Document:

exv10w166

EXHIBIT
10.166

Property Catastrophe Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

In consideration of the premium and subject to the

terms and conditions hereinafter set forth

The Reinsurers executing the

Interests and Liabilities Agreement

attached to this Contract

do hereby indemnify, as herein provided and specified, the

PEERLESS INSURANCE COMPANY

 

 

Table of Contents

	 	 	 	 	 	 	 
	Article	 	 	 	Page
	 
	I
	 	Business Covered

	 	 	1	 
	II
	 	Exclusions

	 	 	2	 
	III
	 	Term

	 	 	4	 
	IV
	 	Retention and Limit

	 	 	4	 
	V
	 	Reinstatement

	 	 	6	 
	VI
	 	Rates and Premium

	 	 	6	 
	VII
	 	Reports and Remittances

	 	 	6	 
	VIII
	 	Ultimate Net Loss

	 	 	7	 
	IX
	 	Loss Occurrence

	 	 	8	 
	X
	 	Net Retained Lines

	 	 	10	 
	XI
	 	Florida Hurricane Catastrophe Fund

	 	 	10	 
	XII
	 	Other Reinsurance

	 	 	11	 
	XIII
	 	Territory

	 	 	11	 
	XIV
	 	Loss Adjustment and Settlement

	 	 	11	 
	XV
	 	Salvage and Subrogation

	 	 	11	 
	XVI
	 	Interest Penalty

	 	 	12	 
	XVII
	 	Unauthorized Reinsurance

	 	 	13	 
	XVIII
	 	Currency

	 	 	14	 
	XIX
	 	Access to Records

	 	 	14	 
	XX
	 	Errors and Omissions

	 	 	16	 
	XXI
	 	Alterations

	 	 	16	 
	XXII
	 	Arbitration

	 	 	16	 
	XXIII
	 	Insolvency

	 	 	19	 
	XXIV
	 	Dividends and Taxes

	 	 	19	 
	XXV
	 	Federal Excise Tax

	 	 	19	 
	XXVI
	 	Service of Suit

	 	 	20	 
	XXVII
	 	Offset

	 	 	21	 
	XXVIII
	 	Governing Law

	 	 	21	 
	XXIX
	 	Confidentiality

	 	 	21	 
	XXX
	 	Severability

	 	 	22	 
	XXXI
	 	Special Conditions

	 	 	22	 
	XXXII
	 	Agency Agreement

	 	 	24	 
	XXXIII
	 	Entire Agreement

	 	 	24	 
	XXXIV
	 	Third Parties

	 	 	24	 

Attachments:

Exhibit A — Definition of Profit Center

Pools, Syndicates, Associations

War Risk Exclusion Clause

 

 

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (USA) (BRM # 35B)

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (Canada) (N.M.A. 1980a)

Insolvency Funds Exclusion Clause

Terrorism Exclusion Clause

Terrorism Exclusion Clause (Losses Occurring After December 31, 2005)

 

 

Property Catastrophe Excess of Loss

Reinsurance Contract

Effective: January 1, 2006

(hereinafter referred to as the “Contract”)

In consideration of the premium and subject to the

terms and conditions hereinafter set forth

This Contract is entered into by and between

PEERLESS INSURANCE COMPANY, Keene, NH

(hereinafter referred to as the “Company”) of the one part, and the various Reinsurers as

identified by the Interests and Liabilities Agreements attaching to and forming a part of this

Contract (hereinafter individually referred to as the “Subscribing Reinsurer” and collectively

referred to as the “Reinsurers”) of the other part.

Article I — Business Covered

By this Contract the Reinsurers agree to reinsure the Company under the Policies. The terms
“Policy” or “Policies,” whenever used herein, shall mean all binders, policies, contracts,
agreements, certificates, endorsements and other obligations, whether oral or written, of insurance
or reinsurance issued, accepted or held covered provisionally or otherwise by and on behalf of the
Company or a Legal Entity listed in Exhibit A (each, a “Legal Entity” and, collectively, the “Legal
Entities”) and reinsured, directly or indirectly, by the Company and in force at the effective date
hereof or issued or renewed on or after that date and classified by the Company or a Legal Entity
as Property business including, but not limited to:

	 	•	 	Automobile Physical Damage (including Specialty
Automobile and Garagekeepers’ Legal Liability but excluding
Collision),
	 
	 	•	 	Homeowners and Farmowners (Property and/or Section 1 only),
	 
	 	•	 	Commercial Multiple Peril (Property and/or Section 1 only),
	 
	 	•	 	Fire,
	 
	 	•	 	Extended Coverage and Allied Lines,
	 
	 	•	 	Inland Marine (including Yachts),
	 
	 	•	 	Boiler and Machinery,
	 
	 	•	 	Burglary and Theft,
	 
	 	•	 	Earthquake and Flood (when added to a Fire policy by
endorsement or when part of an Inland Marine or Multiple Peril policy),
	 
	 	•	 	Glass,
	 
	 	•	 	Miscellaneous Property Insurance,
	 
	 	•	 	Ocean Marine (Yacht business only),
	 
	 	•	 	Water Damage Insurance

subject to the terms, conditions and limitations set forth herein.

Under this Contract, the indemnity for reinsured loss applies only to business written through the
Profit Centers, as defined in Exhibit A — Definition of Profit Center.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 1.

 

Article II — Exclusions

	A.	 	It is expressly understood and agreed that this Contract does not apply to the
following:

	 	1.	 	All forms of Third Party Liability business, however not to exclude Bailee coverage of
Inland Marine Policies which are covered in accordance with the Business Covered
section of this Contract;
	 
	 	2.	 	Fidelity and Surety
	 
	 	3.	 	Financial Guarantee and/or Insolvency;
	 
	 	4.	 	Life, Accident and Health Insurance;
	 
	 	5.	 	Aircraft insurance, but not to exclude aircraft hulls insured under regular Fire
policies (other than Aircraft Hull policies) and not to exclude Aircraft Property
Damage;
	 
	 	6.	 	Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies,
civil war, rebellion, insurrection, military or usurped power, martial law or
confiscation by order of any government or public authority, but not excluding loss or
damage which would be covered under a standard policy form containing a standard war
exclusion clause;
	 
	 	7.	 	Nuclear Incidents as per Nuclear Incident Exclusion Clause Physical Damage —
Reinsurance and Nuclear Incident Exclusion Clause — Physical Damage and Liability
(Boiler and Machinery) — Reinsurance attached, as Exhibits B and C which are made a
part hereof;
	 
	 	8.	 	Treaty reinsurance assumed, except for any agency reinsurance, or business
written by affiliates of the Company and reinsured internally within the companies that
comprise the Liberty Mutual Agency Markets strategic business unit, and specifically
any reinsurance transacted among or between the companies that comprise Liberty Mutual
Agency Markets (shown in Exhibit A), or any reinsurance between
OneBeacon Insurance Company, its affiliates and Peerless Insurance Company;
	 
	 	9.	 	All liability of the Company or a Legal Entity arising, by agreement, 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
or a Legal Entity 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;
	 
	 	10.	 	Pollution and Seepage as per the original Policies;
	 
	 	11.	 	All losses in respect of overhead transmission and distribution lines
and their supporting structures other than those on or within 1,000 feet of the
insured

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 2.

 

	 	 	 	suppliers’ extension and / or contingent business interruption coverages are not
subject to this exclusion, provided that these are not part of a transmitters’ or
distributors’ policy;
	 
	 	12.	 	Terrorism as per the attached Terrorism Exclusion clause;
	 
	 	13.	 	Mold:
	 
	 	 	 	This Contract does not apply to loss or liability in any way or to any extent arising
out of the actual or alleged presence or actual, alleged or threatened presence of
fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile
organic compounds or other “microbial contamination”. This includes:

	 	a.	 	Any supervision, instruction, recommendations, warnings, or advice
given or which should have been given in connection with the above; and
	 
	 	b.	 	Any obligation to share damages with or repay someone else who
must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination,
either airborne or surface, which arises out of or is related to the presence of
fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores,
including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus
and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event
unless arising out of one or more of the following perils, in which case this exclusion
does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects,
windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami,
flood, freeze or weight of snow.

	 	14.	 	Losses arising out of “extra contractual obligations” or “loss in
excess of policy limits.”

	 	a.	 	The term “extra contractual obligations” shall mean any punitive,
exemplary, compensatory, or consequential damages paid or payable by the Company
or a Legal Entity
as a result of an action against it by its insureds or itsr insured’s
assignee or a third party claimant.
	 
	 	b.	 	The term “loss in excess of policy limits” shall mean any amount paid
or Payable by the Company or a Legal Entity in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an action against the
Company or a Legal Entity by an insured or the insured’s assignee to recover
damages the insured is legally obligated to pay to a third party claimant because
of the Company’s or a Legal Entity’s alleged or actual negligence or bad faith in
rejecting a settlement within policy limits, or in discharging its duty to defend
or prepare the defense in the trial of an action against its insured, or in
discharging its duty to prepare or prosecute an appeal consequent upon such
action.

	B.	 	In respect of business classified by the Company or a Legal Entity as
“Property,” the coverage afforded hereunder shall not apply to the following:

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 3.

 

	 	1.	 	Flood, except when written in conjunction with other perils reinsured by this
Contract, whether under the same policy or a separate policy covering the same risk;
	 
	 	2.	 	All liability on standing or growing crops;
	 
	 	3.	 	Pools, Associations and Syndicates business as per the attached Exhibit D
which is made part thereof.

Article III — Term

	A.	 	This Contract applies only to losses arising out of loss occurrences commencing during its
effective period. This Contract is effective at 12:01 a.m., Local Standard Time, January 1,
2006, Local Standard Time, and shall end at 12:01 a.m., January 1, 2007, Local Standard Time.

	B.	 	This Contract may be terminated in whole or in part only on the following dates; January 31,
February 28, or March 31, 2006 by the Company giving to the Subscribing Reinsurer, written
notice of it’s intention to do so.

	C.	 	If this Contract should expire or terminate while a Loss Occurrence is in progress, the
Reinsurers shall nevertheless be liable to the extent of their interest, subject to the other
conditions of this Contract, for all losses arising out of the Loss Occurrence whether
happening before or after such expiration or termination, provided that no claim is made
against such Loss Occurrence on any renewal of this Contract.

Article IV — Retention and Limit

	A.	 	First Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial net
loss of $50,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the aggregate
during the term of this Contract
	 
	B.	 	Second Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial net
loss of $100,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the
aggregate during the term of this Contract
	 
	C.	 	Third Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial net
loss of $150,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the aggregate
during the term of this Contract.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 4.

 

	D.	 	Fourth Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial net
loss of $200,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the aggregate
during the term of this Contract.
	 
	E.	 	Fifth Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial net
loss of $250,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the
aggregate during the term of this Contract
	 
	F.	 	Sixth Layer Catastrophe Excess of Loss Reinsurance
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 74.8% of the excess Ultimate Net Loss above an initial net
loss of $300,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the
aggregate during the term of this Contract
	 
	G.	 	Seventh Layer Catastrophe Excess of Loss Reinsurance — Earthquake Only
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 74.8% of the excess Ultimate Net Loss above an initial net
loss of $350,000,000 provided, however, that the Reinsurers shall not be liable for more than
$50,000,000 of each and every such Loss Occurrence, nor more than $100,000,000 in the
aggregate during the term of this Contract
	 
	H.	 	Eighth Layer Catastrophe Excess of Loss Reinsurance — Earthquake Only
	 
	 	 	The Reinsurers shall be liable in each and every Loss Occurrence, irrespective of the number
and kinds of Policies involved, for 74.8% of the excess Ultimate Net Loss above an initial net
loss of $400,000,000 provided, however, that the Reinsurers shall not be liable for more than
$25,000,000 of each and every such Loss Occurrence, nor more than $50,000,000 in the aggregate
during the term of this Contract
	 
	I.	 	Recoveries under this Contract, when combined with recoveries from inuring reinsurance,
cannot exceed the Company’s actual loss, direct or indirect, whether as insurer or reinsurer,
less its respective retentions.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 5.

 

Article V — Reinstatement

	A.	 	Each claim hereunder shall reduce the amount of the Reinsurers’ liability from the time of
the occurrence of the loss by the sum paid, but the sum so exhausted shall be reinstated
immediately from the time of the occurrence of the loss.
	 
	B.	 	For all layers each amount so reinstated, the Company agrees to pay an additional premium
calculated by multiplying 100% of the annual reinsurance premium therein by the percentage
that the amount reinstated bears to the limit of this Contract.
	 
	C.	 	A provisional reinstatement premium shall be paid by the Company at the time the Reinsurers
pays the loss giving rise to the reinstatement premium through an offset of the provisional
reinstatement premium due the Reinsurers against the loss payment due the Company, with only
the net amount due to be remitted by the debtor party. The amount of this provisional
reinstatement premium shall be based on 100% of the estimated annual reinsurance premium of
each Layer, whichever may be reinstated.
	 
	D.	 	As promptly as possible after the loss has been paid by the Reinsurers and the annual
Reinsurance premium hereunder has been finally determined, the Company shall prepare and
submit to the Reinsurers a final statement of reinstatement premium due. Any reinstatement
premium shown to be due the Reinsurers (less prior payments, if any) shall be remitted by the
Company with its statement. Any return reinstatement premium shown to be due the Company shall
be remitted by the Reinsurers as promptly as possible after receipt of the Company’s final
statement.

Article VI — Rates and Premium

	A.	 	The rates set forth below shall be applied to the subject earned premium of the Company and
the Legal Entities for all classes of Business Covered hereunder, as stated in Paragraph A of
Article I — Business Covered.

Layer 1 — 0.385%

Layer 2 — 0.308%

Layer 3 — 0.212%

Layer 4 — 0.192%

Layer 5 — 0.173%

Layer 6 — 0.113%

Layer 7 — 0.055%

Layer 8 — 0.034%

Article VII — Reports and Remittances

The annual minimum reinsurance premium shall be remitted in four equal quarterly installments
due on January 15, May 15, August 15 and November 15, 2006. The Company shall submit finalized
accounts to the Reinsurer on February 15, 2007 summarizing the actual subject earned premium for
the January 1, 2006 through December 31, 2006 coverage period. The difference between the deposit
premium and actual subject earned premium will be settled to/from the Company within 15 days of
February 15, 2007.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 6.

 

	 	 	 	 	 	 	 	 	 
	Layer	 	Minimum and Deposit	 	Quarterly
	Layer 1
	 	$	5,000,000	 	 	$	1,250,000	 
	Layer 2
	 	$	4,000,000	 	 	$	1,000,000	 
	Layer 3
	 	$	2,750,000	 	 	$	687,500	 
	Layer 4
	 	$	2,500,000	 	 	$	625,000	 
	Layer 5
	 	$	2,250,000	 	 	$	562,500	 
	Layer 6
	 	$	1,462,500	 	 	$	365,625	 
	Layer 7
	 	$	712,500	 	 	$	178,125	 
	Layer 8
	 	$	450,000	 	 	$	112,500	 

Article VIII — Ultimate Net Loss

	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: all amounts paid or due and
payable by the Company or a Legal Entitiy in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies, less salvages and subrogation recoveries and
amounts recovered or recoverable under pooling agreements or other reinsurances,
whether collectible, or not. “Ultimate Net Loss” includes, but is not limited to, the
following paid or due and payable amounts: Allocated Loss Adjustment Expenses, defense
costs, court costs, supersedeas and appeal bond costs, post and prejudgment interest,
Attorneys’ Fees and Expenses, Claim-Specific Declaratory Judgment Expenses, Field Employee
Salaries and Expenses, Unallocated Loss Adjustment Expenses calculated at 7% of any loss, and
all other costs of investigation or litigation. Nothing herein shall be construed to mean
that losses under this Contract are not recoverable until the Company’s or a Legal Entity’s
ultimate net loss has been ascertained.
	 
	B.	 	“Allocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or
due and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies, including but not limited to Claim-Specific
Declaratory Judgment Expenses, Attorneys’ Fees and Expenses, Field Employee Salaries and
Expenses, court costs, supersedeas and appeal bond costs, post and prejudgment
interest, and expenses of outside adjusters or other third party administrators.
	 
	C.	 	“Unallocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or
due and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies that do not constitute Allocated Loss Adjustment
Expense.
	 
	D.	 	“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses incurred
in actions brought to determine whether the Company or a Legal Entity has a defense and/or
indemnification obligation for individual claims presented against Policies covered under this
Contract. Any Claim-Specific Declaratory Judgment Expense shall be deemed to have been fully
incurred on the same date as the insured’s original loss or loss occurrence (if any) giving
rise to the action, unless otherwise provided for within this Contract.
	 
	E.	 	The term “Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of
attorneys, including but not limited to the fees and expenses of the Company’s or its
affiliates’ in-house attorneys providing legal advice on coverage questions and/or defending
the Company or a Legal Entity in coverage litigation, and fees and expenses of outside

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 7.

 

	 	 	attorneys and/or staff counsel in the defense of policyholder claims. Such Attorneys’
Fees and Expenses for in-house attorneys and staff counsel shall be calculated at the rate for
such attorneys plus the expenses incurred by such attorneys, but excluding office expenses of
the Company and its affiliates and salaries and expenses of its other employees which
constitute Unallocated Loss Adjustment Expense.
	 
	F.	 	The term “Field Employee Salaries and Expenses” as used above, shall mean a pro rata share
of salaries and expenses of the Company’s or its affiliates’ field employees according to the
time occupied in adjusting, defending, and settling such losses or loss occurrences, and of
expenses of all of the Company’s or its affiliates’ officers and employees incurred in
connection with the loss; except that salaries of officers and employees engaged in general
management and located in the home office of the Company or its affiliates and any office
expense of the Company or its affiliates do not constitute Field Employee Salaries and
Expenses, but rather Unallocated Loss Adjustment Expense.

Article IX — Loss Occurrence

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

	 	1.	 	As regards windstorm, hail, tornado, cyclone including ensuing collapse and water
damage, all individual losses sustained by the Company or a Legal Entity occurring during
any period of 72 consecutive hours arising out of and directly occasioned by the same
event. However, as respects named hurricanes or tropical storms within the 48 contiguous
states and Canada, all individual losses sustained by the Company or a Legal Entity
occurring during any period of 168 consecutive hours arising out of and directly occasioned
by the same event. However, the event need not be limited to one state or province or
states or provinces contiguous thereto.
	 
	 	2.	 	As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company or a Legal Entity occurring during
any period of 72 consecutive hours within the area of one municipality or county and the
municipalities or counties contiguous thereto arising out of and directly occasioned by
the same event. The maximum duration of 72 consecutive hours may be extended in respect of
individual losses which occur beyond such 72 consecutive hours during the continued
occupation of an assured’s premises by strikers, provided such occupation commenced during
the aforesaid period.
	 
	 	3.	 	As regards earthquake (the epicentre of which need not necessarily be within the
territorial confines referred to in the introductory portion of this paragraph) 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 “Loss
Occurrence.”

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 8.

 

	 	4.	 	As regards “freeze,” only individual losses directly occasioned by collapse, breakage
of glass and water damage (caused by bursting of frozen pipes and tanks) may be included
in the “Loss Occurrence.”
	 
	 	5.	 	As regards firestorms, brush fires and any other fires or series of fires, irrespective of
origin (except as provided in subparagraphs 2 and 3 above), which spread through trees,
grassland or other vegetation, all individual losses sustained by the Company or a Legal
Entity which commence during any period of 168 consecutive hours and within a 150-mile radius
of any fixed point selected by the Company may be included in the “Loss Occurrence.” However,
an individual loss subject to this subparagraph 5 cannot be included in more than one “Loss
Occurrence.”

	B.	 	For all “Loss Occurrences,” the Company may choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company or a Legal Entity
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
Occurrences” referred to in subparagraph (1) and (2) of paragraph A above defined as occurring
during any period of 72 consecutive hours where only one such period of 72 consecutive hours
shall apply with respect to one event, regardless of the duration of the event.

	C.	 	As respects those “Loss Occurrences” referred to in subparagraph (1) and (2)
of paragraph A above, if the disaster, accident or loss occasioned by the event is of
greater duration than 72 consecutive hours, then the Company may divide that disaster,
accident or loss into two or more “Loss Occurrences,” provided no two periods overlap and no
individual loss is included in more than one such period, and provided that no period
commences earlier than the date and time of the occurrence of the first recorded individual
loss sustained by the Company or a Legal Entity arising out of that disaster, accident or
loss.

	D.	 	No individual losses occasioned by an event that would be covered by 72 hours clauses may be
included in any “Loss Occurrence” claimed under 168 hours provision.

	E.	 	Any date change, including leap year calculations, shall not in and of itself be regarded as
“Loss Occurrence” for the purposes of this reinsurance.

	F.	 	Losses directly or indirectly occasioned by:

	 	1.	 	loss of, alteration of, or damage to, or;
	 
	 	2.	 	a reduction in the functionality, availability or operation of a computer system,
hardware, program, software, data, information repository, microchip, integrated circuit
or similar device in computer equipment or non- computer equipment, whether the property
of the policyholder of the Company or a Legal Entity or not, do not in and of themselves
constitute an event unless arising out of one or more of the following perils:

fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm,
hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or
weight of snow.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 9.

 

Article X — Net Retained Lines

	A.	 	This Contract applies only to such portion of any Policy that the Company, directly or
indirectly, whether as insurer or reinsurer, retains net for its own respective account (prior
to the deduction of any underlying reinsurance specifically permitted in this Contract). In
calculating the amount of any loss hereunder and in computing the amount in excess of which
this Contract attaches only loss or losses in respect of that portion of any insurance, or
reinsurance which the Company, directly or indirectly, whether as insurer or reinsurer,
retains net for its own account shall be included.

	B.	 	It is agreed that the amount of the Reinsurers’ liability hereunder in respect of any loss
shall not be increased by reason of the inability of the Company to collect from any other
reinsurers, whether specific or general, any amount which may have become due from it such
reinsurers whether such inability arises from the insolvency of such other reinsurer or
otherwise.

	C.	 	Allocation of losses and expenses to Legal Entities other than the Company pursuant to inter
company reinsurance among the Legal Entities shall be entirely disregarded for all purposes of
this Contract

Article XI — Florida Hurricane Catastrophe Fund

	A.	 	Any loss reimbursement the Company or a Legal Entity receives under the Florida Hurricane
Catastrophe Fund (FHCF) shall apply as follows:

	 	1.	 	Except as provided in subparagraph 2 below, any such loss reimbursement shall inure
solely to the benefit of the Company and shall be entirely disregarded in applying all of
the provisions of this Contract.
	 
	 	2.	 	If one or more loss occurrences commencing during the term of this Contract result(s)
in recoveries made by the Company under this Contract and the Company or a Legal Entity
under FHCF, and such recoveries, together with any other reinsurance recoveries made by the
Company applicable to said loss occurrence(s), exceed the amount permitted by Florida law,
any amount in excess thereof shall reduce the ultimate net loss subject to this Contract
for the loss occurrence(s) to which the recoveries apply.

	B.	 	For purposes hereof, if a loss reimbursement received by the Company or a Legal Entity under
the FHCF is based on the Company’s or a Legal Entity’s losses in more than one loss occurrence
and the FHCF does not designate the amount allocable to each loss occurrence, the
reimbursement shall be prorated in the proportion that the Company’s or a Legal Entity’s
losses in each loss occurrence bear to the Company’s and the Legal Entities’ total losses
arising out of all loss occurrences to which the recovery applies.

	C.	 	Any reimbursement premiums or emergency assessment paid by the Company or a Legal Entity
under the FHCF shall be disregarded for purposes of determining subject premium and ultimate
net loss under this Contract.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 10.

 

Article XII — Other Reinsurance

	A.	 	It is understood and agreed that the Company may purchase underlying property per risk
excess of loss covers which will inure to the benefit of this Contract.

	B.	 	The Company may have in force other excess catastrophe reinsurances, recoveries under which
shall inure solely to the benefit of the Company.

Article XIII — Territory

This Contract is worldwide in scope and shall cover risks wherever located.

Article XIV — Loss Adjustment and Settlement

	A.	 	The Company shall give notice, as soon as practicable, to Reinsurers of any claim that it has
reason to believe could involve this Contract. The Company shall keep the Reinsurers
informed of significant developments likely to affect the cost of any claim or claims
hereunder.

	B.	 	The Company or a Legal Entity may commence, continue, defend, settle, or withdraw from
actions, suits, or prosecutions and, generally, do all such things relating to any claim or
loss in which the Reinsurers are interested as, in the Company’s or Legal Entity’s judgment,
may be beneficial or expedient to the Company or such Legal Entity, as applicable, and the
Reinsurers. The Company shall be the sole judge as to what claims are covered under the
Policies. All of the Ultimate Net Loss and Loss Occurrences, as well as all loss settlements
made and judgments paid by the Company or a Legal Entity, provided they are within the terms
of this Contract either under the strict conditions of the Policies or by way of compromise,
shall be unconditionally binding upon the Reinsurers, who agree to pay all amounts for which
they are liable immediately upon reasonable evidence of the amount due being furnished to the
Reinsurers by the Company. The true intent of this Contract is that the Reinsurers shall, in
every case to which this Contract applies, follow the settlements of the Company and the Legal
Entities.

Article XV — Salvage and Subrogation

	A.	 	The Reinsurers shall be credited with their share of salvage and/or subrogation in respect of
claims and settlements under this Contract, less their share of recovery expense. Unless the
Company and Reinsurers agree to the contrary, the Company or the Legal Entities shall enforce
the right to salvage and/or subrogation and shall prosecute all claims arising out of such
right. Should the Company or a Legal Entity refuse or neglect to enforce this right, the
Reinsurers are hereby empowered and authorized to institute appropriate action in the name of
the Company or a Legal Entity, as applicable.

	B.	 	Amounts recovered from salvage and/or subrogation shall always be used to reimburse the
excess Reinsurers (and the Company, should it carry a portion of excess coverage net) in the
reverse order of their participation in the loss before being used in any way to reimburse the
Company or a Legal Entity for its primary loss. If the amount recovered exceeds the recovery
expense, the recovery expense shall be borne by each party in proportion of its benefit from
the recovery. If the recovery expense exceeds the amount recovered, the amount recovered
(if any) shall be applied to the reimbursement of recovery expense and the

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 11.

 

	 	 	remaining expense, as well as any originally incurred loss expense, shall be added to the
Ultimate Net Loss. If no amount is recovered from salvage and/or subrogation, the expense
incurred in attempting such recovery shall be deemed loss adjusted expense applicable to the
specific loss for which recovery was ought and shall be added to the Ultimate Net Loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Reinsurers under this Contract, shall be applied as if obtained prior to said
payments and all necessary adjustments shall be made between the Company and the Reinsurers as
soon as practicable after said salvage and/or subrogation recovery is obtained.
	 
	D.	 	The Company shall have the right, before the happening of the loss, to waive the right of
subrogation as to that loss.

Article XVI — Interest Penalty

	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer or
to the Company in the following circumstances:

	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not received
within 45 calendar days following the date of presentation to the Reinsurers of
information necessary to approve payment of the claim, and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is not
received within 45 calendar days following the date on which payment is due, and/or
	 
	 	3.	 	If any premium adjustment, agreed by either party to the other, is not received
within 150 calendar days following the expiry or anniversary of this Contract, and/or
	 
	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not provided
in subparagraphs 1, 2, and 3 above, are not received in accordance with the date
specified in this Contract or if no date is specified, within 90 calendar days following
the date the debtor party received the billing.

	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on the
first day of the calendar month in which the amount became past due, plus 2.0%. The variable
rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as published in the
Eastern Edition of The Wall Street Journal on the first day of each successive month during
which the amount due remains unpaid, plus 2.0%. The product shall then be multiplied by
1/365 for each day after the due date that the amount due and the interest amount remain
unpaid. Any interest that occurs pursuant to this Article shall be calculated by the party
to which it is owed.

	C.	 	The validity of any claim or payment may be contested under the provisions of this Contract.
If the debtor party prevails in an arbitration or any other proceeding with respect to the
amounts in dispute, there shall be no interest penalty due. If the creditor party wholly or
partially prevails on any of the amounts in dispute, the interest penalty shall be awarded as
outlined above. Such interest penalty shall be calculated from the date the monies were due

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 12.

 

	 	 	and owing to the date of resolution of the arbitration or proceeding, and shall be payable as
of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly return
the applicable amount of such payment. The arbitrator(s) hearing such dispute shall determine
if interest shall be added to the amount returned by the Company.

	E.	 	Any interest owing pursuant to this Article may be waived by the party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be
waived. Any waiver of any interest pursuant to this paragraph, however, shall not affect the
waiving party’s right to claim and/or pursue interest for any other failure by the other party
to make payment when due under this Article.

Article XVII — Unauthorized Reinsurance

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

	A.	 	As regards Polices coming within the scope of this Contract, the Company agrees that when it
shall file with the insurance regulatory authority or set up on its books reserves for
unearned premium and losses covered hereunder which it shall be required by law to set up, it
will forward to the Subscribing Reinsurer a statement showing the proportion of such reserves
which is applicable to the Subscribing Reinsurer. The Subscribing Reinsurer hereby agrees to
fund such reserves in respect of unearned premium, known outstanding losses that have been
reported to the Subscribing Reinsurer and allocated loss adjustment expense relating thereto,
losses and loss adjustment expense paid by the Company but not recovered from the Subscribing
Reinsurer, plus reserves for losses incurred but not reported as determined by the Company, as
shown in the statement prepared by the Company (hereinafter referred to as “ Subscribing
Reinsurer Obligations”) by Letters of Credit, unless the method of funding is determined by
applicable law, statute, or regulation.

	B.	 	As regards Subscribing Reinsurers authorized in any province or jurisdiction of Canada, such
funding shall be equal to 115% of their proportion of reserves by Letters of Credit for no
more than 15.0% of the total funding required and cash advances for the remaining.

	C.	 	The Subscribing Reinsurer agrees to apply for and secure timely delivery to the Company of
clean, irrevocable, and unconditional Letters of Credit issued by a bank that is a qualified
U.S. financial institution and containing provisions acceptable to the insurance
regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to
the Subscribing Reinsurer’s proportion of said reserves. At the Company’s request,
Subscribing Reinsurer will agree to provide separate Letters of Credit for any Legal Entity
listed covered under this Contract. Such Letters of Credit shall be issued for a period of
not less than one year, and shall be automatically extended for one year from its date of
expiration or any future expiration date unless 60 days prior to any expiration date the
issuing bank shall notify the Company by certified mail that the issuing bank elects not to
consider the Letters of Credit extended for any additional period.

	D.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 13.

 

time, notwithstanding any other provision of this Contract, and be utilized by the Company or
any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution because
of the insolvency of the Company or the Subscribing Reinsurer for one or more of the following
purposes:

	 	1.	 	To pay or reimburse the Company for:

	 	a.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing Reinsurer, to the owners of
Policies reinsured under this Contract on account of cancellations of such Policies;
and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of surrenders and
benefits or losses paid by the Company or a Legal Entity, but not yet recovered from
the Subscribing Reinsurer, under the terms and provisions of the Policies reinsured
under this Contract; and
	 
	 	c.	 	Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the Company.

	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or replaced
by Letters of Credit for a reduced amount and where the Subscribing Reinsurer’s entire
obligations under this Contract remain unliquidated and undischarged 10 days prior to the
termination date, to withdraw amounts equal to the Subscribing Reinsurer’s share of the
liabilities, to the extent that the liabilities have not yet been funded by the
Subscribing Reinsurer and exceed the amount of any reduced or replacement Letters of
Credit, and deposit those amounts in a separate account in the name of the Company in a
qualified U.S. financial institution apart from its general assets, in trust for such
uses and purposes specified in above as may remain after withdrawal and for any period
after the termination date.

Article XVIII — Currency

Whenever a reference to a monetary currency appears in this Contract, it shall be construed
to mean United States Dollars (“USD”). All amounts paid or received by the Company in any other
currency shall be converted into United States Dollars at the rate of exchange on the date at
which it is entered on the books of the Company.

Article XIX — Access to Records

	A.	 	Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized representative, may upon reasonable prior written notice to the Company, at the
Subscribing Reinsurer’s own expense, examine at the offices of the Company or its affiliates,
during normal office hours, the Company’s or the Legal Entities’ policy, accounting,
underwriting, or claim records and files, or any such additional relevant records and files,
as they exist in the Company’s or its affiliates’ possession or reasonable control, relating
to business ceded under this Contract. The Subscribing Reinsurer’s notice shall reasonably
describe the nature of the inspection that it wishes to conduct, the persons conducting the
inspection and upon notice of available files from the Company, the files that it wishes to
review. Subject to the limitations expressed in this Article, this right of inspection shall
survive termination or

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 14.

 

	 	 	expiration of this Contract and shall continue as long as either party has any rights or
obligations under this Contract.
	 
	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or files
concerning any particular claim(s) if the Subscribing Reinsurer has not disputed liability for
payment of such claim(s), and payment of such claim(s) is more than 90 days overdue according
to the Company’s records. The Company shall, however, prior to an arbitration demand that
may be instituted by either party, continue to respond to reasonable specific requests for
information and questions raised by the Subscribing Reinsurer concerning such claims; and
nothing in this Article shall restrict the right or ability of the Subscribing Reinsurer to
seek discovery of relevant information in an arbitration proceeding pursuant to the
Arbitration Article of this Contract.

	C.	 	As a condition precedent to access to records under this Article, the Subscribing Reinsurer,
its personnel and any authorized third party representative of the Subscribing Reinsurer shall
agree to the provisions of the Confidentiality Article of this Contract.

	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer (a)
concerning Trade Secrets of the Company or its affiliates, (b) subject to the terms of a third
party non-disclosure agreement with the Company or its affiliates requiring third party
consent to disclosure, (c) subject to the Work Product Privilege or Attorney-Client Privilege
or (d) concerning individual private information that as a matter of law cannot be disclosed
by the Company or its affiliates (hereinafter referred to in the Contract as
“Privileged Documents”). The Company shall reasonably try to exempt the Reinsurers from any
third party non-disclosure agreement or obtain consent from the third party to disclose to the
Subscribing Reinsurer.

	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured
hereunder following final settlement or final adjudication of the case or cases involving such
claim, with prejudice against all claimants, and all parties to such adjudications; provided
that the Company, may defer release of such Privileged Documents if there are subrogation,
contribution, or other third party actions with respect to that claim or case, which might
jeopardize the Company’s or its affiliates’ defense by release of such Privileged Documents.
In the event that the Company shall seek to defer release of such Privileged Documents, it
will in consultation with the Subscribing Reinsurer take other steps as reasonably necessary
to provide the Subscribing Reinsurer with the information it reasonably requires to indemnify
the Company without causing a loss of such privileges. The Subscribing Reinsurer, however,
shall not have access to Privileged Documents relating to any dispute between the Company and
the Subscribing Reinsurer.

	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section 1839
of the United States Economic Espionage Act of 1996. “Attorney-Client Privilege” shall mean
communications of a confidential nature between (a) the Company or its affiliates, or anyone
retained or in the control of the Company or its affiliates, or their in-house or outside
legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside
legal counsel which relate to legal advice being sought by the Company or its affiliates
and/or which contains legal advice being provided to the Company or its affiliates. “Work
Product Privilege” shall mean communications, written materials and tangible things prepared
by or for in-house or outside counsel, or prepared by or for the Company or its affiliates, in
anticipation of or in connection with litigation, arbitration, or other dispute
resolution proceedings.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 15.

 

Article XX — Errors and Omissions

Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would attach to
it hereunder if such delay, omission, or error had not been made, provided such delay, omission, or
error is rectified upon discovery.

Article XXI — Alterations

The Contract may at any time be altered by mutual consent of the parties by addendum or by
correspondence, either of which to be authorized and signed by a responsible official of the
parties and such addendum or correspondence shall be binding on the parties and be deemed to be an
integral part of this Contract.

Article XXII — Arbitration

	A.	 	Disputes to be Arbitrated. Any and all disputes between the Company and the
Subscribing Reinsurer arising out of, relating to, or concerning this Contract, whether
sounding in contract or tort and whether arising during or after this Contract’s formation, or
after its termination, including disputes as to whether the Contract was validly formed or is
voidable, shall be submitted to the decision of an arbitration panel (“Panel”). The Panel
shall consist of an umpire and two party-appointed arbitrators unless a party meets the
requirements of paragraph C of this Article and demands arbitration pursuant thereto, in which
case the Panel would consist of an umpire only.

	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the
Procedures for the resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel
Version, dated April 2004 (the “Procedures”), developed by the Insurance and Reinsurance
Dispute Resolution Task Force, subject to the following modifications:

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
Alternative section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the list
to be used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial and
disinterested. The members of the Panel may not be:

	 	a.	 	In the control of any party or its parent, affiliate or agent;
	 
	 	b.	 	A former director or officer of any party or its parent,
affiliate or agent; or
	 
	 	c.	 	A likely witness in the arbitration.

The requirement of impartiality means that all members of the Panel shall have the same
obligation to approach the Panel’s duties and decisions with fairness and without
consideration for the fact that Panel members may have been appointed by one of the

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 16.

 

	 		 	parties. The requirement of impartiality does not mean that the three arbitrators have no
previous knowledge of or experience with respect to issues involved in the dispute or
disputes.
	 
	 	4.	 	The first sentence of section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends to
present, discussion of the applicable law and the basis for the requested Award or denial
of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no party (or anyone acting for a party) shall
have any communications concerning the arbitration or any of the issues before the Panel
with any member of the Panel that is not also disclosed to all other parties and all
members of the Panel. Each Panel member shall have a continuing duty to disclose
promptly to all parties and all Panel members any violation of this prohibition and the
specifics of any improper communications that occurred. This prohibition shall remain in
place until all challenges to any arbitration awards and decisions have been either
waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information
and/or documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position Statements may be amended at any reasonable time, but not later than the
close of discovery without a showing to the Panel that the amending Party could not
reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one year
of the arbitration demand, unless the Parties otherwise agree. Should a Party seek a
reasonable extension to this time frame for good cause shown, the other Party’s agreement
shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision: “The
Panel shall make a decision and issue an award with regard to the terms expressed in this
Contract, and the custom and practice of the property and casualty insurance and
reinsurance business. The Panel shall not be obligated to follow the strict rules of law
and evidence.”

	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as
modified by sections B(3), B(4), and B(9) through B(11) of this Article, shall apply in the
event that, in a consolidated proceeding or otherwise, the party initiating arbitration is
seeking payment of a total amount that is no greater than $1,000,000, or the currency
equivalent thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section 16.4 of the
Alternative Streamlined Procedures shall not apply. The Parties agree to comply with section
6.7 of the Procedures

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 17.

 

	 	 	to appoint a single umpire, and hereby designate the umpire list maintained by ARIAS (U.S.) as
the list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
parties mutually agree to a different location.

	E.	 	Confirmation. Either party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that Court shall thereupon be entered
on any award. If such an order is issued, the party against whom confirmation is sought
shall pay the attorneys’ fees incurred of the party who applied for the confirmation order and
all court costs of any such proceeding.

	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any participating party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the parties
participating in the arbitration pending the decision and award by the Panel.

	G.	 	Consolidated Proceedings.

	 	1.	 	Same contract, single Reinsurer. Both the Company and any single Reinsurer on
this Contract have the right to combine any and all disputes between them that concern
this Contract (including any renewal of this Contract or any contract for which this
Contract is a renewal) into a single arbitration proceeding before a single Panel, except
that the standard for determining whether a party may add a new issue, claim or dispute
to an arbitration proceeding shall be the standard for amending a Position Statement, as
set forth in subparagraph B(7) of this Article.
	 
	 	2.	 	Multiple contracts, single Reinsurer. The Company has the right to combine any and
all disputes between the Company and a single Reinsurer into a single arbitration
proceeding before a single Panel where such disputes involve this Contract and any
additional contracts between the two parties, except that the standard for determining
whether a party may add a new issue, claim or dispute to an arbitration proceeding shall
be the standard for amending a Position Statement, as set forth in subparagraph B(7) of
this Article.
	 
	 	3.	 	Same contract, multiple reinsurers. At the Company’s option, if more than one
reinsurer is involved in arbitration relating to this Contract, where there are common
questions of law or fact and a possibility of conflicting awards or inconsistent results,
all such reinsurers shall constitute and act as one party for purposes of this Article
and communications shall be made by the Company to each of the reinsurers constituting
the one party; provided, however, that the reinsurers shall have the right to assert
several, rather than joint defenses or claims, and to be represented by separate counsel.
This provision shall not change the liability of each of the reinsurers under the terms
of this Contract as several to joint.

	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Article. In addition, to the extent the Panel (or the umpire in an Alternative Streamlined
Procedure) looks to applicable law, such Panel or umpire shall apply the law as set forth in
the Governing Law Article of this Contract.

	I.	 	Survival of Article. This Article shall survive the termination or expiration of
this Contract.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 18.

 

Article XXIII — Insolvency

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

	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be
payable on demand, with reasonable provision for verification, on the basis of claims allowed
against the insolvent Company by any court of competent jurisdiction or by any liquidator,
receiver, conservator, or statutory successor of the Company having authority to allow such
claims, without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Reinsurers shall be made directly to the Company or its liquidator, receiver,
conservator, or statutory successor, except to the extent Section 4118(a) of the New York
Insurance Law applies, or except (a) where the Contract specifically provides another payee of
such reinsurance in the event of the insolvency of the Company, or (b) where the Reinsurers
with the consent of the direct insured or insureds has assumed such Policy obligations of the
Company as direct obligations of the Reinsurers to the payees under such Policies and in
substitution for the obligations of the Company to such payees.

	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Reinsurers of the pendency of a claim
against the insolvent Company on the policy or policies reinsured within a reasonable time
after such claim is filed in the insolvency proceeding and that during the pendency of such
claim the Reinsurers may investigate such claim and interpose, at their own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses which it may deem
available to the Company or its liquidator, receiver, conservator, or statutory successor. The
expense thus incurred by the Reinsurers shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit, which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurers.

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

Article XXIV — Dividends and Taxes

In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns, other
than income or profits tax returns to any State or to the District of Columbia or Canada.

Article XXV — Federal Excise Tax

	A.	 	This Article is applicable to those Reinsurers who are domiciled outside of the United
States of America, except those Reinsurers exempt from Federal Excise Tax. Reinsurers that
claim exempt status from Federal Excise Tax shall provide to the Company, upon its request,
proof

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 19.

 

	 	 	that the exempt status adequately satisfies the demands of the U.S. Internal Revenue Service,
Department of the Treasury, or its successor and/or other applicable U.S. government authority.
	 
	B.	 	The Reinsurers shall allow the applicable percentage of the premium payable hereon (as
imposed under Section 4371 of the Internal Revenue Code) for the purpose of paying Federal
Excise Tax to the extent such premium is subject to such tax.

	C.	 	In the event of any return of premium, the Reinsurers shall deduct the aforesaid percentage
from the return premium payable hereon and the Company or its agent shall recover such tax
from the United States Government.

Article XXVI — Service of Suit

(This article applies to unauthorized Reinsurers and to Reinsurers who are domiciled outside
the United States of America.)

	A.	 	This Service of Suit 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.

	B.	 	In the event of the failure of the Reinsurers to pay any amount claimed to be due hereunder,
the Reinsurers, at the request of the Company, will submit to the jurisdiction of a Court of
competent jurisdiction within the United States. Nothing in this Article constitutes or
should be understood to constitute a waiver of the Reinsurers’ 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 Reinsurers, once the
appropriate Court is selected, whether such court is the one originally chosen by the Company
and accepted by Reinsurers 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 them upon this Contract, will abide by the final decision
of such Court or of any Appellate Court in the event of an appeal.

	C.	 	Service of process in such suit may be made upon Mendes & Mount, LLP, 750 Seventh Avenue, New
York, New York 10019.

	D.	 	The above-named are authorized and directed to accept service of process on behalf of
Reinsurers in any such suit. Further, pursuant to any statute of any state, territory, or
district of the United States that makes provision therefore, the Reinsurers hereby designate
the Superintendent, Commissioner, or Director of Insurance, or other officer specified for
that purpose in the statute, or their successor(s) in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit, or proceedings
instituted by or on behalf of the Company or any beneficiary hereunder arising out of this
Contract, and hereby designate the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 20.

 

Article XXVII — Offset

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

Article XXVIII — Governing Law

The validity and interpretation of this Contract shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts.

Article XXIX — Confidentiality

	A.	 	Confidential Information. The submission materials, and any Policy, financial,
underwriting, accounting, and claims information, data statements, representations, and other
materials provided by the Company and received by the Subscribing Reinsurer in the course of
an audit, inspection, or otherwise, represent confidential or proprietary information
(“Confidential Information”). This Confidential Information is intended for the sole use of
the Subscribing Reinsurer (and its retrocessionaires, respective auditors, accountants, and
legal counsel) as may be necessary in analyzing and/or accepting a participation in and/or
executing its responsibilities under or related to this Contract. Subscribing Reinsurer
acknowledges and agrees that with respect to any review of Confidential Information by
Subscribing Reinsurer, and/or discussion of Confidential Information, Company does not waive
and does not intend to waive any available privilege or protection. The review of
Confidential Information by Subscribing Reinsurer and/or discussion of Confidential
Information with Company shall not destroy, waive, or otherwise impair the proprietary and/or
protected status of any Confidential Information or any information revealed in such
discussion with Company personnel, whether reviewed by and/or discussed with Subscribing
Reinsurer intentionally or inadvertently, nor does the review of the Confidential Information
and/or discussion of Confidential Information with Company constitute an estoppel or waiver of
Company’s rights to assert the attorney-client or work-product privileges, or any other
applicable privilege or protection, over certain documents contained in the Company files
and/or certain information.

	B.	 	The Company and Subscribing Reinsurer agree that no confidentiality obligations will apply to
Confidential Information to the extent such Confidential Information: (1) is or becomes
available to the public, other than as a result of impermissible disclosure by the Subscribing
Reinsurer, (2) was or became available lawfully to Subscribing Reinsurer from a source, other
than Company, its affiliates or their personnel, that is not subject to a confidentiality
obligation, (3) was developed independently by Subscribing Reinsurer prior to disclosure by
Company, its affiliates or their personnel, as demonstrated by Subscribing Reinsurer’s
records, or (4) is required to be disclosed by law, regulation, court, or regulatory agency
action.

	C.	 	Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to all
Confidential Information provided by Company and all knowledge and information gained

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 21.

 

	 	 	through its review of Confidential Information or discussions with the Company’s or its
affiliates’ personnel. Subscribing Reinsurer further agrees not to disclose any such
Confidential Information to any other person or entity except as such disclosure may be
necessary to its retrocessionaires, accountants, attorneys, auditors, actuaries or third party
cat modelers or as otherwise required by law. Subscribing Reinsurer agrees that no Confidential
Information is to be copied and/or removed from Company’s premises without the express
permission of Company.
	 
	D.	 	Third-Party Demand. Should Subscribing Reinsurer receive a third-party demand
pursuant to subpoena, summons, or court or governmental order, to disclose Confidential
Information (including Non-public personally identifiable information) that has been provided
by the Company, the Subscribing Reinsurer shall make commercially reasonable efforts to notify
the Company promptly upon receipt of the demand and prior to disclosure of the Confidential
Information and provide the Company a reasonable opportunity to object to the disclosure. If
the Company timely objects to the release of the Confidential Information, the Subscribing
Reinsurer will comply with the reasonable requests of the Company in connection with the
Company’s efforts to resist release of the Confidential Information. The Company shall bear
the cost of resisting the release of the Confidential Information.

	E.	 	Survival. The parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.

Article XXX — 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 XXXI — Special Conditions

	A.	 	The Company may terminate this Contract at any time by the giving of 30 days prior notice
in writing to the Subscribing Reinsurer upon the happening of any one of the following
circumstances:

	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into liquidation
or receivership (whether voluntary or involuntary) or there have been instituted against
it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator,
trustee in bankruptcy, or other agent known by whatever name, to take possession of its
assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus has been reduced by 25.0% of the
amount of surplus at the inception of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has become merged with, acquired or controlled by any
company, corporation, or individual(s) not controlling the Reinsurer’s operations at the
inception of this Contract; or

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 22.

 

	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded below A-
or Standard & Poor’s Rating has been assigned or downgraded below A-.

	B.	 	The coverage afforded by this Contract shall cease as of the date of termination and the
Subscribing Reinsurer shall return the unearned premium, if any. If coverage hereunder
terminates while a claim covered by this Contract is in progress, the Subscribing Reinsurer
shall be liable subject to all other conditions hereof for its proportion of the entire claim,
provided that the event giving rise to the claim started before such termination.

	C.	 	If the Company elects to terminate this Contract, the Company shall have the option to
commute the Subscribing Reinsurer’s liability for loss(es), whether reported or unreported,
comprising the sum total of the present value of the ceded (1) case reserves and allocated
loss adjustment expense, (2) projected ultimate losses, (3) any unearned premium reserve, and
(4) undiscounted outstanding paid claims (hereinafter the “Commutation Losses”), on policies
covered by this Contract as of the effective date of termination.

	 	1.	 	The Company shall submit a statement of valuation showing the elements considered
reasonable to establish the Commutation Losses, and the Subscribing Reinsurer shall pay
the amount requested. In the event the Company and the Subscribing Reinsurer cannot
agree on the statement of valuation of the Subscribing Reinsurer’s liability under such
policies, either party may request in writing that the differences be settled by a panel
of three actuaries. Each party shall appoint an actuary to assess such liability within
15 days after receipt of the written request for commutation. Upon such appointment,
the two actuaries shall appoint a third actuary. If the two actuaries fail to agree on
the third actuary within 30 days of their appointment, each of them shall nominate three
individuals, of whom the other shall decline two, and the final decision shall be made by
drawing lots. The actuaries shall then investigate and capitalize such Commutation
Loss(es) within 30 days. As used herein, “capitalize” shall mean to determine the
present value of Commutation Losses, without regard to the Subscribing Reinsurer’s
ability to pay such losses. The panel shall meet in Boston, Massachusetts, unless the
Company and Subscribing Reinsurer agree otherwise.
	 
	 	2.	 	All actuaries shall be disinterested in the outcome of the commutation and shall be
Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial Society. Except as
stated below, the expense of the actuaries and of the commutation shall be equally
divided between the parties of the commutation.
	 
	 	3.	 	The decision in writing of the actuaries, when filed with the parties hereto, shall
be final and binding, except that if the Company does not agree with the capitalized
value of the Commutation Loss(es), the Company shall have no obligation to commute. In
the event the Company does not agree with the capitalized value of the Commutation
Loss(es) and does not move forward with commutation, the expense of the actuaries
(including reasonable expense of the actuary appointed by the Subscribing Reinsurer) will
be paid by the Company. If the Contract is commuted, payment by the Subscribing
Reinsurer to the Company or any other third party mutually agreed upon by the
Subscribing Reinsurer and the Company shall constitute a complete and final release of
the Subscribing Reinsurer in respect to its liability under this Contract.

	D.	 	Termination under the terms of this Article can be made after the date of expiration of this
Contract.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 23.

 

Article XXXII — Agency Agreement

If more than one reinsured company is named as a party to this Contract, Peerless Insurance
Company shall be deemed the agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any party.

Article XXXIII — Entire Agreement

This Contract shall constitute the entire agreement between the Company and the Subscribing
Reinsurer with respect to the subject matter of this Contract and shall supersede all prior
understandings, negotiations, and discussions, whether oral or written, by or between the Company
and the Subscribing Reinsurer with respect to the subject matter hereof. There are no general or
specific warranties, representations or other agreements by or among the Company and the
Subscribing Reinsurer in connection with entering into this Contract except as specially set forth
in this Contract. Notwithstanding the foregoing, this Contract may be amended or modified only by
a writing signed by both the Company and the Subscribing Reinsurer.

Article XXXIV — Third Parties

This Contract shall not be deemed to give any right or remedy to any third party whatsoever
unless said right or remedy is specifically granted to such third party by the terms of this
Contract.

Agency Markets Property Catastrophe Reinsurance Treaty

Effective January 1, 2006

Page 24.

 

In Witness Whereof, the Company has caused this Contract to be executed by its duly authorized
representative this
30th day of August, 2006

	 	 	 	 	 
	 	Peerless Insurance Company 

 	 
	 	By:  	/s/ Nancy C. Callender
 	 
	 	 	(for and on behalf of the “Company”) 	 
	 	 	 	 
	 

30th day of August, 2006

	 	 	 	 	 
	 	Liberty Mutual Insurance Company

 	 
	 	By:  	/s/
 	 
	 	 	(for and on behalf of the “Subscribing Reinsurer”) 	 
	 	 	 	 

 

EXHIBIT A

Section 1 — Definition of Profit Center:

For purposes of this Contract, the Agency Markets Regional Companies strategic business unit of
Liberty Mutual Insurance Company is defined to include the following Profit Centers:

	 	 	 	 	 
	 	 	 	 	Business Produced By
	 	 	 	 	Agents Resident in
	Profit Center	 	Legal Entities Used By Profit Center	 	the Following State
	America First Insurance:

	 	America First Insurance Co.
America
First Lloyd’s Insurance Co.

Peerless Insurance Co.
	 	AK, LA, OK, TX

AK, LA, OK, TX

AK, LA, OK, TX
	 
	 	 	 	 
	 

	 	Liberty County Mutual Insurance Co.
	 	For business
classified as LMAM
and produced by this
Profit Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group*
 Peerless
Indemnity Insurance Co.
 The
Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business **)

Multi-State Business **)
	 
	 	 	 	 
	Business Solutions Group:

	 	Liberty Mutual Insurance Co.
 Mutual
Fire Insurance Co.
 LM Insurance
Corp.
Liberty Insurance Corp.
The
First Liberty Insurance Corp.
	 	All states other than
Liberty multi-state
business in the other
Profit Centers
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.

Golden Eagle Insurance Corp.
 One
Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY,
UT
AZ, CO, NM, NV,
WY, UT

AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Business Solutions Group *
 Peerless
Indemnity Insurance Co.
 The
Netherlands Insurance Co.
	 	(Multi-State
Business**)

(Multi-State
Business**)

(Multi-State
Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.
 One
Beacon Insurance Co. Cession to
Peerless Insurance Co.
 Peerless
Insurance Co.
	 	CA

CA
CA
	 
	 	 	 	 
	 

	 	Business Solutions Group*
 Peerless
Indemnity Insurance Co.
 The
Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security
Insurance:

	 	Hawkeye-Security Insurance Co.

Consolidated Insurance Co.
	 	IA, KS, MN, MO, NE,
ND, SD, WI

IA, KS, MN, MO, NE,
ND, SD, WI

 

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Hawkeye-Security
Ins. Cont:

	 	Indiana Insurance Co.
	 	IA, KS, MN, MO, NE,
ND, SD.WI
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IA, KS, MN, MO, NE,
ND, SD, WI
	 

	 	Peerless Insurance Co.

The Midwestern Indemnity Co
	 	IA, KS, MN, MO, NE,
ND, SD, WI

IA, KS, MN, MO, NE,

ND, SD, WI
	 
	 	 	 	 
	 

	 	Business Solutions Group *

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Consolidated Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Mid-American Fire and Casualty Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	The Midwestern Indemnity Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Globe American Casualty Co.
	 	All States
	 

	 	National Insurance Association
	 	All States
	 
	 	 	 	 
	 

	 	Business Solutions Group *

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest
Insurance:

	 	Liberty Northwest Insurance Corp. 

North Pacific Insurance Company 

Oregon Automobile Insurance Co.
	 	All States

All States

All States
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV

 

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Montgomery Ins. Cont:

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA,
MD, MS, NC, SC, VA,
WV
	 
	 	 	 	 
	 

	 	Business Solutions Group *

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance:

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ,
NY, PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ,
NY, PA, RI, VT
	 

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ,
NY, PA, RI, VT
	 

	 	One Beacon Insurance Co. Cessions to
Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ,
NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	Merchants and Business Men’s
Mutual Insurance Co.
	 	For business classified
as LMAM and produced
by this Profit Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group *

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)

 

			
	*	 	Business Solutions Group consists of; Liberty Mutual Insurance Co., Liberty Mutual Fire
Insurance Co., LM Insurance Corp., Liberty Insurance Corp., The First Liberty Insurance
Corp., Liberty County Mutual Insurance Co..
	 
	**	 	Agent responsible for the risk resides in the profit center but the risk is located in
multiple states both in and outside states assigned to the Profit Center.

 

 

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

	 	(a)	 	All business derived directly or indirectly from any Pool, Association or
Syndicate which maintains its own reinsurance facilities.
	 
	 	(b)	 	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for
the purpose of insuring property whether on a country-wide basis or in respect of
designated areas. This exclusion shall not apply to so- called Automobile Insurance Plans
or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written or reinsured by the Company for the same perils, which is known
at the time to be insured by, or in excess of underlying amounts placed in the following Pools,
Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

Any Pool, Association or Syndicate formed for the purpose of writing
Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

Section B does not apply:

	 	(a)	 	Where The Total Insured Value over all interests of the risk in question is less than
$250,000,000.
	 
	 	(b)	 	To interests traditionally underwritten as Inland Marine or stock and/or contents written
on a blanket basis.
	 
	 	(c)	 	To Contingent Business Interruption, except when the Company is aware that the key
location is known at the time to be insured in any Pool, Association or Syndicate named
above, other than as provided for under Section B(a).
	 
	 	(d)	 	To risks as follows:
	 
	 	 	 	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public
Utilities (other than railroad schedules) and builder’s risks on the classes of
risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following
Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company and the
Legal Entities from their participation in residual market mechanisms including but not
limited to:

	 	(1)	 	The following so-called “Coastal Pools”:
	 
	 	 	 	Alabama Insurance Underwriting Association

Louisiana Citizens Property Insurance Corporation

Mississippi Windstorm Underwriting Association

North Carolina Insurance Underwriting Association

South Carolina Windstorm and Hail Underwriting Association

Texas Windstorm Insurance Association

AND

	 	(2)	 	All “Fair Plan” and “Rural Risk Plan” business

 

 

AND

	 	(3)	 	Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake
Authority (“CEA”)

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

	 	(i)	 	The inability of any other participant in such “Coastal Pool” and/or “Fair
Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
	 
	 	(ii)	 	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan”
and/or Residual Market Mechanisms, or any participant therein, including the Company,
whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund
(as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

	 	(1)	 	Notwithstanding Section C above, in respect of the CEA, where an assessment is made
against the Company or a Legal Entity by the CEA, the Company may include in Ultimate Net
Loss only that assessment directly attributable to each separate loss occurrence covered
hereunder. The Company’s or the Legal Entities’ initial capital contributions to the CEA
shall not be included in the Ultimate Net Loss.
	 
	 	(2)	 	Notwithstanding Section C above, in respect of CPIC, where an assessment is made
against the Company or a Legal Entity by CPIC, the maximum loss that the Company may
include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not
exceed the lesser of:

	 	(a)	 	The Company’s or the Legal Entity’s assessment from CPIC for the
accounting year in which the loss occurrence commenced, or
	 
	 	(b)	 	The product of the following:

	 	(i)	 	The Company’s or the Legal Entity’s percentage
participation in CPIC for the accounting year in which the loss occurrence
commenced; and
	 
	 	(ii)	 	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may
not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in
respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase
or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the
Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied
by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any
obligations arising from the deferment by CPIC of the collection of monies.

	NOTES:	 	Wherever used herein the terms:

	“Company” 	 	 	shall be understood to mean “Company,” “Reinsured,” “Reassured” or
whatever other term is used in the attached reinsurance document to designate the
reinsured company or companies.
	 
	“Agreement” 	 	 	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever
other term is used to designate the attached reinsurance document.
	 
	“Reinsurers” 	 	 	shall be understood to mean “Reinsurers,” “Underwriters” or whatever
other term is used in the attached reinsurance document to designate the reinsurer or
reinsurers.

 

 

War Risk Exclusion Clause

The Reinsurers shall not be liable for loss or damage caused directly or indirectly by (a)
hostile or warlike action in time of peace or war, including action hindering, combating or
defending against an actual, impending or expected attack, (1) by any government or sovereign power
(de jure or de facto) or by any authority maintaining or using military, naval or air forces; or
(2) by military, naval or air forces, it being understood that any discharge, explosion or use of
any weapon of war employing atomic fission or radioactive force shall be conclusively presumed to
be such a hostile or warlike action by such government power, authority or forces; (b)
insurrection, rebellion, revolution, civil war, usurped power, or action taken by governmental
authority in hindering, combating or defending against such an occurrence.

The War Risk Exclusion Clause shall not apply to interest insured under policies, endorsements or
binders containing a standard war or hostilities or warlike operations exclusion clause.

 

 

Nuclear Incident Exclusion Clause —
Physical Damage — Reinsurance (U.S.A.)

	1.	 	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed
for the purpose of covering Atomic or Nuclear Energy risks.
	 
	2.	 	Without in any way restricting the operation of paragraph (1) of this Clause, this
Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage
(including business interruption or consequential loss arising out of such Physical Damage) to:

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

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

	 	(a)	 	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear
installation, or
	 
	 	(b)	 	where said insurance contains a provision excluding coverage for damage to property
caused by or resulting from radioactive contamination, however caused. However on and
after 1st January 1960 this sub-paragraph (b) shall only apply provided the said
radioactive contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.

	4.	 	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
	 
	5.	 	It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard.
	 
	6.	 	The term “special nuclear material” shall have the meaning given it in the Atomic Energy
Act of 1954 or by any law amendatory thereof.
	 
	7.	 	Reassured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

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

	 	(a)	 	all policies issued by the Reassured or the Legal Entities on or before 31st December
1957 shall be free from the application of the other provisions of this Clause until
expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of
this Clause shall apply.
	 
	 	(b)	 	with respect to any risk located in Canada policies issued by the Reassured or the
Legal Entities on or before 31st December 1958 shall be free from the application of the
other provisions of this Clause until expiry date or 31st December 1960 whichever first
occurs whereupon all the provisions of this Clause shall apply.

12/12/57

N.M.A. 1119 BRMA 35B

 

 

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

	1.	 	This Agreement 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 Agreement
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:

	 	(a)	 	nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	(b)	 	any other nuclear reactor installation, including laboratories handling radioactive
materials in connection with reactor installations, and critical facilities as such, or
	 
	 	(c)	 	installations for fabricating complete fuel elements or for processing substantial
quantities of radioactive materials, and for reprocessing, salvaging, chemically
separating, storing or disposing of spent nuclear fuel or waste materials, or
	 
	 	(d)	 	installations other than those listed in (c) above using substantial quantities
of radioactive isotopes or other products of nuclear fission.

	3.	 	Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this
Agreement 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 the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear
installation, or
	 
	 	(b)	 	where the said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused

	4.	 	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this
Agreement 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.	 	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 “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and any other
substances which may be designated by or pursuant to any law, act or statute, or any law
amendatory thereof as being prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic energy.
	 
	7.	 	Reinsured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

	8.	 	Without in any way restricting the operation of paragraphs 1,2,3 and 4 of this clause, this
Agreement does not cover any loss or liability accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, caused:

	 	(1)	 	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or
any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear
explosion, except for ensuing loss or damage which results directly from fire, lightning
or explosion of natural, coal or manufactured gas;
	 
	 	(2)	 	by contamination by radioactive material.

	NOTE:  	 	Without in any way restricting the operation of paragraphs 1,2,3 and 4 of this clause,
paragraph 8 of this clause shall only apply to all original contracts of the Reinsured or the
Legal Entities, whether new, renewal or replacement, which become effective on or after
December 31, 1992.

N.M.A. 1980a (1/4/96)

 

 

Insolvency Funds Exclusion Clause

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

 

 

TERRORISM EXCLUSION CLAUSE

This Contract does not apply to and specifically excludes terrorism-related losses as follows:

	A.	 	For risks located in the United States of America, its territories and possessions, and at
the premises of any United States mission as such terms are intended to apply under the terms
of the Terrorism Risk Insurance Act of 2002, as it may be amended from time-to-time:

	 	1.	 	“Insured Losses” resulting, directly or indirectly, from a “Certified Act of
Terrorism” under the terms of the Terrorism Risk Insurance Act of 2002 as it may be
amended from time-to-time.
	 
	 	2.	 	Loss or damage, directly or indirectly, arising out of or in connection with
nuclear, chemical, biological, or radiological explosion, pollution, or contamination
resulting from any Other Act of Terrorism. Notwithstanding the foregoing, this Contract
shall extend to cover insured physical loss or damage, excluding all time-element
coverages and extensions, incurred as a direct and immediate consequence of an Other Act
of Terrorism employing any non-nuclear weapon or device designed to disperse chemical,
biological, or radiological contaminants; but, no coverage shall be afforded for any
ensuing chemical, biological, or radiological contamination or pollution resulting from
an Other Act of Terrorism employing such weapon or device.
	 
	 	 	 	“Other Act of Terrorism” as used in this subparagraph A.2. above shall mean any violent
act or act that is dangerous to human life, property, or infrastructure that results in
physical loss or damage that is committed by an individual or individuals acting on behalf
of any person or interest as part of an effort to coerce the civilian population of the
United States or to influence the policy or affect the conduct of the United States
government by coercion, which is not a “Certified Act of Terrorism” under the terms of
TRIA.

	B.	 	For risks located within the United Kingdom, this Contract shall not cover:

	 	1.	 	Loss, destruction, or damage in Great Britain (being England, Wales, and Scotland)
occasioned by or happening through or as a direct or indirect consequence of an Act of
Terrorism.
	 
	 	2.	 	Loss, destruction, or damage in Northern Ireland within the meaning of the Northern
Ireland (Emergency Provisions) Act 1973 or successors thereof.

	 	 	In the event of an occurrence giving rise to a loss or losses payable by the Company or a Legal
Entity not being certified by Her Majesty’s government or Her Majesty’s Treasury or any
successor relevant Authority to have been an Act of Terrorism and solely by reason thereof the
Company or a Legal Entity is unable to recover such loss or losses in whole or in part from
Pool Reinsurance Company Limited, the Reinsurers accept that this subparagraph B.1. above does
not apply to such loss or losses.
	 
	 	 	For the purpose of this paragraph B:

 

 

	 	 	“Act of Terrorism” means an act of persons acting on behalf of or in connection with any
organization that carries out activities directed towards the overthrowing or influencing by
force or violence of Her Majesty’s government in the United Kingdom.
	 
	 	 	This paragraph B shall not, however, apply to goods in transit or goods in temporary
storage while in transit.
	 
	 	 	Notwithstanding the foregoing, this paragraph B excludes loss or damage directly or indirectly
arising out of or in connection with nuclear, chemical, biological, or radiological explosion,
pollution, or contamination resulting from any Act of Terrorism. This Contract shall extend,
however, to cover insured physical loss or damage, excluding all time-element coverages and
extensions, incurred as a direct and immediate consequence of an Act of Terrorism employing any
non-nuclear weapon or device designed to disperse chemical, biological, or radiological
contaminants; but, no coverage shall be afforded for any ensuing chemical, biological, or
radiological contamination or pollution resulting from an Act of Terrorism employing such
weapon or device.
	 
	C.	 	For risks located in all other sovereignties not subject to paragraphs A or B above:
	 
	 	 	Loss or damage, directly or indirectly, caused by, contributed to by, resulting from, or
arising out of or in connection with any Act of Terrorism, as defined in this paragraph C,
regardless of any other cause or event contributing concurrently or in any other sequence to
the loss.
	 
	 	 	For the purpose of this paragraph C:
	 
	 	 	“Act of Terrorism” shall mean any violent act or act that is dangerous to human life, property,
or infrastructure that results in physical loss or damage that is committed by an individual or
individuals acting on behalf of any person or interest as part of an effort to coerce the
civilian population of any nation or to influence the policy or affect the conduct of the
government of any such sovereign nation by coercion.
	 
	 	 	Where an occurrence falling within the definition of Act of Terrorism in this paragraph C,
involving risks insured or reinsured in Consorcio, Gareat, Extremus, the Australian Terrorism
Pool (or any similar scheme formed during the term of this Contract) gives rise to a loss or
losses payable by the Company and such occurrence is not certified by the individual authority
acting respectively for Consorcio, Gareat, Extremus, the Australian Terrorism Pool (or any
similar scheme formed during the term of this Contract) having responsibility to make such
judgment, or any successor authority, as an Act of Terrorism, the Reinsurers accept that this
exclusion does not apply to such loss(es).
	 
	 	 	Notwithstanding the foregoing, this paragraph C excludes loss or damage, directly or
indirectly, arising out of or in connection with nuclear, chemical, biological, or radiological
explosion, pollution, or contamination resulting from any Act of Terrorism. This Contract shall
extend, however, to cover insured physical loss or damage, excluding all time-element coverages
and extensions, incurred as a direct and immediate consequence of an Act of Terrorism employing
any non-nuclear weapon or device designed to disperse chemical, biological, or radiological
contaminants; but, no coverage shall be afforded for any ensuing chemical, biological, or
radiological contamination or pollution resulting from an Act of Terrorism employing such
weapon or device.

 

 

Terrorism Exclusion Clause

(APPLICABLE TO LOSSES OCCURRING AFTER 31 DECEMBER 2005 FOR RISKS LOCATED IN THE UNITED
STATES OF AMERICA, ITS TERRITORIES AND POSSESSIONS, AND AT THE PREMISES OF ANY UNITED STATES
MISSION.)

	A.	 	In the event that the Terrorism Risk Insurance Act of 2002 (“TRIA”) is extended, renewed, or
succeeded without interruption beyond 31 December 2005, and without revision or adaptation
beyond 31 December 2005 to the definitions set forth in subsections 102 (1)(A), (14), and (15)
of TRIA, this Contract shall not cover:

	 	1.	 	“Insured Losses” resulting directly or indirectly from a “Certified Act of
Terrorism” under the terms of TRIA, as it may be amended from time-to-time.
	 
	 	2.	 	Loss or damage, directly or indirectly, arising out of or in connection with
nuclear, chemical, biological, or radiological explosion, pollution, or contamination
resulting from any Other Act of Terrorism. Notwithstanding the foregoing, this Contract
shall extend to cover insured physical loss or damage, excluding all time-element
coverages and extensions, incurred as a direct and immediate consequence of an Other Act
of Terrorism employing any non-nuclear weapon or device designed to disperse chemical,
biological, or radiological contaminants; however, no coverage shall be afforded for any
ensuing chemical, biological, or radiological contamination or pollution resulting from
an Other Act of Terrorism employing such weapon or device.
	 
	 	 	 	“Other Act of Terrorism” as used in this subparagraph A.2. shall mean any violent act or
act that is dangerous to human life, property, or infrastructure; that results in
physical loss or damage; that is committed by an individual or individuals acting on
behalf of any person or interest as part of an effort to coerce the civilian population
of the United States or to influence the policy or affect the conduct of the United
States government by coercion, which is not a “Certified Act of Terrorism” under the
terms of TRIA.

	B.	 	If TRIA is: (a) not extended, renewed, or succeeded without interruption beyond
31 December 2005, or (b) extended, renewed, or succeeded beyond 31 December 2005, but with
revision or adaptation to one or more of the definitions set forth in subsections 102 (1)(A),
(14), and (15) of TRIA, then, in respect of any losses occurring after 31 December 2005, this
contract shall not cover:

	 	1.	 	Losses resulting directly or indirectly from an Act of Terrorism.
	 
	 	2.	 	Loss or damage directly or indirectly arising out of or in connection with nuclear,
chemical, biological, or radiological explosion, pollution, or contamination resulting
from any Other Act of Terrorism. Notwithstanding the foregoing, this Contract shall
extend to cover insured physical loss or damage, excluding all time-element coverages and
extensions, incurred as a direct and immediate consequence of an Other Act of Terrorism
employing any non-nuclear weapon or device designed to disperse chemical, biological, or
radiological contaminants; however, no coverage shall be afforded for any ensuing
chemical, biological, or radiological contamination or pollution resulting from employing
such weapon or device.

 

 

“Act of Terrorism” as used in subparagraphs B.1. and B.2. shall mean any violent act or act that is
dangerous to human life, property, or infrastructure; that results in physical loss or damage
within the United States; and that is committed by an individual or individuals acting on behalf of
any foreign person or foreign interest as part of an effort to coerce or put in fear the civilian
population of the United States or to influence the policy or affect the conduct of the United
States government by coercion.

“Other Act of Terrorism” as used in subparagraph B(2) above shall mean any violent act or act that
is dangerous to human life, property, or infrastructure that results in physical loss or damage
that is committed by an individual or individuals acting on behalf of any person or interest as
part of an effort to coerce the civilian population of the United States or to influence the policy
or affect the conduct of the United States government by coercion, which is not an “Act of
Terrorism.”

 

 

AMENDMENT No. 1

attaching to and forming a part of

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2006

WHEREAS, the undersigned have entered in that certain Property Catastrophe Excess of Loss
Reinsurance Contract, effective January 1, 2006 (the “Contract”).

It is mutually agreed that effective March 20, 2006 this Contract is amended as follows:

	1.	 	Exhibit A is revised to read:

Exhibit A

Definition of Profit Centers:

For purposes of Article I or any Articles, wherever the word Profit Centers is used,
the Profit Centers are defined to include the following Profit Centers of Liberty
Mutual Agency Market (LMAM).

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	America First Insurance:

	 	America First Insurance Co.
	 	AK, LA, OK, TX
	 

	 	America First Lloyd’s Insurance Co.
	 	AK, LA, OK, TX
	 

	 	Peerless Insurance Co.
	 	AK, LA, OK, TX
	 
	 	 	 	 
	 

	 	Liberty County Mutual Insurance Co.
	 	For business classified as LMAM
and produced by this Profit
Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business **)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business **)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business **)
	 
	 	 	 	 
	Business Solutions Group:

	 	Liberty Mutual Insurance Co. 

Liberty  Liberty Mutual Fire Insurance Co. 

LM  Insurance Corp. 

Liberty Insurance Corp. 

The First Liberty Insurance Corp. 

Liberty County Mutual Insurance Co
	 	All states other than
multi-state business in the
other Profit Centers
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	Golden Eagle Insurance Corp.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Business Solutions Group * 

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.
	 	CA
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	CA

			
	 	 	 
	Agency Markets Property Catastrophe Reinsurance Treaty
	 	Page 1.

 

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	Golden Eagle Ins Con’t:

	 	Peerless Insurance Co.
	 	CA
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security Insurance:

	 	Hawkeye-Security Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Consolidated Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Indiana Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	The Midwestern Indemnity Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Consolidated Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Mid-American Fire and Casualty Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	The Midwestern Indemnity Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Globe American Casualty Co.
	 	All States
	 

	 	National Insurance Association
	 	All States
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest Insurance:

	 	Liberty Northwest Insurance Corp.
	 	All States
	 

	 	North Pacific Insurance Company
	 	All States
	 

	 	Oregon Automobile Insurance Co.
	 	All States
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV

2

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	Montgomery Insurance Cont:

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cessions to
Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	Liberty Mutual Mid-Atlantic
Insurance Co. (f/k/a Merchants and
Business Men’s Mutual Insurance Co.)
	 	For business classified as LMAM and produced by this Profit Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)

 

			
	*	 	Business Solutions Group consists of; Liberty Mutual Insurance Co., Liberty Mutual Fire
Insurance Co., LM Insurance Corp., Liberty Insurance Corp., The First Liberty Insurance
Corp., and Liberty County Mutual Insurance Co..
	 
	**	 	Agent responsible for the risk resides in the profit center but the risk is located in
multiple states both in and outside states assigned to the Profit Center.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

3

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly
authorized representatives.

Signed at BOSTON, MASSACHUSETTS

LIBERTY MUTUAL INSURANCE COMPANY

	 	 	 

	Signature: /s/ Robert C. Andrews

	 	Title: Vice President
	 
	 	 
	 
	 	 
	Attest: /s/ John C. MacLean Jr.

	 	Date: August 30, 2006

Signed at KEENE, NEW HAMPSHIRE

PEERLESS INSURANCE COMPANY

	 	 	 

	Signature: /s/ Nancy C. Callender

	 	Title: A.V.P. Risk Management
	 
	 	 
	 
	 	 
	Attest: /s/

	 	Date: 8/30/06

4

 

AMENDMENT No. 2

attaching to and forming a part of

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2006

WHEREAS, the undersigned have entered in that certain Property Catastrophe Excess of Loss
Reinsurance Contract, effective January 1, 2006 (the “Contract”).

It is mutually agreed that effective at 12:01 a.m., Local Standard Time, April 1, 2006, this
Contract is amended as follows:

	1.	 	Under the terms of Article III, Paragraph B, the following layers are terminated; Layer
6, Layer 7 and Layer 8. Premium will be prorata for the time at risk.
	 
	2.	 	Exhibit A is revised to read:

Exhibit A

Definition of Profit Centers:

For purposes of Article I or any Articles, wherever the word Profit Centers is used,
the Profit Centers are defined to include the following Profit Centers of Liberty
Mutual Agency Market (LMAM).

	 	 	 	 	 
	 	 	 	 	Business Produced By
	 	 	 	 	Agents Resident in the
	Profit Center	 	Legal Entities Used By Profit Center	 	Following State
	America First Insurance:

	 	America First Insurance Co.
	 	AK, LA, OK, TX
	 

	 	America First Lloyd’s Insurance Co.
	 	AK, LA, OK, TX
	 

	 	Peerless Insurance Co.
	 	AK, LA, OK, TX
	 
	 	 	 	 
	 

	 	Liberty County Mutual Insurance Co.
	 	For business classified
as LMAM and produced by
this Profit Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business **)
	 
	 	 	 	 
	Business Solutions Group:

	 	Liberty Mutual Insurance Co. 

Liberty Mutual Fire Insurance Co. 

LM Insurance Corp. 

Liberty Insurance Corp. 

The First Liberty Insurance Corp.

Employers Insurance Co. of Wausau 

Wausau General Insurance Co. 

Wausau Underwriters Insurance Co. 

Wausau Business Insurance Co.
	 	All states other than
multi-state business in
the other Profit Centers
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	Golden Eagle Insurance Corp.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)

			
	 	 	 
	Agency Markets Property Catastrophe Reinsurance Treaty
	 	Page 1 of 4

 

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	Colorado Casualty Con’t:

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.

One Beacon Insurance Co. Cession to
	 	CA
	 

	 	Peerless Insurance Co.
	 	CA
	 

	 	Peerless Insurance Co.
	 	CA
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security Insurance:

	 	Hawkeye-Security Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Consolidated Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Indiana Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 

	 	The Midwestern Indemnity Co.
	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Consolidated Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Mid-American Fire and Casualty Co.
	 	IL, IN, KY, MI, OH, TN
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	The Midwestern Indemnity Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Globe American Casualty Co.
	 	All States
	 

	 	National Insurance Association
	 	All States
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest Insurance:

	 	Liberty Northwest Insurance Corp.
	 	All States
	 

	 	North Pacific Insurance Company
	 	All States
	 

	 	Oregon Automobile Insurance Co.
	 	All States
	 
	 	 	 	 
	 

	 	Business Solutions Group*
	 	(Multi-State Business**)

			
	 	 	 
	Agency Markets PCAT XoL Reinsurance Treaty
	 	Page 2 of 4

 

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	One Beacon Insurance Co. Cessions to
Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	Liberty Mutual Mid-Atlantic Insurance
Co. (f/k/a Merchants and Business
Men’s Mutual Insurance Co.)
	 	For business classified
as LMAM and produced
by this Profit Center only
	 
	 	 	 	 
	 

	 	Business Solutions Group *
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)

 

			
	*	 	Business Solutions Group consists of; Liberty Mutual Insurance Co., Liberty Mutual Fire
Insurance Co., LM Insurance Corp., Liberty Insurance Corp., The First Liberty Insurance Corp.,
Liberty County Mutual Insurance Co., Employers Insurance Co. of Wausau, Wausau General
Insurance Co., Wausau Underwriters Insurance Co. and Wausau Business Insurance Co..
	 
	*	 	Agent responsible for the risk resides in the profit center but the risk is located in
multiple states both in and outside states assigned to the Profit Center.

All other terms and conditions remain unchanged.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly
authorized representatives.

Signed at BOSTON, MASSACHUSETTS

			
	 	 	 
	Agency Markets PCAT XoL Reinsurance Treaty
	 	Page 3 of 4

 

 

LIBERTY MUTUAL INSURANCE COMPANY

	 	 	 

	Signature: /s/ Robert C. Andrews

	 	Title: Vice President
	 
	 	 
	 
	 	 
	Attest: /s/ John C. MacLean Jr.

	 	Date: August 30, 2006

Signed at KEENE, NEW HAMPSHIRE

PEERLESS INSURANCE COMPANY

	 	 	 

	Signature:
/s/ Nancy C. Callender

	 	Title: A.V.P. — Risk Management
	 
	 	 
	 
	 	 
	Attest: /s/

	 	Date: 8/30/06

			
	 	 	 
	Agency Markets PCAT XoL Reinsurance Treaty
	 	Page 4 of 4exv10w167

EXHIBIT
10.167

Property Catastrophe Excess of Loss

Reinsurance Contract No. 2000252

$20,000,000 xs $30,000,000

Effective: January 1, 2008

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

 

 

Table of Contents

	 	 	 	 	 	 	 
	Clause	 	Article Number	 	Page	 
	 
	 	 	 	 	 	 
	Access To Records (LM-00100-2007.08.13-A)
	 	XIV
	 	 	11	 
	Alterations
	 	XVI
	 	 	13	 
	Agency Agreement (LM-02800-2006-04.12-A)
	 	XXVII
	 	 	22	 
	Arbitration (LM-00200-2007.05.03-A)
	 	XVII
	 	 	13	 
	Assignment, Novation, or Transfer (LM-00300-2007.10.05-A)
	 	XXX
	 	 	23	 
	Business Covered
	 	I
	 	 	1	 
	Confidentiality Clause (LM-00400-2005.11.10-A)
	 	XXIV
	 	 	17	 
	Currency (LM-00500-2005.08.09-A)
	 	XIII
	 	 	11	 
	Dividends and Taxes (LM-00600-2005.06.02-A)
	 	XIX
	 	 	16	 
	Effective Date and Termination
	 	III
	 	 	4	 
	Entire Agreement (LM-00701-2005.08.24-A)
	 	XXVIII
	 	 	22	 
	Errors and Omissions (LM-00800-2005.06.02-A)
	 	XV
	 	 	12	 
	Exclusions
	 	II
	 	 	2	 
	Extra Contractual Obligations (LM-00900-2007.03.28-A)
	 	XXXII
	 	 	23	 
	Federal Excise Tax (LM-01000-2005.08.24-A)
	 	XX
	 	 	16	 
	Federal Terrorism Excess Recovery (LM-01100-2007.12.28-A)
	 	XXXIV
	 	 	24	 
	Governing Law (LM-01200-2005.06.02-A)
	 	XXIII
	 	 	17	 
	Insolvency (LM-01300-2005.08.24-A)
	 	XVIII
	 	 	15	 
	Interest Penalty (LM-01400-2005.08.24-A)
	 	XI
	 	 	8	 
	Loss Adjustment and Settlement (LM-01500-2006.09.07-A)
	 	IX
	 	 	7	 
	Loss in Excess of Original Policy Limits (LM-01600-2005.08.24-A)
	 	XXXIII
	 	 	24	 
	Loss Occurrence
	 	V
	 	 	5	 
	Net Retained Lines
	 	VI
	 	 	7	 
	Offset (LM-01700-2005.06.02-A)
	 	XXII
	 	 	17	 
	Other Reinsurance
	 	VII
	 	 	7	 
	Reinsurance Claims Obligations (LM-00310-2007.10.10-A)
	 	XXXI
	 	 	23	 
	Salvage and Subrogation (LM-01800-2006.09.12-A)
	 	X
	 	 	8	 
	Service of Suit (LM-01900-2005.08.24-A)
	 	XXI
	 	 	17	 
	Severability (LM-02000-2005.06.02-A)
	 	XXV
	 	 	19	 
	Special Conditions (LM-02100-2007.10.05-A)
	 	XXVI
	 	 	19	 
	Territory (LM-02201-2005.06.02-A)
	 	VIII
	 	 	7	 
	Third Parties (LM-02700-2005.09.27-A)
	 	XXIX
	 	 	23	 
	Ultimate Net Loss
	 	IV
	 	 	4	 
	Unauthorized Reinsurance (LM-02502-2006.10.26-A)
	 	XII
	 	 	9	 

Attachments:

Exhibit A — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement Pools,
Syndicates, Associations

War Risk Exclusion Clause

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (USA)

	 	 	 
	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

 

 

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (Canada)

Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994) Worldwide Excluding U.S.A. & Canada)

Insolvency Funds Exclusion Clause

Terrorism Exclusion Clause

Mold Exclusion

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

 

 

Property Catastrophe Excess of Loss

Reinsurance Contract No. 2000252

$20,000,000 xs $30,000,000

Effective: January 1, 2008

(hereinafter referred to as the “Contract”)

In consideration of the premium and subject to the

terms and conditions hereinafter set forth

This Contract is entered into by and between

PEERLESS INSURANCE COMPANY, Keene, NH

(hereinafter referred to as the “Company”) on the one part, and the various Reinsurers as

identified by the Interests and Liabilities Agreements attaching to and forming a part of this

Contract (hereinafter individually referred to as the “Subscribing Reinsurer” and collectively

referred to as the “Reinsurers”) on the other part.

Article I — Business Covered

By this Contract the Subscribing Reinsurer agrees to reinsure the Company under the policies,
contracts, agreements, certificates, other obligations and binders, whether oral or written, of
insurance or reinsurance and/or any endorsements to any of the foregoing, issued, accepted or held
covered provisionally or otherwise, by and on behalf of the Company or a Legal Entity listed below
(each, a “Legal Entity” and, collectively, the “Legal
Entities”) (hereinafter called “Policies”) and reinsured, directly or indirectly, by the Company
and in force at the effective date hereof or issued or renewed on or after that date, and
classified by the Company or a Legal Entity as the Property coverages including but not limited to;

American Ambassador Casualty Company

American Fire and Casualty Company

America First Insurance Company

America First Lloyd’s Insurance Company

Avomark Insurance Company

Consolidated Insurance Company

Excelsior Insurance Company

Globe American Casualty Company

Hawkeye-Security Insurance Company

Indiana Insurance Company

Mid-American Fire and Casualty Company

National Insurance Association

Ohio Casualty of New Jersey, Inc.

Ohio Security Insurance Company

Peerless Indemnity Insurance Company

The Ohio Casualty Insurance Company

The Midwestern Indemnity Company

The Netherlands Insurance Company

West American Insurance Company

Employers Insurance Company of Wausau and

Wausau General Insurance Company and

Wausau Underwriters Insurance Company and

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 1 of 40

 

Wausau Business Insurance Company for business classified as Business Solutions Group or
Wausau Group Multi-State business only,

Liberty Mutual Insurance Company, (on behalf of The First
Liberty Insurance Corporation, LM Insurance Corporation, Liberty Insurance Corporation, Liberty
Mutual Fire Insurance Company for business classified as Business Solutions Group Multi-State
business only).

Under this Contract, the indemnity for reinsured loss applies to business written through Liberty
Mutual Agency Markets — Indiana Insurance Regional Company only.

Property coverages;

	 	•	 	Fire
	 
	 	•	 	Extended Coverage and Allied Lines,
	 
	 	•	 	Inland Marine (including Yachts),
	 
	 	•	 	Multiple Peril policies (Personal and Commercial),
	 
	 	•	 	Automobile Physical Damage (including Specialty Automobile and Garagekeepers’ Legal
Liability but excluding Collision)
	 
	 	•	 	Homeowners and Farmowners
	 
	 	•	 	Burglary and Theft
	 
	 	•	 	Earthquake and Flood (when added to a Fire Policy by endorsement or when part of an Inland
Marine or Multiple Peril Policy),
	 
	 	•	 	Miscellaneous Property Insurance,
	 
	 	•	 	Ocean Marine (for Policies written for Marinas, Boat Dealers and Yachts),
	 
	 	•	 	Water Damage Insurance

subject to the terms, conditions and limitations set forth herein and in the Exhibit attached to
and forming part of this Contract.

Article II — Exclusions

This Contract does not apply to:

	A.	 	Treaty reinsurance assumed by the Company except for any agency reinsurance, or business
written by affiliates of the Company and reinsured internally within the companies that comprise
the Liberty Mutual Agency Markets strategic business unit, and specifically any reinsurance
transacted among or between the companies that comprise Liberty Mutual Agency Markets and Peerless
Insurance Company.
	 
	B.	 	Loss or damage as excluded in the Pools, Associations and Syndicates Exclusion Clause, as
attached hereto and forming part of this Contract.
	 
	C.	 	Loss or damage caused by flood except under Inland Marine Policies and except limited flood
coverage as provided for by multiple peril policies whether under the same Policy or a separate
Policy covering the same risk.
	 
	D.	 	Loss or damage as excluded in the War Risk Exclusion Clause, as attached hereto and forming part
of this Contract.
	 
	E.	 	Loss or damage excluded by the following Nuclear Incident Exclusion Clauses as attached hereto
and forming part of this Contract:

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 2 of 40

 

	 	(1)	 	Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance — U.S.A. — N.M.A.
1119.
	 
	 	(2)	 	Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance — Canada — N.M.A. 1980a.
	 
	 	(3)	 	Nuclear Energy Risks Exclusion Clause — 1994 — Reinsurance — (Worldwide Excluding U.S.A.
and Canada) — N.M.A. 1975a.

	F.	 	Loss or damage as excluded in the Insolvency Funds Exclusion Clause, as attached hereto and
forming part of this Contract.
	 
	G.	 	Policies classified as Insolvency or Financial Guarantee.
	 
	H.	 	Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or
contamination, other than contamination from smoke damage. Nevertheless, this exclusion does not
preclude any payment of the cost of the removal of debris of property damaged by a loss otherwise
covered hereunder.
	 
	I.	 	Losses in respect of overhead transmission and distribution lines and their supporting
structures, other than those on or within 300 meters (or 1,000 feet) of the insured premises.
It is understood and agreed that public utilities extension and/or supplier’s extension and/or
contingent business interruption coverages are not subject to this exclusion, provided these
are not part of a transmitters’ or distributors’ Policy.
	 
	J.	 	Terrorism-related losses excluded by the Terrorism Exclusion Clauses, both of which are
attached hereto and forming part of this Contract.
	 
	K.	 	Mold Exclusion — as attached hereto and forming part of this Contract.
	 
	L.	 	Boiler
and Machinery except for losses caused by a covered peril. 
	 
	M.	 	Aircraft hull.
	 
	N.	 	Motor Cargo (Legal Liability).
	 
	O.	 	Property coverages classified by the Company as “Casualty,” other than burglary, theft and
robbery when afforded under an Inland Marine Policy or under the Property insurance section of a
multiple peril policy.
	 
	P.	 	Fidelity and Surety, except for Safe Deposit Box Insurance.
	 
	Q.	 	Ocean Marine except for property Policies written for Marinas, Boat Dealers and Yachts.
	 
	R.	 	Liability in respect of growing and/or standing crops; however, this exclusion shall not apply
to nursery or greenhouse crops.

Article III — Effective Date and Termination

	A.	 	This Contract applies only to losses arising out of loss occurrences commencing during its
effective period. This Contract is effective at 12:01 a.m., January 1, 2008, Local Standard Time,
and shall end at 12:01 a.m., January 1, 2009, Local Standard Time.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 3 of 40

 

	B.	 	If this Contract should expire or terminate while a Loss Occurrence is in progress, the
Subscribing Reinsurer shall nevertheless be liable to the extent of their interest, subject to the
other conditions of this Contract, for all losses in the Loss Occurrence whether happening before
or after such expiration or termination, provided that no claim is made against such Loss
Occurrence on any renewal of this Contract.

Article IV — Ultimate Net Loss (LM-02403-2005.12.23-P)

	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: all amounts paid or due and
payable by the Company or a Legal Entity in the investigation, appraisal, adjustment, settlement,
litigation, defense or appeal, payment or subrogation of claims or judgments arising from each and
every loss or loss occurrence for which the Company or a Legal Entity is or may be found liable
under the Policies, less salvages and subrogation recoveries and amounts recovered or recoverable
under pooling agreements or other reinsurances, whether collectible, or not. “Ultimate Net Loss”
includes, but is not limited to, the following paid or due and payable amounts: Allocated Loss
Adjustment Expenses, Unallocated Loss Adjustment Expenses calculated at 7.0% of any loss, and all
other costs of investigation or litigation. Extra Contractual Obligations, as defined in the Extra
Contractual Obligations Article, and Loss in Excess of Original Policy Limits, as described in the
Loss in Excess of Policy Limits Article, shall be included in “Ultimate Net Loss,” provided that
Extra Contractual Obligations and Loss in Excess of Original Policy Limits, combined, shall not
exceed 25.0% of “Ultimate Net Loss”. Nothing herein shall be construed to mean that losses under
this Contract are not recoverable until the Company’s or a Legal Entity’s Ultimate Net Loss has
been ascertained.
	 
	B.	 	“Allocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or due
and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments arising
from each and every loss or loss occurrence for which the Company or a Legal Entity is or may be
found liable under the Policies, including but not limited to Claim-Specific Declaratory Judgment
Expenses, Attorneys’ Fees and Expenses, Field Employee Salaries and Expenses, defense costs, court
costs, supersedeas and appeal bond costs, post and prejudgment interest, and expenses of outside
adjusters or other third party administrators.
	 
	C.	 	“Unallocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or due
and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments arising
from each and every loss or loss occurrence for which the Company or a Legal Entity is or may be
found liable under the Policies that do not constitute Allocated Loss Adjustment Expense.
	 
	D.	 	“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses incurred in
actions brought to determine whether the Company or a Legal Entity has a defense and/or
indemnification obligation for individual claims presented against Policies covered under this
Contract. Any Claim-Specific Declaratory Judgment Expense shall be deemed to have been fully
incurred on the same date as the insured’s original loss or loss occurrence (if any) giving rise to
the action, unless otherwise provided for within this Contract.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 4 of 40

 

	E.	 	The term “Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of
attorneys, including but not limited to the fees and expenses of the Company’s or its affiliates’
in-house attorneys providing legal advice on coverage questions and/or defending the Company or a
Legal Entity in coverage litigation, and fees and expenses of outside attorneys and/or staff
counsel in the defense of policyholder claims. Such Attorneys’ Fees and Expenses for in-house
attorneys and staff counsel shall be calculated at the rate for such attorneys plus the expenses
incurred by such attorneys, but excluding office expenses of the Company and its affiliates and
salaries and expenses of their other employees which constitute Unallocated Loss Adjustment
Expense.
	 
	F.	 	The term “Field Employee Salaries and Expenses” as used above, shall mean a pro rata share of
salaries and expenses of the Company’s or its affiliates’ field employees according to the time
occupied in adjusting, defending, and settling such losses or loss occurrences, and of expenses of
all of the Company’s or its affiliates’ officers and employees incurred in connection with the
loss; except that salaries of officers and employees engaged in general management of the Company
or its affiliates and any office expense of the Company or its affiliates do not constitute Field
Employee Salaries and Expenses, but rather Unallocated Loss Adjustment Expense.

Article V — Loss Occurrence

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

	 	1.	 	As regards windstorm, hail, tornado, cyclone including ensuing collapse and water damage,
all individual losses sustained by the Company or a Legal Entity occurring during any period of 72
consecutive hours arising out of and directly occasioned by the same event. However, as respects
named hurricanes or tropical storms within the 48 contiguous states and Canada, all individual
losses sustained by the Company or a Legal Entity occurring during any period of 120 consecutive
hours arising out of and directly occasioned by the same event. However, the event need not be
limited to one state or province or states or provinces contiguous thereto.
	 
	 	2.	 	As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company or a Legal Entity occurring during any
period of 72 consecutive hours within the area of one municipality or county and the municipalities
or counties contiguous thereto arising out of and directly occasioned by the same event. The
maximum duration of 72 consecutive hours may be extended in respect of individual losses which
occur beyond such 72 consecutive hours during the continued occupation of an assured’s premises by
strikers, provided such occupation commenced during the aforesaid period.
	 
	 	3.	 	As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the introductory portion of this paragraph A) and fire
following directly occasioned by the earthquake, only those individual fire losses which

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 5 of 40

 

	 	 	 	commence during the period of 168 consecutive hours may be included in a Company’s
or a Legal Entity’s “Loss Occurrence.”
	 
	 	4.	 	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of
glass and water damage (caused by bursting of frozen pipes and tanks) may be included in the
Company’s or Legal Entity’s “Loss Occurrence.”
	 
	 	5.	 	As regards firestorms, brush fires and any other fires or series of fires, irrespective of
origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland
or other vegetation, all individual losses sustained by the Company or a Legal Entity which
commence during any period of 168 consecutive hours and within a 150-mile radius of any fixed point
selected by the Company may be included in the Company’s or a Legal Entity’s “Loss Occurrence.”
However, an individual loss subject to this subparagraph 5 cannot be included in more than one
“Loss Occurrence.”

	B.	 	For all “Loss Occurrences,” other than those referred to in subparagraph 2 of paragraph A above,
the Company may choose the date and time when any such period of consecutive hours commences,
provided that it is not earlier than the date and time of the occurrence of the first recorded
individual loss sustained by the Company or a Legal Entity 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 Occurrences” referred to in subparagraph 1 of paragraph A above
defined as occurring during any period of 72
consecutive hours where only one such period of 72 consecutive hours shall apply with respect to
one event, regardless of the duration of the event.
	 
	C.	 	As respects those “Loss Occurrences” referred to in subparagraph 2 of paragraph A above, if the
disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive
hours, then the Company may divide that disaster, accident or loss into two or more “Loss
Occurrences,” provided no two periods overlap and no individual loss is included in more than one
such period, and provided that no period commences earlier than the date and time of the occurrence
of the first recorded individual loss sustained by the Company or a Legal Entity arising out of
that disaster, accident or loss.
	 
	D.	 	No individual losses occasioned by an event that would be covered by 72 or 120 hours clauses may
be included in any “Loss Occurrence” claimed under 168 hours provision.
	 
	E.	 	Any date change, including leap year calculations, shall not in and of itself be regarded as a
Loss Occurrence for the purposes of this Contract.
	 
	F.	 	Losses directly or indirectly occasioned by:

	 	1.	 	loss of, alteration of, or damage to, or
	 
	 	2.	 	a reduction in the functionality, availability or operation of a computer system,
hardware, program, software, data, information repository, microchip, integrated circuit or similar
device in computer equipment or non-computer equipment, whether the property of the policyholder of
the Company or a Legal Entity or not, do not in and of themselves constitute an event unless
arising out of one or more of the following perils:
	 
	 	 	 	fire, lightning, explosion, aircraft or
vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano,
tsunami, flood, freeze or weight of snow.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 6 of 40

 

Article VI — Net Retained Lines

	A.	 	This Contract applies only to such portion of any Policy that the Company, directly or
indirectly, whether insurer or reinsurer, retains net for its own respective account (prior to the
deduction of any underlying reinsurance specifically permitted in this Contract). In calculating
the amount of any loss hereunder and in computing the amount in excess of which this Contract
attaches only loss or losses in respect of that portion of any insurance, or reinsurance which the
Company, directly or indirectly, whether insurer or reinsurer, retains net for its own account
shall be included.
	 
	B.	 	It is agreed that the amount of the Subscribing Reinsurer’s liability hereunder in respect of
any loss shall not be increased by reason of the inability of the Company to collect from any other
reinsurer, whether specific or general, any amount which may have become due from such reinsurers
whether such inability arises from the insolvency of such other reinsurer or otherwise.
	 
	C.	 	Allocation of losses and expenses to Legal Entities other than the Company pursuant to
inter-company reinsurance among the Legal Entities shall be entirely disregarded for all purposes
of this Contract.

Article VII — Other Reinsurance

	A.	 	It is understood and agreed that the Company may purchase underlying property per risk
excess of loss covers which will inure to the benefit of this Contract.
	 
	B.	 	The Company may have in force other excess catastrophe reinsurances, recoveries under which
shall inure solely to the benefit of the Company.

Article VIII — Territory (LM-02201-2005.06.02-A)

This Contract is worldwide in scope and shall cover risks wherever located.

Article IX — Loss Adjustment and Settlement (LM-01500-2006.09.07-A)

	A.	 	The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of any
claim that it has reason to believe could involve this Contract. The Company shall keep the
Subscribing Reinsurer informed of significant developments likely to affect the cost of any claim
or claims hereunder.
	 
	B.	 	The Company or a Legal Entity may commence, continue, defend, settle, or withdraw from actions,
suits, or prosecutions and, generally, do all such things relating to any claim or loss in which
the Subscribing Reinsurer is interested as, in the Company’s or such Legal Entity’s judgment, may
be beneficial or expedient to the Company or such Legal Entity, as applicable, and the Subscribing
Reinsurer. The Company and the Legal Entities shall be the sole judge as to what claims are
covered under their Policies. All of the Ultimate Net Loss and Loss Occurrences, as well as all
loss settlements made and judgments paid by the Company or a Legal Entity, provided they are within
the terms of this Contract either under the strict conditions of the Company’s or Legal Entities’
Policies or by way of compromise, shall be unconditionally binding upon the Subscribing Reinsurer,
who agrees

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 7 of 40

 

	 	 	to pay all amounts for which it is liable immediately upon reasonable evidence of the
amount due being furnished to the Subscribing Reinsurer by the Company. The true intent of
this Contract is that the Subscribing Reinsurer shall, in every case to which this Contract
applies, follow the settlements and the fortunes of the Company and the Legal Entities.

Article X — Salvage and Subrogation (LM-01800-2006.09.12-A)

	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or subrogation in
respect of claims and settlements under this Contract, less its share of recovery expense.
Unless the Company agrees to waive such rights in the settlement of a disputed claim, or the
Company and the Subscribing Reinsurer agree to the contrary, the Company and the Legal Entities
shall enforce the right to salvage and/or subrogation and shall prosecute all claims arising
out of such right. Should the Company or the Legal Entities refuse or neglect to enforce this
right, the Subscribing Reinsurer is hereby empowered and authorized to institute appropriate
action in the name of the Company or the Legal Entities, as applicable.
	 
	B.	 	Amounts recovered from salvage and/or subrogation shall always be used to reimburse the excess
Subscribing Reinsurer (and the Company, should it carry a portion of excess
coverage net) in the reverse order of their participation in the loss before being used in any way
to reimburse the Company or a Legal Entity for its primary loss. If the amount recovered exceeds
the recovery expense, the recovery expense shall be borne by each Party in proportion to its
benefit from the recovery. If the recovery expense exceeds the amount recovered, the amount
recovered (if any) shall be applied to the reimbursement of recovery expense and the remaining
expense, as well as any originally incurred loss expense, shall be added to the Ultimate Net Loss.
If no amount is recovered from salvage and/or subrogation, the expense incurred in attempting such
recovery shall be deemed loss expense and shall be added to the Ultimate Net Loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either Party, subsequent to payments made
by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior to said
payments and all necessary adjustments shall be made between the Company and the Subscribing
Reinsurer as soon as practicable after said salvage and/or subrogation recovery is obtained.
	 
	D.	 	The Company or a Legal Entity shall have the right, before the happening of the loss, to waive
its right of subrogation as to that loss.

Article XI — Interest Penalty (LM-01400-2005.08.24-A)

	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer
or to the Company in the following circumstances:

	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not received
within 45 calendar days following the date of presentation to the Subscribing Reinsurer of
information necessary to approve payment of the claim, and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is not received
within 45 calendar days following the date on which payment is due, and/or

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 8 of 40

 

	 	3.	 	If any premium adjustment, agreed by either Party to the other, is not received within
150 calendar days following the expiry or anniversary of this Contract, and/or
	 
	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not provided in
subparagraphs 1, 2, and 3 above, are not received in accordance with the date specified in
this Contract or if no date is specified, within 90 calendar days following the date the
debtor Party received the billing.

	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to an
interest payment computed by multiplying the amount due by a variable rate consisting of the U.S.
Prime Rate as published in the Eastern Edition of The Wall Street Journal on the first day of the
calendar month in which the amount became past due, plus 2%. The variable rate shall be adjusted
monthly thereafter to equal the U.S. Prime Rate as published in the Eastern Edition of The Wall
Street Journal on the first day of each successive month during which the amount due remains
unpaid, plus 2%. The product shall then be multiplied by 1/365 for each day after the due date
that the amount due and the interest amount remain unpaid. Any interest that occurs pursuant to
this Article shall be calculated by the Party to which it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this Contract. If
the debtor Party prevails in arbitration or any other proceeding with respect to the amounts in
dispute, there shall be no interest penalty due. If the creditor Party wholly or partially
prevails on any of the amounts in dispute, the interest penalty shall be awarded as outlined above.
Such interest penalty shall be calculated from the date the monies were due and owing to the date
of resolution of the arbitration or proceeding, and shall be payable as of the date of resolution
of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is contesting,
and wholly or partially prevails in the contest, the Company shall promptly return the applicable
amount of such payment. The arbitrator(s) hearing such dispute shall determine if interest shall
be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be waived.
Any waiver of any interest pursuant to this paragraph, however, shall not affect the waiving
Party’s right to claim and/or pursue interest for any other failure by the other Party to make
payment when due under this Article.

Article XII — Unauthorized Reinsurance (LM-02502-2006.10.26-A)

(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any time
thereafter does not qualify for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves.)

	A.	 	As regards Policies issued by the Company coming within the scope of this Contract, the Company
agrees that when it shall file with the insurance regulatory authority or set up on its books
reserves for unearned premium and losses covered hereunder which it shall be required by law to set
up, it will forward to the Subscribing Reinsurer a statement showing the proportion of such
reserves which is applicable to the Subscribing Reinsurer. The Subscribing Reinsurer hereby agrees
to fund such reserves in respect of unearned premium,

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 9 of 40

 

	 	 	known outstanding losses that have been reported to the Subscribing Reinsurer and allocated
loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by
the Company or the Legal Entities but not recovered from the Subscribing Reinsurer, plus
reserves for losses incurred but not reported as determined by the Company, as shown in the
statement prepared by the Company (hereinafter referred to as “Subscribing Reinsurer
Obligations”) by Letters of Credit, unless the method of funding is determined by applicable
law, statute, or regulation.
	 
	B.	 	The Subscribing Reinsurer agrees to apply for and secure timely delivery to the Company of
clean, irrevocable, and unconditional Letters of Credit issued by a bank that is a qualified U.S.
financial institution and containing provisions acceptable to the insurance regulatory authorities
having jurisdiction over the Company’s reserves in an amount equal to the Subscribing Reinsurer’s
proportion of said reserves. At the Company’s request, Subscribing Reinsurer will agree to provide
separate Letters of Credit for each Legal Entity. Such Letters of Credit shall be issued for a
period of not less than one year, and shall be automatically extended for one year from their date
of expiration or any future expiration date unless 60
days prior to any expiration date the issuing bank shall notify the Legal Entity by certified mail
that the issuing bank elects not to consider the Letters of Credit extended for any additional
period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time,
notwithstanding any other provision of this Contract, and be utilized by the Company, a Legal
Entity or any successor, by operation of law, of the Company or a Legal Entity, including without
limitation, any liquidator, rehabilitator, receiver, or conservator of the Company, without
diminution because of the insolvency of the Company, a Legal Entity or the Subscribing Reinsurer
for one or more of the following purposes:

	 	1.	 	To pay or reimburse the Company or a Legal Entity for:

	 	i.	 	The Subscribing Reinsurer’s share under this Contract of premiums returned, but
not yet recovered from the Subscribing Reinsurer, to the owners of Policies
reinsured under this Contract on account of cancellations of such Policies; and
	 
	 	ii.	 	The Subscribing Reinsurer’s share, under this Contract, of surrenders and
benefits or losses paid by the Company or a Legal Entity, but not yet recovered from
the Subscribing Reinsurer, under the terms and provisions of the Policies reinsured
under this Contract; and
	 
	 	iii.	 	Any other amounts necessary to secure the credit or reduction from liability
for reinsurance taken by the Company or a Legal Entity.

	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or replaced by
Letters of Credit for a reduced amount and where the Subscribing Reinsurer’s entire
obligations under this Contract remain unliquidated and undischarged 10 days prior to the
termination date, to withdraw amounts equal to the Subscribing Reinsurer’s share of the
liabilities, to the extent that the liabilities have not yet been funded by the Subscribing
Reinsurer and exceed the amount of any reduced or replacement Letters of Credit, and deposit
those amounts in a separate account in the name of the Company or a Legal Entity in a
qualified U.S. financial institution apart from its general assets, in trust for such uses
and purposes specified in above as may remain after withdrawal and for any period after the
termination date.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 10 of 40

 

	D.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers (“Party”,
individually, or “Parties”, collectively) arising out of, relating to, or concerning this Article
shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator Program. Unless the Parties
otherwise agree, the ARIAS Newer Arbitrator Program expedited proceeding with a single Newer
Arbitrator shall be used to resolve any such disputes.

Article XIII — Currency (LM-00500-2005.08.09-A)

Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars (“USD”). However, in those cases where the Policies are issued by the
Company using Canadian Dollars (“CAD”), it shall mean Canadian Dollars. All payments made by
either Party shall be made in United States Dollars except that payments made involving Policies
issued using Canadian Dollars shall be made in Canadian Dollars. All amounts paid or received by
the Company in any other currency shall be converted into United States Dollars at the rate of
exchange on the date at which it is entered on the books of the Company.

Article XIV — Access to Records (LM-00100-2007.08.13-A)

	A.	 	Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized representative, may upon reasonable prior written notice to the Company, at the
Subscribing Reinsurer’s own expense, examine at the offices of the Company or its affiliates,
during normal office hours, the Company’s or the Legal Entities’ Policy, accounting, underwriting,
or claim records and files, or any such additional relevant records and files, as they exist in the
Company’s or its affiliates’ possession or reasonable control, relating to business ceded under
this Contract. The Subscribing Reinsurer’s notice shall reasonably describe the nature of the
inspection that it wishes to conduct, the persons conducting the inspection and upon notice of
available files from the Company, the files that it wishes to review. Subject to the limitations
expressed in this Article, this right of inspection shall survive termination or expiration of this
Contract and shall continue as long as either Party has any rights or obligations under this
Contract.
	 
	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or files
concerning any particular claim(s) if the Subscribing Reinsurer has not disputed liability for
payment of such claim(s), and payment of such claim(s) is more than ninety (90) days overdue
according to the Company’s records. The Company shall, however, prior to an arbitration demand
that may be instituted by either Party, continue to respond to reasonable specific requests for
information and questions raised by the Subscribing Reinsurer concerning such claims; and nothing
in this Article shall restrict the right or ability of the Subscribing Reinsurer to seek discovery
of relevant information in an arbitration proceeding pursuant to the Arbitration Article of this
Contract.
	 
	C.	 	As a condition precedent to access to records under this Article, the Subscribing Reinsurer, its
personnel and any authorized third party representative of the Subscribing Reinsurer shall agree to
the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer (1)
concerning Trade Secrets of the Company or its affiliates, (2) subject to the terms of a

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 11 of 40

 

	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents falling within (3) above, in connection with the
underlying claim reinsured hereunder following final settlement or final adjudication of the case
or cases involving such claim, with prejudice against all claimants, and all Parties to such
adjudications; provided that the Company, may defer release of such Privileged Documents if there
are subrogation, contribution, or other third party actions with respect to that claim or case,
which might jeopardize the Company’s or its affiliates’ defense by release of such Privileged
Documents. In the event that the Company shall seek to defer release of such Privileged Documents,
it will in consultation with the Subscribing Reinsurer take other steps as reasonably necessary to
provide the Subscribing Reinsurer with the information it reasonably requires to indemnify the
Company without causing a loss of such privileges. The Subscribing Reinsurer, however, shall not have access to Privileged Documents relating to any dispute between the Company and the Subscribing Reinsurer.
	 
	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section 1839 of
the United States Economic Espionage Act of 1996. “Attorney—Client Privilege” shall mean
communications of a confidential nature between 1) the Company or its affiliates, or anyone
retained by or in the control of the Company or its affiliates, or their in-house or outside legal
counsel, or anyone in the control of such legal counsel, and 2) any in-house or
outside legal counsel which relate to legal advice being sought by the Company or its affiliates
and/or which contains legal advice being provided to the Company or its affiliates. “Work Product Privilege” shall mean communications, written materials and tangible things
prepared by or for in-house or outside counsel or prepared by or for the Company or its
affiliates, in anticipation of or in connection with litigation, arbitration, or other dispute
resolution proceedings.

Article XV — Errors and Omissions (LM-00800-2005.06.02-A)

Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either Party hereto from any liability, which would attach to
it hereunder if such delay, omission, or error had not been made, provided such delay, omission, or
error is rectified upon discovery.

Article XVI — Alterations

The Contract may at any time be altered by mutual consent of the Parties by addendum or by
correspondence, either of which to be authorized and signed by a responsible official of the
Parties and such addendum or correspondence shall be binding on the Parties and be deemed to be an
integral part of this Contract.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 12 of 40

 

Article XVII — Arbitration (LM-00200-2007.05.03-A)

	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution procedures that are
otherwise contained in this Contract, any and all disputes between the Company and any Subscribing
Reinsurer or Reinsurers (“Party” individually or “Parties” collectively) arising out of, relating
to, or concerning this Contract, whether sounding in contract or tort and whether arising during or
after this Contract’s formation, or after its termination, including disputes as to whether the
Contract was validly formed or is voidable, shall be submitted to the decision of an arbitration
panel (“Panel”). The Panel shall consist of an umpire and two party-appointed arbitrators unless a
Party meets the requirements of Paragraph C of this Article and demands arbitration pursuant
thereto, in which case the Panel would consist of an umpire only.
	 
	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the Procedures for
the resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel Version, dated April 2004
(the “Procedures”), developed by the Insurance and Reinsurance Dispute Resolution Task Force,
subject to the following modifications:

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with Alternative
section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the list to be
used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial and
disinterested. The members of the Panel may not be: (1) in the control of any Party or its
parent, affiliate, or agent, (2) a former director or officer of any Party or its parent,
affiliate, or agent, or (3) a likely witness in the arbitration. The requirement of
impartiality means that all members of the Panel shall have the same obligation to approach
the Panel’s duties and decisions with fairness and without consideration for the fact that
Panel members may have been appointed by one of the Parties. The requirement of
impartiality does not mean that any arbitrator can have no previous knowledge of or experience with respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the following
sentence: “The Panel shall require that each Party submit concise written statements of
position, including summaries of the facts and evidence a Party intends to present,
discussion of the applicable law and the basis for the requested Award or denial of relief
sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party) shall have
any communications concerning the arbitration or any of the issues before the Panel with any
member of the Panel that is not also disclosed to all other Parties and all members of the
Panel. Each Panel member shall have a continuing duty to disclose promptly to all Parties
and all Panel members any violation of this prohibition and the specifics of any improper
communications that occurred. This prohibition shall remain in place until all challenges
to any arbitration awards and decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision: “The
Parties may propound discovery seeking disclosure of such information and/or documents
relevant to the dispute or necessary for the proper resolution of the dispute.”

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 13 of 40

 

	 	7.	 	Position statements may be amended at any reasonable time, but not later than the close
of discovery without a showing to the Panel that the amending Party could not reasonably
have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one year of the
arbitration demand, unless the Parties otherwise agree. Should a Party seek a reasonable
extension to this time frame for good cause shown, the other Party’s agreement shall not be
unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue subpoenas
and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the prevailing Party,
as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision: “The Panel
shall make a decision and issue an award with regard to the terms expressed in this Contract,
and the custom and practice of the property and casualty insurance and reinsurance business.
The Panel shall not be obligated to follow the strict rules of law and evidence.”

	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this Article,
the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as modified by
sections B3, B4, and B9 through B11 of this Article, shall apply in the event that, in a
consolidated proceeding or otherwise, the Party initiating arbitration is seeking payment of a
total amount that is no greater than one million dollars ($1,000,000), or the currency equivalent
thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section 16.4 of the Alternative
Streamlined Procedures shall not apply. The Parties agree to comply with section 6.7 of the
Procedures to appoint a single umpire, and hereby designate the umpire list maintained by ARIAS
(U.S.) as the list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the Parties
mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an order
confirming any award of the Panel; a judgment of that court shall thereupon be entered on any
award. If such an order is issued, the Party against whom confirmation is sought shall pay the
attorneys’ fees incurred of the Party who applied for the confirmation order and all court costs of
any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent any
participating Party from applying to a court of competent jurisdiction to issue a restraining order
or other equitable relief to maintain the “status quo” of the Parties participating in the
arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.

	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any single Subscribing
Reinsurer on this Contract have the right to combine any and all disputes between them that
concern this Contract (including any renewal of this Contract or any contract for which this
Contract is a renewal) into a single arbitration proceeding before a single Panel, except
that the standard for determining whether a Party may add a

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 14 of 40

 

	 	 	 	new issue, claim, or dispute to an arbitration proceeding shall be the standard for
amending a Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer. The Company has the right to combine
any and all disputes between the Company and a single Subscribing Reinsurer into a single
arbitration proceeding before a single Panel where such disputes involve this Contract and
any additional contracts between the two Parties, except that the standard for determining
whether a Party may add a new issue, claim, or dispute to an arbitration proceeding shall be
the standard for amending a Position statement, as set forth in Paragraph B7 of this
Article.
	 
	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more than one
Subscribing Reinsurer is involved in arbitration relating to this Contract, where there are
common questions of law or fact and a possibility of conflicting awards or inconsistent
results, all such Reinsurers shall constitute and act as one Party for purposes of this
Article and communications shall be made by the Company to each of the Reinsurers
constituting the one Party; provided, however, that the Reinsurers shall have the right to
assert several, rather than joint defenses or claims, and to be represented by separate
counsel. This provision shall not change the liability of each of the Reinsurers under the
terms of this Contract from several to joint.

	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this Arbitration
Article. In addition, to the extent the Panel (or the umpire in an Alternative Streamlined
Procedure) looks to applicable law, such Panel or umpire shall apply the law as set forth in the
Governing Law Article of this Contract.
	 
	I.	 	Survival of Article. This Article shall survive the termination or expiration of this Contract.

Article XVIII — Insolvency (LM-01300-2005.08.24-A)

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

	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be payable
on demand, with reasonable provision for verification, on the basis of claims allowed against the
insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims, without
diminution because of such insolvency or because such liquidator, receiver, conservator, or
statutory successor has failed to pay all or a portion of any claims. Such payments by the
Subscribing Reinsurer shall be made directly to the Company or its liquidator, receiver,
conservator, or statutory successor, except to the extent Section 4118(a) of the New York Insurance
Law applies, or except (a) where the Contract specifically provides another payee of such
reinsurance in the event of the insolvency of the Company, or (b) where the Subscribing Reinsurer
with the consent of the direct insured or insureds has assumed such Policy obligations of the
Company as direct obligations of the Subscribing Reinsurer to the payees under such Policies and in
substitution for the obligations of the Company to such payees.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 15 of 40

 

	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of the
insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency of a claim
against the insolvent Company on the Policy or Policies reinsured within a reasonable time after
such claim is filed in the insolvency proceeding and that during the pendency of such claim the
Subscribing Reinsurer may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses which it may deem
available to the Company or its liquidator, receiver, conservator, or statutory successor. The
expense thus incurred by the Subscribing Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit, which may accrue to the Company solely as a result of the
defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Reinsurers are involved in the same claim and a majority in interest elects to
interpose defense to such claim, the expense shall be apportioned in accordance with the terms of
this Contract as though such expense had been incurred by the insolvent Company.

Article XIX — Dividends and Taxes (LM-00600-2005.06.02-A)

In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns, other
than income or profits tax returns to any State or to the District of Columbia.

Article XX — Federal Excise Tax (LM-01000-2005.08.24-A)

	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the
United States of America, except for any Subscribing Reinsurer exempt from Federal Excise Tax. A
Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide to the
Company, upon its request, proof that the exempt status adequately satisfies the demands of the
U.S. Internal Revenue Service, Department of the Treasury, or its successor and/or other applicable
U.S. government authority.
	 
	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable hereon
(as imposed under Section 4371 of the Internal Revenue Code) for the purpose of paying Federal
Excise Tax to the extent such premium is subject to such tax.
	 
	C.	 	In the event of any return of premium, the Subscribing Reinsurer shall deduct the aforesaid
percentage from the return premium payable hereon and the Company or its agent shall recover such
tax from the United States Government.

Article XXI — Service of Suit (LM-01900-2005.08.24-A)

(This article applies to unauthorized Reinsurers and to Reinsurers who are domiciled outside
the United States of America.)

	A.	 	This Service of Suit 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,

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 16 of 40

 

	 	 	not as an alternative to the Arbitration Article for resolving disputes arising out of this
Contract.

	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer’s
right to commence an action in any Court of competent jurisdiction in the United States, to remove
an action to a United States District 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 Subscribing
Reinsurer, once the appropriate Court is selected, whether such court is the one originally chosen
by the Company and accepted by the Subscribing 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 them upon this Contract, will abide by the
final decision of such Court or of any Appellate Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon; Mendes & Mount, LLP, 750 Seventh Avenue, New
York, NY 10019-6829.)
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state, territory,
or district of the United States that makes provision therefore, the Subscribing Reinsurer hereby
designates the Superintendent, Commissioner, or Director of Insurance, or other officer specified
for that purpose in the statute, or their successor(s) in office, as their true and lawful attorney
upon whom may be served any lawful process in any action, suit, or proceedings instituted by or on
behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby
designate the above-named as the person to whom the said officer is authorized to mail such process
or a true copy thereof.

Article XXII — Offset (LM-01700-2005.06.02-A)

Each Party to this Contract together with their successors or assigns shall have and may
exercise, at any time, the right to offset any balance(s) due the other (or, if more than one, any
other). Such offset may include balances due under this Contract, and any other contracts between
the Parties, whether such balances arises from premium, losses, or otherwise, and regardless of the
capacity of any Party, whether as assuming and/or ceding insurer, under the various reinsurance
contracts involved, provided however, that in the event of insolvency of a Party hereto, offsets
shall only be allowed in accordance with the provisions of the applicable law, statute, or
regulation governing such offset.

Article XXIII — Governing Law (LM-01200-2005.06.02-A)

The validity and interpretation of this Contract shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts.

Article XXIV — Confidentiality (LM-00400-2005.11.10-A)

	A.	 	Confidential Information. The submission materials, and any Policy, financial,

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 17 of 40

 

	 	 	underwriting, accounting, and claims information, data statements, representations, and
other materials provided by the Company or it affiliates and received by the Subscribing
Reinsurer in the course of an audit, inspection, or otherwise, represent confidential or
proprietary information (“Confidential Information”). This Confidential Information is
intended for the sole use of the Subscribing Reinsurer (and its retrocessionaires,
respective auditors, accountants, and legal counsel) as may be necessary in analyzing and/or
accepting a participation in and/ or executing its responsibilities under or related to this
Contract. The Subscribing Reinsurer acknowledges and agrees that with respect to any review
of Confidential Information by the Subscribing Reinsurer, and/or discussion of Confidential
Information, the Company and its affiliates do not waive and do not intend to waive any
available privilege or protection. The review of Confidential Information by the
Subscribing Reinsurer and/or discussion of Confidential Information with the Company or its
affiliates shall not destroy, waive, or otherwise impair the proprietary and/or protected
status of any Confidential Information or any information revealed in such discussion with
the personnel of the Company or its affiliates, whether reviewed by and/or discussed with
the Subscribing Reinsurer intentionally or inadvertently, nor does the review of the
Confidential Information and/or discussion of Confidential Information with the Company or
its affiliates constitute an estoppel or waiver of the Company’s or its affiliates’ rights
to assert the attorney-client or work-product privileges, or any other applicable privilege
or protection, over certain documents contained in the Company’s or its affiliates’ files
and/or certain information.
	 
	A.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations will apply
to Confidential Information to the extent such Confidential Information: (1) is or becomes
available to the public, other than as a result of impermissible disclosure by the Subscribing
Reinsurer, (2) was or became available lawfully to the Subscribing Reinsurer from a source, other
than the Company, its affiliates or their personnel, that is not subject to a confidentiality
obligation, (3) was developed independently by the Subscribing Reinsurer prior to disclosure by the
Company, its affiliates or their personnel, as demonstrated by the Subscribing Reinsurer’s records,
or (4) is required to be disclosed by law, regulation, court, or regulatory agency action, subject
to Paragraph D of this Article.
	 
	B.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to all
Confidential Information provided by the Company and all knowledge and information gained through
its review of Confidential Information or discussions with the personnel of the Company or its
affiliates. The Subscribing Reinsurer further agrees not to disclose any such Confidential
Information to any other person or entity except as such disclosure may be necessary to its
retrocessionaires, accountants, attorneys, auditors, actuaries or third party catastrophe modelers
or as otherwise required by law.
The Subscribing Reinsurer agrees that no Confidential Information is to be copied and/or
removed from the Company’s or its affiliates’ premises without the express permission of the Company.
	 
	C.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand pursuant to
subpoena, summons, or court or governmental order, to disclose Confidential Information (including
Non-public personally identifiable information) that has been provided by the Company or its
affiliates, the Subscribing Reinsurer shall make commercially reasonable efforts to notify the
Company promptly upon receipt of the demand and prior to disclosure of the Confidential Information
and provide the Company a reasonable opportunity to object to the disclosure. If the Company
timely objects to the release of the Confidential Information, the Subscribing Reinsurer will

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 18 of 40

 

	 	 	comply with the reasonable requests of the Company in connection with the Company’s efforts
to resist release of the Confidential Information. The Company shall bear the cost of
resisting the release of the Confidential Information.
	 
	D.	 	Survival. The Parties agree that the obligations contained in this Article shall survive the
expiration or termination of this Contract.

Article XXV — Severability (LM-02000-2005.06.02-A)

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 XXVI — Special Conditions (LM-02100-2007.10.05-A)

	A.	 	This Article applies only in the event that:

	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing Reinsurer to
cease writing business or has imposed upon it any other restrictions on or conditions
relating to the Subscribing Reinsurer’s license or conduct of business in any jurisdiction;
or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary), or there have been instituted against it
proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator,
trustee in bankruptcy, or other agent known by whatever name, to take possession of its
assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been reduced by 25% or
there has been a 25% reduction in the Subscribing Reinsurer’s stamp capacity or funds at
Lloyd’s of the amount of surplus at the inception of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has entered into a definitive agreement to become merged with,
acquired, or controlled by any company, corporation, or individual(s) not controlling the
Subscribing Reinsurer’s operations at the inception of this Contract; or
	 
	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded below A- or
Standard and Poor’s Rating has been assigned or downgraded below A-; or
	 
	 	6.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least 200% of
the Subscribing Reinsurer’s Authorized Control Level Risk-Based Capital; or
	 
	 	7.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	8.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	9.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 19 of 40

 

	 	10.	 	The Subscribing Reinsurer, directly or through the actions of a parent company or an
affiliated entity, has or has attempted to assign, novate or transfer the Subscribing
Reinsurer’s rights and/or obligations under this Contract, including any attempted transfer of
rights and/or obligations under any U.S. or foreign statute, legislation or jurisprudence,
without the Company’s prior written consent; or
	 
	 	11.	 	The Subscribing Reinsurer, directly or through the actions of a parent company or an
affiliated entity, has invoked any U.S. or foreign statute, legislation or jurisprudence which
purports to enable the Reinsurer to require the Company to settle its claims liabilities,
including but not limited to any estimated or undetermined claims liabilities under this
Contract, on an accelerated basis. This condition does not apply to any attempt to enforce a
settlement of claims liabilities under a commutation process to which the Parties have agreed.

	B.	 	If one or more of the above-stated circumstances occur, the Company shall provide the
Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s share of all paid
recoverables, case reserves, loss adjustment expenses, incurred but not reported losses, reserves
for unearned premium, and ceding commissions due under this Contract (collectively “Obligations”).
Within fifteen (15) days of the Subscribing Reinsurer’s receipt of such statement, the Subscribing
Reinsurer agrees to fund all Obligations by clean, irrevocable, and unconditional Letters of Credit
payable exclusively to the Company and issued by a bank acceptable to the Company. At the
Company’s request, the Subscribing Reinsurer shall agree to provide separate Letters of Credit for
each Legal Entity. Such Letters of Credit shall be issued for a period of not less than one year,
and shall be automatically extended for one year from their dates of expiration or any future
expiration dates, unless sixty (60) days prior to any expiration date the issuing bank shall notify
the Company or a Legal Entity, as applicable by certified mail that the issuing bank elects not to
extend any Letter of Credit for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer, pursuant to the provisions of this Contract, may be drawn upon at any time,
notwithstanding any other provision of this Contract, and be utilized by the Company, a Legal
Entity, or any successor, by operation of law, of the Company or a Legal Entity, including without
limitation, any liquidator, rehabilitator, receiver, or conservator of the Company or a Legal
Entity, without diminution because of the insolvency of the Company, a Legal Entity or the
Subscribing Reinsurer for one or more of the following purposes:

	 	1.	 	To pay or reimburse the Company or a Legal Entity for:

	 	a.	 	The Subscribing Reinsurer’s
share under this Contract of premiums returned, but not yet recovered from the Subscribing
Reinsurer, to the owners of Policies reinsured under this Contract due to cancellations of
such Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of surrenders
and benefits or liabilities paid by the Company or a Legal Entity, but not yet recovered
from the Subscribing Reinsurer, under the terms and provisions of the Policies reinsured
under this Contract; and
	 
	 	c.	 	Any other amounts necessary to secure the credit or reduction
from liability for reinsurance taken by the Company or a Legal Entity.

	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or replaced by
Letters of Credit for a reduced amount and where the Subscribing Reinsurer’s entire
obligations under this Contract remain unliquidated and undischarged ten (10) days prior

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 20 of 40

 

	 	 	 	to the termination date, to withdraw amounts equal to the Subscribing Reinsurer’s share of
the liabilities, to the extent that the liabilities have not yet been funded by the
Subscribing Reinsurer and exceed the amount of any reduced or replacement Letters of Credit,
and deposit those amounts in a separate account in the name of the Company or a Legal Entity
in a qualified U.S. financial institution apart from its general assets, in trust for such
uses and purposes as specified above as may remain after withdrawal and for any period after
the termination date.

	D.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall prepare
an adjusted statement of the Subscribing Reinsurer’s Obligations, for the sole purpose of amending
the Letters of Credit, in the following manner:

	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the balance of
credit as of the statement date, the Subscribing Reinsurer shall, within fifteen (15) days
after receipt of notice of such excess, secure delivery to the Company of an amendment to
the Letters of Credit increasing the amount of credit by the amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations are less
than the balance of credit as of the statement date, the Company shall, within fifteen (15)
days after receipt of written request from the Subscribing Reinsurer, release such excess
credit by agreeing to secure an amendment to the Letters of Credit reducing the amount of
credit available by the amount of such excess credit.

	E.	 	If the Subscribing Reinsurer fails to fund such Obligations by Letters of Credit as
described above, the Company may terminate this Contract at any time by the giving of thirty (30)
days prior written notice to the Subscribing Reinsurer.
	 
	F.	 	The coverage afforded by this Contract shall cease as of the date of termination and
the Subscribing Reinsurer shall return the unearned premium, if any. If coverage hereunder
terminates while a claim covered by this Contract is in progress, the Subscribing Reinsurer shall
be liable subject to all other conditions hereof for its proportion of the entire claim, provided
that the event giving rise to the claim started before such termination.
	 
	G.	 	If the Company elects to terminate this Contract, the Company shall have the option to
commute the Subscribing Reinsurer’s liability for loss(es), whether reported or unreported,
comprising the sum total of the present value of the ceded: (1) case reserves and allocated loss
adjustment expense, (2) projected ultimate losses, (3) any unearned premium reserve, and (4)
undiscounted outstanding paid claims (hereinafter the “Commutation Losses”), on Policies covered by
this Contract as of the effective date of termination.

	 	1.	 	The Company shall submit a statement of valuation showing the elements considered
reasonable to establish the Commutation Losses, and the Subscribing Reinsurer shall pay the
amount requested. In the event the Company and the Subscribing Reinsurer cannot agree on
the statement of valuation of the Subscribing Reinsurer’s liability under such Policies,
either Party may request in writing that the differences be settled by a panel of three
actuaries. Each Party shall appoint an actuary to assess such liability within fifteen (15)
days after receipt of the written request for commutation. Upon such appointment, the two
actuaries shall appoint a third actuary. If the two actuaries fail to agree on the third
actuary within thirty (30) days of their appointment, each of them shall nominate three
individuals, of whom the other shall decline two, and the final decision shall be made by
drawing lots. The actuaries shall then investigate and capitalize such Commutation Loss(es)
within thirty (30) days. As used herein, “capitalize” shall mean to

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 21 of 40

 

	 	 	 	determine the present value of Commutation Losses, without regard to the Subscribing
Reinsurer’s ability to pay such losses. The panel shall meet in Boston, Massachusetts,
unless the Company and Subscribing Reinsurer agree otherwise.
	 
	 	2.	 	All actuaries shall be disinterested in the outcome of the commutation and shall be
Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial Society. Except as
stated below, the expense of the actuaries and of the commutation shall be equally divided
between the Parties of the commutation.
	 
	 	3.	 	The decision in writing of the actuaries, when filed with the Parties hereto, shall be
final and binding, except that if the Company does not agree with the capitalized value of
the Commutation Loss(es), the Company shall have no obligation to commute. In the event the
Company does not agree with the capitalized value of the Commutation Loss(es) and does not
move forward with commutation, the expense of the actuaries including reasonable expense of
the actuary appointed by the Subscribing Reinsurer will be paid by the Company. If the
Contract is commuted, payment by the Subscribing Reinsurer to the Company or any other third
party mutually agreed upon by the Subscribing Reinsurer and the Company shall constitute a
complete and final release of the Subscribing Reinsurer in respect to its liability under
this Contract.

	H.	 	Termination under the terms of this Article can be made after the date of expiration of this
Contract.

Article XXVII — Agency Agreement (LM-2800-2006.04.12A)

If more than one reinsured company is named as a Party to this Contract, Peerless Insurance
Company shall be deemed the agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any Party.

Article XXVIII — Entire Agreement (LM-00701-2005.08.24-A)

This Contract shall constitute the entire agreement between the Company and the Subscribing
Reinsurer with respect to the subject matter of this Contract and shall supersede all prior
understandings, negotiations and discussions, whether oral or written, by or between the Company
and the Subscribing Reinsurer relating to the subject matter hereof. There are no general or
specific warranties, representations or other agreements by or among the Company and the
Subscribing Reinsurer in connection with entering into this Contract except as specifically set
forth in this Contract. Notwithstanding the foregoing, this Contract may be amended or modified
only by a writing signed by both the both the Company and the Subscribing Reinsurer.

Article XXIX — Third Parties (LM-02700-2005.09.27-A)

This Contract shall not be deemed to give any right or remedy to any third party whatsoever
unless said right or remedy is specifically granted to such third party by the terms of this
Contract.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 22 of 40

 

Article XXX — Assignment, Novation, or Transfer (LM-00300-2007.10.05-A)

This Contract shall be binding upon and inure to the benefit of the Company and the
Subscribing Reinsurer and their respective successors and assigns; provided, however, that this
Contract may not be assigned, novated or transferred, including any attempted transfer of rights
and/or obligations under any U.S. or foreign statute, legislation or jurisprudence, by either the
Company or the Subscribing Reinsurer, or as the result of the actions of a parent company or
affiliated entity of either, without the prior written consent of the other. In the event of any
assignment, novation or transfer, the assignor, novator or transferor shall remain liable under
this Contract, and further guarantees the performance of all obligations of any assignee, novatee
or transferee under this Contract. Notwithstanding the foregoing, the Company may assign this
Contract to an affiliated entity, without the Subscribing Reinsurer’s written consent.

Article XXXI — Reinsurer Claims Obligations (LM-03100-2007.10.10-A)

It is understood and agreed that the Subscribing Reinsurer will fulfill its obligations under
the Loss Adjustment and Settlement Article, until all claims have been reported and settled.
Without first obtaining the Company’s written consent, the Subscribing Reinsurer will not, either
directly or as the result of an action of a parent company or an affiliated entity, invoke any U.S.
or foreign statute, legislation, or jurisprudence that purports to enable the Subscribing Reinsurer
to require the Company or a Legal Entity to settle their claims liabilities, including but not
limited to any estimated or undetermined claims liabilities, under this Contract on an accelerated
basis. It is further expressly understood and agreed that in the event the Subscribing Reinsurer
attempts to require the Company or a Legal Entity to settle their claims liabilities on an
accelerated basis, the Company shall continue to have the right to utilize or to draw upon Letters
of Credit or other collateral, under the terms of this Contract. This Article does not prevent the
Company and the Subscribing Reinsurer from settling any claims liabilities using a commutation
process that is agreeable to both Parties. This Article shall in no way affect the rights and
obligations of the Company and the Subscribing Reinsurer under the Insolvency Article.

Article XXXII — Extra Contractual Obligations (LM-00900-2007.03.28-A)

	A.	 	This Contract shall protect the Company within the limits hereof for 90% of Extra
Contractual Obligations. “Extra Contractual Obligations” are defined as any actual or potential
liabilities not covered under any other provision of this Contract, arising from or relating to any
alleged or actual act, error or omission, whether intentional or otherwise, or from any alleged or
actual negligence, tortious conduct, reckless conduct, violations of statutes or regulations
governing the conduct of insurance companies and/or claims adjusters, or bad faith in connection
with: (i) the handling of any claim under the Policies covered by this Contract, such liabilities
arising because of, but not limited to, the following: failure by the Company, a Legal Entity or
by a third party claims administrator to settle within the Policy limit, or by reason of alleged or
actual negligence, fraud or bad faith of the Company, a Legal Entity or by a third party claims
administrator in rejecting an offer of settlement, or in defending or prosecuting litigation,
including appeals, arbitration, or any alternative dispute resolution or settlement discussions
involving any claim; or (ii) the providing of or failure to provide any loss control or loss
prevention services in connection with any Policy hereunder.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 23 of 40

 

	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in all
circumstances, to be the date of the original Occurrence, loss occurrence, accident, casualty,
disaster, or loss, as selected by the Company.
	 
	C.	 	However, this Article shall not apply where the loss has been incurred due to final legal
adjudication of any fraudulent or criminal act directed against the Company by a member of the
Board of Directors or a corporate officer of the Company or a Legal Entity acting individually or
collectively or in collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim covered hereunder.

Article XXXIII — Loss In Excess of Original Policy Limits (LM-01600-2005.08.24-A)

	A.	 	This Contract shall protect the Company within the limits hereof, for 90% of any Loss in
excess of the Company’s original Policy limit where Loss in excess of the limit has been incurred
because of a failure by the Company, or a Legal Entity or by a third-party claims administrator to
settle within the Policy limit or by reason of alleged or actual negligence, fraud, or bad faith in
rejecting an offer of settlement or in defending or prosecuting litigation, including appeals,
arbitration, or any alternative dispute resolution or settlement discussions involving any claim.
	 
	B.	 	However, the above paragraph shall not apply where the loss has been incurred due to final legal
adjudication of any fraudulent or criminal act directed against the Company by a member of the
Board of Directors or a Corporate Officer of the Company or a Legal Entity 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.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which the
Company or a Legal Entity would have been contractually liable to pay had it not been for the limit
of the original Policy. The date on which any Loss in excess of the Company’s original Policy
limit is incurred by the Company or a Legal Entity shall be deemed, in all circumstances, to be the
date of the original Occurrence, accident, casualty, disaster, loss occurrence or loss, as selected
by the Company.

Article XXXIV — Federal Terrorism Excess Recovery (LM-01100-2007.12.28-A)

	A.	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 and any subsequent amendments thereto (“TRIA”) as a result of
loss occurrences commencing during the term of this Contract shall apply as follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the benefit of
the Company and shall be entirely disregarded in applying all of the provisions of this Contract.
	 
	C.	 	If one or more loss occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA, and such
amounts, together with any other reinsurance recoveries to the Company for said loss occurrence(s),
exceed the total amount of “Insured Losses” to the Company,

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 24 of 40

 

	 	 	any amount in excess thereof shall be held by the Company. The Company shall then reimburse
the Subscribing Reinsurer a portion of such excess recovery in an amount equal to the
proportion that the Subscribing Reinsurer’s payment under this Contract bears to the total
treaty reinsurance recoveries to the Company for Insured Losses for said loss occurrence(s).
Provided, however, that in no event shall such reimbursement exceed the amount paid by the
Subscribing Reinsurer to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is based on the
Company’s Insured Losses in more than one loss occurrence and neither the Secretary of the Treasury
nor his delegate specifies the amount of loss allocable to each respective loss occurrence, the
reimbursement shall be pro-rated in the proportion that the Company’s Insured Losses in each loss
occurrence bears to the Company’s total Insured Losses resulting from all loss occurrences to which
the reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss (es)” shall have the same meaning as set forth in
Section 102(5) of TRIA.

	 	 	 

	Effective: January 1, 2008

	 	2008 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	Indiana Insurance Regional
	 

	 	Companies — $20m x $30m

Page 25 of 40

 

Exhibit A

Property Catastrophe Excess of Loss

1. Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate Net
Loss above an initial net loss to the Company of $30,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $20,000,000 of each and every such Loss
Occurrence, nor more that $40,000,000 in the aggregate during the term of this Contract.

2. Rate and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered, as
stated in Article I — Business Covered, times a rate of 0.7333%.

3. Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $2,000,000
remitted in four equal quarterly installments of $500,000 on January 1, April 1, July 1 and October
1, 2008. In the event this Contract is terminated prior to January 1, 2009, the minimum premium
shall be prorated and no deposit premium installments shall be due after the effective date of
termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2009
summarizing the actual subject earned premium for the January 1, 2008 through December 31, 2008
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Subscribing Reinsurer within 15
days of February 15, 2009.

The term Subject Earned premium shall mean the premiums earned by the Company or the Legal
Entities, on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the Legal
Entities.

	 	 	 	 	 
	ASLOB	 	Percentage
	Fire
	 	 	100	%
	Allied Lines
	 	 	100	%
	Homeowners
	 	 	90	%

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 26 of 40

 

	 	 	 	 	 
	ASLOB	 	Percentage
	Farmowners
	 	 	90	%
	Commercial Multiple Peril
	 	 	 	 
	(Property)
	 	 	100	%
	Inland Marine
	 	 	100	%
	Auto Physical Damage
	 	 	 	 
	(Private Passenger)
	 	 	35	%
	Auto Physical Damage
	 	 	 	 
	(Commercial)
	 	 	35	%

Estimated Subject Earned Premium: $245,458,379

4. Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $20,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $20,000,000
in respect of any one loss occurrence nor $40,000,000 in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment when the
developed premium is finally established.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 27 of 40

 

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

	 	(a)	 	All business derived directly or indirectly from any Pool, Association or Syndicate which
maintains its own reinsurance facilities.
	 
	 	(b)	 	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the
purpose of insuring property whether on a country-wide basis or in respect of designated areas.
This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to
provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time
to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or
Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

Any Pool, Association or Syndicate formed for the purpose of writing

Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

Section B does not apply:

	 	(a)	 	Where the Total Insured Value over all interests of the risk in question is less than
$250,000,000.
	 
	 	(b)	 	To interests traditionally underwritten as Inland Marine or stock and/or contents written
on a blanket basis.
	 
	 	(c)	 	To Contingent Business Interruption, except when the Company is aware that the key
location is known at the time to be insured in any Pool, Association or Syndicate named above,
other than as provided for under Section B (a).
	 
	 	(d)	 	To risks as follows:
	 
	 	 	 	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other
than railroad schedules) and builder’s risks on the classes of risks specified in this subsection
(d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its
participation in residual market mechanisms including but not limited to:

	 	(1)	 	Any so-called “Coastal Pools” including but not limited to:
	 
	 	 	 	Alabama Insurance Underwriting Association 

Louisiana Citizens Property Insurance Corporation

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 28 of 40

 

	 	 	 	Mississippi Windstorm Underwriting Association 

North Carolina Insurance Underwriting Association

South Carolina Windstorm and Hail Underwriting Association 

Texas Windstorm Insurance Association

AND

	 	(2)	 	All “Fair Plan” and “Rural Risk Plan” business

AND

	 	(3)	 	Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority
(“CEA”)

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

	 	(i)	 	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or
“Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
	 
	 	(ii)	 	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or
Residual Market Mechanisms, or any participant therein, including the Company, whether by way of
subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the
Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

	 	(1)	 	Notwithstanding Section C above, in respect of the CEA, where an assessment is made
against the Company by the CEA, the Company may include in its Ultimate Net Loss only that
assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s
initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
	 
	 	(2)	 	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against
the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in
respect of any loss occurrence hereunder shall not exceed the lesser of:

	 	(a)	 	The Company’s assessment from CPIC for the accounting year in which the loss occurrence
commenced, or
	 
	 	(b)	 	The product of the following:

	 	(i)	 	The Company’s percentage participation in CPIC for the accounting year in which the loss
occurrence commenced; and
	 
	 	(ii)	 	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may
not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in
respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase
or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the
Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied
by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any
obligations arising from the deferment by CPIC of the collection of monies.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 29 of 40

 

NOTES: Wherever used herein the terms:

	“Company” 	 	 	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other
term is used in the attached reinsurance document to designate the reinsured company or companies.
	 
	“Agreement” 	 	 	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other
term is used to designate the attached reinsurance document.
	 
	“Reinsurers” 	 	 	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term
is used in the attached reinsurance document to designate the reinsurer or reinsurers.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 30 of 40

 

War Risk Exclusion Clause

The Reinsurers shall not be liable for loss or damage caused directly or indirectly by (1)
hostile or warlike action in time of peace or war, including action hindering, combating or
defending against an actual, impending or expected attack, (a) by any government or sovereign power
(de jure or de facto) or by any authority maintaining or using military, naval or air forces; or
(b) by military, naval or air forces, it being understood that any discharge, explosion or use of
any weapon of war employing atomic fission or radioactive force shall be conclusively presumed to
be such a hostile or warlike action by such government power, authority or forces; (2)
insurrection, rebellion, revolution, civil war, usurped power, or action taken by governmental
authority in hindering, combating or defending against such an occurrence.

The War Risk Exclusion Clause shall not apply to interest insured under Policies, endorsements or
binders containing a standard war or hostilities or warlike operations exclusion clause.

 
			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 31 of 40

 

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)

	1.	 	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for
the purpose of covering Atomic or Nuclear Energy risks.
	 
	2.	 	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance
does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether
as Insurer or Reinsurer, from any insurance against Physical Damage (including business
interruption or consequential loss arising out of such Physical Damage) to:

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

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

	 	(a)	 	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear
installation, or
	 
	 	(b)	 	where said insurance contains a provision excluding coverage for damage to property caused
by or resulting from radioactive contamination, however caused. However on and after 1st January
1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion
provision has been approved by the Governmental Authority having jurisdiction thereof.

	4.	 	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
	 
	5.	 	It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard.
	 
	6.	 	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of
1954 or by any law amendatory thereof.
	 
	7.	 	Reassured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

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

	 	(a)	 	all policies issued by the Reassured on or before 31st December 1957 shall be free from
the application of the other provisions of this Clause until expiry date or 31st December 1960
whichever first occurs whereupon all the provisions of this Clause shall apply.
	 
	 	(b)	 	with respect to any risk located in Canada policies issued by the Reassured on or before
31st December 1958 shall be free from the application of the other provisions of this Clause until
expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this
Clause shall apply.

12/12/57 N.M.A. 1119 BRMA 35B

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 32 of 40

 

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

	1.	 	This Contract 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 Contract 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:

	 	(a)	 	nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	(b)	 	any other nuclear reactor installation, including laboratories handling radioactive
materials in connection with reactor installations, and critical facilities as such, or
	 
	 	(c)	 	installations for fabricating complete fuel elements or for processing substantial
quantities of radioactive materials, and for reprocessing, salvaging, chemically separating,
storing or disposing of spent nuclear fuel or waste materials, or
	 
	 	(d)	 	installations other than those listed in (c) above using substantial quantities of
radioactive isotopes or other products of nuclear fission.

	3.	 	Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Contract
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 the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear
installation, or
	 
	 	(b)	 	where the said insurance contains a provision excluding coverage for damage to property
caused by or resulting from radioactive contamination, however caused.

	4.	 	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this
Contract 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.	 	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 “radioactive material” means uranium, thorium, plutonium, neptunium, their respective
derivatives and compounds, radioactive isotopes of other elements and any other substances which
may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being
prescribed substances capable of releasing atomic energy, or as being requisite for the production,
use or application of atomic energy.
	 
	7.	 	Reinsured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

	8.	 	Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this
Contract does not cover any loss or liability accruing to the Reinsured, directly or indirectly,
and whether as Insurer or Reinsurer, caused:

	 	(1)	 	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any
other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion,
except for ensuing loss or damage which results directly from fire, lightning or explosion of
natural, coal or manufactured gas;
	 
	 	(2)	 	by contamination by radioactive material.

	NOTE: 	 	Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause,
paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether
new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 33 of 40

 

Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994)

(Worldwide Excluding U.S.A. & Canada)

This Contract shall exclude Nuclear Energy Risks whether such risks are written directly and/or
by way of reinsurance and/or via Pools and/or Associations.

For all
purposes of this Contract Nuclear Energy Risks shall mean all first party and/or third
party insurances or reinsurances (other than Workers’ Compensation and Employers’ Liability) in
respect of:-

	 	(I)	 	All Property on the site of a nuclear power station.

Nuclear Reactors, reactor buildings and plant and equipment therein on any site other than a nuclear power station.

	 	(II)	 	All Property, on any site (including but not limited to the sites referred to in (I)
above) used or having been used for:-

	 	(a)	 	The generation of nuclear energy; or
	 
	 	(b)	 	The Production, Use or Storage of Nuclear Material.

	 	(III)	 	Any other Property eligible for insurance by the relevant local Nuclear Insurance Pool
and/or Association but only to the extent of the requirements of that local Pool and/or
Association.
	 
	 	(IV)	 	The supply of goods and services to any of the sites, described in (I) to (III) above,
unless such insurances or reinsurances shall exclude the perils of irradiation and contamination by
Nuclear Material.

Except as undernoted, Nuclear Energy Risks shall not include:-

	 	(i)	 	Any insurance or reinsurance in respect of the construction or erection or installation or
replacement or repair or maintenance or decommissioning of Property as described in (I) to (III)
above (including contractors’ plant and equipment);
	 
	 	(ii)	 	Any Machinery Breakdown or other Engineering insurance or reinsurance not coming within
the scope of (i) above;

Provided always that such insurance or reinsurance shall exclude the perils of irradiation and
contamination by Nuclear Material.

However, the above exemption shall not extend to:-

	 	(1)	 	The provision of any insurance or reinsurance whatsoever in respect of:-

	 	(a)	 	Nuclear Material;
	 
	 	(b)	 	Any Property in the High Radioactivity Zone or Area of any Nuclear Installation as from
the introduction of Nuclear Material or — for reactor installations — as from fuel loading or first
criticality where so agreed with the relevant local Nuclear Insurance Pool and/or Association.

	 	(2)	 	The provision of any insurance or reinsurance for the undernoted perils:-

	 	•	 	Fire, lightning, explosion;
	 
	 	•	 	Earthquake;
	 
	 	•	 	Aircraft and other aerial devices or articles dropped therefrom;
	 
	 	•	 	Irradiation and radioactive contamination;
	 
	 	•	 	Any other peril insured by the relevant local Nuclear Insurance Pool and/or Association;

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 34 of 40

 

	 	 	 	in respect of any other Property not specified in (1) above which directly involves the
Production, Use or Storage of Nuclear Material as from the introduction of Nuclear Material into
such Property.

Definitions:

“Nuclear Material” means:-

	 	(i)	 	Nuclear fuel, other than natural uranium and depleted uranium, capable of producing energy
by a self-sustaining chain process of nuclear fission outside a Nuclear Reactor, either alone or in
combination with some other material; and
	 
	 	(ii)	 	Radioactive Products or Waste.

“Radioactive Products or Waste” means any radioactive material produced in, or any material made
radioactive by exposure to the radiation incidental to the production or utilization of nuclear
fuel, but does not include radioisotopes which have reached the final stage of fabrication so as to
be usable for any scientific, medical, agricultural, commercial or industrial purpose.

“Nuclear Installation” means:-

	 	(i)	 	Any Nuclear Reactor;
	 
	 	(ii)	 	Any factory using nuclear fuel for the production of Nuclear Material, or any factory for
the processing of Nuclear Material, including any factory for the reprocessing of irradiated
nuclear fuel; and
	 
	 	(iii)	 	Any facility where Nuclear Material is stored, other than storage incidental to the
carriage of such material.

“Nuclear Reactor” means any structure containing nuclear fuel in such an arrangement that a
self-sustaining chain process of nuclear fission can occur therein without an additional source of
neutrons.

“Production, Use or Storage of Nuclear Material” means the production, manufacture, enrichment,
conditioning, processing, reprocessing, use, storage, handling and disposal of Nuclear Material.

“Property” shall mean all land, buildings, structures, plant, equipment, vehicles, contents
(including but not limited to liquids and gases) and all materials of whatever description whether
fixed or not.

“High Radioactivity Zone or Area” means:-

	 	(i)	 	For nuclear power stations and Nuclear Reactors, the vessel or structure which immediately
contains the core (including its supports and shrouding) and all the contents thereof, the fuel
elements, the control rods and the irradiated fuel store; and
	 
	 	(ii)	 	For non-reactor Nuclear Installations, any area where the level of radioactivity requires
the provision of a biological shield.

N.M.A. 1975(a)

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 35 of 40

 

Insolvency Funds Exclusion Clause

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

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 36 of 40

 

TERRORISM
EXCLUSION CLAUSE

This Contract does not apply to and specifically excludes terrorism-related losses as follows:

	A.	 	For risks located in the United States of America, its territories and possessions, and at the
premises of any United States mission:

	 	1.	 	In the event that the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism
Risk Insurance Extension Act of 2005 (“TRIA”) is extended, renewed, or succeeded without
interruption beyond 31 December 2007, and without revision or adaptation beyond 31 December 2007 to
the definitions set forth in subsections 102 (1)(A), (14), and (15) of TRIA, this Contract shall
not cover:

	 	a.	 	“Insured Losses” resulting directly or indirectly from a “Certified Act of Terrorism” under
the terms of TRIA, as it may be amended from time-to-time.
	 
	 	b.	 	Loss or damage, directly or indirectly, arising out of or in connection with nuclear,
chemical, biological, or radiological explosion, pollution, or contamination resulting from any
Other Act of Terrorism. Notwithstanding the foregoing, this Contract shall extend to cover insured
physical loss or damage, excluding all time-element coverages and extensions, incurred as a direct
and immediate consequence of an Other Act of Terrorism employing any non-nuclear weapon or device designed to disperse chemical, biological, or radiological
contaminants; however, no coverage shall be afforded for any ensuing chemical, biological, or
radiological contamination or pollution resulting from an Other Act of Terrorism employing such
weapon or device.

“Other Act of Terrorism” as used in this subparagraph A.1.b shall mean any violent act or act
that is dangerous to human life, property, or infrastructure; that results in physical loss or
damage; that is committed by an individual or individuals acting on behalf of any person or
interest as part of an effort to coerce the civilian population of the United States or to
influence the policy or affect the conduct of the United States government by coercion, which is
not a “Certified Act of Terrorism” under the terms of TRIA.

	 	2.	 	If TRIA is: (a) not extended, renewed, or succeeded without interruption beyond
31 December 2007, or (b) extended, renewed, or succeeded beyond 31 December 2007, but
with revision or adaptation to one or more of the definitions set forth in subsections
102 (1)(A), (14), and (15) of TRIA, then, in respect of any losses occurring after 31
December 2007, this contract shall not cover:

	 	a.	 	Losses resulting directly or indirectly from an Act of Terrorism.
	 
	 	b.	 	Loss or damage directly or indirectly arising out of or in connection with nuclear,
chemical, biological, or radiological explosion, pollution, or contamination resulting from any
Other Act of Terrorism. Notwithstanding the foregoing, this Contract shall extend to cover insured
physical loss or damage, excluding all time-element coverages and extensions, incurred as a direct
and immediate consequence of an Other Act of Terrorism employing any non-nuclear weapon or device
designed to disperse chemical, biological, or radiological contaminants; however, no coverage shall
be afforded for any ensuing chemical, biological, or

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 37 of 40

 

	 	 	 	radiological contamination or pollution resulting from employing such weapon or
device.

	 	 	 	“Act of Terrorism” as used in subparagraph A.2.a. shall mean any violent act or act that is
dangerous to human life, property, or infrastructure; that results in physical loss or damage
within the United States; and that is committed by an individual or individuals acting on behalf of
any foreign person or foreign interest as part of an effort to coerce or put in fear the civilian
population of the United States or to influence the policy or affect the conduct of the United
States government by coercion.
	 
	 	 	 	“Other Act of Terrorism” as used in subparagraph A.2.b above shall mean any violent act or act
that is dangerous to human life, property, or infrastructure that results in physical loss or
damage that is committed by an individual or individuals acting on behalf of any person or interest
as part of an effort to coerce the civilian population of the United States or to influence the
policy or affect the conduct of the United States government by coercion, which is not an “Act of
Terrorism.”

	B.	 	For risks located within the United Kingdom, this Contract shall not cover:

	 	1.	 	Loss, destruction, or damage in Great Britain (being England, Wales, and Scotland)
occasioned by or happening through or as a direct or indirect consequence of an Act of Terrorism.
	 
	 	2.	 	Loss, destruction, or damage in Northern Ireland within the meaning of the Northern Ireland
(Emergency Provisions) Act 1973 or successors thereof.

In the event of an occurrence giving rise to a loss or losses payable by the Company not being
certified by Her Majesty’s government or Her Majesty’s Treasury or any successor relevant Authority
to have been an Act of Terrorism and solely by reason thereof the Company is unable to recover such
loss or losses in whole or in part from Pool Reinsurance Company Limited, the Reinsurers accept
that this subparagraph B.1. above does not apply to such loss or losses.

For the purpose of this paragraph B:

“Act of Terrorism” means an act of persons acting on behalf of or in connection with any
organization that carries out activities directed towards the overthrowing or influencing by force
or violence of Her Majesty’s government in the United Kingdom.

This paragraph B shall not, however, apply to goods in transit or goods in temporary storage
while in transit.

Notwithstanding the foregoing, this paragraph B excludes loss or damage directly or indirectly
arising out of or in connection with nuclear, chemical, biological, or radiological explosion,
pollution, or contamination resulting from any Act of Terrorism. This Contract shall extend,
however, to cover insured physical loss or damage, excluding all time-element coverages and
extensions, incurred as a direct and immediate consequence of an Act of Terrorism employing any
non-nuclear weapon or device designed to disperse chemical, biological, or radiological
contaminants; but, no coverage shall be afforded for any ensuing chemical, biological, or
radiological contamination or pollution resulting from an Act of Terrorism employing such weapon or
device.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 38 of 40

 

	C.	 	For risks located in all other sovereignties not subject to paragraphs A or B above:
	 
	 	 	Loss or damage, directly or indirectly, caused by, contributed to by, resulting from, or
arising out of or in connection with any Act of Terrorism, as defined in this paragraph C,
regardless of any other cause or event contributing concurrently or in any other sequence to the
loss.
	 
	 	 	For the purpose of this paragraph C:
	 
	 	 	“Act of Terrorism” shall mean any violent act or act that is dangerous to human life,
property, or infrastructure that results in physical loss or damage that is committed by an
individual or individuals acting on behalf of any person or interest as part of an effort to coerce
the civilian population of any nation or to influence the policy or affect the conduct of the
government of any such sovereign nation by coercion.
	 
	 	 	Where an occurrence falling within the definition of Act of Terrorism in this paragraph C,
involving risks insured or reinsured in Consorcio, Gareat, Extremus, the Australian Terrorism Pool
(or any similar scheme formed during the term of this Contract) gives rise to a loss or losses
payable by the Company and such occurrence is not certified by the individual authority acting
respectively for Consorcio, Gareat, Extremus, the Australian Terrorism Pool (or any similar scheme
formed during the term of this Contract) having responsibility to make such judgment, or any
successor authority, as an Act of Terrorism, the Reinsurers accept that this exclusion does not
apply to such loss(es).
	 
	 	 	Notwithstanding the foregoing, this paragraph C excludes loss or damage, directly or
indirectly, arising out of or in connection with nuclear, chemical, biological, or radiological
explosion, pollution, or contamination resulting from any Act of Terrorism. This Contract shall
extend, however, to cover insured physical loss or damage, excluding all time-element coverages and
extensions, incurred as a direct and immediate consequence of an Act of Terrorism employing any
non-nuclear weapon or device designed to disperse chemical, biological, or radiological contaminants; but, no coverage shall be afforded for any ensuing
chemical, biological, or radiological contamination or pollution resulting from an Act of Terrorism
employing such weapon or device.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 39 of 40

 

Mold Exclusion

This Contract does not apply to loss or liability in any way or to any extent arising out of
the actual or alleged presence or actual, alleged or threatened presence of fungi including, but
not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial
contamination.” This includes:

	 	1)	 	Any supervision, instruction, recommendations, warnings, or advice given or which should
have been given in connection with the above; and
	 
	 	2)	 	Any obligation to share damages with or repay someone else that must pay damages because of
such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne
or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins,
microbial volatile organic compounds or spores, including, without limitation, Penicillium,
Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Notwithstanding the foregoing, this exclusion shall not apply to losses or liability arising out of
one or more of the following perils:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Property Catastrophe

Excess of Loss Contract —

Indiana Insurance Regional

Companies — $20m x $30m

Page 40 of 40

 

INTERESTS AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

S20,000,000 XS $30,000,000

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby mutually agreed by and between the Company of the one part and the Subscribing
Reinsurer of the other part, that the Subscribing Reinsurer shall have a 75% share in the
interests and liabilities of the Subscribing Reinsurer as set forth in the Contract attached
hereto.

This Agreement shall be effective for the period commencing 12:01 a.m., Local Standard Time,
January 1, 2008 and ending 12:01 a.m., Local Standard Time, January 1, 2009.

Property Catastrophe Excess Of Loss Reinsurance Contract — $20,000,000 xs $30,000,000

Effective: 01/01/200

Contract No. 2000252

Page 1 of 2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement and the attached Property
Catastrophe Excess of Loss Reinsurance Contract $20,000,000 xs $30,000,000 to be executed in
duplicate by their respective duly authorized officers;

In Keene,
New Hampshire, this
28th day of February, 2008, for and on behalf of:

	 	 	 

	PEERLESS INSURANCE COMPANY

	 	 
	 
	 	 
	/s/ Nancy C. Callender
 

Signature

	 	 
	 
	 	 
	Nancy C. Callender
 

Name

	 	 
	 
	 	 
	Agency Markets AVP — Manager-Reinsurance Management
 

Title

	 	 

And in
Boston, Massachusetts, this
21st day of March, 2008, for and on behalf of:

	 	 	 

	LIBERTY MUTUAL INSURANCE COMPANY

	 	 
	 
	 	 
	/s/ Elaine Caprio Brady
 

Signature

	 	   
	 
	 	 
	Elaine Caprio Brady
 

Name

	 	   
	 
	 	 
	Vice President
 

Title

	 	   

Property Catastrophe Excess Of Loss Reinsurance Contract — $20,000,000 xs $30,000,000

Effective: 01/01/200

Contract No. 2000252

Page 2 of 2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00176-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00176-of-00352.parquet"}]]