Document:

exhibit101-fhcfreinsuran

                                                                                                                                                                                               FHCF Supplement Layer                               Reinsurance Contract                              Effective:  June 1, 2020                               FedNat Insurance Company                                  Sunrise, Florida                                                                         _______________________   Certain identified information has been omitted from this exhibit because it is not material and  would be competitively harmful if publicly disclosed.  Redactions are indicated by [***].           20\F7V1085                                                                                   

 

                                                                                                                 Table of Contents                                                                                    Article                                                                  Page     1   Classes of Business Reinsured                                       1     2   Commencement and Termination                                        1     3   Territory                                                           2     4   Exclusions                                                          3     5   Retention and Limit                                                 4     6   Other Reinsurance                                                   5     7   Definitions                                                         5     8   Loss Occurrence                                                     6     9   Loss Notices and Settlements                                        6    10   Cash Call                                                           7    11   Salvage and Subrogation                                             7    12   Reinsurance Premium                                                 7    13   Sanctions                                                           8    14   Late Payments                                                       8    15   Offset                                                              9    16   Access to Records                                                   9    17   Liability of the Reinsurer                                         10    18   Net Retained Lines (BRMA 32E)                                      10    19   Errors and Omissions (BRMA 14F)                                    10    20   Currency (BRMA 12A)                                                10    21   Taxes (BRMA 50B)                                                   11    22   Federal Excise Tax (BRMA 17D)                                      11    23   Reserves                                                           11    24   Insolvency                                                         12    25   Arbitration                                                        13    26   Service of Suit (BRMA 49C)                                         14    27   Severability (BRMA 72E)                                            14    28   Governing Law (BRMA 71B)                                           14    29   Confidentiality                                                    15    30   Non-Waiver                                                         16    31   Notices and Contract Execution                                     16    32   Intermediary                                                       16         20\F7V1085                                                                                   

 

                                                                                                              FHCF Supplement Layer                               Reinsurance Contract                               Effective: June 1, 2020                               entered into by and between                                FedNat Insurance Company                                  Sunrise, Florida                       (hereinafter referred to as the "Company")                                         and                         The Subscribing Reinsurer(s) Executing the                         Interests and Liabilities Agreement(s)                                  Attached Hereto                       (hereinafter referred to as the "Reinsurer")        Article 1 - Classes of Business Reinsured   By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the  Company under its policies in force at the effective time and date hereof or issued or renewed at  or after that time and date, and classified by the Company as Property business, including but  not limited to, Dwelling Fire, Inland Marine, Mobile Home, Commercial and Homeowners  business (including any business assumed from Citizens Property Insurance Corporation),  subject to the terms, conditions and limitations hereinafter set forth.      Article 2 - Commencement and Termination   A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2020,     with respect to losses arising out of loss occurrences commencing at or after that time and     date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2021.    B. Notwithstanding the provisions of paragraph A above, the Company may terminate a     Subscribing Reinsurer's percentage share in this Contract at any time by giving written     notice to the Subscribing Reinsurer in the event any of the following circumstances occur:        1. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the         Subscribing Reinsurer's accounting system) at the inception of this Contract has been         reduced by 20.0% or more of the amount of surplus (or the applicable equivalent)         12 months prior to that date; or        2. The Subscribing Reinsurer's policyholders' surplus (or its equivalent under the         Subscribing Reinsurer's accounting system) at any time during the term of this         Contract has been reduced by 20.0% or more of the amount of surplus (or the         applicable equivalent) at the date of the Subscribing Reinsurer's most recent financial         statement filed with regulatory authorities and available to the public as of the         inception of this Contract; or   20\F7V1085  Page 1                                                                                     

 

                                                                                        3. The Subscribing Reinsurer's A.M. Best's rating has been assigned or downgraded         below A- and/or Standard & Poor's rating has been assigned or downgraded below         BBB+; or        4. The Subscribing Reinsurer has become, or has announced its intention to become,         merged with, acquired by or controlled by any other entity or individual(s) not         controlling the Subscribing Reinsurer's operations previously; or        5. A State Insurance Department or other legal authority has ordered the Subscribing         Reinsurer to cease writing business; or        6. The Subscribing Reinsurer has become insolvent or has been placed into liquidation,         receivership, supervision, administration, winding-up or under a scheme of         arrangement, or similar proceedings (whether voluntary or involuntary) or proceedings         have been instituted against the Subscribing Reinsurer for the appointment of a         receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in         bankruptcy, or other agent known by whatever name, to take possession of its assets         or control of its operations; or        7. The Subscribing Reinsurer has reinsured its entire liability under this Contract without         the Company's prior written consent; or        8. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty         treaty reinsurance business; or        9. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is         compensated on a contingent basis or is otherwise provided with financial incentives         based on the quantum of claims paid; or       10. The Subscribing Reinsurer has failed to comply with the funding requirements set forth         in the Reserves Article.    C. The "term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern     Standard Time, June 1, 2020 to 12:01 a.m., Eastern Standard Time, June 1, 2021.      However, if this Contract is terminated, the "term of this Contract" as used herein shall     mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2020 to the effective     time and date of termination.    D. If this Contract is terminated or expires while a loss occurrence covered hereunder is in     progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions     of this Contract, be determined as if the entire loss occurrence had occurred prior to the     termination or expiration of this Contract, provided that no part of such loss occurrence is     claimed against any renewal or replacement of this Contract.      Article 3 - Territory   This Contract shall only apply to risks located in the State of Florida.     20\F7V1085  Page 2                                                                                     

 

                                                                                    Article 4 - Exclusions   A. This Contract does not apply to and specifically excludes the following:        1. Reinsurance assumed by the Company under obligatory reinsurance agreements,         except business assumed by the Company from Citizens Property Insurance         Corporation.        2. Hail damage to growing or standing crops.        3. Business rated, coded or classified as Flood insurance or which should have been         rated, coded or classified as such.        4. Business rated, coded or classified as Mortgage Impairment and Difference in         Conditions insurance or which should have been rated, coded or classified as such.        5. Title insurance and all forms of Financial Guarantee, Credit and Insolvency.        6. Aviation, Ocean Marine, Boiler and Machinery, Fidelity and Surety, Accident and         Health, Animal Mortality and Workers Compensation and Employers Liability.        7. Errors and Omissions, Malpractice and any other type of Professional Liability         insurance.         8. Loss and/or damage and/or costs and/or expenses arising from seepage and/or         pollution and/or contamination, other than contamination from smoke.  Nevertheless,         this exclusion does not preclude payment of the cost of removing debris of property         damaged by a loss otherwise covered hereunder, subject always to a limit of 25.0% of         the Company's property loss under the applicable original policy.        9. Loss or liability as excluded under the provisions of the "War Exclusion Clause"         attached to and forming part of this Contract.       10. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause - Physical         Damage - Reinsurance (U.S.A.)" attached to and forming part of this Contract.       11. Loss or liability from any Pool, Association or Syndicate and any assessment or         similar demand for payment related to the FHCF or Citizens Property Insurance         Corporation.       12. Loss or liability of the Company arising by contract, operation of law, or otherwise,         from its participation or membership, whether voluntary or involuntary, in any         insolvency fund.  "Insolvency fund" includes any guaranty fund, insolvency fund, plan,         pool, association, fund or other arrangement, however denominated, established or         governed, which provides for any assessment of or payment or assumption by the         Company of part or all of any claim, debt, charge, fee or other obligation of an insurer,         or its successors or assigns, which has been declared by any competent authority to         be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge,         fee or other obligation in whole or in part.    20\F7V1085  Page 3                                                                                     

 

                                                                                       13. Losses in the respect of overhead transmission and distribution lines other than those         on or within 150 meters (or 500 feet) of the insured premises.       14. Mold, unless resulting from a peril otherwise covered under the policy involved.       15. Loss or liability as excluded under the provisions of the "Terrorism Exclusion" attached         to and forming part of this Contract.       16. All property loss, damage, destruction, erasure, corruption or alteration of Electronic         Data from any cause whatsoever (including, but not limited to, Computer Virus) or loss         of use, reduction in functionality, cost, expense or whatsoever nature resulting         therefrom, unless resulting from a peril otherwise covered under the policy involved.           "Electronic Data" as used herein means facts, concepts and information converted to         a form usable for communications, interpretation or processing by electronic and         electromechanical data processing or electronically-controlled equipment and includes         programs, software and other coded instructions for the processing and manipulation         of data or the direction and manipulation of such equipment.            "Computer Virus" as used herein means a set of corrupting, harmful or otherwise         unauthorized instructions or code, including a set of maliciously-introduced,         unauthorized instructions or code, that propagate themselves through a computer         system network of whatsoever nature.           However, in the event that a peril otherwise covered under the policy results from any         of the matters described above, this Contract, subject to all other terms and         conditions, will cover physical damage directly caused by such listed peril.      Article 5 - Retention and Limit   A. Subject further to the provisions of paragraph B below, the Company shall retain and be     liable for the first $275,000,000 of ultimate net loss arising out of any one loss occurrence.      The Reinsurer shall then be liable for the amount by which such ultimate net loss exceeds     the Company's retention, but the Reinsurer's liability for ultimate net loss (plus an allowance     for loss adjustment expense) shall not exceed $710,000,000 as respects all losses arising     out of loss occurrences commencing during the term of this Contract.    B. The amounts provided for in paragraph A above are based on an estimate of the     Company's Florida Hurricane Catastrophe Fund ("FHCF") Mandatory layer.  Such amounts     shall be provisional, and shall be further adjusted to the Company's actual FHCF     Mandatory layer used in its Reimbursement Contract for the 2020/2021 hurricane season     beginning on June 1, 2020 (hereinafter the "Reimbursement Contract").      20\F7V1085  Page 4                                                                                     

 

                                                                                  C. Notwithstanding the provisions of paragraphs A and B above, the following shall apply:        1. When the Company experiences ultimate net loss from one or two covered events         during the term of this Contract, the Company’s full retention shall be applied to each         of the covered events; and        2. When the Company experiences ultimate net loss from more than two covered events         during the term of this Contract, the Company’s full retention shall be applied to each         of the two covered events causing the largest ultimate net loss for the Company.  For         each other covered event resulting in ultimate net loss, the Company’s retention shall         be reduced to one - third of its full retention and applied to all other covered events.     D. No claim will be made under this Contract in any one loss occurrence unless at least two     risks insured or reinsured by the Company are involved in such loss occurrence.    E. As part of the Reinsurer's limit of liability set forth in paragraphs A and B above, the     Reinsurer shall be liable for an amount equal to 10.0% of ultimate net loss paid or to be     paid by the Reinsurer as an allowance for loss adjustment expense incurred by the     Company.      Article 6 - Other Reinsurance   The Company shall be permitted to carry other reinsurance, recoveries under which shall inure  solely to the benefit of the Company and be entirely disregarded in applying all of the provisions  of this Contract.      Article 7 - Definitions   A. "Loss in excess of policy limits" and "extra contractual obligations" as used in this Contract     shall mean:        1. "Loss in excess of policy limits" shall mean 90.0% of any amount paid or payable by         the Company in excess of its policy limits, but otherwise within the terms of its policy,         such loss in excess of the Company's policy limits having been incurred because of,         but not limited to, failure by the Company to settle within the policy limits or by reason         of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer         of settlement or in the preparation of the defense or in the trial of an action against its         insured or reinsured or in the preparation or prosecution of an appeal consequent         upon such an action.  Any loss in excess of policy limits that is made in connection         with this Contract shall not exceed 25.0% of the actual catastrophe loss.        2. "Extra contractual obligations" shall mean 90.0% of any punitive, exemplary,         compensatory or consequential damages paid or payable by the Company, not         covered by any other provision of this Contract and which arise from the handling of         any claim on business subject to this Contract, such liabilities arising because of, but         not limited to, failure by the Company to settle within the policy limits or by reason of         the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of         settlement or in the preparation of the defense or in the trial of an action against its   20\F7V1085  Page 5                                                                                     

 

                                                                                         insured or reinsured or in the preparation or prosecution of an appeal consequent         upon such an action.  An extra contractual obligation shall be deemed, in all         circumstances, to have occurred on the same date as the loss covered or alleged to         be covered under the policy.  Any extra contractual obligations that are made in         connection with this Contract shall not exceed 25.0% of the actual catastrophe loss.       Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess     of policy limits or any extra contractual obligation incurred by the Company as a result of     any fraudulent and/or criminal act by any officer or director of the Company acting     individually or collectively or in collusion with any individual or corporation or any other     organization or party involved in the presentation, defense or settlement of any claim     covered hereunder.    B. "Policies" as used in this Contract shall mean all policies, contracts and binders of     insurance or reinsurance.    C. "Ultimate net loss" as used in this Contract shall mean the sum or sums (including loss in     excess of policy limits and extra contractual obligations, as defined herein) paid or payable     by the Company in settlement of claims and in satisfaction of judgments rendered on     account of such claims, after deduction of all salvage, all recoveries and all claims on     inuring insurance or reinsurance, whether collectible or not.  Nothing herein shall be     construed to mean that losses under this Contract are not recoverable until the Company's     ultimate net loss has been ascertained.      Article 8 - Loss Occurrence   A. "Loss occurrence" as used in this Contract shall mean the sum of individual insured losses     incurred under Policies resulting from the same covered event.    B. "Covered event" as used in this Contract shall mean any one storm declared to be a     hurricane by the National Hurricane Center of the National Weather Service or any other     division of the National Weather Service, operated by the National Oceanographic and     Atmospheric Administration of the United States Government (NHC) which causes insured     losses in Florida.  A covered event begins when a hurricane causes damage in Florida     while it is a hurricane and continues throughout any subsequent downgrades in storm     status by the National Hurricane Center regardless of whether the hurricane makes landfall.      Any storm, including a tropical storm, which does not become a hurricane is not a covered     event.      Article 9 - Loss Notices and Settlements   A. Whenever losses sustained by the Company are reserved by the Company for an amount     greater than 50.0% of the Company's retention hereunder and/or appear likely to result in a     claim under this Contract, the Company shall notify the Subscribing Reinsurers and shall     provide updates related to development of such losses.  The Reinsurer shall have the right     to participate in the adjustment of such losses at its own expense.      20\F7V1085  Page 6                                                                                     

 

                                                                                  B. All loss settlements made by the Company, provided they are within the terms of this     Contract and the terms of the original policy (with the exception of loss in excess of policy     limits or extra contractual obligations coverage, if any, under this Contract), shall be binding     upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable,     including the associated allowance for loss adjustment expense, upon receipt of reasonable     evidence of the amount paid by the Company.      Article 10 - Cash Call   Notwithstanding the provisions of the Loss Notices and Settlements Article, upon the request of  the Company, the Reinsurer shall pay any amount with regard to a loss settlement or  settlements (including the associated allowance for loss adjustment expense) that are  scheduled to be made (including any payments projected to be made) within the next 20 days  by the Company, subject to receipt by the Reinsurer of a satisfactory proof of loss.  Such agreed  payment shall be made within 10 days from the date the demand for payment was transmitted  to the Reinsurer.      Article 11 - Salvage and Subrogation   The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by  the Company, less the actual cost, excluding salaries of officials and employees of the  Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making  such recovery) on account of claims and settlements involving reinsurance hereunder.  Salvage  thereon shall always be used to reimburse the excess carriers in the reverse order of their  priority according to their participation before being used in any way to reimburse the Company  for its primary loss.  The Company hereby agrees to enforce its rights to salvage or subrogation  relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all  claims arising out of such rights, if, in the Company's opinion, it is economically reasonable to  do so.      Article 12 - Reinsurance Premium   A. As premium for reinsurance coverage provided by this Contract, the Company shall pay the     Reinsurer a premium equal to the product of the following (or a pro rata portion thereof in     the event the term of this Contract is less than 12 months):        1. A factor of 1.11; times        2. The final rate on line determined in accordance with the Company's Reimbursement         Contract; times        3. The Company's actual limit under the FHCF Mandatory layer used in its         Reimbursement Contract.    B. The Company shall pay the Reinsurer an annual deposit premium of $[***], in four equal     installments of $[***] on July 1 and October 1 of 2020, and on January 1 and April 1 of    20\F7V1085  Page 7                                                                                     

 

                                                                                     2021.  However, in the event this Contract is terminated, there shall be no deposit premium     installments due after the effective date of termination.    C. On or before May 31, 2021, the Company shall provide a report to the Reinsurer setting     forth the premium due hereunder for the term of this Contract, computed in accordance with     paragraph A above, and any additional premium due the Reinsurer or return premium due     the Company shall be remitted promptly.      Article 13 - Sanctions   Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under  this Contract if it would result in a violation of any mandatory sanction, prohibition or restriction  under United Nations resolutions or the trade or economic sanctions, laws or regulations of the  European Union, United Kingdom or United States of America that are applicable to either party.      Article 14 - Late Payments   A. The provisions of this Article shall not be implemented unless specifically invoked, in     writing, by one of the parties to this Contract.    B. In the event any premium, loss or other payment due either party is not received by the     intermediary named in the Intermediary Article (hereinafter referred to as the     "Intermediary") by the payment due date, the party to whom payment is due may, by     notifying the Intermediary in writing, require the debtor party to pay, and the debtor party     agrees to pay, an interest charge on the amount past due calculated for each such payment     on the last business day of each month as follows:        1. The number of full days which have expired since the due date or the last monthly         calculation, whichever the lesser; times        2. 1/365ths of the six-month United States Treasury Bill rate as quoted in The Wall Street         Journal on the first business day of the month for which the calculation is made; times        3. The amount past due, including accrued interest.       It is agreed that interest shall accumulate until payment of the original amount due plus     interest charges have been received by the Intermediary.    C. The establishment of the due date shall, for purposes of this Article, be determined as     follows:        1. As respects the payment of routine deposits and premiums due the Reinsurer, the due         date shall be as provided for in the applicable section of this Contract.  In the event a         due date is not specifically stated for a given payment, it shall be deemed due 30 days         after the date of transmittal by the Intermediary of the initial billing for each such         payment.      20\F7V1085  Page 8                                                                                     

 

                                                                                      2. Any claim or loss payment due the Company hereunder shall be deemed due 10 days         after the proof of loss or demand for payment is transmitted to the Reinsurer.  If such         loss or claim payment is not received within the 10 days, interest will accrue on the         payment or amount overdue in accordance with paragraph B above, from the date the         proof of loss or demand for payment was transmitted to the Reinsurer.        3. As respects any payment, adjustment or return due either party not otherwise         provided for in subparagraphs 1 and 2 of this paragraph C, the due date shall be as         provided for in the applicable section of this Contract.  In the event a due date is not         specifically stated for a given payment, it shall be deemed due 10 days following         transmittal of written notification that the provisions of this Article have been invoked.       For purposes of interest calculations only, amounts due hereunder shall be deemed paid     upon receipt by the Intermediary.    D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from     contesting the validity of any claim, or from participating in the defense of any claim or suit,     or prohibiting either party from contesting the validity of any payment or from initiating any     arbitration or other proceeding in accordance with the provisions of this Contract.  If the     debtor party prevails in an arbitration or other proceeding, then any interest charges due     hereunder on the amount in dispute shall be null and void.  If the debtor party loses in such     proceeding, then the interest charge on the amount determined to be due hereunder shall     be calculated in accordance with the provisions set forth above unless otherwise     determined by such proceedings.  If a debtor party advances payment of any amount it is     contesting, and proves to be correct in its contestation, either in whole or in part, the other     party shall reimburse the debtor party for any such excess payment made plus interest on     the excess amount calculated in accordance with this Article.    E. Interest charges arising out of the application of this Article that are $1,000 or less from any     party shall be waived unless there is a pattern of late payments consisting of three or more     items over the course of any 12-month period.      Article 15 - Offset   The Company and the Reinsurer may offset any balance or amount due from one party to the  other under this Contract or any other contract heretofore or hereafter entered into between the  Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.  The  provisions of this Article shall not be affected by the insolvency of either party.      Article 16 - Access to Records   The Reinsurer or its designated representatives shall have access at any reasonable time to all  records of the Company which pertain in any way to this reinsurance, provided the Reinsurer  gives the Company at least 15 days prior notice of request for such access.  However, a  Subscribing Reinsurer or its designated representatives shall not have any right of access to the  records of the Company if it is not current in all undisputed payments due the Company.   "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not  contested in writing to the Company specifying the reason(s) why the payments are disputed.     20\F7V1085  Page 9                                                                                     

 

                                                                                      Article 17 - Liability of the Reinsurer   A. The liability of the Reinsurer shall follow that of the Company in every case and be subject     in all respects to all the general and specific stipulations, clauses, waivers and modifications     of the Company's policies and any endorsements thereon.  However, in no event shall this     be construed in any way to provide coverage outside the terms and conditions set forth in     this Contract.    B. Nothing herein shall in any manner create any obligations or establish any rights against     the Reinsurer in favor of any third party or any persons not parties to this Contract.      Article 18 - Net Retained Lines (BRMA 32E)   A. This Contract applies only to that portion of any policy which the Company retains net for its     own account (prior to deduction of any underlying reinsurance specifically permitted in this     Contract), and in calculating the amount of any loss hereunder and also in computing the     amount or amounts in excess of which this Contract attaches, only loss or losses in respect     of that portion of any policy which the Company retains net for its own account shall be     included.    B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not     be increased by reason of the inability of the Company to collect from any other     reinsurer(s), whether specific or general, any amounts which may have become due from     such reinsurer(s), whether such inability arises from the insolvency of such other     reinsurer(s) or otherwise.      Article 19 - Errors and Omissions (BRMA 14F)   Inadvertent delays, errors or omissions made in connection with this Contract or any transaction  hereunder shall not relieve either party from any liability which would have attached had such  delay, error or omission not occurred, provided always that such error or omission is rectified as  soon as possible after discovery.      Article 20 - Currency (BRMA 12A)   A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they shall be     construed to mean United States Dollars and all transactions under this Contract shall be in     United States Dollars.    B. Amounts paid or received by the Company in any other currency shall be converted to     United States Dollars at the rate of exchange at the date such transaction is entered on the     books of the Company.        20\F7V1085  Page 10                                                                                     

 

                                                                                  Article 21 - Taxes (BRMA 50B)   In consideration of the terms under which this Contract is issued, the Company will not claim a  deduction in respect of the premium hereon when making tax returns, other than income or  profits tax returns, to any state or territory of the United States of America or the District of  Columbia.      Article 22 - Federal Excise Tax (BRMA 17D)   A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the     applicable percentage of the premium payable hereon (as imposed under Section 4371 of     the Internal Revenue Code) to the extent such premium is subject to the Federal Excise     Tax.    B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct     the applicable percentage from the return premium payable hereon and the Company or its     agent should take steps to recover the tax from the United States Government.      Article 23 - Reserves   A. The Reinsurer agrees to fund its share of amounts, including but not limited to, the     Company's ceded unearned premium and outstanding loss and the allowance for loss     adjustment expense reserves (including all case reserves plus any reasonable amount     estimated to be unreported from known loss occurrences) (hereinafter referred to as     "Reinsurer's Obligations") by:        1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if         confirmation is required by the insurance regulatory authorities involved, by a bank or         banks meeting the NAIC Securities Valuation Office credit standards for issuers of         letters of credit and acceptable to said insurance regulatory authorities; and/or        2. Escrow accounts for the benefit of the Company; and/or        3. Cash advances;       if the Reinsurer:        1. Is unauthorized in any state of the United States of America or the District of Columbia         having jurisdiction over the Company and if, without such funding, a penalty would         accrue to the Company on any financial statement it is required to file with the         insurance regulatory authorities involved; or        2. Has an A.M. Best Company's rating equal to or below B++ at the inception of this         Contract.       The Reinsurer, at its sole option, may fund in other than cash if its method and form of     funding are acceptable to the insurance regulatory authorities involved.     20\F7V1085  Page 11                                                                                     

 

                                                                                  B. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of     credit will be in a form acceptable to insurance regulatory authorities involved, will be issued     for a term of at least one year and will include an "evergreen clause," which automatically     extends the term for at least one additional year at each expiration date unless written     notice of non-renewal is given to the Company not less than 30 days prior to said expiration     date.  The Company and the Reinsurer further agree, notwithstanding anything to the     contrary in this Contract, that said letters of credit may be drawn upon by the Company or     its successors in interest at any time, without diminution because of the insolvency of the     Company or the Reinsurer, but only for one or more of the following purposes:        1. To reimburse itself for the Reinsurer's share of unearned premiums returned to         insureds on account of policy cancellations, unless paid in cash by the Reinsurer;        2. To reimburse itself for the Reinsurer's share of losses and/or the allowance for loss         adjustment expense paid under the terms of policies reinsured hereunder, unless paid         in cash by the Reinsurer;        3. To reimburse itself for the Reinsurer's share of any other amounts claimed to be due         hereunder, unless paid in cash by the Reinsurer;        4. To fund a cash account in an amount equal to the Reinsurer's share of amounts,         including but not limited to, the Reinsurer's Obligations as set forth above, funded by         means of a letter of credit which is under non-renewal notice, if said letter of credit has         not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;        5. To refund to the Reinsurer any sum in excess of the actual amount required to fund         the Reinsurer's share of amounts, including but not limited to, the Reinsurer's         Obligations as set forth above, if so requested by the Reinsurer.       In the event the amount drawn by the Company on any letter of credit is in excess of the     actual amount required for B(1), B(2) or B(4), or in the case of B(3), the actual amount     determined to be due, the Company shall promptly return to the Reinsurer the excess     amount so drawn.      Article 24 - Insolvency   A. In the event of the insolvency of the Company, this reinsurance shall be payable directly to     the Company or to its liquidator, receiver, conservator or statutory successor on the basis of     the liability of the Company without diminution because of the insolvency of the Company or     because the liquidator, receiver, conservator or statutory successor of the Company has     failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver,     conservator or statutory successor of the Company shall give written notice to the     Reinsurer of the pendency of a claim against the Company indicating the policy or bond     reinsured which claim would involve a possible liability on the part of the Reinsurer within a     reasonable time after such claim is filed in the conservation or liquidation proceeding or in     the receivership, and that during the pendency of such claim, the Reinsurer may investigate     such claim and interpose, at its own expense, in the proceeding where such claim is to be     adjudicated, any defense or defenses that it may deem available to the Company or its     liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the   20\F7V1085  Page 12                                                                                     

 

                                                                                     Reinsurer shall be chargeable, subject to the approval of the Court, against the Company     as part of the expense of conservation or liquidation to the extent of a pro rata share of the     benefit which may accrue to the Company solely as a result of the defense undertaken by     the Reinsurer.    B. Where two or more Subscribing Reinsurers are involved in the same claim and a majority in     interest elect to interpose defense to such claim, the expense shall be apportioned in     accordance with the terms of this Contract as though such expense had been incurred by     the Company.    C. It is further understood and agreed that, in the event of the insolvency of the Company, the     reinsurance under this Contract shall be payable directly by the Reinsurer to the Company     or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of     the New York Insurance Law or except (1) where this Contract specifically provides another     payee of such reinsurance in the event of the insolvency of the Company or (2) where the     Reinsurer with the consent of the direct insured or insureds has assumed such policy     obligations of the Company as direct obligations of the Reinsurer to the payees under such     policies and in substitution for the obligations of the Company to such payees.      Article 25 - Arbitration   A. As a condition precedent to any right of action hereunder, in the event of any dispute or     difference of opinion hereafter arising with respect to this Contract, it is hereby mutually     agreed that such dispute or difference of opinion shall be submitted to arbitration.  One     Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall     be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active     or retired disinterested executive officers of insurance or reinsurance companies or Lloyd's     London Underwriters.  In the event that either party should fail to choose an Arbiter within     30 days following a written request by the other party to do so, the requesting party may     choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration.  If     the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their     appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of     whom the other shall decline, and the decision shall be made by drawing lots.    B. Each party shall present its case to the Arbiters within 30 days following the date of     appointment of the Umpire.  The Arbiters shall consider this Contract as an honorable     engagement rather than merely as a legal obligation and they are relieved of all judicial     formalities and may abstain from following the strict rules of law.  The decision of the     Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the     Umpire and the decision of the majority shall be final and binding upon both parties.      Judgment upon the final decision of the Arbiters may be entered in any court of competent     jurisdiction.    C. If more than one Subscribing Reinsurer is involved in the same dispute, all such     Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party     for purposes of this Article and communications shall be made by the Company to each of     the Subscribing Reinsurers constituting one party, provided, however, that nothing herein     shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint,    20\F7V1085  Page 13                                                                                     

 

                                                                                     defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers     participating under the terms of this Contract from several to joint.    D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with     the other the expense of the Umpire and of the arbitration.  In the event that the two     Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the     Umpire and the arbitration shall be equally divided between the two parties.    E. Any arbitration proceedings shall take place at a location mutually agreed upon by the     parties to this Contract, but notwithstanding the location of the arbitration, all proceedings     pursuant hereto shall be governed by the law of the state in which the Company has its     principal office.      Article 26 - Service of Suit (BRMA 49C)   (Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not  authorized in any State, Territory or District of the United States where authorization is required  by insurance regulatory authorities)    A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due     hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a     court of competent jurisdiction within the United States.  Nothing in this Article constitutes or     should be understood to constitute a waiver of the Reinsurer's rights to commence an     action in any court of competent jurisdiction in the United States, to remove an action to a     United States District Court, or to seek a transfer of a case to another court as permitted by     the laws of the United States or of any state in the United States.    B. Further, pursuant to any statute of any state, territory or district of the United States which     makes provision therefor, the Reinsurer hereby designates the party named in its Interests     and Liabilities Agreement, or if no party is named therein, the Superintendent,     Commissioner or Director of Insurance or other officer specified for that purpose in the     statute, or his successor or successors in office, as its true and lawful attorney upon whom     may be served any lawful process in any action, suit or proceeding instituted by or on     behalf of the Company or any beneficiary hereunder arising out of this Contract.      Article 27 - Severability (BRMA 72E)   If any provision of this Contract shall be rendered illegal or unenforceable by the laws,  regulations or public policy of any state, such provision shall be considered void in such state,  but this shall not affect the validity or enforceability of any other provision of this Contract or the  enforceability of such provision in any other jurisdiction.      Article 28 - Governing Law (BRMA 71B)   This Contract shall be governed by and construed in accordance with the laws of the State of  Florida.     20\F7V1085  Page 14                                                                                     

 

                                                                                    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, including all information obtained through any     audits and any claims information between the Company and the Reinsurer, and any     submission or other materials relating to any renewal (hereinafter referred to as     "Confidential Information") are proprietary and confidential to the Company.      B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any     Confidential Information to any third parties, including but not limited to the Reinsurer's     subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates,     underwriting agencies, research organizations, any unaffiliated entity engaged in modeling     insurance or reinsurance data, and statistical rating organizations.      C. Confidential Information may be used by the Reinsurer only in connection with the     performance of its obligations or enforcement of its rights under this Contract and will only     be disclosed when required by (1) retrocessionaires subject to the business ceded to this     Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial     condition, (3) external auditors performing an audit of the Reinsurer's records in the normal     course of business, or (4) the Reinsurer's legal counsel; provided that the Reinsurer     advises such parties of the confidential nature of the Confidential Information and their     obligation to maintain its confidentiality.  The Company may require that any third-party     representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article     or by a separate written confidentiality agreement, containing terms no less stringent than     those set forth in this Article.  If a third-party representative of the Reinsurer is not bound, in     writing, by this Confidentiality Article or by a separate written confidentiality agreement, the     Reinsurer shall be responsible for any breach of this provision by such third-party     representative of the Reinsurer.    D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other     legal process or any regulatory authority to release or disclose any or all of the Confidential     Information, the Reinsurer agrees to provide the Company with written notice of same at     least 10 days prior to such release or disclosure, to the extent legally permissible, and to     use its best efforts to assist the Company in maintaining the confidentiality provided for in     this Article.    E. Any disclosure of Non-Public Personally Identifiable Information shall comply with all state     and federal statutes and regulations governing the disclosure of Non-Public Personally     Identifiable Information.  "Non-Public Personally Identifiable Information" shall be defined as     this term or a similar term is defined in any applicable state, provincial, territory, or federal     law.  Disclosing or using this information for any purpose not authorized by applicable law is     expressly forbidden without the prior consent of the Company.    F. The parties agree that any information subject to privilege, including the attorney-client     privilege or attorney work product doctrine (collectively "Privilege") shall not be disclosed to     the Reinsurer until, in the Company's opinion, such Privilege is deemed to be waived or     otherwise compromised by virtue of its disclosure pursuant to this Contract.  Furthermore,     the Reinsurer shall not assert that any Privilege otherwise applicable to the Confidential   20\F7V1085  Page 15                                                                                     

 

                                                                                     Information has been waived or otherwise compromised by virtue of its disclosure pursuant     to this Contract.      G. The provisions of this Article shall extend to the officers, directors and employees of the     Reinsurer and its affiliates, and shall be binding upon their successors and assigns.      Article 30 - Non-Waiver   The failure of the Company or Reinsurer to insist on compliance with this Contract or to exercise  any right, remedy or option hereunder shall not:  (1) constitute a waiver of any rights contained  in this Contract, (2) prevent the Company or Reinsurer from thereafter demanding full and  complete compliance, (3) prevent the Company or Reinsurer from exercising such remedy in  the future, nor (4) affect the validity of this Contract or any part thereof.      Article 31 - Notices and Contract Execution   A. Whenever a notice, statement, report or any other written communication is required by this     Contract, unless otherwise specified, such notice, statement, report or other written     communication may be transmitted by certified or registered mail, nationally or     internationally recognized express delivery service, personal delivery, electronic mail, or     facsimile.  With the exception of notices of termination, first class mail is also acceptable.    B. The use of any of the following shall constitute a valid execution of this Contract or any     amendments thereto:        1. Paper documents with an original ink signature;        2. Facsimile or electronic copies of paper documents showing an original ink signature;         and/or        3. Electronic records with an electronic signature made via an electronic agent.  For the         purposes of this Contract, the terms "electronic record," "electronic signature" and         "electronic agent" shall have the meanings set forth in the Electronic Signatures in         Global and National Commerce Act of 2000 or any amendments thereto.    C. This Contract may be executed in one or more counterparts, each of which, when duly     executed, shall be deemed an original.      Article 32 - Intermediary   Aon Benfield Inc., or one of its affiliated corporations duly licensed as a reinsurance  intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business  hereunder.  All communications (including but not limited to notices, statements, premiums,  return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss  settlements) relating to this Contract will be transmitted to the Company or the Reinsurer  through the Intermediary.  Payments by the Company to the Intermediary will be deemed  payment to the Reinsurer.  Payments by the Reinsurer to the Intermediary will be deemed   20\F7V1085  Page 16                                                                                     

 

                                                                                  payment to the Company only to the extent that such payments are actually received by the  Company.      In Witness Whereof, the Company by its duly authorized representative has executed this  Contract as of the date specified below:    This 2nd day of April in the year 2020.    FedNat Insurance Company    /s/ Mike Braun    20\F7V1085  Page 17                                                                                     

 

                                                                                                              War Exclusion Clause        As regards interests which at time of loss or damage are on shore, no liability shall attach hereto  in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of  foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or  confiscation by order of any government or public authority.       20\F7V1085                                                                      

 

                                                                                                                                      Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)      1.   This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or       Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.    2.   Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or       liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against       Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:           I.  Nuclear reactor power plants including all auxiliary property on the site, or          II.  Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor             installations, and "critical facilities" as such, or          III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material,"             and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or         IV.   Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other             products of nuclear fission.    3.   Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or       liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer,       from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and       which normally would be insured therewith except that this paragraph (3) shall not operate         (a)   where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or         (b)   where said insurance contains a provision excluding coverage for damage to property caused by or resulting from             radioactive contamination, however caused.  However on and after 1st January 1960 this sub-paragraph (b) shall only             apply provided the said radioactive contamination exclusion provision has been approved by the Governmental             Authority having jurisdiction thereof.    4.   Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or       liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer,       when such radioactive contamination is a named hazard specifically insured against.    5.   It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear       exposure is not considered by the Reassured to be the primary hazard.    6.   The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law       amendatory thereof.    7.   Reassured to be sole judge of what constitutes:         (a)   substantial quantities, and         (b)   the extent of installation, plant or site.    Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that         (a)   all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other             provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of             this Clause shall apply.         (b)   with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be             free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first             occurs whereupon all the provisions of this Clause shall apply.    12/12/57  N.M.A. 1119  BRMA 35B     20\F7V1085                                                                                                       

 

                                                                                                             Terrorism Exclusion                           (Property Treaty Reinsurance)        Notwithstanding any provision to the contrary within this Contract or any amendment thereto, it  is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused  by, contributed to by, resulting from or arising out of or in connection with any act of terrorism,  as defined herein, regardless of any other cause or event contributing concurrently or in any  other sequence to the loss.    An act of terrorism includes any act, or preparation in respect of action, or threat of action  designed to influence the government de jure or de facto of any nation or any political division  thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public  or a section of the public of any nation by any person or group(s) of persons whether acting  alone or on behalf of or in connection with any organization(s) or government(s) de jure or  de facto, and which:        1. Involves violence against one or more persons, or        2. Involves damage to property; or        3. Endangers life other than the person committing the action; or        4. Creates a risk to health or safety of the public or a section of the public; or        5. Is designed to interfere with or disrupt an electronic system.    This Contract also excludes loss, damage, cost or expense directly or indirectly caused by,  contributed to by, resulting from or arising out of or in connection with any action in controlling,  preventing, suppressing, retaliating against or responding to any act of terrorism.    Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this  Contract, in respect only of personal lines, this Contract will pay actual loss or damage (but not  related cost and expense) caused by any act of terrorism provided such act is not directly or  indirectly caused by, contributed to by, resulting from or arising out of or in connection with  radiological, biological, chemical, or nuclear pollution or contamination.                                  20\F7V1085                                                                                   

 

                                                                                 The Interests and Liabilities Agreements, constituting 6 pages in total, have been omitted from  this exhibit because such agreements are not material and would be competitively harmful if  publicly disclosed.    20\F7V1085exhibit102-reimbursement

                                                                     RON DESANTIS                       STATE BOARD OF ADMINISTRATION                    GOVERNOR                                                                         CHAIR                                   OF FLORIDA                                                                                                     JIMMY PATRONIS                                                                    CHIEF FINANCIAL OFFICER                            1801 HERMITAGE BOULEVARD, SUITE 100                                            TALLAHASSEE, FLORIDA 32308             ASHLEY MOODY                                                                      ATTORNEY GENERAL                                       (850) 488-4406                                                                                            ASHBEL C. WILLIAMS                                  POST OFFICE BOX 13300              EXECUTIVE DIRECTOR &                                        32317-3300                   CHIEF INVESTMENT OFFICER                                                                  REIMBURSEMENT CONTRACT                                                                         Effective:  June 1, 2020                                   (“Contract”)                                                                              between                                                                                 1                                   (“Company”)                                                                              NAIC #2                                                                                and       THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (“SBA”)    WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (“FHCF”)    PREAMBLE           Section 215.555, Florida Statutes creates the FHCF and directs the SBA to administer the FHCF. This  Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory  FHCF coverage, and Addenda, is subject to Section 215.555, Florida Statutes, and to any administrative  rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principal  document are equally applicable to each Addendum unless specifically superseded by one of the Addenda.  In consideration of the promises set forth in this Contract, the parties agree as follows:     ARTICLE I - SCOPE OF AGREEMENT  As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the  SBA in a specified format the business it writes which is described in this Contract as Covered Policies.  The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides                                                     1 FedNat Insurance Company; Monarch National Insurance Company; or Maison Insurance Company  2 FedNat Insurance Company--10790; Monarch National Insurance Company--15715; Maison Insurance Company-- 14568                                          1                                    FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

reimbursement to the Company under certain circumstances, as described herein, and does not provide or  extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall  reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at  the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each  Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter  defined.   ARTICLE II - PARTIES TO THE CONTRACT  This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies  under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any  insured of the Company, any claimant against an insured of the Company, or any other third party have any  rights under this Contract, except as provided in Article XV. The SBA will disburse funds only to the  Company, except as provided for in Article XV. The Company shall not, without the prior approval of the  Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other  consideration any sums the FHCF pays under this Contract or the right to receive such sums.    ARTICLE III – TERM; EXECUTION   (1) Term     This  Contract  applies to  Losses  from  Covered  Events  which  commence  during  the  period  from     12:00:01 a.m.,  Eastern  Time,  June 1, 2020,  to  12:00  midnight,  Eastern  Time,  May  31, 2021 (the     “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after     the effective time and date of expiration or termination. Should this Contract expire or terminate while     a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the     same manner and to the same extent it would have been responsible had the Contract expired the day     following the conclusion of the Covered Event in progress.  (2) Mandatory Nature of this Contract     (a) Statutory Requirement        This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in        fulfillment of the statutory requirement that the SBA enter into a Contract with each Company        writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must        enter into such a Contract with each such Company, and each such Company must enter into the        Contract  as  a  condition  of  doing  business  in  Florida.  Under Section 215.555(16)(c),  Florida        Statutes, Companies writing  Covered  Policies  must  execute  the Contract  by  March  1  of  the        immediately preceding Contract Year.                                                   2                                    FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

                   (b) Duty  to  Provide  a  Fully  and  Timely  Executed  Copy  of  this  Contract  to  the  FHCF        Administrator        The  Company  must  provide  a fully executed  copy  of  this  Contract  in  electronic  form  to  the        Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New        Participant, no later than 30 days after the New Participant began writing Covered Policies.   (3) Contract Deemed Executed Notwithstanding Execution Errors     Except with respect to New Participants, this Contract is deemed to have been executed by the Company     as  of  the  March 1  statutory  deadline,  notwithstanding  the  fact  that  the  Coverage  Level  election  in     Article XX(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the     Contract on the part of the Company may have lacked the requisite authority. With respect to New     Participants, this Contract is deemed to have been executed by the New Participant as of the date on     which the New Participant began writing Covered Policies; coverage shall be determined as provided     in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write     Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or     if the executed Contract includes an invalid Coverage Level election under Article XX, the Company’s     Coverage Level shall be deemed as follows:      (a) For a Company that is a member of a National Association of Insurance Commissioners (NAIC)        group, the same Coverage Level selected by the other Companies of the same NAIC group shall be        deemed. If executed Contracts for none of the members of an NAIC group have been received by        the FHCF Administrator, the Coverage Level from the prior Contract Year shall be deemed.      (b) For a Company that is not a member of an NAIC group under which other Companies are active        participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.     (c) For a New Participant that is a member of an NAIC group, the same Coverage Level selected by        the other Companies of the same NAIC group shall be deemed.     (d) For a New Participant that is not a member of an NAIC group under which other Companies are        active participants in the FHCF, the 45%, 75% or 90% Coverage Levels may be selected if the        FHCF Administrator receives executed Contracts within 30 calendar days after the effective date        of the first Covered Policy, otherwise, the 45% Coverage Level shall be deemed to have been        selected.   ARTICLE IV - LIABILITY OF THE FHCF                                            3                                    FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

  (1) The SBA shall reimburse the Company with respect to each Covered Event commencing during the       Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s       Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable       Coverage Level, plus 10% of the reimbursed Losses as a Loss Adjustment Expense Allowance, the       total of which shall not exceed the Company’s Limit.     (2) Section 215.555(4)(c)1., Florida Statutes provides that the obligation of the FHCF with respect to all       Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of       the FHCF up to a specified dollar limit.      (3) In order to assure that reimbursements do not exceed the statutory limit on the obligation of the FHCF       provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered       Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event.       The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed       the  Projected  Payout  Multiple  as calculated  based  on  the  capacity  needed  to  provide  the  FHCF’s       coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall       reduce the projected payout factors or multiples for determining each participating insurer’s projected       payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.     (4) Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from       other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to       further reimbursements.    ARTICLE V - DEFINITIONS   As used in this Contract, the following words and phrases are defined to mean:  (1)  Actual Claims-Paying Capacity of the FHCF       This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any       reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of       revenue bonds under Section 215.555(6), Florida Statutes.  (2)  Actuarially Indicated        This term means an amount determined according to principles of actuarial science to be adequate, but       not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including       additional amounts if needed to pay debt service on revenue bonds and to provide required debt service       coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined       according  to  principles  of  actuarial  science  to  reflect  each  insurer’s  relative  exposure  to  hurricane       losses.                                               4                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

                (3)  Additional Living Expense (ALE)       ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential       Structure or its contents. Fair rental value, loss of rents, or business interruption losses are not covered       by the FHCF.    (4)  Administrator       This term means the entity with which the SBA contracts to perform administrative tasks associated       with the operations of the FHCF. The current Administrator is Paragon Strategic Solutions Inc., 8200       Tower, 5600 West 83rd Street, Suite 1100, Minneapolis, Minnesota 55437. The telephone number is       (800) 689-3863, and the facsimile number is (800) 264-0492.  (5)  Authorized Insurer           This term is defined in Section 624.09(1), Florida Statutes.  (6)  Balance of the Fund as of December 31 or Fund Balance        This term means the amount of assets available to pay claims resulting from Covered Events which       occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or       proceeds from other financing mechanisms.  (7)  Borrowing Capacity       This term means the amount of funds which are able to be raised by the issuance of revenue bonds or       through other financing mechanisms, less bond issuance expenses and reserves.   (8)  Citizens Property Insurance Corporation (Citizens)       This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida       Statutes.  For  the  purposes of the  FHCF,  Citizens  Property  Insurance  Corporation  incorporates  two       accounts, (a) the coastal account and (b) the personal lines and commercial lines accounts. Each account       is treated by the FHCF as if it were a separate participating insurer with its own reportable exposures,       Reimbursement Premium, Retention, and Ultimate Net Loss.  (9)  Covered Event       This term means any one storm declared to be a hurricane by the National Hurricane Center which       causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida       while it is a hurricane and continues throughout any subsequent downgrades in storm status by the       National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a       tropical storm, which does not become a hurricane is not a Covered Event.  (10) Coverage Level                                               5                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

     This term means the level of reimbursement (90%, 75%, or 45%), as elected by the Company under       Article XX or deemed under Article III(3), which is used in determining reimbursement under Article       IV.         (11) Covered Policy       (a) Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean          only that portion of a binder, policy or contract of insurance that insures real or personal property          located in the State of Florida to the extent such policy insures a Residential Structure or the          contents of a Residential Structure, located in the State of Florida.         (b) 1. Covered  Policy  also  includes  any  collateral  protection  insurance  policy  covering  personal             residences which protects both the borrower’s and the lender’s financial interest, in an amount             at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy,             if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes.             A Company will be deemed to be able to accurately report data if the company submits the             required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.           2. The SBA finds that the replacement cost value of a dwelling is the functional equivalent of the             dwelling coverage  amount under the lapsed homeowner’s  policy and  that coverage  in the             amount of the replacement cost value fulfills the legislative intent that collateral protection             policies are to be covered by the FHCF only when they protect the borrower’s interest in the             dwelling to the same extent as a traditional residential policy. Therefore, for purposes of this             definition  of Covered Policy,  a  collateral  protection policy  is  deemed  to  be  written  in  an             amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s             policy if the dwelling coverage amount is either:             a.  Equal  to  or  greater  than  the  amount  of  dwelling  coverage  in  place  under  the  “lapsed                homeowner’s policy,” i.e., the last residential policy placed by the borrower; or             b. Equal to or greater than 100% of the replacement cost value of the dwelling, as                  determined under a methodology approved in advance as required by the Data Call. For                the purpose of this determination, “replacement cost value” means the cost to replace the                dwelling on the same premises, without deduction for depreciation, with material of like                kind and quality and for like use.       (c) Covered Policy does not include any policy or exposure excluded under Article VI.   (12) Deductible Buy-Back Policy                                               6                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

     This term means a specific policy that provides coverage to a policyholder for some portion of the       policyholder’s deductible under a policy issued by another insurer.                       (13) Estimated Claims-Paying Capacity of the FHCF       This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year,       plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity       of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.   (14) Excess Policy       This term means, for the purposes of this Contract, a policy that provides insurance protection for large       commercial property risks and that provides a layer of coverage above a primary layer (which is insured       by a different insurer) that acts much the same as a very large deductible.    (15) Insurer Group       For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group       means the group designation assigned by the National Association of Insurance Commissioners (NAIC)       for regulatory purposes. A Company is a member of a group as designated by the NAIC until such       Company is assigned another group designation or is no longer a member of a group.  (16) Limit       This term means the maximum amount that a Company may recover under this Contract, calculated by       multiplying the Company’s Reimbursement Premium by the Payout Multiple.  (17) Loss        This term means an incurred loss under a Covered Policy from a Covered Event, including Additional       Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents       and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does       not include allocated or unallocated loss adjustment expenses or any item for which this Contract does       not provide reimbursement pursuant to the exclusions in Article VI.   (18) Loss Adjustment Expense Allowance       (a) The Loss Adjustment Expense Allowance is equal to 10% of the reimbursed Losses under this          Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.          (b) The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable          to a Company.  (19) New Participant         This term means a Company that begins writing Covered Policies on or after the beginning of the       Contract Year. A Company that removes Covered Policies from Citizens pursuant to an assumption                                              7                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

     agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also       considered a New Participant.  (20) Payout Multiple       This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes,       which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total       aggregate  industry  Reimbursement  Premium  for  the  FHCF  for  the  Contract  Year  billed  as  of       December 31  of  the  Contract  Year.  The  final  Payout  Multiple  is  determined  once  Reimbursement       Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.  (21) Premium Formula        This  term  means  the  Formula  developed  pursuant  to  Section  215.555(5)(b),  Florida  Statutes,  and       approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement       Premium to be paid to the FHCF.  (22) Projected Payout Multiple       The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section       215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated       single  season  Claims-Paying  Capacity  of  the  FHCF  by  the  estimated  total  aggregate  industry       Reimbursement  Premium  for  the  FHCF  for  the  Contract  Year.  The  Company’s  Reimbursement       Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to       estimate the Company’s coverage from the FHCF for the Contract Year.  (23) Reimbursement Premium or Premium       These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000       of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes,       by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.  (24) Residential Structure       In  general,  this  term  means  a  unit  or  building  used  exclusively  or predominantly  for  dwelling  or       habitational occupancies, including the primary structure and appurtenant structures insured under the       same Covered Policy and any other structures covered under endorsements associated with the Covered       Policy covering the Residential Structure.        (a) With respect to a unit or home insured under a personal lines residential policy form, such unit or          home is deemed to have a habitational occupancy and to be a Residential Structure regardless of          the term of its occupancy.       (b) With respect to a condominium structure or complex insured under a commercial lines policy, such          structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless          of the term of occupancy of individual units.                                               8                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

     (c) A  single  structure  which includes  a  mix  of  commercial  habitational  and  commercial  non-         habitational  occupancies,  and  is  insured  under  a  commercial  lines  policy,  is  considered  a          Residential  Structure  if  50%  or  more  of  the  total  insured  value  of  the  structure  is  used  for          habitational occupancies.        (d) Residential Structures do not include any structures excluded under Article VI.  (25) Retention       This term means the amount of Losses from a Covered Event which must be incurred by the Company       before it is eligible for reimbursement from the FHCF.       (a) When the Company incurs Losses from one or two Covered Events during the Contract Year,          the Company’s full Retention shall be applied to each of the Covered Events.        (b) When the Company incurs Losses from more than two Covered Events during the Contract Year,          the Company’s full Retention shall be applied to each of the two Covered Events causing the          largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s          Retention shall be reduced to one-third of its full Retention.            1. All reimbursement of Losses for each Covered Event shall be based on the Company’s full             Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-            third of the full Retention shall be made on or after January 1 of the Contract Year provided             the Company reports its Losses as specified in this Contract.          2. Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses             as reported on the Company’s Proof of Loss Reports, but shall not include incurred but not             reported Losses. The Company’s Proof of Loss Reports shall be used to determine which             Covered  Events  constitute  the  Company’s  two  largest  Covered  Events.  After  this  initial             determination, any subsequent adjustments shall be made quarterly by the SBA only if the             Proof of Loss Reports reveal that loss development patterns have resulted in a change in the             order of Covered Events entitled to the reduction to one-third of the full Retention.       (c) The  Company’s  full  Retention  is  established  in  accordance  with  the  provisions  of  Section          215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by          the Company’s Reimbursement Premium for the Contract Year.    (26) Retention Multiple       (a) The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the          Company’s Retention. The Retention Multiple for the 2020/2021 Contract Year shall be equal to          $4.5 billion, adjusted based upon the reported exposure for the 2018/2019 Contract Year to reflect          the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry                                              9                                    FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

        Reimbursement Premium at the 90% Coverage Level for the Contract Year as determined by the          SBA.        (b) The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company          under this Contract as follows:          1. If the Company elects the 90% Coverage Level, the adjusted Retention Multiple is 100% of the             amount determined under paragraph (a);          2. If the Company elects the 75% Coverage Level, the adjusted Retention Multiple is 120% of the             amount determined under paragraph (a); or           3. If the Company elects the 45% Coverage Level, the adjusted Retention Multiple is 200% of the             amount determined under paragraph (a).  (27) Ultimate Net Loss       (a) This term means all Losses under Covered Policies in force at the time of a Covered Event prior to          the application of the Company’s Retention and Coverage Level, and excluding loss adjustment          expense and any exclusions under Article VI.          (b) In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be          reduced by the deductibles applicable under the policy to the hurricane loss, which must first be          applied to the portion of the Loss covered by the FHCF.       (c) Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from          such Loss to arrive at the amount of liability attaching hereunder.       (d) All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under          this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all          necessary adjustments shall be made by the parties hereto.       (e) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the          Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such          subrogation. The Company further agrees to undertake such actions as may be necessary to enforce          its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any          claim, loss, or payment arising out of a Covered Event.      ARTICLE VI – EXCLUSIONS    This Contract does not provide reimbursement for:    (1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a       loss under the first-party property section of a policy pertaining strictly to the structure, its contents,       appurtenant structures, or ALE coverage.     (2) Any policy which excludes wind or hurricane coverage.                                              10                                   FHCF-2020K                                                                    Rule 19-8.010 F.A.C.                                                                                                                             

 

(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined     by the FHCF.  (4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess        Policy issued by a different insurer;     (b) Any policy providing a layer of windstorm or hurricane coverage for a particular structure above        or below a layer of windstorm or hurricane coverage under a separate policy issued by a different        insurer, or any other circumstance in which two or more insurers provide primary windstorm or        hurricane coverage for a single structure using separate policy forms;      (c) Any other policy providing a layer of windstorm or hurricane coverage for a particular structure        below a layer of self-insured windstorm or hurricane coverage for the same structure; or     (d) The exclusions in this subsection do not apply to primary quota share policies written by Citizens        Property Insurance Corporation under Section 627.351(6)(c)2., Florida Statutes.  (5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income,     or business interruption.     (6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in     Article V(11)(b).   (7) Any reinsurance assumed by the Company.  (8) Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does     not apply to any policy identified as covering a residential condominium association or to any policy     on which the insured is a residential condominium association.  (9) Retail, office, mercantile, or manufacturing facilities, or other similar structures.  (10) Any exposure for condominium or homeowner associations if no Residential Structures are insured     under the policy.   (11) Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral     part of a retirement community consisting primarily of habitational structures that are not nursing     homes will not be subject to this exclusion.    (12) Any exposure under commercial policies covering only appurtenant structures or structures that do not     function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).  (13) Policies covering only Additional Living Expense.  (14) Any exposure for barns or barns with apartments or living quarters.                                           11                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

(15) Any exposure for builders risk coverage or new Residential Structures under construction.  (16) Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment)     requiring licensing.  (17) Any liability of the Company for extra contractual obligations or liabilities in excess of original policy     limits.  This  exclusion  includes,  but  is  not  limited  to,  amounts  paid  as  bad  faith  awards,  punitive     damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of     the coverage limits under the Covered Policy.   (18) Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event,     including individual coverage limits (i.e., building, appurtenant structures, contents, and additional     living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer,     including, but not limited to, a  discount on or waiver of an  applicable  deductible. This  exclusion     includes overpayments of a specific individual coverage limit even if total payments under the policy     are within the aggregate policy limit.  (19) Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in     excess of the Additional Living Expense exposure reported for that policy under the Data Call for the     applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract     Year).     (20) Any losses which the Company’s claims files do not adequately support. Claim file support shall be     deemed adequate if in compliance with the Records Retention Requirements outlined on the Form     FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.  (21) Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss     assessments or under similar coverages for contractual liabilities.   (22) Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c),     Florida Statutes.   (23) Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception:  Covered     Policies assumed from Citizens under the terms and conditions of an executed assumption agreement     between the Company and Citizens are covered by this Contract.   (24) All liability of the Company arising by contract, operation of law, or otherwise, from its participation     or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes     any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever     denominated,  established  or  governed,  which  provides  for  any  assessment  of  or  payment  or                                           12                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

   assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an     insurer,  or  its  successors  or  assigns,  which  has  been  declared  by  any  competent  authority  to  be     insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation     in whole or in part.    (25) Property losses that are proximately caused by any peril other than a Covered Event, including, but     not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event,     or any liability of the  Company for loss or damage  caused by or resulting from nuclear reaction,     nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate     or  remote,  and  regardless  of  any  other  cause  or  event  contributing  concurrently  or  in  any  other     sequence to the loss.  (26) Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of     water, storm surge, or spray from any of these, whether or not driven by wind.  (27) A policy providing personal property coverage separate from coverage of personal property included     in a homeowner’s, mobile home owner’s, condominium unit owner’s, or tenant’s policy or other policy     covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal     property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type     of policy that does not meet the definition of covered policy.  (28) Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property     meeting the following requirements:     (a) An endorsement  predominantly  covering  Specialized  Fine  Arts  Risks  and  not  covering  any        Residential  Structure  if  it  meets  the  description  in  subparagraph  1  and  if  the  conditions  in        subparagraph 2 are met.        1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement           that:           a. Insures works  of art, of rarity, or of historic  value, such  as paintings,  works  on paper,              etchings,  art  glass  windows,  pictures,  statuary,  sculptures,  tapestries,  antique  furniture,              antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;           b. Charges a minimum premium of $500; and            c. Insures scheduled items valued, in the aggregate, at no less than $100,000.        2. The insurer offers specialized loss prevention services or other collector services designed to           prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance           purposes, such as:                                          13                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

         a. Collection risk assessments;           b. Fire and security loss prevention;           c. Warehouse inspections to protect items stored off-site;           d. Assistance with collection inventory management; or           e. Collection valuation reviews.     (b) An endorsement generally used by the Company to cover personal property which could include        property of a collectible nature, including fine arts, as further described in this paragraph, either        on a scheduled basis or written under a blanket limit, and not covering anything other than personal        property. All such endorsements are subject to the exclusion provided in this paragraph when the        endorsement limit equals or exceeds $500,000. Generally such collectible property has unusually        high values due to its investible, artistic, or unique intrinsic nature. The class of property covered        under such an endorsement represents an unusually high exposure value and such endorsement is        intended to provide coverage for a class or classes of property that is not typical for the contents        coverage under residential property insurance policies. In many cases property may be located at        various locations either in or outside the state of Florida or the location of the property may change        from time to time. The investment nature of such property distinguishes this type of exposure from        the typical contents associated with a Covered Policy.  (29) Any losses under liability coverages.   ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES  The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses  by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be  binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIII relating  to inspection of records and examinations.   ARTICLE VIII –REIMBURSEMENT ADJUSTMENTS  Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess  reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements  are those payments made to the Company by the SBA that are in excess of the Company’s coverage under  the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple  or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation  of  Reimbursement  Premium  or  Retention,  incorrect  Proof  of  Loss  Reports,  incorrect  calculation  of  reinsurance  recoveries,  or  subsequent  readjustment  of  policyholder  claims,  including  subrogation  and  salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date                                          14                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

for adjustments along with the interest due thereon through the due date. The applicable interest rate for  interest credits, and for interest charges for adjustments beyond the Company’s control, will be the average  rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest  rate for interest charges on excess reimbursements due to adjustments resulting from incorrect exposure  submissions or Proof of Loss Reports will accrue at this rate plus 5%. All interest will continue to accrue if  not paid by the due date.     ARTICLE IX - REIMBURSEMENT PREMIUM  (1) The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract     Year. The  Reimbursement  Premium  for  the  Contract  Year  shall  be  calculated  in  accordance  with     Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).  (2) The  Company’s  Reimbursement  Premium  is  based  on  its  June  30  exposure  in  accordance  with     Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an     increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement     Premium  adjusted  when  the  Company  cancels  policies  or  is  liquidated  or  otherwise  changes  its     business  status  (merger,  acquisition,  or  termination)  or  stops  writing  new  business  (continues  in     business with its policies in a runoff mode). Similarly, new business written after June 30 will not     increase or decrease the Company’s FHCF Reimbursement Premium or impact its FHCF coverage.     FHCF  Reimbursement  Premiums  are  required  of  all  Companies  based  on  their  writing Covered     Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in     Section 215.555(2)(m), Florida Statutes, shall exist for the entirety of the Contract Year regardless of     exposure changes, except as provided for New Participants under Article X.    (3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their     Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A     Company  may choose  to estimate its  own Reimbursement Premium installments.  However, if the     Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge     will  accrue  on  the  difference  between  the  estimated  Reimbursement  Premium  and  the  final     Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that     estimated Reimbursement Premium as the second installment as well, which will be considered as an     estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium     if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment     as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional     Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not                                           15                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

   accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an     interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on     Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of     the  Contract  Year.  An  interest  credit  will  be  applied  for  any  Reimbursement  Premium  which  is     overpaid  as  either  an  estimate  or  as  a  provisional  Reimbursement  Premium.  Interest  shall  not  be     credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be     the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The     applicable interest rate for interest charges will accrue at this rate plus 5%.   ARTICLE X - REPORTS AND REMITTANCES  (1) Exposures     (a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall        report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily        required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area        as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract        Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted        for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format        specified by the SBA.     (b) If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of        the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract        Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values        under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental        Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule        19-8.029, F.A.C., and other data or information in the format specified by the SBA.     (c) If the Company first begins writing Covered Policies on December 1 through and including May        31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to        the SBA.     (d) The requirement that a report is due on a certain date means that the report shall be received by the        SBA no later than 4 p.m. Eastern Time on the due date. Reports sent to the FHCF Administrator in        Minneapolis, Minnesota, will be returned to the sender. Reports not in the physical possession of        the SBA by 4 p.m., Eastern Time, on the applicable due date are late.  (2) Reimbursement Premium     (a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay        the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and                                          16                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

   December 1  of  the  Contract  Year in  amounts  to  be  determined  by  the  FHCF. However,  if the     Company’s  Reimbursement  Premium  for  the  prior  Contract  Year  was  less  than  $5,000,  the     Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement     Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. the     Company  will  be  invoiced  for  amounts  due,  if  any,  beyond  the  provisional  Reimbursement     Premium payment, on or before December 1 of the Contract Year.    (b) If the Company is under administrative supervision, or if any control or oversight of the Company     has been transferred through any legal or regulatory action to a state regulator or court appointed     receiver or rehabilitator (referred to in the aggregate as “state action”):      1. The full annual provisional Reimbursement Premium as billed and any outstanding balances        will be due and payable on August 1, or the date that such State action occurs after August 1        of the Contract Year.     2. Failure  by  such  Company  to  pay  the  full  annual  provisional  Reimbursement  Premium  as        specified in subparagraph 1. by the applicable due date shall result in the 45% Coverage Level        being deemed for the complete Contract Year regardless of the level selected for the Company        through the execution of this Contract and regardless of whether a Covered Event occurred or        triggered coverage.       3. Subparagraphs 1. and 2.  do not apply if the state regulator, receiver, or rehabilitator provides        a letter of assurance to the FHCF stating that the Company will have the resources and will pay        the full Reimbursement Premium for the Coverage Level selected through the execution of this        Contract.     4. When  control  or  oversight  has  been  transferred,  in  whole  or  in  part,  through  a  legal  or        regulatory action, the controlling management of the Company shall specify by August 1 or as        soon thereafter as possible (but not to exceed two weeks after any regulatory or legal action) in        a letter to the FHCF as to the Company’s intentions to either pay the full FHCF Reimbursement        Premium as specified in subparagraph 1., to default to the 45% Coverage Level being deemed        as specified in subparagraph 2., or to provide the assurances as specified in subparagraph 3.      (c) A  New  Participant  that  first  begins  writing  Covered  Policies  on  or  after  June  1  but  prior  to     December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of     $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.     The Administrator shall calculate the Company's actual Reimbursement Premium for the period     based on its actual exposure as of November 30 of the Contract Year, as reported on or before     February 1 of the Contract Year. To recognize that New Participants have limited exposure during                                                    17                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

      this  period,  the  actual  Reimbursement  Premium  as  determined  by  processing  the  Company's        exposure  data  shall  then  be divided  in  half,  the  provisional  Reimbursement  Premium  shall  be        credited, and the resulting amount shall be the total Reimbursement Premium due for the Company        for the  remainder  of the  Contract  Year.  However,  if that  amount  is  less  than  $1,000,  then  the        Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of        the Contract Year. The Company’s Retention and coverage will be determined based on the total        Reimbursement Premium due as calculated above.     (d) A New Participant that first begins writing Covered Policies on or after December 1 through and        including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000        no later than 30 days from the date the New Participant began writing Covered Policies.     (e) The  requirement  that  the  Reimbursement  Premium  is  due  on  a  certain  date  means  that  the        Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited        to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable        to the particular installment.      (f) Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following        sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract        Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract        Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be        used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to        Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be        used  for  payments  relating  to  such  revenue  bonds  in  the  event  emergency  assessments  are        insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-       event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used        shall  be  returned,  without  interest,  to  the  Fund  when  emergency  assessments  or  other  legally        available funds remain available after making payment relating to the post-event revenue bonds        and any other purposes for which emergency assessments were levied.  (3) Losses     (a) In General         Losses resulting from a Covered Event commencing during the Contract Year shall be reported by        the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute,        this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota        share  primary  insurance  agreement(s)  with  Citizens  Property  Insurance  Corporation  Coastal        Account, Citizens and the Company shall report only their respective portion of Losses under the                                           18                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

   quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes,     the SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the     FHCF, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one     Contract Year.   (b) Loss Reports     1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from        each Covered Event to provide information to the SBA in determining any potential liability        for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-       L1A,  adopted  for  the  Contract  Year  under Rule  19-8.029,  F.A.C.  Interim  Loss  Reports        (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than        fourteen days from the date of the notice from the SBA that such a report is required.       2. FHCF reimbursements will be issued based on Ultimate Net Loss information reported by the        Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under        Rule 19-8.029, F.A.C.          a. To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures           of two executive officers authorized by the Company to sign or submit the report.         b. The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for           the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof           of Loss Report for a specific Covered Event that qualifies the Company for reimbursement           under that Covered Event, and must be prepared to supply a Detailed Claims Listing for           any subsequent Proof of Loss Report upon request.          c. While the Company may submit a Proof of Loss Report requesting reimbursement at any           time following a Covered Event, the Company shall submit a mandatory Proof of Loss           Report for each Covered Event no later than December 31 of the Contract Year during           which the Covered Event occurs using the most current data available, regardless of the           amount  of  Ultimate  Net  Loss  or  the  amount  of  reimbursements  or  advances  already           received.         d. The Company shall submit its Proof of Loss Reports by each quarter-end or year-end using           the most current data available, but with an “as of” date not more than sixty days prior to           the applicable quarter-end or year-end date.        e. For the Proof of Loss Reports due by December 31 of the Contract Year and the required           subsequent annual reports required under subparagraph 4., the Company shall include a           Detailed Claims Listing if requested by the SBA.                                                    19                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

3. Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until all     Losses resulting from a Covered Event are fully discharged including any adjustments to such     Losses due to salvage or other recoveries, or the Company has received its full coverage under     the Contract Year in which the Covered Event occurred. Guidelines follow:       a. Quarterly Proof of Loss  Reports are due by March 31 from a  Company whose Losses        exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Covered Event.     b. Quarterly Proof of Loss Reports are due by June 30 from all Companies regardless of the        amount  of  Ultimate  Net  Loss  or  the  amount  of  reimbursements  or  advances  already        received.     c. Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from a        Company  whose  Losses  exceed,  or  are  expected  to  exceed,  its  FHCF  Retention  for  a        specific Covered Event, except as required under subparagraph 4.     If the Company’s Retention must be recalculated as the result of an exposure resubmission,     and  if the  recalculated  Retention  changes  the  FHCF’s  reimbursement  obligations,  then  the     Company  shall  submit  additional  Proof  of  Loss  Reports  for  recalculation  of  the  FHCF’s     obligations.   4. The  Company shall submit  a mandatory  Proof  of  Loss  Report for  each  Covered  Event by     June 30  and  December 31 of  each  calendar  year following  the  end  of  the  Contract  Year,     regardless  of  whether the Company’s  Losses  exceed,  or  are  expected  to  exceed,  its  FHCF     Retention for a specific Covered Event. This Proof of Loss Report filing requirement shall     continue until the earlier of the commutation process described in paragraph (3)(d) or until all     Losses resulting from the Covered Event are fully discharged including any adjustments to     such Losses due to salvage or other recoveries.  5. The  SBA,  except  as  noted  below,  will  determine  and  pay,  within  30  days  or  as  soon  as     practicable after receiving Proof of Loss Reports, the reimbursement amount due based on     Losses  paid  by  the  Company  to  date  and  adjustments  to this  amount  based  on  subsequent     quarterly information. The adjustments to reimbursement amounts shall require the SBA to     pay, or the Company to return, amounts reflecting the most recent determination of Losses.       a. The SBA shall have the right to consult with all relevant regulatory agencies to seek all        relevant information, and shall consider any other factors deemed relevant, prior to the        issuance of reimbursements.                                                  20                                   FHCF-2020K                                                            Rule 19-8.010 F.A.C.                                                                                                             

 

      b. The SBA shall require commercial self-insurance funds established under Section 624.462,           Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof           of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior           to the issuance of reimbursements.          c. The SBA shall have the right to conduct a claims examination prior to the issuance of any           advances  or  reimbursements  requested  by  Companies  that  have  been  placed  under           regulatory supervision by a State or where control has been transferred through any legal           or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.     6. All  Proof  of  Loss  Reports  received  will  be  compared  with  the  FHCF’s  exposure  data  to        establish  the  facial reasonableness of the  reports. The SBA  may also  review the results  of        current  and  prior  Contract  Year  exposure  and  claims  examinations  to  determine  the        reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting        these tests for reasonableness will be scheduled for reimbursement. Companies not meeting        these tests for reasonableness will be handled on a case-by-case basis and will be contacted to        provide  specific  information  regarding  their  individual  book  of  business. The  discovery  of        errors in a Company’s reported exposure under the Data Call may require a resubmission of        the  current  Contract  Year  Data  Call  which,  as  the  Data  Call  impacts  the  Company’s        Reimbursement  Premium,  Retention,  and  coverage  for  the  Contract  Year,  will  be  required        before the Company’s request for reimbursement or an advance will be fully processed by the        Administrator.   (c) Loss Reimbursement Calculations     1. In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for        a specific Covered Event before any reimbursement is payable from the FHCF for that Covered        Event. As described in Article V(25)(b), Retention adjustments will be made on or after January        1 of the Contract Year. No interest is payable on additional payments to the Company due to        this  type  of  Retention  adjustment.  Each  Company,  including  entities  created  pursuant  to        Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of        reimbursement  due  under  the individual  Company’s  Contract  up  to  the  amount  of  the        Company’s payout. If more than one Covered Event occurs in any one Contract Year, any        reimbursements due from the FHCF shall take into account the Company’s Retention for each        Covered  Event.  However, the  Company’s  reimbursements  from  the  FHCF  for  all  Covered        Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout                                                     21                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

     Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement       Premium for the Contract Year.     2. Reserve  established.  When  a  Covered  Event  occurs  in  a  subsequent  Contract  Year  when       reimbursable Losses are still being paid for a Covered Event in a previous Contract Year, the       SBA will establish a reserve for the outstanding reimbursable Losses for the previous Contract       Year, based on the length of time the Losses have been outstanding, the amount of Losses       already paid, the percentage of incurred Losses still unpaid, and any other factors specific to       the loss development of the Covered Events involved.  (d) Commutation     1. Except as provided in subparagraph 3., not less than 36 months or more than 60 months after        the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the        exception of Companies having no reportable Losses as described in sub-subparagraph a.        Otherwise, the final Proof of Loss Report(s) is required as specified in sub-subparagraph b.        The Company and SBA may mutually agree to initiate commutation after 36 months and        prior to 60 months after the end of the Contract Year. The commutation negotiations shall        begin at the later of 60 months after the end of the Contract Year or upon completion of the        FHCF claims examination for the Company and the resolution of all outstanding examination        issues.        a. If the Company’s most recently submitted Proof of Loss Report(s) indicates that it has no          Losses resulting from Covered Events during the Contract Year, the SBA shall after 36          months  request  that  the  Company  execute  a  final  commutation  agreement.  The  final          commutation agreement shall constitute a complete and final release of all obligations of          the  SBA  with  respect  to  Losses.  If  the  Company  chooses  not  to  execute  a  final          commutation  agreement,  the  SBA  shall  be  released  from  all  obligations  60  months          following the end of the Contract Year if no Proof of Loss Report indicating reimbursable          Losses had been filed and the commutation shall be deemed concluded. However, during          this  time,  if  the  Company  determines  that  it  does  have Losses to  report  for  FHCF          reimbursement, the Company must submit an updated Proof of Loss Report prior to the          end of 60 months after the Contract Year and the Company shall be required to follow the          commutation provisions and time frames otherwise specified in this section.         b. If the Company has submitted a Proof of Loss Report indicating that it does have Losses          resulting  from  a  Covered  Event  during  the  Contract  Year,  the  SBA  may  require  the          Company to submit within 30 days an updated, current Proof of Loss Report for each                                                   22                                   FHCF-2020K                                                              Rule 19-8.010 F.A.C.                                                                                                                 

 

     Covered Event during the Contract Year. The Proof of Loss Report must include all paid       Losses as well as all outstanding Losses and incurred but not reported Losses, which are       not finally settled and which may be reimbursable Losses under this Contract, and must       be  accompanied  by  supporting  documentation  (at  a  minimum  an  adjuster’s  summary       report or equivalent details) and a copy of a written opinion on the present value of the       outstanding Losses and incurred but not reported Losses by the Company’s certifying       actuary. Failure of the Company to provide an updated current Proof of Loss Report,       supporting documentation, and an opinion by the date requested by the SBA may result       in referral to the Florida Office of Insurance Regulation for a violation of the Contract.       Increases in reported paid, outstanding, or incurred but not reported Losses on original or       corrected Proof of Loss Report filings received later than 60 months after the end of the       Contract Year shall not be eligible for reimbursement or commutation.   2. Determining the present value of outstanding Losses.     a. If the Company exceeds or expects to exceed its Retention, the Company and the SBA        or their respective representatives shall attempt, by mutual agreement, to agree upon the        present value  of all outstanding Losses,  both reported and  incurred but not reported,        resulting from Covered Events during the Contract Year. The Loss valuation process        under this subparagraph may begin only after all other issues arising under this Contract        have been resolved, and shall be suspended pending resolution of any such issues that        arise during the Loss valuation process. Payment by the SBA of its portion of any amount        or amounts so mutually agreed and certified by the Company’s certifying actuary shall        constitute a complete and final release of the SBA in respect of all Losses, both reported        and unreported, under this Contract.     b. If agreement on present value cannot be reached within 90 days of the FHCF’s receipt        of the final Proof of Loss Report and supporting documentation, the Company and the        SBA may mutually appoint an actuary, adjuster, or appraiser to investigate and determine        such Losses. If both parties then agree, the SBA shall pay its portion of the amount so        determined to be the present value of such Losses.     c. If the parties fail to agree on the valuation of any Losses, then any difference in valuation        of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph.        Either the SBA or the Company may initiate the process under this subparagraph by        providing written notice to the other party stating that the parties are at an impasse with        respect to valuation of Losses and specifying the dollar amounts in dispute.                                                23                                   FHCF-2020K                                                           Rule 19-8.010 F.A.C.                                                                                                           

 

       i. One actuary shall be chosen by each party, and the third actuary shall be chosen by            those two actuaries. If either party does not appoint an actuary within 30 days after            the initiation of the process, the other party may appoint two actuaries. If the two            actuaries fail to agree on the selection of an independent third actuary within            30 days of their appointment, each of them shall name two, of whom the other shall            decline one and the decision shall be made by drawing lots.         ii. All of the actuaries shall be regularly engaged in the valuation of property claims            and  losses  and  shall  be  members  of  the  Casualty  Actuarial  Society  and  of  the            American Academy of Actuaries.         iii. None of the actuaries shall be under the control of either party to this Contract.          iv. Each party shall submit a written statement of its case to the panel of actuaries and            the opposing party no later than 30 days after the appointment of the third actuary.            Within 15 days after receiving the other party’s submission, a party may submit its            written response to the panel of actuaries and the other party. After the appointment            of the third actuary, a party may not communicate with the panel or any member of            the panel except in writing simultaneously furnished to all members of the panel and            the opposing party. Any member of the panel may present questions to be answered            by both parties, which shall be answered in writing and simultaneously furnished to            the members of the panel and the opposing party or, at the discretion of the panel,            may be  provided in a  meeting or teleconference attended  by both parties and all            members of the panel.         v. The  written  decision  of  a  majority  of  the  panel  as  to  the  disagreement  over  the            valuation of losses identified in the written notice of impasse, when filed with the            parties hereto, shall be final and binding on both parties.    d. The reasonable and customary expense of the actuaries and of the commutation (as a result       of sub-subparagraphs 2.b. and c.) shall be equally divided between the two parties. Said       commutation shall take place in Tallahassee, Florida, unless some other place is mutually       agreed upon by the Company and the SBA.  3.    The Company and SBA may mutually agree to initiate and complete a commutation for zero     dollars without being subject to the 36-month waiting period provided in subparagraph (d)1.     Such  early  commutation,  once  completed,  eliminates  the  mandatory  Proof  of  Loss  Report     requirements required under subparagraphs (b)3. and 4. for all reporting periods subsequent to     the completion of the commutation.                                                 24                                   FHCF-2020K                                                            Rule 19-8.010 F.A.C.                                                                                                             

 

      4.   Upon full execution of the commutation agreement and the issuance of the final reimbursement           payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past,           present  and  future  officers,  directors,  shareholders,  employees,  agents,  receivers,  trustees,           attorneys and its legal representatives, unconditionally and completely releases and forever           discharges the other party, its predecessors, successors, assigns, and its past, present and future           officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal           representatives from any and  all past, present, and future  rights,  liabilities,  and obligations           including,  but  not  limited  to,  payments,  claims,  debts,  demands,  causes  of  action,  costs,           disbursements,  fees,  attorneys’  fees,  expenses,  damages,  injuries,  or  losses  of  every  kind,           whether  known  or  unknown,  reported  or  unreported,  or  fixed  or  contingent,  relating  to  or           arising out of this Reimbursement Contract.  (4) Advances     (a) The SBA may make advances for loss reimbursements as defined herein, at market interest rates,        to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early        reimbursement which allows the Company to continue to pay claims in a timely manner. Advances        will be made based on the Company’s paid and reported outstanding Losses for Covered Policies        (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report, and shall        include a Loss Adjustment Expense Allowance as calculated by the FHCF. In order to be eligible        for an advance, the Company must submit its exposure data for the Contract Year as required        under subsection (1) of this Article. Except as noted below, advances, if approved, will be made        as soon as practicable  after the SBA receives a written  request, signed  by two officers of the        Company, for an advance of a specific amount and any other information required for the specific        type of advance under paragraphs (c) and (d). All reimbursements due to the Company shall be        offset against any amount of outstanding advances plus the interest due thereon.     (b) For advances or excess advances, which are advances that are in excess of the amount to which        the Company is entitled, the market interest rate shall be the prime rate as published in the Wall        Street Journal on the first business day of the Contract Year. This rate will be adjusted annually        on the first business day of each subsequent Contract Year, regardless of whether the Company        executes subsequent Contracts. In addition to the prime rate, an additional 5% interest charge will        apply on excess advances. All interest charged will commence on the date the SBA issues a check        for an advance and will cease on the date upon which the FHCF has received the Company’s Proof        of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such        reimbursement is less than the amount of outstanding advances issued to the Company, interest                                          25                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

   will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss     Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding     the  amount  of  any  outstanding  advances.  Interest  shall  be  billed  on  a  periodic  basis.  If  it  is     determined that the Company received funds in excess of those to which it was entitled, the interest     as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will     continue until the Company reimburses the FHCF for the overpayment.    (c) If  the  Company  has  an  outstanding  advance  balance  as  of  December  31  of  this  or  any  other     Contract Year, the Company is required to have an actuary certify outstanding and incurred but     not reported Losses as reported on the applicable December Proof of Loss Report.   (d) The specific type of advances enumerated in Section 215.555, Florida Statutes, follow.      1. Advances to Companies to prevent insolvency, as defined under Article XV.        a. Section  215.555(4)(e)1., Florida  Statutes,  provides  that  the SBA  shall  advance  to  the           Company amounts necessary to maintain the solvency of the Company, up to 50 percent           of the SBA’s estimate of the reimbursement due to the Company.           b. In addition to the requirements outlined in subparagraph (4)(a), the requirements for an           advance to a Company to prevent insolvency are that the Company demonstrates it is           likely to qualify for reimbursement and that the immediate receipt of moneys from the           SBA  is  likely  to  prevent  the  Company  from  becoming  insolvent,  and  the  Company           provides the following information:            i. Current assets;            ii. Current liabilities other than liabilities due to the Covered Event;            iii.  Current surplus as to policyholders;            iv. Estimate of other expected liabilities not due to the Covered Event; and            v. Amount of reinsurance available to pay claims for the Covered Event under other              reinsurance treaties.        c. The SBA’s final decision regarding an application for an advance to prevent insolvency           shall be based on whether or not, considering the totality of the circumstances, including           the SBA’s obligations to provide reimbursement for all Covered Events occurring during           the Contract Year, granting an advance is essential to allowing the entity to continue to           pay additional claims for a Covered Event in a timely manner.      2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.                                                     26                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

      a. Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity           created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the           SBA’s  estimate  of the  reimbursement due  or the  entity’s  share  of the  actual aggregate           Reimbursement Premium for that Contract Year, multiplied by the current available liquid           assets of the FHCF.          b. In  addition  to  the  requirements  outlined  in  paragraph  (4)(a),  the  requirements  for  an           advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the           entity must demonstrate to the SBA that the advance is essential to allow the entity to pay           claims for a Covered Event.       3. Advances to limited apportionment companies.        Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of        estimated reimbursement payable to limited apportionment companies.   (e) In determining whether or not to grant an advance and the amount of an advance, the SBA:      1. Shall determine whether its assets available for the payment of obligations are sufficient and         sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;        2. Shall review and consider all the information submitted by such Companies;      3. Shall review such Companies’ compliance with all requirements of Section 215.555, Florida         Statutes;      4. Shall consult with all relevant regulatory agencies to seek all relevant information;      5. Shall  review  the  damage  caused  by  the  Covered  Event  and  when  that  Covered  Event         occurred;       6. Shall  consider  whether  the  Company  has  substantially  exhausted  amounts  previously         advanced;        7. Shall consider any other factors deemed relevant; and      8. Shall require  commercial self-insurance  funds  established under section 624.462, Florida         Statutes,  to  submit  a  copy  of  written  estimates  of  expenses  in  support  of  the  amount  of         advance requested.  (f) Any  amount  advanced  by  the  SBA shall  be  used  by  the  Company  only  to  pay  claims  of its      policyholders for the Covered Event which has precipitated the immediate need to continue to      pay additional claims as they become due.                                                     27                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

(5) Inadequate Data Submissions     If exposure data or other information required to be reported by the Company under the terms of this     Contract are not received by the FHCF in the format specified by the FHCF or is inadequate to the     extent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a     resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a     resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission     fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA     requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be     $2,000.  A  resubmission  of  exposure  data  may  delay  the  processing  of  the  Company’s  request  for     reimbursement or an advance.   (6) Confidential Information/Trade Secret Information     Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under     Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are     confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a),     Art. I of the State Constitution. If other information submitted by the Company to the FHCF could     reasonably be ruled a “trade secret” as defined in Section 812.081, Florida Statutes, such information     must be clearly marked “Trade Secret Information.”     ARTICLE XI - TAXES  In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction  in respect of the Reimbursement Premium herein when making premium tax returns to the appropriate  authorities. Should any taxes be levied on the Company in respect of the Reimbursement Premium herein,  the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes.   ARTICLE XII - ERRORS AND OMISSIONS  Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company  from any liability which would attach to it hereunder if such delay, omission, or error had not been made.   ARTICLE XIII - INSPECTION OF RECORDS  The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the  Company relating to the Covered Policies under this Contract, including Company files concerning claims,  Losses,  or legal  proceedings  regarding  subrogation  or  claims  recoveries  which  involve  this  Contract,  including premium, loss records and reports involving exposure data or Losses under Covered Policies.  This  right  by  the  SBA  to  inspect,  examine,  and  verify  shall  survive  the  completion  and  closure  of  an  exposure examination or claims examination file and the termination of the Contract. The Company shall                                           28                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

have no right to re-open an exposure or claims examination once closed and the findings have been accepted  by  the  Company;  any  re-opening  shall  be  at  the  sole  discretion  of  the  SBA.  If  the  State  Board  of  Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data  submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA  may  choose  not  to  require,  or  accept,  a  resubmission  if  the  resubmission  will  result  in  additional  reimbursements to the Company.  The SBA may require any discovered errors, inadvertent omissions, and  typographical errors associated with the data reporting of insured values, discovered prior to the closing of  the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper  values. The Company shall retain its records in accordance with the requirements for records retention  regarding exposure  reports and  claims  reports  outlined herein, and in any administrative  rules  adopted  pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as  defined in definition (11)(b) of Article V, must be able to provide documentation that the policy covers  personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount  at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy or at least  equal to the replacement cost value of the dwelling, as provided in Article V(11)(b).    (1) Purpose of FHCF Examination     The purpose of the  examinations conducted by the SBA is to evaluate the accuracy of the FHCF     exposure  or  Loss  data  reported  by  the  Company.  However,  due  to  the  limited  nature  of  the     examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or     in its entirety. The Company should not rely on the FHCF to identify every type of reporting error in     its data. In addition, the reporting requirements are subject to change each Contract Year so it is the     Company’s  responsibility  to  be  familiar  with  the  applicable  Contract  Year  requirements  and  to     incorporate any changes into its data for that Contract Year. It is also the Company’s responsibility to     ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules     when reporting exposure data. The examination report is not intended to provide a legal determination     of the Company’s compliance.    (2) Examination Requirements for Exposure Verification     The Company shall retain complete and accurate records, in policy level detail, of all exposure data     submitted  to  the  SBA  in  any  Contract  Year  until  the  SBA  has  completed  its  examination  of  the     Company’s exposure submissions. The Company shall also retain complete and accurate records of     any completed exposure examination for any Contract Year in which the Company incurred Losses     until the completion of the claims examination and commutation for that Contract Year. The records     to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C.                                           29                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

A complete list of records to be retained for the exposure examination is set forth in Form FHCF- EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.                                                                             30                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

(3) Examination Requirements for Loss Reports     The  Company  shall  retain  complete  and  accurate  records  of  all  reported  Losses  and/or  advances     submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable     Losses and commutation for the Contract Year (if applicable) has been concluded. The records to be     retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1,     both adopted for the Contract Year under Rule 19-8.029, F.A.C.     (4) Examination Procedures     (a) The FHCF will send an examination notice letter to the Company providing the commencement        date  of  the  examination, the  site  of  the  examination,  any  accommodation requirements  of the        examiner, and the reports and data which must be assembled by the Company and forwarded to        the FHCF. The Company shall be prepared to choose one location in which to be examined, unless        otherwise specified by the SBA.      (b) The reports and data are required to be forwarded to the FHCF as set forth in an examination notice        letter. The  information is  then  forwarded  to  the  examiner.  If  the  FHCF receives  accurate  and        complete records as requested, the examiner will contact the Company to inform the Company as        to what policies or other documentation will be required once the examiner is on site. Any records        not required to be provided to the examiner in advance shall be made available at the time the        examiner arrives on site. Any records to support reported exposure or Losses which are provided        after  the  examiner  has  left  the  work-site  will,  at  the  SBA’s  discretion,  result  in  an  additional        examination of exposure and/or Loss records or an extension or expansion of the examination        already in progress. All costs associated with such additional examination or with the extension or        expansion of the original examination shall be borne by the Company.       (c) At the conclusion of the examiner’s work and the management review of the examiner’s report,        findings, recommendations, and work papers, the FHCF will forward an examination report to the        Company.     (d) Within 30 days from the date of the letter accompanying the examination report, the Company        must provide a written response to the FHCF. The response must indicate whether the Company        agrees  with  the  findings  and  recommendations  of  the  examination  report.  If  the  Company        disagrees with any examination findings or recommendations, the reason for the disagreement        must be outlined in the response and the Company must provide supporting information to support        its objection. An extension of 30 days may be granted if the Company can show that the need for        additional  time  is  due  to  circumstances  beyond  the  reasonable  control  of  the  Company.  No        response is required if the examination report does not include any findings or recommendations.                                          31                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

(e) If  the  Company  accepts  the  examination  findings  and  recommendations,  and  there  is  no     recommendation for additional information, the examination report will be finalized and the exam     file closed.  (f) If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting     or a conference call between the Company and FHCF management.  (g) 1.   If the recommendation of the examiner is to resubmit the Company’s exposure data for the         Contract Year in question, then the FHCF will send the Company a letter outlining the process        for resubmission and including a deadline to resubmit. Once the resubmission is received, the        FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year        which has been examined. The SBA shall then review the resubmission with respect to the        examiner’s findings, and accept the resubmission or contact the Company with any questions        regarding  the  resubmission.  Once  the  SBA  has  accepted  the  resubmission  as  a  sufficient        response to the examiner’s findings, the exam is closed.     2. If the recommendation of the examiner is to give the Company the option to either resubmit        the exposure data or to pay the estimated Reimbursement Premium difference, then the FHCF        will  send  the  Company  a  letter  outlining  the  process  for  resubmission  or  for  paying  the        estimated Reimbursement Premium difference and including a deadline for the resubmission        or  the  payment  to  be  received  by  the  FHCF’s  Administrator.  If  the  Company  chooses  to        resubmit, the same procedures outlined in Article XIII(4) apply.  (h) If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for     the Contract Year under review, the FHCF will send the Company a letter outlining the process     for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss     Report(s)  is  received  by  the  FHCF  Administrator,  the  FHCF’s  Administrator  will  calculate  a     revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with     respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed or contact the     Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s)     as a sufficient response to the examiner’s findings, the exam is closed.  (i) The examiner’s list of errors is made available in the examination report sent to the Company.      Given that the examination was based on a sample of the Company’s policies or claims rather than     the whole universe of the Company’s Covered Policies or reported claims, the error list is not     intended to provide a complete list of errors but is intended to indicate what information needs to     be reviewed and corrected throughout the Company’s book of Covered Policy business or claims     information to ensure more complete and accurate reporting to the FHCF.                                                    32                                   FHCF-2020K                                                               Rule 19-8.010 F.A.C.                                                                                                                   

 

(5) Costs of the Examinations     The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive     for a Company to delay preparations for an examination, the SBA shall be reimbursed by the Company     for any examination expenses incurred in addition to the usual and customary costs, which additional     expenses were incurred as a result of the Company’s failure, despite proper notice, to be prepared for     the examination or as a result of a Company’s failure to provide requested information. All requested     information must be complete and accurate.   ARTICLE XIV – OFFSETS   The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts  payable under the Reimbursement Contract for any Contract Year and also including the Company’s full  Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any  (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or  (3) amounts agreed to in a commutation agreement, which are due and payable to the Company from the  SBA as a result of the liability of the SBA.   ARTICLE XV - INSOLVENCY OF THE COMPANY  Company  shall  notify  the  FHCF  immediately  upon  becoming  insolvent.  Except  as  otherwise  provided  below, no reimbursements will be made until the FHCF has completed and closed its examination of the  insolvent Company’s Losses, unless an agreement is entered into by the court appointed receiver specifying  that all data and computer systems required for FHCF exposure and claims examinations will be maintained  until completion of the Company’s exposure and claims examinations. Except as otherwise provided below,  in  order  to  account  for  potential  erroneous  reporting,  the  SBA  shall  hold  back  25%  of  requested  reimbursements until the exposure and claims examinations for the Company are completed. Only those  Losses  supported  by  the  examination  will  be  reimbursed.  Pursuant  to  Section  215.555(4)(g),  Florida  Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolvent  insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. For  the  purpose  of  this  Contract,  a  Company  is  insolvent  when  an  order  of  liquidation  with  a  finding  of  insolvency has been entered by a court of competent jurisdiction. In light of the need for an immediate  infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may  enter into agreements with FIGA allowing exposure and claims examinations to take place immediately  without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net  of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are  completed and before the response time expires for claims filing by reinsurers and financial institutions,                                           33                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

which  have  a  priority interest in those funds  pursuant to Section 215.555(4)(g), Florida  Statutes.  Such  agreements must ensure the availability of the necessary records and adequate security must be provided  so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by  reinsurers or financial institutions having a priority interest in these funds, that the funds will be repaid to  the FHCF by FIGA within a reasonable time.     ARTICLE XVI - TERMINATION  The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided  by law or applicable rules.   ARTICLE XVII – VIOLATIONS  (1) Statutory Provisions     (a) Section  215.555(10),  Florida  Statutes,  provides  that  any  violation  of  Section  215.555,  Florida        Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance        Code.  This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code,        under the authority of that section of Florida Statutes.     (b) Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce        the rules and the provisions and requirements of this Contract, required by and adopted pursuant to        Section 215.555, Florida Statutes.  (2) Noncompliance     (a) As used in this Article, the term “noncompliance” means the failure of the Company to meet any        applicable  requirement  of  Section  215.555,  Florida  Statutes,  or  of  any  rule  adopted  under  the        authority of that section of Florida Statutes, including, but not limited to, any failure to meet a        deadline  for  an  FHCF  payment,  Data  Call  submissions  or  resubmissions, Loss  reporting or        commutation  documentation,  or  a  deadline  related  to  SBA  examination  requirements.  The        Company remains in a state of noncompliance as long as the Company fails to meet the applicable        requirement(s).     (b) If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments        or advances due to the Company until the SBA determines that the Company is no longer in a state        of noncompliance.   ARTICLE XVIII - APPLICABLE LAW  This Contract shall be governed by and construed according to the laws of the State of Florida in respect of  any matter relating to or arising out of this Contract.                                                                     34                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

ARTICLE XIX – DUE DATES  If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday,  then the  actual due date will be the day immediately following the applicable due  date which is not a  Saturday, Sunday or a legal State of Florida or federal holiday.   ARTICLE XX – REIMBURSEMENT CONTRACT ELECTIONS  (1) Coverage Level     For  purposes  of  determining  reimbursement  (if  any)  due  the  Company  under  this  Contract  and  in     accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% Coverage Level     under this Contract. If the Company is a member of an NAIC group, all members must elect the same     Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his     or her initials in the box under (a) below, affirms that the Company has elected the same Coverage     Level as all members of its  NAIC  group.  If the  Company is  an  entity created pursuant to Section     627.351, Florida Statutes, the Company must elect the 90% Coverage Level. The Company shall not     be permitted to change its Coverage Level after the March 1 statutory deadline for execution of the     Contract. The Company shall be permitted to change its Coverage Level upon timely execution of the     Contract for the next Contract Year, but may not reduce its Coverage Level if revenue bonds issued     under Section 215.555(6), Florida Statutes, are outstanding.          The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2019 was as     follows: 3        (a) NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group:                                                                           X                                          (b) Coverage  Level  Election:  The  Company  hereby  elects  the  following  Coverage  Level  for  the        Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2020, to 12:00 a.m., Eastern Time, May        31, 2021, (the individual executing this Contract on behalf of the Company shall place his or her        initials in the box to the left of the percentage elected for the Company):                                                                                                                                      X                                   45%   OR              75%   OR              90%                                                                                                            3 FedNat Insurance Company—75%; Monarch National Insurance Company—75%; Maison Insurance Company— 90%                                          35                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.                                                                                                                         

 

  (2) Additional Living Expense (ALE) Written as Time Element Coverage     If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e.,     coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the     ‘Yes – Time Element ALE’ box below. If your Company does not write time element ALE coverage,     initial ‘No – Time Element ALE’ box below.                              4                      5                                      OR                         Yes – Time             No – Time                       Element ALE            Element ALE      ARTICLE XXI – SIGNATURES    Approved by:    Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida  and as Administrator of the Florida Hurricane Catastrophe Fund.      By: _/s/ Martin K. Helgestad____________________       __3/27/2020________________________                                               Date       Authority to sign on behalf of the Company:    The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of  the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with  the requisite authority to bind the Company and make the representations on behalf of the Company as set  forth in this Contract.     ______________________________6_______________________________________                                      Printed Name and Title    By: __________________7_________________________       _____________8________________                                 Signature                                      Date                                                       4 Maison Insurance Company  5 FedNat Insurance Company; Monarch National Insurance Company  6 FedNat Insurance Company; Monarch National Insurance Company; Maison Insurance Company  7 FedNat Insurance Company—Michael Braun, President; Monarch National Insurance Company—Michael Braun,  President; Maison Insurance Company—Doug Raucy, President  8 FedNat Insurance Company—2/26/2020; Monarch National Insurance Company—2/26/2020; Maison Insurance  Company—2/19/2020                                          36                                   FHCF-2020K                                                                  Rule 19-8.010 F.A.C.

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