Document:

Form of 4.375% Notes due 2041

 Exhibit 4.2 
 REGISTERED 
 No. 
 PHILIP MORRIS INTERNATIONAL INC. 
  

					
		  	4.375% NOTES DUE 2041	  	PRINCIPAL AMOUNT
		  		  	$
		  		  	CUSIP NO. 718172 AM1
		  		  	ISIN NO. US718172AM11

 THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY (THE
“DEPOSITARY”) TO A NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
 PHILIP MORRIS INTERNATIONAL INC., a Virginia corporation
(hereinafter called the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of
$                     on November 15, 2041, and to pay interest thereon from November 15, 2011 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually in arrears on May 15 and November 15, in each year, commencing May 15, 2012, at the rate of 4.375% per annum until the principal hereof is paid or made
available for payment. 
 The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will,
as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be May 1 or November 1
(whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so 

 
punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee for the Notes, notice whereof shall be given to Holders of Notes not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture. 
 Payment of the principal of (and premium, if any) and interest on this Note
will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or by
wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least 15 days prior to the date for payment by the person entitled thereto. All payments of principal,
premium, if any, and interest in respect of this Note will be made by the Company in immediately available funds. 
 Additional
provisions of this Note are contained on the reverse hereof, and such provisions shall have the same effect as though fully set forth in this place. 
 Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee for the Notes by manual signature, this Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose. 

 IN WITNESS WHEREOF, PHILIP MORRIS INTERNATIONAL INC. has caused this instrument to be duly
executed. 
  

			
	Dated: November 15, 2011
	
	PHILIP MORRIS INTERNATIONAL INC.
		
	By:	 	  

 

			
	Name:	 	Marco Kuepfer
	Title:	 	Vice President Finance and Treasurer
		
	Attest:	 	

 
			
		
	By:	 	  

 

			
	Name:	 	 Jerry Whitson

	Title:	 	Deputy General Counsel and
		 	Corporate Secretary

 CERTIFICATE OF AUTHENTICATION 

This is one of the Securities of the series designated therein described in the within-mentioned Indenture. 

 

			
	HSBC BANK USA, NATIONAL ASSOCIATION,
	as Trustee
		
	By:	 	  

		 	Authorized Officer

 (Reverse of Note) 
 PHILIP MORRIS INTERNATIONAL INC. 
 This Note is one of a duly authorized issue of
debentures, notes or other evidences of indebtedness (hereinafter called the “Securities”) of the Company of the series hereinafter specified, which series is limited in aggregate principal amount to $750,000,000 (except as provided in the
Indenture hereinafter mentioned), all such Securities issued and to be issued under an Indenture dated as of April 25, 2008 between the Company and HSBC Bank USA, National Association, as Trustee (herein called the “Indenture”), to
which Indenture and all other indentures supplemental thereto reference is hereby made for a statement of the rights and limitations of rights thereunder of the Holders of the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon which the Securities are and are to be authenticated and delivered. As provided in the Indenture, the Securities may be issued in one or more series, which different series
may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions, if any, may be subject to different sinking, purchase or analogous
funds, if any, may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided or permitted. This Note is one of a series of the Securities designated therein as 4.375% Notes due 2041 (the
“Notes”). 
 Section 1010 of the Indenture shall be applicable to the Notes, except that the term
“Holder,” when used in Section 1010 of the Indenture, shall mean the beneficial owners of a Note or any person holding on behalf or for the account of the beneficial owner of a Note. 

The Company may redeem the Notes prior to maturity in whole, but not in part, on not more than 60 days’ notice and not less than 30
days’ notice at a redemption price equal to the principal amount of such Notes plus any accrued interest and additional amounts to the date fixed for redemption if: 

 

	 	•	 	 as a result of a change in or amendment to the tax laws, regulations or rulings of the United States or any political subdivision or taxing authority
of or in the United States or any change in official position regarding the application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction in the United States) that is announced or
becomes effective on or after November 15, 2011, the Company has or will become obligated to pay additional amounts with respect to the Notes as described in Section 1010 of the Indenture, or 

 

	 	•	 	 on or after November 15, 2011, any action is taken by a taxing authority of, or any decision is rendered by a court of competent jurisdiction in,
the United States or any political subdivision or taxing authority of or in the United States, including any of those actions specified in the bullet point above, whether or not such action is taken or decision is rendered with respect to the
Company, or any change, amendment, application or interpretation is officially proposed, which, in any such case, in the written opinion of independent legal counsel of recognized

	 	 
standing, will result in a material probability that the Company will become obligated to pay additional amounts with respect to the Notes, 

and the Company in its business judgment determines that such obligations cannot be avoided by the use of reasonable measures available to the Company.

 If the Company exercises its option to redeem the Notes, the Company will deliver to the Trustee a certificate signed by an
authorized officer stating that it is entitled to redeem the Notes and the written opinion of independent legal counsel if required. 
 The Indenture contains provisions for defeasance at any time of the entire principal of all the Securities of any series upon compliance by the Company with certain conditions set forth therein.

 If an Event of Default (other than an Event of Default described in Section 501(4) or 501(5) of the Indenture) with
respect to the Notes shall occur and be continuing, then either the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities of all series then Outstanding (or, if such default is not applicable to all series of the
Securities, the Holders of at least 25% in principal amount of the then Outstanding Securities of all series to which it is applicable) (in each case voting as a single class) may declare the entire principal amount of the Securities of all series
so affected due and payable in the manner and with effect provided in the Indenture. If an Event of Default specified in Section 501(4) or 501(5) occurs with respect to the Company, all of the unpaid principal amount and accrued interest then
Outstanding shall ipso facto become and be immediately due and payable in the manner with the effect provided in the Indenture without any declaration or other act by the Trustee or any Holder. 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all
series of Securities affected thereby (voting as a single class). The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of all series affected thereby at the time
Outstanding (voting as a single class) to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences to the affected series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the transfer hereof or in exchange or in lieu hereof whether or not notation of such consent or waiver is made upon
this Note. 
 No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Note at the times, place and rate, and in the coin or currency, herein and in the Indenture prescribed. 

 As provided in the Indenture and subject to certain limitations therein set forth, this Note
is transferable on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company to be maintained for that purpose in the Borough of Manhattan, The City of New York, or at any
other office or agency of the Company maintained for that purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his or her
attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 

The Notes are issuable only in registered form in denominations of $2,000 and any integral multiple of $1,000 in excess thereof. As
provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of a like tenor and of a different authorized denomination, as requested by the Holder surrendering
the same. 
 No service charge shall be made for any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 
 The Company, the
Trustee for the Notes and any agent of the Company or such Trustee may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this
Note be overdue, and neither the Company, such Trustee nor any such agent shall be affected by notice to the contrary. 

Certain of the Company’s obligations under the Indenture with respect to Notes may be terminated if the Company irrevocably deposits
with the Trustee money or Government Obligations sufficient to pay and discharge the entire indebtedness on all Notes, as provided in the Indenture. 
 This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. 
 Certain terms used in this Note which are defined in the Indenture have the meanings set forth therein. 

 ASSIGNMENT FORM 
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 
 PLEASE INSERT
SOCIAL SECURITY NUMBER OR 
 OTHER IDENTIFYING NUMBER OF ASSIGNEE 

 
  
  

(Name and address of Assignee, including zip code, must be printed or typewritten) 

 
  
  

 
  
  

the within Note, and all rights thereunder, hereby irrevocably, constituting and appointing 

 
  
  

 
  
  

Attorney to transfer the said Note on the books of Philip Morris International Inc. with full power of substitution in the premises. 

Dated:                      

 

					
		  		  	  

		  	NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Note in every particular, without alteration or
enlargement or any change whatsoever.Automobile Quota Share Reinsurance Contract

 Exhibit 10.1 
 

 
  
 INTERESTS AND
LIABILITIES AGREEMENT 
 (the “Agreement”) 
 of 
 GREENLIGHT REINSURANCE, LTD. 

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

Effective: September 1, 2011 
 (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, on 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 September 1,
2011 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. 

  
 1 of 2

 

 
  
 Brokerage hereunder is 1.0% of ceded Gross
Net Written Premium Income collected. 
 IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be executed by its duly
authorized representative as follows: 
 on this 10TH day of November in the year 2011. 
 GREENLIGHT REINSURANCE, LTD. 
 

 
 Market Reference Number: 
 AFFIRMATIVE INSURANCE COMPANY 
 AUTOMOBILE QUOTA SHARE REINSURANCE
CONTRACT 

  
 2 of 2

 

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

  
 1 of 38

 

 
  
 AUTOMOBILE QUOTA SHARE
REINSURANCE CONTRACT 
 TABLE OF CONTENTS 

 

							
	 Article
	  	 	  	Page	 
			
		  	 Preamble
	  	 	4	  
	   1
	  	 Business Covered
	  	 	4	  
	   2
	  	 Term
	  	 	4	  
	   3
	  	 Retention and Limit
	  	 	5	  
	   4
	  	 Maximum Limits of Liability
	  	 	6	  
	   5
	  	 Special Termination
	  	 	6	  
	   6
	  	 Territory
	  	 	8	  
	   7
	  	 Exclusions
	  	 	8	  
	   8
	  	 Assignments
	  	 	10	  
	   9
	  	 Other Reinsurance
	  	 	10	  
	 10
	  	 Premium
	  	 	10	  
	 11
	  	 Provisional Ceding Commission
	  	 	11	  
	 12
	  	 Commission Adjustment
	  	 	11	  
	 13
	  	 Profit Sharing
	  	 	12	  
	 14
	  	 Reports and Remittances
	  	 	12	  
	 15
	  	 Definitions
	  	 	13	  
	 16
	  	 Extra Contractual Obligations/Excess of Policy Limits
	  	 	15	  
	 17
	  	 Net Retained Liability
	  	 	16	  
	 18
	  	 Original Conditions
	  	 	16	  
	 19
	  	 No Third Party Rights
	  	 	16	  
	 20
	  	 Loss Settlements
	  	 	16	  
	 21
	  	 Alternate Payee
	  	 	17	  
	 22
	  	 Commutation
	  	 	17	  
	 23
	  	 Offset
	  	 	18	  
	 24
	  	 Salvage and Subrogation
	  	 	18	  
	 25
	  	 Currency
	  	 	19	  
	 26
	  	 Unauthorized Reinsurance
	  	 	19	  
	 27
	  	 Taxes
	  	 	21	  
	 28
	  	 Access to Records
	  	 	22	  
	 29
	  	 Confidentiality
	  	 	22	  
	 30
	  	 Indemnification and Errors and Omissions
	  	 	23	  
	 31
	  	 Insolvency
	  	 	24	  
	 32
	  	 Arbitration
	  	 	25	  
	 33
	  	 Service of Suit
	  	 	27	  
	 34
	  	 Governing Law
	  	 	28	  
	 35
	  	 Entire Agreement
	  	 	28	  
	 36
	  	 Intermediary
	  	 	28	  
	 37
	  	 Mode of Execution
	  	 	29	  

  
 2 of 38

 

 
  
 AUTOMOBILE QUOTA SHARE
REINSURANCE CONTRACT 
 TABLE OF CONTENTS 

 

							
	 Articles
	 	 	  	Page	 
	 (Cont’d)
	 	 	  	 	 
		 	 Company Signing Block
	  	 	29	  
			
	Attachments	 		  			
		 	 Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.
	  	 	30	  
		 	 Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.
	  	 	32	  
		 	 Trust Agreement Requirements Clause
	  	 	37	  

  
 3 of 38

 

 
  

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, 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 Old American County Mutual Fire Insurance Company (“Old American”), USAgencies Casualty Insurance Company, USAgencies Direct Insurance Company and Insura Property and 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 September 1, 2011, and shall remain in effect until December 31, 2012, applying to: 

 

	 	1.	Losses occurring during the period from September 1, 2011 through December 31, 2011, on Policies issued or renewed during that period; and

  
 4 of 38

 

 
  
  

	 	2.	Losses occurring during the period from January 1, 2012 through December 31, 2012, on Policies in force at the beginning of that period or issued or renewed
during that period. 

  

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

  

	C.	Notwithstanding the above, in the event that no approval is obtained from the Illinois Department of Insurance by February 28, 2012, this Contract shall be null
and void at inception and any amounts previously paid either party shall be returned. 

  

	D.	The Reinsurer shall have the option to renew this Contract for a twelve-month period covering losses occurring during the period from January 1, 2013 through
December 31, 2013, on Policies in force at the beginning of that period, or issued or renewed during that period, at terms and participation identical to the terms of this Contract. The Reinsurer must provide the Company with 75 days notice of
its intention to exercise this option. Furthermore, the Reinsurer will have this option only in the event that the Company has not terminated the Reinsurer’s share of this Contract under the Special Termination Article of this Contract.

 ARTICLE 3 
 RETENTION AND LIMIT 
  

	A.	1. 	The Company shall cede, and the Reinsurer shall accept as reinsurance, a 10.0% quota share with respect to losses occurring on covered Policies during the period September 1, 2011 through
December 31, 2011. 

  

	 	2.	The Company shall cede, and the Reinsurer shall accept as reinsurance, a 40.0% quota share with respect to losses occurring on covered Policies during the period
January 1, 2012 through December 31, 2012. 

  

	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, shall not exceed 3.0% of Net Premiums Earned.

  

	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; 

  
 5 of 38

 

 
  
  

	 	2.	as respects Property business, $3,000,000 any one Catastrophe Loss Occurrence, and, as respects all such losses subject hereto, an amount equal to 3.0% of Gross Net
Premiums Earned Income. 

  

	D.	The Reinsurer’s liability for all losses subject hereto shall not exceed an amount equal to 117.0% of Net Premiums Earned. 

 

	E.	It is agreed that the ceded Gross Net Earned Premium Income for Policies subject to this Contract, as respects the period from January 1, 2012 through
December 31, 2012, shall not exceed a “Premium Cap” equal to $100,000,000 less the ceded Gross Net Earned Premium Income hereunder for the period from September 1, 2011 through December 31, 2011, unless accepted and approved
in writing by the Reinsurer. In the event the Premium Cap would apply, the quota share cession under subparagraph A(2) above shall be reduced to the same proportion that the Premium Cap bears to the Company’s subject Gross Net Earned Premium
Income for the period from January 1, 2012 through December 31, 2012. 

 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 

  
 6 of 38

 

 
  

	 	
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 the Company’s Risk Based Capital ratio falls
below 200.0% at any time during the term of this Contract. 

  

	D.	For purposes of this Article, a “Change in Control”, as respects a party to this Contract, means that a Person has entered into an agreement or understanding
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%. For the purposes of this
paragraph, a “Person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated entity or governmental entity. 

 

	E.	 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 

  
 7 of 38

 

 
  

	 	
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: 

  
 8 of 38

 

 
  
  

	 	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. 

  
 9 of 38

 

 
  
  

	 	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 
 The Company shall cede to the
Reinsurer its quota share percentage of the Gross Net Written Premium Income collected by the Company for subject Policies issued or renewed during the period from September 1, 2011 through December 31, 2011. However, the unearned portion
thereof, as of December 31, 2011, shall be returned by the Reinsurer. At December 31, 2011, the Company shall then cede the Reinsurer’s quota share percentage of the unearned portion, as of that date, of the Gross Net Written Premium
Income for subject Policies in force as of that date. Furthermore, the Company shall cede to the Reinsurer its quota share percentage of the Gross 

  
 10 of 38

 

 
  
 
Net Written Premium Income collected by the Company after December 31, 2011, for subject Policies issued or renewed after that date. The Reinsurer’s quota share percentages applicable
to subject Policies shall be determined in accordance with the Retention and Limit Article. 
 ARTICLE 11 

PROVISIONAL CEDING COMMISSION 
  

	A.	The Reinsurer shall allow the Company a provisional ceding commission of 28.50% 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 in accordance with the provisions set forth herein. The adjusted commission rate shall be calculated as
follows and be applied to Net Premiums Earned: 

  

	 	1.	if the ratio of Losses Incurred to Net Premiums Earned is 73.00% or greater, the adjusted commission rate shall be 21.00%; 

 

	 	2.	if the ratio of Losses Incurred to Net Premiums Earned is less than 73.00%, but not less than 58.00%, the adjusted commission rate shall be 21.00%, plus 100.00% of the
difference in percentage points between 73.00% and the actual ratio of Losses Incurred to Net Premiums Earned; 

  

	 	3.	if the ratio of Losses Incurred to Net Premiums Earned is 58.00% or less, the adjusted commission rate shall be 36.00%. 

 

	B.	Within 30 days after the end of each calendar quarter, beginning with the calendar quarter ending 12 months after expiration or termination of this Contract, until all
losses subject hereto have been finally settled, the Company shall calculate and report the adjusted commission on Net Premiums Earned. If the adjusted commission on Net Premiums Earned is less than commissions previously allowed by the Reinsurer on
Net Premiums Earned, the Company shall remit the difference to the Reinsurer with its report. If, for any calculation more than 24 months after expiration or termination of this Contract, the adjusted commission on Net Premiums Earned is greater
than commissions previously allowed by the Reinsurer on Net Premiums Earned, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report. 

  
 11 of 38

 

 
  
 ARTICLE 13

 PROFIT SHARING 
  

	A.	Simultaneously with commutation of this Contract, a profit commission calculation shall be prepared by the Company, based on cumulative transactions hereunder from the
inception of this Contract through the date of calculation, including the commutation amount. The Reinsurer shall pay to the Company a profit commission of 25.00% of the amount, if any, by which 58.00% of Net Premium Earned exceeds Losses Incurred
for the term of this Contract. 

  

	B.	The profit commission payment shall be equal to: 

  

	 	1.	100.0% of the profit commission, if this Contract is commuted as of December 31, 2014 or an earlier date; 

 

	 	2.	50.0% of the profit commission, if this Contract is commuted as of July 1, 2015 or an earlier date but not prior to January 1, 2015; 

 

	 	3.	0.0% of the profit commission, if this Contract is commuted after July 1, 2015. 

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 summarizing: 

 

	 	1.	Gross Net Written Premium Income during the month; 

  

	 	2.	reinsurance premium on Gross Net Written Premium Income collected 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. 

  
 12 of 38

 

 
  
 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, and showing such
reserves separately for business assumed from Old American. 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 December 31, 2011, the Company shall report to the Reinsurer the unearned premium for subject business in force as of
December 31, 2011. Simultaneously with the Reinsurer’s return of the ceded unearned premium, less provisional ceding commission thereon, in accordance with the Premium Article, the Company shall pay to the Reinsurer its increased quota
share percentage of such unearned premium (in accordance with paragraph A(2) of the Retention and Limit Article), less the provisional ceding commission thereon. Such payment shall take place within five business days after the Company’s
receipt of the returned ceded unearned premium from the reinsurer under its Automobile Liability Quota Share Reinsurance Contract, effective January 1, 2011 through December 31, 2011. 

 

	D.	An accounting reconciliation between collected Gross Net Written Premium Income and actual Gross Net Written Premium Income shall be performed by the Company within 90
days after expiration of this Contract, 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” menas 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; 

  
 13 of 38

 

 
  
  

	 	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.	“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. 

  

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

 

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

  

	F.	“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 as of the same date. 

  

	G.	“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. 

  
 14 of 38

 

 
  
 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. 

  
 15 of 38

 

 
  
 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.

  
 16 of 38

 

 
  
 ARTICLE 21

 ALTERNATE PAYEE 
  

	A.	It is understood that this Contract reinsures policies assumed by the Company from Old American. This Article shall only apply if the Reinsurer does not satisfy the
Reinsurer’s obligations to the Company regarding the risks assumed by the Reinsurer that represent a portion of the policies assumed by the Company from Old American. The Reinsurer’s obligations shall be limited to and shall be applied in
accordance with the terms of this Contract. 

  

	B.	Now, therefore, it is agreed that in the event of the insolvency and appointment of a conservator, liquidator or statutory successor of the Company and to the extent
that the Reinsurer has not satisfied the Reinsurer’s obligations outlined in Paragraph A above, Old American shall be substituted for the Company as payee of any reinsurance recoverable hereunder in respect of any claim or claims made against
policies originally issued by Old American, and the Reinsurer, upon notice from Old American, shall make payment thereof directly to Old American. 

  

	C.	In the event the foregoing provisions apply, all the other provisions of this Contract shall apply to Old American in the same manner as if Old American were
substituted for the Company as the reinsured party hereunder, and to the extent this Contract reinsures Old American, coverage hereunder shall be excluded as respects the Company. 

ARTICLE 22 

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 are to be commuted at the end
of any calendar quarter on or after December 31, 2013. 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 

  
 17 of 38

 

 
  

	 	
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. However, the Reinsurer shall not disagree if the ratio of Losses Incurred to Net Premiums Earned is less than 58.00% as of the date of commutation. 

 

	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 hereunder. 

 ARTICLE 23 
 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 24 
 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. 

  
 18 of 38

 

 
  

	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 25 

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 26 
 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. The Reinsurer shall provide funding separately for (1) the Reinsurer’s Obligations
related to business ceded by the Company to 

  
 19 of 38

 

 
  

	 	
the Reinsurer that was originally assumed by the Company from Old American County Mutual Fire Insurance Company, and (2) all other Reinsurer’s Obligations not described in
(1) above. The separate funding requirement shall continue until all Losses Incurred under the Contract have been fully settled or the Contract is commuted in accordance with the Commutation Article or the Company advises the Reinsurer in
writing that separate funding is no longer required. The separate funding requirement shall continue in the event of insolvency of the Company or the Reinsurer and shall continue if the Contract is terminated in accordance with the Special
Termination Article. 

  

	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 containing provisions acceptable to
the insurance regulatory authorities having jurisdiction over the Company’s reserves 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; 

  
 20 of 38

 

 
  

	 	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 27 
 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. 

  
 21 of 38

 

 
  

	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
28 
 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 29 

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 subject to the business ceded to this Contract; 

  
 22 of 38

 

 
  

	 	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 30 
 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.

  
 23 of 38

 

 
  
 ARTICLE 31

 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 

  
 24 of 38

 

 
  

	 	
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 Insurance 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 32 

ARBITRATION 
  

	A.	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. 

  
 25 of 38

 

 
  

	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. 

  
 26 of 38

 

 
  
  

	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 33 
 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. 

  
 27 of 38

 

 
  

	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 34 
 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 35 
 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 36 

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. 

  
 28 of 38

 

 
  
 ARTICLE 37

 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 9th day of November, in the year of 2011. 
 AFFIRMATIVE INSURANCE
COMPANY 
 

 
  
  

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  
 29 of 38

 

 
  
 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. 

  
 30 of 38

 

 
  

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

  

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

  

	7.	Reassured to be sole judge of what constitutes: 

  

	 	(a)	substantial quantities, and 

  

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

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

 

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

  

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

 12/12/57 
 NMA 1119 

 
  
  

					
	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.

  
 31 of 38

 

 
  
 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. 

  
 32 of 38

 

 
  

	(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, 

  
 33 of 38

 

 
  
 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

  
 34 of 38

 

 
  
 
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. 

  
 35 of 38

 

 
  
  

	(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.

 21/9/67 
 NMA
1590 (amended) 

  
 36 of 38

 

 
  
 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. 

  
 37 of 38

 

 
  
  

	 	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. If such ceding insurer is subject to the commercial domicile laws or regulations of another state, such laws or regulations shall apply to the extent not in conflict with those of such ceding
insurer’s domicile. 

  
 38 of 38

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00196-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00196-of-00352.parquet"}]]