Document:

EXH. 10.1 2013 FHCF Contract

Exhibit 10.1

REIMBURSEMENT CONTRACT 

Effective: June 1, 2013 
(Contract) 

between 

UNITED PROPERTY AND CASUALTY INSURANCE COMPANY
(Company) 

NAIC # 10969

and 

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

PREAMBLE 

The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes "Statute", which directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each Addenda unless specifically superseded by one of the Addenda. 

In consideration of the promises set forth in this Contract, the parties agree as follows: 

ARTICLE I - SCOPE OF AGREEMENT 

As a condition precedent to the SBA's obligations under this Contract, the Company, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. 

The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the loss, in excess of the Company's Retention as a result of each Loss Occurrence commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

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Rule 19-8.010 F.A.C.

ARTICLE II - PARTIES TO THE CONTRACT 

This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or any claimant against an insured of the Company, or any other third party, have any rights under this Contract, except as provided in Article XIV. The SBA will only disburse funds to the Company, except as provided for in Article XIV of this Contract. The Company shall not, without the prior approval of the Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums. 

ARTICLE III - TERM 

This Contract shall apply to Loss Occurrences which commence during the period from 12:00:01 a.m., Eastern Time, June 1, 2013, to 12:00 midnight, Eastern Time, May 31, 2014 (Contract Year). 

The Company must designate a coverage level, make the required selections, and return this fully executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time, March 1, 2013. Failure to do so may result in a referral to the Office of Insurance Regulation within the Department of Financial Services for administrative action. Furthermore, the Company's coverage level under this Contract will be deemed as follows: 
		
	(1) 
	For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed. 

		
	(2) 
	For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be deemed. 

		
	(3) 
	For New Participants, as that term is defined in Article V(21), that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. 

		
	(4) 
	For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed. 

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be responsible for such Loss Occurrence in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Loss Occurrence in progress. 

ARTICLE IV - LIABILITY OF THE FHCF 

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

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

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

		
	(4) 
	Upon the occurrence of a Covered Event, the SBA shall evaluate the potential losses to the FHCF and the FHCF's capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF's mandatory coverage. The SBA shall make adjustments to the Projected Payout Multiple in order to 

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Rule 19-8.010 F.A.C.

reimburse the optional Temporary Increase in Coverage Limit (TICL) Options coverage based on the SBA's ongoing evaluation of potential losses and capacity. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer's projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity. 
		
	(5) 
	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. 

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

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

ARTICLE V - DEFINITIONS 

		
	(1) 
	Actual Claims-Paying Capacity of the FHCF 

This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds, or through other means available by law to the SBA, up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes. 
		
	(2) 
	Actuarially Indicated 

This term means, with respect to Premiums paid by Companies for reimbursement provided by the FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a), Florida Statutes. 
		
	(3) 
	Additional Living Expense (ALE) 

ALE losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential Structure or its contents based on the coverage provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF. 
		
	(4) 
	Administrator 

This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 8200 Tower, 5600 West 83rd Street, Suite 1100, Minneapolis, Minnesota 55437. The telephone number is (800) 689-3863, and the facsimile number is (800) 264-0492. 
		
	(5) 
	Authorized Insurer 

This term is defined in Section 624.09(1), Florida Statutes. 
		
	(6) 
	Borrowing Capacity 

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves. 
		
	(7) 
	Citizens Property Insurance Corporation (Citizens) 

This term means the entity formed under Section 627.351(6), Florida Statutes, and refers to both Citizens Property Insurance Corporation Coastal Account and Citizens Property Insurance Corporation Personal Lines and Commercial Lines Accounts. 
		
	(8) 
	Contract 

This term means this Reimbursement Contract for the current Contract Year. 
		
	(9) 
	Covered Event 

This term means any one storm declared to be a hurricane by the National Hurricane Center which causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event. 
(10) Covered Policy or Covered Policies 

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Rule 19-8.010 F.A.C.

		
	(a) 
	Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure, as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida. 

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

		
	1.
	Fire 

		
	2.
	Allied Lines 

		
	3.
	Farmowners Multiple Peril 

		
	4.
	Homeowners Multiple Peril 

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

		
	6.
	Inland Marine 

Note that where particular insurance exposures, e.g., mobile homes, are reported on an annual statement is not dispositive of whether or not the exposure is a Covered Policy. 
		
	(c) 
	This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage. 

		
	(d) 
	Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower's and the lender's financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner's policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available. 

		
	(e) 
	See Article VI of this Contract for specific exclusions. 

		
	(11) 
	Deductible Buy-Back Policies 

This term means a specific policy that provides coverage to a policyholder for some portion of the policyholder's deductible under a policy issued by another insurer. 
		
	(12) 
	Estimated Claims-Paying Capacity of the FHCF 

This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes. 
		
	(13) 
	Excess Policies 

This term, for the purposes of this Contract, means a policy that provides insurance protection for large commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible. 
		
	(14) 
	Florida Department of Financial Services (Department) 

This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida Insurance Code. 
		
	(15) 
	Florida Insurance Code 

This term means those chapters identified in Section 624.01, Florida Statutes, which are designated as the Florida Insurance Code.
		
	(16) 
	Formula or the Premium Formula

This term means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula. The Formula, shall, pursuant to Section 215.555(5)(b), Florida Statutes, include a cash build-up factor in the amount specified therein.
		
	(17) 
	Fund Balance or Balance of the Fund as of December 31

These terms mean the amount of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract Year.
		
	(18) 
	Insurer Group

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Rule 19-8.010 F.A.C.

For purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the National Association of Insurance Commissioners (NAIC) for purposes of filing consolidated financial statements. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group recognized by the NAIC.
		
	(19) 
	Loss Occurrence

This term means the sum of individual insured Losses incurred under Covered Policies resulting from the same Covered Event. “Losses” means all incurred losses under Covered Policies, including Additional Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder, and excludes allocated or unallocated Loss Adjustment Expenses.
		
	(20) 
	Loss Adjustment Expense Reimbursement

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

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

		
	(21) 
	New Participant(s)

This term means all Companies which begin writing Covered Policies on or after the beginning of the Contract Year. A Company that removes exposure from either Citizens entity, as that term is defined in (7) above, pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.
		
	(22) 
	Office of Insurance Regulation

This term means that office within the Department of Financial Services and which was created in Section 20.121(3), Florida Statutes.
		
	(23) 
	Payout Multiple

This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes, which is derived by dividing the single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.
		
	(24) 
	Premium

This term means the same as Reimbursement Premium.
		
	(25) 
	Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section 215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.
		
	(26) 
	Reimbursement Premium

This term means the Premium determined by multiplying each $1,000 of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.
		
	(27) 
	Residential Structures

This term means dwelling units, including the primary structure and appurtenant structures insured under the same policy and any other structures covered under endorsements associated with a policy covering a residential structure. Covered Residential Structures do not include any structures listed under Article VI herein or structures used solely for non-residential purposes.
		
	(28) 
	Retention

The Company’s Retention means the amount of hurricane losses under Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF.
		
	(a) 
	When the Company experiences covered losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.

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Rule 19-8.010 F.A.C.

		
	(b) 
	When the Company experiences covered losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest covered losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered Events.

		
	1. 
	All reimbursement of covered losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after December 31 of the Contract Year provided the Company reports its losses as specified in this Contract.

		
	2. 
	Adjustments to the Company’s Retention shall be based upon its paid and outstanding losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events, and the reduction to one-third of the full Retention shall be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made by the SBA only if the quarterly loss reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

		
	(c) 
	The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.

		
	(d) 
	Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.

(29) Retention Multiple
		
	(a) 
	The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2013/2014 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2011/2012 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.

		
	(b) 
	The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:

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

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

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

		
	(30) 
	Ultimate Net Loss 

		
	(a) 
	This term means all Losses of the Company under Covered Policies in force at the time of a Covered Event, as defined under (9) above, prior to the application of the Company's FHCF Retention, as defined under (28) above, and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI herein, arising from each Loss Occurrence during the Contract Year, provided, however, that the Company's Ultimate Net Loss shall be determined in accordance with the deductible level written under the policy sustaining the loss. 

		
	(b) 
	Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder. 

		
	(c) 
	All salvages, recoveries or payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto. 

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

		
	(e) 
	The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out 

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Rule 19-8.010 F.A.C.

of a Covered Event. 

ARTICLE VI - EXCLUSIONS
 
This Contract does not provide reimbursement for: 
		
	(1) 
	Any losses not defined as being within the scope of a Covered Policy. 

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

		
	(3) 
	Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF. 

		
	(4) 
	Any policy for Residential Structures, as defined in Article V(27) herein, that provides a layer of coverage underneath an Excess Policy, as defined in Article V(13) herein, issued by a different insurer. 

		
	(5) 
	Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption. 

		
	(6) 
	Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d) herein. 

		
	(7) 
	Any reinsurance assumed by the Company. 

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

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

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

		
	(11) 
	Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion. 

		
	(12) 
	Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex). 

		
	(13) 
	Policies covering only Additional Living Expense.

		
	(14) 
	Any exposure for barns or barns with apartments. 

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

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

		
	(17) 
	Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of the coverage limits under the Covered Policy. 

		
	(18) 
	Any losses paid in excess of a policy's hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit. 

		
	(19) 
	Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call for the applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract Year). 

		
	(20) 
	Any losses for which the Company's claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year. 

		
	(21) 
	Amounts paid to reimburse a policyholder for condominium association loss assessments or under similar coverages for contractual liabilities. 

		
	(22) 
	Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes. 

		
	(23) 
	Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the 

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Rule 19-8.010 F.A.C.

Authorized Insurer and Citizens are covered by this Contract. 
		
	(24) 
	All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. Insolvency fund includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part. 

		
	(25) 
	Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss. 

		
	(26) 
	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind. 

		
	(27) 
	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C. 

		
	(28) 
	Any losses under liability coverages.

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES 

The Company shall investigate and settle or defend all claims and losses. All payments of claims or losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIII relating to inspection of records and examinations. 

ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS 
		
	(1) 
	Offsets 

The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under any Contract Year and the Company's full Premium for the current Contract Year (regardless of installment due dates), against any reimbursement or advance amounts, or amounts agreed to in a commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA. 
		
	(2) 
	Reimbursement Adjustments 

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements which have been paid to the Company along with interest thereon. Excess loss reimbursements are those payments made to the Company by the SBA that are in excess of the Company's coverage under the Contract Year. Excess loss reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest credits, and for interest charges for adjustments beyond the Company's control, will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges on excess loss reimbursements due to adjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%. All interest will continue to accrue if not paid by the due date. 

ARTICLE IX - REIMBURSEMENT PREMIUM 

		
	(1) 
	The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2). 

		
	(2) 
	The Company's Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except 

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Rule 19-8.010 F.A.C.

as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company's FHCF Reimbursement Premium or impact its FHCF coverage. FHCF Reimbursement Premiums are required of all companies based on their writing Covered Policies in Florida as of June 30, and each company's FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X. 
		
	(3) 
	Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company's estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF's Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%. 

ARTICLE X - REPORTS AND REMITTANCES
 
		
	(1) 
	Exposures 

		
	(a) 
	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA. 

		
	(b) 
	If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA. 

		
	(c) 
	If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA. 

		
	(d) 
	The requirement that a report is due on a certain date means that the report shall be in the physical possession of the FHCF's Administrator in Minneapolis no later than 5 p.m. Central Time on the due date. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Reports sent to the SBA in Tallahassee, Florida, will be returned to the sender. Reports not in the physical possession of the FHCF's Administrator by 5 p.m., Central Time, on the applicable due date are late. 

		
	(2) 
	Reimbursement Premium 

		
	(a) 
	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the 

9                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

Contract Year in amounts to be determined by the FHCF. However, if the Company's Reimbursement Premium for the prior Contract Year was less than $5,000, the Company's full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year. 
		
	(b) 
	If the Company is under administrative supervision, or if any control or oversight of the Company has been transferred through any legal or regulatory action to a state regulator or court appointed receiver or rehabilitator (referred to in the aggregate as state action): 

		
	1. 
	The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable on August 1, or the date that such State action occurs after August 1 of the Contract Year. 

		
	2. 
	Failure by such Company to pay the full annual provisional Reimbursement Premium as specified in 1. above by the applicable due date(s) shall result in the 45% coverage level being deemed for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a hurricane event occurred or triggered coverage. 

		
	3. 
	The provisions required in 1. and 2. above will not apply when the state regulator, receiver, or rehabilitator provides a letter of assurance to the FHCF that the Company will have the resources and will pay the full Reimbursement Premium for the coverage level selected through the execution of this Contract. 

		
	4. 
	When control or oversight has been transferred, in whole or in part, through a legal or regulatory action, the controlling management of the Company shall specify by August 1 or as soon thereafter as possible (but not to exceed two weeks after any regulatory or legal action) in a letter to the FHCF as to the Company's intentions to either pay the full FHCF Reimbursement Premium as specified in 1. above, to default to the 45% coverage being deemed as specified in 2. above, or to provide the assurances as specified in 3. above. 

		
	(c) 
	A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 upon execution of this Contract. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than April 1 of the Contract Year. The Company's Retention and coverage will be determined based on the total Premium due as calculated above. 

		
	(d) 
	A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 upon execution of this Contract. 

		
	(e) 
	The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be in the physical possession of the FHCF no later than 2 p.m., Eastern Time, on the due date applicable to the particular installment. If remitted by check to the FHCF's Post Office Box, the check shall be physically in the Post Office Box 100822, Atlanta, GA 30384-0822, as set out on the invoice sent to the Company. If remitted by check by hand delivery, the check shall be physically on the premises of the FHCF's bank in College Park, Georgia, as set out on the invoice sent to the Company. If remitted electronically, the wire transfer shall have been completed to the FHCF's account at its bank in Atlanta, Georgia, as set out on the invoice sent to the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Premium checks sent to the SBA in Tallahassee, Florida, or to the FHCF's Administrator in Minneapolis, Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical possession of the FHCF by 2 p.m., Eastern Time, on the applicable due date are late.

		
	(f) 
	Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, 

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Rule 19-8.010 F.A.C.

Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for losses attributable to Covered Events occurring in that Contract Year or for losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past losses or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)1., Florida Statutes, Reimbursement Premiums and earnings thereon may be used for payments relating to revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the revenue bonds and any other purposes for which emergency assessments were levied.
		
	(3) 
	Claims and Losses 

		
	(a) 
	In General 

		
	1. 
	Claims and losses resulting from Loss Occurrences commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreement(s) with Citizens Property Insurance Corporation Coastal Account, Citizens and the Company shall report only their respective portion of losses under the quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to pay for losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year. 

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

		
	(b) 
	Loss Reports 

		
	1. 
	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence to provide information to the SBA in determining any potential liability for possible reimbursable losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required. 

		
	2. 
	FHCF loss reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C. 

		
	a. 
	To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the report. 

		
	b. 
	The Company must also submit a detailed claims listing (as outlined on the Proof of Loss Report) at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request. 

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

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

		
	3. 
	Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims 

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Rule 19-8.010 F.A.C.

and losses resulting from a Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred. Guidelines follow: 
		
	a. 
	Quarterly Proof of Loss Reports are due by March 31 from an insurer whose losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Loss Occurrence(s). 

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

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

If the Company's Retention must be recalculated as the result of an exposure resubmission, and if the recalculated Retention changes the FHCF's reimbursement obligations, then the Company shall submit additional Proof of Loss Reports for recalculation of the FHCF's obligations. 
		
	4. 
	Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable, using the most current data available. This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the commutation process described in (3)(d) below or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries. 

		
	5. 
	The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of losses. 

		
	a. 
	The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements. 

		
	b. 
	The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm losses, prior to the issuance of reimbursements. 

		
	c. 
	The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements submitted by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.

		
	6. 
	All Proof of Loss Reports received will be compared with the FHCF's exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4. above, Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company's reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company's Premium, Retention, and coverage for the Contract Year, will be required before the Company's request for reimbursement or an advance will be fully processed by the Administrator. 

		
	(c) 
	Loss Reimbursement Calculations 

		
	1. 
	In general, the Company's paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after December 31 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company sustaining reimbursable losses will receive the amount of reimbursement due under the Contract up to the amount of the Company's payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the 

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Rule 19-8.010 F.A.C.

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

		
	3. 
	Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable losses for the previous Contract Year, based on the length of time the losses have been outstanding, the amount of losses already paid, the percentage of incurred losses still unpaid, and any other factors specific to the loss development of the Covered Events involved. 

		
	(d) 
	Commutation 

		
	1. 
	Not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the exception of Companies having no reportable losses as described in paragraph (3)(d)1.a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in paragraph (3)(d)1.b. below. The Company and SBA may mutually agree to initiate commutation after 36 months and prior to 60 months after the end of the Contract Year. The commutation negotiations shall begin at the later of 60 months after the end of the Contract Year or upon completion of the FHCF loss examination for the Company and the resolution of all outstanding examination issues. 

		
	a. 
	If the Company's most recently submitted Proof of Loss Report(s) indicate that it has no losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA shall after 36 months request that the Company execute a final commutation agreement. The final commutation agreement shall constitute a complete and final release of all obligations of the SBA with respect to all claims and losses. If the Company chooses not to execute a final commutation agreement, the SBA shall be released from all obligations 60 months following the end of the Contract Year if no Proof of Loss Report(s) indicating reimbursable losses have been filed and the commutation shall be deemed concluded. However during this time, if the Company determines that it does have losses to report for FHCF reimbursement, the Company must submit an updated Proof of Loss Report(s) prior to the end of 60 months after the Contract Year and the Company shall be required to follow the commutation provisions and time frames otherwise specified in this section.

		
	b. 
	If the Company has submitted a Proof of Loss Report(s) indicating that it does have losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA may require the Company to submit within 30 days an updated, current Proof of Loss Report(s) for each Loss Occurrence during the Contract Year. The Proof of Loss Report(s) must include all paid losses as well as all outstanding losses and incurred but not reported losses, which are not finally settled and which may be reimbursable losses under this Contract, and must be accompanied by supporting documentation (at a minimum an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding losses and incurred but not reported losses by the Company’s certifying actuary. Failure of the Company to provide an updated current Proof of Loss Report(s), supporting documentation, and an opinion by the date requested by the SBA may result in referral to the Office of Insurance Regulation for a violation of the Contract. Increases in reported paid, outstanding, or incurred but not reported losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or commutation.

		
	2. 
	Determining the present value of outstanding claims and losses.

		
	a. 
	If the Company exceeds or expects to exceed its Retention, the Company and the SBA or their respective representatives shall attempt, by mutual agreement, to agree upon the present value of all outstanding claims and losses, both reported and incurred but not reported, resulting from Loss Occurrences during the Contract Year. Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete 

13                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

and final release of the SBA in respect of all claims and losses, both reported and unreported, under this Contract.
		
	b.
	If agreement on present value cannot be reached within 90 days of the FHCF’s receipt of the final Proof of Loss Report(s) and supporting documentation, the Company and the SBA may mutually appoint an actuary, adjuster, or appraiser to investigate and determine such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such claims or losses.

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

		
	i. 
	One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.

		
	ii. 
	All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.

		
	iii. 
	None of the actuaries shall be under the control of either party to this Contract.

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

		
	v. 
	The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties. 

		
	d. 
	The reasonable and customary expense of the actuaries and of the commutation (as a result of b. and c. above) shall be equally divided between the two parties. Said commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA. 

		
	(4) 
	Advances 

		
	(a) 
	In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company's paid and reported outstanding losses for Covered Policies (excluding all incurred but not reported [IBNR] losses) as reported on a Proof of Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under paragraph (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under subparagraphs (c) and (e) below. All reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon. 

		
	(b) 
	For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. In addition to the prime rate, an additional 5% interest charge will apply on excess advances. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company's Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue on the outstanding balance of the advance(s) until 

14                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment. 
		
	(c) 
	If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify outstanding and incurred but not reported losses as reported on the applicable December Proof of Loss Report. 

		
	(d) 
	The specific type of advances enumerated in Section 215.555, Florida Statutes, follow. 

		
	1. 
	Advances to Companies to prevent insolvency, as defined under Article XIV of this Contract.

		
	a. 
	Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.

		
	b. 
	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:

		
	i. 
	Current assets;

		
	ii. 
	Current liabilities other than liabilities due to the Covered Event;

		
	iii. 
	Current surplus as to policyholders;

		
	iv. 
	Estimate of other expected liabilities not due to the Covered Event; and 

Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.
		
	c. 
	The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

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

		
	a. 
	Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.

		
	b. 
	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

		
	3. 
	Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.
		
	(e) 
	In determining whether or not to grant an advance and the amount of an advance, the SBA:

		
	1. 
	Shall determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;

		
	2. 
	Shall review and consider all the information submitted by such Companies;

		
	3. 
	Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;

		
	4. 
	Shall consult with all relevant regulatory agencies to seek all relevant information;

		
	5. 
	Shall review the damage caused by the Covered Event and when that Covered Event occurred;

		
	6. 
	Shall consider whether the Company has substantially exhausted amounts previously advanced;

		
	7. 
	Shall consider any other factors deemed relevant; and

		
	8. 
	Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.

		
	(f) 
	Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for 

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Rule 19-8.010 F.A.C.

the Covered Event or Covered Events which have precipitated the immediate need to continue to pay additional claims as they become due.
		
	(5) 
	Delinquent Payments 

Failure to submit a payment when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set forth in Article VIII(2) and Article IX(2) of this Contract. 
		
	(6) 
	Inadequate Data Submissions 

If exposure data or other information required to be reported by the Company under the terms of this Contract is not received by the FHCF in the format specified by the FHCF or is inadequate to the extent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company's examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company's request for reimbursement or an advance. 
		
	(7) 
	Delinquent Submissions 

Failure to submit an exposure submission, resubmission, loss report, or commutation documentation when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. 
		
	(8) 
	Confidential Information/Trade Secret Information 

Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If other information submitted by the Company to the FHCF could reasonably be ruled a trade secret as defined in Section 812.081, Florida Statutes, such information must be clearly marked Trade Secret Information. 

ARTICLE XI - TAXES
 
In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Premium herein when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes. 

ARTICLE XII - ERRORS AND OMISSIONS
 
Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made. 

ARTICLE XIII - INSPECTION OF RECORDS
 
The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or loss examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss reimbursement examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the FHCF Finance Corporation has issued revenue bonds and relied upon the exposure and loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports 

16                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (10)(d) of Article V herein, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy.
		
	(1) 
	Purpose of FHCF Examination

The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF exposure or loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a company’s data is reported accurately or in its entirety. The company should not rely on the FHCF to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.
		
	(2) 
	Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail, of all exposure data submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred losses until the completion of the loss reimbursement examination for that Contract Year. The records to be retained shall include the exam file which supports the exposure reported to the SBA and any other information which would allow for a complete examination of the Company’s reported exposure data. The exam file shall be prepared according to the SBA Exam File Specifications outlined in the Data Call. The Company must also have available, at the time of the examination, a copy of its underwriting manual, a copy of its rating manual, and staff to respond to the questions of the SBA or its agents. The Company is also required to retain declarations pages and policy applications to support reported exposure. To meet the requirement that the application must be retained, the Company may retain either the actual application or may retain the actual application in an electronic format. A complete list of records to be retained is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C.
		
	(3) 
	Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported losses and/or advances submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable losses and commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C. The Company must also retain the required exposure exam file for the Contract Year in which the loss occurred, and must have available any other information which would allow for a complete examination of the Company’s losses.
		
	(4) 
	Examination Procedures

		
	(a) 
	The FHCF will send an examination notice to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF upon request. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

		
	(b) 
	The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported losses which are provided after the examiner has left the work-site will, at the SBA’s discretion, result in an additional examination of exposure and/or loss records or an extension or expansion of the examination already in progress. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.

17                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

		
	(c) 
	At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations.

		
	(d) 
	If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.

		
	(e) 
	If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.

		
	(f)    1. 
	If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. The resubmission will include a data file to be submitted to the FHCF’s Administrator and an exam file to be submitted to the offices of the SBA. The resubmission is also required to be accompanied by a detailed written description of the specific changes made to the resubmitted data. Once the resubmission is received by the FHCF’s Administrator, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.

		
	2. 
	If the recommendation of the examiner is either to resubmit the Company’s exposure data for the Contract Year in question or giving the option to pay the estimated Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIII(3)(f)1. apply.

		
	(g) 
	If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. The updated Proof of Loss Report(s) will be submitted to the FHCF’s Administrator with a copy of the Proof of Loss Report(s) and a supporting detailed claims listing to be submitted to the offices of the SBA. The report is required to be accompanied by a detailed written description of the specific changes made. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.

		
	(h) 
	The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.

		
	(5) 
	Costs of the Examinations

The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive for a Company to delay preparations for an examination, the SBA shall be reimbursed by the Company for any examination expenses incurred in addition to the usual and customary costs, which additional expenses were incurred as a result of the Company’s failure, despite proper notice, to be prepared for the examination or as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.

ARTICLE XIV - INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Except as otherwise provided below, no 

18                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

covered loss reimbursements will be made until the FHCF has completed and closed its examination of the insolvent Company’s losses, unless an agreement is entered into by the court appointed receiver specifying that all data and computer systems required for FHCF exposure and loss examinations will be maintained until completion of the Company’s exposure and loss examinations. Except as otherwise provided below, in order to account for potential erroneous reporting, the SBA shall hold back 25% of requested loss reimbursements until the exposure and loss examinations for the Company are completed. Only those losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and loss examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make loss reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed and before the response time expires for claims filing by reinsurers and financial institutions, which have a priority interest in those funds pursuant to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by reinsurers or financial institutions having a priority interest in these funds, that the funds will be repaid to the FHCF by FIGA within a reasonable time.

ARTICLE XV - TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules.

ARTICLE XVI - VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of Florida. Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract.

ARTICLE XVII - APPLICABLE LAW

This Contract shall be governed by and construed according to the laws of the State of Florida in respect of any matter relating to or arising out of this Contract.

ARTICLE XVIII – REIMBURSEMENT CONTRACT ELECTIONS

		
	(1) 
	Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company is a member of an NAIC group, all members must elect the same reimbursement percentage, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same reimbursement percentage as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90% reimbursement percentage. The Company shall not be permitted to change its reimbursement percentage during the Contract Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the issuance of revenue bonds, until the bonds have been fully repaid.
    
IMPORTANT NOTE: The FHCF has issued revenue bonds as a result of its liabilities for Covered Events 

19                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

under the Contract Year effective June 1, 2005. As those bonds have not been fully repaid, the Company may not select a Reimbursement Percentage that is less than its selection under the prior Contract Year effective June 1, 2012.
    
    
The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2012 was as follows: United Property and Casualty Insurance Company - 90%

20                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

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

	
	
	 

	 

		
	(b) 
	Reimbursement Percentage Election: The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2013, to 12:00 a.m., Eastern Time, May 31, 2014, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 

	
									
	 
	 
	 
	 
	 
	 
	MR
	 

	 
	45%
	OR
	 
	75%
	OR
	90
	%

		
	(2)
	Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and Commercial Non-Habitational Exposure, Written on a Commercial Policy 

This section is applicable to all Companies which either have exposure for single structures with a mix of commercial habitational and commercial non-habitational exposure written under a Commercial Policy, or have the authority to write such policies. If the Company does not have the authority to write this type of exposure, this section does not apply; initial the N/A box on the next page, which completes this section of ARTICLE XVIII. If the Company does write, or has the authority to write, this type of exposure, please read and complete the remainder of this section.

Commercial-Residential Class Code 
If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial-residential class code (based on a classification plan on file with and reviewed by the Administrator), the entire exposure for the structure should be reported to the FHCF under the Data Call, and the FHCF will reimburse losses for the entire structure as well. 

Commercial Non-Residential/Business Class Code 
If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial non-residential or business class code (based on a classification plan on file with and reviewed by the Administrator), the habitational portion of that structure should be identified and reported to the FHCF under the Data Call. 

However, in recognition of the unusual nature of commercial structures with incidental habitational exposure and the hardship some companies may face in having to carve out such incidental habitational exposure, as well as the losses to such structures, the FHCF will accommodate these companies by allowing them to exclude the entire exposure for the single structure from their Data Call submission, providing the following two conditions are met: 
		
	(a) 
	The decision to not carve out and report the incidental habitational exposure shall apply to all such structures insured by the Company; and 

		
	(b) 
	If the incidental habitational exposure is not reported to the FHCF, the Company agrees it shall not report losses to the structure and the FHCF shall not reimburse any losses to the structure. 

    

21                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

Initial the CARVING box below if the Company is able to carve out and report its incidental habitational exposure, OR, if this requirement presents a hardship, the Company must communicate its decision to not carve out and to not report the incidental exposure by having the individual executing this Contract on behalf of the Company placing his or her initials in the NOT CARVING box below. If the Company does not currently write such policies, but has the authority to write such policies after the start date of this Contract, the decision to carve or not carve out the incidental habitational exposure must be indicated below. 

	
					
	 
	 
	 
	 
	MR

	 
	OR
	 
	OR

	 
	 
	 
	 

	CARVING
	 
	NOT CARVING
	 
	NA

By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable decision for the corresponding Contract Year Data Call submission and any subsequent resubmissions. 

Important Note: Since this election will impact your Data Call submission, please share this decision with the individual(s) responsible for compiling your Data Call submission. 

		
	(3) 
	Additional Living Expense (ALE) Written as Time Element Coverage 

If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e., coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the 'Yes - Time Element ALE' box below. If your Company does not write time element ALE coverage, initial 'No - Time Element ALE' box below. 

	
			
	 
	 
	MR

	 
	OR

	 
	 

	Yes - Time
	 
	No - Time

	Element ALE
	 
	Element ALE

22                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.

ARTICLE XIX - SIGNATURES 
Approved by: 

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

By: __________________________________________ ______________________________ 
Ashbel C. Williams                             Date 
Executive Director & CIO 

Approved as to legality: 

By: __________________________________________ _____________________________ 
                         Date 

______________________________________________ 
United Property and Casualty Insurance Company

                                             Melvin A. Russell, President                                                    
                                            Typed/Printed Name and Title 

By: /s/ Melvin A. Russell                         2/22/13         
Signature                               Date

 

23                                                                        FHCF-2013K
Rule 19-8.010 F.A.C.EXH. 10.2 2013 Single Year Reinsurance Contract

Exhibit 10.2

PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
Effective:  June 1, 2013

issued to

UNITED PROPERTY & CASUALTY INSURANCE COMPANY
St. Petersburg, Florida
including any and/or all companies that are or hereafter become affiliated therewith

TABLE OF CONTENTS
	
					
	1.
	 
	BUSINESS COVERED
	 
	1

	2.
	 
	DEFINITIONS
	 
	1

	3.
	 
	TERM
	 
	3

	4.
	 
	TERRITORY
	 
	4

	5.
	 
	EXCLUSIONS
	 
	4

	6.
	 
	SPECIAL ACCEPTANCE
	 
	6

	7.
	 
	RETENTION AND LIMIT
	 
	6

	8.
	 
	FLORIDA HURRICANE CATASTROPHE FUND
	 
	7

	9.
	 
	OTHER REINSURANCE
	 
	7

	10.
	 
	LOSS NOTICES AND SETTLEMENTS
	 
	7

	11.
	 
	PREMIUM
	 
	7

	12.
	 
	SALVAGE AND SUBROGATION
	 
	8

	13.
	 
	OFFSET
	 
	8

	14.
	 
	LATE PAYMENTS
	 
	9

	15.
	 
	LIABILITY OF THE REINSURER
	 
	9

	16.
	 
	NET RETAINED LINES
	 
	10

	17.
	 
	FUNDING OF RESERVES
	 
	10

	18.
	 
	ACCESS TO RECORDS
	 
	11

	19.
	 
	CONFIDENTIALITY
	 
	12

	20.
	 
	ERRORS AND OMISSIONS
	 
	12

	21.
	 
	CURRENCY
	 
	12

	22.
	 
	TAXES
	 
	12

	23.
	 
	FEDERAL EXCISE TAX
	 
	13

	24.
	 
	INSOLVENCY
	 
	13

	25.
	 
	ARBITRATION
	 
	13

	26.
	 
	SERVICE OF SUIT
	 
	15

	27.
	 
	SEVERABILITY
	 
	16

	28.
	 
	GOVERNING LAW
	 
	16

	29.
	 
	AGENCY
	 
	16

	30.
	 
	ENTIRE AGREEMENT
	 
	16

	31.
	 
	MODE OF EXECUTION
	 
	16

	32.
	 
	INTERMEDIARY
	 
	16

ATTACHMENTS
Schedule A
Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (USA)
Terrorism Exclusion

PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
Effective:  June 1, 2013
(hereinafter referred to as the “Contract”)

issued to

UNITED PROPERTY & CASUALTY INSURANCE COMPANY
St. Petersburg, Florida
including any and/or all companies that are or hereafter become affiliated therewith
(hereinafter referred to collectively as the “Company”)

by

THE SUBSCRIBING REINSURER(S)
EXECUTING THE INTERESTS AND LIABILITIES
AGREEMENT(S) ATTACHED HERETO
(hereinafter referred to as the “Reinsurer”)

ARTICLE 1 - BUSINESS COVERED

By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the Company under its policies, contracts and binders of insurance or reinsurance (hereinafter called “Policies”) in force at the effective time and date hereof or issued or renewed at or after that time and date, covering business classified by the Company as Property business, including but not limited to Homeowners and Condominium Owners, and including business assumed by the Company in connection with depopulation of Policies from Citizens Property Insurance Corporation, subject to the terms, conditions and limitations set forth herein and in Schedule A, attached to and forming part of this Contract.

ARTICLE 2 - DEFINITIONS

		
	A.
	“Ultimate Net Loss” as used herein shall be defined as the sum or sums (including Loss in Excess of Policy Limits, Extra Contractual Obligations, Loss Adjustment Expense, as hereinafter defined, and any Loss Adjustment Expense/fair rental value unrecoverable from the FHCF) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims after deduction of all salvage, all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not.  Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company's Ultimate Net Loss has been ascertained.

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

		
	1.
	“Loss in Excess of Policy Limits” shall mean 90% of any amount paid or payable by the Company in excess of its Policy limits, but otherwise within the terms of its Policy, such loss in excess of the Company's Policy limits having been incurred because of, but not limited to, failure by the Company to settle within the Policy limits 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 an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action.

		
	2.
	“Extra Contractual Obligations” shall mean 90% of any punitive, exemplary, compensatory or consequential damages paid or payable by the Company, not covered by any other provision of this Contract and which arise from the handling of any claim on business subject to this Contract, such liabilities arising because of, but not limited to, failure by the Company to settle within the Policy limits 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 an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent 

1

upon such an action.  An Extra Contractual Obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the Policy.

Notwithstanding anything stated herein, this Contract shall not apply to any Loss in Excess of Policy Limits or any Extra Contractual Obligation incurred by the Company as a result of any fraudulent and/or criminal act by any officer or director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.  Further, it is understood that Loss Adjustment Expense in connection with Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered under this Contract in the same manner as other Loss Adjustment Expense.

Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York):  In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.

		
	C.
	“Loss Adjustment Expense” as used herein shall be defined as all costs and expenses allocable to a specific claim that are incurred by the Company in the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim, regardless of how such costs and expenses are allocated for statutory reporting purposes, including but not limited to court costs and costs of supersedeas and appeal bonds, and including but not limited to a) pre-judgment interest, unless included as part of the award or judgment; b) post-judgment interest; c) legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto; d) monitoring counsel expenses; and e) a pro rata share of salaries and expenses of Company field employees, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract. Loss Adjustment Expense does not include salaries and expenses of employees, other than (e) above, and office and other overhead expenses.

		
	D.
	“Loss Occurrence” as used herein 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 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, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.

		
	2. 
	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period.

		
	3. 
	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph A) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “Loss Occurrence.”

		
	4. 
	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks and/or melting snow or sleet) may be included in the Company’s “Loss Occurrence.”

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 arising out of that disaster, accident or loss.

Only one period of consecutive hours shall apply with respect to one event, except that, as respects those “Loss Occurrences” referred to in subparagraph 2 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 that no two periods overlap and no individual loss is included in more than one such period, and 

2

provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss. 

It is understood that losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.”  Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils and no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours. 

		
	E.
	“Term of this Contract” as used herein shall be defined as the period from 12:01 a.m., Eastern Time, June 1, 2013, until 12:01 a.m., Eastern Time, June 1, 2014.  However, if this Contract is terminated, “Term of this Contract” as used herein shall mean the period from 12:01 a.m., Eastern Time, June 1, 2013, until the effective time and date of termination if this Contract is terminated on a cutoff basis, or through the end of the runoff period if this Contract is terminated on a runoff basis.

ARTICLE 3 - TERM

		
	A.
	This Contract shall become effective at 12:01 a.m., Eastern Time, June 1, 2013, with respect to losses arising out of Loss Occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Time, June 1, 2014, unless earlier terminated in accordance with the provisions of this Contract.

		
	B.
	If this Contract is terminated or expires while a Loss Occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire Loss Occurrence had occurred prior to the termination or expiration of this Contract, provided that no part of such Loss Occurrence is claimed against any renewal or replacement of this Contract.

		
	C.
	Notwithstanding the provisions of paragraph A above, the Company may require the Subscribing Reinsurer to provide funding in accordance with the provisions of the Funding of Reserves Article and/or may reduce or terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:

		
	1.
	The Subscribing Reinsurer's Policyholders' surplus (or its equivalent under the Subscribing Reinsurer's accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount of surplus (or the applicable equivalent) at any date during the prior 12-month period (including the 12-month period prior to the inception of this Contract); or

		
	2.
	The Subscribing Reinsurer's A.M. Best's financial strength rating has been assigned or downgraded below A- and/or its Standard & Poor's financial strength rating has been assigned or downgraded below A-; or 

		
	3.
	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or

		
	4.
	A State Insurance Department or other legal authority having jurisdiction over the Reinsurer has ordered the Subscribing Reinsurer to cease writing business; or 

		
	5.
	The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision, administration, winding-up or under a scheme of arrangement or similar proceedings (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or

		
	6.
	The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or 

		
	7.
	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or 

		
	8.
	The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.

3

The effective date of reduction or termination shall be the date specified in the Company's written notice of reduction or termination; however such date shall not be earlier than the date of public announcement as respects the earliest applicable trigger, or if there is no date of public announcement as respects the applicable trigger, the date the written notice of reduction or termination is sent to the Subscribing Reinsurer.  The Reinsurer shall notify the Company as promptly as possible upon the occurrence of any of the events set forth in subparagraphs 1 through 8 above.

		
	D.
	Additionally, in the event of any of the circumstances listed in paragraph C above, the Company shall have the option to commute the Subscribing Reinsurer's liability for losses arising under Policies subject to this Contract.  In the event the Company and the Subscribing Reinsurer cannot agree on the net present value of the Subscribing Reinsurer's liability under such Policies, they shall appoint an independent actuary to assess such liability and shall share equally any expense of any such actuary.  If the Company and the Subscribing Reinsurer cannot agree on an independent actuary, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots.  Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer's participation under this Contract.

		
	E.
	If the Company elects to reduce or terminate a Subscribing Reinsurer's participation percentage in accordance with the provisions of paragraph C above, the Subscribing Reinsurer shall have no liability, as respects such reduced or terminated share, for losses arising out of Loss Occurrences commencing after the effective date of reduction or termination.  Further, the reinsurance premium, including the minimum premium, if applicable, due for any Contract Year hereunder shall be prorated based on the Reinsurer's period of participation for the Contract Year and shall be paid as promptly as possible after the final Adjusted Premium is determined hereunder.

		
	F.
	The Company's option to require commutation as set forth under paragraph D above shall survive the termination or expiration of this Contract.

		
	G.
	The Company's waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

		
	H.
	Notwithstanding the expiration or termination of this Contract or the Reinsurer's participation hereunder, the provisions of this Contract will continue to apply to all obligations and liabilities of the parties incurred hereunder to the end that all such obligations and liabilities will be fully discharged and performed.

ARTICLE 4 - TERRITORY

The territorial limits of this Contract shall follow the Company's Policies.

ARTICLE 5 - EXCLUSIONS

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

		
	1.
	Reinsurance assumed, except as respects the following:  

		
	a.
	Reinsurance assumed as a result of the depopulation of the Citizens Property Insurance Company and any successor organization of this entity; and/or 

		
	b.
	Any reinsurance assumed from private carriers as a result of depopulations; and/or

		
	c.
	Intercompany reinsurance between the Company and its affiliates; and/or

		
	d.
	Reinsurance assumed by the Company where the policies involved are to be reissued as Policies of the Company at the next anniversary or expiration.

		
	2.
	Financial guarantee and/or insolvency.

		
	3.
	Third party liability and medical payments business.

4

		
	4.
	Liability as a member, subscriber or reinsurer of any pool, syndicate or association and any combination of insurers or reinsurers formed for the purpose of covering specific perils, specific classes of business or for the purpose of insuring risks located in specific geographical areas and any assessments from Citizens Property Insurance Company and any successor organization of this entity.

		
	5.
	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, however 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.

		
	6.
	Loss or liability from any pool, association or syndicate and any assessment or similar demand for payment related to the Florida Hurricane Catastrophe Fund.

		
	7.
	All Accident and Health, Fidelity, Surety, Boiler and Machinery, Workers' Compensation and Credit business.

		
	8.
	All Ocean Marine business.

		
	9.
	Flood and/or earthquake when written as such, but only as respects those Policies issued in the State of Florida.

		
	10.
	Difference in Conditions insurances and similar kinds of insurances, however styled, insofar as they may provide coverage for losses from the following causes:

		
	a.
	Flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water or spray from any of the foregoing, all whether wind-driven or not, except when covering property in transit; or

		
	b.
	Earthquake, landslide, subsidence or other earth movement or volcanic eruption, except when covering property in transit.

		
	11.
	Mortgage Impairment insurances and similar kinds of insurances, however styled.

		
	12.
	All Automobile business.

		
	13.
	Loss or damage directly or indirectly occasioned by, happening through or in consequences of war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, or confiscation or nationalization or requisition or destruction of or damage to property by or under the order of any government or public or local authority.

		
	14.
	Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke.  Nevertheless, this exclusion does not preclude any payment of the cost of removal of debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company's property loss under the applicable original Policy.

		
	15.
	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance” attached to and forming part of this Contract.

		
	16.
	All liability arising out of mold, spores and/or fungus but this exclusion shall not apply to those losses which follow as a direct result of a loss caused by a peril otherwise covered hereunder.

		
	17.
	Terrorism, in accordance with the “Terrorism Exclusion Clause - Property Treaty Reinsurance - NMA2930c” attached to and forming part of this Contract.

		
	B.
	The Reinsurer shall not be required to provide cover or pay any claim or provide any benefit hereunder that would cause the Reinsurer to be in violation of any applicable trade or economic sanctions, laws or regulations.

5

		
	C.
	Should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Company's Policy, any amount of loss for which the Company is liable because of such invalidation will not be excluded hereunder.

		
	D.
	The exclusions set forth in paragraph A above, with the exception of subparagraphs 2, 4, 5, 6, 13, 15 and 17, shall not apply when they are merely incidental to the main operations or exposures of the insured, provided such main operations or exposures are also covered by the Company and are not themselves excluded from the scope of this Contract.  The Company will be the sole judge of what is “incidental.”

		
	E.
	Should the Company, by reason of an inadvertent act, error or omission, be bound to afford coverage excluded hereunder or should an existing insured extend its operations to include coverage excluded hereunder, the Reinsurer shall waive the exclusion(s) set forth in paragraph A above, with the exception of subparagraphs 2, 4, 5, 6, 13, 15 and 17.  The duration of said waiver shall not extend beyond the time that notice of such coverage has been received by the responsible underwriting authority of the Company plus the minimum time period thereafter for the Company to terminate such coverage.

ARTICLE 6 - SPECIAL ACCEPTANCE

The Company may submit to the Reinsurer for special acceptance business not covered by this Contract.  Such business, if accepted by the Reinsurer, shall be covered hereunder, and shall be subject to the terms and conditions of this Contract, except as otherwise modified by such special acceptance.  The Reinsurer shall be deemed to have accepted a risk if it has not responded within five business days after receipt of the request for special acceptance.  Any business covered by special acceptance under the reinsurance contract being replaced by this Contract will be automatically covered hereunder.  Further, in the event a Subscribing Reinsurer becomes a party to this Contract subsequent to the special acceptance of any business not normally covered hereunder, the Subscribing Reinsurer will be deemed to have accepted such business for coverage hereunder.

ARTICLE 7 - RETENTION AND LIMIT

		
	A.
	Coverage A - First Excess Layer

The Company shall retain and be liable for the first $20,000,000 of Ultimate Net Loss arising out of each Loss Occurrence commencing during the Term of this Contract.  The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds $20,000,000, but the liability of the Reinsurer shall not exceed $30,000,000 in the aggregate for Loss Occurrences commencing during the Term of this Contract.
		
	B.
	Coverage B - Second Excess Layer

The Company shall retain and be liable for the first $20,000,000 of Ultimate Net Loss arising out of each Loss Occurrence commencing during the Term of this Contract.  The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds $20,000,000, but the liability of the Reinsurer shall not exceed $60,000,000 in the aggregate for Loss Occurrences commencing during the Term of this Contract, and recoveries under Coverage A shall inure to the benefit of Coverage B when calculating Coverage B Reinsurer liabilities.
		
	C.
	Coverage C - Third Excess Layer

The Company shall retain and be liable for the first $20,000,000 of Ultimate Net Loss arising out of each Loss Occurrence commencing during the Term of this Contract.  The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds $20,000,000, but the liability of the Reinsurer shall not exceed $100,000,000 in the aggregate for Loss Occurrences commencing during the Term of this Contract, and recoveries under Coverage A and Coverage B shall inure to the benefit of Coverage C when calculating Coverage C Reinsurer liabilities.
		
	D.
	Coverage D - Fourth Excess Layer

The Company shall retain and be liable for the first $20,000,000 of Ultimate Net Loss arising out of each Loss Occurrence commencing during the Term of this Contract.  The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds $20,000,000, but the liability of the Reinsurer shall not exceed $150,000,000 in the aggregate for Loss Occurrences commencing during the Term of this Contract, and recoveries under Coverage A, Coverage B and Coverage C shall inure to the benefit of Coverage D when calculating Coverage D Reinsurer liabilities.

6

ARTICLE 8 - FLORIDA HURRICANE CATASTROPHE FUND

		
	A.
	The Company shall purchase mandatory coverage from the Florida Hurricane Catastrophe Fund (hereinafter referred to as the “FHCF”) with the following provisional limit and retention:

90% of $490,619,000 excess of $187,160,000 (hereinafter referred to as the “Mandatory Layer”)

The provisional limit and retention above may increase or decrease in accordance with the provisions of the reimbursement contract between the Company and the State Board of Administration of the State of Florida (hereinafter referred to as the “SBA”).

		
	B.
	Any loss reimbursement paid or payable to the Company for the Mandatory Layer provided by the FHCF and resulting from Loss Occurrences commencing during the Term of this Contract, shall inure to the benefit of this Contract whether collectible or not, and shall be deemed paid to the Company in accordance with the reimbursement contract between the Company and the SBA at the projected payout multiple set forth therein as of the date hereof (calculated based on a claims paying capacity of the FHCF of $17,000,000,000 and will be deemed not to be reduced by any subsequent recalculation of the projected payout multiple or the final payout multiple due to any reduction or exhaustion of the FHCF's claims-paying capacity). 

		
	C.
	Prior to final calculation of the Company's FHCF retention and payout for the Mandatory Layer coverage provided by the reimbursement contract between the Company and the SBA, the Reinsurer's liability hereunder will be calculated provisionally based on the projected FHCF payout and in accordance with paragraphs A and B above.  Following the FHCF's final calculation of the payout for the Mandatory Layer provided by the reimbursement contract, the Ultimate Net Loss under this Contract will be recalculated.  If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one Loss Occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer.  If the loss to the Reinsurer under any excess layer of this Contract in any one Loss Occurrence is greater than the amount previously paid by the Reinsurer under that excess layer, the Reinsurer shall promptly remit the difference to the Company.  

		
	D.
	If an FHCF reimbursement amount is based on the Company's losses in more than one Loss Occurrence commencing during the Term of this Contract and the FHCF does not designate the amount allocable to each Loss Occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company's losses in each Loss Occurrence bear to the Company's total losses arising out of all Loss Occurrences to which the FHCF reimbursement applies. 

ARTICLE 9 - OTHER REINSURANCE

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

ARTICLE 10 - LOSS NOTICES AND SETTLEMENTS

		
	A.
	As respects each excess layer hereunder, whenever losses sustained by the Company appear likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.

		
	B.
	The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.

		
	C.
	Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer.  The Reinsurer shall pay within 10 business days to the Company its share of amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

ARTICLE 11 - PREMIUM

		
	A.
	As provisional premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “Deposit Premium” for that excess layer in Schedule A attached hereto, in three installments.  Each of the first three installments shall be an amount equal to 25.0% 

7

of the “Deposit Premium” for that excess layer, and is due on July 1 and October 1 of 2013, and January 1, 2014. However, in the event this Contract is terminated, there shall be no deposit premium installments due after the effective date of termination.

		
	B.
	No later than April 1, 2014 (or as promptly as possible following the date of termination in the event this Contract is terminated prior to April 1, 2014), the Company shall provide a report to the Reinsurer setting forth the Adjusted Premium due hereunder for each excess layer, and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.

		
	C.
	“Adjusted Premium” as used herein shall be determined as follows:

		
	1.
	The Company's Adjusted Premium for each excess layer will be equal to the amount, shown as “Deposit Premium” for that excess layer in Schedule A attached hereto, subject to the following circumstances:

		
	a.
	Adjusted TIV increases to an amount equal to or less than 110% of Provisional TIV; or

		
	b.
	Adjusted TIV decreases to an amount equal to or greater than 90% of Provisional TIV.

		
	2.
	However, in the event:

		
	a.
	Adjusted TIV increases to an amount greater than 110% of Provisional TIV, the Company's Adjusted Premium will equal the percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, applied to the Company's Adjusted TIV, less 10% of the amount, shown as “Deposit Premium” for that excess layer in Schedule A attached hereto; or

		
	b.
	Adjusted TIV decreases to an amount less than 90% of Provisional TIV, the Company's Adjusted Premium will be equal to the greater of the following:

		
	i.
	The amount, shown as “Minimum Premium” for that excess layer in Schedule A attached hereto; or

		
	ii.
	The percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, applied to the Company's Adjusted TIV, plus 10% of the amount, shown as “Deposit Premium” for that excess layer in Schedule A attached hereto.

The term “Adjusted TIV” as used herein shall mean the Company's total insurance values for business reinsured hereunder (as set forth in the Business Covered Article), in force at September 30, 2013. “Provisional TIV” shall equal $72,977,013,000. 

ARTICLE 12 - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage or subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as a retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder.  Recoveries therefrom shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss.  The Company hereby agrees to enforce its rights to salvage and subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights, provided it is economically reasonable, in the Company's opinion, to do so.

ARTICLE 13 - OFFSET

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

8

ARTICLE 14 - LATE PAYMENTS

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

		
	B.
	In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

		
	1.
	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times

		
	2.
	1/365th of the one-month LIBOR on the first business day of the month for which the calculation is made, plus 1%; times

		
	3.
	The amount past due, including accrued interest.

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

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

		
	1.
	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract.  In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.

		
	2.
	Any claim or loss payment due the Company hereunder shall be deemed due 10 business days after the proof of loss or demand for payment is transmitted to the Reinsurer.  If such loss or claim payment is not received within the 10 business days, interest will accrue on the payment or amount overdue in accordance with paragraph B of this Article, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.

		
	3.
	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of this paragraph, the due date shall be as provided for in the applicable section of this Contract.  In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 business days following transmittal of written notification that the provisions of this Article have been invoked.

		
	D.
	For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

		
	E.
	Nothing herein shall be construed as limiting or prohibiting the Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract.  If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void.  If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings.  If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

ARTICLE 15 - LIABILITY OF THE REINSURER

		
	A.
	The liability of the Reinsurer shall follow that of the Company in every case and be subject in all respects to all of the general and specific stipulations, clauses, waivers, interpretations and modifications of the Company's Policies and any endorsements thereto.  However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

9

		
	B.
	Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third party or any persons not parties to this Contract.

ARTICLE 16 - NET RETAINED LINES

		
	A.
	This Contract applies only to that portion of any Policy which the Company retains net for its own account (prior to deduction of any reinsurance which inures solely to the benefit of the Company), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any Policy which the Company retains net for its own account shall be included.

		
	B.
	The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 17 - FUNDING OF RESERVES

(Applies to each Subscribing Reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company's reserves and/or at the option of the Company in the event any of the triggers set forth in paragraph C of the Term Article occur.)

		
	A.
	As regards Policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for unearned premium or losses covered hereunder, or any other outstanding balances which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer.  The Reinsurer hereby agrees to fund its share of any unearned premium (including, but not limited to, the unearned portion of any deposit premium installment as determined by the Company), known outstanding losses and Loss Adjustment Expense that have been reported to the Reinsurer, losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer, including all case reserves plus any reasonable amount estimated to be unreported from known Loss Occurrences, plus any other outstanding balances owed to the Company (hereinafter referred to as “Reinsurer Obligations”) by funds withheld, cash advances, Letter of Credit or a Trust Agreement which meets the requirements of the Florida Insurance Laws and Regulations and are acceptable to the Company.  The Reinsurer shall have the option to fund in another manner if the method and form thereof is acceptable to the Company and the insurance regulatory authorities having jurisdiction over the Company's reserves.

As respects a reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company's reserves, it is understood that any funding required of such reinsurer as set forth above shall not be greater than the amount of funding required by the insurance regulatory authorities having jurisdiction over the Company's reserves.

		
	B.
	When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company's reserves in an amount equal to the Reinsurer's Obligations.  Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date, unless 30 days (or 60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

		
	C.
	The Reinsurer and the Company agree that the Letters of Credit or other funding provided by the 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 any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company for the following purposes, unless otherwise provided for in a separate Trust Agreement:

		
	1.
	To reimburse the Company for the Reinsurer's Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;

		
	2.
	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer's Obligations (or in excess of 102% of the Reinsurer's Obligations if funding is provided by a Trust Agreement) under this Contract;

		
	3.
	To fund an account with the Company for the Reinsurer's Obligations.  Such cash deposit shall be held in an interest bearing account separate from the Company's other assets, and interest thereon not in excess of the U.S. prime rate shall accrue to the benefit of the Reinsurer;

		
	4.
	To pay the Reinsurer's share of any other amounts the Company claims are due under this Contract.

All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.  In the event the amount drawn by the Company is in excess of the actual amount required for (1) or (3), or in the case of (4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn.

		
	D.
	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

		
	E.
	At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer's Obligations, for the sole purpose of amending the Letter of Credit or other method of funding, in the following manner:

		
	1.
	If the statement shows that the Reinsurer's Obligations exceed the balance of the Letter of Credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.  Should another method of funding be used, the Reinsurer shall increase such funding by the amount of the difference set forth in the statement within 30 days after receipt of the statement.

		
	2.
	If, however, the statement shows that the Reinsurer's Obligations are less than the balance of the Letter of Credit (or that 102% of the Reinsurer's Obligations are less than the Trust Account balance if funding is provided by a Trust Agreement) as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.  Should another method of funding be used, the Company shall decrease such funding by the amount of the difference set forth in the statement within 30 days after receipt of the statement.

		
	F.       
	Should the Subscribing Reinsurer be in breach of its obligations under this Article, or any Trust Agreement that the Subscribing Reinsurer enters into to collateralize the Reinsurer's Obligations hereunder, notwithstanding anything to the contrary elsewhere in this Contract, including but not limited to the Arbitration Article, the Company may seek immediate relief in respect of said breach from any court sitting in Pinellas County, Florida having competent jurisdiction of the parties hereto or the state and federal courts having jurisdiction for disputes from Pinellas County, as determined by the Company, and the parties consent to jurisdiction of such court.  The Subscribing Reinsurer agrees that in addition to obeying the order of such court, it will bear all costs, including reasonable attorneys' fees and court costs, incurred by the Company in seeking the relief sought from such breach.  In the alternative, at the sole discretion of the Company, the Company may elect to demand arbitration of such dispute pursuant to the provisions of the Arbitration Article hereunder.

ARTICLE 18 - ACCESS TO RECORDS

The Reinsurer or its duly appointed representative shall have access to the books and records of the Company on matters relating to this reinsurance upon reasonable advance written notice to the Company and at reasonable times during the regular business hours of the Company, at the location where such books and records are maintained in the ordinary course of business, for the purpose of obtaining information concerning this Contract or the subject matter thereof.  However, the Reinsurer shall have such access only if it is current in all undisputed payments due to the Company in accordance with the provisions of this Contract.  It is understood that reasonable advance written notice shall not be less than five business days.  The Reinsurer may make copies of records of the Company related to this Contract, but at the Reinsurer's sole expense.

11

ARTICLE 19 - CONFIDENTIALITY

		
	A.
	The Reinsurer hereby acknowledges that the terms and conditions of this Contract, documents, information and data provided to it by the Company, whether directly or through an authorized agent, during the course of negotiation, administration, and performance of this Contract (hereinafter referred to as “confidential information”) are proprietary and confidential to the Company.  Confidential information shall not include documents, information or data that the Reinsurer can show:

		
	1.
	Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

		
	2.
	Have been rightfully received from a third person without obligation of confidentiality; or

		
	3.
	Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

		
	B.
	Absent the written consent of the Company, the Reinsurer shall not disclose any confidential information to any third parties, including any affiliated companies, except:

		
	1.
	When required by retrocessionaires subject to the business ceded to this Contract; 

		
	2.
	When required by regulators performing an audit of the Reinsurer's records and/or financial condition; 

		
	3.
	When required by external auditors performing an audit of the Reinsurer's records in the normal course of business; or

		
	4.
	When required by courts or arbitrators in connection with an actual or potential dispute hereunder.

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

		
	C.
	Notwithstanding the above, in the event the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the confidential information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

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

ARTICLE 20 - ERRORS AND OMISSIONS 

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

ARTICLE 21 - CURRENCY

		
	A.
	Whenever the word “Dollars” or the “$” sign appears in this Contract, it shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

		
	B.
	Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

ARTICLE 22 - TAXES

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

12

ARTICLE 23 - FEDERAL EXCISE TAX

		
	A.
	The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

		
	B.
	In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

ARTICLE 24 - INSOLVENCY

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

		
	B.
	In the event of the insolvency of the Company, this reinsurance shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Company or on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim.  It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

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

		
	D.
	It is further understood and agreed that, in the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee or other party as more specifically limited by any statute or regulation applicable hereto, of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees.  However, the exceptions provided in (1) and (2) above shall apply only to the extent that applicable statutes or regulations specifically permit such exceptions.

ARTICLE 25 - ARBITRATION

		
	A.
	Binding Arbitration.  Except as may be elected by the Company pursuant to paragraph F of the Funding of Reserves Article of this Contract, any dispute relating in any way to the formation, scope, implementation, performance or enforcement of this Contract, or which arises out of or relates to this Contract, shall be resolved through binding arbitration in accordance with this Article.  The provisions of this Article are intended to control in the event that other provisions of this Contract or of any other contract are in conflict with the provisions of this Article.  No provision of this Contract or of any other contract or understanding shall result in the provisions of this Article being interpreted as being permissive or optional.

 
		
	B. 
	Initiation of Arbitration.  To initiate arbitration, a party to this Contract shall notify the other party in writing by certified or registered mail, return receipt requested, of its desire to arbitrate.  The notice shall refer to this Article of the Contract and state the nature of the dispute and the remedy sought.  The Party to which the notice is sent shall respond to it in writing within 10 business days after receipt thereof.

 
		
	C. 
	Arbitrator Appointment Process.  The dispute shall be resolved by a panel of three arbitrators.  Subject to the qualification requirements set forth in the following sections, each Party shall, by e-mail to the other Party or its counsel, appoint one of the arbitrators within 30 days after the notification of initiation of arbitration is received.  If a Party fails to appoint an arbitrator within such 30 days, the other Party may appoint the second arbitrator.

 
		
	D. 
	Umpire Selection Process.  Within 30 calendar days after the date of the e-mail naming them as an arbitrator, the two party-appointed arbitrators shall each provide the other by e-mail the names of three candidates for the third arbitrator, who shall act as umpire, chairing the arbitration panel.  If a party-appointed arbitrator fails timely to provide such names, subject to the disqualification of candidates for conflicts disclosed on an umpire questionnaire, the umpire may be selected by the party-appointed arbitrator who timely submitted umpire candidate names.  Each named candidate shall be asked to complete and return, within 10 business days, a questionnaire similar to the Neutral Selection Questionnaire found on the ARIAS-US website.  If a candidate fails to return a fully completed umpire questionnaire postmarked in the 10 business days provided, the name of that candidate shall be stricken from the list and not considered further.  Any candidate whose responses in the questionnaire indicate a conflict of interest shall be disqualified from consideration as umpire, but may be replaced by another candidate by the party which named the disqualified candidate within five business days.  Substitute candidates shall be subject to the questionnaire process set forth above.  If the party-appointed arbitrators do not, within 20 business days of the return of the completed umpire questionnaires, agree on an umpire from among the persons named and not disqualified by the questionnaires, then within a further period of 10 business days, each party-named arbitrator shall strike two names from those suggested by the other party-appointed arbitrator (or strike a lesser number if necessary to leave one name pending proposed by each Party), and the umpire shall be selected from the remaining two candidates (one of whom being designated as the “even” candidate, and one the “odd” candidate), using the first digit to the left of the decimal point of the closing Dow industrial average on the next business day (said digit being either “even” or “odd”), subject to the provisions of this Article.

 
		
	E. 
	Arbitrator Qualifications.  Each of the two party-appointed arbitrators (1) shall be a current or former officer of a property and casualty insurance or reinsurance company, (2) shall have not less than 10 years' experience with property insurance or reinsurance, and (3) shall not be a current or former employee, officer, or director of a Party or any of their respective affiliates.  The umpire (a) shall be a current or former officer of a property and casualty insurance or reinsurance company, (b) shall have not less than 10 years' experience in property and casualty insurance or reinsurance, and (c) shall not be a current or former employee, officer, or director of a Party or any of their respective affiliates.  If an appointed arbitrator or umpire dies, develops a conflict of interest, becomes disabled or is otherwise unable or unwilling to serve, a substitute shall be selected in the same manner as the departing member was chosen, and the arbitration shall continue.

 
		
	F. 
	Place and Time; Procedure.  Within 30 calendar days after both arbitrators and the umpire have been appointed or selected, the panel shall hold an organizational meeting to determine and notify the Parties of the procedure to be filed, what discovery will be permitted and the date of the final hearing.  The arbitration hearing and any pre-hearing conferences shall be held in St. Petersburg, Florida, on the date(s) fixed by the arbitrators, provided that the arbitrators may call for pre-hearing conferences by means of teleconference or videoconference as they may deem appropriate.  The arbitrators shall establish pre-hearing and hearing procedures as warranted by the facts and issues of the dispute.  The arbitrators may consider any relevant evidence and shall give the evidence such weight as they deem appropriate after consideration of any objections raised.  Each Party may examine any witnesses who testify at the arbitration hearing. The arbitrators may allow discovery limited to that discovery reasonably necessary to facilitate the effective presentation of the dispute to the arbitrators.  If the arbitrators elect to allow discovery, they shall distribute a discovery plan which shall set forth the scope of permissible discovery and the time frame during which discovery shall be conducted.  All arbitration proceedings shall be conducted in the English language.  The arbitrators shall base their decision on the terms and conditions of this Contract and applicable law.  The arbitrators shall decide all substantive and procedural issues by majority vote.  The arbitration proceedings and the outcome thereof shall be kept strictly confidential.  The panel is empowered to grant interim relief as it may deem appropriate.  If the reinsurance agreement is accompanied by any collateral requirements, the panel shall enforce the collateral requirements pending the final hearing.

 
		
	G. 
	Costs.  Each party shall bear the cost of the arbitrators appointed by it, and shall jointly and severally bear the cost of the umpire.  The remaining costs of arbitration shall be allocated by the panel as part of its final award.  The arbitrators may not award attorneys' fees to any Party.

 
		
	H. 
	Award.  The award of the arbitration panel shall be in writing and shall be binding upon the Parties.  If either Party fails to carry out any aspect of the award, the other Party may seek enforcement of the award in a court of competent jurisdiction, as specified in this Contract, under the Federal Arbitration Act. 

14

		
	I. 
	Consolidation.  Any claims asserted by a Party against the other Party with respect to this Contract or any agreement related to this Contract or the reinsurance program to which this Contract pertains shall be asserted in a single arbitration proceeding, and it is agreed that if such claims are asserted in more than one arbitration proceeding, that the claims shall be consolidated in a single arbitration proceeding, to be heard by the first arbitration panel that is appropriately selected and constituted.  The Parties further agree that any arbitration under this Contract shall, at the sole option of either Party, be consolidated with any other arbitration relating to the reinsurance program to which this Contract pertains. 

		
	J. 
	Alternative Expedited Arbitration.  

		
	1.
	Notwithstanding the foregoing provisions of this Article, in the event an amount in dispute hereunder is $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator.  The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS), using that organization's Enhanced Umpire Selection program, or any similar program, limiting the potential arbitrators to persons satisfying the qualifications set forth in paragraph E of this Article.

 
		
	2.
	Each party's case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator.  Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.

 
		
	3.
	Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator.  As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties.  The arbitrator will have all the powers conferred on the arbitration panel as hereinabove provided and the terms of this Article not otherwise specifically altered by the terms of this paragraph J will apply.

ARTICLE 26 - SERVICE OF SUIT

(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)

		
	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. 
	The parties agree that the state and federal courts located in Pinellas County, Florida or state and federal courts having jurisdiction for disputes from Pinellas County, are the courts of competent personal and subject matter jurisdiction and are the proper venue for any court proceedings permitted under this Article or under this Contract.  The parties further agree not to assert, by way of motion, as a defense, or otherwise in any such proceeding, that the venue of the suit is improper or that the agreement or the subject matter may not be enforced by such courts.

		
	C.
	In the event the Reinsurer fails to pay any amount claimed to be due hereunder or otherwise fails to perform its obligations hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of the state or federal courts in Pinellas County, Florida or the state and federal courts having jurisdiction for disputes from Pinellas County, as determined by the Company.  The Reinsurer will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, will abide by the final decision of such court or of any appellate court in the event of an appeal.

		
	D.
	Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Office of Insurance Regulation, Commissioner of Insurance for the State of Florida 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 Company or any beneficiary hereunder arising out of this Contract.

15

ARTICLE 27 - SEVERABILITY

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

ARTICLE 28 - GOVERNING LAW

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of the rules with respect to conflicts of law.

ARTICLE 29 - AGENCY

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

ARTICLE 30 - ENTIRE AGREEMENT

		
	A.
	This Contract and any related trust agreement, letter of credit and/or special acceptance(s), shall constitute the entire agreement between the parties hereto with respect to the business reinsured hereunder and there are no understandings between the parties other than as expressed in this Contract.

		
	B.
	Any change to or modification of this Contract shall be null and void unless made by an addendum signed by both parties.

ARTICLE 31 - MODE OF EXECUTION

		
	A.
	This Contract (including any addenda thereto) may be executed by any of the following methods: 

		
	1.
	An original written ink signature of paper documents; 

		
	2.
	Facsimile or electronic copies of paper documents showing an original ink signature; and/or

		
	3.
	Electronic signature technology employing computer software and a digital signature or digitizer pad to capture a person's handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

		
	B.
	The use of any of the any one or a combination of the methods set forth in paragraph A above shall constitute a valid execution of this Contract.  This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 32 - INTERMEDIARY

TigerRisk Partners LLC is hereby recognized as the Intermediary negotiating this Contract for all business hereunder.  All communications (including, but not limited to, notices, statements, premium, return premium, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through TigerRisk Partners LLC, 7601 France Avenue South, Suite 200, Edina, Minnesota 55435.  Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer.  Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

IN WITNESS WHEREOF, the Company has confirmed its review of the Interests and Liabilities Agreement(s) attached to and forming part of this Contract and its agreement to be bound by the terms and conditions thereof, and has executed this Contract by its duly authorized representative on:

this ________________________ day of _______________________________________, in the year _____________________.

___________________________________________________________UNITED PROPERTY & CASUALTY INSURANCE COMPANY

17

SCHEDULE A

attached to the

PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
Effective:  June 1, 2013

issued to

UNITED PROPERTY & CASUALTY INSURANCE COMPANY
St. Petersburg, Florida
including any and/or all companies that are or hereafter become affiliated therewith

	
					
	 
	First Excess 
Layer
	Second Excess 
Layer
	Third Excess 
Layer
	Fourth Excess 
Layer

	 
	 
	 
	 
	 

	Minimum Premium
	$11,760,000
	$16,680,000
	$19,400,000
	$13,500,000

	Premium Rate
	0.02014%
	0.02857%
	0.03323%
	0.02312%

	Deposit Premium
	$14,700,000
	$20,850,000
	$24,250,000
	$16,875,000

The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.

18

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

		
	1.
	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

		
	2.
	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

		
	I.
	Nuclear reactor power plants including all auxiliary property on the site, or

		
	II.
	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or

		
	III.
	Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material", and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or

		
	IV.
	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

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

		
	(a)
	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

		
	(b)
	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.  However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

		
	4.
	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

		
	5.
	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

		
	6.
	The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

		
	7.
	Reassured to be sole judge of what constitutes:

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

Note.     Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
		
	(a)
	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

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

19

TERRORISM EXCLUSION
(Property Treaty Reinsurance)

Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, it is agreed that this reinsurance agreement excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss. 

An act of terrorism includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which: 

		
	(i)
	involves violence against one or more persons; or 

		
	(ii)
	involves damage to property; or 

		
	(iii)
	endangers life other than that of the person committing the action; or 

		
	(iv)
	creates a risk to health or safety of the public or a section of the public; or 

		
	(v)
	is designed to interfere with or to disrupt an electronic system. 

This reinsurance agreement also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism. 

Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this reinsurance agreement, in respect only of personal lines this reinsurance agreement will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act 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 or contamination or explosion. 

20

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