitioner in writing and served via certified or
registered mail, return receipt requested, to do so. At the same time as the appointment, the Respondent shall identify in writing any issues which in its view must be resolved in the arbitration proceeding and which were not identified by the
Petitioner. If the Respondent fails to appoint its arbitrator within 30 calendar days of being requested to do so, in writing, by the Petitioner, the Petitioner shall have the right to appoint the second arbitrator. Within 30 calendar days after
their appointment, the two arbitrators so chosen shall select a third arbitrator to act as umpire. If the two arbitrators do not agree as to the selection of a third arbitrator within 60 calendar days after their appointment, the third arbitrator
shall be selected from a list of six individuals (three named by each arbitrator) by a judge of the federal district court in Dallas County, Texas. 

 13.3 Each arbitrator shall be a disinterested, active, or retired official or officer of an insurance or
reinsurance company, not under the control or management of either party to this Contract. 
 13.4 Within 30 calendar days after notice of
appointment of all arbitrators, the Petitioner and the Respondent shall each submit a statement of position to the Panel. 
 13.5 Within 60
calendar days after notice of appointment of all arbitrators, each party shall provide the other with all books, records, and/or other documents relating to this agreement that are not otherwise protected from disclosure by either the work-product
or attorney client privilege. For the purposes of this Article, the term “document” shall include electronic documents, including e-mails. 
 13.6 Within 30 calendar days following the exchange of documents, the Petitioner and the Respondent shall submit pre-hearing briefs to the Panel. 
 13.7 Unless some other location is mutually agreeable to the parties, arbitration proceedings shall take place within Dallas County, Texas. Arbitration shall commence as soon as practicable but in no
event longer than 120 calendar days after selection of the third arbitrator with notice thereof to the parties. The specific time and site of arbitration shall be promptly agreed to by the parties, or if no agreement is reached, then determined by
the Panel. 
 13.8 The Panel shall be relieved from applying the strict rules of evidence and/or procedure however the Panel is not relieved
from applying the terms of this Agreement. Should either party fail to appear at an arbitration and/or fail to furnish the Panel with any subpoenaed papers or information, the Panel is empowered to proceed ex parte. The Panel shall make its award
within 60 calendar days following the close of the hearing. The majority decision of the Panel shall be final and binding upon the parties and shall be reduced to a written award, which may include factual findings, and shall be signed by any two of
the three arbitrators, dated and delivered overnight to the parties. The Panel may award pre-judgment and post-judgment interest, as well as the costs associated with the arbitration, including attorney’s fees, but in no case shall the
authority of the Panel extend to awarding punitive or exemplary damages. Judgment may be entered upon the award by any court having jurisdiction. 
 13.9 Each party will bear the expense of its own arbitrator, but shall equally share with the other the expense of the third arbitrator. In the event that the two arbitrators are chosen by one party, as
above provided, the expense of the two arbitrators, the third arbitrator and the arbitration shall be equally divided between the Petitioner and the Respondent. 

 Unless mutually agreed otherwise, a court reporter transcript shall be taken of the hearing with costs to be
divided equally between the parties. The remaining costs of arbitration shall be allocated by the Panel. 
 13.10 The Arbitration proceeding
brought hereunder, any or all provisions contained herein, and arbitration awards entered pursuant to this Article are specifically governed by, subject to and enforceable under the Federal Arbitration Act (Title 9, United States Code, Sections
1-14, as amended.) 
 13.11 Each party agrees that time is of the essence with respect to all terms and conditions referenced in this Article.
All deadlines contained in this Article may be extended by mutual agreement of the parties, and if the Panel has been selected, the Panel’s agreement must also be obtained. 
 13.12 This Article shall survive the termination of this Contract. 
 ARTICLE
14—HONORABLE UNDERTAKING 
 The purposes of this Contract are not to be defeated by narrow or technical legal interpretations of its
provisions. This Contract shall be construed as an honorable undertaking and should be interpreted for the purpose of giving effect to the intentions of the parties hereto. 
 ARTICLE 15—SALVAGE AND SUBROGATION 
 The Company may, in its sole discretion,
pursue salvage and subrogation. The Reinsurer shall be credited with its proportional share of actual salvage or subrogation recoveries (i.e. reimbursement obtained or recoveries made by the Company), less the actual cost, excluding salaries of
officials and employees of the Company, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. 
 ARTICLE 16—ASSESSMENTS AND ASSIGNMENTS 
 The Reinsurer hereby assumes liability
for any and all costs, assessments or assignments imposed as a result of Policies reinsured hereunder (whether before or after the termination of this Agreement) levied or made by a guaranty fund, insolvency fund, plan, pool, association, or other
arrangement created by statute or regulation including, but not limited to, assessments levied by the Volunteer Fire Departments, TAIPA or the Texas Property & Casualty Insurance Guaranty Association. 

 ARTICLE 17—CONSERVATION, LIQUIDATION OR INSOLVENCY 

17.1 In the event of the insolvency of the Company, the Reinsurance afforded by this Agreement shall be payable directly by the Reinsurer to the Company
or its liquidator, receiver or statutory successor on the basis of the liability of the Company under the Policies, without diminution because of the insolvency of the Company, in accordance with the provisions of any State Law which may be involved
except: 
  

	a.	where the Agreement specifically provides another payee of such reinsurance in the event of the insolvency of the Company; or 

 

	b.	where the Reinsurer with the consent of the direct insured(s) 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 the payees. 

 17.2 In the event of the insolvency
of the Company, the liquidator, receiver, or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Company on a Policy within a reasonable time after such claim is filed in the
insolvency proceedings. 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 which it may deem available to the
Company or its liquidator, receiver or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of the
proportionate share of the benefits that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer. 
 17.3 If two
(2) or more reinsurers are involved in the same claim and a majority in interest elects to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred
by the Company. 
 17.4 As respects subject business assumed as reinsurance under this Agreement, the parties agree that if the Company has a
conservator, liquidator, or receiver appointed for it, or becomes the subject of any conservation, liquidation or insolvency proceeding, and the Company is purchased and merged into another insurance entity, the acquiring insurance entity shall be
substituted for the Company as payee of any reinsurance recoverable hereunder in respect of losses under Policies subject hereto, and the Reinsurer shall make payments thereof directly to the substituted insurer. 

17.5 In the event the foregoing provisions apply, all the other provisions of this Agreement shall apply to the substituted insurer in the same manner as
if said insurer were substituted for the Company as the reinsured party hereunder, and to the extent this Agreement reinsures such substituted insurer, coverage hereunder shall be excluded as respects the Company. 

 ARTICLE 18—REGULATORY MATTERS 
 18.1 It is the parties’ understanding that the Texas Department of Insurance views current premium due over ninety (90) calendar days past due (aged by item and effective date) from insureds or
their designated representative to the Company as non-admitted assets. 
 18.2 The Reinsurer shall agree, at no cost to the Company, to take
those actions (including, but not limited to, modifications in how funds are handled and how accounts are cleared and settled) as deemed necessary by the Company to ensure that the Company suffers no adverse impact because of this reinsurance
program and is in compliance with the laws of the State of Texas and regulations promulgated by any governmental entity thereof, including the Texas Department of Insurance, insofar as this reinsurance program is concerned. 

18.3 The parties acknowledge that the Company is subject to Article 5.144 of the Texas Insurance Code, which allows the Commissioner of Insurance to
order refunds or discounts of premiums determined to be excessive or unfairly discriminatory. The Reinsurer agrees to be bound by any such determination by the Commissioner and to proportionately make any refund or provide any discount ordered by
the Commissioner. This provision shall survive termination of this Agreement and the run-off of all policies under Article 5 of this Agreement. 
 ARTICLE 19—LOSS IN EXCESS OF POLICY LIMITS/EXTRA CONTRACTUAL OBLIGATIONS 
 19.1
This Agreement shall protect the Company for one hundred percent (100%) of any Loss in Excess of Policy Limits (XPL) and/or one hundred percent (100%) of the Extra Contractual Obligations (ECO) which shall be deemed to be a loss under the
Policy involved and shall be subject to this Agreement. 
 19.2 Notwithstanding anything stated herein, this Agreement shall not apply to any
Extra Contractual Obligation (ECO) incurred by the Company or the MGA as a result of any fraudulent and/or criminal act by any officer or director of the Company or the MGA acting individually or collectively or in collusion with any individual or
corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. 

ARTICLE 20—SAVINGS CLAUSE 

20.1 If any law or regulation of any Federal, State or Local Government of the United States of America, or the ruling of officials having supervision
over insurance companies or any arbitration panel, should prohibit or render this Agreement or any portion thereof illegal, as to risks or properties located in the jurisdiction of such authority, either the Company or the Reinsurer may, upon
written notice to the other, suspend or abrogate this Agreement insofar as it relates to risks or properties located within such jurisdiction to such extent as may be necessary to comply with such law, regulation or ruling. Such illegality shall in
no way affect any other portion thereof, provided, however, that the Reinsurer or the Company may terminate or suspend this Agreement insofar as it relates to the Business to which such law or regulation may apply. 

 20.2 Should any portion of this Agreement be held to be unenforceable by Arbitration or any court of
competent jurisdiction, the remainder of such Agreement shall be construed as if originally written without the unenforceable portion thereof, giving effect to the extent possible of the original intent of the parties hereto as expressed in such
Agreement as originally written. 
 ARTICLE 21 – UNAUTHORIZED (NON-ADMITTED) REINSURANCE 

21.1 The Company agrees, in respect of its Policies falling within the scope of the Contract, that when it files with its insurance regulatory authority,
or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The Reinsurer hereby agrees to secure delivery to the Company, a clean,
irrevocable, evergreen, unconditional letter of credit drawn on a bank that is a member of the Federal Reserve System and approved by the National Association of Insurance Commissioners, and in accordance with the rules and regulations as set forth
by the Texas Department of Insurance or any other regulatory authority having jurisdiction, for an amount equal to 100% of the Reinsurer’s share of the reserves for unearned premium and outstanding losses and loss expenses, including incurred
but not reported losses, less the amount of funds previously withheld for this program. The Company agrees to furnish the Reinsurer with necessary accounting data to establish the amount of such letter of credit. 

Quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of
funding, in the following manner: 
  

	 	1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC as of the statement date, the Reinsurer shall, within 15 (fifteen) days after
receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined
above, increase such funding by the amount of such difference. 

  

	 	2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less
than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 15 (fifteen) days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure
an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such
excess. If the Company does not comply with a request for a reduction to the funding, the Company shall reimburse the Reinsurer for all funding costs. 

 21.2 In the event the Reinsurer and the Company mutually agree, the Reinsurer may, instead of complying with
Article 21.1, enter into a trust agreement and establish a trust account for the benefit of the Company in a bank that is a member of the Federal Reserve System, and in accordance with the rules and regulations as set forth by the Texas Department
of Insurance or any other regulatory authority having jurisdiction. Such amount required to be deposited into such trust account shall be determined in accordance with Article 21.1 above. 
 21.3 The assets deposited in the trust account shall be valued, according to their current fair market value, and shall consist only of cash, certificates of deposit, and/or investments of the types
permitted by the Texas Insurance Code, Article 5.75-1 (d), provided that such investments are issued by an institution that is not the parent, subsidiary, or affiliate of either the guarantor or the beneficiary. 

21.4 The trust agreement shall further require that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent.

 21.5 The Reinsurer and the Company hereby agree that the assets in the trust account established pursuant to this Agreement may be withdrawn
by the Company at any time, notwithstanding any other provisions in this Agreement. Such withdrawals shall be utilized and applied by the Company or its successors in interest by operation of law, including without limitation any liquidator,
rehabilitator, receiver, or conservator of such Company, without diminution because of insolvency on the part of the Company or the Reinsurer, only for the following purposes: 

 

	 	a.	to reimburse the Company for the Reinsurer’s share of premiums returned to the owners of Policies reinsured under this Agreement on account of cancellations of
such Policies; or 

  

	 	b.	to reimburse the Company for the Reinsurer’s share of surrenders and benefits or losses paid by the Company pursuant to the provisions of the Policies reinsured
under this Agreement; or 

  

	 	c.	in the event of notice of termination of the trust, to fund an account with the Company in an amount at least equal to the Reinsurer’s share of reserves described
in Article 21.1 above; or 

  

	 	d.	to pay any other amounts due the Company under this Agreement. 

 ARTICLE 22—FEDERAL EXCISE TAX 
 If the Reinsurer is subject to Federal Excise
Tax, the Reinsurer agrees to allow, for the purpose of paying the Tax, the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code), to be deducted from the premium payable hereon, but
only to the extent such premium is subject to Federal Excise Tax. In the event of any return of premium becoming due hereunder, the Reinsurer shall deduct the applicable percentage of 

 
the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government. As respects premiums ceded to the Reinsurer under this
Agreement, the Reinsurer agrees to comply with United States Internal Revenue Service Ruling 2008-15 (or any modification thereof) and agree to indemnify the Company for any liability, expense, interest or penalty it may incur by reason of the
Reinsurer’s breach of this Article. 
 ARTICLE 23—PROGRAM REVIEW 

The Reinsurer acknowledges that it has been afforded the opportunity to review the records of the Company and its MGA including but not limited to rate
levels, rate filings, underwriting guidelines and claims handling. Although the Company may perform reviews as well, it is understood that the participation of the Reinsurer on this contract is based upon its continuing due diligence and not based
upon due diligence performed by the Company. The Company shall not be responsible for monitoring the MGA, and any acts or omissions of the MGA will not serve to relieve the Reinsurer of its obligations under this Agreement. 

ARTICLE 24—SERVICE OF SUIT (BRMA 49C) 
 24.1 It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of any court of
competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. Further, nothing in this Article should be construed as
abrogating the requirements set forth in Article 13 that the parties must submit all disputes to binding arbitration. 
 24.2 Further, pursuant
to any statute of any state, territory or district of the United States which makes provision therefore, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent,
Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding
instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract. 
 ARTICLE 25—INTERMEDIARY

 Neither party hereto has utilized the services of a Reinsurance Intermediary for any actions taken with regard to the negotiation,
drafting, and/or execution of this Agreement. 

 ARTICLE 26 – EXCLUSIONS 
 26.1 This Contract shall not cover and specifically excludes: 
  

	 	1.	Loss or damage that is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law
or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the fifty
States of the Union, the District of Columbia, and including bridges between the U.S.A. and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under Policies containing a
standard war or hostilities or warlike operations exclusion clause. 

  

	 	2.	Business excluded by the following attached Nuclear Incident Exclusion Clauses: 

 

	 	a.	Nuclear Incident Exclusion Clauses—Liability—Reinsurance—U.S.A.; 

 

	 	b.	Nuclear Incident Exclusion Clauses—Physical Damage—Reinsurance—U.S.A. 

 

	 	3.	Pools, Associations and Syndicates, except as provided in the Assignments Article. 

 

	 	4.	Mortgage Impairment Insurance or other similar covers, however styled. 

  

	 	5.	Products Liability, Professional Malpractice Liability, Directors’ & Officers’ Liability, Securities and Exchange Commission Liability, Workers’
Compensation and Employers Liability. 

  

	 	6.	Loss arising out of the ownership, maintenance or use of any vehicle, the principal use of which is as: 

 

	 	a.	a public or livery conveyance; 

  

	 	b.	an emergency vehicle; 

  

	 	c.	a drive-yourself motor vehicle available for leasing periods of less than six months; 

 

	 	d.	an automobile used in speed contests and races; 

  

	 	e.	a motorcycle; 

  

	 	f.	a vehicle used in hauling goods for others; 

  

	 	g.	a vehicle used in hauling hazardous chemicals or radioactive substances; 

  

	 	h.	a vehicle operating under time constraints, including messenger or delivery service. 

 

	 	7.	Reinsurance assumed, except for business assumed from affiliated companies, agency reinsurance and business assumed from Texas county mutual insurance companies.

	 	8.	Losses arising from seepage and pollution as per the Company’s original Policies and any amendments attached thereto. This exclusion will not apply, however, when
the judicial entity having legal jurisdiction invalidates the Company’s pollution exclusion when such liability was intended to be excluded from coverage. 

 

	 	9.	Acts of Terrorism that involve the use, release, or escape of nuclear, biological or chemical materials, or directly or indirectly result in nuclear reaction or
radiation or radioactive contamination; and it appears that the purpose of the terrorism was to release such materials. “Acts of Terrorism” means an act, including but not limited to the use of force or violence and/or the threat thereof,
of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to
put the public, or any section of the public, in fear. 

 This exclusion shall not be construed to apply to loss
occasioned by riots, strikes, civil commotion, vandalism or malicious damage as those terms have been interpreted by United States Courts to apply to insurance policies. 

 

	 	10.	Loss arising from exposure to asbestos, to the extent excluded in the Company’s Policy. 

 

	 	11.	Any penalties, late fees, litigation expenses, arbitration fees or costs incurred as a result of late payment of PIP benefits. 

 

	 	12.	Flood, when written as such. 

  

	 	13.	Earthquake, landslide or other earth movement, when written as such. 

  

	 	14.	Loss Adjustment Expenses sustained in connection with losses subject hereunder. 

 26.2. If the Company inadvertently issues a Policy falling within the scope of exclusion A(6) above, such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the
required notice of cancellation within 30 days after a member of the Company’s executive or managerial staff becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such
period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel. 
 26.3. Business which is beyond the terms, conditions or limitations of this Contract may be submitted to the Reinsurer for special acceptance hereunder and such business, if accepted by the Reinsurer in
writing, shall be subject to all of the terms, conditions and limitations of this Contract except as modified by the special acceptance. 

 ARTICLE 27 – MISCELLANEOUS 
 27.1 This Agreement has been made and entered into in the State of Texas. This Agreement shall be governed by Texas law, without regard to conflicts of law principles. 

27.2 All notices required to be given hereunder shall be deemed to have been duly given by personally delivering such notice in writing or by sending it
by a delivery service or by mailing it, Certified Mail, return receipt requested, with postage prepaid. Any party may change the address to which notices and other communications hereunder are to be sent to such party by giving the other party
written notice thereof in accordance with this provision. 
 27.3 This Agreement shall be binding upon the parties hereto, together with their
respective executors, administrators, personal representatives, heirs and assigns. 
 27.4 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
 27.5 This
Agreement may be amended, modified, or supplemented only by a written instrument executed by all parties hereto. 
 27.6 This Agreement is the
entire Agreement between the parties and supersedes one and all previous agreements, written or oral, and amendments thereto. 
 27.7 A waiver
by the Company, the Reinsurer or its designated representative of any breach or default by the other party under this Agreement shall not constitute a continuing waiver or a waiver by the Company, the Reinsurer or its designated representative of
any subsequent act in breach or of default hereunder. Moreover, any such waiver must be in writing in order to be binding upon that party. 
  

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

 

											
	The Company:	 		 	The Reinsurer:
				
	OLD AMERICAN COUNTY MUTUAL	 		 		 	GREENLIGHT REINSURANCE LTD.
					
	FIRE INSURANCE COMPANY	 		 		 		 	
						
	By:	 	/s/ April Findley	 		 		 	By:	 	/s/ Jim Ehman
		 	April Findley, President	 		 		 		 	Jim Ehman, Senior Underwriter
						
	Date:	 	3/27/13	 		 		 	Date:	 	3/28/13

 SCHEDULE OF BUSINESS 
 The Company, the Reinsurer and the MGA agree that the MGA has the authority to accept, on forms approved by the Company, any Policy, endorsement, binder, certificate, or proposal for insurance. The
MGA’s authority is limited by this Schedule of Business. 
 Overall: 

 

			
	Maximum Premium Written	  	$30,000,000
	Territory	  	Texas only
	Maximum policy term	  	Twelve Month

 Lines of business and maximum limits of liability 

 

					
	Coverage 	  	Maximum Limits 	 
	 Bodily Injury Liability
	  	$	 100,000 each person	 
		  	$	 300,000 each accident	 
	 Property Damage Liability
	  	$	 100,000 each accident	 
	 Uninsured/Underinsured Motorists
	  			
	 Bodily Injury
	  	$	 100,000 each person	 
		  	$	 300,000 each accident	 
	 Property Damage
	  	$	 100,000 each accident	 
	 Personal Injury Protection
	  	$	 2,500 each person	 
	 Medical payments
	  	$	 5,000 each person	 
	 Physical Damage
	  	$	 70,000 each automobile	 

 This Agreement does not apply to and specifically excludes the following: 

 

	 	a.	Any business not produced by MGA, or 

  

	 	b.	Any business not classified as private passenger automobile liability or physical damage, or 

 

	 	c.	Exclusions specified within this Quota Share Reinsurance Agreement. 

 ENDORSEMENT NO. 1 

to the 

INTERESTS AND LIABILITIES AGREEMENT 
 Effective: March 31, 2013 
 (the “Agreement”) 

of 

GREENLIGHT REINSURANCE, LTD. 
 (the “Subscribing Reinsurer”) 
 with respect to the 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
 Effective: March 31, 2013 
 (the “Contract”) 

issued to 

AFFIRMATIVE INSURANCE COMPANY 
 Burr Ridge, Illinois 
 (the “Company”) 

Addendum No. 1 to the Contract, as executed by the Company, shall form part of the Contract, effective March 31, 2013. 

IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Endorsement to be executed by its duly authorized representative(s) as follows: 

this
28th day of March, in the year 2013. 

GREENLIGHT REINSURANCE, LTD. 
                         /s/ Jim
Ehman

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00215-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00215-of-00352.parquet"}]]