Document:

exv10w170

EXHIBIT
10.170

Property Catastrophe Excess of Loss

Reinsurance Contract

No. 2010250

Effective: January 1, 2010

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract No.
	 

	 	2010250

 

 

PROPERTY CATASTROHE EXCESS OF LOSS REINSURANCE CONTRACT

	 	 	 	 	 	 	 	 	 
	Clause	 	Article Number	 	Page
	Access To Records (LM-00100-2009.09.29-A) (AM)
	 	 	18	 	 	 	13	 
	Arbitration (LM-00200-2009.10.26-A) (AM)
	 	 	20	 	 	 	14	 
	Assignment, Novation, or Transfer (LM-00300-2008.05.13-A)
	 	 	32	 	 	 	26	 
	Business Covered
	 	 	1	 	 	 	1	 
	Confidentiality (LM-00400-2009.11.03-A)
	 	 	27	 	 	 	19	 
	Currency (LM-00500-2009.09.29-A)
	 	 	17	 	 	 	13	 
	Definitions
	 	 	4	 	 	 	3	 
	Dividends and Taxes (LM-00600-2009.03.10-A)
	 	 	22	 	 	 	18	 
	Effective Date and Termination
	 	 	3	 	 	 	3	 
	Entire Agreement (LM-00701-2008.08.15-A)
	 	 	31	 	 	 	26	 
	Errors and Omissions (LM-00800-2005.06.02-A)
	 	 	19	 	 	 	14	 
	Exclusions
	 	 	2	 	 	 	2	 
	Extra Contractual Obligations (LM-00900-2009.09.29-A-PCAT) (AM)
	 	 	6	 	 	 	5	 
	Federal Excise Tax (LM-01000-2008.08.15-A)
	 	 	23	 	 	 	18	 
	Florida Hurricane Catastrophe Fund (LM-02900-2009.12.18-P) (AM)
	 	 	10	 	 	 	8	 
	Federal Terrorism Excess Recovery (LM-01100-2008.08.06-A)
	 	 	34	 	 	 	27	 
	Governing Law (LM-01200-2008.09.18-A)
	 	 	26	 	 	 	19	 
	Insolvency (LM-01300-2009.09.03-A) (AM)
	 	 	21	 	 	 	17	 
	Interest Penalty (LM-01400-2005.08.24-A)
	 	 	15	 	 	 	10	 
	Loss Adjustment and Settlement (LM-01500-2009.09.29-A) (AM)
	 	 	13	 	 	 	9	 
	Loss in Excess of Original Policy Limits (LM-01600-2009.09.29-A-PCAT) (AM)
	 	 	7	 	 	 	5	 
	Loss Occurrence
	 	 	8	 	 	 	6	 
	Net Retained Lines
	 	 	9	 	 	 	7	 
	Offset (LM-01700-2009.03.26-A)
	 	 	25	 	 	 	19	 
	Other Reinsurance
	 	 	11	 	 	 	8	 
	Reinsurer Claims Obligations (LM-03100-2008.07.21-A) (AM)
	 	 	29	 	 	 	21	 
	Salvage and Subrogation (LM-01800-2008.08.15-A) (AM)
	 	 	14	 	 	 	9	 
	Service of Suit (LM-01900-2009.09.29-A)
	 	 	24	 	 	 	18	 
	Severability (LM-02000-2005.06.02-A)
	 	 	28	 	 	 	21	 
	Special Conditions (LM-02100-2009.12.09-A) (AM)
	 	 	30	 	 	 	21	 
	Territory (LM-02201-2005.06.02-A-PCAT)
	 	 	12	 	 	 	8	 
	Third Parties (LM-02700-2005.09.27-A)
	 	 	33	 	 	 	27	 
	Ultimate Net LOSS (LM-02403-2009.09.30-P) (AM)
	 	 	5	 	 	 	3	 
	Unauthorized Reinsurance (LM-02500-2009.12.09-A) (AM)
	 	 	16	 	 	 	11	 

Attachments:

	•	 	Exhibit A — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit B — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit C — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit D — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement

	 	 	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe

	 

	 	Excess of Loss Contract No.

	 

	 	2010250

 

 

	•	 	Exhibit E — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit F — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit G — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Exhibit H — Limit & Retention, Rate & Premium, Reports & Remittances, Reinstatement
	 
	•	 	Pools, Syndicates, Associations (LM-03300-2008.11.03-P)
	 
	•	 	War Risk Exclusion Clause
	 
	•	 	Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (USA)
	 
	•	 	Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (Canada)
	 
	•	 	Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994) Worldwide Excluding U.S.A. & Canada)
	 
	•	 	Insolvency Funds Exclusion Clause
	 
	•	 	Terrorism Exclusion Clause (LM-02300-2009.09.30-P)
	 
	•	 	Mold Exclusion

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract No.
	 

	 	2010250

 

 

Property Catastrophe Excess of Loss

Reinsurance Contract

No. 2010250

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

(hereinafter referred to as the “Subscribing Reinsurer”)

Article 1
— Business Covered

By this Contract the Subscribing Reinsurer agrees to reinsure the Company under all written or oral
binders, policies, cover notes or contracts of insurance or reinsurance and/or any endorsements to
any of the foregoing, issued, accepted or held covered provisionally or otherwise, by and on behalf
of the Company or ceded directly or indirectly to the Company by an Affiliate of the Company, or
OneBeacon Insurance Company for Policies subject to the rewritten Indemnity Reinsurance Agreement
by and between the Company and OneBeacon Insurance Company, (hereinafter each referred to as, a
“Legal Entity” and, collectively, the “Legal Entities”) for business identified as belonging to the
Agency Markets strategic business unit of the Liberty Mutual Group and in force at the effective
date hereof or issued or renewed on or after that date, and classified by the Company or a Legal
Entity as Property coverages (hereinafter referred to individually as “Policy” or collectively as
“Policies”) including but not limited to;

	 	 	Property coverages;

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 1 of 53

 

	 	 	subject to the terms, conditions and limitations set forth herein and in Exhibits A, B, C,
D, E, F, G and H attached to and forming part of this Contract.

Article 2 — Exclusions

This Contract does not apply to:

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

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

	F.	 	Loss or damage as excluded in the Insolvency Funds Exclusion Clause, as attached
hereto and forming part of this Contract.
	 
	G.	 	Policies classified as Insolvency or Financial Guarantee.
	 
	H.	 	Losses arising from seepage and pollution as per the Company’s policy exclusions. This
exclusion shall not apply, however, when the judicial entity having legal jurisdiction
invalidates the Company’s pollution exclusion, thereby obligating the Company for pollution
liability when such liability was intended to be excluded from coverage. Nevertheless, this
exclusion does not preclude any payment of the cost of the removal of debris of property
damaged by a loss otherwise covered hereunder.
	 
	I.	 	Losses in respect of overhead transmission and distribution lines and their supporting
structures, other than those on or within 300 meters (or 1,000 feet) of the insured premises.
It is understood and agreed that public utilities extension and/or suppliers extension and/or
contingent business interruption coverages are not subject to this exclusion, provided these
are not part of a transmitters’ or distributors’ Policy.
	 
	J.	 	Terrorism-related losses excluded by the Terrorism Exclusion Clause, attached hereto and
forming part of this Contract.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 2 of 53

 

	K.	 	Mold but only as respects the Mold Exclusion as attached hereto and forming part of this
Contract.

	L.	 	Equipment Breakdown Coverage.

	M.	 	Aircraft hull.

	N.	 	Motor Cargo (Legal Liability).

	O.	 	Property coverages classified by the Company as “Casualty,” other than burglary, theft and
robbery when afforded under an Inland Marine Policy or under the Property insurance section
of a multiple peril policy.

	P.	 	Business classified by the Company as Fidelity and Surety, except for Safe Deposit Box
Insurance.

	Q.	 	Ocean Marine except for property Policies written for Marinas, Boat Dealers and Yachts.

	R.	 	Liability in respect of hail damage to growing and/or standing crops; however, this
exclusion shall not apply to nursery or greenhouse crops.

Article 3 — Effective Date and Termination

	A.	 	This Contract applies only to losses arising out of loss occurrences commencing during
its effective period. This Contract is effective at 12:01 a.m., January 1, 2010, Local
Standard Time, and shall end at 12:01 a.m., January 1, 2011, Local Standard Time,
	 
	B.	 	If this Contract should expire or terminate while a Loss Occurrence is in progress, the
Subscribing Reinsurer shall nevertheless be liable to the extent of its interest, subject to
the other conditions of this Contract, for all losses in the Loss Occurrence whether
happening before or after such expiration or termination, provided that no claim is made
against such Loss Occurrence on any renewal of this Contract.

Article 4 — Definitions

	A.	 	The term “Affiliate” or “Affiliates”, as used in this Contract, means an entity that
directly, or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with the Company.

Article 5 — Ultimate Net Loss (LM-02403-2009.09.30-P) (AM)

	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: all amounts paid or due and payable
by the Company or a Legal Entity in the investigation, appraisal, adjustment, settlement
litigation, defense or appeal, or payment of claims or judgments arising from each and every
loss, and/or loss occurrence for which the Company or a Legal Entity is or may be found
liable under the Policies, less salvages and subrogation recoveries, and amounts recovered or
recoverable under pooling agreements or other reinsurances, whether collectible or not.
“Ultimate Net Loss” includes, but is not limited to, the following paid or due and payable
amounts: Allocated Loss Adjustment Expenses, Unallocated Loss Adjustment Expenses calculated
at 7% of any loss, and all other costs

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 3 of 53

 

		 	of investigation or litigation for which the Company or a Legal Entity is or may be found
liable under the Policies. Extra Contractual Obligations, as defined in the Extra
Contractual Obligations Article, and Loss in Excess of Original Policy Limits, as described
in the Loss in Excess of Policy Limits Article, shall be included in “Ultimate Net Loss,”
provided that Extra Contractual Obligations and Loss in Excess of Original Policy Limits,
combined, shall not exceed 25% of “Ultimate Net Loss.”
	 
	B.	 	Nothing herein shall be construed to mean that losses under this Contract are not
recoverable until the Company’s or a Legal Entity’s Ultimate Net Loss has been
ascertained.
	 
	C.	 	“Allocated Loss Adjustment Expense” as used herein shall mean any and all expenses
paid or due and payable by the Company or a Legal Entity in the investigation, appraisal,
adjustment, settlement, litigation, defense or appeal, or payment of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal
Entity is or may be found liable under the Policies, including but not limited to Claim-
Specific Declaratory Judgment Expenses, Attorneys’ Fees and Expenses, Field
Employee Salaries and Expenses, defense costs, court costs, supersedeas and appeal
bond costs, Post or Prejudgment Interest or Delayed Damages, and expenses of outside
adjusters or other third party administrators.
	 
	D.	 	“Unallocated Loss Adjustment Expense” as used herein shall mean any and all
expenses paid or due and payable by the Company or a Legal Entity in the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal, or payment of claims or
judgments arising from each and every loss or loss occurrence for which the Company
or a Legal Entity is or may be found liable under the Policies that do not constitute
Allocated Loss Adjustment Expense.
	 
	E.	 	“Claim-Specific Declaratory Judgment Expenses” shall mean the fees and expenses
incurred in actions brought to determine whether the Company or a Legal Entity has a
defense and/or indemnification obligation for individual claims presented against Policies
covered under this Contract. Any Claim-Specific Declaratory Judgment Expense shall
be deemed to have been fully incurred on the same date as the insured’s original loss or
loss occurrence (if any) giving rise to the action, unless otherwise provided for within
this Contract.
	 
	F.	 	“Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of
attorneys, including but not limited to the fees and expenses of the Company’s or its
affiliates’ in-house attorneys providing legal advice on coverage questions and/or
defending the Company or a Legal Entity in coverage litigation, and fees and expenses
of staff counsel in the defense of policyholder claims. Such Attorneys’ Fees and
Expenses for in-house attorneys and staff counsel shall be calculated at the rate for
such attorneys plus the expenses incurred by such attorneys, but excluding office
expenses of the Company and Its affiliates and salaries and expenses of their other
employees which constitute Unallocated Loss Adjustment Expense.
	 
	G.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages
added to a settlement, verdict, award, or judgment based on the period of time prior to or
after the settlement, verdict, award, or judgment whether or not expressly identified as
such.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No, 2010250

Page 4 of 53

 

	H.	 	“Field Employee Salaries and Expenses” as used above, shall mean a pro rate share of salaries
and expenses of the Company’s or its affiliates’ field employees according to the time
occupied in adjusting, defending, and settling such losses or loss occurrences, and of
expenses of all of the Company’s or its affiliates’ officers and employees incurred in
connection with the loss; except that salaries of officers and employees engaged in general
management of the Company or its affiliates and any office expense of the Company or its
affiliates do not constitute Field Employee Salaries and Expenses, but rather Unallocated Loss
Adjustment Expense.

Article 6
— Extra Contractual Obligations (LM-00900-2009.09.29-A-PCAT) (AM)

	A.	 	This Contract shall protect the Company within the limits hereof for 100% of Extra
Contractual Obligations. “Extra Contractual Obligations” are defined as any actual or
potential liabilities not covered under any other provision of this Contract, arising from
or relating to any alleged or actual act, error or omission, whether intentional or otherwise,
or from any alleged or actual negligence, tortious conduct, reckless conduct, violations
of statutes or regulations governing the conduct of insurance companies and/or claims
adjusters, or bad faith in connection with: (i) the handling of any claim under the
Policies, such liabilities arising because of, but not limited to, the following: failure
by the Company, a Legal Entity or by a third party claims administrator to settle within the
Policy limit, or by reason of alleged or actual negligence, fraud or bad faith of the
Company, a Legal Entity or by a third party claims administrator in rejecting an offer of
settlement, or in defending or prosecuting litigation, including appeals, arbitration, or
any alternative dispute resolution or settlement discussions involving any claim; or (ii) the
providing of or failure to provide any loss control or loss prevention services in
connection with any Policy hereunder.
	 
	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in
all circumstances, to be the date of the original occurrence, Loss Occurrence,
accident, casualty, disaster, or loss, as determined by the Company.
	 
	C.	 	However, this Article shall not apply where the loss has been incurred due to any
fraudulent or criminal act directed against the Company or a Legal Entity by a member
of the Board of Directors or a corporate officer of the Company or a Legal Entity acting
individually or collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or settlement of any claim
covered hereunder.

Article 7 — Loss In Excess of Original Policy Limits (LM-01600-2009.09.29-A-PCAT)
(AM)

	A.	 	This Contract shall protect the Company within the limits hereof, for 100% of any Loss in
excess of the original Policy limit where Loss in excess of the limit has been incurred
because of a failure by the Company, or a Legal Entity or by a third-party claims
administrator to settle within the Policy limit or by reason of alleged or actual
negligence,
fraud, or bad faith in rejecting an offer of settlement or in defending or prosecuting
litigation, including appeals, arbitration, or any alternative dispute resolution or
settlement discussions involving any claim.

	B.	 	However, the above paragraph shall not apply where the loss has been incurred due to
any fraudulent or criminal act directed against the Company or a Legal Entity by a

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 5 of 53

 

	 	 	member of the Board of Directors or a corporate officer of the Company or a Legal Entity
acting individually or collectively or in collusion with any individual or corporation or
any other organization or party involved in the presentation, defense or settlement of any
claim covered hereunder.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which the
Company or a Legal Entity would have been contractually liable to pay had it not been for the
limit of the original Policy. The date on which any Loss in excess of the original Policy
limit is incurred by the Company or a Legal Entity shall be deemed, in all circumstances, to
be the date of the original occurrence, accident, casualty, disaster, Loss Occurrence or
Loss, as determined by the Company.

Article 8 — Loss Occurrence

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

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 6 of 53

 

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

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

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

Article 9 — Net Retained Lines

	A.	 	This Contract applies only to such portion of any obligation that the Company retains net
for its own account (prior to the deduction of any underlying reinsurance specifically
permitted in this Contract). In calculating the amount of any loss hereunder and in computing
the amount in excess of which this Contract attaches only loss in respect of

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 7 of 53

 

	 	 	that portion of any insurance, or reinsurance which the Company retains net shall be
included.
	 
	B.	 	It is agreed that the amount of the Subscribing Reinsurer’s liability hereunder in respect
of any loss shall not be increased by reason of the inability of the Company to collect
from any other reinsurer, whether specific or general, any amount which may have
become due from it whether such inability arises from the insolvency of such other
reinsurer or otherwise.
	 
	C.	 	Allocation of losses and expenses to Legal Entities other than the Company pursuant to
inter-company reinsurance among the Legal Entities and the Company shall be entirely
disregarded for all purposes of this Contract.

Article 10
— Florida Hurricane Catastrophe Fund (LM-02900-2009.12.18-P) (AM)

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

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

	B.	 	For purposes hereof, if a loss reimbursement received by the Company or a Legal Entity
under the FHCF is based on the Company’s or a Legal Entity’s losses in more than one
Loss Occurrence and the FHCF does not designate the amount allocable to each Loss
Occurrence, the reimbursement shall be prorated in the proportion that the Company’s
and the Legal Entity’s losses in each Loss Occurrence bear to the Company’s and the
Legal Entities’ total losses arising out of all Loss Occurrences to which the recovery
applies.
	 
	C.	 	Any reimbursement premiums or emergency assessment paid by the Company or the
Legal Entities under the FHCF shall be disregarded for purposes of determining subject
premium and Ultimate Net Loss under this Contract.

Article 11 — Other Reinsurance

The Company is permitted to have other treaty reinsurance. The premium for any such reinsurance
that inures to the benefit of this Contract will not be included within the subject premium
hereunder. Additionally, the Company may purchase facultative reinsurance on any subject risk it
deems advisable, and the premium for that portion of the Company’s policy reinsured elsewhere will
not be included within the subject premium hereunder.

	 	 	 

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Article 12
— Territory (LM-02201-2005.06.02-A-PCAT)

	A.	 	This Contract is worldwide in scope and shall cover risks wherever located.
	 
	B.	 	It is specifically agreed that the retention of the Company shall apply to losses occurring
on property anywhere in the world.

Article 13 — Loss Adjustment and Settlement (LM-01500-2009.09.29-A) (AM)

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

Article 14 — Salvage and Subrogation (LM-01800-2008.08.15-A) (AM)

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

	B.	 	Amounts recovered from salvage and/or subrogation shall always be used to reimburse
the excess Subscribing Reinsurer (and the Company, should it carry a portion of excess
coverage net) in the reverse order of their participation in the loss before being used in
any way to reimburse the Company or a Legal Entity for its primary loss. If the amount
recovered exceeds the recovery expense, the recovery expense shall be borne by each
party in proportion to its benefit from the recovery. If the recovery expense exceeds the
amount recovered, the amount recovered (if any) shall be applied to the reimbursement
of recovery expense and the remaining expense, as well as any originally incurred loss
expense, shall be added to the Ultimate Net Loss. If no amount is recovered from

	 	 	 

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	 	 	salvage and/or subrogation, the expense incurred in attempting such recovery shall be deemed
loss expense and shall be added to the Ultimate Net Loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to
payments made by the Subscribing Reinsurer under this Contract, shall be applied as if
obtained prior to said payments and all necessary adjustments shall be made between
the Company and the Subscribing Reinsurer as soon as practicable after said salvage
and/or subrogation recovery is obtained.
	 
	D.	 	The Company or a Legal Entity shall have the right, before the happening of the loss, to
waive its right of subrogation as to that loss.

Article 15 — Interest Penalty (LM-01400-2005.08.24-A)

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

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

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

Article 16 — Unauthorized Reinsurance (LM-02500-2009.12.09-A) (AM)

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

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

	B.	 	For a Subscribing Reinsurer who, either at the inception of this Contract or at any time
thereafter, is unauthorized in any province or jurisdiction of Canada, and as respects
risks within Canada for the purposes of the Insurance Companies Act (Canada), such
funding shall be equal to 115% of the Subscribing Reinsurer’s Obligations or such other
amount as may be required by the Office of the Superintendent of Financial
Institutions Canada.
	 
	C.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply for and
secure timely delivery to the Company of clean, irrevocable, and unconditional Letters of
Credit issued by a bank that is a qualified U.S. financial institution acceptable to the
Company, and containing provisions acceptable to the insurance regulatory authorities
having jurisdiction over the Company’s reserves, in an amount equal to the Subscribing
Reinsurer’s proportion of said reserves. At the Company’s request, the Subscribing
Reinsurer will agree to provide a separate Letter of Credit for each Legal Entity. Such
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	 	 	automatically extended for one year from the date of expiration or any future expiration
date unless, sixty (60) days prior to any expiration date, the issuing bank shall notify
the Company or a Legal Entity, as applicable, by certified mail that the issuing bank
elects not to consider the Letters of Credit extended for any additional period.
	 
	D.	 	The Subscribing Reinsurer and the Company agree that the Letters of Credit provided
by the Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn
upon at any time, notwithstanding any other provision of this Contract, and be utilized by
the Company or a Legal Entity or any successors thereto, by operation of law, of the
Company or a Legal Entity, including without limitation, any liquidator, rehabilitator,
receiver, or conservator of the Company, without diminution because of the insolvency
of the Company or a Legal Entity or the Subscribing Reinsurer for one or more of the
following purposes:

	 	1.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of premiums returned to the owners of Policies reinsured under this
Contract because of cancellations of the Policies;
	 
	 	2.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of surrenders and benefits or losses paid by the Company or a Legal Entity
under provisions of the Policies reinsured under this Contract;
	 
	 	3.	 	To fund an account with the Company or a Legal Entity in an amount, at least,
equal to the deduction for reinsurance ceded from the Company’s or a Legal
Entity’s liabilities for Policies ceded under this Contract. The account shall
include, but not be limited to, amounts for Policy reserves, claims and losses
incurred (including losses incurred but not reported), loss adjustment expenses,
and unearned premium reserves;
	 
	 	4.	 	To pay existing liabilities between the Company and the Subscribing Reinsurer
upon commutation of this Contract; and
	 
	 	5.	 	To pay any other amounts the Company claims are due under this Contract.
	 
	 	6.	 	If the Company has concluded that the issuing bank’s financial condition is
such
that the value of the security represented by the Letter of Credit may be in
jeopardy, the Company or a Legal Entity, as applicable, may require that a
replacement Letter of Credit be issued by a bank acceptable to the Company, by
providing the Subscribing Reinsurer with written notice requesting such
replacement Letter of Credit. If the Subscribing Reinsurer fails to provide
acceptable replacement security within ten (10) business days following receipt
of the Company’s notice, the Company or a Legal Entity may draw upon the
existing Letter of Credit in amounts equal to the Subscribing Reinsurer’s
Obligations.

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

	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within
thirty (30) days after receipt of notice of such excess, secure delivery to the
Company of an amendment to the Letters of Credit increasing the amount of credit by
the amount of such difference.

	 	 	 

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	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall,
within thirty (30) days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such excess
credit.

	F.	 	The Subscribing Reinsurer will take any other reasonable steps that may be required for
the Company to take full credit on its statutory financial statements for the reinsurance
provided by this Contract.
	 
	G.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers
(“Party”, individually, or “Parties”, collectively) arising out of, relating to, or
concerning this
Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator Program. Unless
the Parties otherwise agree, the ARIAS-U.S. Newer Arbitrator Program expedited
proceeding with a single Newer Arbitrator shall be used to resolve any such disputes.

Article 17 — Currency (LM-00600-2009.09.29-A)

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

Article 18 — Access to Records (LM-00100-2009.09.29-A) (AM)

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

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

	 	 	 

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	C.	 	As a condition precedent to access to records under this Article, the Subscribing
Reinsurer, its personnel, and any authorized third party representative of the Subscribing
Reinsurer shall agree to the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing
Reinsurer: (1) concerning Trade Secrets of the Company or its Affiliates, (2) subject to
the terms of a third party non-disclosure agreement with the Company or its Affiliates
requiring third party consent to disclosure, (3) subject to the Work-Product Privilege or
Attorney-Client Privilege, or (4) concerning individual private information that, as a
matter of law, cannot be disclosed by the Company or its Affiliates (hereinafter referred
to in the Contract as “Privileged Documents”). The Company shall reasonably try to
exempt the Subscribing Reinsurer from any third party non-disclosure agreement or
obtain consent from the third party to disclose to the Subscribing Reinsurer.
	 
	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the
Subscribing Reinsurer’s access to Privileged Documents falling within D.(3) above, in
connection with the underlying claim reinsured hereunder following final settlement or
final adjudication of the case or cases involving such claim, with prejudice against all
claimants, and all parties to such adjudications; provided that the Company, may defer
release of such Privileged Documents if there are subrogation, contribution, or other
third party actions with respect to that claim or case, which may jeopardize the
Company’s or its Affiliates’ defense by release of such Privileged Documents. In the
event that the Company shall seek to defer release of such Privileged Documents or to
withhold documents concerning Trade Secrets, it will in consultation with the Subscribing
Reinsurer take other steps as reasonably necessary to provide the Subscribing
Reinsurer with the information it reasonably requires to indemnify the Company without
causing a loss of such privileges or protections. The Subscribing Reinsurer, however,
shall not have access to Privileged Documents relating to any dispute between the
Company and the Subscribing Reinsurer.
	 
	F.	 	For purposes of this Article, Trade Secrets” shall have the meaning provided in Section
1839 of the United States Economic Espionage Act of 1996. “Attorney-Client Privilege”
shall mean communications of a confidential nature between: (1)the Company or its
Affiliates, or anyone retained by or in the control of the Company or its Affiliates, or
their
in-house or outside legal counsel, or anyone in the control of such legal counsel, and (2)
any in-house or outside legal counsel which relate to legal advice being sought by the
Company or its Affiliates and/or which contains legal advice being provided to the
Company or its Affiliates. “Work-Product Privilege” shall mean communications, written
materials, and tangible things prepared by or for in-house or outside counsel, or prepared
by or for the Company or its Affiliates, in anticipation of or in connection with
litigation,
arbitration, or other dispute resolution proceedings.

Article 19 — Errors and Omissions (LM-00800.2005.06.02-A)

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

Article 20
— Arbitration (LM-00200-2009.10.26-A)

	 	 	 

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

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
section
6.2 of the Procedures, except that other professionals who have worked for at
least ten (10) years for an insurer or reinsurer shall also be qualified to serve as
an arbitrator or umpire.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in the event that section 6.7(a) of the Procedures is invoked. If
ARIAS ceases to maintain a list, each Party shall exchange eight names of
qualified umpire candidates and shall follow section 6.7 of the Procedures for the
selection of the umpire.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial
and disinterested. The members of the Panel may not be: (1) in the control of
any Party or its parent affiliate, or agent, (2) a former director or officer of any
Party or its parent, affiliate, or agent, or (3) a likely witness in the
arbitration. The
requirement of impartiality means that all members of the Panel shall have the
same obligation to approach the Panel’s duties and decisions with fairness and
without consideration for the fact that Panel members may have been appointed
by one of the Parties. The requirement of impartiality does not mean that any
arbitrator can have no previous knowledge of or experience with respect to
issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of section 10.4 of the Procedures shall be replaced by the
following sentence: The Panel shall require that each Party submit concise
written statements of position, including summaries of the facts and evidence a
Party intends to present, discussion of the applicable law and the basis for the
requested Award or denial of relief sought.”
	 
	 	5.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	6.	 	Position statements may be amended at any reasonable time, but not later than
the close of discovery, without a showing to the Panel that the amending Party
could not reasonably have raised the new claim or issue at an earlier time.
	 
	 	7.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party

	 	 	 

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	 	 	 	seek a reasonable extension to this time frame for good cause shown, the other
Party’s agreement shall not be unreasonably withheld.
	 
	 	8.	 	To the extent permitted by the law, the Panel shall have the authority to
issue
subpoenas and other orders to enforce its decisions.
	 
	 	9.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	10.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
The
Panel shall make a decision and issue an award with regard to the terms
expressed in this Contract, and the custom and practice of the property and
casualty insurance and reinsurance business. The Panel shall not be obligated
to follow the strict rules of law and evidence.”

	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of
this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures,
as modified by paragraphs B.3, B.4, and B.8 through B.10 of this Article, shall apply in
the event that, in a consolidated proceeding or otherwise, the Party initiating arbitration
is seeking payment of a total amount that is no greater than one million dollars
($1,000,000), or the currency equivalent thereof. Sections 16.1, 16.2, 16.3 and the
second sentence of section 16.4 of the Alternative Streamlined Procedures shall not
apply. The Parties agree to comply with section 6.7 of the Procedures to appoint a
single umpire, and hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order
confirming any award of the Panel; a judgment of that court shall thereupon be entered
on any award. If the application for confirmation is contested and a judgment is issued
confirming the award, then the Party against whom confirmation is sought shall pay the
attorneys’ fees incurred by the Party who applied for the confirmation and all court costs
of any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any
participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.

	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any single
Subscribing Reinsurer on this Contract have the right to combine any and all
disputes between them that concern this Contract (including any renewal of this
Contract or any contract for which this Contract is a renewal) into a single
arbitration proceeding before a single Panel, except that the standard for
determining whether a Party may add a new issue, claim, or dispute to an
arbitration proceeding shall be the standard for amending a position statement,
as set form in paragraph B.6 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer.

	 	 	 

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	 	a.	 	Either the Company or any single Subscribing Reinsurer has the
right to
combine any and all disputes between the Company and such single
Subscribing Reinsurer into one arbitration proceeding before a single
Panel where such disputes involve this Contract and any additional
contracts between the two Parties.
	 
	 	b.	 	Notwithstanding the foregoing, subject in each instance to the
mutual
agreement of the Parties, new issues, claims, or disputes may be added
to such existing arbitration proceeding.

	 	3.	 	Same contract, multiple Subscribing Reinsurers. At the Company’s option, if
more than one Subscribing Reinsurer is involved in arbitration relating to this
Contract, where there are common questions of law or fact and a possibility of
conflicting awards or inconsistent results, all such Subscribing Reinsurers shall
constitute and act as one Party for purposes of this Article and communications shall
be made by the Company to each of the Subscribing Reinsurers constituting the one
Party; provided, however, that the Subscribing Reinsurers shall have the right to
assert several, rather than joint defenses or claims, and to be represented by separate
counsel. This provision shall not change the liability of each of the Subscribing
Reinsurers under the terms of this Contract from several to joint.

	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Arbitration Article.
	 
	I.	 	Survival of Article. This Article shall survive the termination or expiration of
this Contract.

Article 21 — Insolvency (LM-01300-2009.09.03-A) (AM)

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

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

	 	 	 

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

Article 22 — Dividends and Taxes (LM-00600-2009.03.10-A)

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

Article 23 — Federal Excise Tax (LM-01000-2008.08.15-A)

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

Article 24 — Service of Suit (LM-01900-2009.09.29-A)

(This Article applies to any unauthorized Subscribing Reinsurer and to any Subscribing Reinsurer
who is domiciled outside the United States of America.)

	A.	 	This Article will not be read to conflict with or override the obligations of the
parties to arbitrate their disputes as provided for in the Arbitration Article. This Article
is intended

	 	 	 

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	 	 	as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as
an alternative to the Arbitration Article for resolving disputes arising out of this
Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be
due hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to
the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in
this Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the
United States, to remove an action to a United States District Court, or to seek a transfer
of a case to another Court as permitted by the laws of the United States or of any state
in the United States. The Subscribing Reinsurer, once the appropriate Court is selected,
whether such court is the one originally chosen by the Company and accepted by the
Subscribing Reinsurer or is determined by removal, transfer, or otherwise, as provided
for above, will comply with all requirements necessary to give said Court jurisdiction and,
in any suit instituted against it upon this Contract, will abide by the final decision of
such Court or of any Appellate Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon: Mendes & Mount, LLP, 750
Seventh Avenue, New York, NY 10019-6829.
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of
the Subscribing Reinsurer in any such suit Further, pursuant to any statute of any state,
territory, or district of the United States that makes provision therefore, the Subscribing
Reinsurer hereby designates the Superintendent, Commissioner, or Director of
Insurance, or other officer specified for that purpose in the statute, or their successor(s)
in office, as their true and lawful attorney upon whom may be served any lawful process
in any action, suit, or proceedings instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Contract, and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a
true copy thereof.

Article 25 — Offset (LM-01700-2009.0-26-A)

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

Article 26 — Governing Law (LM-01200-2008.09.18-A)

The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts, without regard to conflicts of law principles.

	 	 	 

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Article 27 — Confidentiality (LM-00400-2009.11.03-A)

	A.	 	Confidential Information. The submission materials, and any Policy,
financial,
underwriting, accounting, and claims information, data statements, representations, and
other materials provided by the Company or its Affiliates and received by the
Subscribing Reinsurer in the course of an audit, inspection, or otherwise in connection
with this Contract, represent confidential or proprietary information (“Confidential
Information”). This Confidential Information is intended for the sole use of the
Subscribing Reinsurer (and its affiliates, retrocessionaires, accountants, attorneys,
auditors, actuaries or catastrophe modelers or others where required by law) as may be
necessary in analyzing and/or accepting a participation in and/or executing its
responsibilities under or related to this Contract. To the extent that the Subscribing
Reinsurer intends to provide Confidential Information to any third parties (other than its
employees and affiliates), prior to such disclosure, the Subscribing Reinsurer must
require that such third parties agree, in writing, to be bound by this Confidentiality
Article or by a separate written confidentiality agreement, containing terms no less stringent
than those set forth in this Article. The Subscribing Reinsurer acknowledges and agrees
that with respect to any review of Confidential Information by the Subscribing Reinsurer,
and/or discussion of Confidential Information, the Company and its Affiliates do not
waive and do not intend to waive any available privilege or protection. The review of
Confidential Information by the Subscribing Reinsurer and/or discussion of Confidential
Information with the Company or its Affiliates shall not destroy, waive, or otherwise
impair the proprietary and/or protected status of any Confidential Information or any
information revealed in such discussion with the personnel of the Company or its
Affiliates, whether reviewed by and/or discussed with the Subscribing Reinsurer
intentionally or inadvertently, nor does the review of the Confidential Information and/or
discussion of Confidential Information with the Company or its Affiliates constitute an
estoppel or waiver of the Company’s or its Affiliates’ rights to assert the attorney-client
or work-product privileges, or any other applicable privilege or protection over certain
documents contained in the Company’s or its Affiliates’ files and/or certain information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations will
apply to Confidential Information to the extent such Confidential Information: (1) is or
becomes available to the public, other than as a result of impermissible disclosure by the
Subscribing Reinsurer, (2) was or became available lawfully to the Subscribing
Reinsurer from a source, other than the Company, its Affiliates or their personnel, that is
not subject to a confidentiality obligation, (3) was developed independently by the
Subscribing Reinsurer prior to disclosure by the Company, its Affiliates, or their
personnel, as demonstrated by the Subscribing Reinsurer’s records, or (4) is required to
be disclosed by law, regulation, court, or regulatory agency action, subject to the Third-Party Demand paragraph of this Article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining
to all Confidential Information provided by the Company and all knowledge and
information gained through its review of Confidential Information or discussions with the
personnel of the Company or its Affiliates. The Subscribing Reinsurer further agrees not
to disclose any such Confidential Information to any other person or entity, except as
such disclosure may be necessary to its affiliates, retrocessionaires, accountants,
attorneys, auditors, actuaries or catastrophe modelers or others where required by law.
The Subscribing Reinsurer may store Confidential Information about this Contract in its
group-wide IT systems and is entitled to make the Confidential Information available to
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	 	 	management and accounting purposes. The Subscribing Reinsurer agrees that no Confidential
Information is to be copied and/or removed from the Company’s or its Affiliates’ premises
without the express permission of the Company.
	 
	D.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand
pursuant to subpoena, summons, or court or governmental order, to disclose
Confidential Information (including Non-Public Personally Identifiable Information) that
has been provided by the Company or its Affiliates, the Subscribing Reinsurer shall
make commercially reasonable efforts to notify the Company promptly upon receipt of
the demand and prior to disclosure of the Confidential Information and provide the
Company a reasonable opportunity to object to the disclosure. If the Company timely
objects to the release of the Confidential Information, the Subscribing Reinsurer will
comply with the reasonable requests of the Company in connection with the Company’s
efforts to resist release of the Confidential Information. The Company shall bear the cost
of resisting the release of the Confidential Information.
	 
	E.	 	Survival. The Parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.

Article 28 — Severability (LM-02000-2005.06.02-A)

If any provision of this Contract shall be rendered illegal or unenforceable by the laws,
regulations or public policy of any state, such provision shall be considered void in such state,
but this shall not affect the validity or enforceability of any other provision of this Contract
or the enforceability of such provision in any other jurisdiction.

Article 29 — Reinsurer Claims Obligations (LM-03100-2008.07.21-A) (AM)

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

Article 30 — Special Conditions (LM-02100-2009.12.09-A) (AM)

	A.	 	This Article applies only in the event that:

	 	1.	 	A State Insurance Department or other legal authority orders the
Subscribing Reinsurer to cease writing business or has imposed upon it any other
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	 		 	on or conditions relating to the Subscribing Reinsurer’s license or conduct of
business in any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been reduced
by 25% or more from the amount on the effective date of this Contract, or has
been reduced by 25% or more in any period of twelve (12) months or less after
the effective date of this Contract. For the purposes of this paragraph 3, a
change in policyholders’ surplus or equity will be deemed to occur on the date
the Subscribing Reinsurer releases its quarterly financial results; or
	 
	 	4.	 	As respects a Subscribing Reinsurer domiciled outside the United States other
than a Lloyd’s syndicate, such Subscribing Reinsurer’s Shareholder Funds, Net
Worth or Capital & Surplus has been reduced by 25% or more from the amount
on the effective date of this Contract, or has been reduced by 25% or more in
any period of twelve (12) months or less after the effective date of this Contract;
or
	 
	 	5.	 	As respects a Subscribing Reinsurer who is a Lloyd’s syndicate, such
Subscribing Reinsurer’s Stamp Capacity or Funds at Lloyd’s has been reduced
by 25% or more from the amount on the effective date of this Contract or has
been reduced by 25% or more in any period of twelve (12) months or less after
the effective date of this Contract; or
	 
	 	6.	 	There has been a change in control with respect to the Subscribing Reinsurer.
For the purposes of this Contract, a “change in control” with respect to the
Subscribing Reinsurer shall mean that a Person has entered into an agreement
or understanding to purchase, sell or otherwise obtain (whether by stock or asset
purchase, bulk reinsurance, merger, consolidation or otherwise, in one or a
series of transactions), or has so purchased, sold or otherwise transferred or
obtained, a controlling interest in the Subscribing Reinsurer. Without limiting the
foregoing, a Person shall be deemed to have a controlling interest in the
Subscribing Reinsurer if such Person owns, controls or holds an ownership
interest in the Subscribing Reinsurer of at least 20%. For the purposes of this
paragraph, a “Person” means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated entity or governmental entity; or
	 
	 	7.	 	The Subscribing Reinsurer’s A.M. Best’s financial strength rating has been
assigned or downgraded below A- or Standard and Poor’s financial strength
rating has been assigned or downgraded below A-; or
	 
	 	8.	 	As respects a Subscribing Reinsurer who is subject to an Authorized Control
Level Risk-Based Capital Requirement, such Subscribing Reinsurer fails to
maintain its surplus at a level of at least 200% of the Subscribing Reinsurer’s
Authorized Control Level Risk-Based Capital; or
	 
	 	9.	 	The Subscribing Reinsurer announces intentions to cease assumed reinsurance
underwriting operations; or
	 
	 	10.	 	The Subscribing Reinsurer voluntarily ceases assumed reinsurance underwriting
operations; or

	 	 	 

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	 	11.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or
	 
	 	12.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has or has attempted to assign, novate or transfer the
Subscribing Reinsurer’s rights and/or obligations under this Contract, including
any attempted transfer of rights and/or obligations under any U.S. or foreign
statute, legislation or jurisprudence, without the Company’s prior written consent;
or
	 
	 	13.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has invoked any U.S. or foreign statute, legislation or
jurisprudence which purports to enable the Subscribing Reinsurer to require the
Company to settle its claims liabilities, including but not limited to any estimated
or undetermined claims liabilities under this Contract, on an accelerated basis.
This does not include any attempt to enforce a settlement of claims liabilities
under a commutation process to which the parties have agreed; or
	 
	 	14.	 	There is a severance or obstruction of free and unfettered communication and/or
normal commercial or financial intercourse between the United States of America
and the country in which the Subscribing Reinsurer is incorporated or has its
principal office, as a result of war, currency regulations or any circumstances
arising out of political, financial or economic uncertainty.

	B.	 	If one or more of the circumstances in paragraphs A.1 through A.14 occur (a “Trigger
Event”), the Subscribing Reinsurer shall provide the Company with written notice within
five (5) business days from the happening of a Trigger Event. Following the earlier of (1)
the Company’s receipt of notice of a Trigger Event from the Subscribing Reinsurer and
(2) the occurrence of a Trigger Event, the Company may terminate this Contract, upon
thirty (30) days written notice to the Subscribing Reinsurer, except in connection with a
Trigger Event described in paragraph A.1, A.2 or A.14, in which case the Company may
terminate immediately.
	 
	C.	 	Irrespective of the Subscribing Reinsurer’s failure to provide the Company with timely
written notice of the happening of a Trigger Event, upon occurrence of a Trigger Event,
the Company may terminate this Contract at any time, upon thirty (30) days written
notice to the Subscribing Reinsurer, except in connection with a Trigger Event described
in paragraph A.1, A.2 or A.14, in which case the Company may terminate immediately.
No failure or delay by the Company in exercising its option under this paragraph will
operate as a waiver thereof.
	 
	D.	 	Termination under this Article can be made after the date of expiration of this Contract.
	 
	E.	 	If this Contract is terminated under this Article, this Contract shall remain in full force
and
effect as respects the Company’s and the Subscribing Reinsurer’s respective rights and
obligations, prior to the effective date and time of termination. The coverage afforded by
this Contract shall cease as of the date and time of termination and the Subscribing
Reinsurer shall return the unearned premium, if any, within fifteen (15) days of the
termination date, and the minimum premium, if any, shall be prorated. If coverage
hereunder terminates while a claim covered by this Contract is in progress, the
Subscribing Reinsurer shall be liable, subject to all conditions hereof, for its proportion of
the entire claim, provided the event giving rise to the claim started before such
termination.

	 	 	 

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	F.	1.	 	If the Company elects to terminate this Contract under this Article, the Company may also
elect to commute this Contract. Such election to commute shall be made either within the
written thirty (30) day notice to the Subscribing Reinsurer of the Company’s intention to
terminate this Contract, or by written notice thereafter. If the Company elects to commute,
the Subscribing Reinsurer has the option to provide security for its Obligations (as defined
herein), as an alternative to commutation. The Subscribing Reinsurer shall notify the Company
of its decision to provide security for its Obligations under this Contract within fifteen
(15) business days of the receipt of written notice of the Company’s election to commute. If
the Subscribing Reinsurer elects to provide security for its Obligations, the Company shall
provide the Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s
share of all paid recoverables, case reserves, loss adjustment expenses, incurred but not
reported losses, reserves for unearned premium, and ceding commissions due under this Contract
prior to the effective date and time of termination (collectively “Obligations”). Within
fifteen (15) days of the Subscribing Reinsurer’s receipt of such statement, the Subscribing
Reinsurer shall collateralize all unfunded Obligations by securing clean, irrevocable, and
unconditional Letters of Credit, payable exclusively to the Company (or at the Company’s
request, payable to any affiliates of the Company covered under this Contract) and issued by a
bank acceptable to the Company. At the Company’s request, the Subscribing Reinsurer shall
agree to provide a separate Letter of Credit for each Legal Entity.
	 
	 	2.	 	Any Letters of Credit secured by the Subscribing Reinsurer shall be issued for
a period of not less than one year, and shall be automatically extended for one
year from their dates of expiration or any future expiration dates, unless sixty
(60)
days prior to any expiration date the issuing bank shall notify the Company or a
Legal Entity, as applicable, by certified mail that the issuing bank elects not to
extend any Letter of Credit for any additional period.
	 
	 	3.	 	The Subscribing Reinsurer and the Company agree that the Letters of Credit
provided by the Subscribing Reinsurer, pursuant to the provisions of this Article,
may be drawn upon at any time, notwithstanding any other provision of this
Contract, and be utilized by the Company, a Legal Entity or any successor, by
operation of law, of the Company or a Legal Entity, including without limitation,
any liquidator, rehabilitator, receiver, or conservator of the Company or a Legal
Entity, without diminution because of the insolvency of the Company or a Legal
Entity, or the Subscribing Reinsurer for one or more of the following purposes:

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

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

	 	 	 

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	 	b.	 	Where the Letters of Credit will expire without renewal or be
reduced or
replaced by Letters of Credit for a reduced amount and where the
Subscribing Reinsurer’s Obligations under this Contract remain
unliquidated and undischarged ten (10) days prior to the expiration of
the Letter of Credit, to withdraw amounts equal to the Subscribing
Reinsurer’s Obligations, to the extent that the liabilities have not yet
been funded by the Subscribing Reinsurer and exceed the amount of
any reduced or replacement Letters of Credit.
	 
	 	c.	 	If the Company has concluded that the issuing bank’s financial
condition
is such that the value of the security represented by the Letter of Credit
may be in jeopardy, the Company or a Legal Entity, as applicable, may
require that a replacement Letter of Credit be issued by a bank
acceptable to the Company, by providing the Subscribing Reinsurer with
written notice requesting such replacement Letter of Credit. If the
Subscribing Reinsurer fails to provide acceptable replacement security
within ten (10) business days following receipt of the Company’s notice,
the Company or a Legal Entity may draw upon the existing Letter of
Credit in amounts equal to the Subscribing Reinsurer’s Obligations.
	 
	 	d.	 	If the Company or a Legal Entity draws on the Letter of Credit
to obtain
a cash advance, under paragraphs F.3.b or F.3.c, the Company or the
Legal Entity, as applicable, will hold the amount of the cash advance so
obtained in trust in the name of the Company in any qualified United
States financial institution as defined by the Insurance Law of the
Company’s or Legal Entity’s domiciliary state, solely to secure the
Obligations and for the use and purposes enumerated above. The
Company or the Legal Entity, as applicable, will return any balance to
the Subscribing Reinsurer upon the complete and final liquidation and
discharge of all of the Subscribing Reinsurer’s Obligations to the
Company under this Contract or in the event the Subscribing Reinsurer
provides alternative or replacement security consistent with the terms
hereof and acceptable to the Company.

	G.	 	If the Company elects to commute this Contract and the Subscribing Reinsurer does not
fund its Obligations under this Contract, then:

	 	1.	 	The Company shall submit a statement of valuation showing the Subscribing
Reinsurer’s liability for loss(es), whether reported or unreported, comprising the
sum total of the present value of the ceded: (a) case reserves and allocated
loss adjustment expense, (b) projected ultimate losses, (c) any unearned
premium reserve, and (d) undiscounted outstanding paid claims (hereinafter the
“Commutation Losses”), on Policies covered by this Contract as of the effective
date and time of termination. If the Subscribing Reinsurer agrees with the
statement of valuation, the Subscribing Reinsurer shall pay the amount
requested within ten (10) days of receipt of the statement of valuation.
	 
	 	2.	 	In the event the Company and the Subscribing Reinsurer cannot agree on the
statement of valuation of the Subscribing Reinsurer’s liability under such
Policies, either party may request in writing that the differences be settled by a
panel of three actuaries. Each party shall appoint an actuary to assess such
liability within fifteen (15) days after receipt of the written request for
commutation. Upon such appointment, the two actuaries shall appoint a third
actuary. If the two actuaries fail to agree on the third actuary within thirty (30)

	 	 	 

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	 	 	 	days of their appointment, each of them shall nominate three individuals, of whom
the other shall decline two, and the final decision shall be made by drawing lots.
	 
	 	3.	 	The actuaries shall then investigate and Capitalize such Commutation
Loss(es) within thirty (30) days. As used herein, “Capitalize” shall mean to
determine the present value of Commutation Losses, without regard to the Subscribing
Reinsurer’s ability to pay such losses. The panel shall meet in Boston,
Massachusetts, unless the Company and the Subscribing Reinsurer agree otherwise.
	 
	 	4.	 	All actuaries shall be disinterested in the outcome of the commutation and
shall
be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial
Society. Except as stated below, the expense of the actuaries and of the
commutation shall be equally divided between the parties of the commutation.
	 
	 	5.	 	The decision in writing of the actuaries, when filed with the parties
hereto, shall
be final and binding, except that if the Company does not agree with the
Capitalized value of the Commutation Loss(es), the Company shall have no
obligation to commute. In the event the Company does not agree with the
Capitalized value of the Commutation Loss(es) and does not move forward with
commutation, the Company will pay the expense of the actuaries including
reasonable expense of the actuary appointed by the Subscribing Reinsurer.
	 
	 	6.	 	If the Contract is commuted, payment by the Subscribing Reinsurer to the
Company or any other third party mutually agreed upon by the Subscribing
Reinsurer and the Company shall constitute a complete and final release of the
Subscribing Reinsurer in respect to its liability under this Contract.
	 
	 	7.	 	The commutation process described in this Article shall not be subject to
any
other dispute resolution process, including but not limited to the Arbitration
Article
of this Contract.

Article 31 — Entire Agreement (LM-00701-2008.08.15-A)

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

Article 32 — Assignment, Novation, or Transfer (LM-00300-2008.05.13-A)

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 26 of 53

 

remain liable under this Contract, and further guarantees the performance of all obligations of
any assignee, novatee or transferee under this Contract Notwithstanding the foregoing, the
Company may assign this Contract to an insurance entity controlling, controlled by or under
common control with the Company, without the Subscribing Reinsurer’s written consent.

Article 33 — Third Parties (LM-02700-2005.09.27-A)

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

Article 34 — Federal Terrorism Excess Recovery (LM-01100-2008.08.06-A)

	A.	 	Any loss reimbursement the Company receives from the United States Government
under the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk
Insurance Extension Act of 2005 and as further amended by the Terrorism Risk
Insurance Program Reauthorization Act of 2007 (“TRIA”) as a result of Loss
Occurrence(s) commencing during the term of this Contract shall apply as follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions
of this Contract.
	 
	C.	 	If one or more Loss Occurrence(s) commencing during the term of this Contract result(s)
in reinsurance recoveries to the Company under this Contract and reimbursement under
TRIA, and such amounts, together with any other reinsurance recoveries to the
Company for said Loss Occurrence(s), exceed the total amount of “Insured Losses” to
the Company, any amount in excess thereof shall be held by the Company. The
Company shall then reimburse the Subscribing Reinsurer a portion of such excess
recovery in an amount equal to the proportion that the Subscribing Reinsurer’s payment
under this Contract bears to the total treaty reinsurance recoveries to the Company for
Insured Losses for said Loss Occurrence(s). Provided, however, that in no event shall
such reimbursement exceed the amount paid by the Subscribing Reinsurer to the
Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is
based on the Company’s Insured Losses in more than one Loss Occurrence and neither
the Secretary of the Treasury nor his delegatee specifies the amount of loss allocable to
each respective Loss Occurrence, the reimbursement shall be pro-rated in the
proportion that the Company’s Insured Losses in each Loss Occurrence bears to the
Company’s total Insured Losses resulting from all Loss Occurrences to which the
reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss(es)” shall have the same meaning as set forth
in Section 102(5) of TRIA.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 27 of 53

 

Exhibit A

First Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $500,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every such
Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 3.5531, subject to a minimum premium of $10,080,000 (or a
pro rata portion thereof in the event this Contract is terminated prior to January 1, 2011).
The Average Annual Loss shall be calculated using the results generated by the Catastrophe
Model, using input data provided by the Company for subject business in force at October 1,
2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $12,600,000 payable
in two equal half-yearly installments of $6,300,000 on January 1st, and July 1st, 2010. In
the event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 28 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc. ceases
to exist and there is no successor entity, or in the event that Aon Benfield Inc. or its
successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 29 of 53

 

Exhibit B

Second Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $600,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every such
Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 4.0568, subject to a minimum premium of $8,400,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $10,500,000 payable
in two equal half-yearly installments of $5,250,000 on January 1st, and July 1st, 2010. In
the event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 30 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss,
the Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 31 of 53

 

Exhibit C

Third Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $700,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every such
Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 4.6324, subject to a minimum premium of $7,680,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1,2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $9,600,000 payable in
two equal half-yearly installments of $4,800,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASSIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 32 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent,
Aon Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 33 of 53

 

Exhibit D

Fourth Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $800,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every such
Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 4.8790, subject to a minimum premium of $6,720,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $8,400,000 payable in
two equal half-yearly installments of $4,200,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1,2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 34 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss,
the Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 35 of 53

 

Exhibit E

Fifth Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $900,000,000 provided, however, that the
Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every such
Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 5.1134, subject to a minimum premium of $6,144,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $7,680,000 payable in
two equal half-yearly installments of $3,840,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 36 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 37 of 53

 

Exhibit F

Sixth Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $1,000,000,000 provided, however, that
the Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every
such Loss Occurrence.

SECTION 2  — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 5.3414, subject to a minimum premium of $5,520,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $6,900,000 payable in
two equal half-yearly installments of $3,450,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 38 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 39 of 53

 

Exhibit G

Seventh Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $1,100,000,000 provided, however, that
the Subscribing Reinsurer shall not be liable for more than $100,000,000 of each and every
such Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 5.7883, subject to a minimum premium of $5,184,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $6,480,000 payable in
two equal half-yearly installments of $3,240,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	“Catastrophe Model” as used herein shall mean the Occurrence Exceedance Probability Curve
within AIR CLASIC/2 detailed loss model, version 11.0, for the nationwide perils of hurricane
and earthquake. The Catastrophe Model shall use the net pre-catastrophe loss perspective
(after inuring recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within that model, and
incorporate, for earthquake, demand surge and fire following as estimated and understood
within that model, and exclude Allocated Loss Adjustment Expense and Unallocated Loss
Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 40 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $100,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$100,000,000 in respect of any one Loss Occurrence nor $200,000,000 in all during the period
of this Contract.
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 41 of 53

 

Exhibit H

Eighth Property Catastrophe Excess of Loss

SECTION 1 — LIMIT AND RETENTION

	A.	 	No claim shall be made in any one Loss Occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For purposes hereof, the
Company shall be the sole judge of what constitutes one risk.
	 
	B.	 	The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss to the Company of $1,200,000,000 provided, however, that
the Subscribing Reinsurer shall not be liable for more than $125,000,000 of each and every
such Loss Occurrence.

SECTION 2 — PREMIUM, REPORTS, REMITTANCES

	A.	 	The Company shall pay to the Subscribing Reinsurer a premium equal to the product of the
Average Annual Loss multiplied by 5.8774, subject to a minimum premium of $5,880,000 (or a pro
rata portion thereof in the event this Contract is terminated prior to January 1, 2011). The
Average Annual Loss shall be calculated using the results generated by the Catastrophe Model,
using input data provided by the Company for subject business in force at October 1, 2010.
	 
	B.	 	The Company shall pay to the Subscribing Reinsurer a deposit premium of $7,350,000 payable in
two equal half-yearly installments of $3,675,000 on January 1st, and July 1st, 2010. In the
event this Contract is terminated prior to January 1, 2011, the minimum premium shall be
prorated and no deposit premium installments shall be due after the effective date of
termination.
	 
	C.	 	As soon as practicable after the termination or expiration of this Contract, the Company
shall render to the Subscribing Reinsurer a statement of the premium due as provided in the
first paragraph and any additional premium due the Subscribing Reinsurer or return premium due
the Company shall be remitted forthwith.
	 
	D.	 	“Average Annual Loss” as used herein shall equal the total sum calculated by adding, for all
modeled losses estimated by the Catastrophe Model, each modeled event’s mean loss within this
layer multiplied by that event’s probability rate.
	 
	E.	 	 “Catastrophe Model” as used herein shall mean the Occurrence Exceedance
Probability Curve within AIR CLASIC/2 detailed loss model, version 11.0,
for the nationwide perils of hurricane and earthquake. The Catastrophe
Model shall use the net pre-catastrophe loss perspective (after inuring
recoveries) and incorporate, for hurricane, the near term perspective with
demand surge and without storm surge all as estimated and understood within
that model, and incorporate, for earthquake, demand surge and fire
following as estimated and understood within that model, and exclude
Allocated Loss Adjustment Expense and Unallocated Loss Adjustment Expense.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 42 of 53

 

	F.	 	The calculation of Average Annual Loss shall be performed by the Calculation Agent, Aon
Benfield Analytics, a division of Aon Benfield Inc. In the event that Aon Benfield Inc.
ceases to exist and there is no successor entity, or in the event that Aon Benfield Inc. or
its successor is otherwise unable to perform the calculation of the Average Annual Loss, the
Company shall designate an alternative Calculation Agent.

SECTION 3 — REINSTATEMENT

	A.	 	It is hereby understood and agreed that each claim hereon reduces the amount of indemnity
from the time of the Loss Occurrence by the sum paid, but any amount so exhausted is hereby
automatically reinstated from the time of the Loss Occurrence.
	 
	B.	 	One reinstatement will be provided at an additional premium calculated at 100% of the
developed premium hereon, but pro rata as to the fraction of the face value of this Contract
(i.e., the fraction of $125,000,000) reinstated. Such reinstatement premium shall be payable
simultaneously with each loss settlement.
	 
	C.	 	Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed
$125,000,000 in respect of any one Loss Occurrence nor $250,000,000 in all during the period
of this Contract
	 
	D.	 	If at the time of a loss settlement hereon the developed premium is unknown, the above
calculation of reinstatement premium shall be based upon the deposit premium, subject to
adjustment when the developed premium is finally established.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 43 of 53

 

Pools, Associations and Syndicates Exclusion (LM-03300-2008.11.03-P)

Section A:

Excluding:

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

Section B:

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

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

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

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

Section B does not apply:

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

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

Section C:

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

	 	(1)	 	Any so-called “Coastal Pools,” including but not limited to:

Alabama Insurance Underwriting Association

Connecticut FAIR Plan

Delaware FAIR Plan

Georgia Underwriting Association

Louisiana Citizens Property Insurance Corporation

Mississippi Windstorm Underwriting Association

New Jersey Insurance Underwriting Association

New York Property Insurance Underwriting Association

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 44 of 53

 

North Carolina Insurance Underwriting Association

Pennsylvania FAIR Plan

South Carolina Windstorm and Hail Underwriting Association

Texas Windstorm Insurance Association

Virginia Property Insurance Association

AND

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

AND

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

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

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

Section D:

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

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

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

	 	(3)	 	Notwithstanding Section C above, where an assessment is made against the Company by
any such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual
Market Mechanism, the Company may include in its Ultimate Net Loss only that assessment
directly attributable to each separate loss occurrence covered hereunder which is not
otherwise recoverable or recoupable by the Company

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 45 of 53

 

War Risk Exclusion Clause

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

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 46 of 53

 

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance

(U.S.A.)

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

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

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

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

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

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

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

	 	(a)	 	all policies issued by the Reassured on or before 31st December 1957 shall be free from
the application of
the other provisions of this Clause until expiry date or 31st December 1980 whichever
first occurs
whereupon all the provisions of this Clause shall apply.
	 
	 	(b)	 	with respect to any risk
located in Canada policies issued by the Reassured on or before 31st December
1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st
December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57

N.M.A. 1119

BRMA 35B

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 47 of 53

 

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance

(Canada)

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

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

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

	 	(a)	 	where the Reinsured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or
	 
	 	(b)	 	where the said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused.

	4.	 	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this
Agreement does not cover any loss or liability by radioactive contamination accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
	 
	5.	 	This clause shall not extend to risks using radioactive isotopes in any form where the
nuclear exposure is not considered by the Reinsured to be the primary hazard.
	 
	6.	 	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and any other
substances which may be designated by or pursuant to any law, act or statute, or any law
amendatory thereof as being prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic energy.
	 
	7.	 	Reinsured to be sole judge of what constitutes:

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

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

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

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

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 48 of 53

 

Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994)

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

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

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

	 	(I)	 	All Property on the site of a nuclear power station.
	 
	 	 	 	Nuclear Reactors, reactor buildings and plant and equipment therein on any site other
than a nuclear power station.
	 
	 	(II)	 	All Property, on any site (Including but not limited to the sites referred to in (I)
above) used or having been used for:-

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

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

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

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

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

However, the above exemption shall not extend to:-

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

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

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

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 49 of 53

 

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

Definitions:

“Nuclear Material” means:-

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

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

“Nuclear Installation” means:-

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

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

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

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

“High Radioactivity Zone or Area” means:-

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

N.M.A. 1975(a)

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 50 of 53

 

Insolvency Funds Exclusion Clause

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

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 51 of 53

 

TERRORISM EXCLUSION
(LM-02300-2009.09.30-P)

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

	A.	 	For risks located in the United States of America, its territories and possessions, and at
the premises of any United States mission, this Contract shall not cover:

	 	1.	 	“Insured Losses” resulting directly or indirectly from a “Certified Act of
Terrorism” under the terms of the Terrorism Risk Insurance Act of 2002, as amended by the
Terrorism Risk Insurance Extension Act of 2005 and as amended by the Terrorism Risk
Insurance Program Reauthorization Act of 2007 hereafter (“TRIA”).
	 
	 	2.	 	Notwithstanding the above and subject otherwise to the terms, conditions and
limitations of this Contract, this Contract shall pay insured physical loss or damage
incurred as a direct and immediate consequence of an Act of Terrorism (as defined herein)
including fire following thereon occurring within the United States (as defined in TRIA)
that is planned and committed exclusively by a citizen or citizens of the United States
and provided such citizen or citizens are not acting on behalf of or under the direction
of any foreign person or foreign interest, and further provided the Act of Terrorism is
not directly or indirectly caused by, contributed to by, resulting from, or arising out
of or in connection with biological, chemical, radioactive or nuclear pollution,
contamination or explosion.
	 
	 	 	 	“Act of Terrorism” as used in this paragraph A shall mean any violent act or act that is
dangerous to human life, property, or infrastructure; that results in physical loss or
damage; that is committed by an individual or individuals acting on behalf of any person
or interest as part of an effort to coerce the civilian population of the United States
or to influence the policy or affect the conduct of the United States government by
coercion.

	 	 	 

	Effective: January 1, 2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 52 of 53

 

Mold Exclusion

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

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

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

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

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

	 	 	 

	Effective: January 1,2010

	 	2010 Property Catastrophe
	 

	 	Excess of Loss Contract
	 

	 	Contract No. 2010250

Page 53 of 53

 

INTERESTS AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

$825,000,000 XS $500,000,000

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on the
other part that the Subscribing Reinsurer’s share in the interests and liabilities of the
reinsurers as set forth in the attached Property Catastrophe Excess of Loss Reinsurance Contract
No. 2010250, effective 12:01 a.m., Local Standard Time, January 1, 2010, to which this Agreement is
attached shall be for:

90% — Exhibit A — First Excess of Loss

90% — Exhibit B — Second Excess of Loss

90% — Exhibit C — Third Excess of Loss

90% — Exhibit D — Fourth Excess of Loss

90% — Exhibit E — Fifth Excess of Loss

90% — Exhibit F — Sixth Excess of Loss

90% — Exhibit G — Seventh Excess of Loss

90% — Exhibit H — Eighth Excess of Loss

The share of the Subscribing Reinsurer in the interests and liabilities of all reinsurers
participating in said Contract shall be separate and apart from the shares of such other
reinsurers to the said Contract. The interests and liabilities of the Subscribing Reinsurer shall
not be joint with those of the other reinsurers and in no event shall the Subscribing Reinsurer
participate in the interests and liabilities of the any other reinsurers participating in said
Contract.

Property Catastrophe Excess Of Loss Reinsurance Contract

Effective: 01/01/2010

Contract No. 2010250

Page 1 of 2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement and the attached
Property Catastrophe Excess of Loss Reinsurance Contract $825,000,000 xs $500,000,000 to
be executed in duplicate by their respective duly authorized officers;

In Keene, New Hampshire, this 18th day of January, 2010, for and on behalf of:

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel P. Baker
 

Signature

	 	 
	 	/s/ Nancy C. Callender
 

Signature
	 	 
	 
	 	 	 	 	 	 
	Daniel P. Baker

	 	 	 	Nancy C. Callender	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	AM-VP-Mgr. Financial Services 

	 	 	 	AM-AVP-Mgr. Reinsurance Mgmt. 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

And in Boston, Massachusetts, this 22nd day of March, 2010, for and on
behalf of:

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Lauren H. Covert
 

Signature

	 	 
	 	/s/ Elaine Caprio Brady
 

Signature
	 	 
	 
	 	 	 	 	 	 
	Lauren H. Covert 

	 	 	 	Elaine Caprio Brady 	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	Director of Ceded Reinsurance 

	 	 	 	VICE PRESIDENT 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

Property Catastrophe Excess Of Loss Reinsurance Contract

Effective: 01/01/2010

Contract No. 2010250

Page 2 of 2exv10w171

EXHIBIT
10.171

AGENCY MARKETS DISCONTINUED OPERATIONS

QUOTA SHARE REINSURANCE CONTRACT

NO. 3100700

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

Effective: January 1, 2010

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued Operations
Reinsurance Contract No. 3100700

 

 

AGENCY MARKETS DISCONTINUED OPERATIONS QUOTA SHARE REINSURANCE

CONTRACT NO. 3100700

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	Clause	 	Article Number	 	Page
	ACCESS TO
RECORDS (LM-00100-2009.09.29-A) (AM)
	 	 	13	 	 	 	5	 
	AMENDMENTS
	 	 	14	 	 	 	6	 
	ARBITRATION (LM-00200-2009.10.26-A)
	 	 	15	 	 	 	6	 
	ASSIGNMENT, NOVATION or TRANSFER (LM-00300-2008.05.13-A)
	 	 	16	 	 	 	9	 
	BUSINESS COVERED
	 	 	1	 	 	 	1	 
	CEDING COMMISSION
	 	 	11	 	 	 	4	 
	CONFIDENTIALITY (LM-00400-2009.11.03-A) (AM)
	 	 	17	 	 	 	9	 
	CURRENCY (LM-00500-2009.09.29)
	 	 	18	 	 	 	10	 
	DEFINITIONS
	 	 	6	 	 	 	3	 
	DIVIDENDS AND TAXES (LM-00600-2009.03.10-A)
	 	 	19	 	 	 	11	 
	EFFECTIVE DATE AND TERMINATION
	 	 	2	 	 	 	2	 
	ENTIRE AGREEMENT (LM-00701-2008.08.15-A)
	 	 	20	 	 	 	11	 
	ERRORS OR
OMISSIONS (LM-00800-2005.06.02-A)
	 	 	21	 	 	 	11	 
	EXTRA
CONTRACTUAL OBLIGATIONS (LM-00900-2009.09.29-A) (AM)
	 	 	8	 	 	 	4	 
	FEDERAL EXCISE TAX (LM-01000-2008.08.15-A)
	 	 	22	 	 	 	11	 
	FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2008.08.06-A)
	 	 	23	 	 	 	12	 
	GOVERNING
LAW (LM-01200-2008.09.18-A)
	 	 	24	 	 	 	12	 
	INSOLVENCY (LM-01300-2009.09.03-A) (AM)
	 	 	25	 	 	 	12	 
	INTEREST
PENALTY (LM-01401-2005.12.21-Q)
	 	 	26	 	 	 	13	 
	INURING REINSURANCE
	 	 	27	 	 	 	14	 
	LIMIT OF LIABILITY
	 	 	4	 	 	 	2	 
	LOSS ADJUSTMENT AND SETTLEMENT (LM-01501-2009.09.29-Q) (AM)
	 	 	28	 	 	 	14	 
	LOSS IN
EXCESS OF POLICY LIMITS (LM-01600-2009.09.29-A) (AM)
	 	 	7	 	 	 	3	 
	OFFSET (LM-01700-2009.03.26-A)
	 	 	29	 	 	 	15	 
	REINSURANCE
CLAIMS OBLIGATIONS (LM-03100-2008.07.21-A) (AM)
	 	 	30	 	 	 	15	 
	REINSURANCE PREMIUM
	 	 	10	 	 	 	4	 
	REPORTS AND REMITTANCES
	 	 	12	 	 	 	5	 
	SALVAGE AND SUBROGATION (LM-01800-2008.08.15-A) (AM)
	 	 	31	 	 	 	15	 
	SERVICE OF SUIT (LM-1900-2009.09.29-A)
	 	 	32	 	 	 	16	 
	SEVERABILITY (LM-02000-2005.06.02-A)
	 	 	33	 	 	 	16	 
	SPECIAL CONDITIONS (LM-02100-2009.09.17-A) (AM)
	 	 	34	 	 	 	17	 
	TERRITORY (LM-02200-2005.06.02-A) (AM)
	 	 	3	 	 	 	2	 
	THIRD
PARTIES (LM-02700-2005.09.27-A)
	 	 	35	 	 	 	21	 
	ULTIMATE NET
LOSS (LM-02400-2009.09.30-A) (AM)
	 	 	5	 	 	 	2	 
	UNAUTHORIZED
REINSURANCE (LM-02500-2009.09.29-A) (AM)
	 	 	36	 	 	 	21	 

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued Operations
Reinsurance Contract No. 3100700

 

 

AGENCY MARKETS DISCONTINUED OPERATIONS QUOTA SHARE REINSURANCE CONTRACT

NO. 3100700

(hereinafter referred to as the “Contract’)

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

(hereinafter referred to as the “Subscribing Reinsurer”)

ARTICLE 1 — BUSINESS COVERED

	A.	 	By this Contract, the Subscribing Reinsurer obligates itself to accept as reinsurance of the
Company and the Company obligates itself to cede to the Subscribing Reinsurer, 100% of the
Company’s Net Retained Liability on the business covered hereunder, written by the Company or
ceded directly or indirectly to the Company by an Affiliate of the Company (hereinafter each
referred to as a “Legal Entity” and, collectively, the “Legal Entities”) for business
identified as belonging to the Agency Markets strategic business unit of the Liberty Mutual
Group. The business covered hereunder is defined as Policies either in force at the inception
of the term of this Contract, or written within a Policy period (new or renewal) effective
during the term of this Contract, subject to the terms and conditions contained herein for the
following distribution codes:

	 	1.	 	Ohio Commercial Lines California discontinued operations; distribution code — OCLD.
	 
	 	2.	 	Ohio Casualty Accident and Health United Teachers Program; distribution code —
OCAH.
	 
	 	3.	 	Ohio Casualty Personal Lines Service Center Business; distribution code — OPLD.
	 
	 	4.	 	GoAmerica Run Off business and GoAmerica Indianapolis Region; distribution code
 — GAIR.
	 
	 	 	 	GoAmerica Metro Region; distribution code — GAMT. 
	 
	 	 	 	Total GoAmerica Insurance; distribution code — GOLNS.
	 
	 	5.	 	Safeco SFIS — All including but not limited to Monoline Forced Placement
Property, General Liability, Automobile and Representations and Warranties;
distribution code — SFIS.
	 
	 	6.	 	Safeco Corporate Self Insurance Policies; distribution code — SFCI.
	 
	 	7.	 	Safeco Commercial Insurance Run Off, including but not limited to American
States and Safeco commercial policies for select exited lines of business (Errors and
Omissions, Directors and Officers Liability, General Liability, Workers’ Compensation);
distribution code — SFSC.

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 1 of 24

 

	 	8.	 	Safeco Construction Defect; distribution code SFCD.

	B.	 	All reinsurance under this Contract shall be subject to the same rates, terms, conditions
and waivers, and to the same modifications and alterations as the respective Policies.

ARTICLE 2 — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective at 12:01 a.m. Local Standard Time, January 1, 2010 and
shall remain in force until terminated as provided in this Article.
	 
	B.	 	This Contract may be terminated in its entirety in any year by either Party giving the other
Party thirty (30) days’ written notice. Unless otherwise mutually agreed, the Subscribing
Reinsurer shall remain liable hereunder until natural expiry of all cessions in force at the
effective date of termination.

ARTICLE
3-TERRITORY (LM-02200-2005.06.02-A)

The territorial limits of this Contract shall be identical with those of the Policies.

ARTICLE 4 — LIMIT OF LIABILITY

As respects business subject to this Contract the Company shall cede to the Subscribing Reinsurer
and the Subscribing Reinsurer agrees to accept 100% of the Company’s Net Retained Liability.

ARTICLE 5 — ULTIMATE NET LOSS (LM-02400-2009.09.30-A) (AM)

	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or due and
payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, or payment of claims or judgments arising from each
and every loss, and/or loss occurrence for which the Company or a Legal Entity is or may be
found liable under the Policies, less salvages and subrogation recoveries and amounts
recovered or recoverable under pooling agreements or other reinsurances, whether collectible
or not. “Ultimate Net Loss” includes, but is not limited to, the following paid or due and
payable amounts: loss adjustment expenses, defense costs, court costs, supersedeas and appeal
bond costs, Post or Prejudgment Interest or Delayed Damages, Attorneys Fees and Expenses,
Claim-Specific Declaratory Judgment Expenses, a pro rate share of salaries and expenses of the
Company’s or its Affiliates’ field employees according to the time occupied in adjusting,
defending, and settling such loss, and expenses of all of the Company’s or its Affiliates’
officers and employees incurred in connection with the loss; (except that salaries of officers
and employees engaged in general management and located in the home office of the Company or
its Affiliates and any office expense of the Company or its Affiliates shall not be included),
and all other costs of investigation or litigation for which the Company or a Legal Entity is
or may be found liable under the Policies, (2) Extra Contractual Obligations (as defined in
the Extra Contractual Obligations Article), and (3) Loss in excess of original Policy limits
(as described in the Loss in Excess of Original Policy Limits Article).
	 
	B.	 	Nothing herein shall be construed to mean that losses under this Contract are not recoverable
until the Ultimate Net Loss has been ascertained.

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 2 of 24

 

	C.	 	“Claim-Specific Declaratory Judgment Expenses” shall mean the fees and expenses incurred in
actions brought to determine whether the Company or a Legal Entity has a defense and/or
indemnification obligation for individual claims presented against Policies covered under this
Contract. Any Claim-Specific Declaratory Judgment Expense shall be deemed to have been fully
incurred on the same date as the insured’s original loss or loss occurrence (if any) giving
rise to the action, unless otherwise provided for within this Contract.

	D.	 	“Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of attorneys,
including but not limited to the fees and expenses of the Company’s or its Affiliates’
in-house attorneys providing legal advice on coverage questions and/or defending the Company
or a Legal Entity in coverage litigation, and fees and expenses of staff counsel in the
defense of policyholder claims. Such Attorneys’ Fees and Expenses for in-house attorneys and
staff counsel shall be calculated at the rate for such attorneys plus the expenses incurred by
such attorneys, but excluding office expenses of the Company and its Affiliates and salaries
and expenses of their other employees.

	E.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added to a
settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement, verdict, award, or judgment whether or not expressly identified as such.

ARTICLE 6 — DEFINITIONS

The following terms, wherever used in this Contract, shall have the meaning set forth herein, and
shall be deemed to refer to the singular or plural as the context may require:

	A.	 	The term “Affiliate” shall mean an entity that directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the Company.

	B.	 	The term “Loss” or “Loss Occurrence” shall be consistent with the definition of Loss or Loss
Occurrence contained in the Policies covered by this Contract.

	C.	 	The term “Policy(ies)” shall mean the Company’s or the Legal Entities’ binders, contracts,
policies, amendments, certificates as identified in the Business Covered Article, which
provide insurance on the business reinsured under this Contract.

	D.	 	“Net Retained Liability” shall mean the Ultimate Net Loss less any inuring reinsurance.

ARTICLE 7 — LOSS IN EXCESS OF POLICY LIMITS (LM-01600-2009.09.29-A) (AM)

	A.	 	This Contract shall protect the Company within the limits hereof, for 100% of any Loss in
excess of the original Policy limit where Loss in excess of the limit has been incurred
because of a failure by the Company, or a Legal Entity or by a third-party claims
administrator to settle within the Policy limit or by reason of alleged or actual negligence,
fraud, or bad faith in rejecting an offer of settlement or in defending or prosecuting
litigation, including appeals, arbitration, or any alternative dispute resolution or
settlement discussions involving any claim.

	B.	 	However, the above paragraph shall not apply where the loss has been incurred due to the
fraud of a member of the Board of Directors or a corporate officer of the Company or a Legal
Entity acting individually or collectively or in collusion with any individual or corporation
or any other organization or party involved in the presentation, defense or settlement of any
claim covered hereunder.

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 3 of 24

 

	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which the
Company or a Legal Entity would have been contractually liable to pay had it not been for the
limit of the original Policy. The date on which any Loss in excess of the original Policy
limit is incurred by the Company or a Legal Entity shall be deemed, in all circumstances, to
be the date of the original occurrence, accident, casualty, disaster, loss occurrence or Loss,
as determined by the Company.

ARTICLE
8 — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2009.09.29-A) (AM)

	A.	 	This Contract shall protect the Company within the limits hereof for 100% of Extra
Contractual Obligations. “Extra Contractual Obligations” are defined as any actual or
potential liabilities not covered under any other provision of this Contract, arising from or
relating to any alleged or actual act, error or omission, whether intentional or otherwise, or
from any alleged or actual negligence, tortious conduct, reckless conduct, violations of
statutes or regulations governing the conduct of insurance companies and/or claims adjusters,
or bad faith in connection with: (i) the handling of any claim under the Policies, such
liabilities arising because of, but not limited to, the following: failure by the Company, a
Legal Entity or by a third party claims administrator to settle within the Policy limit, or by
reason of alleged or actual negligence, fraud or bad faith of the Company, a Legal Entity or
by a third party claims administrator in rejecting an offer of settlement, or in defending or
prosecuting litigation, including appeals, arbitration, or any alternative dispute resolution
or settlement discussions involving any claim; or (ii) the providing of or failure to provide
any loss control or loss prevention services in connection with any Policy hereunder.

	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in all
circumstances, to be the date of the original occurrence, Loss Occurrence, accident, casualty,
disaster, or loss, as determined by the Company.

	C.	 	However, this Article shall not apply where the loss has been incurred due to the fraud of a
member of the Board of Directors or a corporate officer of the Company or a Legal Entity
acting individually or collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or settlement of any claim
covered hereunder.

ARTICLE 10 — REINSURANCE PREMIUM

	A.	 	The Company shall pay to the Subscribing Reinsurer, 100% of the unearned premium as of
December 31, 2009, less 15% Ceding Commission, less 100% of the unearned premium on
reinsurance programs which inure to the benefit of this Contract for the business defined in
Paragraph A. of the Business Covered Article.

	B.	 	The Company shall pay to the Subscribing Reinsurer, 100% of the gross written premiums, less
return premiums related to endorsements or modifications to Policies in force as of January 1,
2010, and for new and renewal Policies incepting on or after January 1, 2010, less 15% Ceding
Commission, less premiums paid for reinsurance which inures to the benefit of the Contract for
the business defined in Paragraph A of the Business Covered Article.

ARTICLE 11 — CEDING COMMISSION

	A.	 	The Company shall retain a Ceding Commission of 15% of the unearned premium as of December
31,2009 for the business defined in Paragraph A of the Business Covered Article.

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 4 of 24

 

	B.	 	The Company shall retain a Ceding Commission of 15% of the gross written premiums related to
endorsements or modifications to Policies in force as of January 1, 2010, and for, new and
renewal Policies incepting on or after January 1, 2010, less return premiums.

ARTICLE 12 — REPORTS AND REMITTANCES

	A.	 	Reports.
	 
	 	 	Within thirty (30) days after the end of each month, the Company shall report to the
Subscribing Reinsurer, a summary by program of the following information on the Company’s
Net Retained Liability reinsured under this Contract.

	 	1.	 	Written premium, earned premium, unearned premium, commission, allocated loss
adjustment expense, paid loss, case reserves and IBNR

	B.	 	Remittance.

	 	1.	 	The net balance due either party resulting from premium and loss transactions
shall be settled no less than quarterly.

ARTICLE 13 — ACCESS TO RECORDS (LM-00100-2009.09.29-A) (AM)

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

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

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

	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer: (1)
concerning Trade Secrets of the Company or its Affiliates, (2) subject to the terms of a third
party non-disclosure agreement with the Company or its Affiliates requiring third party
consent to disclosure, (3) subject to the Work-Product Privilege or Attorney-Client Privilege,
or (4) concerning individual private information that, as a matter of law, cannot be disclosed
by the

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 5 of 24

 

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

ARTICLE
14 — AMENDMENTS

This Contract may be modified or amended in any terms and conditions by mutual consent of the
Parties by an endorsement formally signed by an authorized representative of each Party. Such an
endorsement shall be considered as part of this Contract.

ARTICLE
15 — ARBITRATION (LM-00200-2009.10.26-A)(AM)

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

	 	 	 	 	 

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

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
section 6.2 of the Procedures, except that other professionals who have worked for at
least ten (10) years for an insurer or reinsurer shall also be qualified to serve as an
arbitrator or umpire.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in the event that section 6.7(a) of the Procedures is invoked. If ARIAS
ceases to maintain a list, each Party shall exchange eight names of qualified umpire
candidates and shall follow section 6.7 of the Procedures for the selection of the
umpire.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial
and disinterested. The members of the Panel may not be: (1) in the control of any Party
or its parent, affiliate, or agent, (2) a former director or officer of any Party or
its parent, affiliate, or agent, or (3) a likely witness in the arbitration. The
requirement of impartiality means that all members of the Panel shall have the same
obligation to approach the Panel’s duties and decisions with fairness and without
consideration for the fact that Panel members may have been appointed by one of the
Parties. The requirement of impartiality does not mean that any arbitrator can have no
previous knowledge of or experience with respect to issues involved in the dispute or
disputes.
	 
	 	4.	 	The first sentence of section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends
to present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	6.	 	Position statements may be amended at any reasonable time, but not later than
the close of discovery, without a showing to the Panel that the amending Party could
not reasonably have raised the new claim or issue at an earlier time.
	 
	 	7.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party seek
a reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.
	 
	 	8.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.
	 
	 	9.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	10.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
“The Panel shall make a decision and issue an award with regard to the terms expressed
in this Contract, and the custom and practice of the property and casualty insurance
and reinsurance business. The Panel shall not be obligated to follow the strict rules
of law and evidence.”

	 	 	 	 	 

	 
	 	 	 	 
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	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as
modified by paragraphs B.3, B.4, and B.8 through B.10 of this Article, shall apply in the
event that, in a consolidated proceeding or otherwise, the Party initiating arbitration is
seeking payment of a total amount that is no greater than one million dollars ($1,000,000), or
the currency equivalent thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section
16.4 of the Alternative Streamlined Procedures shall not apply. The Parties agree to comply
with section 6.7 of the Procedures to appoint a single umpire, and hereby designate the umpire
list maintained by ARIAS (U.S.) as the list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that court shall thereupon be entered
on any award. If the application for confirmation is contested and a judgment is issued
confirming the award, then the Party against whom confirmation is sought shall pay the
attorneys’ fees incurred by the Party who applied for the confirmation and all court costs of
any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.

	 	1.	 	Same contract single Subscribing Reinsurer. Both the Company and any single
Subscribing Reinsurer on this Contract have the right to combine any and all disputes
between them that concern this Contract (including any renewal of this Contract or any
contract for which this Contract is a renewal) into a single arbitration proceeding
before a single Panel, except that the standard for determining whether a Party may
add a new issue, claim, or dispute to an arbitration proceeding shall be the standard
for amending a position statement, as set forth in paragraph B.6 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer.

	 	a.	 	Either the Company or any single Subscribing Reinsurer has the
right to combine any and all disputes between the Company and such single
Subscribing Reinsurer into one arbitration proceeding before a single Panel
where such disputes involve this Contract and any additional contracts between
the two Parties.
	 
	 	b.	 	Notwithstanding the foregoing, subject in each instance to the
mutual agreement of the Parties, new issues, claims, or disputes may be added
to such existing arbitration proceeding.

	 	3.	 	Same contract, multiple Subscribing Reinsurers. At the Company’s option, if
more than one Subscribing Reinsurer is involved in arbitration relating to this
Contract, where there are common questions of law or fact and a possibility of
conflicting awards or inconsistent results, all such Subscribing Reinsurers shall
constitute and act as one Party for purposes of this Article and communications shall
be made by the Company to each of the Subscribing Reinsurers constituting the one
Party; provided, however, that the Subscribing Reinsurers shall have the right to
assert several, rather than joint defenses or claims, and to be represented by
separate counsel. This provision shall not change the liability of each of the
Subscribing Reinsurers under the terms of this Contract from several to joint.

	 	 	 	 	 

	 
	 	 	 	 
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	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Arbitration Article.
	 
	I.	 	Option to Litigate. Notwithstanding the foregoing provisions of this Article, to the
extent that either Party has demanded payment of a total amount of at least twenty million
dollars ($20,000,000) or the currency equivalent thereof under this Contract, and an
arbitration demand has been served, either Party retains the option to initiate litigation to
resolve any disputes arising from such demand, provided however, that the Party initiating
such option to litigate must file suit within sixty (60) days from the date on which the
arbitration demand was served. The Parties hereby waive their rights to a jury trial in
connection with any such litigation.
	 
	J.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.

ARTICLE
16 — ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2008.05.13-A)

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

ARTICLE 17 — CONFIDENTIALITY (LM-00400-2009.11.03-A)(AM)

	A.	 	Confidential Information. The submission materials, and any Policy, financial, underwriting,
accounting, and claims information, data statements, representations, and other materials
provided by the Company or its Affiliates and received by the Subscribing Reinsurer in the
course of an audit, inspection, or otherwise in connection with this Contract, represent
confidential or proprietary information (“Confidential Information”). This Confidential
Information is intended for the sole use of the Subscribing Reinsurer (and its affiliates,
retrocessionaires, accountants, attorneys, auditors, actuaries or catastrophe modelers or
others where required by law) as may be necessary in analyzing and/or accepting a
participation in and/or executing its responsibilities under or related to this Contract. To
the extent that the Subscribing Reinsurer intends to provide Confidential Information to any
third parties (other than its employees and affiliates), prior to such disclosure, the
Subscribing Reinsurer must require that such third parties agree, in writing, to be bound by
this Confidentiality Article or by a separate written confidentiality agreement, containing
terms no less stringent than those set forth in this Article. The Subscribing Reinsurer
acknowledges and agrees that with respect to any review of Confidential Information by the
Subscribing Reinsurer, and/or discussion of Confidential Information, the Company and its
Affiliates do not waive and do not intend to waive any available privilege or protection. The
review of Confidential Information by the Subscribing Reinsurer and/or discussion of
Confidential Information with the Company or its Affiliates shall not destroy, waive, or
otherwise impair the proprietary and/or protected status of any Confidential Information or
any information revealed in such discussion with the personnel of the Company or its
Affiliates, whether reviewed by and/or discussed with the Subscribing Reinsurer intentionally
or inadvertently, nor does the review of the Confidential Information and/or discussion of
Confidential Information with the Company or its Affiliates constitute an

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	estoppel or waiver of the Company’s or its Affiliates’ rights to assert the
attorney-client or work-product privileges, or any other applicable privilege or protection
over certain documents contained in the Company’s or its Affiliates’ files and/or certain
information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations will
apply to Confidential Information to the extent such Confidential Information: (1) is or
becomes available to the public, other than as a result of impermissible disclosure by the
Subscribing Reinsurer, (2) was or became available lawfully to the Subscribing Reinsurer from
a source, other than the Company, its Affiliates or their personnel, that is not subject to a
confidentiality obligation, (3) was developed Independently by the Subscribing Reinsurer prior
to disclosure by the Company, its Affiliates, or their personnel, as demonstrated by the
Subscribing Reinsurer’s records, or (4) is required to be disclosed by law, regulation, court,
or regulatory agency action, subject to the Third-Party Demand paragraph of this Article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to
all Confidential Information provided by the Company and all knowledge and information gained
through its review of Confidential Information or discussions with the personnel of the
Company or its Affiliates. The Subscribing Reinsurer further agrees not to disclose any such
Confidential Information to any other person or entity, except as such disclosure may be
necessary to its affiliates, retrocessionaires, accountants, attorneys, auditors, actuaries or
third party catastrophe modelers or as otherwise others where required by law. The Subscribing
Reinsurer may store Confidential Information about this Contract in its group-wide IT systems
and is entitled to make the Confidential Information available to all companies and units of
the Subscribing Reinsurer for administration, risk management and accounting purposes. The
Subscribing Reinsurer agrees that no Confidential Information is to be copied and/or removed
from the Company’s or its Affiliates’ premises without the express permission of the Company.
	 
	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure of Non-Public
Personally Identifiable Information shall comply with all state and federal statutes and
regulations governing the disclosure of Non-Public Personally Identifiable Information. “Non-
Public Personally Identifiable Information” shall be defined as this term or a
similar term is defined in any applicable state, provincial, territory, or federal law.
Disclosing or using this information for any purpose not authorized by applicable law is
expressly forbidden without the prior consent of the Company.
	 
	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand pursuant to
subpoena, summons, or court or governmental order, to disclose Confidential Information
(including Non-Public Personally Identifiable Information) that has been provided by the
Company or its Affiliates, the Subscribing Reinsurer shall make commercially reasonable
efforts to notify the Company promptly upon receipt of the demand and prior to disclosure of
the Confidential Information and provide the Company a reasonable opportunity to object to the
disclosure. If the Company timely objects to the release of the Confidential Information, the
Subscribing Reinsurer will comply with the reasonable requests of the Company in connection
with the Company’s efforts to resist release of the Confidential Information. The Company
shall bear the cost of resisting the release of the Confidential Information.
	 
	F.	 	Survival. The Parties agree that the obligations contained in this Article shall survive the
expiration or termination of this Contract.

ARTICLE 18-CURRENCY (LM-00500-2009.09.29)

Whenever a reference to a monetary currency appears in this Contract it shall be construed to mean
United States Dollars (“USD”). However, in those cases where the Policies are issued using Canadian

	 	 	 	 	 

	 
	 	 	 	 
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Dollars
(“CAD”), it shall mean Canadian Dollars. All payments made by either party shall be
made in United States Dollars except that payments made involving Policies issued using Canadian
Dollars shall be made in Canadian Dollars. All amounts paid or received by the Company in any other
currency shall be converted into United States Dollars at the rate of exchange on the date at which
it is entered on the books of the Company.

ARTICLE 19 — DIVIDENDS AND TAXES (LM-0600-2009.03.10-A)

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

ARTICLE 20 — ENTIRE AGREEMENT (LM-00701-2008.08.15-A)

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

ARTICLE 21 — ERRORS AND OMISSIONS (LM-00800-2005.06.26-A)

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

ARTICLE 22 — FEDERAL EXCISE TAX (LM-01000-2008.08.15-A)

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

	 	 	 	 	 

	 
	 	 	 	 
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ARTICLE 23 — FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2008.08.06-A)

	A.	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Extension Act
of 2005 and as further amended by the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIA”) as a result of Loss Occurrence(s) commencing during the term of this Contract
shall apply as follows:
	 
	B.	 	Except as provided below, any Loss reimbursement under TRIA shall inure solely to the benefit
of the Company and shall be entirely disregarded in applying all of the provisions of this
Contract.
	 
	C.	 	If one or more Loss Occurrence(s) commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA, and
such amounts, together with any other reinsurance recoveries to the Company for said Loss
Occurrence(s), exceed the total amount of “Insured Losses’ to the Company, any amount in excess
thereof shall be held by the Company. The Company shall then reimburse the Subscribing
Reinsurer a portion of such excess recovery in an amount equal to the proportion that the
Subscribing Reinsurer’s payment under this Contract bears to the total treaty reinsurance
recoveries to the Company for Insured Losses for said Loss Occurrence(s). Provided, however,
that in no event shall such reimbursement exceed the amount paid by the Subscribing Reinsurer
to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is based on
the Company’s Insured Losses in more than one Loss Occurrence and neither the Secretary of the
Treasury nor his delegatee specifies the amount of Loss allocable to each respective Loss
Occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s Insured
Losses in each Loss occurrence bears to the Company’s total Insured Losses resulting from all
Loss Occurrences to which the reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss(es)” shall have the same meaning as set forth in
Section 102(5) of TRIA.

ARTICLE 24 — GOVERNING LAW (LM-01200-2008.09.18-A)

The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts, without regard to conflicts of law principles.

ARTICLE 25 — INSOLVENCY (LM-01300-2009.09.03-A) (AM)

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

	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be
payable, with reasonable provision for verification, on the basis of claims allowed against
the insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims,
without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Subscribing

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	Reinsurer shall be made directly to the Company or its liquidator, receiver,
conservator, or statutory successor, except to the extent Section 4118(a) of the New York
Insurance Law applies, or except (a) where the Contract specifically provides another payee
of such reinsurance in the event of the insolvency of the Company, or (b) where the
Subscribing Reinsurer with the consent of the direct insured or insureds has assumed such
Policy obligations of the Company as direct obligations of the Subscribing Reinsurer to the
payees under such Policies and in substitution for the obligations of the Company to such
payees.
	 
	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding and that during the
pendency of such claim the Subscribing Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator, receiver, conservator,
or statutory successor. The expense thus incurred by the Subscribing Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit, which may accrue to the
Company solely as a result of the defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Subscribing Reinsurers are involved in the same claim and a majority in
interest elects to interpose defense to such claim, the expense shall be apportioned in
accordance with the terms of this Contract as though such expense had been incurred by the
insolvent Company.

ARTICLE 26 — INTEREST PENALTY (LM-1401-2005.12.21-Q)

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

	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within 45 calendar days following the date on which payment is due pursuant to
the Reports and Remittances Article, and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is not
received within 45 calendar days following the date on which payment is due pursuant to
the Reports and Remittances Article, and/or
	 
	 	3.	 	If any premium adjustment, agreed by either Party to the other, is not
received within 150 calendar days following the expiry or anniversary of this Contract,
and/or

	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not provided in
subparagraphs 1, 2, and 3 above, are not received in accordance with the date specified in
this Contract or if no date is specified, within 90 calendar days following the date the
debtor Party received the billing.

	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on
the first day of the calendar month in which the amount became past due, plus 2%. The variable
rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as published in the
Eastern Edition

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	of The Wall Street Journal on the first day of each successive month during
which the amount due remains unpaid, plus 2%. The product shall then be multiplied by 1/365
for each day after the due date that the amount due and the interest amount remain unpaid.
Any interest that occurs pursuant to this Article shall be calculated by the Party to which
it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this Contract.
If the debtor Party prevails in arbitration or any other proceeding with respect to the
amounts in dispute, there shall be no interest penalty due. If the creditor Party wholly or
partially prevails on any of the amounts in dispute, the interest penalty shall be awarded as
outlined above. Such interest penalty shall be calculated from the date the monies were due
and owing to the date of resolution of the arbitration or proceeding, and shall be payable as
of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If the Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly return
the applicable amount of such payment. The arbitrator(s) hearing such dispute shall determine
if interest shall be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be
waived. Any waiver of any interest pursuant to this paragraph, however, shall not affect the
waiving Party’s right to claim and/or pursue interest for any other failure by the other Party
to make payment when due under this Article.

ARTICLE 27— INURING REINSURANCE

All reinsurance amounts paid to or collected from a reinsurance agreement which provides coverage
for the Business Covered under this Contract shall inure to the benefit of this Contract.

ARTICLE 28 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01501-2009.09.29-Q)(AM)

	A.	 	The Company shall give notice, pursuant to the Reports and Remittances Article of any claim
that it has reason to believe could involve this Contract. The Company shall keep the
Subscribing Reinsurer informed of significant developments likely to affect the cost of any
claim or claims hereunder.

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

	 	 	 	 	 

	 
	 	 	 	 
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ARTICLE 29 — OFFSET (LM-01700-2009.03.26-A)

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

ARTICLE 30 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2008.07.21-A)(AM)

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

ARTICLE 31 — SALVAGE AND SUBROGATION (LM-01800-2008.08.15-A)(AM)

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

	B.	 	Amounts recovered from salvage and/or subrogation shall always be used to reimburse the
excess Subscribing Reinsurer (and the Company, should it carry a portion of excess coverage
net) in the reverse order of their participation in the Loss before being used in any way to
reimburse the Company or a Legal Entity for its primary Loss. If the amount recovered exceeds
the recovery expense, the recovery expense shall be borne by each party in proportion to its
benefit from the recovery. If the recovery expense exceeds the amount recovered, the amount
recovered (if any) shall be applied to the reimbursement of recovery expense and the remaining
expense, as well as any originally incurred loss expense, shall be added to the Ultimate Net
Loss. If no amount is recovered from salvage and/or subrogation, the expense incurred in
attempting such recovery shall be deemed loss expense and shall be added to the Ultimate Net
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	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior
to said payments and all necessary adjustments shall be made between the Company and the
Subscribing Reinsurer as soon as practicable after said salvage and/or subrogation recovery is
obtained.
	 
	D.	 	The Company or a Legal Entity shall have the right, before the happening of the Loss, to
waive its right of subrogation as to that Loss.

ARTICLE 32 — SERVICE OF SUIT (LM-01900-2009.09.29-A)

	(This Article applies to any unauthorized Subscribing Reinsurer and to any Subscribing Reinsurer
who is domiciled outside the United States of America.)

	A.	 	This Article will not be read to conflict with or override the obligations of the parties to
arbitrate their disputes as provided for in the Arbitration Article. This Article is intended
as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an
alternative to the Arbitration Article for resolving disputes arising out of this Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a case
to another Court as permitted by the laws of the United States or of any state in the United
States. The Subscribing Reinsurer, once the appropriate Court is selected, whether such court
is the one originally chosen by the Company and accepted by the Subscribing Reinsurer or is
determined by removal, transfer, or otherwise, as provided for above, will comply with all
requirements necessary to give said Court jurisdiction and, in any suit instituted against it
upon this Contract, will abide by the final decision of such Court or of any Appellate Court
in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon: Mendes & Mount, LLP, 750 Seventh Avenue,
New York, NY 10019-6829.
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state,
territory, or district of the United States that makes provision therefore, the Subscribing
Reinsurer hereby designates the Superintendent, Commissioner, or Director of Insurance, or
other officer specified for that purpose in the statute, or their successor(s) in office, as
their true and lawful attorney upon whom may be served any lawful process in any action, suit,
or proceedings instituted by or on behalf of the Company or any beneficiary hereunder arising
out of this Contract, and hereby designate the above-named as the person to whom the said
officer is authorized to mail such process or a true copy thereof.

ARTICLE 33 — SEVERABILITY (LM-02000-2005.06.02-A)

If any provision of this Contract shall be rendered illegal or unenforceable by the laws,
regulations, or public policy of any state, such provision shall be considered void in such state,
but this shall not affect the validity or enforceability of any other provision of this Contract
or the enforceability of such provision in any other jurisdiction.

	 	 	 	 	 

	 
	 	 	 	 
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ARTICLE
34 — SPECIAL CONDITIONS (LM-02100-2009.09.17-A) (AM)

	A.	 	This Article applies only in the event that:

	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business or has imposed upon it any other restrictions on or
conditions relating to the Subscribing Reinsurer’s license or conduct of business in
any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been reduced
by 25% or more from the amount on the effective date of this Contract, or has been
reduced by 25% or more in any period of twelve (12) months or less after the effective
date of this Contract. For the purposes of this paragraph 3, a change
in policyholders’
surplus or equity will be deemed to occur on the date the Subscribing Reinsurer
releases its quarterly financial results; or
	 
	 	4.	 	As respects a Subscribing Reinsurer domiciled outside the United States other
than a Lloyd’s syndicate, such Subscribing Reinsurer’s Shareholder Funds, Net Worth or
Capital & Surplus has been reduced by 25% or more from the amount on the effective date
of this Contract, or has been reduced by 25% or more in any period of twelve (12)
months or less after the effective date of this Contract; or
	 
	 	5.	 	As respects a Subscribing Reinsurer who is a Lloyd’s syndicate, such
Subscribing Reinsurer’s Stamp Capacity or Funds at Lloyd’s has been reduced by 25% or
more from the amount on the effective date of this Contract or has been reduced by 25%
or more in any period of twelve (12) months or less after the effective date of this
Contract; or
	 
	 	6.	 	There has been a change in control with respect to the Subscribing Reinsurer.
For the purposes of this Contract, a “change in control’’ with respect to the
Subscribing Reinsurer shall mean that a Person has entered into an agreement or
understanding to purchase, sell or otherwise obtain (whether by stock or asset
purchase, bulk reinsurance, merger, consolidation or otherwise, in one or a series of
transactions), or has so purchased, sold or otherwise transferred or obtained, a
controlling interest in the Subscribing Reinsurer. Without limiting the foregoing, a
Person shall be deemed to have a controlling interest in the Subscribing Reinsurer if
such Person owns, controls or holds an ownership interest in the Subscribing Reinsurer
of at least ten percent. For the purposes of this paragraph, a “Person” means an
individual, corporation, limited liability company, partnership, association, trust,
unincorporated entity or governmental entity; or
	 
	 	7.	 	The Subscribing Reinsurer’s A.M. Best’s financial strength rating has been
assigned or downgraded below A- or Standard and Poor’s financial strength rating has
been assigned or downgraded below A-; or
	 
	 	8.	 	As respects a Subscribing Reinsurer who is subject to an Authorized Control
Level Risk-Based Capital Requirement, such Subscribing Reinsurer fails to maintain its
surplus at a level of at least 200% of the Subscribing Reinsurer’s Authorized Control
Level Risk-Based Capital; or
	 
	 	9.	 	The Subscribing Reinsurer announces intentions to cease assumed reinsurance
underwriting operations; or

	 	 	 	 	 

	 
	 	 	 	 
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	 	10.	 	The Subscribing Reinsurer voluntarily ceases assumed reinsurance underwriting
operations; or
	 
	 	11.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or
	 
	 	12.	 	The Subscribing Reinsurer, directly or through the actions of a parent
company or an affiliated entity, has or has attempted to assign, novate or transfer
the Subscribing Reinsurer’s rights and/or obligations under this Contract, including
any attempted transfer of rights and/or obligations under any U.S. or foreign statute,
legislation or jurisprudence, without the Company’s prior written consent; or
	 
	 	13.	 	The Subscribing Reinsurer, directly or through the actions of a parent
company or an affiliated entity, has invoked any U.S. or foreign statute, legislation
or jurisprudence which purports to enable the Subscribing Reinsurer to require the
Company to settle its claims liabilities, including but not limited to any estimated
or undetermined claims liabilities under this Contract, on an accelerated basis. This
does not include any attempt to enforce a settlement of claims liabilities under a
commutation process to which the parties have agreed; or
	 
	 	14.	 	There is a severance or obstruction of free and unfettered communication
and/or normal commercial or financial intercourse between the United States of America
and the country in which the Subscribing Reinsurer is incorporated or has its
principal office, as a result of war, currency regulations or any circumstances
arising out of political, financial or economic uncertainty.

	B.	 	If one or more of the circumstances in paragraphs A.1 through A.14 occur (a “Trigger Event”),
the Subscribing Reinsurer shall provide the Company with written notice within five (5)
business days from the happening of a Trigger Event. Following the earlier of (1) the
Company’s receipt of notice of a Trigger Event from the Subscribing Reinsurer and (2) the
occurrence of a Trigger Event, the Company may terminate this Contract, upon thirty (30) days
written notice to the Subscribing Reinsurer, except in connection with a Trigger Event
described in paragraph A.1, A.2 or A.14, in which case the Company may terminate immediately.

	C.	 	Irrespective of the Subscribing Reinsurer’s failure to provide the Company with timely
written notice of the happening of a Trigger Event, upon occurrence of a Trigger Event, the
Company may terminate this Contract at any time, upon thirty (30) days written notice to the
Subscribing Reinsurer, except in connection with a Trigger Event described in paragraph A.1,
A.2 or A.14, in which case the Company may terminate immediately. No failure or delay by the
Company in exercising its option under this paragraph will operate as a waiver thereof.

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

	E.	 	If this Contract is terminated under this Article, this Contract shall remain in full force
and effect as respects the Company’s and the Subscribing Reinsurer’s respective rights and
obligations, prior to the effective date and time of termination. The coverage afforded by
this Contract shall cease as of the date and time of termination and the Subscribing Reinsurer
shall return the unearned premium, if any, within fifteen (15) days of the termination date,
and the minimum premium, if any, shall be prorated. If coverage hereunder terminates while a
claim covered by this Contract is in progress, the Subscribing Reinsurer shall be liable,
subject to all conditions hereof, for its proportion of the entire claim, provided the event
giving rise to the claim started before such termination.

	F.  	1.   	 	If the Company elects to terminate this Contract under this Article, the Company may
also elect to commute this Contract. Such election to commute shall be made either
within the written thirty (30) day notice to the Subscribing Reinsurer of the
Company’s intention to terminate this Contract, or by written notice thereafter. If
the Company

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	 	elects to commute, the Subscribing Reinsurer has the option to provide security
for its Obligations (as defined herein), as an alternative to commutation. The
Subscribing Reinsurer shall notify the Company of its decision to provide security
for its Obligations under this Contract within fifteen (15) business days of the
receipt of written notice of the Company’s election to commute. If the Subscribing
Reinsurer elects to provide security for its Obligations, the Company shall provide
the Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s
share of all paid recoverables, case reserves, loss adjustment expenses, incurred
but not reported losses, reserves for unearned premium, and ceding commissions due
under this Contract prior to the effective date and time of termination
(collectively “Obligations”). Within fifteen (15) days of the Subscribing
Reinsurer’s receipt of such statement, the Subscribing Reinsurer shall collateralize
all unfunded Obligations by securing clean, irrevocable, and unconditional Letters
of Credit, payable exclusively to the Company and issued by a bank acceptable to the
Company. At the Company’s request, the Subscribing Reinsurer shall agree to provide
a separate Letter of Credit for each Legal Entity.
	 
	 	2.	 	Any Letters of Credit secured by the Subscribing Reinsurer shall be issued for
a period of not less than one year, and shall be automatically extended for one year
from their dates of expiration or any future expiration dates, unless sixty (60) days
prior to any expiration date the issuing bank shall notify the Company or a Legal
Entity, as applicable, by certified mail that the issuing bank elects not to extend any
Letter of Credit for any additional period.
	 
	 	3.	 	The Subscribing Reinsurer and the Company agree that the Letters of Credit
provided by the Subscribing Reinsurer, pursuant to the provisions of this Article, may
be drawn upon at any time, notwithstanding any other provision of this Contract, and be
utilized by the Company, a Legal Entity or any successor, by operation of law, of the
Company or a Legal Entity, including without limitation, any liquidator, rehabilitator,
receiver, or conservator of the Company or a Legal Entity, without diminution because
of the insolvency of the Company or a Legal Entity, or the Subscribing Reinsurer for
one or more of the following purposes:

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

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

	 	b.	 	Where the Letters of Credit will expire without renewal or be
reduced or replaced by Letters of Credit for a reduced amount and where the
Subscribing Reinsurer’s Obligations under this Contract remain unliquidated and
undischarged ten (10) days prior to the expiration of the Letter of Credit, to
withdraw amounts equal to the Subscribing Reinsurer’s Obligations, to the
extent that the liabilities have not yet been funded by the Subscribing
Reinsurer and exceed the amount of any reduced or replacement Letters of
Credit.
	 
	 	c.	 	If the Company has concluded that the issuing bank’s financial
condition is such that the value of the security represented by the Letter of
Credit may be in jeopardy, the Company or a Legal Entity, as applicable, may
require that a

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	 	replacement Letter of Credit be issued by a bank acceptable to the
Company, by providing the Subscribing Reinsurer with written notice
requesting such replacement Letter of Credit. If the Subscribing Reinsurer
fails to provide acceptable replacement security within five (5) business
days following receipt of the Company’s notice, the Company or a Legal
Entity may draw upon the existing Letter of Credit in amounts equal to the
Subscribing Reinsurer’s Obligations.
	 
	 	d.	 	If the Company or a Legal Entity draws on the Letter of Credit
to obtain a cash advance, under paragraphs F.3.b or F.3.c, the Company or the
Legal Entity, as applicable, will hold the amount of the cash advance so
obtained in trust in the name of the Company in any qualified United States
financial institution as defined by the Insurance Law of the Company’s or
Legal Entity’s domiciliary state, solely to secure the Obligations and for the
use and purposes enumerated above. The Company or the Legal Entity, as
applicable, will return any balance to the Subscribing Reinsurer upon the
complete and final liquidation and discharge of all of the Subscribing
Reinsurer’s Obligations to the Company under this Contract or in the event the
Subscribing Reinsurer provides alternative or replacement security consistent
with the terms hereof and acceptable to the Company.

	G.	 	If the Company elects to commute this Contract and the Subscribing Reinsurer does not fund
its Obligations under this Contract, then:

	 	1.	 	The Company shall submit a statement of valuation showing the Subscribing
Reinsurer’s liability for loss(es), whether reported or unreported, comprising the sum
total of the present value of the ceded: (a) case reserves and allocated loss
adjustment expense, (b) projected ultimate losses, (c) any unearned premium reserve,
and (d) undiscounted outstanding paid claims (hereinafter the “Commutation Losses”), on
Policies covered by this Contract as of the effective date and time of termination. If
the Subscribing Reinsurer agrees with the statement of valuation, the Subscribing
Reinsurer shall pay the amount requested within ten (10) days of receipt of the
statement of valuation.
	 
	 	2.	 	In the event the Company and the Subscribing Reinsurer cannot agree on the
statement of valuation of the Subscribing Reinsurer’s liability under such Policies,
either party may request in writing that the differences be settled by a panel of three
actuaries. Each party shall appoint an actuary to assess such liability within fifteen
(15) days after receipt of the written request for commutation. Upon such appointment,
the two actuaries shall appoint a third actuary. If the two actuaries fail to agree on
the third actuary within thirty (30) days of their appointment, each of them shall
nominate three individuals, of whom the other shall decline two, and the final decision
shall be made by drawing lots.
	 
	 	3.	 	The actuaries shall then investigate and Capitalize such Commutation Loss(es)
within thirty (30) days. As used herein, “Capitalize” shall mean to determine the
present value of Commutation Losses, without regard to the Subscribing Reinsurer’s
ability to pay such losses. The panel shall meet in Boston, Massachusetts, unless the
Company and the Subscribing Reinsurer agree otherwise.
	 
	 	4.	 	All actuaries shall be disinterested in the outcome of the commutation and
shall be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial Society.
Except as stated below, the expense of the actuaries and of the commutation shall be
equally divided between the parties of the commutation.
	 
	 	5.	 	The decision in writing of the actuaries, when filed with the parties hereto,
shall be final and binding, except that if the Company does not agree with the
Capitalized value of the

	 	 	 	 	 

	 
	 	 	 	 
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	 	 	 	Commutation Loss(es), the Company shall have no obligation to commute. In the
event the Company does not agree with the Capitalized value of the Commutation
Loss(es) and does not move forward with commutation, the Company will pay the
expense of the actuaries including reasonable expense of the actuary appointed by
the Subscribing Reinsurer.
	 
	 	6.	 	If the Contract is commuted, payment by the Subscribing Reinsurer to the
Company or any other third party mutually agreed upon by the Subscribing Reinsurer and
the Company shall constitute a complete and final release of the Subscribing Reinsurer
in respect to its liability under this Contract.
	 
	 	7.	 	The commutation process described in this Article shall not be subject to any
other dispute resolution process, including but not limited to the Arbitration Article
of this Contract.

ARTICLE
35 — THIRD PARTIES (LM-02700-2005.09.27-A)

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

ARTICLE 36 — UNAUTHORIZED REINSURANCE (LM-02500-2009.09.29-A) (AM)

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

	A.	 	As regards Policies or bonds coming within the scope of this Contract, the Company agrees
that when it shall file with the insurance regulatory authority or set up on its books
reserves for unearned premium and losses covered hereunder which it shall be required by taw
to set up, it will forward to the Subscribing Reinsurer a statement showing the proportion of
such reserves which is applicable to the Subscribing Reinsurer. The Subscribing Reinsurer
hereby agrees to fund such reserves in respect of unearned premium, known outstanding losses
that have been reported to the Subscribing Reinsurer and allocated loss adjustment expense
relating thereto, losses and allocated loss adjustment expense paid by the Company or the
Legal Entities but not recovered from the Subscribing Reinsurer, plus reserves for losses
incurred but not reported as determined by the Company, as shown in the statement prepared by
the Company (hereinafter referred to as “ Subscribing Reinsurer’s Obligations”) by Letters of
Credit, unless the Company and the Subscribing Reinsurer agree to another method of funding,
or another method of funding (other than Letters of Credit) is mandated by applicable law,
statute, or regulation.
	 
	B.	 	As regards a Subscribing Reinsurer who, either at the inception of this Contract or at any
time thereafter, is unauthorized in any province or jurisdiction of Canada, such funding shall
be equal to 110% of its proportion of reserves by Letters of Credit for no more than 15% of
the total funding required and cash advances for the remaining balance.
	 
	C.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply for and secure
timely delivery to the Company of clean, irrevocable, and unconditional Letters of Credit
issued by a bank that is a qualified U.S. financial institution acceptable to the Company, and
containing provisions acceptable to the insurance regulatory authorities having jurisdiction
over the Company’s reserves, in an amount equal to the Subscribing Reinsurer’s proportion of
said reserves. At the Company’s request, the Subscribing Reinsurer will agree to provide a
separate Letter of Credit for each Legal Entity. Such Letters of Credit shall be issued for a
period of not less than one year, and shall be automatically extended for one year from the
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	 	 	or any future expiration date unless, sixty (60) days prior to any expiration date,
the issuing bank shall notify the Company or a Legal Entity, as applicable, by certified
mail that the issuing bank elects not to consider the Letters of Credit extended for any
additional period.
	 
	D.	 	The Subscribing Reinsurer and the Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company or
a Legal Entity or any successors thereto, by operation of law, of the Company or a Legal
Entity, including without limitation, any liquidator, rehabilitator, receiver, or conservator
of the Company, without diminution because of the insolvency of the Company or a Legal Entity
or the Subscribing Reinsurer for one or more of Hie following purposes:

	 	1.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of premiums returned to the owners of Policies reinsured under this Contract
because of cancellations of the Policies;
	 
	 	2.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of surrenders and benefits or losses paid by the Company or a Legal Entity under
provisions of the Policies reinsured under this Contract;
	 
	 	3.	 	To fund an account with the Company or a Legal Entity in an amount, at least,
equal to the deduction for reinsurance ceded from the Company’s or a Legal Entity’s
liabilities for Policies ceded under this Contract. The account shall include, but not
be limited to, amounts for Policy reserves, claims and losses incurred (including
losses incurred but not reported), loss adjustment expenses, and unearned premium
reserves;
	 
	 	4.	 	To pay existing liabilities between the Company and the Subscribing Reinsurer
upon commutation of this Contract; and
	 
	 	5.	 	To pay any other amounts the Company claims are due under this Contract.
	 
	 	6.	 	If the Company has concluded that the issuing bank’s financial condition is
such that the value of the security represented by the Letter of Credit may be in
jeopardy, the Company or a Legal Entity, as applicable, may require that a replacement
Letter of Credit be issued by a bank acceptable to the Company, by providing the
Subscribing Reinsurer with written notice requesting such replacement Letter of Credit.
If the Subscribing Reinsurer fails to provide acceptable replacement security within
five (5) business days following receipt of the Company’s notice, the Company or a
Legal Entity may draw upon the existing Letter of Credit in amounts equal to the
Subscribing Reinsurer’s Obligations.

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

	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within
thirty (30) days after receipt of notice of such excess, secure delivery to the Company
of an amendment to the Letters of Credit increasing the amount of credit by the amount
of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall, within
thirty (30) days after receipt of written request from the Subscribing Reinsurer,
release such excess credit by agreeing to secure an amendment to the Letters of Credit
reducing the amount of credit available by the amount of such excess credit.

	 	 	 	 	 

	 
	 	 	 	 
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	F.	 	The Subscribing Reinsurer will take any other reasonable steps that may be required for the
Company to take full credit on its statutory financial statements for the reinsurance provided
by this Contract.
	 
	G.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers
(“Party”, individually, or “Parties”, collectively) arising out of, relating to, or concerning
this Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator Program. Unless the
Parties otherwise agree, the ARIAS-U.S. Newer Arbitrator Program expedited proceeding with a
single Newer Arbitrator shall be used to resolve any such disputes.

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 23 of 24

 

IN WITNESS WHEREOF the Parties hereto, by their respective duly authorized officers, have
executed this Contract, in duplicate original, as of the dates set forth below.

At Keene, New Hampshire on this 7th day of January, 2010

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel P. Baker
 

Signature

	 	 
	 	/s/ Nancy C. Callender
 

Signature
	 	 
	 
	 	 	 	 	 	 
	 
	Daniel P. Baker

	 	 	 	Nancy C. Callender	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	 
	AM-VP-Mgr. Financial Services 

	 	 	 	AM-AVP-Mgr. Reinsurance Mgmt. 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

At Boston, Massachusetts on this 22th day of March, 2010

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Lauren H. Covert
 

Signature

	 	 
	 	/s/ Elaine Caprio Brady
 

Signature
	 	 
	 
	 	 	 	 	 	 
	 
	Lauren H. Covert 

	 	 	 	ELAINE CAPRIO BRADY 	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	 
	Director of Ceded Reinsurance 

	 	 	 	VICE PRESIDENT 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

	 	 	 	 	 

	 
	 	 	 	 
	Effective: January 1, 2010

	 	 
	 	Agency Markets Discontinued

Operations Reinsurance Contract No.

3100700

Page 24 of 24

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