Document:

Reimbursement Contract

 Exhibit 10.3 
  

					
	  
 

	  	 STATE BOARD OF ADMINISTRATION

OF FLORIDA
  

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406
  

POST OFFICE BOX 13300

32317-3300
	  	 RICK SCOTT

GOVERNOR
 CHAIR

 
 JEFF ATWATER

CHIEF FINANCIAL OFFICER
  

PAM BONDI

ATTORNEY GENERAL
  

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

	  	  
	  	  
	  	  

 REIMBURSEMENT CONTRACT 

Effective: June 1, 2016 

(Contract) 
 between 

HOMEOWNERS CHOICE PROPERTY AND CASUALTY INSURANCE COMPANY 

(Company) 
 NAIC # 12944

 and 
 THE STATE BOARD
OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) 
 WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF) 

PREAMBLE 
 The Legislature of the State of Florida has
enacted Section 215.555, Florida Statutes (Statute), which 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 the Statute 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 All provisions in the principal document are equally applicable to each Addendum unless specifically superseded by one of the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, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, 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 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 Loss Occurrence commencing during the Contract
Year, to the extent funds are available, all as hereinafter defined. 
  

					
		 	

	  	

  

					
		 	
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 ARTICLE II - PARTIES TO THE CONTRACT 

This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or 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 only disburse funds to the Company, except as provided for in Article XV. The Company shall not, without the prior
approval of the 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 
  

	(1)	The term of this Contract shall apply to Loss Occurrences which commence during the period from 12:00:01 a.m., Eastern Time, June 1, 2016, to 12:00 midnight, Eastern Time, May 31, 2017 (Contract Year). Pursuant to the
terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in
progress, the SBA shall be responsible for such Loss Occurrence 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 Loss Occurrence in progress.

  

	(2)	The Company is required to designate a coverage level, make the required selections, and return this fully executed Contract to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later
than 5 p.m., Central Time, March 1, 2016. Failure to do so shall result in the Company’s coverage level under this Contract being deemed as follows: 

 

	 	(a)	For Companies that are 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 Companies that are 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 New Participants, as that term is defined in Article V(21), that are 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 New Participants that are 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 providing that the FHCF Administrator
receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed. 

  

	(3)	Failure by the Company to meet the requirements of this Article may result in referral to the Office of Insurance Regulation. 

ARTICLE IV - LIABILITY OF THE FHCF 
  

	(1)	The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss
paid by the Company in excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus 5% of the reimbursed losses for Loss Adjustment Expense Reimbursement. 

 

	(2)	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XIX. 

  

					
		 	
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	(3)	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this Contract Year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding
loss reimbursement calculations, see section (3)(c) of Article X. 

  

	(4)	Upon the occurrence of a Covered Event, the SBA shall 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 mandatory 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. 

 

	(5)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further
reimbursements. 

  

	(6)	After the end of the calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the SBA shall publish in the
Florida Administrative Register a statement of the FHCF’s estimated Borrowing Capacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of December 31. 

 

	(7)	The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA
is able to raise through the issuance of revenue bonds or through other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes. The obligations and the
liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.). 

 ARTICLE V - DEFINITIONS 

 

	(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, or through other means available by law to the SBA, up to the limit in
accordance with Section 215.555(4)(c)1. and (6), Florida Statutes. 
  

	(2)	Actuarially Indicated 

 This term means, with respect to Premiums paid by Companies for
reimbursement provided by the FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a), Florida Statutes. 
  

	(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 based on the coverage provided in the policy. 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 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. 

  

					
		 	
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	(6)	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. 
  

	(7)	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. 

 

	(8)	Contract 

 This term means this Reimbursement Contract for the current Contract Year.

  

	(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)	Covered Policy or Covered Policies 

  

	 	(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)	Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida
Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as: 

 

	 	1.	Fire 

  

	 	2.	Allied Lines 

  

	 	3.	Farmowners Multiple Peril 

  

	 	4.	Homeowners Multiple Peril 

  

	 	5.	Commercial Multiple Peril (non liability portion, covering condominiums and apartments) 

  

	 	6.	Inland Marine 

 Note that where particular insurance exposures, e.g., mobile homes, are reported
on an annual statement is not dispositive of whether or not the exposure is a Covered Policy. 
  

	 	(c)	This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage. 

 

	 	(d)	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 required
data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available. 

  

	 	(e)	See Article VI for specific exclusions. 

  

	(11)	Deductible Buy-Back Policies 

 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. 

  

					
		 	
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	(12)	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. 

 

	(13)	Excess Policies 

 This term, for the purposes of this Contract, means 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. 

 

	(14)	Florida Department of Financial Services (Department) 

 This term means the Florida
regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida Insurance Code. 

 

	(15)	Florida Insurance Code 

 This term means those chapters identified in Section 624.01,
Florida Statutes, which are designated as the Florida Insurance Code. 
  

	(16)	Formula or the Premium Formula 

 This term means the Formula approved by the SBA for the
purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The Formula, shall, pursuant to Section 215.555(5)(b),
Florida Statutes, include a cash build-up factor in the amount specified therein. 
  

	(17)	Fund Balance or Balance of the Fund as of December 31 

 These terms mean the amount
of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract Year. 
  

	(18)	Insurer Group 

 For purposes of the coverage option 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 purposes of filing consolidated financial statements. 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 recognized by the NAIC. 
  

	(19)	Loss Occurrence 

 This term means the sum of individual insured Losses incurred under
Covered Policies resulting from the same Covered Event. “Losses” means all incurred losses under Covered Policies, 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, and excludes allocated or unallocated Loss Adjustment Expenses. 
  

	(20)	Loss Adjustment Expense Reimbursement 

  

	 	(a)	Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes. 

 

	 	(b)	To the extent that loss reimbursements are limited to the Payout Multiple applied to each Company, the 5% Loss Adjustment Expense is included in the total Payout Multiple applied to each Company. 

 

	(21)	New Participant(s) 

 This term means all Companies which begin writing Covered Policies
on or after the beginning of the Contract Year. A Company that removes exposure from Citizens pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New
Participant. 

  

					
		 	
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	(22)	Office of Insurance Regulation 

 This term means that office within the Department of
Financial Services and which was created in Section 20.121(3), Florida Statutes. 
  

	(23)	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 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. 
  

	(24)	Premium 

 This term means the same as Reimbursement Premium. 

 

	(25)	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. 
  

	(26)	Reimbursement Premium 

 This term means the Premium 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. 

 

	(27)	Residential Structures 

 This term means units or buildings used exclusively or
predominantly for dwelling or habitational occupancies, including the primary structure and appurtenant structures insured under the same policy and any other structures covered under endorsements associated with a policy covering a residential
structure. For the purpose of this Contract, a single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and which is insured under a commercial policy, is considered a Residential Structure if 50%
or more of the total insured value of the structure is used for habitational occupancies. Covered Residential Structures do not include any structures listed under Article VI. 

 

	(28)	Retention 

 The Company’s Retention means the amount of hurricane losses under
Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF. 
  

	 	(a)	When the Company experiences covered 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 experiences covered 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 covered
losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered Events. 

 

	 	1.	All reimbursement of covered 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 

  

					
		 	
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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, and the reduction to
one-third of the full Retention shall be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made quarterly by the SBA only if the 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. 

  

	(29)	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 2016/2017 Contract Year shall be equal to $4.5 billion, adjusted
based upon the reported exposure for the 2014/2015 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the
Contract Year as determined by the SBA. 

  

	 	(b)	The Retention Multiple shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows: 

 

	 	1.	If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above; 

 

	 	2.	If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or 

 

	 	3.	If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above. 

 

	(30)	Ultimate Net Loss 

  

	 	(a)	This term means all Losses of the Company under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s FHCF Retention and reimbursement percentage, and excluding loss
adjustment expense and any exclusions under Article VI, arising from each Loss Occurrence during the Contract Year. 

  

	 	(b)	The Company’s Ultimate Net Loss shall be determined in accordance with the deductible level as specified under the policy sustaining the loss without taking into consideration any deductible discounts or deductible
waivers. 

  

	 	(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)	Nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained. 

 

	 	(f)	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.

  

					
		 	
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 ARTICLE VI - EXCLUSIONS 

This Contract does not provide reimbursement for: 
  

	(1)	Any losses not defined as being within the scope of a Covered Policy. 

  

	(2)	Any policy which excludes wind or hurricane coverage. 

  

	(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; or

		
		 	 (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.

		
		 	 (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(10)(d). 

  

	(7)	Any reinsurance assumed by the Company. 

  

	(8)	Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes. 

 

	(9)	Any exposure for homeowner associations if no habitational structures are insured under the policy. 

  

	(10)	Any exposure for homes and condominium structures or units that are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period. 

 

	(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. 

  

	(15)	Any exposure for builders risk coverage or new Residential Structures still under construction. 

  

	(16)	Any exposure for recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing and written on a separate policy or endorsement. 

 

	(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 each 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. 

  

					
		 	
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	(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 sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing
mechanisms, up to the limit pursuant to 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 Authorized
Insurer 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 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)	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean 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)	Policies and endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements: 

 

	 	(a)	A policy or endorsement covering Specialized Fine Arts Risks and not covering any Residential Structure and/or contents thereof (other than such specialized fine arts items covered in the Specialized Fine Arts policy or
endorsement) 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 policy or endorsement is a policy or 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. 

  

					
		 	
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	 	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:

  

	 	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)	A policy form or 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 policy forms or endorsements are subject to the exclusion provided in this paragraph when the policy or 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 a policy or endorsement represents an unusually high exposure value
and such policy 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. 

 

	(28)	Any losses under liability coverages. 

  

	(29)	Any exposure for a condominium structure insured on a commercial policy in which more than 50% of the individual units are non-owner occupied and rented for 6 or more rental periods by different parties during the
course of a 12-month period. 

  

	(30)	Any structure used exclusively or predominantly for non-dwelling or non-habitational occupancies. 

 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 - LOSS REIMBURSEMENT ADJUSTMENTS 

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements which have been paid to the
Company along with interest thereon. Excess loss 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 loss reimbursements may result from adjustments to
the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, 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 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 loss 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. 

  

					
		 	
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 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 Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company
estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional 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 Premium billed but is less than the final
Premium, interest will not accrue. If the 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 Premiums resulting from submissions
or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional 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. 

  

					
		 	
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	 	(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. If the applicable due date is a Saturday, Sunday or legal
holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor
a postage meter date is in any way determinative. 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 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 1. above by the applicable due date(s) 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 hurricane event occurred or triggered coverage. 

 

	 	3.	The provisions required in 1. and 2. above will not apply when the state regulator, receiver, or rehabilitator provides a letter of assurance to the FHCF 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 1. above, to default to the 45% coverage being deemed as
specified in 2. above, or to provide the assurances as specified in 3. above. 

  

	 	(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 upon execution of this Contract. 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 

  

					
		 	
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Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the provisional Premium shall
be credited, and the resulting amount shall be the total 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 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 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 upon execution of this
Contract. 

  

	 	(e)	The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account at its bank in Tampa,
Florida, as set out on the invoice sent to the Company, on the due date applicable to the particular installment. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the
applicable due date which is not a Saturday, Sunday or legal holiday. Reimbursement Premiums not credited to the FHCF’s account on the applicable due date are late. 

 

	 	(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)	Claims and Losses 

  

	 	(a)	In General 

  

	 	1.	Claims and losses resulting from Loss Occurrences 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 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. 

  

	 	2.	If the Company is in non-compliance with Section 215.555, Florida Statutes for any Contract Year, including deadlines for sending in Contracts, addenda or attachments to Contracts, Data Call submissions or
resubmissions, loss reports, or in responding to SBA exam requirements, the SBA reserves the right to withhold any payments or advances until such time the Company becomes compliant. 

  

					
		 	
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	 	(b)	Loss Reports 

  

	 	1.	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence 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-LIA, 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 loss 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 original or 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 (as outlined on the Proof of Loss Report) 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 should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request. 

  

	 	c.	While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a Loss Occurrence, all Companies shall submit a mandatory Proof of Loss Report for each Loss Occurrence no earlier than
December 1 and no later than December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss reimbursements or advances
already received. Reports may be faxed only if the Company does not qualify for a reimbursement. 

  

	 	d.	For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and 4. below, the Company shall submit its Proof of
Loss Reports by each quarter-end or year-end using the most current data available. However, the date of such data shall not be more than sixty days prior to the applicable quarter-end or year-end date. 

 

	 	3.	Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims and losses resulting from a Loss Occurrence 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 Loss Occurrence(s) occurred. Guidelines follow: 

  

	 	a.	Quarterly Proof of Loss Reports are due by March 31 from an insurer whose losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Loss Occurrence(s). 

 

	 	b.	Quarterly Proof of Loss Reports are due by June 30 from an insurer whose losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Loss Occurrence(s), 

 

	 	c.	Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from an insurer whose losses exceed, or are expected to exceed, its FHCF Retention for a specific Loss Occurrence(s).

 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. 

  

					
		 	
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	 	4.	Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable, using the most current data available, accompanied by a
detailed claims listing (as outlined on the Proof of Loss Report). This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the commutation
process described in (3)(d) below or until all claims and losses resulting from the Loss Occurrence 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.

  

	 	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 submitted 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 loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4. above, 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 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(28)(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 sustaining reimbursable losses will
receive the amount of reimbursement due under the 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 Multiple or Payout Multiple, as applicable,
times the individual Company’s Reimbursement Premium for the Contract Year. 

  

					
		 	
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	 	2.	In determining reimbursements under this Contract, the SBA shall reimburse each of the Companies, including entities created pursuant to Section 627.351(6), Florida Statutes, for the amount (if any) of reimbursement due
under the individual Company’s Contract, but not to exceed for all Loss Occurrences, an amount equal to the Projected Payout Multiple or the Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the
Contract Year. 

  

	 	3.	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.	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
paragraph (3)(d)1.a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in paragraph (3)(d)1.b. below. 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 loss 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 a Loss Occurrence(s) 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 all claims and 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(s) indicating reimbursable losses have 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(s) 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(s) indicating that it does have losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA may require the Company to submit within 30 days an
updated, current Proof of Loss Report(s) for each Loss Occurrence during the Contract Year. The Proof of Loss Report(s) 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(s), supporting documentation, and an opinion by the date requested by the SBA
may result in referral to the 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. 

  

					
		 	
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	 	2.	Determining the present value of outstanding claims and 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 claims and
losses, both reported and incurred but not reported, resulting from Loss Occurrences during the Contract Year. 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 claims and 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(s) and supporting documentation, the Company and the SBA may mutually appoint an actuary,
adjuster, or appraiser to investigate and determine such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such claims or losses. 

 

	 	c.	If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, as provided in this paragraph. 

  

	 	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, 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 its case to the panel in writing on the 30th day after the appointment of the third actuary. Following the submission of the case to the
panel, the parties are prohibited from providing any further information or other communication except at the request of the panel. Such responses to requests from the panel must be in writing and simultaneously provided to the other party and all
members of the panel, except that the panel may require the response to be provided in a meeting or teleconference attended by both parties and all members of the panel. 

 

	 	v.	The decision in writing of any two actuaries, 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 b. and c. above) 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. 

  

	(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 [IBNR] losses) as reported on a Proof of
Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated 

  

					
		 	
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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 paragraph (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
subparagraphs (c) and (e) below. All reimbursements due to a 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(s) for the
Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue on the outstanding balance of the advance(s)
until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). 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 XIV. 

  

	 	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) above, 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. 

  

					
		 	
 18
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	 	2.	Advances to entities created pursuant to Section 627.351(6), Florida Statutes. 

  

	 	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 subparagraph (4)(a) above, 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 or Covered Events which have precipitated the immediate need to continue to pay additional claims
as they become due. 

  

	(5)	Delinquent Payments 

 Failure to submit a payment when due is a violation of the terms of
this Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set forth in Article VIII(2) and Article IX(2). 
  

	(6)	Inadequate Data Submissions 

 If exposure data or other information required to be
reported by the Company under the terms of this Contract is 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. 

  

					
		 	
 19
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Rule 19-8.010 F.A.C.

	(7)	Delinquent Submissions 

 Failure to submit an exposure submission, resubmission, loss
report, or commutation documentation when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. 
  

	(8)	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 Premium herein when making premium
tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the 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 loss examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss reimbursement 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 (formerly known as the FHCF 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 (10)(d) 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. 
  

	(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 

  

					
		 	
 20
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Rule 19-8.010 F.A.C.

 
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 loss reimbursement 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. 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 19-8.030, 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-LIB, adopted for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C. 

 

	(4)	Examination Procedures 

  

	 	(a)	The FHCF will send an examination notice 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 upon request. 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 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 and require a
response from the Company by a date certain as to the examination findings and recommendations. 

  

	 	(d)	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. 

 

	 	(e)	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. 

  

					
		 	
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	(f)	 	 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 Premium difference, then the FHCF will send the Company a letter outlining the process for
resubmission or for paying the estimated 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(3)(f)1. apply.
		
	(g)	 	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.
		
	(h)	 	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.

  

	(4)	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 Premium for the current Contract Year (regardless
of installment due dates), against any (1) 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. 

  

					
		 	
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 ARTICLE XV - INSOLVENCY OF THE COMPANY 

Company shall notify the FHCF immediately upon becoming insolvent. Except as otherwise provided below, no covered loss 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 loss examinations
will be maintained until completion of the Company’s exposure and loss examinations. Except as otherwise provided below, in order to account for potential erroneous reporting, the SBA shall hold back 25% of requested loss reimbursements until
the exposure and loss 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 loss examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make loss 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, 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 
 Pursuant to the provisions of
Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of Florida. Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is
authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract. 

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. 

  

					
		 	
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Rule 19-8.010 F.A.C.

 ARTICLE XIX – REIMBURSEMENT CONTRACT ELECTIONS 

 

	(1)	Reimbursement Percentage 

 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% reimbursement percentage under this Contract. If the Company is a member of an NAIC group, all members must elect the same
reimbursement percentage, 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 reimbursement percentage 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% reimbursement percentage. The Company shall not be permitted to change its reimbursement percentage during the Contract
Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the issuance of revenue bonds, until the bonds are no
longer outstanding. 
 The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2015 was as follows:
Homeowners Choice Property and Casualty Insurance Company - 90% 
  

	 	(a)	NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group: 

  

 
  

	 	(b)	Reimbursement Percentage Election: The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2016, to 12:00 a.m., Eastern Time, May 31, 2017,
(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): 

 

											
	

    45%        OR                    75%   
     OR                    90%

  

	(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. 
  

					
	

	 	OR	 	
	 Yes – Time

Element ALE
	 		 	 No – Time

Element ALE

  

					
		 	
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 ARTICLE XX – SIGNATURES 
  

									
	Approved by:	 		  		 	
				
	Florida Hurricane Catastrophe Fund	 		  		 	
	By:	  	State Board of Administration of the State of Florida	 		  		 	
					
	By:	  	

	 		  		 	4/7/16
		  	  
	 		  	  

		  	Ashbel C. Williams	 		  		 	Date
		  	Executive Director & CIO	 		  		 	
				
	Approved as to legality:	 		  		 	
					
	By:	  	

	 		  		 	4/7/16
		  	  
	 		  	  

		  	CRAIG A. MEYER	 		  		 	Date
		  	ASSISTANT GENERAL COUNSEL	 		  		 	
					
		  	  
 Homeowners Choice Property and Casualty Insurance
Company
	 		  		 	
					
		  	 Richard R. Allen CFO
	 		  		 	
		  	Typed/Printed Name and Title	 		  		 	
					
	By:	  	

	 		  		 	02/24/2016
		  	  
	 		  	  

		  	Signature	 		  		 	Date

  

					
		 	
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	 	 FHCF-2016K

Rule 19-8.010 F.A.C.Working Layer Catastrophe Excess of Loss Reinsurance Contract

 Exhibit 10.8 
  

 
 **** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has
been filed separately with the U.S. Securities and Exchange Commission. 
 WORKING LAYER CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

 EFFECTIVE: JUNE 1, 2016 

ISSUED TO 
 HOMEOWNERS
CHOICE PROPERTY & CASUALTY INSURANCE COMPANY 
 TAMPA, FLORIDA 

Including any and/or all companies that are or may hereafter become affiliated therewith 

 

 
 WORKING LAYER CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT 

TABLE OF CONTENTS 
  

					
	 ARTICLE 1
	  			
	 BUSINESS COVERED
	  	 	1	  
		
	 ARTICLE 2
	  			
	 TERM
	  	 	1	  
		
	 ARTICLE 3
	  			
	 SPECIAL TERMINATION
	  	 	2	  
		
	 ARTICLE 4
	  			
	 TERRITORY
	  	 	3	  
		
	 ARTICLE 5
	  			
	 EXCLUSIONS
	  	 	3	  
		
	 ARTICLE 6
	  			
	 RETENTION AND LIMIT
	  	 	5	  
		
	 ARTICLE 7
	  			
	 REINSURANCE PREMIUM
	  	 	8	  
		
	 ARTICLE 8
	  			
	 EXPERIENCE ACCOUNT
	  	 	8	  
		
	 ARTICLE 9
	  			
	 DEFINITIONS
	  	 	8	  
		
	 ARTICLE 10
	  			
	 LOSS OCCURRENCE DEFINITION
	  	 	11	  
		
	 ARTICLE 11
	  			
	 ACCESS TO RECORDS
	  	 	12	  
		
	 ARTICLE 12
	  			
	 ARBITRATION
	  	 	12	  
		
	 ARTICLE 13
	  			
	 CONFIDENTIALITY
	  	 	14	  
		
	 ARTICLE 14
	  			
	 CURRENCY
	  	 	15	  
		
	 ARTICLE 15
	  			
	 ENTIRE AGREEMENT
	  	 	15	  
		
	 ARTICLE 16
	  			
	 ERROR AND OMISSIONS
	  	 	16	  
		
	 ARTICLE 17
	  			
	 FEDERAL EXCISE TAX
	  	 	16	  
		
	 ARTICLE 18
	  			
	 GOVERNING LAW
	  	 	16	  
		
	 ARTICLE 19
	  			
	 INSOLVENCY
	  	 	16	  

 

 
  

					
	 ARTICLE 20
	  			
	 LATE PAYMENTS
	  	 	17	  
		
	 ARTICLE 21
	  			
	 LIABILITY OF THE REINSURER
	  	 	19	  
		
	 ARTICLE 22
	  			
	 LOSS NOTICES AND SETTLEMENTS
	  	 	19	  
		
	 ARTICLE 23
	  			
	 NO ASSIGNMENT
	  	 	20	  
		
	 ARTICLE 24
	  			
	 NON-WAIVER
	  	 	20	  
		
	 ARTICLE 25
	  			
	 NOTICES AND AGREEMENT EXECUTION
	  	 	20	  
		
	 ARTICLE 26
	  			
	 OFFSET
	  	 	21	  
		
	 ARTICLE 27
	  			
	 OTHER REINSURANCE
	  	 	21	  
		
	 ARTICLE 28
	  			
	 SALVAGE AND SUBROGATION
	  	 	21	  
		
	 ARTICLE 29
	  			
	 SERVICE OF SUIT
	  	 	22	  
		
	 ARTICLE 30
	  			
	 SEVERABILITY
	  	 	23	  
		
	 ARTICLE 31
	  			
	 TAXES
	  	 	23	  
		
	 ARTICLE 32
	  			
	 THIRD PARTY RIGHTS
	  	 	23	  
		
	 ARTICLE 33
	  			
	 COMMUNICATIONS
	  	 	23	  

 ATTACHMENTS 
 Nuclear Incident
Exclusion Clause - Physical Damage – Reinsurance U.S.A. 
 Sanction Limitation And Exclusion Clause 

 

 
 WORKING LAYER CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT 

(hereinafter called the “Contract”) 

EFFECTIVE: JUNE 1, 2016 

issued to 
 HOMEOWNERS CHOICE
PROPERTY & CASUALTY INSURANCE COMPANY 
 Including any and/or all companies that are or may hereafter become affiliated therewith

 (hereinafter called the “Reinsured”) 

by 
 THE SUBSCRIBING
REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABLITIES AGREEMENT 
 ATTACHED TO THIS CONTRACT 

(hereinafter called, with other participants, the “Reinsurer”) 

ARTICLE 1 
 BUSINESS COVERED

 This Contract is to indemnify the Reinsured in respect of its net excess liability as a result of any loss or losses which may occur during the
Term of this Contract under any policies, contracts and binders of insurance or reinsurance (hereinafter called “Policies’’) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or
renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations hereinafter set forth.

 ARTICLE 2 
 TERM 

 

	1.	This Contract shall become effective at 12:00:01 a.m., Eastern Time, June 1, 2016, with respect to losses arising out of Loss Occurrences which commence at or after that time and date, and shall remain in force
until 11:59:59 p.m., Eastern Time, May 31, 2021, unless earlier terminated in accordance with the provisions of the Special Termination Article herein. 

  

	2.	Pursuant to the terms of this Contract, the Reinsurer shall not be liable for Loss Occurrences which commence either prior to the effective time and date of this Contract or after the effective time and date of
expiration or termination. In the event a Loss Occurrence covered hereunder is in progress at the end of any Contract Year, 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 end of such Contract Year, provided that no part of such Loss Occurrence is claimed in the subsequent Contract Year or against any renewal or replacement of this Contract. 

  
 Page 1 

 

 
  

 ARTICLE 3 

SPECIAL TERMINATION 
  

	1.	The Reinsured may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsurer at least 30 days prior to the end of such Contract Year, in the event any of the following
circumstances occur: 

  

	 	a.	The Florida Office of Insurance Regulation or other legal authority has ordered the Reinsurer to cease writing business; or 

  

	 	b.	The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or 

 

	 	c.	The 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 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. 

  

	2.	The Reinsured may terminate this Contract at the end of the Third or any subsequent Contract Year in the event the balance of the Experience Account is greater than zero as of the effective date of termination, by
giving the Reinsurer at least 30 days prior written notice. In the event of termination in accordance with this paragraph, the liability of the parties hereunder shall be commuted. Upon commutation, the Reinsurer shall pay to the Reinsured an amount
equal to the sum of the following: 

  

	 	a.	The outstanding reserves as of the date of termination for unpaid Ultimate Net Loss ceded under this Contract as mutually agreed upon by the parties to this Contract ; and 

 

	 	b.	90% of the balance of the Experience Account as of the date of termination. 

 Such payment shall
constitute a full and final commutation and release of the Reinsured and the Reinsurer as respects all liability under this Contract, without the need for execution and delivery of any further documentation. 

  
 Page 2 

 

 
  

	3.	The Reinsurer may immediately terminate this Contract by giving 10 days written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of
the Premium Article. Should the Reinsured remit payment during this notice period, the Reinsurer shall lose the right to terminate. 

  

	4.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsured in the event any of the following circumstances occur: 

 

	 	a.	The Reinsured 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 Reinsured 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 

  

	 	b.	A change of control and/or sale of the Reinsured. 

  

	5.	The Reinsurer may terminate this Contract at the end of the Third or any subsequent Contract Year in the event the balance of the Experience Account is less than zero as of the effective date of termination, by giving
the Reinsured at least 30 days prior written notice. 

 ARTICLE 4 

TERRITORY 
 The liability of the Reinsurer shall be
limited to losses under Policies covering property located within the territorial limits of the State of Florida; but this limitation shall not apply to moveable property if the Reinsured’s Policies provide coverage when said moveable property
is outside the aforementioned territorial limits. 
 ARTICLE 5 

EXCLUSIONS 
  

	1.	This Contract does not apply to and specifically excludes the following: 

  

	 	a.	All excess of loss reinsurance assumed by the Reinsured. 

  

	 	b.	Reinsurance assumed by the Reinsured under obligatory reinsurance agreements, except intercompany reinsurance between the Reinsured and its affiliates and agency reinsurance where the policies involved are to be
re-underwritten in accordance with the underwriting standards of the Reinsured and reissued as policies of the Reinsured at the next anniversary or expiration date. 

  
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	 	c.	Financial guarantee and insolvency. 

  

	 	d.	Insurance policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business. 

 

	 	e.	Flood and/or earthquake when written as such for standalone policies where flood and/or earthquake is the only named peril. 

  

	 	f.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause—Physical Damage -Reinsurance U.S.A.” attached to and forming part of this Contract. 

 

	 	g.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause. 

  

	 	h.	Loss or liability from any Pool, Association or Syndicate and any assessment or similar demand for payment related to the Florida Hurricane Catastrophe Fund or Citizens Property Insurance Corporation. 

 

	 	i.	All liability of the Reinsured 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 Reinsured 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. 

  

	 	j.	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% of the Reinsured’s property loss under the applicable original policy. 

  
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	 	k.	Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon. 

 

	 	l.	All liability arising out of mold, spores and/or fungus, but this exclusion shall not apply to those losses which follow as a direct result of a loss caused by a peril otherwise covered hereunder. 

 

	2.	With the exception of subparagraphs (c), (f), (g) and (k) of paragraph (1) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the
Reinsured’s policy, any amount of loss for which the Reinsured is liable because of such invalidation will not be excluded hereunder. 

  

	3.	The Reinsured may submit to the Reinsurer, for special acceptance hereunder, business not covered by this Contract. Within seven days of receipt of such request, each Reinsurer shall accept such request, ask for
additional information, or reject the request. If a Reinsurer fails to respond to a special acceptance request within seven days, the Reinsurer shall be deemed to have agreed to the special acceptance. If said business is accepted by the Reinsurer,
it will be subject to the terms of this Contract, except as such terms are modified by such acceptance. Any special acceptance business covered under the reinsurance agreement being replaced by this Contract will be automatically covered hereunder.
Further, in the event a Reinsurer becomes a party to this Contract subsequent to the special acceptance of any business not normally covered hereunder, the Reinsurer shall automatically accept the same as being a part of this Contract.

 ARTICLE 6 

RETENTION AND LIMIT 
  

	1.	As respects business subject to this Contract, the Reinsured shall retain and be liable for the first amount of Ultimate Net Loss, equal to the following: 

 

	 	a.	Reinsured’s Retention, as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2016, shall equal ****. Reinsured’s Retention, as respects all
loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2017, shall equal the greater of the following: 

  

	 	i.	****; or 

  

	 	ii.	**** plus ****% of the Reinsured’s Policyholders’ Surplus as of December 31, 2016, rounded up to the nearest ****. 

  
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	 	b.	Reinsured’s Retention, as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2018, shall equal the greater of the following: 

 

	 	i.	****; or 

  

	 	ii.	**** plus ****% of the Reinsured’s Policyholders’ Surplus as of December 31, 2017, rounded up to the nearest ****. 

  

	 	c.	Reinsured’s Retention, as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2019, shall equal the greater of the following: 

 

	 	i.	****; or 

  

	 	ii.	**** plus ****% of the Reinsured’s Policyholders’ Surplus as of December 31, 2018, rounded up to the nearest ****. 

  

	 	d.	Reinsured’s Retention, as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2020, shall equal the greater of the following: 

 

	 	i.	****; or 

  

	2.	**** plus ****% of the Reinsured’s Policyholders’ Surplus as of December 31, 2019, rounded up to the nearest ****. The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds
the applicable Reinsured’s Retention, but the liability of the Reinsurer shall be limited as follows: 

  

	 	a.	For each Loss Occurrence in any Contract Year, the amount of the Reinsurer’s liability shall be limited to the First Event Occurrence Limit, as defined in paragraph (3) of this Article; 

 

	 	b.	In the event the First Event Occurrence Limit is exhausted from a loss or losses in a given Contract Year, the Reinsurer’s Reinstatement Occurrence Limit, as defined in paragraph (3) of this Article, shall
apply to all loss or losses arising out of Loss Occurrences commencing during such Contract Year; 

  

	 	c.	The Reinsurer’s liability for all Loss Occurrences during the Term of this Contract that are categorized as First Event Loss Occurrences shall be limited to the First Event Coverage Term Aggregate Limit, as defined
in paragraph (3) of this Article; 

  
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	 	d.	The Reinsurer’s liability for all Loss Occurrences during the Term of this Contract that are categorized as Reinstatement Loss Occurrences shall be limited to the Reinstatement Term Aggregate Limit, as defined in
paragraph (3) of this Article; 

  

	 	e.	The Reinsurer’s liability in any single Contract Year, subject always to the provisions of subparagraphs (c) and (d) above, shall be limited to that Contract Year’s applicable First Event Occurrence
Limit plus the Reinstatement Occurrence Limit; 

  

	 	f.	The Reinsurer’s liability for all Loss Occurrences, regardless of being categorized as First Event or Reinstatement, during the Term of this Contract shall be limited to ****. 

 

	3.	Per the provisions of paragraph (2) above, the reinsurance limits are as follows: 

  

	 	a.	Reinsurer’s First Event Occurrence Limit and Reinstatement Occurrence Limit shall each be equal to: 

  

	 	i.	**** for Contract Year effective June 1, 2016. 

  

	 	ii.	**** plus ****% of the positive value, if any, of the Experience Account at May 31, 2017, for Contract Year effective June 1, 2017. 

 

	 	iii.	**** plus ****% of the positive value, if any, of the Experience Account at May 31, 2018, for Contract Year effective June 1, 2018. 

 

	 	iv.	**** plus ****% of the positive value, if any, of the Experience Account at May 31, 2019, for Contract Year effective June 1, 2019. 

 

	 	b.	**** plus ****% of the positive value, if any, of the Experience Account at May 31, 2020, for Contract Year effective June 1, 2020. Reinsurer’s First Event Coverage Term Aggregate Limit shall be equal to
****. 

  

	 	c.	Reinsurer’s Reinstatement Term Aggregate Limit shall be equal to ****. 

  

	4.	Notwithstanding the provisions above, no claim shall be made under the terms and conditions of this Contract in any one Loss Occurrence unless at least two risks insured or reinsured by the Reinsured are involved in
such Loss Occurrence. For purposes hereof, the Reinsured shall be the sole judge of what constitutes “one risk.” 

  
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 ARTICLE 7 

REINSURANCE PREMIUM 
 The Reinsured shall
pay the Reinsurer an annual premium of ****, payable on June 1 of each Contract Year. 
 ARTICLE 8 

EXPERIENCE ACCOUNT 
  

	1.	The Reinsurer shall establish a notional Experience Account for the benefit of the Reinsured equal to the following: 

  

	 	a.	Cumulative premium earned; less 

  

	 	b.	Accrued reinsurer margin equal to ****% of premium earned; less 

  

	 	c.	Cumulative net losses paid under this Contract; less 

  

	 	d.	Outstanding reserves as of the date of termination for unpaid Ultimate Net Loss ceded to this Contract. 

Premium is earned as it is paid by the Reinsured and received by the Reinsurer. 

 

	2.	If the balance of the Experience Account is positive, the Reinsurer shall pay the Reinsured an amount equal to ****% of the balance upon termination of this Contract. 

ARTICLE 9 
 DEFINITIONS 

ULTIMATE NET LOSS 
 The term “Ultimate Net Loss” as used
herein shall be defined as the sum or sums (including Loss in Excess of Policy Limits, Extra Contractual Obligations and Loss Adjustment Expense, as hereinafter defined) paid or payable by the Reinsured 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 Reinsured’s Ultimate Net Loss has been ascertained. 

  
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 LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS 

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows: 

 

	 	a.	“Loss in Excess of Policy Limits” shall mean 100% of any amount paid or payable by the Reinsured in excess of its Policy limits, but otherwise within the terms of its Policy, such loss in excess of the
Reinsured’s Policy limits having been incurred because of, but not limited to, failure by the Reinsured to settle within the Policy limits or by reason of the Reinsured’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. 

 

	 	b.	“Extra Contractual Obligations” shall mean 100% of any punitive, exemplary, compensatory or consequential damages paid or payable by the Reinsured, 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 Reinsured to settle within the Policy limits or by reason of the Reinsured’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.
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. 

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 Reinsured as a result of any fraudulent and/or criminal act by any officer or director of the Reinsured 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. 
 Further, any Loss in Excess of Policy Limits
and/or Extra Contractual Obligations that are made in connection with this Contract shall not exceed 25% of the contractual loss under all Policies involved in the Loss Occurrence as respects each excess layer hereunder. 

LOSS ADJUSTMENT EXPENSE 
 The term “Loss Adjustment
Expense” as used herein shall be defined as expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense, and/or appeal of 

  
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claims, regardless of how such expenses are classified for statutory reporting purposes. Loss Adjustment Expense shall include, but not be limited to, interest on judgments, expenses of outside
adjusters, expenses and a pro rata share of salaries of the Reinsured’s field employees and expenses of other employees of the Reinsured who have been temporarily diverted from their normal and customary duties and assigned to the adjustment of
losses covered by this Contract, expenses of the Reinsured’s officials incurred in connection with losses covered by this Contract, and Declaratory Judgment Expenses or other legal expenses and costs incurred in connection with coverage
questions and legal actions connected thereto. Loss Adjustment Expense shall not include normal office expenses or salaries of the Reinsured’s employees or officials. 

DECLARATORY JUDGMENT EXPENSE 
 The term “Declaratory
Judgment Expense” as used herein shall be defined as the Reinsured’s own costs and legal expense incurred in direct connection with declaratory judgment actions brought to determine the Reinsured’s defense and/or indemnification
obligations that are assignable to specific claims arising out of Policies reinsured by this Contract, regardless of whether the declaratory judgment action is successful or unsuccessful. Any Declaratory Judgment Expense shall be deemed to have been
fully incurred by the Reinsured on the same date as the original loss (if any) giving rise to the action. 
 CONTRACT YEAR 

“Contract Year” as used herein shall be defined as the period from 12:00:01 a.m., Eastern Time, June 1, 2016, through 11:59:59 p.m., Eastern
Time, May 31, 2017, and each subsequent 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated, the final Contract Year shall be from the beginning of the then current Contract Year to the
effective time and date of termination. 
 TERM OF THIS CONTRACT 

“Term of this Contract” as used herein shall be defined as the period from 12:00:01 a.m., Eastern Time, June 1, 2016, through 11:59:59 p.m.,
Eastern Time, May 31, 2021. However, if this Contract is terminated, Term of this Contract as used herein shall mean the period from 12:00:01 a.m., Eastern Time, June 1, 2016 to the effective time and date of termination. 

  
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 ARTICLE 10 

LOSS OCCURRENCE DEFINITION 
 LOSS OCCURRENCE 

 

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

 

	 	a.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Reinsured occurring during any period of 96 consecutive hours arising out of
and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto. 

  

	 	b.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Reinsured occurring during any period of 96 consecutive hours within the area of one
municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses which occur beyond
such 96 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period. 

 

	 	c.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the opening paragraph of this Article) and fire following directly occasioned by the earthquake, only
those individual fire losses which commence during the period of 168 consecutive hours may be included in the Reinsured’s Loss Occurrence. 

  

	 	d.	As regards freeze, only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be included in the Reinsured’s Loss Occurrence.

  
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	 	e.	As regards firestorms, brush fires and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs (b) and (c) above), which spread through trees, grassland or other
vegetation, all individual losses sustained by the Reinsured which occur during any period of 168 consecutive hours within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another
may be included in the Reinsured’s Loss Occurrence. 

  

	2.	For all Loss Occurrences the Reinsured may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded
individual loss sustained by the Reinsured arising out of that disaster, accident or loss and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any Loss Occurrence referred to in
subparagraph (a) or (b) of paragraph (1) above where only one such period of 96 consecutive hours shall apply with respect to one event, regardless of the duration of the event. 

 

	3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision. 

ARTICLE 11 
 ACCESS TO RECORDS

 The Reinsurer or its designated representatives shall have access to the books and records of the Reinsured on matters relating to this
reinsurance at all reasonable times, and at the location where such books and records are maintained in the ordinary course of business, for the purpose of obtaining and making copies of information concerning this Contract or the subject matter
thereof. Notification of a request for inspection of records shall be sent to the Reinsured by the Reinsurer in written form. The Reinsurer’s right of audit and inspection shall continue as long as either party has a claim against the other
arising out of this Contract. 
 ARTICLE 12 

ARBITRATION 
  

	1.	 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 Reinsured, 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 

  
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Underwriters at Lloyd’s. 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, the two Arbiters shall request the American
Arbitration Association to appoint the Umpire. If the American Arbitration Association fails to appoint the Umpire within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the
state in which the arbitration is to be held to appoint the Umpire. 

  

	2.	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. 

 

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

  

	4.	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. 

  

	5.	Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract. Notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the
law of the State of Florida. 

  
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 ARTICLE 13 

CONFIDENTIALITY 
  

	1.	The Reinsurer hereby acknowledges that the terms and conditions of this Contract, any materials provided in the course of audit or inspection and any documents, information and data provided to it by the Reinsured,
whether directly or through an authorized agent, in connection with the placement and execution of this Contract (hereinafter referred to as “Confidential Information”) are proprietary and confidential to the Reinsured. Confidential
Information shall not include documents, information or data that the Reinsurer can show: 

  

	 	a.	Are publicly available or have become publicly available through no unauthorized act of the Reinsurer; 

  

	 	b.	Have been rightfully received from a third person without obligation of confidentiality; or 

  

	 	c.	Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality. 

  

	2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated
companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except: 

  

	 	a.	When required by retrocessionaires subject to the business ceded to this Contract; 

  

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

  

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

  

	 	d.	When required by attorneys in connection with an actual or potential dispute hereunder; or 

  

	 	e.	When required for the Reinsurer’s internal operations directly related to carrying out the terms and conditions of this Contract. 

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

  
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	3.	With regard to any personally identifiable information of the insured under the Reinsured’s Policy to which the Reinsurer or its representatives may have access, the Reinsurer shall agree to be bound by the
insurance privacy laws of the state in which the Policy is issued and any applicable U.S. federal law and shall keep such information secure in accordance with U.S. insurance industry standards or that of the Reinsurer’s country of domicile,
whichever standards are higher. 

  

	4.	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 Reinsured with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Reinsured in maintaining the confidentiality provided for in this Article. 

 

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

ARTICLE 14 
 CURRENCY 

 

	1.	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.

  

	2.	Amounts paid or received by the Reinsured 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 Reinsured.

 ARTICLE 15 

ENTIRE AGREEMENT 
 This Contract and any related
trust agreement, Letter of Credit and/or special acceptance, shall constitute the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other
than as expressed in this Contract. Any change or modification to this Contract shall be null and void unless made by written amendment to this Contract and signed by a duly authorized officer of each of the parties hereto. 

  
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 ARTICLE 16 

ERROR AND OMISSIONS 
 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 17 

FEDERAL EXCISE TAX 
  

	1.	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. 

  

	2.	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 Reinsured or its agent should take steps to recover the
tax from the United States Government. 

 ARTICLE 18 

GOVERNING LAW 
 This Contract shall be governed by
and construed in accordance with the laws of the State of Florida. 
 ARTICLE 19 

INSOLVENCY 
  

	1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company. 

 

	2.	 In the event of the insolvency of one or more of the Reinsured’s companies, this reinsurance shall be
payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured or on the basis of claims files and allowed in the
liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Reinsured or because the liquidator, receiver, conservator or

  
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statutory successor of the Reinsured 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 Reinsured
shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court,
against the Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer. 

 

	3.	Where two or more Reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though
such expense had been incurred by the Reinsured. 

  

	4.	It is further understood and agreed that, in the event of the insolvency of one or more of the Reinsured’s companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Reinsured
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 or other party as more specifically limited by
any statute or regulation applicable hereto, of such reinsurance in the event of the insolvency of the Reinsured or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Reinsured
as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Reinsured to such payees. However, the exceptions provided in (1) and (2) above shall apply only to the extent that
applicable statutes or regulations specifically permit such exceptions. 

 ARTICLE 20 

LATE PAYMENTS 
  

	1.	The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. 

  
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	2.	In the event any premium, loss or other payment due either party is not received by the payment due date, the party to whom payment is due may require the debtor party to pay, and the debtor party agrees to pay, an
interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows: 

  

	 	a.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times 

  

	 	b.	0.016%; times 

  

	 	c.	The amount past due, including accrued interest. 

 It is agreed that interest shall accumulate
until payment of the original amount due plus interest penalties have been received by the party to whom payment is due. 
  

	3.	If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law or is held unenforceable by an arbitrator or a court of competent jurisdiction, such interest rate shall
be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated in any way. 

 

	4.	The establishment of the due date shall, for purposes of this Article, be determined as follows: 

  

	 	a.	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 of the initial billing for each such payment. 

  

	 	b.	Any claim or loss payment due the Reinsured hereunder shall be deemed due 30 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
30 days, interest will accrue on the payment amount overdue in accordance with paragraphs (2) and (3) above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer. 

 

	 	c.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs (a) and (b) of this paragraph, 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 following transmittal of written notification that the provisions of this Article have been invoked. 

  
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	5.	Nothing herein shall be construed as limiting or prohibiting a 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 penalties due hereunder on
the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty 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. 

  

	6.	Interest penalties 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 21 

LIABILITY OF THE REINSURER 
  

	1.	The liability of the Reinsurer shall follow that of the Reinsured in every case and be subject in all respects to all the general and specific stipulations, clauses, waivers, interpretations and modifications of the
Reinsured’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. 

 

	2.	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 22 
 LOSS NOTICES AND
SETTLEMENTS 
  

	1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses
at its own expense. 

  
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	2.	All loss settlements made by the Reinsured, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt
of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured. Notwithstanding the foregoing, and subject to the provisions set forth under paragraph (2) of the Exclusions Article, should any judicial,
regulatory, or legislative entity having legal jurisdiction require that the Reinsured be liable for any amounts that are otherwise outside the terms of the Reinsured’s original Policies, the Reinsurer agrees that such amounts shall be subject
always to the terms and conditions of this Contract. 

 ARTICLE 23 

NO ASSIGNMENT 
 Neither party shall assign its
rights or obligations hereunder to any other entity, whether or not an affiliate, without the express written consent of the other party, and any purported assignment in violation of this provision shall be deemed to not have occurred for the
purposes of this Contract. 
 ARTICLE 24 

NON-WAIVER 
 The failure of the Reinsured or the
Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights or remedies contained herein nor prevent either party from thereafter demanding full and complete
compliance nor prevent either party from exercising such rights or remedies with respect to similar situations in the future. 
 ARTICLE
25 
 NOTICES AND AGREEMENT EXECUTION 
  

	1.	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. 

 

	2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto: 

  
 Page 20 

 

 
  

	 	a.	Paper documents with an original ink signature; 

  

	 	b.	Facsimile or electronic copies of paper documents showing an original ink signature; and/or 

  

	 	c.	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. 

  

	3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. 

ARTICLE 26 
 OFFSET 

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

ARTICLE 27 
 OTHER REINSURANCE

 The Reinsured shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Reinsured and be
entirely disregarded in applying all of the provisions of this Contract. 
 ARTICLE 28 

SALVAGE AND SUBROGATION 
 The Reinsurer shall be
credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured 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 Reinsured for its primary loss. The Reinsured hereby agrees to enforce its rights to salvage or 

  
 Page 21 

 

 
  

 
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 Reinsured’s opinion, it is
economically reasonable to do so. 
 ARTICLE 29 

SERVICE OF SUIT 
 (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.) 

 

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

 

	2.	In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, 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. The Reinsurer, once the appropriate court is accepted
by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract,
will abide by the final decision of such court or of any Appellate Court in the event of an appeal. 

  

	3.	Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the Office of the General Counsel, Berkshire Hathaway Insurance
Group, 100 First Stamford Place, Suite 200, Stamford CT 06902, upon whom service of process may be served by any lawful process in any action, suit or proceeding instituted by or on behalf of the Reinsured or any beneficiary hereunder arising out of
this Contract. 

  
 Page 22 

 

 
  

 ARTICLE 30 

SEVERABILITY 
 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 31 

TAXES 
 In consideration of the terms under which
this Contract is issued, the Reinsured 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 of the District of
Columbia. 
 ARTICLE 32 
 THIRD
PARTY RIGHTS 
 This Contract is solely between the Reinsured and the Reinsurer, and in no instance shall any other party have any rights under this
Contract except as expressly provided otherwise in the Insolvency Article. 
 ARTICLE 33 

COMMUNICATIONS 
 All communication (including but
not limited to notices, reports and statements) relating to this Contract and all payments (including but not limited to premium, return premium, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) under this Contract
shall be made directly between the Reinsured and the Reinsurer. 

  
 Page 23 

 

 
  

 NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE – REINSURANCE U.S.A.

  

	1.	This Reinsurance does not cover any loss or liability accruing to the Reinsured, 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 Reinsured, 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 Reinsured, 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 Reinsured 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 Reinsured, 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 Reinsured 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.	Reinsured 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 Reinsured 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 Reinsured 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. 

 

 
  

 SANCTION LIMITATION AND EXCLUSION CLAUSE 

No reinsurer shall be deemed to provide cover and no reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the
provision of such cover, payment of such claim or provision of such benefit would expose that reinsurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulation of the
European Union, United Kingdom or United States of America.

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