Document:

exv4w48

 

Exhibit 4.48

Execution Version

Guarantee Request and Reimbursement Agreement

between

Converium AG, Zurich, Switzerland

(hereinafter referred to as the “Borrower”)

and

Bayerische Hypo- und Vereinsbank Aktiengesellschaft, Munich, Germany

(hereinafter referred to as “Bank”)

Whereas:

	A.	 	The Bank is prepared to provide financing to the Borrower by issuing guarantees,
standby letters of credit and sureties “on first demand” in accordance with the terms of
this Agreement.
	 
	B.	 	The total aggregate amount of all guarantees to be issued by the Bank under this
Agreement shall not exceed USD 250,000,000 (in words: US dollars two-hundred and
fifty million) or its equivalent at any time.

Now therefore, the Borrower and the Bank agree as follows:

	1.	 	Definitions

	 	 	In this Agreement the following terms shall have the following meaning:
	 
	 	 	“Agreement” means this Guarantee Request and Reimbursement Agreement.
	 
	 	 	“Availability Expiry Date” has the meaning given to such term in clause 2.3.
	 
	 	 	“Business Day” means a day on which banks are open for business in Munich,
London and New York.
	 
	 	 	“Cash Cover Threshold” has the meaning given to such term in clause 10. (f).
	 
	 	 	“Cash Equivalent Collateral” means instruments, denominated in USD, EURO, CHF,
GBP or YEN, that are short-term obligations of, or unconditionally guaranteed by, a
government (or agency of such government having an equivalent rating) of an OECD
country and are readily tradeable and rated AAA by Moody’s or S&P and qualifying

 

 

	 	 	as zero risk weighted assets under applicable liquidity
principles, provided that the
same provides for payment of both principal and interest (and not principal alone or
interest alone), is not subject to any contingency regarding the payment of principal or
interest and is not convertible or exchangeable to any other security.
	 
	 	 	“Change of Control Event” means the Borrower becomes the subsidiary of another
company (other than Converium Holding AG or its current subsidiaries) or one or
more person(s) acting either individually or in concert obtain(s) control of Converium
Holding AG (meaning that such person(s) are able to direct the affairs and/or control
the composition of Converium Holding AG’s board of directors or equivalent body);
provided that no such event shall constitute an Event of Default hereunder if the Bank
has notified the Borrower that such event shall not constitute an Event of Default
hereunder; and provided further that no such event shall constitute an Event of
Default hereunder until the date which falls one month after the occurrence of such
event.
	 
	 	 	“Consolidated Tangible Net Worth” means at any time Converium Holding AG’s
Total equity as determined from the line item so described under the heading
Liabilities and equity in the consolidated financial statements of Converium Holding
AG most recently delivered under clause 10 (c) and (d) of this Agreement, minus
goodwill.
	 
	 	 	“Consolidated Total Borrowings” means, at any time Converium Holding AG’s Total
debt as determined from the line item so described under the heading Liabilities and
equity in the consolidated financial statements of Converium Holding AG most
recently delivered under clause 10 (c) and (d) of this Agreement.
	 
	 	 	“Default Interest Rate” has the meaning given to such term in clause 6.3.
	 
	 	 	“Event of Default” means any of the events set out in clause 11.
	 
	 	 	“Evergreen Guarantee” means a guarantee which includes a provision which
automatically extends the expiry date thereof for a specified period unless, within
some period of time in advance of the then applicable expiry date thereof, the Bank
gives notice to the beneficiary to the effect that such guarantee will not be so
extended.
	 
	 	 	“Federal Funds Rate” means, in relation to any day, the rate per annum equal to:

	 	(a)	 	the weighted average of the rates on overnight Federal funds transactions with
members of the US Federal Reserve System arranged by Federal funds
brokers, as published for that day (or, if that day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New
York; or
	 
	 	(b)	 	if a rate is not so published for any day which is a Business Day, the average
of the quotations for that day on such transactions received by the Bank from
three (3) Federal funds brokers of recognised standing selected by the Bank.

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	 	 	“Guarantee Request” shall mean a request of the Borrower to the Bank substantially in
form of Annex 1 hereto to issue a guarantee.
	 
	 	 	“NAIC” means the National Association of Insurance Commissioners (or any
successor person which assumes all or any part of its function).
	 
	 	 	“Non-Extension Date” means, with respect to any Evergreen Guarantee, the date set
in the guarantee by which the Bank must give notice to the beneficiary thereof of the
non-renewal of such Evergreen Guarantee in order to avoid the automatic extension of
the expiry date thereof.
	 
	 	 	“Rating” means the Standard & Poors (S&P) financial strength rating of the Borrower.

	2.	 	Guarantee Facility, Purpose

	2.1	 	Subject to the terms and conditions of this Agreement and to the extent permitted by
applicable laws, regulations and internal compliance policies, the Bank is prepared to
issue on behalf of the Borrower guarantees or standby letters of credit and sureties “on
first demand” (hereinafter all designated as “guarantees”, unless individually
specified) in favour of third parties (“Beneficiaries”) denominated in USD, EURO,
CHF, GBP or YEN (or any other freely convertible currency if agreed between the
parties) up to a total aggregate principal amount of USD 250,000,000 (in words: US
dollars two-hundred and fifty million) or, with regard to guarantees issued in other
currencies than USD, its equivalent, at any time. If, at any time, the aggregate
outstanding amount of guarantees issued under this Agreement exceeds such amount,
then the Borrower shall upon demand of the Bank immediately provide full cash
cover for the excess amount or shall achieve reduction of the Bank’s obligations
accordingly.
	 
	 	 	Each guarantee will be issued by the Bank pursuant to a Guarantee Request of the
Borrower which shall be substantially in the form of Annex 1 hereto.
	 
	2.2	 	This Guarantee Facility shall be used for the Borrower’s general corporate purposes
and the purpose of issuing letters of credit in order to collateralise third party claims
related to the global reinsurance underwriting business of the Borrower and its
subsidiary Converium Rückversicherung (Deutschland) AG.
	 
	 	 	The Bank shall not be obliged to concern itself with the purpose for which a guarantee
will be issued.
	 
	2.3	 	This Guarantee Facility is made available by the Bank until the date falling 364 days
after the day of signing hereof (the “Availability Expiry Date”). No guarantee will be
issued by the Bank after such date but the Agreement shall otherwise remain in full
force and effect until expiration of all outstanding guarantees. Each guarantee issued
hereunder shall be limited by an expiry date falling no later than 364 days after the
date of the issuance of the guarantee.

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	3.	 	Issuance of Guarantees

	3.1	 	A guarantee, subject to Sections 4 and 5 below and the other provisions and
requirements of this Agreement, will only be issued by the Bank in response to a
written request by the Borrower in the form of the Guarantee Request, which must be
duly signed by the Borrower. The proposed date of issuance of the guarantee must be
a Business Day within the term of this agreement and the Guarantee Request must be
delivered at least two Business Days prior to the proposed date of issuance. The
Borrower may also request the issuance of retroactive guarantees in accordance with
law and industry practice. The Bank will issue the requested guarantee in the preagreed
form annexed as Annex 2 hereto. Guarantee texts that are not in in accordance
with this pre-agreed form are subject to approval of the Bank, as are beneficiaries
which do not have their seat in either (i) an OECD member country or (ii) a country
listed in Annex 3 hereto. The individual beneficiary and the chosen governing law
(except for the choice of the laws of the countries listed in
Annex 4 hereto which are
pre-approved subject only to changes in circumstances in the future of which we will
inform you without undue delay) are subject to these not violating laws, regulations or
internal compliance policies.
	 
	3.2	 	In compliance with the instructions of the Borrower in the Guarantee Request, the
Bank issues guarantees itself (“direct guarantee”) or instructs another bank (“Second
Bank”) (which shall be a NAIC approved bank if so requested by the Borrower) under
its counterliability (“counter-guarantee”) to issue or confirm the guarantee (“indirect
guarantee”). If the Bank does not receive instructions from the Borrower, it may issue
an indirect guarantee, provided this is deemed necessary under the circumstances in
the interest of the Borrower.
	 
	3.3	 	A Guarantee Request may also be made by the Borrower by facsimile transmission, in
which event the Bank shall have no liability for, and the Borrower accepts the full risk
of, any error in transmission, lack of due authorisation by the Borrower, non receipt or
otherwise. Such Guarantee Request shall be confirmed as soon as reasonably
practicable by letter but so that the Bank shall be entitled to rely on such facsimile
transmission and to act in accordance with the same notwithstanding the non receipt
of any such confirmation or any discrepancy between the facsimile transmission and
the confirming letter.
	 
	3.4	 	A guarantee shall have a face amount of at least the then current equivalent of USD
100,000 and in any case less than the then current equivalent of EURO 150,000,000.
A maximum of 100 guarantees may be outstanding at any time.
	 
	3.5	 	Evergreen-Guarantees:
	 
	 	 	If as of the date twenty (20) days prior to the Non-Extension Date of any Evergreen
Guarantee the Bank has not have received a written direction from the Borrower to
not cause or permit such extension, the Bank shall nonetheless be permitted (but shall
not be obligated) to allow such guarantee to automatically extend for up to 364 days
and the Borrower hereby authorizes such extension. Notwithstanding the foregoing, if
as a consequence of the automatic extension of any Evergreen Guarantee the expiry
date thereof would be a date later than the date falling 364 days after the Availability
Expiry Date, then on or prior to the Non-Extension Date with respect to such

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	 	 	Evergreen Guarantee the Bank shall give such notice as is necessary to prevent such
automatic extension. In addition, upon the direction of the Borrower for any
Evergreen Guarantee, the Bank shall give such notice as is necessary to prevent an
automatic extension of the expiry date of such Evergreen Guarantee;
provided,
however, that in no event shall the Bank have liability to the Borrower for its failure
to give such notice if written direction to give such notice is received by the Bank less
than twenty (20) days prior to the Non-Extension Date for such Evergreen Guarantee.

	4.	 	Conditions Precedent

	4.1	 	A guarantee will be issued by the Bank subject to the condition precedent that the
Bank has received all of the following in form and substance satisfactory to it:

	 	(a)	 	certified copy of the Articles of Incorporation of the Borrower;
	 
	 	(b)	 	up-to-date certified extract of the Commercial Register of the Borrower of
latest date evidencing that the signatories for the Borrower under this
agreement are authorised to enter into this Agreement in the name of the
Borrower;
	 
	 	(c)	 	original or certified copy of the resolution of the “Verwaltungsrat” of the
Borrower authorising the execution and performance of this Agreement;
	 
	 	(d)	 	inhouse legal opinion of the Borrower in form and substance satisfactory to
the Bank confirming that this Agreement has been validly entered into by the
Borrower which has full power, capacity and authority to do so;
	 
	 	(e)	 	copies of the audited financial statements of the Borrower and the audited
consolidated financial statements of Converium Holding AG, for their fiscal
year 2005 and and the preliminary financial statements of each of the
Borrower and Converium Holding AG for their fiscal year 2006 (to the extent
available); and
	 
	 	(f)	 	specimen signatures of such agents of the Borrower as shall be authorised to
sign this Agreement, a Guarantee Request and any notices required to be given
by the Borrower pursuant to the provisions of this Guarantee Agreement.

	4.2	 	Any obligation of the Bank to issue guarantees hereunder is subject to the further
conditions precedent that as of the request date and the requested issuance date of the
guarantee:

	 	(a)	 	the representations and warranties set out in Section 9 are correct in all
material respects;
	 
	 	(b)	 	no Event of Default (or any event which with the giving of notice or lapse of
time might constitute an Event of Default) is continuing or would result from
the proposed issuance; and

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	 	(c)	 	if the Rating of the Borrower is less than the applicable Cash Cover Threshold
or the Borrower ceases to have a Rating: the Borrower has (in addition to
fulfilling its obligations to collateralise already outstanding guarantees
pursuant to clause 10 (f) below) provided cash collateral or Cash Equivalent
Collateral in accordance with the requirements of clause 10 (f) below in
respect of all guarantees which it requests to be issued.

	5.	 	Conditions Governing Guarantees and Reimbursement Claims

	5.1	 	A Guarantee Request of the Borrower and the Borrower’s obligation to reimburse and
indemnify the Bank shall be subject to the following:

	 	(a)	 	Guarantee account entries and remuneration/guarantee commission

	 	 	Upon delivery, respectively, dispatch of the guarantee or the request to issue or
confirm the guarantee the Bank is entitled to debit the Borrower’s guarantee account
with the amount of the guarantee, with any fees owed in accordance with this
Agreement or otherwise agreed between the parties and, for the duration of the Bank’s
undertaking, the periodic guarantee commission owed in accordance with this
Agreement.

	 	(b)	 	Examination of documents

	 	 	The Bank will examine with reasonable care, whether any demands for payment,
statements and other documents to be presented under a guarantee appear on their face
to be conform with the terms of the guarantee and consistent with each other. If
documents are sent by means of authenticated teletransmission (e.g. tested telex or
SWIFT), the Bank may treat them as originals.

	 	(c)	 	Reimbursement

	 	 	The Borrower will reimburse the Bank for all required disbursements and
expenditures (which in particular includes the immediate reimbursement of payments
made by the Bank under the terms of any guarantee and which for indirect guarantees
also include all commission, all reasonable expenses and costs charged to the Bank by
the Second Bank issuing the guarantee) resulting from the execution and performance
of a Guarantee Request, including those resulting from judicial and extrajudicial
proceedings and the enforcement or preservation of the Bank’s rights in Germany or
abroad and further including all reasonable expenses and costs (legal and otherwise)
incurred by the Bank in connection with the enforcement, preservation or assessment
of its rights under guarantees which are subject to a law other than German law and/or
a place of jurisdiction outside of Germany. This obligation to reimburse also covers
disbursements and expenditures incurred after the debit entry of the guarantee amount
in the Borrower’s guarantee account has been reversed, in particular to the extent that
the obligation to pay under the guarantee is still in effect, or a judical decision for
payment exists, which is enforceable in the country where it was passed.

	 	(d)	 	Notification of Borrower

	 	 	The Bank will, without undue delay (unverzüglich), notify the Borrower upon
receiving a demand for payment under any guarantee complying with the terms of
such guarantee.
	 
	 	 	The Bank will provide the Borrower at its request with the originals of the documents
received by the Bank and complying with the terms of the guarantee, which are

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	 	 	relevant for the Borrower, provided the Bank no longer needs them to safeguard its
rights or to perform its obligations.

	 	(e)	 	Payment under any Guarantee

	 	 	The Bank will effect payment in accordance with the terms of the guarantee when it
has received from the beneficiary/the Second Bank a demand for payment complying
with the terms of the guarantee/counter-guarantee prior to the expiry of the
guarantee/counter-guarantee. With respect to such demand for payment under
guarantees, standby letters of credit and sureties “on first demand” the Bank can only
take into consideration the defence of legal abuse (“Rechtsmißbrauch”), if the
Borrower has put forward such defence to the Bank without delay in writing
documented by conclusive evidence (“liquide Beweismittel”), or if it is obviously
manifest that the preconditions of such defence have occurred, and in each case only
to the extent permissible under the terms of the guarantee and the law applicable
thereto.
	 
	 	 	In the case of other sureties, the Bank will consider all permissible objections of
defences, which have been made credible to the Bank in writing within a reasonable
period so that they may be forwarded to the Beneficiary.
	 
	 	 	The Borrower may send written statements to the Bank by fax, provided the original
letter is sent immediately thereafter.

	 	(f)	 	Cancellation (“Ausbuchung”) of entries in the guarantee account

	 	 	Upon expiry of direct guarantees, which are not explicitly subject to foreign (i.e. non-
German) law, the Bank will reverse the debit entries for these guarantees in the
Borrower’s guarantee account and cease to charge guarantee commission, provided
these guarantees expire, according to their terms, beyond doubt on a certain calendar
date, or upon presentation of documents specified in the guarantee for the purpose of
determining the expiry, and provided further that no demand for payment has been
received by the Bank before the expiry of such guarantee.
	 
	 	 	With respect to all other direct guarantees, respectively, indirect guarantees the Bank
will reverse the debit entries in the Borrower’s guarantee account and cease to charge
guarantee commission, when the Beneficiary has either returned the original
guarantee document to the Bank for cancellation, or released the Bank without reserve
from its liability, respectively, when the Second Bank has released the Bank without
reserve from its liability.
	 
	 	 	In case of a surety provided for a security in legal proceedings, unless the Beneficiary
has returned the original guarantee document to the Bank for cancellation, evidence
must be submitted to the Bank either regarding the Beneficiary’s consent to the Bank’s
discharge from its liability, or of a final court order according to Section 109
subsection 2 of the German Code of Civil Procedure.
	 
	 	 	It is incumbent on the Borrower to provide for the relevant requirements for the
reversal of the debit entry of the guarantee amount in the Borrower’s guarantee
account.

	 	(g)	 	Reduction

	 	 	In case of reductions of a direct guarantee, the Bank will reverse the corresponding
partial amount of the debit entry in the Borrower’s guarantee account and will take
this into account when calculating the guarantee commission, provided either that the
terms of the reduction clause in the guarantee have been complied with beyond doubt,
or that the Bank has been partially released without reserve from its liability by the

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Beneficiary. With respect to indirect guarantees, this provision applies accordingly to the
extent the Bank has been partially released without reserve from its liability by the Second Bank.
In the event of a demand for partial payment, the guarantee amount will be reduced by the amount
paid by the Bank.

	 	(h)	 	Uniform rules for demand guarantees

If a guarantee/counter-guarantee is, in accordance with the Borrower’s instructions, subject to the
»Uniform Rules for Demand Guarantees« of the International Chamber of Commerce, Paris (ICC
publication No. 458), these rules will apply additionally insofar as they are not inconsistent with
the provisions of this Section 5.1.

 Except as otherwise expressly stated in such
guarantee/counter-guarantee, the Bank is entitled, if it has received a complying demand for extension or payment (»extend or
pay«), to effect payment five calendar days after notification thereof to the Borrower,
unless prior thereto the Bank has received instruction from the Borrower to extend the
validity of the guarantee, and the Bank has accepted such instruction.

	 	(h)	 	Standby letters of credit

Unless otherwise agreed, the Bank issues standby letters of credit subject to the
»Uniform Customs and Practice for Documentary Credits« of the International
Chamber of Commerce, Paris, which apply additionally insofar as they are not
inconsistent with these guarantee conditions.

	5.2	 	The Borrower also acknowledges the following important risk information:

The issuing of guarantees, standby letters of credit and sureties “on first demand”,
hereinafter all designated as “guarantee(s)”, unless individually specified) entails
special risks for the Borrower. The Bank is obliged to effect payment without delay
on receipt of a demand for payment complying with the terms of the guarantee. After
payment has been effected by the Bank, the Borrower can put forward any defences or
objections arising from the contract underlying the guarantee (for example due to
faulty or incorrect delivery, warranty claims) only directly against the Beneficiary.
The Borrower therefore bears the risk of having to assert its restitution claims against
the Beneficiary in recovery proceedings (risk of litigation) and having to realize them
(enforcement/insolvency risk).

On receipt of a demand for payment, the Bank can only take into consideration the
defence of abuse of rights (“Rechtsmißbrauch”), if the Borrower has put forward such
defence to the Bank and — in the case of indirect guarantees — also to the Second Bank
without delay in writing documented by conclusive evidence (“liquide Beweismittel”),
or if it is obviously manifest that the preconditions of such defence have occurred and
in each case only to the extent permissible under the terms of the guarantee and the
law applicable thereto.

According to case law, the obligation to provide a guarantee “on first demand”
included in the contract underlying the guarantee may be invalid, if it was agreed in
general business conditions and not in a separate individual agreement between the
contracting parties. The validity of such a contractual obligation to provide a
guarantee “on first demand” cannot be determined by the Bank; instead, it is up to the
Borrower to examine this aspect and to obtain professional legal advice, if necessary.

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	6.	 	Reimbursement, Interest
	 
	6.1	 	All amounts (other than the fees and guarantee commission as to which Section 12
shall apply) payable by the Borrower as a result of the execution and performance of a
Guarantee Request (including as a result of any payments made by the Bank to a
beneficiary under a guarantee) shall become due three Business Days after the
Borrower has received from the Bank a payment notice with respect to such amounts.
	 
	6.2	 	All amounts paid by the Bank and remaining unpaid by the Borrower shall bear
interest, payable on demand, for each day until paid at a rate per annum equal to (i)
the sum of the Federal Funds Rate for such day plus 0.50% per annum if such day
falls on or before the date the reimbursement or other payment obligation of the
Borrower is due and (ii) the Default Interest Rate (as defined below) if such day falls
after such due date. Such interest shall accrue from and including the date of the
Bank’s payment to and including the date of payment.
	 
	6.3	 	In the event of a default by the Borrower in the payment of any amount due (except
interest), the Borrower shall pay interest thereon from the date of the default to the
date of actual payment (after as well as before judgement) accruing on a daily basis at
an interest rate (the “Default Interest Rate”) of 2 % p.a. above the Federal Funds Rate
(or in the case of default in payments due in any other currency than USD, the
relevant overnight interest rate quoted to the Bank in the London Interbank Market at
or about 11 a.m. London time) for amounts corresponding to the amount in default,
such rate to be determined day by day by the Bank conclusively and binding upon the
Borrower.
	 
	6.4	 	If the Borrower fails to pay any amount of interest, the
Borrower shall pay to the Bank liquidated damages for all amounts of interest overdue calculated at the same rate and
for the same period as stipulated in clauses 6.2 and 6.3 above. The Borrower shall be
free to prove that no damage has arisen, or the damage has not arisen in the asserted
amount. The right of the Bank to claim further damages shall remain unaffected.
	 
	6.5	 	Without prejudice to the foregoing the Borrower shall indemnify the Bank against any
expenses or losses which the Bank may sustain or incur as a consequence of the
default by the Borrower in payment of any principal amount or interest thereon or any
other amount payable hereunder (including all costs incurred by the Bank in respect to
the preservation or enforcement of its rights hereunder) except to the extent caused by
the gross negligence or willful misconduct of the Bank.
	 
	 
	7.	 	Payments, Currency
	 
	7.1	 	All payments to be made by the Borrower hereunder on account of principal, interest
or otherwise shall be made to the credit of an account opened in the name of the
Borrower with the Bank, without set off or any counterclaim and free and clear of and
exempt from, and without deduction from or on account of, any present or future
taxes, levies, imposts, duties, deductions, withholdings, or other charges of whatever
nature, imposed, levied, selected, withheld or assessed by or within Germany,
Switzerland or any other jurisdiction. If the Borrower is compelled by any applicable
law or treaty to deduct any such taxes or make any such other deductions, the

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Borrower shall pay such additional amounts as may be necessary in order that the
payments after such deductions shall equal the amount which would have been
required to be paid hereunder in the absence of all such deductions.

	7.2	 	Any payments falling due on a day which is not a Business Day shall be made on the
next Business Day and any interest shall accrue and be payable up to that day.
	 
	7.3	 	Payments insufficient to cover due payment obligations under this Agreement will be
applied in the following order:

	 	•	 	any amounts due which are not interest and principal;
	 
	 	•	 	interest; and
	 
	 	•	 	principal.

	7.4	 	Where the Bank has been requested to issue a guarantee in a currency other than USD,
the Bank shall on the day on which the guarantee is issued determine the USD
equivalent thereof at the Bank’s spot rate of exchange and shall debit the Borrower’s
guarantee account accordingly. Where a beneficiary has demanded payment under a
guarantee in a currency other than USD, the Bank shall, as of the date on which it
effects payment, determine the USD equivalent of its payment at its spot rate of
exchange and the reimbursement obligation of the Borrower shall be owed in USD
acccordingly. Any other currency conversions (e.g. in determining the available
facility amount from time time) shall also be calculated by the Bank at its spot rate of
exchange on the relevant date.
	 
	 
	8.	 	Increased Costs

If any applicable treaty, law or regulation or any change, therein or in the
interpretation thereof shall subject the Bank to any tax or other charge, which affects
the cost to the Bank of making or maintaining the Facility or shall change the basis of
taxation of payments to the Bank (except for changes in the rate of tax on the overall
net income of the Bank) or shall impose, modify or deem applicable any reserve or
deposit requirement against assets held by, or deposits with or for the account of, or
advances or facilities by the Bank or there shall occur any other condition or event in
the relevant Interbank Market or otherwise with respect to this Agreement or the
Facility, and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining the Facility or to reduce the amount of principal, interest or
other payments, received or receivable by the Bank hereunder, then the Borrower
shall pay to the Bank on demand all additional amounts which will indemnify the
Bank for such increased cost or reduction applicable to succeeding renewals. In the
event that there shall occur any such event, the Bank shall promptly notify the
Borrower in writing of such event and its nature, and shall specify to the Borrower the
increased costs.

For the avoidance of doubt, any increased cost incurred by the Bank resulting from
the discussion paper produced by the Basle Committee on Banking Supervision in
January 2001, or any subsequent paper or accord produced by the Basle Committee
on Banking Supervision, or the corresponding EU directive, will be recoverable by
the Bank under this Section 8, to the extent such increased cost results from
compliance with any modification of or accord, directive, guideline, recommendation,

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transitions rule relating thereto, or any implementation thereof or of the EU directive,
made after the date of this Agreement.

	9. 	 	Representations and Warranties

In consideration of the Bank entering into this Agreement and making and
maintaining the Facility provided for hereunder, the Borrower represents and warrants
to the Bank that:

	 	(a)	 	the Borrower is a stock corporation duly organised, validly existing and in
good standing order under the laws of Switzerland;
	 
	 	(b)	 	the Borrower has the authority to enter into and perform this Agreement to
make Guarantee Requests hereunder and to perform its obligations under this
Agreement and in this regards all necessary decisions and resolutions of the
Borrower and its shareholders have been taken;
	 
	 	(c)	 	this Agreement constitutes the legal and binding obligations of the Borrower
enforceable in accordance with its respective terms;
	 
	 	(d)	 	the choice of laws of the Federal Republic of Germany constitutes a valid
choice of laws under the laws of Switzerland and a judgement of a German
court would be enforceable in Switzerland;
	 
	 	(e)	 	the entry into and the execution and performance of this Agreement does not
conflict with the constitutional documents of the Borrower and does not
violate any law, directive, order, decree, arbitral award, judgement or any
agreement to which the Borrower is a party;
	 
	 	(f)	 	the payment obligations of the Borrower under this Agreement rank and will
rank at least pari passu with all other unsecured obligations of the Borrower;
	 
	 	(g)	 	no event has occurred which constitutes or will constitute a default under or in
respect of this or any other agreement, undertaking, or instrument to which the
Borrower is a party;
	 
	 	(h)	 	there has been no material adverse change in the Borrower’s financial position
since the date of the latest audited or unaudited financial statements;
	 
	 	(i)	 	all necessary approvals, consents or authorisations, filings or registrations
required or advisable in connection with the entry into, performance, validity
and enforceability of this Agreement and the transactions contemplated hereby
have been obtained and are in full force and effect;
	 
	 	(j)	 	the financial information delivered by the Borrower is complete and correct
and convey a complete and correct picture of the financial position of the
Borrower as at that date. The financial statements were prepared in accordance
with all applicable accounting and auditing principles, and these principles
were applied in the same form and manner as in previous years, unless
otherwise stated in the financial statements; and

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	 	(k)	 	that, for purposes of Section 8 of the German money laundering act
(Geldwäschegesetz), it transacts the business contemplated in this Agreement
for its own account.

	10.	 	Undertakings

The Borrower undertakes towards the Bank from the date of execution and delivery of
this Agreement and so long as any amount payable hereunder is outstanding:

Information:

	 	(a)	 	to promptly inform the Bank of the occurrence of any event which is or may
become an Event of Default (whether with the giving of notice passing of time
or the making of any determination) and of all material events, which might
negatively affect the ability of the Borrower to fulfil its obligations under or in
connection with this Agreement;
	 
	 	(b)	 	to promptly inform the Bank (i) of any change in its Rating and (ii) of any
change in its fiscal year;
	 
	 	(c)	 	to furnish to the Bank as soon as available, but not later than 6 months after
the close of each financial year of the Borrower and Converium Holding AG
respectively, the audited financial statements of the Borrower and Converium
Holding AG respectively, prepared in accordance with generally accepted
accounting principles consistently applied;
	 
	 	(d)	 	to furnish to the Bank as soon as available, but not later than 60 days after the
end of a financial quarter, the quarterly financial statements of Converium
Holding AG;
	 
	 	(e)	 	upon request, to provide to the Bank such additional financial or other
information or documentation as the Bank may from time to time reasonably
request (including but not limited to information required by regulatory
provisions such as sections 13 and 18 of the German Banking Act and
documents or evidence required by applicable “know your customer” checks);

 Other:

	 	(f)	 	cash collateralisation: if at any time and as long as the Rating of the Borrower
is less than BBB+ (the “Cash Cover Threshold”, until the Rating increases to
A- from which point onwards the Rating of A- shall be the “Cash Cover
Threshold”) or the Borrower ceases to have a Rating, the Borrower shall
within five Business Days of the relevant change in the Rating provide cash
collateral (on a blocked, pledged account held with the Bank) in the currencies
in which each relevant outstanding guarantee is denominated in an amount
equal to 110% of the amounts for which the Bank is under a payment
obligation under each outstanding guarantee.

12

 

	 	 	 	Instead of cash collateral, the borrower may provide Cash Equivalent
Collateral in the currencies in which each relevant outstanding guarantee is
denominated, the aggregate fair market value of which must equal 110% of the
amounts for which the Bank is under a payment obligation under each
outstanding guarantee.
	 
	 	 	 	So long as the Borrower remains under the obligation to provide or uphold
such collateralisation (by way of cash collateral or Cash Equivalent Collateral)
it shall ensure that such collateralisation at all times equals the levels set out
above. Any such cash or Cash Equivalent Collateral shall be released as soon
as reasonably practicable once the Borrower’s Rating is equal to or above the
applicable Cash Cover Threshold. For the avoidance of doubt, the benefits (i.e.
interest) arising from the cash or Cash Equivalent Collateral shall itself also
serve as collateral but shall otherwise ultimately accrue for the account of the
Borrower.

	11.	 	Events of Default

Upon the occurrence of any of the following events:

	 	(a)	 	failure by the Borrower to pay when due any amount payable as a result from
the execution and performance of a Guarantee Request or any other amount
payable under or in connection with this Agreement, when the same becomes
due (unless caused by administrative or technical error and paid within 5
Business Days of its due date); or
	 
	 	(b)	 	failure by the Borrower to fulfill any obligation under this Agreement to
provide cash collateral or Cash Equivalent Collateral, as and when the same
becomes due; or
	 
	 	(c)	 	any representation or warranty made by the Borrower in or in connection with
this Agreement or any certificate or statement delivered proves to be incorrect
or untrue in any material respect at the time such representation or warranty
was made, or (as the case may be) any certificate or statement was dated; or
	 
	 	(d)	 	failure by the Borrower to fulfil (i) any undertaking or other obligation or
provision under this Agreement (except for the non-payment Event of Default
described above in item (a) and the collateralisation Event of Default described
above in item (b)) and this failure, if capable of remedy, is not remedied within
ten days of the earlier of the Bank giving notice to the Borrower or the
Borrower becoming otherwise aware of its failure to comply or (ii) any
payment obligation not related to this Agreement when such payment
obligation becomes due provided it exceeds the amount or equivalent of USD
100,000,000; or
	 
	 	(e)	 	filing of any involuntary petition against the Borrower in bankruptcy or any
involuntary petition seeking reorganisation, an arrangement, readjustment of
the Borrower’s debts or of any other relief under any insolvency act or law,
now or hereafter existing, or the involuntary appointment of an insolvency

13

 

	 	 	 	administrator, a receiver or trustee of the Borrower for all or a substantial part
of its property or the issuance of a warrant or attachment against any
substantial part of the property of the Borrower; or overindebtedness (asset
value less than liabilities), inability to pay its debts when due or any other
applicable insolvency event occurs or any insolvency filing is made with
respect to such events; or
	 
	 	(f)	 	deterioration of the financial status of the Borrower or the occurrence of an
extraordinary situation or a material adverse change in the business, assets or
financial or other condition of the Borrower, which give reasonable grounds to
conclude that such situation, change or circumstances will imperil, delay or
preclude the purpose and performance of this Agreement; or
	 
	 	(g)	 	the Consolidated Total Borrowings of Converium Holding AG at any time
exceed 35 per cent. of Converium Holding AG’s Consolidated Tangible Net
Worth; or Converium Holding AG’s Consolidated Tangible Net Worth no
longer exceeds USD 1,237,500,000 at any time; or
	 
	 	(h)	 	the rights or remedies of the Bank under this Agreement or the effectiveness or
ranking of any security granted or purporting to be granted in connection with
this Agreement are no longer in full force and effect; or
	 
	 	(i)	 	it is or becomes unlawful for the Borrower to perform any of its obligations
under this Agreement; any obligation of the Borrower under this Agreement
(or any security granted in respect thereof) is not or cease to be legal, valid,
binding or enforceable and the cessation individually or cumulatively
materially and adversely affects the interests of the Bank under this
Agreement; or the Borrower rescinds or purports to rescind or repudiates or
purports to repudiate this Agreement (or any security granted in respect
thereof); or
	 
	 	(j)	 	a Change of Control Event occurs;

then, and in any such event, the Bank’s obligation to make or maintain this Facility
shall, upon notice to the Borrower thereof, immediately terminate and the Borrower
shall provide full cash collateral in matching currencies on a blocked, pledged account
held with the Bank (excluding for the avoidance of doubt any Cash Equivalent
Collateral or other non-cash collateral unless the Bank expressly agrees thereto) for
any guarantee issued by the Bank except to the extent the Bank is immediately and
permanently released from its obligations thereunder by the beneficiary.

The Borrower shall indemnify the Bank against the actual loss or expenses, as
conclusively certified to it by the Bank, which the Bank may incur as a consequence
of an Event of Default.

14

 

	12.	 	Fees, Costs and Expenses
	 
	12.1	 	The Borrower shall pay to the Bank an up-front fee of 0.20% calculated on the
aggregate principal amount of the Facility which shall be payable within seven days
of the date of signing of this Agreement.
	 
	12.2	 	As long as the payment undertaking of the Bank under a guarantee remains in force
(and including guarantees which have been collateralised and including with respect
to periods subject to retroactive effectiveness of any guarantee), the Borrower shall
pay to the Bank upon first demand a guarantee commission at the rate of 0.70% p.a.
on the amount outstanding under such guarantee, which, in case of and for the
duration of an upgrading of the Rating of the Borrower to at least A-, will be reduced
to 0.50% p.a., beginning with the next full month falling after such upgrading of the
Rating. The guarantee commission shall be payable by the Borrower on a monthly
basis for the number of days elapsed on the last Business Day of each month.
	 
	12.3	 	The Borrower shall reimburse the Bank for all costs and expenses incurred by the
Bank in connection with the performance and enforcement of this Agreement and the
preservation of its rights hereunder, including (but not limited to) value added taxes
and the reasonable fees and expenses of legal advisors of the Bank, except to the
extent caused by the gross negligence or willful misconduct of the Bank.
	 
	12.4	 	If the Bank receives an amount in respect of the Borrower’s liability under this
Agreement or if that liability is converted into a claim, proof, judgement or order in a
currency other than the currency (the “Contractual Currencies”) in which the amount
is expressed or permitted to be payable under this Agreement:

	 	(a)	 	the Borrower shall indemnify the Bank as an independent obligation against
any loss or liability arising out of or as a result of the conversion;
	 
	 	(b)	 	if the amount received by the Bank, when converted into the Contractual
Currency at the exchange rate determined by the Bank, is less than the amount
owed in the Contractual Currency, the borrower shall forthwith on demand pay
to the Bank an amount in the contractual currency equal to the deficit; and
	 
	 	(c)	 	the Borrower shall pay to the Bank on demand any taxes and
reasonable exchange costs payable in connection with any such conversion.

	12.5	 	The Borrower waives any right it may have in any jurisdiction to pay any amount
under this Agreement in a currency other than that in which it is expressed to be
payable.

	13.	 	Assignment

This Agreement and the rights and obligations hereunder shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their respective
successors and assignees. The Borrower may not assign or transfer, however, any of
its rights, duties or obligations hereunder without the Bank’s prior written consent.
The Bank may at its own cost, in accordance with standard banking practices, grant
sub-participations with respect to all or any parts of its rights, claims and/or

15

 

obligations under this Agreement to members of the European Central Bank System,
banks, financial service providers, financial institutions, insurance companies,
institutional investors, funds, pension funds, public pension schemes and similar
institutions and may make dispositions with respect to such rights, claims and/or
obligations. In particular, the Bank shall be entitled to assign, pledge or transfer in
whole or in part any claims for amounts outstanding under this Agreement including
collateral provided therefor, if any, to any of the aforementioned institutions. The
Bank may take any such measures in particular for the purpose of risk diversification,
equity capital optimisation and refinancing. The Borrower herewith releases the Bank
from its confidentiality obligation to the extent necessary for taking the measures
described above. References to the Bank under this Agreement shall be construed to
be references to such institution as if it were an original party hereto.

	14.	 	No Waiver

No failure to exercise nor any delay in exercising on our part any right or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy prevent any further or other exercise thereof or the exercise of
any other right or remedy. The rights and remedies herein provided are cumulative
and not exclusive of any right provided by law.

	15.	 	Communications

The correspondence between the parties shall be submitted to the relevant party at the
contact details set out below and shall be in the English language. Documents and
evidences in connection with this Agreement have to be submitted, if not in the
original English language, together with a certified English translation.

	16.	 	General Legal Provisions
	 
	16.1	 	This Agreement and each Guarantee Request made hereunder shall be governed by
and construed in accordance with the laws of Germany. Place of jurisdiction shall be
Munich. The Bank shall be entitled, however, to assert any legal action against the
Borrower also before any other court of competent jurisdiction.
	 
	16.2	 	Should any of the provisions of this Agreement be or become invalid in whole or in
part, the other provisions shall remain in force. The invalid provision shall, according
to the intent and purpose of this Agreement, be deemed to be re-placed by such valid
provision, which in its economic effect comes as close as legally possible to that of
the invalid provision. The same shall apply in cases of a gap (“Regelungslücke”).
	 
	16.3	 	Changes to this Agreement (including with regard to this clause) must be made in
writing by all parties thereto.
	 
	16.4	 	The Annexes form an integral part of this Agreement.

***

16

 

	 	 	 	 	 	 	 
	Zurich, ___ August 2006
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signature:

	 	 
	 	 
	 	 
	 	 	 	 	 
	 	 
	Name, title:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	 
	Signature:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	Name, title:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	 

	 	 	 	for

Converium AG

General Guisan-Quai 26

8022 Zurich

Switzerland	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Att.: Richard Rabl	 	 
	 

	 	 	 	Corporate Treasurer	 	 
	 

	 	 	 	Tel.: +41 44 639 96 61	 	 
	 

	 	 	 	Fax: +41 44 639 76 61	 	 
	 
	 	 	 	 	 	 
	Munich, ___ August 2006
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signature:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	Name, title:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	 
	Signature:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	Name, title:

	 	 
	 	 
	 	 
	 
	 	 	 	 
	 	 
	 

	 	 	 	for

Bayerische Hypo- und Vereinsbank AG

Am Tucherpark 16

80538 München

Germany	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Att.: Adrian Indlekofer (Managing	 	 
	 

	 	 	 	Director, Institutional Clients Group)	 	 
	 

	 	 	 	Tel.: +49-89-378 14374	 	 
	 

	 	 	 	Fax: +49-89-378 33 14374	 	 

17

 

Annex 1

Guarantee Request

To: Bayerische Hypo-und Vereinsbank AG

Guarantee Request and Reimbursement Agreement

between

Bayerische Hypo-und Vereinsbank AG and Converium AG

dated
[          ] (the “Agreement”)

— Guarantee Request —

	 	 	 	 	 	 	 	 
	Name and Address of Principal	 	 	hereby requests
	 
	 	 	 	 	 	 	 
	the Borrower — (Converium AG) address	 	 	Bayerische Hypo-und Vereinsbank Aktiengesellschaft
	 
	 	 	 	 	 	 	 
	—“Principal” —	 	 	 	 	 
	 

	 	 	 	 	 	 	—“Bank” —
	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	to issue a guarantee in the
_________ language
 and in accordance with the specifications set forth below
for and on behalf of the Principal
	 
	 	 	 	 	 	 	 
	The guarantee is to be issued:  
	 
	 	 	 	 	 	 	 
	o     for the own account of the Principal within the meaning of Section 8 German Money Laundering Act
	 
	 	 	 	 	 	 	 
	o     for the account of the following third party: ________________________________________________
	 
	 	 	 	 	 	 	 
	Beneficiary (Name and Address):

	 
	 	 	 	 	 	 	 
	Currency

	 	 Guarantee Amount
	 	Interest	 	 	 
	 
	 	 	 	 	 	 	 
	                                                   

	 	 	 	o     incl. interest
	 	 	o     plus interest at a rate of ___% p.a.
	 
	 	 	 	 	 	 	 
	Guarantee Amount in Words:

	 
	 	 	 	 	 	 	 
	Validity Period:
	
o     effective date ________ 

o     expiry date __________

o     unlimited duration _______
 	 	 	Note: The guarantee is of unlimited duration if the Principle fails to stipulate an expiry date or if the law governing this guarantee does not permit limitation of the validity period.

18

 

	 	 	 	 	 	 	 	 	 	 
	Type of Guarantee and Details of Underlying Transaction:
	 
	 	 	 	 	 	 	 	 	 
	The Guarantee shall secure the [payment] obligations of [insert name] to
[insert name of beneficiary] pursuant to the
_________ Agreement dated [          ] in
the amount of
[          ]. The Guarantee shall be issued by the Bank in favour
of insert name of beneficiary
[               ].
	 
	Issuing Bank	 	 	 	 	 	 
	 
	o     Bank in favour of Beneficiary (direct guarantee)
	 
	 	 	 	 	 	 	 	 	 
	o     Second bank in the Beneficiary’s country (indirect guarantee)
	o     The following second bank (indirect guarantee): _______________________
	 
	 	 	 	 	 	 	 	 	 
	 
	Text of Guarantee:
	 	 	 	 	 	 	 	 	 
	 
	o     see attached	 	 	o     
in the form of Annex
______ to the Facility
Agreement	 	   Note: Texts which
do not comply with
the form annexed to
the Facility
Agreement are
subject to the Bank’s approval.

	 
	Transmission by	 	 	 	 	 	 
	 
	o     letter by courier

	 	 	
o     SWIFT / Telex

	 	 		 	 	 
	 
	Delivery or mailing of Guarantee to:	 	 	 
	 
	o     
Principal

 o     
Beneficiary or second bank	 	 	o     Principal’s Representative/Agent abroad (Name and Address)

                                          
             

	 
	Special Instructions
(e.g. advising of a direct guarantee, deadline, copies to _____ ):
	 
	 	 	 	 	 	 	 	 	 
	 
	Important
Acknowledgement by the Principal: 
We acknowledge and request
that this request for the issuance of a guarantee shall be subject to
the terms and conditions of the Facility Agreement. Due to such
conditions and the application of foreign law in individual cases,
guarantees involve special risks (outlined in particular in Sections
5.1 and 5.2 of the Facility Agreement).

	 	 	Person to Contact
at Principal (name,
telephone number):
	 
	Conditions Precedent:

	We confirm that:

	(a)  the representations and
warranties set out in Section 9 of the Agreement are correct in all
material respects;

	(b)  no event of default set out in Section 11 of the
Agreement (or any event which with the giving of notice or lapse of
time might constitute  an event of default) is continuing or would
result from the proposed issuance; and

	(c)  the S&P financial strength
rating of the Converium AG is not less than the applicable “Cash Cover
Threshold” (as defined in the  Agreement).

	 
	 	 	 	 	 	 	 	 	 
	 
	Place

	 	 	 	 	 	Date
	 	 	Legally binding
signature(s) and
stamp of Principal
	 
	 	 	 	 	 	 	 	 	 

19

 

Annex 2

Approved Form of Guarantee / Letter of Credit

Bayerische
Hypo- und Vereinsbank AG [acting through its New York Branch]

Attention:
[          ]

	 	 	 
	FOR INTERNAL IDENTIFICATION PURPOSES ONLY
	 
	 	 
	Date:                                                      Our No.                                                        Issuing Bank No.                                         
	 
	 	 
	Irrevocable Letter of
	 	 
	Credit                                              

	 	Accountholder                                         
	 

	 	          Reinsurer
	 
	 	 
	                                                            

	 	Issuing Bank                                                                                                                                       
	                                                            

	 	Beneficiary    (Reinsured)                          Amount                                         
	                                                            

	 	Expiry                                                                       
	                                                            

	 	State of Domicile                                                        
	 
	 	 

	 	 	 	 	 
	Irrevocable

	 	 	 	Issue
	Letter of Credit No.

	                                                            
	 	Date:                                                             
	 
	To Beneficiary:

	 	          (Name)	 	 
	 

	 	          (Address)	 	 

We have established this unconditional, clean and irrevocable Letter of Credit in your favor as
beneficiary for drawings up to U.S. $                     effective immediately. This Letter of Credit is
payable at our office at [Address], Attn: Standby Letter of Credit Unit or such other office as we
may advise from time to time and expires with our close of business on                                         . Except
when the amount of this Letter of Credit is increased, this Letter of Credit cannot be modified or
revoked without your consent.

We hereby undertake to promptly honor your sight draft(s) drawn on us, indicating our Letter of
Credit No.                     , for all or any part of this Letter of Credit upon presentation of your draft
drawn on us at our offices on or before the expiration date hereof or any automatically extended
date of expiration.

The term “Beneficiary” includes any successor by operation of law of the named Beneficiary
including, without limitation, any liquidator, receiver, conservator, or supervisor.

It is a condition of this Letter of Credit that it is deemed to be automatically extended without
amendment for one (1) year from the initial stated expiry date hereof, or any future expiration
date, unless at least thirty (30) days prior to any expiration date we notify you that we elect not to
consider this Letter of Credit extended for any such additional period.

Such notice shall be deemed given upon our mailing a written notice to such effect to you at your
address specified above by registered mail or overnight courier service.

20

 

Except as expressly stated herein, this undertaking is not subject to any agreement, condition, or
qualification. The obligation of [Name of Issuer] under this Letter of Credit is the individual
obligation of [Name of Issuer], and is in no way contingent upon reimbursement with respect
thereto.

This Letter of Credit is subject to and governed by the Laws of [the U.S. state of domicile of the
Beneficiary] [the state of [New York]] and the 1993 Revision of the Uniform Customs and Practice
for Documentary Credits of the International Chamber of Commerce (Publication 500) and, in the
event of any conflict the laws of [the U.S. state of domicile of the Beneficiary] [the state of
[New York]] shall control. If this Letter of Credit expires during an interruption of business as
described in Article 17 of said Publication 500, we hereby specifically agree to effect payment if this Letter
of Credit is drawn against within thirty (30) days after the resumption of business.

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Authorized Name (typed)
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Signature
	 	 

21

 

Annex 3

List of Approved Countries of Beneficiaries

Chile

China

Hong Kong

Israel

India

Malaysia

Puero Rico

Singapore

22

 

Annex 4

List of Currently Approved Governing Laws

France

Austria

Australia

Belgium

Canada

Czech Republic

Denmark

Spain

Greece

Hong Kong

Ireland

Israel

Italy

Japan

Malyasia

Netherlands

Singapore

23exv4w49

 

Exhibit 4.49

THIS FRONTING AND ADMINISTRATION AGREEMENT is made on the 22nd day of December 2006

between:

	(1)	 	CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General
Guisan-Quai 26, 8022 Zürich, Switzerland
(Converium);
	 
	(2)	 	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT
AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered office is at
Königinstrabe, 107, 80802
München, Germany (Munich Re);
	 
	(3)	 	NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of
America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131
(National Indemnity);
	 
	(4)	 	GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED
(registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary
Axe, London EC3A 8EQ (Global ); and

Whereas:

(A) An
aviation and aerospace underwriting pool (the Pool) has been established between
certain insurance and reinsurance companies including Converium, Munich Re, National
Indemnity and Global in respect of risks written after the date of the Pool Members’ Agreement (as
hereinafter defined) and attaching on or after 1 January 2003, and in respect of which inter alia
Converium appoints Global as its agent for writing insurance and reinsurance in respect of certain
risks and to provide administration and management services in
respect of the Pool.

(B) Converium intends to appoint National Indemnity and Munich Re (or members of their
Groups) to provide fronting insurance for Converium in respect of Relevant Risks which incept in
the Period (all terms as hereinafter defined). The intention is that, unless otherwise stated, in
respect of each risk which would be written in the name of Converium under the terms of the Pool
Members’ Agreement, National Indemnity or a member of its Group
will front 50 per cent. of such
risk and Munich Re or a member of its Group will front 50 per cent. of such risk. In certain
jurisdictions where there is currently fronting in place in respect of National Indemnity’s or
Munich Re’s participation in the Pool, the fronter (being those persons listed in column 4 of of
Schedule 2 and Schedule 3) has agreed to extend the fronting that is currently in place so that it
covers (in each case) 50 per cent of each risk in such jurisdiction which would be written in the
name of Converium under the Pool Members’ Agreement.

(C) Accordingly, this Agreement constitutes a Fronting Arrangement for the purposes of the Pool
Members’ Agreement and sets out the basis on which (1) National Indemnity and Munich Re or
members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 will appoint Global
to underwrite, administer and

 

 

manage such Relevant Risks and (2) all business written in the name of National
Indemnity and Munich Re or members of their Groups set out in Part I of Schedule 2
or Part I of Schedule 3 under this Agreement will be fully reinsured by Converium.

Now it is hereby agreed as follows:

1. Definitions

1.1 Unless otherwise defined in this Agreement and unless the context otherwise requires, all
words and phrases shall have the meaning ascribed to them in the Pool Members’ Agreement.

Agent means Global as the context requires;

Agreement means this Agreement as amended from time to time;

Business means the business of writing Fronting Insurance Contracts as agent for National
Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of
Schedule 3 in their capacity as fronting insurers for Converium and managing such business on
behalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2
or Part I of Schedule 3 and doing such other things ancillary or incidental thereto in any such
case as may from time to time be permitted or required by or pursuant to this Agreement and for the
avoidance of doubt, Business excludes that portion of any risk reflecting the participation of
National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I
of Schedule 3 under the Pool Members’ Agreement and that portion of any risk which is written on
behalf of Munich Re or National Indemnity by the persons set out in column 4 of Schedule 2 or
Schedule 3 respectively;

Business Day means any day (not being a Saturday or Sunday) on which banks are open for the
transaction of general banking business in London;

Confidential Information means:

	(a)	 	all information obtained by a party as a result of negotiating and entering into this
Agreement;
	 
	(b)	 	all financial or other information received by a party pursuant to this Agreement in respect
of Global;
	 
	(c)	 	all financial or other information received by a party pursuant to this Agreement in respect
of Converium;
	 
	(d)	 	all financial or other information received by a party pursuant to this Agreement in
respect of National Indemnity or Munich Re; and
	 
	(e)	 	information as to the terms of this Agreement or of any agreement referred to in it and
information relating to the performance by any party of its obligations under this Agreement
or any agreement referred to in it;

Page 2 

 

Claim means, in relation to any Reinsured Risk, the notification, by the insured
(or as applicable reinsured) of an actual or potential claim under such Reinsured Risk and, for
the avoidance of doubt, a Claim shall be deemed to have been made where there is a settlement,
compromise, commutation and/or policy buy back entered into by or on behalf of National Indemnity,
Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in
relation to the Reinsured Risks (or any of them);

Claims-Related Extra Contractual Obligation means any liability on the part of National Indemnity,
Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 (or
amount agreed to be paid by or on behalf of National Indemnity, Munich Re or members of their
Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in respect of potential or alleged
liability on the part of National Indemnity, Munich Re or members of their Groups set out in Part
I of Schedule 2 or Part I of Schedule 3) which has arisen in connection with or which relates in
any way to the conduct of a claim and/or the conduct of the Business where such liability (or
potential or alleged liability) has arisen because of or relates in any way to any Reinsured Risk
in respect of which a Fronting Insurance Contract has been written in such person’s name save to
the extent that any Claims-Related Extra Contractual Obligation results from fraud of National
Indemnity or a member of its Group, or Munich Re or a member of its Group;

duly authorised means:

	(a)	 	in the United Kingdom, duly authorised to carry on general insurance business under the
Financial Services and Markets Act 2000; and
	 
	(b)	 	in any other jurisdiction, duly authorised, licensed or otherwise approved or permitted,
under the laws of the applicable jurisdiction, to underwrite or carry on general insurance
business covering Specified Risks in accordance with the relevant laws or regulations of such
jurisdiction;

Due means with respect to any sum or amount of money that such sum or amount has been demanded by
or from the Agent and Due Premium means that amount of written premium that has been demanded by
the Agent from an Original Insured, being the insured party to any relevant Fronting Insurance
Contract, for and on behalf of Munich Re and /or National Indemnity, as appropriate, by way of
bill, invoice or other enforceable demand, and in respect of which the Agent has assigned a date by
when such Original Insured must actually pay the amount of premium
demanded (Due Date) and
calculated in all cases as at the relevant Due Date(s).

Fronting Insurance Contract means a contract of insurance and/or reinsurance which is written by
Global pursuant to this Agreement on behalf of National Indemnity or Munich Re or the relevant
member of such person’s Group (solely in its capacity as fronting insurer for Converium) in
respect of the proportion of the Relevant Risks set out in Clause 2.3(b) attaching during the
Period provided that Fronting Insurance

Page 3 

 

Contracts shall not relate to the percentage of each policy issued under the Pool Members’
Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’
Agreement;

GAI means GLOBAL AEROSPACE, INC. (formerly known as ASSOCIATED AVIATION UNDERWRITERS, INC.) a
Delaware corporation.

Group means in relation to a company, that company and any company which is a holding company of
that company or a subsidiary of that company or of such holding company;

holding company has the meaning ascribed thereto by Section 736 of the Companies Act 1985;

Incurred Position means, in relation to Converium, such amount as may be determined in accordance
with Clause 15 as being the greater of:

	(a)	 	Due Premium (in relation to the relevant Reinsured Risks less any (i) due reinsurance
premiums ceded in respect of reinsurance taken out in accordance with the Pool Business Plan
(as defined in the Pool Members’ Agreement) as amended from time to time or otherwise taken
out by the Agents on behalf of the Members of the Pool as a whole; (ii) original commissions
in relation to such Reinsured Risks; and (iii) taxes on the premiums relating to such
Reinsured Risks, ((a) less each of (i), (ii) and
(iii) being the Net Premiums) multiplied by
150 per cent;
	 
	(b)	 	120 per cent. of outstanding claims amounts attributable to relevant Reinsured Risks
(including reserves for claims incurred but not reported maintained by National Indemnity or
Munich Re or the relevant member of such person’s Group (as the case may be) in respect of
relevant Reinsured Risks) written in the name of National Indemnity or Munich Re or the
relevant member of such person’s Group less amounts recoverable in respect of reinsurance
taken out in accordance with the Pool Business Plan (as defined in the Pool Members’
Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of the
Members of the Pool as a whole ; or
	 
	(c)	 	$8,600,000.00 million plus the Net Premiums in relation to the relevant Reinsured Risks;

provided that:

	 	(i)	 	if in relation to Converium, it has its financial strength rating upgraded
to A- or above by S&P or if such rating is not available, above such comparable
rating as may be reasonably agreed between the parties the references to “150” and
“120” above shall be read as “100” save that nothing in this proviso shall be
construed to reduce the Incurred Position below the minimum percentage which is
required to allow Munich Re, National Indemnity or the relevant member of its
Group to

Page 4 

 

	 	 	 	receive credit for the Reinsurance to which the security relates under the
laws of the jurisdiction in which such person is domiciled; and
	 
	 	(ii)	 	proviso (i) above shall only apply during such periods as Standard &
Poor’s financial strength rating of Converium is A- or above (or if such rating is
not available, such comparable rating as may be reasonably agreed between
Converium, Munich Re and National Indemnity). Converium shall make such additional
deposits to and or increase any relevant LOC(s) in the MR Fund, as appropriate,
and the NICO Fund in the event that Standard & Poor’s financial strength rating of
Converium falls below A- subsequent to termination of this Agreement under Clause
10.1 so as to comply with the requirements of Clause 13 or Clause 14 (as
appropriate) without regard to proviso (i) above;

The Incurred Position shall be calculated by the Agent within 20 business days of the end of each
quarter, one quarter in arrears or upon written request by any of the parties hereto, within 25
business days of the receipt of such written request.

Letter of Credit (“LOC”) means a clean, unconditional and irrevocable Letter of Credit issued on
behalf of Converium by a bank with a credit rating by Standard and Poors of AA or above (or if such
rating is not available, such other comparable rating as may be reasonably agreed between the
person in whose favour such Letter of Credit is written and Converium) for the benefit of National
Indemnity or Munich Re (or the applicable member of such person’s Group) (as the case may be) in an
amount to be determined from time to time in accordance with Clause 13 or Clause 14 (as
appropriate) provided that the bank issuing any Letter of Credit must be one that would permit (a)
National Indemnity or the relevant member of its Group to receive credit for the Reinsurance to
which that Letter of Credit relates under the laws of the jurisdiction in which such person is
domiciled; or (b) Munich Re or the relevant member of its Group to receive credit for the
Reinsurance to which that Letter of Credit relates under the laws of Germany;

Letter of Credit Notice means a notice issued by National Indemnity or Munich Re (as the case may
be) from time to time requiring Converium to either: (a) arrange or cause to be arranged the issue
and/or delivery of a Letter of Credit and/or to increase the amount of any such Letter of Credit;
or (b) deposit additional funds in the MR Fund or the NICO Fund;

Net Premiums has the meaning given to it in the definition of Incurred Position;

Overriding Commission means the overriding commission payable in accordance with Clause 6, the
amount of which shall be calculated in accordance with Schedule 1;

Period means the period beginning at 12:01 am BST on 1 January 2007 and ending at 12.01 a.m. BST
on 30 June 2007;

Page 5 

 

Pool Members’ Agreement means the Agreement between GAI, Global and various insurance
companies and reinsurance companies including National Indemnity, Munich Re and Converium dated 27
November 2002 for the formation of an aviation and aerospace underwriting pool under the
management of Global and GAI;

Premium shall have the meaning given to it in Clause 5.1;

profit shall mean, subject to the provisions of Schedule 4 or Schedule 5, for the purposes of
Clauses 13.5, 13.12 to 13.14, 14.5 and 14.12 to 14.14:

	(a)	 	the Due Premiums in respect of the relevant Reinsured Risks;
	 
	 	 	LESS
	 
	(b)	 	paid claims in respect of the relevant Reinsured Risks as at 31 December 2010;
	 
	 	 	LESS
	 
	(c)	 	outstanding claims which have been notified to Global or any of its subsidiaries in
relation to relevant Reinsured Risks as at 31 December 2010;
	 
	 	 	LESS
	 
	(d)	 	the reserves held for incurred but not reported claims in respect of relevant Reinsured Risks
as at 31 December 2010 by Munich Re or National Indemnity or a relevant number of such
person’s group, calculated by Munich Re or National Indemnity (or such person’s respective
appointee) (as appropriate) in accordance with actuarial best practice and guidance produced
by relevant actuarial bodies in the relevant country (and subject to the dispute resolution
mechanism in Clause 6),

in the case of (a) to (c) as produced by Global’s computer systems;

Regulatory Action means:

	(a)	 	any order of a court of competent jurisdiction;
	 
	(b)	 	any order made, decision given or final view expressed by a competent national,
supranational, governmental or regulatory authority or agency; or
	 
	(c)	 	any enactment of a legislative body;
	 
	(i)	 	which prohibits or restricts to a material extent the carrying on of the Business or
the arrangements contemplated by this Agreement; or
	 
	(ii)	 	in consequence of which any of the parties would incur fines or a liability in damages
were this Agreement to be performed in accordance with its terms;

Reinsurance has the meaning given to it in Clause 3;

Page 6 

 

Reinsured Risks means that percentage of any and all contracts of insurance, reinsurance or
retrocession written by either Agent in the name of Munich Re, National Indemnity (or members of
their Groups set out in Part I of Schedule 2 or Part I of Schedule 3) solely in its capacity as
fronting insurer for Converium under, pursuant to or in connection with (or purportedly under,
pursuant to or in connection with) this Agreement (as such contracts may be amended from time to
time) and irrespective of whether the acceptance of such contract was within the scope of the
authority granted to the Agent by Munich Re or National Indemnity or members of their Groups set
out in Part I of Schedule 2 or Part I of Schedule 3 under the terms of this Agreement or within
the scope of (or in accordance with the terms of) the Pool Members’ Agreement and Reinsured Risk
shall be construed accordingly. For the avoidance of doubt, Reinsured Risks shall not include the
percentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s or
National Indemnity’s interest under the Pool Members’ Agreement;

Relevant Risks means Specified Risks relating to those countries set out in Part I of Schedule 2 in the case of Munich Re and the members of its Group and Part I of Schedule 3 in the
case of National Indemnity and the members of its Group, which are insurance or reinsurance risks;

Respective Proportion has the meaning given to it in the Pool Members’ Agreement;

Specified Risks means aerospace, aviation and all related and incidental insurance and reinsurance
risks;

subsidiary and wholly-owned subsidiary shall have the meanings given thereto in Section 736 of the
Companies Act 1985; and

Taxation
means all forms of taxation and statutory, governmental, state, provincial, local
governmental or municipal impositions, duties, contribution and levies and all penalties, charges,
costs and interest relating thereto.

1.2 References to Recitals, Clauses, Schedules and parties are, except where otherwise provided, to
Recitals, Clauses, Schedules or parties to this Agreement. The Schedules form part of this
Agreement and have the same force and effect as if set out in the body of this Agreement.

1.3 References to a statutory provision include such provision and any regulations made in
pursuance thereof as from time to time modified or re-enacted whether before or after the date of
this Agreement so far as such modification or re-enactment applies or is capable of applying to any
transactions entered into pursuant to this Agreement or to which this Agreement relates and (so far
as the same may be relevant) shall include any statutory provisions or regulations which such
provisions or regulations have directly or indirectly replaced.

1.4 The headings and index hereto are inserted for convenience only and shall not affect the
construction of this Agreement.

Page 7 

 

1.5 References to Converium, Munich Re (and any member of its Group), National Indemnity
(and any member of its Group) or to the Agents or any of them mean and include their respective
successors in title and permitted assigns.

1.6 Where the context so admits, references to the singular shall be deemed to include the plural
and vice versa.

1.7 References to Schedule 2 or Schedule 3 shall be to that Schedule as amended in accordance with
the terms of Schedule 2 or Schedule 3 (respectively) at the relevant time.

2.  Appointment of Global and GAI to write Fronting Insurance

2.1 Each of Munich Re and National Indemnity (for itself and as agent for each member of its
Group set out in Part I of Schedule 2 or Part I of Schedule 3 respectively) hereby severally
appoints Global to act as agent for it or such member of its Group as is set out in Part I of
Schedule 2 or Part I of Schedule 3 in the relevant jurisdiction indicated in those Schedules (which
appointment Global hereby accepts and acknowledges):

	 	(a)	 	to underwrite and/or bind and/or effect Fronting Insurance
Contracts in the name of each of such persons in accordance with the terms of
this Agreement; and
	 
	 	(b)	 	to administer the Fronting Insurance Contracts and
any reinsurance of them including (without limitation) providing those services
specified in paragraphs 1.2 and 2 of Schedule 3 of the Pool Members’ Agreement
in relation to the Fronting Insurance Contracts

2.2 The Agent in performing its services under this Agreement shall act as agent (and describe
itself as acting as agent) for Munich Re or the relevant member of its Group when acting pursuant
to its appointment by Munich Re or a member of its Group or National Indemnity or the relevant
member of its Group when acting pursuant to its appointment by National Indemnity or a member of
its Group.

2.3 The appointment by each of Munich Re and National Indemnity and the relevant members of their
Groups of Global to act as its agent to underwrite and/or bind and/or effect Fronting Insurance
Contracts in the name of Munich Re or National Indemnity or the relevant member of its Group is
limited to the negotiation and/or underwriting and/or binding and/or effecting of Fronting
Insurance Contracts:

	 	(a)	 	in those countries set out against such person’s name in Part I
of Schedule 2 or Part I of Schedule 3;
	 
	 	(b)	 	in respect of the percentage set out against such person’s name
in Part I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective
Proportion of the Relevant Risk;

Page 8 

 

	 	(c)	 	which are bound and/or effected prior to the
expiration of the Period;
	 
	 	(d)	 	which incept in the Period (provided that where a policy relating
to a Relevant Risk was written prior to the Period and is cancelled but
re-written on the same terms save for the fact that Converium is replaced as
an underwriter by Munich Re and National Indemnity for the Period, such policy
shall be deemed to incept in the Period);
	 
	 	(e)	 	the period of which does not, in any case, exceed 12 months plus
odd time not exceeding 15 months in all;
	 
	 	(f)	 	the terms of which, where written on a risks attaching basis, do
not allow for any risks to attach where the period of such risks exceeds 12
months plus odd time not exceeding 15 months in all;
	 
	 	(g)	 	which are in respect of Relevant Risks; and
	 
	 	(h)	 	which are within the scope of the insurance and reinsurance
contracts the Agents are authorised to write under the Pool Members’ Agreement.

2.4 Global shall not have any entitlement whatsoever to remuneration from Munich Re, National
Indemnity or the members of their Groups and none of Munich Re, National Indemnity or the members
of their Groups shall have any obligation whatsoever to remunerate the Agents in respect of the
assumption and performance of the Agents’ obligations under this Agreement.

2.5 Either Agent may (subject to prior notification of Converium, Munich Re and National Indemnity)
appoint a wholly-owned subsidiary of Global, which has been appointed pursuant to Clause 10 of the
Pool Members’ Agreement, for the purposes of providing all or some of the services under this
Agreement in relation to such part of the Business as the board of directors of the relevant Agent
may determine and shall give prior notice of such appointment to each of Converium, Munich Re and
National Indemnity. Such subsidiary shall, as soon as reasonably practicable, become a party to
this Agreement by executing a Deed of Adherence in the form (or substantially in the form) set out
in Annexure 1.

2.6 The appointment by Munich Re, National Indemnity or the relevant member of their Group of the
relevant Agent as its agent under Clause 2.1 shall be extended to the subsidiary, as if references
to Globalwere references to such subsidiary, in each case in relation only to such services and/or
to such parts of the Business as is determined by the board of directors of the relevant Agent.

2.7 Any appointment of a subsidiary under Clause 2.5 shall terminate upon such subsidiary ceasing
to be a wholly-owned subsidiary of Global.

2A.  Extension of National Indemnity and Munich Re Fronting Lines

Page 9 

 

2A.1 Munich Re’s Respective Proportion of Specified Risks written in the
jurisdictions set out in of Schedule 2 is fronted by the company
set out opposite such jurisdiction in of Schedule 2 (together
the MR Fronters). Munich Re agrees to use its reasonable endeavours to amend its agreements with
the MR Fronters so that each MR Fronter also writes fifty per cent (50%) of Converium’s Respective
Proportion of Specified Risks in the jurisdiction set out opposite it in of Schedule 2 (the MR Converium Risks),which shall then be 100% quota share reinsured by
Munich Re.

2A.2 Converium agrees that to the extent MR Converium Risks are written by the MR Fronters on
terms previously agreed with Converium in writing and provided that Munich Re and each member of
its Group pays to Converium all amounts received by it from the MR Fronters in relation to them
fronting Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the
MR Fronters in respect of the Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the
MR Fronters in relation to the Converium Risks (which security shall be provided from the MR Fund
pro rata to the applicable exposure); and

(c) reinsure Munich Re’s reinsurance of the MR Converium Risks on an equivalent basis to that
set out in Clause 3.

2A.3 Converium shall pay Munich Re commission (the MR Fronted Commission)
for reinsuring the Converium Risks on the basis set out in Clauses
2A.4 to 2A.6.

2A.4 The amount of MR Fronted Commission payable by Converium shall be calculated by reference to
the total gross premium income written by the Agents in the period in question in respect of each
MR Converium Risk after deduction of (i) any original commission or taxes on premiums payable
thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of
the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in
relation to the Pool (such amount being referred to as the MR Relevant Net Premium Income).

2A.5 The amount of MR Fronted Commission payable by Converium to Munich Re shall be calculated by
multiplying the MR Relevant Net Premium Income attributable to MR Converium Risks covered by
policies written by MR Fronters by 1 per cent. (or by such percentage as may be agreed from time
to time between Munich Re and Converium in writing).

2A.6 The amount of MR Fronted Commission attributable to any calendar quarter shall be due and
payable on (i) the last business day of the immediately following calendar quarter, or (ii) the
date on which a cash distribution is paid by the Agents to Converium under the Pool Members’
Agreement with respect to business written in such calendar quarter, whichever is earlier and shall
be deducted by Munich Re from the MR Fund on that date.

Page 10 

 

2A.7 National Indemnity’s Respective Proportion of Specified Risks written in the
jurisdictions set out in of Schedule 3 is fronted by the
company set out opposite such jurisdiction in  of Schedule 3
(together the NIC Fronters). National Indemnity agrees to use its reasonable endeavours to amend
its agreements with the NIC Fronters so that each NIC Fronter also writes fifty per cent (50%) of
Converium’s Respective Proportion of Specified Risks in the jurisdiction set out opposite it in
of Schedule 3(Part 1, Schedules 2 and 3)) (the NIC Converium
Risks), which shall then be reinsured by National Indemnity.

2A.8 Converium agrees that to the extent the NIC Converium Risks are written by the NIC Fronters
on terms previously agreed with Converium in writing and provided that National Indemnity and each
member of its Group pays to Converium all amounts received by it from the NIC Fronters in relation
to them fronting NIC Converium Risks it will:

(a) pay overriding commissions previously notified to and agreed by Converium in writing due to the
NIC Fronters in respect of the NIC Converium Risks;

(b) provide any security previously notified to and agreed by Converium in writing required by the
NIC Fronters in relation to the NIC Converium Risks (which security shall be provided from the NIC
Fund pro rata to the applicable exposure); and

(c) reinsure National Indemnity’s reinsurance of the NIC Converium Risks on an equivalent basis to
that set out in Clause 3.

2A.9
Converium shall pay National Indemnity commission (the NIC Fronted Commission) for reinsuring
the NIC Converium Risks on the basis set out in Clauses 2A.10 to 2A.12.

2A.10 The amount of NIC Fronted Commission payable by Converium shall be calculated by reference
to the total gross premium income written by the Agents in the period in question in respect of
each NIC Converium Risk after deduction of (i) any original commission or taxes on premiums payable
thereunder but before the deduction of amounts, if any, payable to the Agents under the terms of
the Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relation
to the Pool (such amount being referred to as the NIC Relevant Net Premium Income).

2A.11 The amount of NIC Fronted Commission payable by Converium to National Indemnity shall be
calculated by multiplying the NIC Relevant Net Premium Income attributable to NIC Converium Risks
covered by policies written by NIC Fronters by 1 per cent, (or by such percentage as may be agreed
from time to time between National Indemnity and Converium in writing).

2A.12 The amount of NIC Fronted Commission attributable to any calendar quarter shall be due and
payable on (i) the last business day of the immediately following calendar quarter, or (ii) the
date on which a cash distribution is paid by the Agents to Converium under the Pool Members’
Agreement with respect to business written in

Page 11 

 

such calendar quarter, whichever is earlier and shall be deducted by National
Indemnity from the NICO Fund on that date.

3.  Converium’s Reinsurance and Indemnity Obligations

3.1 Immediately upon, and with effect from, the acceptance and/or binding of a Reinsured Risk
by the Agents (or either of them), Munich Re or the relevant member of its Group and National
Indemnity or the relevant member of its Group shall cede to Converium and Converium agrees to
accept by way of reinsurance the quota share percentage set out
against such person’s name in Part I
of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of the Relevant Risk
(the total amount ceded pursuant to this Clause 3.1 shall be the Reinsurance and the amount ceded
in relation to a particular Reinsured Risk by a particular entity shall be the Reinsurance relating
to that Reinsured Risk). Such cession and acceptance shall be effected immediately and
automatically on, and with effect from, the acceptance and/or binding of the Reinsured Risk in
question.

3.2 In consideration of Munich Re and National Indemnity agreeing to enter into this Agreement,
Converium agrees to reinsure and indemnify Munich Re, National Indemnity or the relevant member of
its Group, without limit in time or amount, in respect of the Ultimate Net Loss of Munich Re,
National Indemnity or the relevant member of its Group in respect of, or relating to, each
Reinsured Risk in respect of which a Fronting Insurance Contract is written in such person’s name.
This Agreement shall only apply to the portion of a risk reflecting Converium’s
participation in the Pool Members’ Agreement and in respect of Munich Re, National Indemnity and
each member of such person’s Group shall only apply to the portion of such risk actually fronted by
such person.

3.3 The term Ultimate Net Loss, as used herein, shall mean all amounts paid or agreed to be paid
(including by way of set-off, release or any other form of consideration) by Munich Re, National
Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2 or Part I of
Schedule 3 (or the Agent(s) on behalf of Munich Re, National Indemnity or the relevant member of
such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3) in respect of or in
relation to Claims and/or Claims-Related Extra Contractual Obligations relating, in any way, to a
Reinsured Risk (or any or all Reinsured Risks) and shall include, without limit, all adjustment
expenses arising from the evaluation, assessment, investigation and/or settlement of claims other
than the salaries of employees and office expenses of Munich Re or any member of its Group (in the
case of Ultimate Net Losses relating to Munich Re or any member of its Group) or National Indemnity
or any member of its Group (in the case of Ultimate Net Losses relating to National Indemnity or
any member of its Group) provided that Converium shall be entitled to all amounts physically
received by way of recoveries/salvages. It is further understood and agreed that:

	 	(a)	 	any of Munich Re, National Indemnity or the relevant member of
such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shall
be entitled to recover any part of its Ultimate Net

Page 12 

 

	 	 	 	Loss once that has been ascertained without having to wait
until its total Ultimate Net Loss has been ascertained; and
	 
	 	(b)	 	for the avoidance of doubt, notwithstanding any other provision
of this Agreement, it is understood and agreed that neither Munich Re, National
Indemnity nor the relevant member of such person’s Group listed in Part I of
Schedule 2 or Part I of Schedule 3 shall be required to actually pay (in the
sense of making a physical disbursement of money or monies worth) any amounts
in respect of which indemnity is claimed in order to trigger Converium’s
indemnity obligations hereunder.

3.4 If the terms of any reinsurance taken out by the Agents for the benefit of Munich Re, National
Indemnity or a member of such person’s Group in relation to the Pool (a Pool Reinsurance) cover
part or all of any Relevant Risk, the Reinsurance provided for in this Clause 3 shall not extend to
such part of that Relevant Risk provided that to the extent the Agents are not able to recover
under the Pool Reinsurance the Ultimate Net Loss in respect of such Relevant Risk for any reason
other than as a result of a negligent or fraudulent act by Munich Re, National Indemnity or a
member of such person’s Group (provided that for the avoidance of doubt a negligent or fraudulent
act by the Agent or any person appointed by the Agent to act as agent of Munich Re or National
Indemnity shall not be deemed a negligent or fraudulent act by Munich Re, National Indemnity or a
member of such person’s Group for the purposes of this clause unless the Agent was instructed to
undertake such act by Munich Re or National Indemnity or a member of such person’s Group (other
than by instruction approved by Converium), Converium shall reinsure such Ultimate Net Loss
pursuant to this Clause 3.

3.5 The Agents, Munich Re and National Indemnity shall (and shall procure that each relevant member
of such person’s Group shall) take such reasonable action as is necessary to allow the Agents to
make a successful claim under any relevant Pool Reinsurance.

3.6 Converium shall, in all respects, follow the fortunes of Munich Re or National Indemnity or the
member of such person’s group in whose name the relevant Fronting Insurance Contract is written in
relation to all matters falling within the scope of the Reinsurance and the Reinsurance shall be
construed in such a way as to give effect to the parties’ intention that, to the greatest extent
permissible by law:

	 	(a)	 	Munich Re, National Indemnity and the members of their Groups
should retain no economic interest in the Reinsured Risks after the application
of this Reinsurance; and
	 
	 	(b)	 	the economic fortunes of Converium in relation to the Reinsured
Risks should exactly mirror those of Munich Re or National Indemnity or the
member of such person’s Group in whose name the relevant Fronting Insurance
Contract is written.

3.7 Accordingly, and without prejudice to the generality of Clause 3.6, Converium shall be
unconditionally bound to follow all settlements, compromises, commutations,

Page 13 

 

policy buy-backs or other agreements of any nature whatsoever entered into, or agreed, on
behalf of Munich Re, National Indemnity or the members of their Groups by the Agents in relation
to the Fronting Insurance Contracts including any and all ex gratia payments without regard to the
question of whether Munich Re, National Indemnity or the members of their Groups had any liability
whatsoever (whether arguable or otherwise) in respect of such settlements, compromises, etc.

3.8 The parties acknowledge and agree that the obligations of Converium to
indemnify:

	 	(a)	 	Munich Re or a member of its Group in whose name the relevant
Fronting Insurance Contract is written under this Agreement shall not in any way
be affected by any actual or alleged breaches by the Agents or National
Indemnity of the terms of this Agreement, the Pool Members’ Agreement or of any
duties (whether in contract tort or equity) owed by the Agents or National
Indemnity to Converium or Munich Re or the members of their Groups.
	 
	 	(b)	 	National Indemnity or a member of its Group in whose name the
relevant Fronting Insurance Contract is written under this
Agreement shall not in any way be affected by any actual or alleged breaches by
the Agents or Munich Re of the terms of this Agreement, the Pool Members’
Agreement or of any duties (whether in contract tort or equity) owed by the
Agents or Munich Re to Converium or National Indemnity or the members of their
Groups.

4.
Duties
& Waivers

4.1 Converium acknowledges and agrees that this Agreement is being entered into by the
parties solely as a Fronting Arrangement for the purposes of the Pool Members’ Agreement in order
to facilitate the participation by Converium in the underwriting of risks pursuant to the Pool
Members’ Agreement and that, but for Converium having a BBB+ rating from Standard & Poor’s Rating
Services, Converium would in any event have participated directly in such risks pursuant to the
terms of the Pool Members’ Agreement. Accordingly, subject to Clause 4.3, Converium agrees:

	 	(a)	 	that it has been afforded the opportunity to conduct its own
investigations and due diligence in relation to all matters relevant and/or
material to this Agreement and the Pool Members’ Agreement (including the
Reinsurance and the Reinsured Risks);
	 
	 	(b)	 	that neither Munich Re, National Indemnity nor the member of such
person’s Group in whose name a Fronting Insurance Contract is written
nor its agents nor any person acting on its behalf assumes, shall accept, and
owe, any duty of care, whether in contract or in tort, nor fiduciary duties to
Converium in relation to any matters falling within the scope of this Agreement
or the Reinsurance and none of Munich Re, National Indemnity or the

Page 14 

 

	 	 	 	member of such person’s Group in whose name a Fronting Insurance
Contract is written shall accept, or have, any vicarious liability for any
acts or omissions of the Agents in relation thereto;
	 
	 	(c)	 	to waive any duty of disclosure on the part of Munich Re,
National Indemnity or any member of such person’s Group in whose name a relevant
Fronting Insurance Contract is written and/or its agents and/or any other person
acting on behalf of Munich Re, National Indemnity or the member of such person’s
Group in whose name the relevant Fronting Insurance Contract is written in
relation to the Reinsurance and/or the subject-matter of this Agreement
(including, but not limited to, each and every Reinsured Risk and/or the cession
thereof);
	 
	 	(d)	 	to acknowledge and accept the validity of each Fronting Insurance
Contract underwritten by an Agent on behalf of Munich Re, National Indemnity or
the members of their Groups set out in Part I of Schedule 2 and Part I of
Schedule 3 for the benefit of Converium pursuant to (or in purported
pursuance of) this Agreement;
	 
	 	(e)	 	to waive and/or otherwise exclude any right (or remedy) that it
might have, whether now or in the future, to seek or otherwise claim damages in
respect of, or to avoid, rescind or otherwise challenge the validity of any
Fronting Insurance Contract and/or the Reinsurance and/or the cession of, any
Reinsured Risk on any grounds including;

	 	(i)	 	misrepresentation and/or non-disclosure of material facts (whether
innocent, or negligent); and/or
	 
	 	(ii)	 	any breach (or alleged breach) of any duty of utmost good faith by
Munich Re, National Indemnity or the members of their Groups set out in Part I of
Schedule 2 and Part I of Schedule 3 (or any person acting on behalf of Munich Re,
National Indemnity or the members of their Groups set out in Schedule 2 or
Schedule 3); and

	 	(f)	 	save to the extent otherwise provided for in this Agreement,
Converium shall indemnify and keep indemnified Munich Re, National Indemnity or
the members of their Groups set out in Part I of Schedule 2 and Part I of
Schedule 3 in respect of any claim, loss or liability of any kind (including
without limitation any liability to the Agents (or either of them) under the
Pool Members’ Agreement) in respect of or in connection with the conduct (or
purported conduct) of the Business.

4.2 Unless the contrary is expressly stated, no terms of this Agreement and/or Reinsurance which
are expressed to be warranties (or which might be otherwise have been construed as warranties but
for this Clause 4.2) shall take effect as warranties

Page 15 

 

within the meaning of the Marine Insurance Act 1906 (which for the purposes of information
only provides, in general circumstances, for the discharge of liability should a warranty be
breached) but shall, instead, be construed and take effect as innominate terms.

4.3 For the avoidance of doubt, however, nothing in this Clause 4 is intended to affect and/or
waive and/or otherwise exclude any rights or remedies which Converium might have, whether now or
in the future, arising out of, or relating to, fraud on the part of any of Munich Re, National
Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3
themselves (as opposed to fraud of the Agents, or either of them, on behalf of Munich Re, National
Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule
3), provided that the parties agree that no fraud on the part of:

	 	(a)	 	National Indemnity or a member of its Group shall impact the
obligations of Converium to Munich Re or a member of its Group;and
	 
	 	(b)	 	Munich Re or a member of its Group shall impact the obligations
of Converium to National Indemnity.

5.  Premiums and Pool Payments

5.1 Subject to Clause 6, each of Munich Re and National Indemnity agrees for itself and as
agent for each member of its Group set out in Part I of Schedule 2 and Part I of Schedule 3
respectively that Converium shall be entitled to all amounts actually received by the Agents (or
either of them) in respect of premiums payable under the terms and conditions of the Reinsured
Risks including, for the avoidance of doubt, any and all adjustment and/or reinstatement premiums
but after the deduction of any commissions or brokerage or other deductions payable or to be
deducted therefrom (Premiums) provided that all amounts payable to Converium pursuant to Clause 7
of the Pool Members’ Agreement less all amounts payable by Converium under Clause 7.5 of the Pool
Members’ Agreement (and less all amounts due to National Indemnity or Munich Re, respectively,
under Clause 6 as Overriding Commission) shall be paid:

	 	(a)	 	as to fifty percent directly to National Indemnity (or such
member of its Group listed in Part I of Schedule 3 as National Indemnity shall
advise Converium and the Agents) in relation to Reinsurance Risks covered by
Fronting Insurance Contracts written in the name of National Indemnity or any
member of its Group set out in Part I of Schedule 3 to be held as set out in
Clause 14.2.

5.2 The Agents shall hold such proportion of the Premiums that is equivalent to any Overriding
Commission payable (or potentially payable) by Converium to:

	 	(a)	 	Munich Re or any member of its Group and shall pay such amount to
Munich Re in accordance with Clause 6 and shall only pay to Converium the
remaining amount;

Page 16 

 

	 	(b)	 	National Indemnity or any member of its Group and shall pay such amount
to National Indemnity (or such member of its Group listed in Part I of Schedule
3 as National Indemnity shall advise Converium and the Agents in writing prior
to such payment being made) in accordance with Clause 6 and shall only pay the
remaining amount as specified in Clause 5.1 (a).

5.3 All amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’
Agreement shall, except in the case where the MR Fund contains sufficient monies, when the amounts
shall be paid as to fifty per cent from the MR Fund, be paid by Converium as to fifty per cent
directly to the Agents and as to fifty per cent from the NIC Fund, provided that National
Indemnity shall not be obligated to make any payment described in Clauses 14.17(b) or (c) which
would cause the NIC Fund to be reduced below $8, 600,000.00 million (or, if lower and Clause 14.8
applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8). Any shortfall in
amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’ Agreement by
reason of either of the foregoing provisos shall be paid by Converium.

6.
Overriding Commission

6.1 In consideration of Munich Re and the members of its Group set out in Part I of Schedule
2 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to pay
commission to Munich Re for itself and as agent for such member of its Group (Munich Re Overriding
Commission) in respect of each Reinsured Risk covered by Fronting Insurance Contracts written by
such persons.

6.2 In consideration of National Indemnity and the members of its Group set out in Part I of
Schedule 3 agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to
pay commission to National Indemnity (or such member of National
Indemnity’s Group listed in Part I
of Schedules as National Indemnity shall advise Converium and the Agents) for itself and as agent
for such members of its Group (NIC Overriding Commission and together with Munich Re Overriding
Commission, Overriding Commission) in respect of each Reinsured Risk covered by Fronting Insurance
Contracts written by such persons.

6.3 Subject always to Clause 6.4, the relevant Agent shall calculate the amount of Overriding
Commission payable in respect of all Premiums written in respect of the relevant Reinsured Risks
and shall:

	 	(a)	 	deduct and withhold such amounts from the Premiums payable as set
out in Clause 5.1; and
	 
	 	(b)	 	account for, and pay, such amounts to Munich Re or National
Indemnity (or such member of its Group listed in Part I of Schedule 3 as
National Indemnity shall advise Converium and the Agents in writing prior to
such payment being made) in accordance with Schedule 1.

Page 17 

 

6.4 Converium’s obligation to pay Overriding Commission to Munich Re or National
Indemnity shall be discharged only by the actual receipt by Munich Re or National Indemnity (or
such member of National Indemnity’s Group listed in Part I of Schedule 3 as National Indemnity
shall advise Converium and the Agents) of the amounts due and not by the deduction or withholding
by the Agents (or any of them) of amounts calculated to be due in respect of Overriding Commission
provided that such payment obligation shall be discharged to the extent that the Overriding
Commission (or part thereof) payable to Munich Re or National Indemnity is set-off against monies
due and payable by Munich Re or National Indemnity to the relevant Agent in connection with the
Pool. The receipt of Overriding Commission by Munich Re or National Indemnity in respect of
Fronting Insurance Contracts written by members of such person’s Group shall discharge Converium’s
obligations in respect thereof and Converium shall not be concerned as to the application of such
amounts.

7.
Claims

7.1 The Agents shall manage and perform the administration of the Reinsured Risks and the
negotiation and settlement of Claims thereunder and, in doing so, shall act as agent of Munich Re,
National Indemnity (and the members of their Groups set out in Part I of Schedule 2 and Part I of
Schedule 3) and Converium.

7.2 Without prejudice to the
generality of Clause 7.1, all decisions made by the Agents in relation
to the administration of the Reinsured Risks and the negotiation and/or settlement of Claims
thereunder shall be made as agents for Munich Re, National Indemnity (and the members of their
Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium and shall be deemed
to be in the knowledge of all of them (to the greatest extent permitted or allowable by law).

7.3 As between Converium and any of Munich Re, National Indemnity and the members of their Groups
set out in Part I of Schedule 2 and Part I of Schedule 3, Munich Re, National Indemnity and the
members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 shall have no
obligation to provide or disburse funds in respect of any obligations arising under or in relation
to Reinsured Risks. Such funds shall be provided by Converium and, accordingly, Converium shall
ensure that, at all times, sufficient funds are provided to the Agents to enable all obligations
under or in relation to each Reinsured Risk to be met as and when they fall due.

7.4 Any and all funds provided by Converium pursuant to Clause 7.3 shall, until physically
disbursed to the relevant insured or reinsured under the relevant Reinsured Risk or claimant
against such insured, be held by the Agents as agent for Converium and payment of such funds by
Converium to the Agents shall not constitute a discharge of, or operate to discharge, the
obligations of Converium to Munich Re, National Indemnity or any members of their Groups set out in
Part I of Schedule 2 and Part I of Schedule 3 under the terms of the Reinsurance, which obligations
shall be discharged only by (and to the extent of):

	 	(a)	 	physical disbursements of relevant amounts to insureds and/or
reinsureds under the Reinsured Risks or claimant against such insured; and/or

Page 18 

 

	 	(b)	 	physical disbursement to Munich Re, National Indemnity or any members of
their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 of
amounts due under the Reinsurance to Munich Re, National Indemnity or any
members of their Groups set out in Part I of Schedule 2 and Part I of Schedule
3.

8.  Accounts and Information

8.1 Each Agent agrees to provide accounting and other information to Munich Re, National
Indemnity or Converium in the form and in the manner that may be reasonably required by Munich Re,
National Indemnity or Converium from time to time by giving notice as provided for in Clause 22.

8.2 Each of the Agents shall keep, in such forms as may be agreed from time to time with (a) Munich
Re and Converium in relation to Relevant Risks for which Munich Re or a member of its Group
provides Fronting Insurance Contracts or (b) National Indemnity and Converium in relation to
Relevant Risks for which National Indemnity or a member of its Group provides Fronting Insurance
Contracts, books, records, underwriting statistics and accounts of all transactions under this
Agreement.

8.3 Munich Re, National Indemnity or Converium may, subject to any confidentiality
obligations of either Agent, at all reasonable times and on reasonable notice appoint its officers,
employees agents, or auditors to inspect, examine and verify at the offices of either Agent (and to
take copies of such books and records) all such accounts, records, books, vouchers, correspondence
and papers relating to any of the functions performed by the relevant Agent under this Agreement
insofar as they relate to the affairs of Munich Re or the members of its Group set out in Part I of
Schedule 2 or National Indemnity or the members of its Group set out in Part I of Schedule 3 or
Converium or a member of its Group respectively, including without limitation the application of
any money belonging to them paid or received by the relevant Agent and the operation of bank
accounts of such persons by the relevant Agent pursuant to this Agreement, and each of the Agents
shall whenever reasonably required at any time during normal business hours give such officers,
employees, servants or agents access to its offices for such purposes.

8.4 Each of National Indemnity and Munich Re undertakes to agree to supply, to the extent
permissible under any applicable law or regulatory requirements, such information as either Agent
shall reasonably request from time to time in order to facilitate the management of the Business or
the arrangements referred to in Clause 2A (but shall not be obliged to provide any information
relating to any business of each of National Indemnity and Munich Re or any member of its Group to
the extent it does not relate to the Business or the arrangements referred to in Clause 2A).

9.  Relationship between the Parties

9.1 Nothing in this Agreement shall create or constitute a partnership between the parties
hereto or any of them nor, save as expressly provided herein, constitute any one the agent of
another and no party shall do or suffer anything to be done whereby it shall or may be represented
that it is the partner or agent of any other party hereto

Page 19 

 

(save as aforesaid) unless such party is appointed partner or agent of another party
subject to the consent in writing of every other party to this Agreement.

9.2 The relationship between the parties to this Agreement is as described in this Agreement.
Neither that relationship nor the services to be provided by Global nor any other matter shall
give rise to any fiduciary or equitable obligations which would hinder Global from acting as
contemplated under the terms of this Agreement.

10. Termination

10.1 For the purposes of this Clause 10, a Trigger Event shall be deemed to have occurred
in relation to a party if:

	 	(a)	 	it ceases to be duly authorised (or has any suspension,
restriction or other limitation imposed in respect of its authority, licence,
approval or permission) in respect of Specified Risks in the jurisdiction in
which it is incorporated or has its principal place of business (home
jurisdiction);
	 
	 	(b)	 	it goes into liquidation whether compulsorily or voluntarily
(otherwise than a voluntary and solvent liquidation for the purpose of
reconstruction or amalgamation pursuant to a scheme previously agreed between
the parties);
	 
	 	(c)	 	it enters into any composition with its creditors generally or
suffers any similar action in consequence of default by it in its obligations in
respect of any indebtedness for borrowed moneys;
	 
	 	(d)	 	an administration order shall be made in respect of such party;
	 
	 	(e)	 	it stops or threatens to stop payment or ceases or threatens to
cease to carry on its business (otherwise than in connection with or in
pursuance of a winding-up for the purpose of a reconstruction or
amalgamation pursuant to a scheme previously agreed between the parties) or is
deemed for the purpose of Section 123 of the Insolvency Act 1986 to be unable to
pay its debts;
	 
	 	(f)	 	it has an administrative receiver or other receiver or other
similar official appointed over all (or substantially all) of its undertaking
and assets;
	 
	 	(g)	 	it suffers any action similar to any of the events described in
Clauses 10.1(a) to (f) under the laws of any competent
jurisdiction;
	 
	 	(h)	 	it has its financial strength rating downgraded below BBB+ (or
in the case of Converium BBB) by Standard & Poor’s Rating Service (S&P) or if
such rating is not available, below such

Page 20 

 

	 	 	 	comparable rating as may be reasonably agreed between the parties,
or it requests or agrees that S&P should cease to rate it;
	 
	 	(i)	 	Converium is subject to a change of control as defined in
Clause 15.2(f) of the Pool Members’ Agreement.

10.2 In the event that a Trigger Event occurs in relation to any of Munich Re or a member of its
Group set out in Part I of Schedule 2 or National Indemnity or a member of its Group set out in
Part I of Schedule 3, the Agents or either of them may suspend entirely with immediate effect the
appointment by the relevant person (the defaulter) pursuant to Clause 2.1(a), in which case the
parties shall seek to agree a basis upon which such suspension might be lifted and the appointment
reinstated. From the time of any such suspension until the time such agreement is reached, Clause
10.3 shall apply.

10.3 If this Clause 10.3 applies (by reason of Clause 10.2 or 10.7), neither of the Agents shall
(nor shall they have any authority to):

	 	(a)	 	accept Fronting Insurance Contracts in the name of the defaulter
or the person invoking this Clause 10.3 pursuant to Clause 10.7 (as
appropriate);
	 
	 	(b)	 	provide quotations or enter into (or continue) any negotiations
relating to the possible acceptance of, Fronting Insurance Contracts
in the name of the defaulter or the person invoking this Clause 10.3 pursuant to
Clause 10.7 (as appropriate); or
	 
	 	(c)	 	agree any amendments to the terms of or otherwise agree any
endorsements to any Fronting Insurance Contract which would, or would be
reasonably likely to, increase materially the gross exposure of the defaulter
under the Fronting Insurance Contract in question.

10.4 In the event that any of Munich Re, National Indemnity or a member of such person’s Group set
out in Part I of Schedule 2 or Part I of Schedule 3 ceases to be duly authorised (or has any
suspension, restriction or other limitation imposed in respect of its authority, licence, approval
or permission) in respect of any Relevant Risk in a jurisdiction set out against such person’s name
in Part I of Schedule 2 or Part I of Schedule 3 (an Applicable Territory) in circumstances where
Clause 10.1(a) does not apply to such person (a Non-Authorisation Event), then the appointment by
such person (the non-authorised person) pursuant to Clause 2.1(a) in relation to any relevant
Applicable Territory shall be suspended with immediate effect, in which case the parties shall seek
to agree the basis upon which such suspension might be lifted and the relevant part of the
appointment reinstated. From the time of any such suspension until the time such agreement is
reached, Clause 10.6 shall apply.

10.5 If Clause 10.4 applies, as an alternative to suspension pursuant to Clause 10.4, Munich Re or
National Indemnity shall have the right to appoint an alternate member of its respective Group
meeting the requirements of the Pool Members’ Agreement to replace a non-authorized person by
notice to Converium and Agents. If Munich Re or

Page 21 

 

National Indemnity appoint an alternative pursuant to this Clause 10.5, Munich Re or
National Indemnity shall procure that the alternative member of its Group shall enter into an
agreement by which it agrees to be bound by this Agreement as if it were the entity it replaces.

10.6 If this Clause 10.6 applies (by reason of Clause 10.4), neither of the Agents shall (nor shall
they have any authority to):

	 	(a)	 	accept Fronting Insurance Contracts in the name of
the non-authorised person in or relating to the Applicable Territory in
question;
	 
	 	(b)	 	provide quotations for, or enter into (or continue) any
negotiations relating to the possible acceptance of, Fronting
Insurance Contracts in the name of the non-authorised person relating to the
Applicable Territory in question; or
	 
	 	(c)	 	agree any amendments to the terms of or otherwise agree any
endorsements to any Fronting Insurance Contract in the name of the
non-authorised person previously written (and which relates to the Applicable
Territory in question) which would, or would be reasonably likely to, increase
materially the gross exposure of the non-authorised person under the Fronting
Insurance Contract in question.

10.7 In the event that:

	 	(a)	 	Converium ceases lawfully to be able to reinsure any Fronting
Insurance Contracts;
	 
	 	(b)	 	Converium’s participation in the arrangements established by the
Pool Members’ Agreement is terminated; or
	 
	 	(c)	 	a Trigger Event occurs in relation to Converium,

then any person making an appointment pursuant to Clause 2.1 (a) shall be able to suspend all
appointments or, Converium or either Agent shall be entitled, by written notice to the other
parties, to suspend all appointments pursuant to Clause 2. l(a) in which case the parties shall
seek to agree the basis upon which such suspension might be lifted and the relevant part of the
appointment reinstated. From the time of any such suspension until the time such agreement is
reached, Clause 10.3 shall apply.

10.8 For the avoidance of doubt, the Agents’ administrative obligations under Clause 2. l(b) and
their duties of management and administration of the Reinsured Risks and the negotiation and
settlement of Claims under Clause 7 shall not cease by reason of the suspension or termination, in
whole or in part, of an appointment pursuant to Clause 2.1 (a) (except to the extent that
continuing to perform the administrative obligations would be inconsistent with such suspension or
termination or that the parties so agree).

Page 22 

 

10.9 Each party shall notify the other parties upon becoming aware of a Trigger Event in
relation to any of Munich Re, National Indemnity or the members of their Groups set out in Part I
of Schedule 2 or Part I of Schedule 3 or Converium at any time.

10.10 Each of Munich Re and National Indemnity shall notify the other parties upon becoming aware
that the Non-Authorisation Event under Clause 10.4 applies to it or any member of its Group set out
in Part I of Schedule 2 or Part I of Schedule 3 at any time.

10.11 Converium shall notify the other parties upon becoming aware that Clause
10.7(a), (b) or (c) applies to it, at any time.

10.12 Suspension and/or termination of the appointment pursuant to Clause 2.1 (a) in whatever
manner shall in no way affect or limit any accrued rights which any party to this Agreement may
have against the others pursuant to this Agreement or any rights expressly stated to survive
termination of this Agreement.

10.13 Except to the extent that any of (a) Munich Re or (b) National Indemnity, and Converium agree
otherwise (such agreement to be in writing and notified to the Agents), neither the Reinsurance,
nor the obligations of any of Munich Re, National Indemnity or the members of their Groups set out
in Part I of Schedule 2 or Part I of Schedule 3 or Converium, shall terminate if this Agreement or
any part of it is terminated or suspended.

10.14 The appointment of the Agents (or either of them) pursuant to Clause 2.1 (a) shall terminate
automatically at any time when a termination of the appointment of the Agent(s) to provide services
under the Pool Members’ Agreement takes effect. Neither Munich Re nor any member of its Group,
National Indemnity or any member of its Group nor Converium shall be required to make any payment
to the Agents (or either of them) in the event of such a termination save as provided for in the
Pool Members’ Agreement.

10.15 The appointment pursuant to Clause 2.1 may not be terminated save as expressly provided for
in this Agreement.

10.16 For the avoidance of doubt, the occurrence of a Trigger Event or a Non-Authorisation
Event shall not constitute a breach of this Agreement and, save in the case of fraud, a person to
which a Trigger Event applies shall have no liability pursuant to this Agreement, whether in
damages or otherwise, arising from or in connection with any such event, apart from any loss
suffered by the Agents and/or Converium (excluding indirect, special or consequential loss or loss
of profit, goodwill or business opportunity) directly resulting from a failure by a person to which
a Trigger Event applies to notify Global that such an event applies to it in accordance with Clause
10.8 or 10.9 (as the case may be) and the Agents continue to write insurance business on behalf of
such person under this Agreement.

Page 23 

 

11. Confidentiality

11.1 Every party hereto shall hold in confidence and shall not divulge to any other party or
any third party any Confidential Information nor make any public or press announcement regarding
this Agreement or matters connected herewith except as provided in Clause 11.2, 11.3,11.4 or (as
the case may be) Clause 11.5.

11.2 Notwithstanding the provisions of Clause 11.1, any party may disclose Confidential
Information:

	 	(a)	 	in respect of any party to any other party with the prior written
consent of the first party;
	 
	 	(b)	 	with the consent of the other parties (such consent not to be
unreasonably withheld or delayed);
	 
	 	(c)	 	if and to the extent required by law or for the purpose of any
judicial proceedings;
	 
	 	(d)	 	if and to the extent required or permitted by this Agreement;
	 
	 	(e)	 	if and to the extent required by any securities exchange or
regulatory or governmental body or tax authority to which that party or a member
of its Group is subject, wherever situated;
	 
	 	(f)	 	to any member of its Group and to its officers and employees or
those of such member, in any such case to the extent that such person needs to
know such information in order to manage or monitor its business or in the
performance of his or its duties;
	 
	 	(g)	 	to its professional advisers, auditors and bankers; or
	 
	 	(h)	 	if and to the extent the information has come into the
public domain through no fault of that party.

11.3 Notwithstanding Clause 11.1:

	 	(a)	 	each Agent shall, be entitled to provide extracts of this
Agreement to such banks, reinsurers and brokers and other managing agents of
reinsurers in the ordinary course of business as it reasonably deems necessary
for the purpose of carrying out the Business;
	 
	 	(b)	 	any party may give a copy of this Agreement, or a summary of it,
to any insurance company which is a member of any insurance pool constituted by
the Pool Members’ Agreement but not a party hereto.

11.4 Each party shall procure that any person to whom Confidential Information is disclosed
pursuant to Clauses 11.2(f) or (g) complies with the restrictions set out in this Clause 11 as if
such person were a party to this Agreement.

Page 24 

 

11.5 The provisions of this Clause 11 shall remain in full force and effect notwithstanding
the termination of this Agreement and each party shall remain bound by the provisions of this
Clause 11 for only a period of five years following cessation by both Agents of the provision of
any services to Munich Re or National Indemnity (or any member of such person’s Group) pursuant to
this Agreement.

11.6 Neither Global nor GAI shall be obliged to disclose to any other party or, in making any
decision or taking any action in relation to the Business or the management thereof, to take into
consideration information the disclosure of which by Global or (as the case may be) by GAI to any
other party would or might be a breach of duty or confidence to any other person excluding the
details of any cover written and any other information which another party requires to be in
compliance with applicable law.

12.
Undertakings

12.1 Global shall use all reasonable care and skill in the performance of their respective
obligations under this Agreement and shall comply with all applicable laws relating thereto.

12.2 Each of Munich Re and National Indemnity severally agrees, warrants and undertakes to each of
the Agents and Converium that (i) it and each member of its Group listed in Part I of Schedule 2 or
Part I of Schedule 3 (respectively) has (and so long as the appointment of the relevant Agent
remains in force under this Agreement shall continue to have) power to employ each of the Agents;
(ii) it and each member of its Group listed in Part I of Schedule 2 or Part I of Schedule 3
(respectively) has and will have all necessary consents, powers and authorities to authorise each
of the Agents to act as its agent as contemplated by this Agreement; (iii) it has all necessary
consents, powers and authorities to enter into this Agreement in accordance with its terms; and
(iv) it has been validly appointed by each member of its Group listed in Part I of Schedule 2 or
Part I of Schedule 3 (respectively) as agent for the purposes of making the appointment on behalf
of such person in Clause 2.1 and any other purpose necessary pursuant to this Agreement.

12.3 Converium agrees, warrants and undertakes to the Agent, Munich Re and National Indemnity that
it has (and so long as the appointment of the Agent remains in force under the Pool Members’
Agreement shall continue to have) power to employ the Agent and has and will have all necessary
consents, powers and authorities: (i) to enter into this Agreement in accordance with its terms
(including, without limitation, the Reinsurance); and (ii) to authorise the Agent to act as its
agent as contemplated by this Agreement.

12.4 Subject to Munich Re or National Indemnity being fully reimbursed or indemnified (under Clause
3 or otherwise) by Converium for any loss or liability it may incur, Munich Re or National
Indemnity hereby undertakes to ratify (and to procure that any relevant member of its Group
ratifies) every act performed or thing done by each of the Agents which shall hereafter be
performed or done in exercise or purported exercise of the powers conferred or to be conferred upon
the Agent by this Agreement provided only that such acts are in accordance with the terms of this
Agreement and within the scope of the authority granted to the Agent hereunder.

Page 25 

 

12.5 Each of Munich Re and National Indemnity represents and warrants to the Agents and
National Indemnity that those members of its Group marked * in Part I of Schedule 2 or Part I of
Schedule 3 is duly authorised to write all Relevant Risks in the United Kingdom and undertakes
to take all reasonable steps to ensure such authorisations are maintained during the duration
of this Agreement.

12.6 Each of Munich Re and National Indemnity undertakes to notify the Agent and Converium in
writing as soon as reasonably practicable of any changes as to the authorisations (whether in
relation to any Applicable Territory or the United Kingdom) which it or the members of its Group
listed in Part I of Schedule 2 or Part I of Schedule 3 has, or expects to obtain, from time to
time.

13.
Munich Re Security

13.1
Converium shall on or before the 3rd January 2007 (or such later date as
Munich Re may specify) pay to Munich Re the sum of 
$ 8, 600,00.00 million, or arrange or cause to
be arranged the issue and delivery to Munich Re of a Loc in the same sum, to be held on the basis
set out in Clause 13.3.

13.2 Any amounts paid or LOC’s issued and delivered pursuant to Clauses , 13.1, 13.4, 13.6 or 13.9
(or because of the definition of Incurred Position) shall be paid to the account of Munich Re
notified to Converium in writing by Munich Re from time to time.

13.3 The amounts held pursuant to Clause 13.2 shall be known as the MR Fund. Such amounts shall be
held by Munich Re as trustee for Converium provided that Munich Re shall be entitled to make
payments from such account and /or LOC(s), as the case may be, in order to pay amounts which are
due:

	 	(a)	 	or claimed to be due under Reinsured Risks in respect of which
Fronting Insurance Contracts have been written by it or members of its Group;
	 
	 	(b)	 	to it or members of its Group from Converium under the terms of
the Reinsurance;
	 
	 	(c)	 	to it or members of its Group from Converium in respect of
Overriding Commission; and/or
	 
	 	(d)	 	pursuant to Clause 2A.

13.4 At any time prior to 31 December 2010 that the MR Fund (together with the amount of any claims
paid by the Agents or Munich Re in relation to the Reinsured Risks) is less than the fifty per cent
(50%) of the Incurred Position, within ten Business Days of receiving notice from Munich Re or the
Agents (or, if later, the date on which the Incurred Position is determined in accordance with
Schedule 6), Converium shall pay to Munich Re such additional amount, or arrange or cause to be
arranged the issue and delivery to Munich Re of a Loc in such amount, or increase or cause to be
increased any existing Loc in the MR Fund by such additional amount as

Page 26 

 

shall be required for the MR Fund to equal fifty per cent (50%) of the Incurred Position.

13.5 Munich Re shall pay to Converium within ten Business Days of 31 March 2011 (or, if later, the
date on which the profit is determined in accordance with Schedule 4), the profit arising on any
Fronting Insurance Contracts written by Munich Re or any member of its Group calculated on the
basis set out in Clause 13.12, or allow any LOC or LOC’s that has or have been issued and delivered
to Munich Re in accordance with Clauses, 13.1, 13,4, 13.6 or 13.9 (or because of the definition of
Incurred Position) to be reduced, in the aggregate, by an amount equivalent to such profit.
Nothing in this Clause 13.5 shall be construed to require Munich Re to pay any amount or reduce the
LOC’s delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this
Agreement that would cause the MR Fund to be less than the greater of (a) and (b) below:

	 	(a)	 	the sum of:

	 	(i)	 	100 per cent. of outstanding claims reserves, including reserves for
claims incurred but not reported, maintained by Munich Re or the relevant member
of its Group in accordance with applicable law or regulation in respect of
relevant Reinsured Risks written in the name of such person (the MR Reserves);
plus
	 
	 	(ii)	 	the greater of:

	 	(A)	 	$8,600,000.00 million; and
	 
	 	(B)	 	20% of the MR Reserves; or

	 	(b)	 	the minimum amount which is required to allow Munich Re or such
member of its Group to receive credit for the Reinsurance of the Fronting
Insurance Contracts written by it under the laws of the jurisdiction in which
such person is domiciled.

The greater of (a) or (b) above shall be referred to as the Post Profit Incurred Position.

13.6 At any time after 31 December 2010 but prior to 31 December 2014 that the MR Fund is less than
the Post Profit Incurred Position, within ten Business Days of receiving notice from Munich Re or
Agents (or, if later, the date on which the Post Profit Incurred Position is determined in
accordance with Schedule 6), Converium shall pay to Munich Re such additional amount as shall be
required for the MR Fund to equal the Post Profit Incurred Position.

13.7 Munich Re shall pay to Converium, or allow any LOC or LOC’s that has or have been issued and
delivered to Munich Re in accordance with clauses, 13.1, 13.4, 13.6 or 13.9 (or because of the
definition of Incurred Position) to be reduced, in the aggregate, by an equivalent amount, within
ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the date on which the
MR Reserves are

Page 27 

 

determined in accordance with Schedule 6 for that date), the amount required to
reduce the MR Fund to the greater of:

(a) the MR Reserves; or

(b) the minimum amount which is required to allow Munich Re or such member
of its Group to receive credit for the Reinsurance of the Fronting
Insurance Contracts written by it under the laws of the jurisdiction in
which such person is domiciled.

13.8 At any time after 31 March 2015 that the MR Fund is less than the greater of:

	 	(a)	 	the MR Reserves; or
	 
	 	(b)	 	the minimum amount required to allow Munich Re or such
member of its Group to receive credit for the Reinsurance of the Fronting
Insurance Contracts written by it under the laws of the jurisdiction in which
such person is domiciled,

Munich Re may serve a Letter of Credit Notice which shall state the amount of additional
security required to increase the MR Fund to the greater of (a) and (b) above.

13.9 Within ten Business Days of receipt of notice pursuant to Clause 13.8 (or, if later, the
date on which the MR Reserves are determined in accordance with Schedule 6), Converium may
either:

	 	(a)	 	arrange or cause to be arranged the issue and delivery to
Munich Re of a Letter of Credit in the amount set out in the Letter of Credit
Notice for the benefit of Munich Re; or
	 
	 	(b)	 	deposit the required additional funds in the MR Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice,
Converium shall, if practicable and if agreed by Munich Re, be entitled to provide the
necessary security by increasing, or causing to be increased, the amount of any existing
Letter of Credit by the amount of the Letter of Credit Notice rather than by issuing and
delivering, or causing to be issued and delivered, a new Letter of Credit). For the avoidance
of doubt, nothing in this Clause shall be construed as limiting the number of Letter of Credit
Notices that may be served from time to time by Munich Re.

13.10 Within ten Business Days of the end of each quarter following 31 December 2014, Munich Re
shall pay to Converium the amount, if any, by which the MR Fund exceeds the greater of:

	 	(a)	 	the MR Reserves; and

Page 28 

 

	 	(b)	 	the amount required to allow Munich Re or such member of its Group to
receive credit for the Reinsurance of the fronting Insurance Contracts written
by it under the laws of the jurisdiction in which such person is domiciled.

13.11 In
applying Clauses 13.8, 13.9 and 13.10, all currencies shall be converted to US$ at the
relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited
accounts produced for the Pool for the year most recently ended. Clauses 13.4 through 13.10 may be
terminated by the agreement Munich Re and Converium without the consent of the other parties.

13.12 Global shall, by no later than 31 March 2011 deliver to Munich Re and Converium its
calculation of the profit attributable to the Fronting Insurance Contracts written by Munich Re and
the members of its Group calculated on a basis consistent with that used for the purposes of the
audited accounts produced for the Pool in the year ended on 31 December 2010 (the MR Statement).
The MR Statement shall be accompanied by sufficient information to allow Munich Re and Converium to
understand how the profit set out in the MR Statement has been calculated and the basis upon which
it has been calculated (including without limitation the calculation of the MR IBNR). The process
in Clause 15.1 and Schedule 4 shall apply in relation to the MR Statement.

13.13 In determining profit, Global shall:

	 	(a)	 	calculate each of the items in (a) to (d) inclusive of the
definition of profit using each of US$, Canadian $, € and GBP by allocating all
relevant premiums, claims and reserves to one only of such currencies in
accordance with Global’s current practice, for the avoidance of doubt profit
shall be paid out in each of the four currencies; and
	 
	 	(b)	 	use the incurred but not reported reserves as reported by Munich
Re and applicable members of its Group for the Reinsured Risks (the
MR IBNR).

13.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall
calculate the total profit attributable to the Fronting Insurance
Contracts in US$ by converting to
US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts
produced for the Pool for the year ended 31 December 2010 (the Exchange Rate) (such
amount being the Total $ Distribution).

13.15 If Clause 13.14 applies, the amount of any distribution pursuant to Clause 13.5 (using the
Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $
Distribution and the distribution in one or more of the currencies not in deficit shall be reduced
to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which
there was a profit shall be reduced by an equal percentage so that the distribution equals the
Total $ Distribution at the Exchange Rate).

Page 29 

 

13.16 Global shall, by no later than 31 March 2015 deliver to Munich Re and Converium
its calculation of outstanding reserves on claims reported on Reinsured Risks and Munich Re’s
calculation of outstanding reserves on incurred but not reported claims on Reinsured Risks as of
the prior 31 December together with the actuarial calculation of those reserves and sufficient
information to allow Converium, and Munich Re to understand how the reserves were set. This
process shall be repeated within 90 days of the end of each calendar quarter so long as Clause
13.10 remains in effect.

13.17 The amounts required to be held in the MR Fund shall be reduced by:

	 	(a)	 	fifty per cent of the amount of any Letter of Credit established
by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of Munich Re
Clause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to the
Reinsured Risks;
	 
	 	(b)	 	fifty per cent of any amount paid by (or on behalf of) Converium
towards the fund held by the Agents on behalf of the Pool in relation claims on
business written during the Period; and
	 
	 	(c)	 	fifty per cent of the amount of any reinsurance premiums paid by
(or on behalf of) Converium in relation to reinsurance taken out by the Agents
in relation to the business of the Pool written during the Period,

provided that the MR Fund shall not be reduced below $8,600,000.00 million (or, if lower and
Clause 13.8 applies, the amount required to be held in the MR Fund
pursuant to Clause 13.8) as a
result of the operation of Clauses 13.17(b) or (c).

13.18 To the extent that the MR Fund consists of monies Munich Re shall pay to Converium an amount
equal to the interest which is deemed to have accrued on that part of the MR Fund in the quarter to
31 March, 30 June, 30 September and 31 December in each year within two Business Days of such date.
The amount of such interest shall be calculated on a daily basis. Interest shall accrue on the
amounts in the MR Fund in each quarter at a rate equal to the “yield on the one year US Treasury
Notes” on the first Business Day after the 31 March, 30 June, 30 September or 31 December ending
the previous quarter as shown in the Wall Street Journal for the close of that first Business Day
of the calendar quarter. For the purposes of the foregoing sentence, the “one year US Treasury
Yield” shall mean the annual yield on the U. S. Treasury Bond or Note maturing on the day nearest
the first anniversary of that first Business Day of that calendar quarter. If there are two bonds
or notes that are equally near the third anniversary, the annual yield of the instruments will be
averaged. No interest shall be paid by Munich Re to Converium in respect of any LOC issued and
delivered to Munich Re in accordance with and pursuant to Converium’s obligations under this
Agreement.

13.19 References in this Clause 13 to reserves for claims incurred but not reported shall mean the
amount of such reserves required to be kept in accordance with actuarial best practice in the
relevant jurisdiction and the guidance produced by relevant actuarial bodies. Converium shall be
provided with sufficient information at

Page 30 

 

all times to understand how such reserves have been calculated and the basis on which
they have been calculated. Converium may challenge the calculation of any such reserve as set out
in Schedule 6 and until such dispute is resolved in accordance with Schedule 6, the provision of
this Clause 13 for which the reserves were provided shall have no effect.

14.
National Indemnity Security

14.1 Converium shall on or before 3rd January 2007 (or such later date as National Indemnity
may specify) pay to National Indemnity the sum of $8,600,000.00 million to be held on the basis set
out in Clause 14.3.

14.2 Any amounts paid pursuant to Clauses 5.1(a), 14.1, 14.4, 14.6 or 14.9 or because of the
definition of Incurred Position, shall be paid to the account of National Indemnity notified to
Converium in writing by National Indemnity from time to time.

14.3 The
amounts held pursuant to Clause 14.2 shall be known as the NICO
Fund.
Such amounts shall be held by National Indemnity as trustee for Converium provided that National
Indemnity shall be entitled to make payments from such account in order to pay amounts which are
due:

	 	(a)	 	or claimed to be due under Reinsured Risks in respect of which
Fronting Insurance Contracts have been written by it or members of its Group;
	 
	 	(b)	 	to it or members of its Group from Converium under the terms of
the Reinsurance;
	 
	 	(c)	 	to it or members of its Group from Converium in respect of
Overriding Commission; and/or
	 
	 	(d)	 	pursuant to Clause 2A.

14.4 At any time prior to 31 December 2010 that the NICO Fund together with the amount of any
claims paid by the Agents or National Indemnity in relation to the Reinsured Risks is less than
fifty per cent (50%) of the Incurred Position, within ten Business Days of receiving notice from
National Indemnity or the Agents (or, if later, the date on which the Incurred Position is
determined in accordance with Schedule 6), Converium shall pay to National Indemnity such
additional amount as shall be required for the NICO Fund to equal fifty per cent (50%) of the
Incurred Position.

14.5 National Indemnity shall pay to Converium within ten Business Days of 31 March 2011 (or, if
later, the date on which the profit is determined in accordance with Schedule 5), the profit
arising on any Fronting Insurance Contracts written by National Indemnity or any member of its
Group calculated on the basis set out in Clause 14.12. Nothing in this clause shall be construed to
require National Indemnity to pay any amount which would cause the NICO Fund to be less than the
greater of (a) and (b) below:

	 	(a)	 	the sum of:

Page 31 

 

	 	(i)	 	100 per cent, of outstanding claims reserves, including reserves for claims
incurred but not reported maintained by National Indemnity or the relevant member
of its Group in accordance with applicable laws in respect of relevant Reinsured
Risks written in the name of the relevant person (the NIC Reserves); plus
	 
	 	(ii)	 	the greater of:

	 	(A)	 	$8,600,000.00 million; and

	 
	 	(B)	 	20% of the NIC Reserves; and

	 	(b)	 	the minimum amount which is required to allow National Indemnity
or such member of its Group to receive credit for the Reinsurance of the
Fronting Insurance Contracts written by it under the laws of the jurisdiction
in which each person is domiciled.

The greater of (a) or (b) above shall be referred to as the NIC Post Profit Incurred Position.

14.6 At any time after 31 December 2010 but prior to 31 December 2014 that the NICO Fund is less
than the NIC Post Profit Incurred Position, within ten Business Days of receiving notice from
National Indemnity or Agents (or, if later, the date on which the Post Profit Incurred Position is
determined in accordance with Schedule 6), Converium shall pay to National Indemnity such
additional amount as shall be required for the NICO Fund to equal the Post Profit Incurred
Position.

14.7 National Indemnity shall pay to Converium within ten Business Days of 31 March 2015 (or, if
later, within ten Business Days of the date on which the NIC Reserves are determined in accordance
with Schedule 6 for that date), an amount as shall be required to reduce the NIC Fund to the
greater of:

	 	(a)	 	the NIC Reserves; or
	 
	 	(b)	 	the minimum amount which is required to allow National
Indemnity or such member of its Group to receive credit for the Reinsurance of
the Fronting Insurance Contracts written by it under the laws of the
jurisdiction in which such person is domiciled.

14.8 At any time after 31 March 2015 that the NICO Fund is less than the greater of:

	 	(a)	 	the NIC Reserves; or
	 
	 	(b)	 	the minimum amount required to allow National Indemnity or such
member of its Group to receive credit for the Reinsurance of the Fronting
Insurance Contracts written by it under the laws of the jurisdiction in which
such person is domiciled,

Page 32 

 

National Indemnity may serve a Letter of Credit Notice which shall state the amount of
additional security required to increase the NICO Fund to the greater of (a) and (b) above.

14.9 Within ten Business Days of receipt of a notice pursuant to Clause 14.8 (or, if later, the
date on which the NIC Reserves are determined in accordance with Schedule 6), Converium may either:

	 	(a)	 	arrange or cause to be arranged the issue and delivery to
National Indemnity of a Letter of Credit in the amount set out in the Letter of
Credit Notice for the benefit of National Indemnity; or
	 
	 	(b)	 	deposit the required additional funds in the NICO Fund.

If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice,
Converium shall, if practicable and if agreed by NICO, be entitled to provide the necessary
security by increasing, or causing to be increased, the amount of any existing Letter of Credit by
the amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to be
issued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clause
shall be construed as limiting the number of Letter of Credit Notices that may be served from time
to time by NICO.

14.10 Within ten Business Days of the end of each quarter following 31 December 2013, National
Indemnity shall pay to Converium the amount, if any, by which the NICO Fund exceeds the greater of:

	 	(a)	 	the NIC Reserves; and
	 
	 	(b)	 	the amount required to allow National Indemnity or such member of
its Group to receive credit for the Reinsurance of the Fronting Insurance
Contracts written by it under the laws of the jurisdiction in which such person
is domiciled.

14.11 In applying Clauses 14.8, 14.9 and 14.10, all currencies shall be converted to US$ at the
relevant exchange rate used by (or to be used by) the Agents for the purpose of the audited
accounts produced for the Pool for the year most recently ended. Clauses 14.4 through 14.10 may be
terminated by National Indemnity and Converium without the consent of the other parties.

14.12 Global shall, by no later than 31 March 2011 deliver to National Indemnity and Converium its
calculation of the profit attributable to the Fronting Insurance Contracts written by National
Indemnity and the members of its Group calculated on a basis consistent with that used for the
purposes of the audited accounts produced for the Pool in the three years ended on 31 December 2010
(the NIC Statement). The National Indemnity Statement shall be accompanied by sufficient
information to allow National Indemnity and Converium to understand how the profit set out in the
NIC Statement has been calculated and the basis upon which it has been calculated (including
without limitation the calculation of the NIC IBNR). The process in Clause 15.2 and Schedule 5
shall apply in relation to the NIC Statement.

Page 33 

 

14.13 In determining profit, Global shall:

	 	(a)	 	calculate each of the items in (a) to (d) inclusive of the
definition of profit using each of US$, Canadian $, € and GBP by allocating all
relevant premiums, claims and reserves to one only of such currencies in
accordance with Global’s current practice, for the avoidance of doubt profit
shall be paid out in each of the four currencies; and
	 
	 	(b)	 	use the incurred but not reported reserves as reported by
National Indemnity and applicable members of its Group for the Reinsured Risks
(the NIC IBNR).

14.14 If the calculation of profit in any of the four currencies shows a loss, then Global shall
calculate the total profit attributable to the Fronting Insurance
Contracts in US$ by converting to
US$ at the relevant exchange rate used by the Agents for the purpose of the audited accounts
produced for the Pool for the year ended 31 December 2010 (the Exchange Rate)
(such amount being the Total $ Distribution).

14.15 If Clause 14.14 applies, the amount of any distribution pursuant to Clause 14.5 (using the
Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $
Distribution and the distribution in one or more of the currencies not in deficit shall be reduced
to ensure that the Total $ Distribution is not exceeded (the distribution of currencies in which
there was a profit shall be reduced by an equal percentage so that the distribution equals the
Total $ Distribution at the Exchange Rate).

14.16 Global shall, by no later than 31 March 2015 deliver to National Indemnity and Converium its
calculation of outstanding reserves on claims reported on Reinsured Risks and National
Indemnity’s calculation of outstanding reserves on incurred but not reported claims on Reinsured
Risks as of the prior 31 December together with the actuarial calculation of those reserves and
sufficient information to allow Converium, and National Indemnity to understand how the reserves
were set. This process shall be repeated within 90 days of the end of each calendar quarter so long
as Clause 14.10 remains in effect.

14.17 The amounts required to be held in the NIC Fund shall be reduced by:

	 	(a)	 	fifty percent of the amount of the Letter of Credit established
by Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of NIC Clause
15.5(c)(iv)) of the Pool Members’ Agreement which relates to the Reinsured
Risks;
	 
	 	(b)	 	fifty per cent of any amount paid by (or on behalf of) Converium
towards the fund held by the [Agents on behalf of the] Pool in relation claims
on business written during the Period; and
	 
	 	(c)	 	fifty per cent of the amount of any reinsurance premiums paid by
(or on behalf of) Converium in relation to reinsurance taken out

Page 34 

 

	 	 	 	by the Agents in relation to the business of the Pool written
during the Period

provided that the NIC Fund shall not be reduced below $8,600,000.00 million (or if lower and
Clause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8) as a
result of the operation of Clauses 14.17(b) or (c).

14.18 National Indemnity shall pay to Converium an amount equal to the interest which is deemed to
have accrued on the NIC Fund in the quarter to 31 March,
30 June, 30 September and 31 December in each year within two Business Days of such date. The
amount of such interest shall be calculated on a daily basis. Interest shall accrue on the amounts
in the NIC Fund in each quarter at a rate equal to the “yield on the one year US Treasury Notes” on
the first Business Day after the 31 March, 30 June, 30 September or 31 December ending the previous quarter as shown in the Wall
Street Journal for the close of that first Business Day of the calendar quarter. For the
purposes of the foregoing sentence, the “one year US Treasury Yield” shall mean the annual yield on
the U.S. Treasury Bond or Note maturing on the day nearest the first anniversary of that first
Business Day of that calendar quarter. If there are two bonds or notes that are equally near the
third anniversary, the annual yield of the instruments will be averaged.

14.19 References in this Clause 14 to reserves for claims incurred but not reported shall mean the
amount of such reserves required to be kept in accordance with actuarial best practice in the
relevant jurisdiction and guidance produced by relevant actuarial bodies in the jurisdiction.
Converium shall be provided with sufficient information at all times to understand how such
reserves have been calculated and the basis on which they have been calculated, Converium may
challenge the calculation of any such reserve as set out in Schedule 6 and until such dispute is
resolved in accordance with Schedule 6, the provision of this Clause 14 for which the reserves were
provided shall have no effect.

15.
Dispute Resolution

15.1 Within thirty (30) days of receipt of Global’s calculations under Clause 13, either
Converium or Munich Re may challenge Global’s calculations under Clause 13. In that
event, the dispute shall be settled as provided in Schedule 6 or in the case of the calculation of
profit, Schedule 4.

15.2 Within thirty (30) days of receipt of Global’s calculations under Clause 14, either Converium
or National Indemnity may challenge Agents’ calculations under Clause 14. In that event, the
dispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit,
Schedule 5.

16.
Letters of Credit and Authority

16.1 Notwithstanding any other provision of this Agreement, National Indemnity or Munich Re
may, at any time, draw down upon any Letter of Credit provided by or on behalf Converium pursuant
to Clause 13 or Clause 14, in order to:

Page 35 

 

	 	(a)	 	fund the payment of amounts due or claimed to be due under Reinsured Risks
in respect of which Fronting Insurance Contracts have been written by it or
members of its Group;
	 
	 	(b)	 	pay any amounts which are due to it or any member of its Group
from Converium under the terms of the Reinsurance; and/or
	 
	 	(c)	 	pay any amounts which are due to it or any member of its Group
from Converium in respect of Overriding Commission.

16.2 Any bank issuing a Letter of Credit relating to this Agreement shall be unconditionally
obliged to accede to any request made by or on behalf of Munich Re or National Indemnity (as
appropriate) to draw down on such Letter of Credit provided only that such bank is satisfied that
such request is made by, or with the proper authority of, Munich Re or National Indemnity (as
appropriate) and/or its authorised representatives (who shall not include the Agent or any
replacements).

16.3 Each of Munich Re and National Indemnity hereby grants the Agent authority to act as their
respective agents in taking all necessary action on its behalf to exercise its rights under Clauses
13 and 14, including (without limitation) the service of a Letter of Credit Notice, but nothing
herein shall be construed as granting the Agent any authority with respect to disputes under
Clauses 15.1 or 15.2 or Schedules 4, 5 or 6.

17. Set-off

17.1 National Indemnity may set off any amount due to it from Converium against any amount
owed by National Indemnity or any member of its Group to Converium under this Agreement.

17.2 Munich Re may set off any amount due to it from Converium against any amount owed by Munich Re
or any member of its Group to Converium under this Agreement.

18.
Regulatory Matters

18.1 The parties shall co-operate with each other to ensure that all information necessary
or desirable for making (or responding to any requests for further information following) any
regulatory notification or filing made in respect of this Agreement, or any agreement, arrangement
or concerted practice of which it forms part, is supplied to the party dealing with such
notification or filing and that they are properly, accurately and promptly made.

18.2 The parties will each procure that any other registrations, filings and/or submissions
required under the laws or regulations of any jurisdiction in respect of the Agreement or any
Fronting Insurance Contract are made.

Page 36 

 

19. Waiver of Obligations

19.1 Waiver by any party of any default by any other party in the performance of any
obligation of such other party hereunder shall not affect such party’s rights in respect of any
other default nor any subsequent default of the same or of a different kind nor shall any delay or
omission of any party to exercise any right arising from any default affect or prejudice that
party’s rights as to the same or any future default. Waiver by one party of any default by any
other party shall not constitute a waiver of such default on the part of or on behalf of any other
party.

19.2 Subject to Clause 19.3, no claim shall be made by Converium against any officer, employee,
agent or sub-contractor of either Agent in respect of any matter arising in respect of this
Agreement, save in the case of criminal actions or omissions, fraud or wilful misconduct.

19.3 Clause 19.2 shall not preclude the Agents from making claims against any of its agents or
sub-contractors on behalf of Converium, National Indemnity or Munich Re or the members of their
Groups.

20. Amendment and Representations

20.1 Any amendment to any term of this Agreement shall be in writing and signed by the
authorised representatives of the parties hereto provided that rights and obligations between
Converium and (a) Munich Re or (b) National Indemnity may be amended by written agreement between
Converium and such person.

20.2 This Agreement sets out the entire agreement and understanding between the parties in relation
to the Business and the arrangements in Clause 2A. It is agreed that no party has entered into this
Agreement in reliance upon, or been induced to enter into this Agreement by, any representation,
warranty or undertaking of any other party hereto (whether express or implied and whether pursuant
to statute or otherwise) which is not set out in this Agreement and to the extent that it may have
done so, it hereby waives (on behalf of itself and the members of its Group) all rights, remedies
and claims it may have in respect thereto. A party may claim in contract for breach of warranty
under this Agreement but shall otherwise have no claim or remedy in respect of misrepresentation
(whether negligent or otherwise, and whether made prior to, and/or in, this Agreement) or untrue
statement made by any other party provided that this Clause 20.2 shall not exclude any liability
for, or remedy in respect of, any fraud including, without limitation, fraudulent misrepresentation
by any party (or (where relevant) any member of its Group).

21. Assignment

No party shall sell, transfer or encumber all or any of its rights or obligations under this
Agreement without the prior written consent of all the other parties.

22. Notices and Communications

22.1 Notices under this Agreement shall be sent to a party at its address and for the
attention of the individual set out in Clause 22.3 provided that a party may change its

Page 37 

 

notice details on giving notice to the other parties of the change in accordance with
this Clause 22. That notice shall only be effective on the date falling five clear Business Days
after the notification has been received or such later date as may be specified in the notice.

22.2 All notices or other communications required for the purposes of this Agreement shall be in
English and shall be given or sent by hand, facsimile, first class post or airmail to the parties
and shall be deemed to be received: (i) if given by hand, at the time of delivery; or (ii) if sent
by facsimile; at the time when the sender receives from the recipient facsimile machine or from
the addressee of the notice confirmation of receipt of the whole of the facsimile; or (iii) if
sent by first class post, 24 hours after posting; or (iv) if sent by airmail, 6 clear Business
Days after the date of posting.

22.3 Notices under this Agreement shall be sent to the following addresses or facsimile numbers
for the attention of the person indicated:

	 	 	 	 	 
	Party	 	Title of individual/address	 	Facsimile Number
	National
Indemnity (for
itself or as agent
for any member of
its Group)

	 	Attention: General Counsel

100 First Stamford Place

Stamford, CT,

USA 06092
	 	+1-203-363-5221
	 
	 	 	 	 
	Munich Re
(for itself or as
agent for any member
of its Group)

	 	Attention: Doris Höpke

(Head of Aviation and Space)

Königinstraße 107

80802 München 

Germany
	 	+49-89- 3891 — 4278
	 
	 	 	 	 
	Converium

	 	Attention: Chris Bell/Christian
Felderer

General Guisan — Quai 26

8022, Zurich

Switzerland
	 	+41-1-639-9066
	 
	 	 	 	 
	Global

	 	Attention: Company Secretary

Fitzwilliam House

10 St. Mary Axe

London EC3A 8EQ
	 	+44 20 7369 2840

22.4 Different persons may be authorised to give or receive instructions for different
purposes, and such persons may include officers of corporations other than the parties hereto,
authorised in that regard by the board of the relevant party. A certified copy of a resolution
of the board of Munich Re, National Indemnity or Converium or the relevant member of such
person’s Group (or with respect to National Indemnity and members of its Group, the Executive
Committee of the board of such entity) may be received and accepted by the Agent as conclusive
evidence of

Page 38 

 

the authority of any person to act and may be considered in full force and effect until
receipt of written notice to the contrary.

23.
Governing Law and Arbitration

23.1 This Agreement and the relationship between the parties shall be governed by and
interpreted in accordance with the law of England and Wales.

23.2 Save as set out in Schedules 4, 5 and 6 each party to this Agreement irrevocably agrees that
the courts of England are to have exclusive jurisdiction to settle any dispute (including claims
for set-off and counterclaims) which may arise in connection with the validity, effect,
interpretation or performance of, or the legal relationships established by, this Agreement or
otherwise in connection with this Agreement and for such purposes irrevocably submits to the
jurisdiction of such courts.

23.3 All parties agree that a final judgment or order of any court referred to in Clause 23.2 in
connection with this Agreement is conclusive and binding on it and may be entered against it in the
courts of any other jurisdiction.

24. Costs

24.1 Each party shall be responsible for the legal and other professional charges and expenses
(including Value Added Tax) incurred by it in connection with the preparation and negotiation of
this Agreement.

24.2 Any costs and expenses which arise pursuant to the terms of the Pool Members Agreement solely
as a result of the operation of this Agreement and which would not have arisen had the Pool Members
Agreement been effected on the basis existing prior to this Agreement shall be paid by Converium.

25. Enforceability

25.1 If any provision of this Agreement or any part thereof:

	 	(a)	 	purports to exclude or restrict or limit any liability and such
exclusion or restriction or limitation is prohibited or rendered void or
unenforceable by any legislation to which it is subject; or
	 
	 	(b)	 	is itself prohibited or rendered void or unenforceable by any
legislation to which it is subject,

then the exclusion, restriction or limitation or the provision or part thereof in question shall
be so prohibited or rendered void or unenforceable to the extent to which it is thus prohibited or
rendered void or unenforceable and no further and the validity or enforceability of any other part
of this Agreement shall not thereby be affected.

26.
Relationship with pool members’ agreement

26.1 This Agreement shall constitute a Fronting Arrangement for the purposes of the Pool
Members’ Agreement and save as set out in this Agreement Converium shall

Page 39 

 

effect all payments under Clause 9.1(f) (subject to Clauses 9.1(g) and (h)) of the Pool
Members’ Agreement as if it is a Nominating Insurer.

26.2
Subject to Clause 26.3, as between Converium and the Agent, the terms of this Agreement are
without prejudice to their rights and obligations under the Pool Members’ Agreement.

26.3 Converium acknowledges that the terms of the Indemnity (as defined in Clause 20 of the Pool
Members’ Agreement) shall apply (mutatis mutandis) to any claims, losses, expenses and
liabilities properly made against or incurred by Indemnified Directors (as defined therein) in
the purported execution of and discharge of their duties with respect to the performance of
services under this Agreement.

26.4 Converium acknowledges that Clause 4.2 of the Pool Members’ Agreement shall apply to any
losses, liabilities or expenses of the Agent (or a wholly-owned subsidiary of Global appointed
pursuant to Clause 2.5) under this Agreement.

27.
No Rights Under
Contracts (Rights of Third Parties) Act 1999 

A person who is not a party to this Agreement is not intended to have any right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms, save in respect of Clause
26.3 conferring the rights and benefits of indemnities on the Indemnified Directors and Clause 19.2
conferring rights and benefits on employees, agents or sub-contractors of either Agent (each such
party being for the purposes of this Clause 27 a Third Party), which shall be enforceable by such
persons by way of proceedings in the courts specified in Clause 23 subject to and in accordance
with the Contracts (Rights of Third Parties) Act 1999, and Clauses 26.3 and 19.2 and this Clause 27
shall not be varied by the parties to this Agreement without the consent of each relevant Third
Party. Any other provision of this Agreement may be varied or revoked without such consent.

28. Counterparts

This Agreement may be executed in any number of counterparts and by the parties to it on
separate counterparts, each of which is an original but all of which together constitute one and
the same instrument.

Page 40 

 

SCHEDULE 1

AMOUNT AND BASIS OF CALCULATION OF OVERRIDING

COMMISSION

1. Introductory

This Schedule sets out further terms and principles applicable to the calculation and
payment of Overriding Commission in accordance with Clause 6.

2. Procedure and Amounts

2.1 The amount of Overriding Commission payable by Converium shall be calculated by
reference to the total gross premium income written by the Agent in the period in question in
respect of each Reinsured Risk after deduction of any (i) original commission or taxes on premiums
payable thereunder but before the deduction of amounts, if any, payable to the Agent under the
terms of the Pool Members’ Agreement and (ii) any premiums payable for reinsurance in relation to
the Pool by the Agents (such amount being referred to as the Relevant Net Premium Income).

2.2 The amount of Overriding Commission payable by Converium to National Indemnity shall be
calculated by multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered
by Fronting Insurance Contracts written by National Indemnity or members of its Group by 4 per
cent. (or by such percentage as may be agreed from time to time between National Indemnity and
Converium).

2.3 The amount of Overriding Commission payable by Converium to Munich Re shall be calculated by
multiplying the Relevant Net Premium Income attributable to Reinsured Risks covered by Fronting
Insurance Contracts written by Munich Re or members of its Group by 4
per cent. (or by such
percentage as may be agreed from time to time between Munich Re and Converium).

2.4 Subject to Clause 6.2, the amount of Overriding Commission attributable to any calendar quarter
shall be due and payable on (i) the last business day of the immediately following calendar
quarter, or (ii) the date on which a cash distribution is paid by the Agents to Converium under the
Pool Members’ Agreement with respect to business written in such calendar quarter, whichever is
earlier and shall be deducted by National Indemnity from the NICO Fund or by Munich Re from the MR
Fund on that date.

Page 41 

 

SCHEDULE 2

MUNICH RE GROUP FRONTING

Part I

Munich Re Group Fronters

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	4. Member of	 	 
	 	 	 	 	 	 	Munich Re	 	 
	 	 	 	 	 	 	Group in whose	 	5. Percentage
	 	 	 	 	 	 	name Fronting	 	of
	1. Agent	 	 	 	 	 	Insurance	 	Converium’s
	Accepting	 	 	 	 	 	Contracts should	 	Respective
	Business	 	2. Jurisdiction	 	3. Business	 	be written	 	Proportion
	Global

	 	Worldwide, subject to
licensing regulations
	 	Business written
in the UK
	 	GRLK
	 	 	50	 

GR LK means Great Lakes Reinsurance (UK) plc

The companies, jurisdictions and business listed in columns 2-4 respectively of this may be
amended or added to with the written agreement (in such person’s absolute discretion) of
Converium, Global and Munich Re provided that the amendment would not result in a Trigger Event
occurring, and that all relevant Fronting Insurance Contracts written after the date of the
agreement are written in the name of the replacement companies, jurisdictions and business.

Page 42 

 

SCHEDULE 3

NATIONAL INDEMNITY GROUP FRONTING

Part I

National Indemnity Group Fronters

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	4. Member	 	 
	 	 	 	 	 	 	of National	 	 
	 	 	 	 	 	 	Indemnity	 	 
	 	 	 	 	 	 	Group in	 	 
	 	 	 	 	 	 	whose name	 	 
	 	 	 	 	 	 	Fronting	 	5. Percentage
	 	 	 	 	 	 	Insurance	 	of
	1. Agent	 	 	 	 	 	Contracts	 	Converium’s
	Accepting	 	 	 	 	 	should be	 	Respective
	Business	 	2. Jurisdiction	 	3. Business	 	written	 	Proportion
	Global

	 	Worldwide, subject to
licencing restrictions
	 	Business written
in the
UK
	 	BHII
	 	 	50	 

BHII means Berkshire Hathaway International Insurance Ltd.

The companies, jurisdictions and business listed in columns 2-4 respectively of this Schedule
may be amended or added to with the written agreement (in such person’s absolute discretion) of
Converium, Global and NIC provided that the amendment would not result in a Trigger Event
occurring, and that all relevant Fronting Insurance Contracts written after the date of the
agreement are written in the name of the replacement companies, jurisdictions and business.

Page 43 

 

Part II

Jurisdictions in which National Indemnity is fronted

	 	 	 	 	 	 	 
	1 . Agent	 	 	 	 	 	 
	Accepting	 	 	 	 	 	4. Fronter for           
	Business	 	2. Jurisdiction	 	3. Business	 	National Indemnity
	Global

	 	Mexico, Ecuador,
Colombia and Venezuela
written in the UK
	 	Business written
in the UK
	 	RSAI
	 
	 	 	 	 	 	 
	Global

	 	US Surplus lines

(except where written in

BHII)
	 	Business written
in the UK
	 	The Marine

Insurance Company

Limited

Page 44 

 

SCHEDULE 4

MR STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of Munich Re or Converium may request from the Agents such additional information as it
reasonably requires to confirm whether it agrees with the MR Statement and the Agents or Munich Re
shall provide such information, to the extent they have it or are entitled to it, promptly and in
any case within 5 Business Days of the request.

2. Munich Re or Converium may notify the Agents and Munich Re or Converium (as appropriate) in
writing (such notification being an Objection Notice) within thirty (30) days after receipt that is
disputes the MR Statement. Any notice indicating that Munich Re or Converium does not accept the
MR Statement shall only be valid for the purposes of this Agreement if it sets out the reasons why
the person serving the notice believes the MR Statement does not correctly state the profits
attributable to the Fronting Insurance Contracts written by Munich Re and the members of its Group
calculated in accordance with Clause 13 and specifies the adjustments which, in such person’s
opinion, should be made to the MR Statement. The validity of any such notice shall be a matter for
determination by the Independent Firm.

3. If an Objection Notice is served in accordance with 2 above, then Munich Re and Converium shall
use all reasonable endeavours (in conjunction with the Agents):

	(a)	 	to meet and discuss the objections in the Objection Notice; and

	(b)	 	to reach agreement upon the adjustments (if any) required to be made to the MR Statement,
within a period of five (5) Business Days after receipt by the Agents of the Objection Notice.

4. If both Munich Re and Converium notify the Agents in writing that they are satisfied with the MR
Statement (either as originally submitted or after adjustments agreed between Munich Re and
Converium pursuant to 3 above) or if neither Munich Re or Converium gives a valid Objection Notice
within the thirty (30) day period referred to in 2 above, then the MR Statement (as so adjusted, if
applicable) shall be final and binding for the purposes of this agreement.

5. If Converium and Munich Re do not reach agreement within five (5) Business Days of receipt by
the Agents of the Objection Notice, then the matters in dispute may be referred (on the application
of either the Converium or Munich Re) for determination by such firm of actuaries of international
standing as shall be agreed by Converium and Munich Re or, failing agreement, appointed by the
President for the time being of the Institute of Actuaries in England and Wales on the application
of Converium or Munich Re (the Independent Firm). Converium and Munich Re shall use all reasonable
endeavours to agree with the Independent Firm the precise terms of reference to apply to its role
as soon as reasonably practicable following a referral to the Independent Firm. Converium and
Munich Re shall procure that the Agents

Page 45 

 

comply with any reasonable requests of the Independent Firm. The following general terms
of reference and procedure shall apply in any event:

	(a)	 	Converium and Munich Re shall each prepare a written statement within five (5) days of the
formal appointment of the Independent Firm on the matters in dispute which (together with the
relevant supporting documents) shall be submitted to the Independent Firm for determination.
The matters in dispute shall be limited to the matters specified in the Objection Notice;

	(b)	 	following delivery of their respective submissions, Converium, and Munich Re shall each have
the opportunity to comment once only on the other’s submissions by written comment delivered
to the Independent Firm not later than ten (10) days after receipt of the other’s submissions;

	(c)	 	any response to a subsequent request by the Independent Firm for information from Converium,
Munich Re or the Agents shall be copied to Converium and Munich Re at the same time and,
unless otherwise directed by the Independent Firm, each person receiving a copy of the
information may, within ten (10) days after it receives such information, comment
once only on that information;

	(d)	 	in giving its determination, the Independent Firm shall state what adjustments (if any) are
necessary, solely for the purposes of this agreement, to the MR Statement in respect of the
matters in dispute in order to comply with the requirements of this agreement and to determine
finally the MR Statement;

	(e)	 	the Independent Firm shall determine (using its own legal advice as appropriate)
any question of the legal construction of this agreement but only insofar as it is relevant to
the determination of the MR Statement;

	(f)	 	the Independent Firm shall act as an expert (and not as an arbitrator) in making any such
determination and any such determination (including any determination of any fact which it has
found it necessary to determine for the purposes of its determination) shall, in the absence
of manifest error, be final and binding on the parties; and

	(g)	 	without prejudice to any other rights which they may respectively have under this agreement,
the parties expressly waive, to the extent permitted by law, any rights of recourse to the
courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and Munich Re shall each be responsible for their own costs in connection with the
preparation, review and agreement or determination of the MR Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between
Converium and Munich Re or in such other proportions as the Independent Firm shall determine.

Page 46 

 

SCHEDULE 5

NIC STATEMENT DISPUTE RESOLUTION MECHANISM

1. Each of National Indemnity or Converium may request from the Agents such additional information
as it reasonably requires to confirm whether it agrees with the NIC Statement and the Agents shall
provide such information, to the extent they have it or are entitled to it, promptly and in any
case within 5 Business Days of the request.

2. National Indemnity or Converium may notify the Agents and National Indemnity or Converium (as
appropriate) in writing (such notification being a NICO Objection Notice) within thirty (30)
days after receipt that it disputes the NIC Statement. Any notice indicating that National
Indemnity or Converium does not accept the NIC Statement shall only be valid for the purposes of
this Agreement if it sets out the reasons why the person serving the notice believes the NIC
Statement does not correctly state the profits attributable to the Fronting Insurance Contracts
written by National Indemnity and the members of its Group calculated in accordance with Clause 14
and specifies the adjustments which, in such person’s opinion, should be made to the NIC Statement.
The validity of any such notice shall be a matter for determination by the Independent Firm.

3. If a NICO Objection Notice is served in accordance with 2 above, then National Indemnity and
Converium shall use all reasonable endeavours (in conjunction with the Agents):

	(a)	 	to meet and discuss the objections in the Objection Notice; and

	(b)	 	to reach agreement upon the adjustments (if any) required to be made to the NIC Statement,
within a period of five (5) Business Days after receipt by the
Agents of the Objection Notice.

4. If both National Indemnity and Converium notify the Agents in writing that they are satisfied
with the NIC Statement (either as originally submitted or after adjustments agreed between National
Indemnity and Converium pursuant to 3 above) or if neither National Indemnity or Converium gives a
valid Objection Notice within the thirty (30) day period referred to in 2 above, then the NIC
Statement (as so adjusted, if applicable) shall be final and binding for the purposes of this
agreement.

5. If Converium and National Indemnity do not reach agreement within five (5) Business Days of
receipt by the Agents of the Objection Notice, then the matters in dispute may be referred (on the
application of either the Converium or National Indemnity) for determination by such firm of
actuaries of international standing as shall be agreed by Converium and National Indemnity or,
failing agreement, appointed by the President for the time being of the Institute of Actuaries in
England and Wales on the application of Converium or National
Indemnity (the Independent Firm).
Converium and National Indemnity shall use all reasonable endeavours to agree with the Independent
Firm the precise terms of reference to apply to its role as soon as reasonably practicable
following a referral to the Independent Firm. Converium and National Indemnity shall procure that
the Agents comply with any

Page 47 

 

reasonable requests of the Independent Firm. The following general terms of reference
and procedure shall apply in any event:

	(a)	 	Converium and National Indemnity shall each prepare a written statement within five (5) days
of the formal appointment of the Independent Firm on the matters in dispute which (together
with the relevant supporting documents) shall be submitted to the Independent Firm for
determination. The matters in dispute shall be limited to the matters specified in the
Objection Notice;

	(b)	 	following delivery of their respective submissions, Converium, and National Indemnity shall
each have the opportunity to comment once only on the other’s submissions by written comment
delivered to the Independent Firm not later than ten (10) days after receipt of the other’s
submissions;

	(c)	 	any response to a subsequent request by the Independent Firm for information from Converium,
National Indemnity or the Agents shall be copied to Converium and National Indemnity at the
same time and, unless otherwise directed by the Independent Firm, each person receiving a copy
of the information may, within ten (10) days after it receives such information, comment once
only on that information;

	(d)	 	in giving its determination, the Independent Firm shall state what adjustments (if any) are
necessary, solely for the purposes of this agreement, to the NIC Statement in respect of the
matters in dispute in order to comply with the requirements of this agreement and to determine
finally the NIC Statement;

	(e)	 	the Independent Firm shall determine (using its own legal advice as appropriate)
any question of the legal construction of this agreement but only insofar as it is relevant to
the determination of the NIC Statement;

	(f)	 	the Independent Firm shall act as an expert (and not as an arbitrator) in making any such
determination and any such determination (including any determination of any fact which it has
found it necessary to determine for the purposes of its determination) shall, in the absence
of manifest error, be final and binding on the parties; and

	(g)	 	without prejudice to any other rights which they may respectively have under this agreement,
the parties expressly waive, to the extent permitted by law, any rights of recourse to the
courts they may otherwise have to challenge the Independent Firm’s determination;

6. Converium and National Indemnity shall each be responsible for their own costs in connection
with the preparation, review and agreement or determination of the NIC Statement.

7. The fees and expenses of the Independent Firm and the Agents shall be shared equally between
Converium and National Indemnity or in such other proportions as the Independent Firm shall
determine.

Page 48 

 

SCHEDULE 6

DISPUTE MECHANISM IN RELATION TO RESERVE CALCULATIONS

1. Converium may dispute any calculation carried out by the Agents, Munich Re or National Indemnity
or any reserves figure provided by the Agents, Munich Re or National Indemnity and Munich Re
or National Indemnity may dispute any calculation carried out by the Agents as set out in this
Schedule.

2. The disputing party may request from the person providing the information in dispute or any
other party such additional information as it reasonably requires and such person shall provide
such information, to the extent they have it or are entitled to it, promptly and in any case within
5 Business Days of the request.

3. The disputing party may notify the person providing the information in dispute in writing (such
notification being an Objection Notice) within thirty (30) days after receipt that it disputes the
information. Any notice indicating that the disputing party does not accept the information shall
only be valid for the purposes of this Agreement if it sets out the reasons why the person serving
the notice believes the information has not been properly calculated in accordance with the
Agreement and specifies the adjustments which, in such person’s opinion, should be made to the
information. Ultimately, the validity of any such notice shall be a matter for determination by the
Independent Firm.

4. If an Objection Notice is served in accordance with paragraph 3 above, then the disputing party
and the disputer shall use all reasonable endeavours (in conjunction with the Agents):

	(a)	 	to meet and discuss the objections in the Objection Notice; and

	(b)	 	to reach agreement upon the adjustments (if any) required to be made to the information,
within a period of five (5) Business Days after receipt of the Objection Notice.

5. If the disputing party and the disputer agree in writing that they are satisfied with the
information (either as originally submitted or after adjustments agreed between them above) then
the information (as so adjusted, if applicable) shall be final and binding for the purposes of this
agreement.

6. The disputing party and the disputer do not reach agreement within five (5) Business Days of
receipt of the Objection Notice, then the matters in dispute may be referred (on the application of
either of them) for determination by such other firm of actuaries of international standing as
shall be agreed by them or, failing agreement, appointed by the President for the time being of the
Institute of Actuaries in England and Wales on the application of either of them (the Independent
Firm). The disputing party and the disputer shall use all reasonable endeavours to agree with
the Independent Firm the precise terms of reference to apply to its role as soon as reasonably
practicable following a referral to the Independent Firm. The disputing party and the disputer
shall procure that the Agents comply with any reasonable

Page 49 

 

requests of the Independent Firm. The following general terms of reference and
procedure shall apply in any event:

	(a)	 	the disputing party and the disputer shall each prepare a written statement within five (5)
days of the formal appointment of the Independent Firm on the matters in dispute which
(together with the relevant supporting documents) shall be submitted
to the Independent Firm
for determination. The matters in dispute shall be limited to the matters specified in the
Objection Notice;

	(b)	 	following delivery of their respective submissions, the disputing party and the disputer
shall each have the opportunity to comment once only on the other’s submissions by written
comment delivered to the Independent Firm not later than ten (10) days after receipt of the
other’s submissions;

	(c)	 	any response to a subsequent request by the Independent Firm for information from the
disputing party and the disputer shall be copied to the other at the same time and, unless
otherwise directed by the Independent Firm, each person receiving a copy of the information
may, within ten (10) days after it receives such information, comment once only on that
information;

	(d)	 	in giving its determination, the Independent Firm shall state what adjustments (if any) are
necessary, solely for the purposes of this agreement, to the information in respect of the
matters in dispute in order to comply with the requirements of this Agreement;

	(e)	 	the Independent Firm shall determine (using its own legal advice as appropriate)
any question of the legal construction of this Agreement;

	(f)	 	the Independent Firm shall act as an expert (and not as an arbitrator) in making any such
determination and any such determination (including any determination of any fact which it has
found it necessary to determine for the purposes of its determination) shall, in the absence
of manifest error, be final and binding on the parties; and

	(g)	 	without prejudice to any other rights which they may respectively have under this agreement,
the parties expressly waive, to the extent permitted by law, any rights of recourse to the
courts they may otherwise have to challenge the Independent Firm’s determination;

7. The disputing party and the disputer shall each be responsible for their own costs in connection
with the preparation, review and agreement or determination of the information.

8. The fees and expenses of the Independent Firm and the Agents shall be shared equally between the
disputing party and the disputer or in such other proportions as the Independent Firm shall
determine.

Page 50 

 

In witness whereof this Agreement has been signed by and on behalf of
the parties on the day and year first before written.

	 	 	 	 	 	 	 	 	 
	SIGNED
by Anthony Medniuk

	 	 	)	 	 		 	 
	 

	 	 	)	 	 	 	 	 
	for and on behalf of

	 	 	)	 	 	 	 	 
	GLOBAL AEROSPACE

	 	 	)	 	 	 	 	 
	UNDERWRITING MANAGERS

	 	 	)	 	 	 	 	 
	LIMITED

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED
by Jeff Cassidy

	 	 	)	 	 		 	 
	 

	 	 	)	 	 	 	 	 
	for and on behalf of

	 	 	)	 	 	 	 	 
	GLOBAL AEROSPACE, INC.

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by Paul
Ziehl and Simone Oesterlein

	 	 	)	 	 	
	 	
	and

	 	 	)	 	 	 	 	 
	duly authorised representatives of

	 	 	)	 	 	 	 	 
	MÜNCHENER
RÜCKVERSICHERUNGS-GESELLSCHAFT

	 	 	)
)	 	 	 	 	 
	AKTIENGESELLSCHAFT
	 	 	 	 	 	 	 	 
	in
MÜNCHEN

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SIGNED by Forrest N. Krutter, Secretary

	 	 	)	 	 		 	 
	and

	 	 	)	 	 	 	 	 
	for and on behalf of

	 	 	)	 	 	 	 	 
	NATIONAL INDEMNITY COMPANY

	 	 	)	 	 	 	 	 

Page 53 

 

	 	 	 	 	 	 	 	 	 
	SIGNED
by Christopher Bell
and Benjamin Gentsch
for and on behalf
of)
CONVERIUM AG

	 	 	)
 
)	 	 	
	 
	

	 	 	 	 	 		 	 
	
	 	 	 	 	 	 	 	 
	
	 	 	 	 	 	 	 	 

Page 54 

 

ANNEXURE
1

FORM OF DEED OF ADHERENCE FOR USE BY SUBSIDIARIES OF

GLOBAL AND GAI

DEED
OF ADHERENCE

THIS DEED is made the [       ] day of [      ],
20[      ] by

	(1)	 	[      ] (No.      ) whose
registered office is at [      ] hereinafter called [New Subsidiary];
	 
	(2)	 	GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED
(registered number 2512067) whose registered office is at Fitzwilliam House, 10 St. Mary
Axe, London EC3 8EQ (Global);
	 
	(3)	 	GLOBAL AEROSPACE, INC. a Delaware company (GAI);
	 
	(4)	 	NATIONAL INDEMNITY COMPANY, a company incorporated in Nebraska, United States of
America, whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131
(National Indemnity);
	 
	(5)	 	CONVERIUM AG, a company incorporated in Switzerland whose registered office is at General
Guisan-Quai 26, 8022 Zürich, Switzerland (Converium); and
	 
	(6)	 	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT
AKTIENGESELLSCHAFT IN MÜNCHEN, whose registered
office is at Königinstraße, 107, 80802
München, Germany (Munich Re).

Whereas:

	(a)	 	[Global/GAI] has duly [incorporated] [acquired] [New
Subsidiary] [to be] [as] its wholly
owned subsidiary in accordance with the provisions of the reinsurance fronting and
administration agreement made between Global, GAI, National Indemnity and Converium and Munich
Re dated • November 2004 as it may have been
subsequently amended (the Agreement).

	(b)	 	Under the provisions of Clause 2.5 of the Agreement, [New Subsidiary] shall become a party to
the Agreement by executing a Deed of Adherence in the form (or substantially in the form) set
out in Annexure 1 to the Agreement and this Deed is in such form.

Now this deed witnesseth as follows:

1. Words and phrases defined in the Agreement shall, unless the context otherwise
requires, have the same meaning in this Deed.

Page 53 

 

2. [New Subsidiary] agrees and undertakes to be bound by and to have the benefit of
the Agreement as if it were named therein as a party in its capacity as and being a subsidiary of
[Global/GAI].

3. [New Subsidiary],
subject to and in accordance with Clause 2.5 of the Agreement, agrees to act
as agent for [XXX] on and in accordance with the terms of the Agreement including on and with
effect from [INSERT EFFECTIVE DATE].

4. This Deed and the relationship between the parties shall be governed by and interpreted in
accordance with English law. For the benefit of the other parties hereto, each party to this Deed
irrevocably agrees that the Courts of England are to have exclusive jurisdiction to settle any
dispute which may arise in connection with this Deed and for any such purposes irrevocably submits
to the jurisdiction of such Courts.

In witness whereof this document has been executed as a Deed the day and year first
before written.

Page 54 

 

In
witness whereof this Agreement has been signed by and on behalf of the
parties on the day and year first before written.

	 	 	 	 	 
	SIGNED by

	 	 	)	 
	 

	 	 	)	 
	for and on behalf of

	 	 	)	 
	GLOBAL AEROSPACE

	 	 	)	 
	UNDERWRITING MANAGERS

	 	 	)	 
	LIMITED

	 	 	)	 
	 
	 	 	 	 
	SIGNED by

	 	 	)	 
	 

	 	 	)	 
	for and on behalf of

	 	 	)	 
	GLOBAL AEROSPACE, INC.

	 	 	)	 
	 
	 	 	 	 
	SIGNED by

	 	 	)	 
	 

	 	 	)	 
	and

	 	 	)	 
	duly authorised representatives of

	 	 	)	 
	MÜNCHENER
RÜCKVERSICHERUNGS-

	 	 	)	 
	GESELLSCHAFT

	 	 	)	 
	AKTIENGESELLSCHAFT

	 	 	)	 
	in
MÜNCHEN

	 	 	)	 
	 
	 	 	 	 
	SIGNED by Forrest N. Krutter, Secretary

	 	 	)	 
	and

	 	 	)	 
	for and on behalf of

	 	 	)	 
	NATIONAL INDEMNITY COMPANY

	 	 	)	 

Page 51 

 

	 	 	 	 	 
	SIGNED by Christopher Bell

	 	 	)	 
	and Benjamin Gentsch

	 	 	)	 
	for and on behalf of)
	 	 	 	 
	CONVERIUM AG
	 	 	 	 

Page 52

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]