Document:

Exhibit 10.27

 

WHOLE ACCOUNT EXCESS OF LOSS

REINSURANCE AGREEMENT

 

This Whole Account Excess of Loss Reinsurance Agreement,
effective as of January 1, 2001 (as from time to time amended, supplemented,
modified or restated in accordance with its terms, the “Agreement”), is
made and entered into by and between ACE
Guaranty Re Inc., an insurance company organized and existing under
the laws of the State of Maryland, (the “Cedent”) and ACE Bermuda Insurance Limited, a Class 4
insurance company organized and existing under the laws of Bermuda (the “Reinsurer”).

 

In
consideration of the mutual covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Cedent and the Reinsurer agree as follows:

 

Article I

Definitions

 

Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
respective meanings ascribed thereto in this Article I.

 

“Additional
Reinsurance Premium” has the meaning set forth in Article IX hereof.

 

“Allocated
Loss Adjustment Expenses” means the expenses arising from or relating to
the adjustment or settlement of Losses hereunder (except for the salaries,
benefits and traveling expenses of the Cedent’s directors, officers, employees
or consultants, and the office expenses, overhead or other fixed expenses of
the Cedent), including, without limitation, expenses and fees associated with
policy coverage declaratory judgment actions, pre-judgment and post-judgment
interest.

 

“Annual
Period” shall mean any January 1st through December 31st
during the Term.

 

“Covered
Business” has the meaning set forth in Article V hereof.

 

“Covered
Losses” means Losses and Allocated Loss Adjustment Expenses, arising with
respect to Covered Business, and occurring during the Term.  A Covered Loss is deemed to occur when the
Cedent receives a notice of claim under the applicable insurance policy or
reinsurance agreement.

 

“Effective
Date” has the meaning set forth in Article III hereof.

 

“First
Layer Annual Aggregate Retention” has the meaning set forth in Article VIII
hereof.

 

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“First
Layer Term Aggregate Retention” has the meaning set forth in Article VIII
hereof.

 

“First
layer Reinsurance Coverage” has the meaning set forth in Article VI hereof.

 

“First
Premium Installment” has the meaning set forth in Article IX hereof.

 

“Inuring
Reinsurance” means the ADS Reinsurance Treaty by and between the Cedent and
various reinsurers dated as of April 1, 2001 and any renewal of such Treaty
entered into by Cedent.

 

“Loss Ratio”
means (Losses minus recoveries received by the Cedent plus loss reserves held
by the Cedent) divided by premium earned by the Cedent.

 

“Losses”
means amounts paid or for which the Cedent becomes liable to pay in settlement
of liabilities arising from Covered Business. 
“Losses” do not include amounts which the Cedent becomes liable
to pay with respect to Covered Business that are in excess of the policy limits
of the Covered Business or that are due to extra-contractual obligations with
respect to Covered Business.

 

“Profit
Commission Account” has the meaning set forth in Article X hereof.

 

“Reinsurance
Premium” has the meaning set forth in Article IX hereof.

 

“Second
Layer Aggregate Retention” has the meaning set forth in Article VIII
hereof.

 

“Second
Layer Reinsurance Coverage” has the meaning set forth in Article VI hereof.

 

“Second
Premium Installment” has the meaning set forth in Article IX hereof.

 

“Term”
means the period commencing with the Effective Date of this Agreement and
ending upon the Termination Date.

 

“Trust
Account” has the meaning set forth in Article XIII hereof.

 

“Termination
Date” has the meaning set forth in Article III hereof.

 

Article II

Representations and Warranties

 

In order to
induce the other party to execute this Agreement, each party hereto makes the
following representations and warranties to the other party, each of which
shall survive the execution and delivery of this Agreement:

 

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Section 2.1.    Corporate Existence and Power.  The Reinsurer and the Cedent are duly formed
and validly existing under the laws of their respective jurisdictions of
domicile and each party has all corporate powers and all governmental licenses,
authorizations, consents and approvals necessary to carry on its respective
business as now conducted.

 

Section 2.2.    Corporate and Governmental Authorization;
Contravention.  The execution,
delivery and performance by the Reinsurer and the Cedent of this Agreement are
within each party’s corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official that has not been made prior to
the date of execution hereof, and do not contravene or constitute a default
under any provision of applicable law or regulation or of the governing
documents of either party hereto, or of any agreement, judgment, injunction,
order, decree or other instrument binding upon either party or any of their
respective affiliates.

 

Section 2.3.    Binding Effect.  This Agreement constitutes a valid and
binding agreement of each party hereto.

 

Article III

Term and Termination

 

Section 3.1.    Effective Date.  The Term of this Agreement shall commence at
12:01 a.m. Eastern Standard Time on January 1, 2001 (the “Effective Date”)
and continue in effect until January 1, 2011, unless earlier terminated as
provided for herein (January 1, 2011 or such earlier date, the “Termination
Date”).

 

Section 3.2.    Termination.

 

(a)       The Cedent shall have
the right to terminate this Agreement effective as of 11:59 p.m. Eastern
Standard Time on any December 31 by giving at least ten (10) days’ prior
written notice to the Reinsurer.

 

(b)      The Reinsurer shall have
the right to terminate this Agreement upon ten (10) days prior written notice
following any failure by the Cedent to pay the Reinsurance Premium when
due.  If the Cedent pays the full amount
of the Reinsurance Premium due within ten (10) days after receipt of the
foregoing notice, this Agreement will remain in full force and effect.  If the Cedent fails to correct the failure
to pay the Reinsurance Premium, this Agreement shall terminate as of 11:59 p.m.
on the tenth day following the date that the Reinsurer’s notice to the Cedent
referred to in this Section 3.2(b) was received by the Cedent.

 

Section 3.3.    Special Termination.

 

Notwithstanding
anything to the contrary set forth in the preceding Section 3.2, the Cedent may
terminate this Agreement on five (5) days’ prior written notice to the extent
that:

 

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(a)   The Reinsurer is the subject
of a liquidation, rehabilitation or similar proceeding, or otherwise is
declared insolvent by any insurance commissioner or other regulatory or
judicial authority having jurisdiction over the Reinsurer;

 

(b)   The Cedent fails to receive
all financial statement credit for the reinsurance provided hereunder in all
applicable United States jurisdictions; or

 

(c)   The state insurance regulator
(or other regulatory or judicial authority having jurisdiction) in any
applicable United States jurisdiction directs the Cedent to terminate all or a
portion of the coverage provided hereunder.

 

Section
3.4  Payment on Termination

 

Upon
termination as provided for in Section 3.2 or Section 3.3, the Reinsurer shall
return to the Cedent funds calculated as the greater of (a) zero dollars, or
(b) an amount calculated as follows: (i) the Reinsurance Premium paid by the
Cedent, less (ii) the amount of earned premium, less (iii) the amount of
Covered Losses paid by the Reinsurer under this Agreement, less (iv) two
million five hundred thousand dollars ($2,500,000) within ten (10) business
days.

 

Payment by the
Reinsurer to the Cedent for any amounts as set forth herein shall constitute a
full and final release of the Reinsurer from all liabilities and obligations
under this Agreement.

 

Article IV

Other Reinsurance

 

Notwithstanding
anything to the contrary set forth in this Agreement, the Cedent shall have the
right to purchase other reinsurance, as well as specific hedges or portfolio
hedges for its own account, with respect to Covered Business.  The Cedent shall notify the Reinsurer of any
other reinsurance it purchases with respect to Covered Business.  The Cedent and the Reinsurer shall use
mutual good faith efforts to reach agreement as to whether any such reinsurance
inures to the benefit of this Agreement. 
Any amounts collected by the Cedent with respect to the Inuring
Reinsurance shall inure to the benefit of this Agreement, provided that such
amounts relate to Covered Losses reinsured hereunder.

 

Article V

Covered Business

 

All insurance
or reinsurance agreements, policies, binders and other contracts reinsuring or
providing financial guaranty insurance, reinsuring, insuring or issuing credit
default swaps, insuring or reinsuring trade credit business, or reinsuring or
providing other substantially similar credit related business issued by the
Cedent prior to or during the Term (the “Covered Business”).

 

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Article VI

Coverage

 

Section 6.1.    First Layer Reinsurance Coverage.  Subject to the terms, conditions and
limitations contained herein, the Reinsurer shall indemnify the Cedent for one
hundred percent (100%) of paid Covered Losses arising out of Covered Business
in excess of the Cedent’s First Layer Annual Aggregate Retention as set forth
in Article VIII; provided, however, that once the Cedent has paid
Covered Losses which exhaust the First Layer Term Aggregate Retention, the
Reinsurer shall indemnify the Cedent for one hundred percent (100%) of paid
Covered Losses without regard to the First Layer Annual Aggregate Retention,
subject to the First Layer Limit of Liability as set forth in Article VII (the
“First Layer Reinsurance Coverage”).

 

Section 6.2.    Second Layer Reinsurance Coverage.  Subject to the terms, conditions and
limitations contained herein, the Reinsurer shall indemnify the Cedent for one
hundred percent (100%) of paid Covered Losses arising out Covered Business in
excess of the Cedent’s Second Layer Aggregate Retention as set forth in Article
VIII, subject to the Annual Aggregate Limit of Liability and Term Aggregate
Limit of Liability as set forth in Article VII below (the “Second Layer Reinsurance
Coverage”).

 

Section 6.3.    Condition Precedent.  Coverage under this Agreement shall not take
effect until the Reinsurer has received payment of the First Premium
Installment; provided, however, that once the First Premium Installment has
been received by the Reinsurer coverage hereunder shall be effective as of the
Effective Date of this Agreement.

 

Section 6.4.    Trade Credit Business.  The Reinsurer shall not be liable under this
Agreement for Covered Losses arising out of the Cedent’s trade credit business
unless the Cedent’s Loss Ratio with respect to such business in any calendar
year is greater than 50%.  In such case,
the Reinsurer shall be liable for Covered Losses arising out of the Cedent’s
trade credit business in excess of a 50% Loss Ratio with respect to the
applicable calendar year only.

 

Article VII

Limit of Liability

 

Section 7.1     First Layer Limit of Liability.  The Reinsurer’s aggregate limit of liability
for all Covered Losses in the First Layer Reinsurance Coverage shall be fifty million
dollars ($50,000,000) (the “First Layer Limit of Liability”).

 

Section 7.2.    Aggregate Limit of Liability.  The Reinsurer’s aggregate limit of liability
for Covered Losses during the Term (including the First Layer Limit of
Liability) shall be one hundred and fifty million dollars ($150,000,000) (the “Term
Aggregate Limit of Liability”); provided, however, that in
any calendar year during the Term, the Reinsurer shall not be

 

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obligated to make payments with
respect to its obligations under this Agreement in excess of fifty million
dollars ($50,000,000) in the aggregate (the “Annual Aggregate Limit of
Liability”).

 

Article VIII

Cedent’s Retention

 

Section 8.1.    First Layer Annual Aggregate Retention.  Subject to the First Layer Term Aggregate
Retention set forth in Section 8.2, the Cedent shall retain a net annual
aggregate retention for paid Covered Losses with respect to the Covered
Business in the First Layer in the following amounts (the “First Layer
Annual Aggregate Retention”):

 

	
  During the first Annual Period of the Term:

  	
   

  	
  $

  	
   30,000,000

  	
   

  
	
  During the second Annual Period of the
  Term:

  	
   

  	
  $

  	
   20,000,000

  	
   

  
	
  During the third and subsequent Annual
  Periods of the Term:

  	
   

  	
  $

  	
   10,000,000

  	
    per year

  

 

Section 8.2.    First Layer Term Aggregate Retention.  The Cedent shall retain a net aggregate
retention during the Term for Covered Losses paid by the Cedent during the Term
with respect to the Covered Business in the First Layer of fifty million
dollars ($50,000,000) (the “First Layer Term Aggregate Retention”).

 

Section 8.3     Second Layer Aggregate Retention.  The Cedent shall retain a net aggregate
retention for Covered Losses paid by the Cedent during the Term with respect to
the Covered Business in the Second Layer of one hundred million dollars
($100,000,000) (the “Second Layer Aggregate Retention”).  The Second Layer Aggregate Retention shall
be in excess of the First Layer Term Aggregate Retention and the First Layer
Reinsurance Coverage.

 

Article IX

Reinsurance Premium

 

Section 9.1.    Reinsurance Premium.  The Cedent shall pay a premium to the
Reinsurer of twenty-six million two hundred and fifty thousand dollars
($26,250,000) (the “First Premium Installment”) on the date on which all
regulatory approvals for this Agreement have been obtained and the Agreement
has been duly executed by the parties hereto; and twenty-six million two
hundred and fifty thousand dollars ($26,250,000) on or before February 1, 2002
(the “Second Premium Installment”).

 

Section 9.2.    Additional Reinsurance Premium.  The Cedent shall pay a premium to the
Reinsurer equal to 10% of Covered Losses paid by the Reinsurer in excess of
fifty million dollars ($50,000,000) pursuant to the Second Layer Reinsurance
Coverage; provided, however, that the amount of such premium due
from the Cedent shall not exceed ten million dollars ($10,000,000) in the
aggregate (the “Additional Reinsurance Premium”).  The

 

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Additional Reinsurance Premium
shall be payable on the date that the Reinsurer pays the applicable Covered
Loss to the Cedent.

 

Article X

Profit Commission

 

Section 10.1.  Profit Commission Account.  (a) 
The Reinsurer shall hold a notional account during the Term of this
Agreement for the purposes set forth in this Article X (the “Profit
Commission Account”).  As of the
first day of each calendar quarter during the Term, and subject to this Article
X, the notional balance of the Profit Commission Account shall equal: (i) The
beginning balance thereof, as described in this Section 10.1, plus (ii) any
Reinsurance Premium and Additional Reinsurance Premium paid during the
preceding calendar quarter, less a one time deduction of two million five
hundred thousand dollars ($2,500,000), minus (iii) Covered Losses paid by the
Reinsurer during the preceding calendar quarter, plus (iv) any Interest Credit,
minus (v) any Interest Debit.

 

(b)   The one time deduction of two million five
hundred thousand dollars ($2,500,000) referred to in the preceding paragraph
(a) shall represent the Reinsurer’s margin.

 

(c)   As of the last day of each calendar quarter,
the Cedent shall calculate an Interest Credit and/or an Interest Debit (as
applicable) on the Profit Commission Account balance.  The “Interest Credit” for purposes of this Article shall
be determined by applying the Interest Rate which is in effect on the first
business day of the quarter for which the calculation is being completed to the
average balance of the Profit Commission Account for only those days during the
subject quarter that the Profit Commission Account is positive.  The “Interest Debit” for purposes of
this Article shall be determined by applying the Interest Rate which is in
effect on the first business day of the quarter for which the calculation is
being completed plus one hundred fifty (150) basis points to the average
balance of the Profit Commission Account for only those days during the subject
quarter that the Profit Commission Account is negative.  The “Interest Rate” for purposes of
this Article shall be the One-Year United States Treasury bill rate as
published in the Wall Street Journal on the first business day of the quarter
for which any such Interest Credit or Interest Debit calculation is being
completed.

 

(d)   The Reinsurer shall calculate the notional
balance of the Profit Commission Account during the Term.  As of the first day of the first calendar
quarter of the Term, the beginning balance thereof shall be zero.  As of the first day of each succeeding
calendar quarter during the Term, such beginning balance shall equal the ending
balance thereof, determined by the Reinsurer as of the last day of the
preceding calendar quarter.

 

Section 10.2   Profit Commission.  On the last day of the Term, the Reinsurer
shall pay to the Cedent as a profit commission the net amount of any Interest
Credits less Interest Debits calculated during the Term as set forth in the
preceding Section 10.1(c), to the extent that the Profit Commission Account
balance is positive as of the last day of the Term.  Alternatively, the Cedent may elect to apply any amount payable
by the Reinsurer pursuant to this Section 10.2 against liabilities for which
the Reinsurer otherwise would be liable

 

7

 

hereunder, but for the limits
of liability set out in Article VII hereof. 
The Cedent shall notify the Reinsurer of its intention to elect the
alternative settlement of the profit commission provided in the preceding
sentence by written notice delivered two (2) days prior to the end of the Term.

 

Payment by the
Reinsurer to the Cedent for any amounts as set forth in this section 10.2 shall
constitute a full and final release of the Reinsurer from all liabilities and
obligations under this Agreement.

 

Article XI

Accounts and Remittances

 

On or prior to
the 30th day following the end of each calendar quarter during the
Term, the Cedent shall render an account to the Reinsurer, which account shall
set forth the following with respect to the most recently ended calendar
quarter: (i) The dollar amount the Reinsurer’s share of Covered Losses paid
during such calendar quarter, and (ii) reserves required to be maintained by
the Reinsurer as provided herein. 
Subject to the terms and conditions of the Agreement, the Reinsurer
shall pay its share of the amount of Covered Losses paid by the Cedent within
seven (7) business days after receipt of the foregoing account.

 

Article XII

Reserves

 

The Reinsurer
shall maintain (i) loss reserves with respect to Covered Losses not yet paid by
the Cedent but reported to the Reinsurer and Covered Losses paid by the Cedent
and not yet recovered from the Reinsurer and (ii) unearned premium reserves.

 

Article XIII

Credit for Reinsurance

 

Section 13.1   Trust Account.  The Reinsurer shall hold an amount equal to
the notional balance of the Profit Commission Account in a trust account for
the benefit of the Cedent at State Street Bank and Trust Company or another
bank mutually acceptable to the parties hereto (the “Trust Account”).  The Trust Account shall comply with all applicable
United States laws and regulations necessary for the Cedent to take financial
statement credit for the First Layer Reinsurance Coverage up to the balance of
the Trust Account.  Upon termination of
this Agreement and satisfaction of all of the Reinsurer’s obligations
hereunder, the Trust Account shall terminate and the balance of the Trust
Account shall be distributed to the Reinsurer. 
For the avoidance of doubt, the Reinsurer shall not be obligated to hold
an amount greater than the Profit Commission Account balance in the Trust
Account.

 

Section 13.2   Letter of Credit.  In the event that the Trust Account provided
for in Section 13.1 contains insufficient funds for the Cedent to take full
financial statement credit for

 

8

 

the First Layer Reinsurance
Coverage, or in the event that the Reinsurer is required hereunder to establish
a reserve for Covered Losses payable pursuant to the Second Layer Reinsurance
Coverage, the Cedent shall have the right to demand that the Reinsurer
establish a clean, irrevocable and unconditional letter of credit for the
benefit of the Cedent.  Such letter of
credit shall be issued by a financial institution constituting a “qualified financial
institution” pursuant to Maryland Insurance Regulation 31.05.08.08 and rated
AA- or higher by Standard and Poor’s Corporation in an amount that, in
combination with the Trust Account, shall be sufficient for the Cedent to take
full financial statement credit for the reinsurance provided pursuant to this
Agreement.  Such letter of credit shall
comply with all applicable United States laws and regulations necessary for the
Cedent to take full financial statement credit as provided in this Section 13.2.  Any costs and expenses incurred in the
provision of any such letter of credit shall be borne by the Cedent.

 

Article XIV

Miscellaneous

 

Section 14.1.  Access to Records.  The Cedent shall place at the disposal of
the Reinsurer at all reasonable times during normal business hours, and the
Reinsurer shall have the right to inspect and audit at any reasonable time
during normal business hours, the books and records of the Cedent pertaining to
the reinsurance provided hereunder, or the subject matter thereof; provided,
however, that the Reinsurer shall not have the right to remove or copy
any records of the Cedent without the consent of the Cedent.  Notwithstanding anything to the contrary set
forth herein, this provision shall survive the termination of the Agreement.

 

Section 14.2.  Arbitration.  (a)  Any dispute between
the Cedent and the Reinsurer arising out of, or relating to, the formation,
interpretation, performance, or breach of this Agreement, or the validity of
all or any portion thereof, shall be settled by arbitration, initiated by
demand therefor promptly delivered by the complaining party to the other.

 

(b)         Each party shall
appoint an individual as arbitrator, and the two so appointed shall then
appoint a third arbitrator.  If either
party refuses or neglects to appoint an arbitrator within thirty (30) days of
the demand referred to in the preceding Section 14.2(a), the other party may
appoint the second arbitrator.  If the
two arbitrators do not agree on a third arbitrator within thirty (30) days of
the later of the two appointments, each of the arbitrators shall nominate three
individuals.  Each arbitrator shall then
decline two of the nominations presented by the other arbitrator.  The third arbitrator shall then be chosen
from the remaining two nominations by drawing lots.  The arbitrators shall be active or retired officers of insurance
or reinsurance companies or Lloyd’s London Underwriters, and shall have no
personal or financial interest in the result of the arbitration.

 

(c)          The arbitration
hearings shall be held in New York, New York, or such other place as may be
mutually agreed.  Each party shall
submit its case to the arbitrators within thirty (30) days of the selection of
the third arbitrator, or within such longer period as may be agreed by the
arbitrators.  The arbitrators shall not
be obliged to follow judicial formalities or the rules of evidence, and they
shall make their decisions according to the customs and practice of the

 

9

 

reinsurance
business.  The arbitrators shall render
their decision within thirty (30) days after the cases have been
presented.  The decision rendered by a
majority of the arbitrators shall be final and binding.  Such decision shall be a condition precedent
to any right of legal action arising out of the arbitrated dispute which either
party may have against the other. 
Judgment upon the award rendered may be entered by a court having
jurisdiction thereof.

 

(d)         Each party shall pay
the fee and expenses of its own arbitrator and one-half of the fee and expenses
of the third arbitrator.  All other
expenses of the arbitration shall be equally divided between the parties.
Except as provided above, arbitration shall be based, insofar as applicable,
upon the procedures of the American Arbitration Association.

 

(e)          Notwithstanding
anything to the contrary set forth herein, this provision shall survive the
termination of the Agreement.

 

Section
14.3.  Confidentiality.  All terms and conditions of this Agreement
and any information obtained in the course of any inspection conducted by or on
behalf of the Reinsurer shall be kept confidential by the Reinsurer as against
third parties, unless the disclosure is required pursuant to applicable law or
regulation, or unless the disclosure is to any of the Reinsurer’s directors,
officers, employees, professional advisers, reinsurers, affiliates, rating
agencies or regulators, each of whom is advised of the confidential nature of
such information and agrees to maintain the confidentiality thereof in
accordance with the terms of this Agreement. 
Disclosing or using this information for any purpose beyond the scope of
this Agreement, or beyond the exception set forth above, is expressly forbidden
without the prior consent of the Cedent. 
Notwithstanding anything to the contrary set forth herein, this
provision shall survive the termination of the Agreement.

 

Section 14.4.  Errors and Omissions.  Inadvertent delays, errors or omissions made
in connection with this Agreement or any transaction hereunder shall not
relieve either party from any liability which would have attached had such
delay, error or omission not occurred, provided always that such error or
omission is rectified as soon as possible after discovery.

 

Section 14.5.  Federal Excise Tax.  Any United States Federal excise taxes due
from either party with respect to this Agreement and the reinsurance provided
hereunder shall be paid by the Cedent.

 

Section 14.6.  Follow the Fortunes.  The Reinsurer’s liability hereunder shall
attach simultaneously with that of the Cedent, and shall be subject in all
respects to the same risks, terms, conditions, interpretations, waivers and to
the same modifications, alterations and cancellations as the respective
insurances and reinsurances of the Cedent, the true intent of this Agreement
being that the Reinsurer in every case to which this Agreement applies shall
follow the underwriting fortunes of the Cedent.

 

Section 14.7   Third-Party Rights.  Nothing herein shall be deemed to create any
obligation or to establish any right against or in favor of any third parties
or persons not parties to this Agreement.

 

10

 

Section 14.8.  Insolvency.  In the event of the insolvency of the Cedent, reinsurance under
this Agreement shall be payable on demand, with reasonable provision for
verification, on the basis of claims allowed against the insolvent Cedent by
any court of competent jurisdiction or by any liquidator, receiver, or
statutory successor of the Cedent having authority to allow such claims, without
diminution because of such insolvency or because such liquidator, receiver, or
statutory successor has failed to pay all or a portion of any claims. Such
payments by the Reinsurer shall be made directly to the Cedent or to its
liquidator, receiver or statutory successor.

 

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

 

Section 14.9.  Offset.  The Cedent and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the terms of this
Agreement.  The party asserting the
right of offset may exercise such right any time, whether the balances due are
on account of premiums or losses or otherwise.

 

Section 14.10.   Service of
Suit/Submission to Jurisdiction. 
(a)  The Reinsurer hereby
irrevocably submit to the nonexclusive jurisdiction of any United States
Federal or State of New York court sitting in New York County in the State of
New York over any suit, action or proceeding arising out of or relating to
this Agreement.  Nothing in this Article
shall be deemed to constitute a waiver of the 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.

 

(b)         In addition to and
without limiting the foregoing, it is agreed that, pursuant to any statute of
any state, territory or district of the United States which makes provision
therefor, the Reinsurer hereby designates the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true and lawful
attorney upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Cedent or any beneficiary
hereunder arising out of this Agreement of reinsurance, and hereby designates
the above-named as the person to whom the said officer is authorized to mail
such process or a true copy thereof.

 

(c)          Notwithstanding
anything to the contrary set forth herein, this provision shall survive the
termination of the Agreement.

 

11

 

Section 14.11.        Counterparts.  This Agreement may be executed in any number
of counterparts, and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

 

Section 14.12.        Headings.  The headings of the several sections and
subsections of this Agreement are inserted for convenience only, and shall not
in any way affect the meaning or construction of any provision of this
Agreement.

 

Section 14.13.        Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the conflicts of laws provisions thereof).

 

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed and delivered by
their duly authorized officers as of the date first above written, and each
party having executed and delivered a counterpart shall be deemed a party to
this Agreement.

 

	
   

  	
  ACE GUARANTY RE INC.

  
	
   

  	
  In New York,
  New York

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Howard W. Albert

  	
   

  
	
   

  	
   

  	
  Name: Howard
  W. Albert

  
	
   

  	
   

  	
  Title:
  Executive Vice President

  and Chief Underwriting Officer

  
	
   

  	
   

  
	
   

  	
  ACE BERMUDA INSURANCE LTD.

  
	
   

  	
  In Hamilton,
  Bermuda

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Dienne A. Samson

  	
   

  
	
   

  	
   

  	
  Name: Dienne
  A. Samson

  
	
   

  	
   

  	
  Title:
  President, FSI

  
						

 

12Exhibit 10.28

 

	
   

  	
  ACEBDA INS. LTD

  
	
   

  	
  XOL “Piere Cover”

  
	
   

  	
   

  
	
   

  	
  ACE Berumuda

  
	
   

  	
  Insurance Ltd.

  

 

ace bermuda

 

PER CONTRACT EXCESS OF LOSS REINSURANCE
AGREEMENT

(the “Agreement”)

 

	
  COMPANY:

  	
   

  	
  ACE Capital Re International Ltd.

  
	
   

  	
   

  	
   

  
	
  REINSURER:

  	
   

  	
  ACE Bermuda Insurance Ltd.

  
	
   

  	
   

  	
   

  
	
  TYPE:

  	
   

  	
  Per Contract Excess of Loss

  
	
   

  	
   

  	
   

  
	
  TERM:

  	
   

  	
  The Term of this Agreement shall commence as of 12:01 a.m.  Atlantic Standard Time on December 31,
  2001 (the “Effective Date”) and
  shall terminate on the earlier of (i) the Cancellation Date and (ii) 12:01
  a.m.  Atlantic Standard Time on
  December 31, 2026 (the earlier to occur of such dates is the “Termination Date”).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as provided herein, after the Termination Date the parties
  will have no rights or obligations under this Agreement other than those
  rights or obligations that have accrued during the Term and remain
  unsatisfied as of the Termination Date.

  
	
   

  	
   

  	
   

  
	
  CANCELLATION:

  	
   

  	
  Subject to ten (10) days prior written notice from the Company to the
  Reinsurer, the Company may cancel this Agreement at any time (the effective
  date of such cancellation is the “Cancellation
  Date”); provided that effective upon the Cancellation Date, no
  return premium shall be due from the Reinsurer to the Company.

  
	
   

  	
   

  	
   

  
	
  PREMIUM:

  	
   

  	
  For the Term, the Company shall pay the Reinsurer a single premium of
  one hundred twenty-five million United States dollars ($125,000,000) on
  December 31, 2001.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Premium payable by the Company as set forth herein shall not be
  reduced by any applicable taxes which may be payable by the Company.

  
	
   

  	
   

  	
   

  
	
  TERRITORY:

  	
   

  	
  This Agreement shall be worldwide in geographical scope.

  
	
   

  	
   

  	
   

  
	
  COVERAGE:

  	
   

  	
  Subject to the Aggregate Limit of liability and all other terms,
  conditions and limitations of this Agreement, the Reinsurer agrees to
  indemnify the Company

  

 

 

	
   

  	
   

  	
  for all Net Loss paid during the Term by the Company under each
  Covered Contract in excess of the Per Contract Retention up to the Per
  Contract Limit.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the avoidance of doubt, there may be more than one Net Loss
  payment under a Covered Contract and all such Net Loss payments shall be the
  subject of coverage hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Company retains the right, in its sole discretion not to cede all
  or any portion of a Net Loss to the Reinsurer hereunder.

  
	
   

  	
   

  	
   

  
	
  PER CONTRACT 

  	
   

  	
   

  
	
  LIMIT:

  	
   

  	
  Subject to the Aggregate Limit, the Reinsurer’s maximum limit of
  liability for all Net Loss under each Covered Contract shall not exceed fifty
  million United States dollars ($50,000,000) (“Per Contract Limit”).

  
	
   

  	
   

  	
   

  
	
  TERM

  	
   

  	
   

  
	
  AGGREGATE

  	
   

  	
   

  
	
  LIMIT:

  	
   

  	
  Notwithstanding the Per Contract Limit, the Reinsurer’s maximum limit
  of liability for all Net Losses during the Term under this Agreement shall
  not exceed four hundred million United States dollars ($400,000,000) (“Aggregate Limit”).

  
	
   

  	
   

  	
   

  
	
  PER CONTACT

  	
   

  	
   

  
	
  RETENTION:

  	
   

  	
  The Reinsurer shall not be liable for any Net Losses in respect of a
  Covered Contract until the total Net Losses paid by the Company under such
  Covered Contract exceed five million United States dollars ($5,000,000) (“Per Contract Retention”).

  
	
   

  	
   

  	
   

  
	
  REPORTS:

  	
   

  	
  The Company shall provide the Reinsurer with a Bordereau on the
  Business Day following January 14th of each year during the Term listing each
  Covered Contract in force as at December 31st of the immediately
  preceding year.  Failure by the
  Company to list a Covered Contract shall not constitute grounds for denial of
  a claim under this Agreement, but shall be remedied as soon as discovered.

  
	
   

  	
   

  	
   

  
	
  CLAIMS NOTICES

  	
   

  	
   

  
	
  & SETTLEMENTS:

  	
   

  	
  Notice. 
  The Company shall promptly advise the Reinsurer, giving all relevant
  details, of a Net Loss or potential Net Loss under a Covered Contract that
  could reasonably be expected to become a ceded Net Loss under this Agreement
  (the “Notice”).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Net Loss Payments.  The Reinsurer shall pay each Net Loss due hereunder to the
  Company within ten (10) Business Days following receipt of a Notice from the
  Company; provided that if no later than three (3) Business Days prior to the
  due

  

 

2

 

	
   

  	
   

  	
  date of the Company’s payment of a Net Loss under the Covered
  Contract (“Due Date”) the Reinsurer is furnished with particulars of the Net
  Loss and the Company’s certification that the Company’s claim must be paid on
  the Due Date, at the request of the Company, the Reinsurer shall place the
  Company in funds for the Reinsurer’s share of such claim payment on or before
  such due date, in satisfaction of its obligations to the Company in respect
  of such Net Loss.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Loss Settlements & Claims Cooperation.  All loss settlements made by the Company,
  provided they are within the terms of this Agreement and the applicable
  Covered Contract, shall be unconditionally binding upon the Reinsurer.  Notwithstanding the foregoing, when
  requested by the Reinsurer, the Company shall permit the Reinsurer to
  associate (at the Reinsurer’s expense) in the defense and control of any
  investigation, claim or other action pertaining to a Net Loss under this
  Agreement.

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS:

  	
   

  	
  (1)              “Actual
  Loss” means, in respect of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                                                              a
  Covered Contract which is a Loss Portfolio Transfer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)          any True-Up payments actually paid by the
  Company to a Portfolio Fund in accordance with the terms of such Covered
  Contract, and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)         any actual claims paid by the Company to a
  cedent of such Covered Contract after the Portfolio Fund balance is reduced
  to zero.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)                                                         all
  Covered Contracts other than those set out in (i) above, any loss, claim,
  profit commission, and/or any other payment by the Company to a cedent under
  and pursuant to the terms of a Covered Contract.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)              “Business Day” means a day that banks and
  foreign exchange offices are open for business in Bermuda.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (3)              “Covered Contracts” means all binders,
  contracts, policies, and other obligations in respect of insurance,
  reinsurance, financial guaranty, other financial obligations underwritten by
  the Company in accordance with its guidelines, or derivatives (including but
  not limited to swaps) in-force at the Effective Date, or written or renewed
  during the Term, in each if such contracts are issued or entered into by the
  Company; provided that Covered Contracts shall not include:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)                                                        unless
  otherwise agreed by the parties, any contracts or treaties ceded by the
  Company to the Reinsurer under a separate reinsurance

  

 

3

 

	
   

  	
   

  	
  agreement.  For purposes of
  clarification and not limitation, such separate reinsurance agreements
  include, as of the Effective Date, the Per Policy Excess of Loss Second
  Retrocession Agreement between the parties dated January 1, 2000 in respect
  of title risks ceded by ACE Capital Title Reinsurance Company to the Company;
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)                                  collateral
  (howsoever called) required to be posted as security for a Covered Contract;
  provided that True-Up payments shall not be considered collateral for
  purposes of this provision.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the avoidance of doubt and unless otherwise agreed by the
  parties, any contracts or treaties ceded by the Reinsurer to the Company
  shall be included in the definition of Covered Contract.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (4)              “Extra Contractual Obligations” means
  those liabilities which are not covered under any other provision of this
  Agreement and which arise from the Company’s handling of any claim on
  business covered hereunder, such liabilities arising because of, but not
  limited to, the following: failure of the Company to settle within the policy
  limit, or by reason of the Company’s alleged or actual negligence, fraud or
  bad faith in rejecting an offer of settlement or in the preparation of the
  defense or in the trial of any action against its insured (or reinsured) or
  in the preparation or prosecution of an appeal consequent upon such action.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (5)              “Inuring Reinsurance” means reinsurance,
  offsetting swaps, and other hedging arrangements that by their terms apply
  first in payment of Net Loss on a Covered Contract to the Company and thereby
  reduce the Net Loss payable by the Reinsurer hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (6)              “Loss
  Portfolio Transfer” means a type of Covered Contract under which a block
  of business, which was insured or reinsured by a cedent, is reinsured to the
  Company in exchange for payment of premium by the cedent to the Company which
  premium is held in a Portfolio Fund and used to pay claims under the Covered
  Contract.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (7)              “Losses
  in Excess of Policy Limits” means any amount of loss together with any
  legal costs and expenses incurred in connection therewith, paid or payable by
  the Company in excess of its policy limits, but otherwise within the coverage
  terms of the policy, as a result of an action against it by its insured or
  its insured’s assignee to recover damages the insured is legally obligated to
  pay to a third party claimant because of the Company’s alleged or actual
  negligence or bad faith in rejecting a settlement within the policy limits,
  or in discharging its duty to defend or prepare the defense in the trial

  

 

4

 

	
   

  	
   

  	
  of an action against its insured, or in discharging its duty to
  prepare or prosecute an appeal consequent upon such action.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (8)              “Net
  Loss” means the losses for which the Company is liable under Covered
  Contracts, such losses to include (a) the Actual Loss, if any paid by the
  Company in satisfaction of its contractual obligations under a Covered
  Contract, (b) loss expenses of the Company whether incurred on its own
  account or as reimbursement under a Covered Contract, including but not
  limited to expenses incurred in connection with settlements, litigation,
  arbitration, research of coverage questions, workouts of a potential loss,
  protection and perfection of any interest under a Covered Contract, but loss
  expenses shall not include the salaries or overhead of the Company, and (c)
  Losses in Excess of Policy Limits and Extra Contractual Obligations covered
  under the terms of a Covered Contract or arising by reason of the liability
  of the Company in settling a covered loss under a Covered Contract.  Nothing in this clause shall be construed
  to mean that losses under this Agreement are not recoverable until the Company’s
  net loss has been ascertained.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All salvages, recoveries, payments and reversals or reductions of
  verdicts or judgments, Portfolio Disbursements, and Profit Commissions,
  including amounts recoverable under Inuring Reinsurance (hereinafter “Recoveries”) (net of the cost of obtaining
  such Recoveries) provided that such Recoveries are received during the Term
  shall be applied as if recovered, received or obtained prior to the aforesaid
  settlement and shall be deducted from the actual losses sustained under a
  Covered Contract to arrive at the amount of the Net Loss under a Covered
  Contract.  To the extent Recoveries
  are received by the Company after a Net Loss has been paid by the Reinsurer,
  the Company shall account to the Reinsurer for the Reinsurer’s share of such
  Recoveries.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (9)              “Profit
  Commissions” means, profit commissions (howsoever called) which are paid
  by the cedent to the Company pursuant to the terms of a Covered Contract and
  which are a function of the profit position of the underlying risk to the
  Covered Contract.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (10)       “Portfolio
  Disbursements” means, in respect of a Covered Contract which is a Loss
  Portfolio Transfer, the amount received by the Company from a Portfolio Fund
  pursuant to a provision in such Covered Contract allowing the Company to
  withdraw monies held in the Portfolio Fund which are in excess of the minimum
  required balance of the Portfolio Fund.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (11)       “Portfolio
  Fund” means, in respect of a Covered Contract which is a Loss Portfolio
  Transfer, the trust or other segregated assets, if applicable,

  

 

5

 

	
   

  	
   

  	
  or, if the premium due the Company under a Covered Contract is
  retained by the cedent on a ‘funds withheld’ basis, then the premium so
  withheld by the cedent (together with interest which accrues thereon).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (12)       “True-Up”
  means the liability, if any, of the Company pursuant to the terms of a
  Covered Contract to make payments to a Portfolio Fund to maintain the same at
  a required minimum level.  True-Up
  payments do not include the original or any subsequent premium or related
  payments by a cedent to the Company (whether or not on a funds withheld
  basis) which are deposited or held in the Portfolio Fund.

  
	
   

  	
   

  	
   

  
	
  GENERAL CONDITIONS:

  	
   

  	
   

  
	
   

  	
   

  	
  1.                   Inspection
  and Audit.   The Reinsurer or its authorized representative
  shall have access to the books and records of the Company at all reasonable
  times for the purpose of obtaining information concerning this Agreement or
  its subject matter.  This access shall
  include, without limitation, access to all papers in the possession of the
  Company in connection with claims and the adjustment of claims.  The Reinsurer’s right of access shall
  continue during the Term and thereafter as long as either party has a claim
  against the other arising out of this Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.                   Headings.   The
  headings to the text of this Agreement are intended and inserted solely for
  convenience of reference and shall not effect the meaning, interpretation,
  construction or effect of this Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.                   Assignment
  and Amendment.   This Agreement may not be
  assigned or amended by either party without the prior written consent of the
  other party.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.                   Third
  Party Beneficiaries.   This Agreement is solely
  between the Company and the Reinsurer. 
  The acceptance of reinsurance hereunder shall not create any right or
  legal relation whatever between the Reinsurer and any original insured or any
  beneficiary under any business reinsured hereunder, and the Company shall
  remain solely liable to such original insured or any such beneficiary.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.                   Enforceability.   In
  the event that any provision contained in this Agreement shall for any reason
  be held by a court of competent jurisdiction to be invalid or unenforceable,
  such invalidity or unenforceability shall not affect any other provision of
  this Agreement, and this Agreement shall be construed as if such
  unenforceable provision had never been contained herein.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.                   Severability.   To
  the extent that this Agreement may be in conflict with any applicable law or
  regulation, this Agreement shall be amended, at the mutual

  

 

6

 

	
   

  	
   

  	
  agreement of both the Company and the Reinsurer, to the extent
  possible, to comply with such law and regulation.  If any term or provision of this Agreement shall be found by a
  court of competent jurisdiction to be illegal or otherwise unenforceable, the
  same shall not invalidate the whole of this Agreement, but such term or
  provision shall be deemed modified to the extent necessary in the court’s
  opinion to render such term or provision enforceable, and the rights and
  obligations of the parties shall be construed and enforced accordingly
  preserving to the fullest permissible extent the intent and agreements of the
  parties set forth herein.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.                   Errors and Omissions.  If either party hereto shall fail to
  perform an obligation under this Agreement, and such failure is shown to be
  unintentional and the result of an oversight, misunderstanding or clerical
  error on the party of either party, then the party shall not be deemed in
  breach thereby, but such error shall be corrected promptly by restoring both
  parties to the positions they would have occupied had no such error occurred.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.                   Entire Agreement.  This Agreement contains the entire
  agreement between the parties hereto relating to the subject matter hereof
  and supersedes and replaces all oral statements and prior writings with
  respect thereto.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9.                   Waivers.  There shall be no waiver of any breach of
  the terms of this Agreement, nor waiver of any right, remedy, power or
  privilege conferred by this Agreement, except as notified in writing by the
  party waiving to the other party, or as otherwise expressly provided for in
  this Agreement.  Notwithstanding this,
  and for the avoidance of doubt:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)  any waiver of a breach of
  any term of this Agreement or of any default hereunder shall not be deemed a
  waiver of any subsequent breach or default and shall in no way affect the
  other terms of this Agreement;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  no failure to exercise
  and no delay on the part of any party in exercising any right, remedy, power
  or privilege of that party under this Agreement and no course of dealing
  between the parties shall be construed or operate as a waiver thereof, nor
  shall any single or partial exercise of any right, remedy, power or privilege
  preclude any other or further exercise thereof or the exercise of any right,
  remedy, power or privilege.  The
  rights and remedies provided by this Agreement are cumulative and are not exclusive
  of any rights or remedies provided by law.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10.            Currency.  All the retentions, limits and premiums are stated in United
  States Dollars.  All claims under this
  Agreement are payable in United States Dollars.  Losses arising out of Covered Contracts written by the Company
  in currencies

  

 

7

 

	
   

  	
   

  	
  other than United States Dollars shall be converted into United
  States Dollars at the rates of exchange as used in the books of the Company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  11.            Offset.  The parties have the right to offset any
  balance(s) from one to the other under this Agreement or under any other
  agreement between the parties hereto.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  12.            Governing Law.  This Agreement, and any dispute,
  controversy or claim arising out of or relating to this Agreement, shall be
  governed by and construed in accordance with the laws of Bermuda.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13.            Arbitration.  If any irreconcilable dispute shall arise between the Company
  and the Reinsurer with reference to the interpretation of this Agreement or
  any Covered Contract (including, but not limited to, disputes concerning the
  formation or validity of this Agreement), whether such dispute arises before
  or after termination of this Agreement, such dispute, upon the written
  request of either party, shall be submitted to three arbitrators, one to be
  chosen by each party, and the third by the two arbitrators so chosen.  Where a party fails to appoint an
  arbitrator within fourteen (14) calendar days of being called upon to do so
  or where the two party-appointed arbitrators fail to appoint a third within
  twenty-eight (28) calendar days of their appointment, then upon application
  ARIAS (UK) will appoint an arbitrator to fill the vacancy.  At any time prior to the appointment by
  ARIAS (UK) the party or arbitrators in default may make such appointment.  All arbitrators shall be active or retired
  disinterested officers of insurance or reinsurance companies or underwriters
  at Lloyd’s of London not under the control of or otherwise affiliated with
  either party to this Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as may be otherwise provided herein, the arbitrators shall
  promulgate roles to interpret this Agreement under ARIAS Arbitration
  Rules.  The arbitrators shall
  interpret this Agreement as an honorable engagement rather than as a legal
  obligation and will make their award with the view to effecting the general
  purpose and intent of this Agreement, rather than in accordance with the
  literal interpretation of this Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The party requesting the arbitration shall submit its case to the
  arbitrators within forty-five (45) calendar days of the appointment of the
  third arbitrator.  The party
  responding to the request for arbitration shall submit its case to the
  arbitrators within forty-five (45) calendar days of the receipt of the
  petitioner’s case.  A hearing shall be
  held within thirty (30) calendar days after receipt of the parties’ cases in
  writing.  The arbiters shall render
  their decision within thirty (30) calendar days after completion of the
  hearing.  The decision in writing of
  any two arbiters, when filed with the parties hereto, shall be final and
  binding on both parties.  Judgment may
  be entered upon the final decision of the arbitrators in any

  

 

8

 

	
   

  	
   

  	
  court having jurisdiction. 
  Each party shall bear the expense of its own arbitrator and shall
  jointly and equally bear with the other party the expense of the third
  arbitrator and arbitration.  Said
  arbitration shall take place in Hamilton, Bermuda, unless some other
  place is mutually agreed upon by the parties.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The procedures specified in this Article shall be the sole and
  exclusive procedures for the resolution of irreconcilable disputes between
  the parties arising out of or relating to this Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  14.            Counterparts.  This Agreement may be executed in any
  number of counterparts, and by the parties on separate counterparts, but will
  not be effective until each party has executed at least one counterpart.  Each counterpart will constitute an
  original of this Agreement, but all the counterparts will together constitute
  but one and the same instrument.  All
  signatures of the parties to this Agreement may be transmitted by facsimile,
  and such facsimile will, for all purposes, be deemed to be the original signature
  of such party whose signature it reproduces and will be binding upon such
  party.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  15.            Form and Address for Notices.  Any notice required or authorized to be
  given or served upon a party pursuant to this Agreement shall be given by
  facsimile (with confirming copy sent promptly by mail), prepaid post or
  overnight delivery service or by hand to that party at its address or
  facsimile number appearing below or such other address or facsimile number as
  the party may have notified in writing to the other party or parties:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In the case of the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ACE Capital Re International, Ltd.

  
	
   

  	
   

  	
  The ACE Building

  
	
   

  	
   

  	
  30 Woodbourne Avenue

  
	
   

  	
   

  	
  Hamilton, HM 08, Bermuda

  
	
   

  	
   

  	
  Attn: President

  
	
   

  	
   

  	
  Tel: 441-298-9572

  
	
   

  	
   

  	
  Fax: 441-296-3379

  

 

9

 

	
   

  	
   

  	
  In the case of the Reinsurer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ACE Bermuda Insurance Ltd.

  
	
   

  	
   

  	
  ACE Global Headquarters

  
	
   

  	
   

  	
  17 Woodbourne Ave.

  
	
   

  	
   

  	
  Hamilton HM 08 Bermuda

  
	
   

  	
   

  	
  Attn: President and CEO, ACE Financial
  Solutions International

  
	
   

  	
   

  	
  Tel: 441-299-9269

  
	
   

  	
   

  	
  Fax: 441-292-8677.

  

 

 

[Remainder of Page Intentionally Left Blank]

 

10

 

IN WITNESS WHEREOF,
this Agreement has been executed in Hamilton, Bermuda by the following
individuals duly authorized to act on behalf of the parties:

 

 

	
  On Behalf of:

  	
   

  	
  On behalf of:

  
	
   

  	
   

  	
   

  
	
  ACE Capital Re International Ltd.

  	
   

  	
  ACE Bermuda Insurance Ltd.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  	
  By:

  	
  /s/ Dienne Samson

  	
   

  
	
   

  	
   

  	
   

  
	
  Name/Title:

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
  Name/Title:

  	
  Dienne Samson

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  President/FSI

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  SUP/Ace Bermuda

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  12/21/01

  	
   

  	
   

  	
  Date:

  	
  12/20/01

  	
   

  
								

 

11

 

COMMUTATION AND SETTLEMENT AGREEMENT

(hereinafter referred to as this “Agreement”)

 

This Agreement is entered into by and between ACE Capital Re International, Ltd.
(hereinafter referred to as the “Company”)
and ACE Bermuda Insurance Ltd.
(hereinafter referred to as the “Reinsurer”)
and made effective 11:59:59 p.m. Local Standard Time, December 31, 2003 (the “Commutation Date”).

 

WHEREAS, the Company and Reinsurer are parties to the Per Contract
Excess of Loss Reinsurance Agreement for the term incepting December 31, 2001
and originally terminating December 31, 2026 (hereinafter referred to as the “Contract”), which is attached hereto and
made part of this Agreement; and

 

WHEREAS, the Company and Reinsurer desire to fully and finally settle
and commute all obligations and liabilities, known and unknown, of the Company
and the Reinsurer under the Contract.

 

NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, IT IS AGREED BY AND BETWEEN THE REINSURER AND THE
COMPANY THAT:

 

1.                                       As consideration
for the following release, the Reinsurer shall pay the Company the Commutation
Amount no later than January 31, 2004, subject to the Reinsurer’s receipt of an
original copy of this Agreement, having been fully executed by the parties
hereto.

 

The “Commutation Amount” shall equal the sum of the Principal and
Return, as defined below:

 

“Principal” shall equal One hundred thirty one million, nine hundred
thirty seven thousand, two hundred eighty five United States dollars
($131,937,285);

 

“Return” shall equal: [Principal] x [Lehman Intermediate Rate]; and

 

“Lehman Intermediate Rate” shall mean the year-to-date total return of
the Lehman Brothers U.S. Intermediate Aggregate Bond Index, determined for the
period January 1, 2004 through the date of transfer by the Reinsurer of the
payment of the Commutation Amount.

 

2.                                       Subject to the
execution of this Agreement by the parties hereto and payment by the Reinsurer
of the Commutation amount as required pursuant to paragraph 1 above, as of the
Commutation Date, the Company releases and discharges the Reinsurer and its
predecessors, successors, parent, subsidiaries, affiliates, assigns, agents,
employees, officers, directors and shareholders (collectively, the “Reinsurer’s
Related Parties”) from any and all present and future obligations, claims,
demands, liabilities and/or losses whatsoever, all whether known or unknown,
reported or unreported, and whether currently existing or arising in the
future, including, but not limited to, all claims (including but not limited to
those claims for which notices have been submitted to the Reinsurer),
obligations, offsets, debts, demands, actions, causes of action, suits, duties,
sums of money, covenants, contracts, controversies, agreements, reckonings,
bonds, bills, promises, doings, omissions, damages, liability for payment of
interest, judgments, costs,

 

1

 

Agreement may not be modified or amended, or any of its provisions
waived, except by an instrument in writing, signed by the parties hereunder.

 

7.                                       Any dispute,
controversy or claim arising out of or relating to this Agreement shall be
subject to arbitration in accordance with the provisions of section 13, Arbitration,
of the General Conditions of the Contract.

 

8.                                       This Agreement
shall be governed and construed in accordance with the laws of Bermuda,
notwithstanding the venue of any arbitration proceeding.

 

9.                                       This Agreement
is solely between the Company and the Reinsurer, and nothing herein shall in
any manner create any obligations or establish any rights against the Reinsurer
in favor of any third parties or any persons not parties to this Agreement.

 

10.                                 This Agreement may be
executed and delivered in counterparts, each of which, when so executed and
delivered shall constitute an original and all of such counterparts shall
together constitute one and the same instrument.

 

 

IN WITNESS WHEREOF, this
Agreement has been executed by the following individuals authorized to act on
behalf of the parties:

 

 

	
  For and on Behalf of:

  	
   

  	
  For and on Behalf of:

  
	
   

  	
   

  	
   

  
	
  ACE BERMUDA INSURANCE LTD.

  	
   

  	
  ACE CAPITAL RE INTERNATIONAL,

  LTD.

  
	
  in Hamilton, Bermuda

  	
   

  	
  in Hamilton, Bermuda

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Dienne Samson

  	
   

  	
   

  	
  /s/ Carla Ranum

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:  Dienne Samson

  	
   

  	
  Name:  Carla Ranum

  
	
  Title: 
  President Ace Financial Solutions International

  	
   

  	
  Title:  Vice President

  
	
  Date:  1/7/04

  	
   

  	
  Date: January 6, 2004

  
					

 

3

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