Document:

exv10w160

EXHIBIT
10.160

FIRST CASUALTY EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2008158

Effective: January 1, 2008 — January 1, 2009

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FIRST CASUALTY EXCESS OF LOSS REINSURANCE CONTRACT No. 2008158

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	ARTICLE	 	CLAUSE	 	PAGE
	 
	 	1	 	 	Coverage

	 	 	3	 
	 	2	 	 	Commencement and Termination

	 	 	6	 
	 	3	 	 	Limit of Liability

	 	 	7	 
	 	4	 	 	Net Retained Lines

	 	 	8	 
	 	5	 	 	Territory

	 	 	8	 
	 	6	 	 	Ultimate Net Loss

	 	 	8	 
	 	7	 	 	Extra Contractual Obligations

	 	 	10	 
	 	8	 	 	Loss in Excess of Original Policy Limits

	 	 	11	 
	 	9	 	 	Definitions

	 	 	12	 
	 	10	 	 	Reinsurance Premium

	 	 	15	 
	 	11	 	 	Reinstatement

	 	 	16	 
	 	12	 	 	Salvage and Subrogation

	 	 	16	 
	 	13	 	 	Loss Adjustment and Settlement

	 	 	17	 
	 	14	 	 	Structured Settlements

	 	 	18	 
	 	15	 	 	Interest Penalty

	 	 	18	 
	 	16	 	 	Dividends and Taxes

	 	 	20	 
	 	17	 	 	Federal Excise Tax

	 	 	20	 
	 	18	 	 	Currency

	 	 	20	 
	 	19	 	 	Access to Records

	 	 	20	 
	 	20	 	 	Insolvency

	 	 	22	 
	 	21	 	 	Arbitration

	 	 	23	 
	 	22	 	 	Offset

	 	 	26	 
	 	23	 	 	Unauthorized Reinsurance

	 	 	27	 
	 	24	 	 	Service of Suit

	 	 	29	 
	 	25	 	 	Errors and Omissions

	 	 	30	 
	 	26	 	 	Confidentiality

	 	 	30	 
	 	27	 	 	Governing Law

	 	 	32	 
	 	28	 	 	Severability

	 	 	32	 
	 	29	 	 	Entire Agreement

	 	 	32	 
	 	30	 	 	Special Conditions

	 	 	32	 
	 	31	 	 	Assignment, Novation or Transfer

	 	 	36	 
	 	32	 	 	Reinsurer Claim Obligations

	 	 	37	 

Attachments:

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

Nuclear Incident Exclusion Clause —
Liability — Reinsurance U.S.A

Nuclear Incident Exclusion Clause —
Liability — Reinsurance — Canada

Terrorism Exclusion Clause

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FIRST CASUALTY EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2008158

(hereinafter referred to as the “Contract”)

The “Subscribing Reinsurer” whose

name appears on the Interests and Liabilities Agreement

attached to and forming a part of this Contract

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

referred to as the “Reinsurers”)

does hereby indemnify, as herein provided and specified, the

PEERLESS INSURANCE COMPANY

(hereinafter referred to as the “Company”).

ARTICLE 1 — COVERAGE

	A.	 	The Subscribing Reinsurer hereby reinsures the Company in respect of liability
which may accrue to the Company or a Legal Entity and reinsured, directly or
indirectly, by the Company under any Policy or Policies, classified by the Company
or a Legal Entity as general liability, automobile liability, and other lines of
business excluding liability in connection with the following classes of business or
contracts:

     Section A

	 	1.	 	Credit Insurance and/or Financial Guarantee.
	 
	 	2.	 	Liability under any Insolvency Fund arising by contract, operation of
law or otherwise, whether voluntary or involuntary. “Insolvency Fund”
includes any guaranty fund, insolvency fund, plan, pool, association, fund or
other arrangement, howsoever denominated, established or governed; which
provides for any assessment of or payment or assumption by the Company or a
Legal Entity of part or all of any claim, debt, charge, fee, or other
obligation of an insurer, or its successors, or assigns, which has been
declared by any competent authority to be insolvent, or which has been
otherwise deemed unable to meet any claim, debt, charge, fee or other
obligation in whole or in part.
	 
	 	3.	 	Reinsurance Assumed except for inter-company reinsurance between the
members of the Agency Markets Group, business classified as reinsurance
written by the Company or a Legal Entity for and on behalf of a direct
insured, business assumed from the Wausau Business Group, business assumed
from OneBeacon Insurance Group and reinsurance assumed by Liberty National
Market — Global Business Unit.
	 
	 	4.	 	Liability as excluded by the attached clauses entitled:

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	 	a.	 	Nuclear Energy Risks Exclusions Clause Reinsurance
Worldwide excluding U.S.A. and Canada — NMA 1975a;
	 
	 	b.	 	Nuclear Incident Exclusion Clause Liability Reinsurance
U.S.A. — NMA1590 (amended);
	 
	 	c.	 	Nuclear Incident Exclusion Clause Liability Reinsurance
Canada — NMA1979a.

	 	5.	 	Terrorism, as attached.
	 
	 	6.	 	Liability whatsoever for any claim or claims in respect of loss or losses directly
or indirectly arising out of, resulting from or in consequence of, or in any way
involving asbestos, or any materials containing asbestos in whatever form or
quantity.
	 
	 	7.	 	Director’s and Officer’s Liability, and Professional Liability coverage
underwritten by the Liberty International Underwriters business unit, except
coverage shall be provided for Extra Contractual Obligations and Loss in Excess of
Original Policy Limits pursuant to Articles 7 and 8 of this Contract.
	 
	 	8.	 	War, invasion, acts of foreign enemies, hostilities or warlike operations (whether
war be declared or not), civil war, mutiny, revolution, rebellion, insurrection,
uprising, military or usurped power, confiscation by order of any public authority
or government de jure or de facto, martial law;

     Section B

	 	1.	 	Workers’ Compensation insurance.
	 
	 	2.	 	Bankers’ and Brokers’ insurances or reinsurance issued by the Company or a Legal
Entity meaning contracts issued to banks, trust companies, building and loan
companies, safe deposit companies, investment companies, including investment
trusts, finance companies, credit unions, stock or security, brokers, or to similar
financial institutions, insuring them against loss from the following hazards:

	 	a.	 	Infidelity of employees and/or partners;
	 
	 	b.	 	Unfaithful performance of duties by employees and/or
partners;
	 
	 	c.	 	Loss of property in transit;
	 
	 	d.	 	Forgery or alteration of negotiable or other paper;
	 
	 	e.	 	Burglary, robbery, theft, false pretenses or fraud;
	 
	 	f.	 	Mysterious disappearance or misplacement of property;
	 
	 	g.	 	Loss of property from safe deposit boxes or other
depositories;
	 
	 	h.	 	Damage to or destruction of money or securities;

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	 	i.	 	Counterfeiting of currencies or securities.

	 	3.	 	Motor Vehicle Physical Damage Insurance, but this exclusion shall
not apply to Motor Vehicle Property Damage Liability Insurance.
	 
	 	4.	 	Fire Insurance, including the coverage ordinarily written under
Extended Coverage Endorsements.
	 
	 	5.	 	Seepage and Pollution in accordance with the ISO Commercial General
Liability Seepage and Pollution Exclusion, except as otherwise restricted by
State law. This exclusion shall not apply to pollution coverage granted
under the 1983 Motor Carrier Act.
	 
	 	6.	 	Group Health, Disability, Hospital or Surgical Insurance, but this
exclusion shall not apply to any loss due to two or more persons insured
under one or more Group policies suffering bodily injuries, including death
resulting therefrom, as a result of one accident or series of accidents
arising out of one event.
	 
	 	7.	 	Livestock Mortality Insurance.
	 
	 	8.	 	Surety business, but this exclusion shall not apply to faithful
performance bonds or public official bonds; provided, however, that the
Subscribing Reinsurer shall not be liable for any loss resulting from the
insolvency of any firm, company, corporation or bank with which a guaranteed
official has deposited funds in the course of his/her duties.
	 
	 	9.	 	Insurance covering the liability of owners or operators of aircraft
carrying passengers for hire, for injuries to such passengers.
	 
	 	10.	 	Contracts of insurance written on any cost-plus plan which provides
for payment of the full amount of all losses, however great, by the
policyholder. This exclusion shall not apply to contracts of insurance,
premiums for which are determined by a retrospective rating plan which
provides for a specific maximum premium or a formula for determination of a
maximum premium.
	 
	 	11.	 	Contracts of liability insurance covering injuries to persons or
property arising out of the rail operations of Class 1 railroads; but this
exclusion shall not apply to railroad Protective Liability policies issued
at the request of the Company’s or Legal Entities’ policyholders doing work
for or on the premises of such railroads.

	B.	 	If any risks reinsured hereunder, but falling within the scope of the above Section
B exclusions, are assigned to the Company or a Legal Entity under any assigned risk
plan, the coverage afforded by this Contract shall apply to such risks, but only for
the policy limits prescribed by said plan, and subject to the limits of this
Contract.

	C.	 	The above Section B exclusions shall not apply when they are merely incidental to
the main operations of the insured, provided such main operations are covered by the
Company or a Legal Entity and are not themselves excluded from the scope of this
Contract. For the purposes of

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this paragraph, “incidental,” as used in this paragraph, is defined as operations that generate 10% or less of the primary insured’s total revenue.

	D.	 	With respect to the business excluded in Section B, coverage shall be provided for
Extra Contractual Obligations and Loss in Excess of Original Policy Limits pursuant
to Articles 7 and 8 of this Contract.

	E.	 	Should the Company or a Legal Entity, by reason of an inadvertent act, error, or
omission, be bound to afford coverage excluded under Section B, the Subscribing
Reinsurer shall waive the exclusion(s). 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 or a Legal Entity plus the minimum time period
required thereafter for the Company or a Legal Entity to terminate such coverage.

	F.	 	The Company may submit to the Subscribing Reinsurer for special acceptance
hereunder, business not covered by this Contract. If said business is accepted by
the Subscribing Reinsurer, it shall be subject to the terms of this Contract, except
as such terms are modified by such acceptance. Any special acceptance business
covered under the reinsurance agreement being replaced by this Contract shall be
automatically covered hereunder. Further, should the Subscribing Reinsurer become a
party to this Contract subsequent to the acceptance of any business not normally
covered hereunder, they shall automatically accept same as being a part of this
Contract.

ARTICLE 2 — COMMENCEMENT AND TERMINATION

	A.	 	This Contract applies to losses occurring during its effective period and reported
to the Company or a Legal Entity by 12:01 a.m., January 1, seven years following the
expiration of this Contract and reported to the Subscribing Reinsurer within 90 days
thereafter. This Contract is effective 12:01 a.m., January 1, 2008, Local Standard
Time and shall continue in effect until 12:01 a.m., January 1, 2009, Local Standard
Time.

	B.	 	This Contract shall also apply to claims occurring subsequent to January 1, 1986
but time barred from recovery due to the expiry of the reporting dates contained in
the Commencement and Termination Article of the original Contracts in-force
subsequent to January 1, 1986. This Contract shall be applicable only to “timed
barred claims” which are first reported to the Subscribing Reinsurer by the Company
during the period January 1, 2008 to January 1, 2009 or within 90 days thereafter.
Notwithstanding the terms and conditions of the original Contracts, any losses
recoverable hereunder shall be subject to all the applicable terms and conditions of
this Contract.

	C.	 	This Contract shall also apply to claims made during the period January 1, 2008 to
January 1, 2009 with respect to losses occurring during the period January 1, 1993
to December 31, 1997 for limits of $25,000,000 excess of

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$75,000,000. Notwithstanding the terms and conditions of the original Contracts, any losses recoverable hereunder shall be subject to all the applicable terms and conditions of this Contract.

ARTICLE 3 — LIMIT OF LIABILITY

	A.	 	The Subscribing Reinsurer shall be liable for the Ultimate Net Loss in excess of the
sum of $50,000,000 of Ultimate Net Loss each Occurrence in respect of business the
subject matter of this Contract, subject to a limit of $50,000,000 on account of each
Occurrence.

	B.	 	Notwithstanding the Subscribing Reinsurer’s liability on each Occurrence as set
forth above, the Subscribing Reinsurer’s liability shall further be limited to
$100,000,000 on account of all Occurrences during the term of this Contract.

	C.	 	It is hereby warranted or so deemed that the Company’s or a Legal Entity’s maximum
limit of liability per insured shall be $50,000,000 for bodily injury and property
damage separately. It is agreed, however, that this warranty shall not apply where
the Company or a Legal Entity is required by statute to provide higher limits, e.g.
Michigan PIP and Ontario Accident Benefits.

	D.	 	It is also agreed that subrogation expense incurred shall be paid in addition to
the applicable limits of liability set forth above, on the basis provided in the
Subrogation Article of this Contract.

	E.	 	It is agreed that the Company’s or a Legal Entity’s limit of liability under any
and all policies of Personal Accident Insurance (individual and group) covering any
one individual shall be considered as not exceeding $300,000 subject to this
Contract. Subject to the limits set forth above, it is agreed that the Company is
reinsured hereunder for the excess of the amounts set forth above of Ultimate Net
Loss each Occurrence involving more than one person covered under such Policies
issued by the Company or a Legal Entity.

	F.	 	It is also understood and agreed that the limit and retention described above
applies both to the Company and the Liberty Mutual Insurance Company, Liberty Mutual
Fire Insurance Company, and all their subsidiaries (other than the Company and the
Legal Entities) (hereafter “the LMG Companies”). Any Loss Occurrence affecting both
the LMG Companies on the one hand, and the Company and the Legal Entities on the
other, shall be combined with respect to the application of the limit and retention
set forth herein. The limit, retention, and reinsurance recovery will be allocated to
the Company in the same ratio that the Ultimate Net Loss bears to the total Ultimate
Net Loss of the Company and the Legal Entities, on the one hand, and the LMG
Companies, on the other.

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ARTICLE 4 — NET RETAINED LINES

	A.	 	This Contract applies only to such portion of any obligation of the Company as the
Company retains net for its own account, and in calculating the amount of any loss
hereunder and in computing the amount or amounts in excess of which this Contract
attaches only loss or losses in respect to that portion of any obligation which the
Company retains net for its own account shall be included.

	B.	 	It is agreed that the amount or amounts of the Subscribing Reinsurer’s liability
hereunder in respect of any losses shall not be increased by reason of the inability
of the Company to collect from any other Subscribing Reinsurer whether specific or
general, any amount or amounts which may have become due from them whether such
inability arises from the insolvency of such other Subscribing Reinsurer or
otherwise.

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

	D.	 	The Company is hereby given permission to purchase other reinsurance on the
business subject hereunder, recoveries under which shall be disregarded in
determining the Company’s net retention under this Contract. It is warranted,
however, that this Contract shall be subject to a minimum net retention by the
Company of $10,000,000 each Occurrence.

ARTICLE 5 — TERRITORY (LM-02201-2005.06.02-A)

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

ARTICLE 6 — ULTIMATE NET LOSS
(LM-02400-2006.11.08-A)

	A.	 	The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts
paid or due and payable by the Company or a Legal Entity in the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal, or payment of
claims or judgments arising from each and every loss occurrence for which the
Company or a Legal Entity is or may be found liable under the Policies, less
salvages and subrogation recoveries and amounts recovered or recoverable under
pooling agreements or other reinsurances, whether collectible or not. “Ultimate Net
Loss” includes, but is not limited to, the following paid or due and payable
amounts: loss adjustment expenses, defense costs, court costs, supersedeas and
appeal bond costs, Post or Prejudgment Interest and Delayed Damages, Attorneys Fees
and Expenses, Claim-Specific Declaratory Judgment Expenses, a pro rata share of
salaries and expenses of the Company’s or its affiliates’ field employees according
to the time occupied in adjusting, defending, and settling such loss, and expenses
of all of the Company’s or

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its affiliates’ officers and employees incurred in connection with the loss; (except that salaries of officers and employees engaged in general management and
located in the home office of the Company or its affiliates’ and any office expense of the Company or its affiliates’ shall not be included), and all
other costs of investigation or litigation, (2) Extra Contractual Obligations
(as defined in the Extra Contractual Obligations Article), and (3) Loss in excess
of original Policy limits (as described in the Loss in Excess of Original Policy Limits Article).

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

	C.	 	The term “Attorneys’ Fees and Expenses” as used above, means the fees and expenses
of attorneys, including the fees and expenses of the Company’s or its affiliates’
in-house attorneys providing legal advice on coverage questions and/or defending
the Company or a Legal Entity in coverage litigation, and fees and expenses of
staff counsel in the defense of policyholder claims. Such Attorneys’ Fees and
Expenses for in-house attorneys and staff counsel shall be calculated at the rate
for such attorneys plus the expenses incurred by such attorneys, but excluding
office expenses of the Company or its affiliates’ and salaries and expenses of
their other employees.

	D.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages
added to a settlement, verdict, award, or judgment based on the period of time prior
to or after the settlement, verdict, award, or judgment whether or not made part of
the settlement, verdict, award, or judgment.

	E.	 	Nothing in this Article shall be construed to mean that losses under this Contract
are not recoverable until the Ultimate Net Loss has been ascertained. In the event a
verdict or judgment is reduced by an appeal or a settlement subsequent to the entry
of the judgment, thereby resulting in an ultimate saving on such verdict or
judgment, or in the event a judgment is reversed outright, the loss adjustment
expense incurred in securing such final reduction or reversal shall be prorated
between the Reinsurers and the Company in the proportion that each benefits from
such reduction or reversal, and the expenses incurred up to the time of the original
verdict or judgment shall be added to the Ultimate Net Loss. In the event there is
no reduction or reversal of a verdict or judgment, the loss adjustment expense
incurred in attempting to secure such reduction or reversal shall be added to the
Ultimate Net Loss.

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ARTICLE 7 — EXTRA CONTRACTUAL OBLIGATIONS
(LM-00900-2007.03.28-A)

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

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

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

	D.	 	This Article shall also apply to protect the Company within the limits hereof for
90% of Extra Contractual Obligations as defined above when incurred in respect of
all classes of business written by the Company or a Legal Entity otherwise not
covered under this Contract. However, the coverage granted under this paragraph will
not allow the erosion of any deductible/excess point or the Ultimate Net Loss by
anything other than the Extra Contractual Obligations including any related expense
awarded against the Company or a Legal Entity in respect of such classes of business
unless such coverage is provided under this Contract. For the purposes of a recovery
under this paragraph for such classes of business, other than Environmental
Impairment Liability, the Company shall retain a minimum net retention of
$50,000,000 each Occurrence after deduction of all inuring reinsurance. For
Environmental Impairment Liability, the Company shall retain a minimum net retention
of $10,000,000. For the purposes of coverage under this paragraph, the date of loss
shall be the

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date on which an action is first brought against the Company or a Legal Entity.

	E.	 	In addition to the above, with respect to any company becoming affiliated with the
Company and becoming part of Liberty Mutual Agency Markets, this Contract shall
respond to 90% of any Extra Contractual Obligations loss on actions first brought
against any acquired company after the date of acquisition, on losses occurring
prior to the date of acquisition. The Subscribing Reinsurer shall have the benefit
of any and all prior inuring reinsurances and/or Errors and Omissions cover
purchased. For the purposes of coverage under this paragraph only, the Date of Loss
shall be the date on which an action is first brought against the Company.

ARTICLE 8 — LOSS IN EXCESS OF
ORIGINAL POLICY LIMITS (LM-01600-2005.08.24-A)

	A.	 	This Contract shall protect the Company within the limits hereof, for 90% of any
Loss in excess of the Company’s or a Legal Entity’s original Policy limit where Loss
in excess of the limit has been incurred because of a failure by the Company or a
Legal Entity or by a third-party claims administrator to settle within the Policy
limit or by reason of alleged or actual negligence, fraud, or bad faith in rejecting
an offer of settlement or in defending or prosecuting litigation, including appeals,
arbitration, or any alternative dispute resolution or settlement discussions
involving any claim.

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

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

	D.	 	This Article shall also apply to protect the Company within the limits hereof for
90% of any Loss in excess of its or a Legal Entity’s original Policy limits when
incurred in respect of all classes of business written by the Company or a Legal
Entity otherwise not covered under this Contract. However, the coverage granted
under this paragraph will not allow the erosion of any deductible / excess point or
the Ultimate Net Loss by anything other than the excess of original Policy limits
Loss (including any related expense) awarded against the Company or a Legal Entity
in respect of such classes of business unless such coverage is provided under this
Contract. For the

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purposes of a recovery under this paragraph for such classes of business
other than Environmental Impairment Liability, the Company shall retain a minimum net retention of $50,000,000 each Occurrence after deduction of
all inuring reinsurance. For Environmental Impairment Liability, the Company shall retain a minimum net retention of $10,000,000. For the purposes of coverage under
this paragraph, the date of loss shall be the date on which an action is first brought against the Company or a Legal Entity.

	E.	 	In addition to the above, with respect to any company becoming affiliated with the
Company and becoming part of Liberty Mutual Agency Markets, this Contract shall
respond to 90% of any loss in excess of original Policy limits on actions first
brought against any acquired company after the date of acquisition, on losses
occurring prior to the date of acquisition. The Subscribing Reinsurer shall have the
benefit of any and all prior inuring reinsurances and/or Errors and Omissions cover
purchased. For the purposes of coverage under this paragraph, the date of loss shall
be the date on which an action is first brought against the acquired company.

ARTICLE 9 — DEFINITIONS

	A.	 	The term “Occurrence” as used in this Contract is defined as follows according to
the class or risk involved:

	 	1.a. 	 	All Classes or Risks Covered Hereunder (other than those defined in
paragraphs B and D below)
	 
	 	1.b. 	 	All injuries to persons and all losses of injury to or destruction of
property resulting from each accident or loss, or from each series of
accidents or losses proximately arising out of one event. An event shall mean
an individual accident or happening, or singular act, error or omission,
which shall be identified as to time and place and be limited in time and
place.
	 
	 	2.a. 	 	With respect to liability insurance coverage written subject to
aggregate limits of liability on a policy year basis, an Occurrence shall
mean the cumulative amount of all losses proceeding from one event. For the
purposes of this paragraph, all losses having a common origin and traceable
to the same cause, omission, or mistake occurring during any one policy year
shall be considered one event. Where the Company or a Legal Entity issues
more than one such Policy to the same policyholder such Policies shall
together be treated as though they were one Policy.
	 
	 	2.b. 	 	Losses under such Policies shall for the purposes of this Contract be
deemed to have occurred in the calendar year in which the inception date of
the Policy falls, except that as respects such Policies issued for a period
in excess of twelve months, losses for the first twelve month period shall be
deemed to have occurred in

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the calendar year in which the inception date of the Policy falls
and losses for each succeeding twelve month period or part thereof shall be
deemed to have occurred in the calendar year in which the anniversary date of
the Policy starting such period falls.

	 	3.	 	Where the Company’s or a Legal Entities’ original Policies provide for aggregate
limits of liability, the Company is permitted to extract from such aggregate Policy
(ies) Limits of Liability the amount of loss sustained by them arising from any one
event in order that such loss may be added to the Company’s or a Legal Entities’
losses from other Policies for the same event in order to determine the Ultimate
Net Loss.
	 
	 	4.a. 	 	Fidelity and Forgery
	 
	 	4.b. 	 	All losses resulting from any fraudulent or dishonest act or omission or series
thereof on the part of any one person or of several persons acting in collusion
(whether employees or not) and irrespective of the number of the Company’s or a
Legal Entity’s obligations involved; provided, that in the case of any loss
involving two or more persons acting in collusion, losses resulting from separate
acts or omissions on the part of each such person shall be included as part of such
loss.

	 	(i.) 	 	It is agreed that an Occurrence commencing prior to the date of
termination of this Contract and discovered not later than three years
after such termination (excluding only any loss prior to the effective date
of this Contract) shall be recoverable under this Contract.
	 
	 	(ii.) 	 	It is further agreed that an Occurrence resulting from a series
of acts or omissions, some prior to and some subsequent to the effective
date of this Contract, shall be disregarded.

	 	(a.) 	 	As regards losses arising under policies and/or
contracts covering on a “losses discovered” or “claims made during”
basis (that is to say policies and/or contracts in which the date
of discovery of the loss, or the date the claim is made against the
insured or is first notified to the Company or a Legal Entity,
determines under which policy and/or contract the loss is
collectible), such losses are covered hereunder and the date of the
discovery of such loss or the date such claim is made or first
notified shall be deemed to be the date of loss for the purposes of
this Contract, provided that the date of the discovery of the loss
or the date the claim is made or first notified falls within the
period covered by this Contract.
	 
	 	(b.) 	 	For the purposes of the foregoing the date of
first discovery of a “loss” or the date the claim is first made
against an insured or first notified to the Company or a

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Legal Entity shall be the date applicable to the
entire loss and/or claim and the Subscribing Reinsurer shall
be liable for their proportion of the entire loss and/or
claim irrespective of the expiry date of this Contract
and provided that such first discovery date or first date
such claim is made or notified falls within the period of this Contract.

	B.	 	The “Date of Loss” for purposes of this Contract is defined as follows:

	 	1.	 	For the purposes of this Contract when “claims-made” and/or “losses
discovered” and/or “occurrence” and/or “accident” policies are involved in
the same loss with other “Claims-Made” and/or “losses discovered” and/or
“occurrence” and/or “accident” policies, the date of loss shall be determined
as follows:

	 	a.	 	If an “occurrence” or “accident” policy is identified
as being involved then the date of loss shall be the date as
determined under the occurrence or accident policy, or
	 
	 	b.	 	If no “occurrence” or “accident” policy is identified
as being involved, then the date of the loss will be the date the
first claim is made or discovered under a “Claims-Made” or “losses
discovered” policy.

	 	2.	 	If an occurrence policy is identified after date of loss is
established under B. above, the date of loss shall not be changed. Only one
date of loss may be established for any event.

	C.	 	The term “Policy” or “Policies,” as used in this contract, shall be defined as any
written or oral binder, policy, cover note or contract of insurance or reinsurance
and/or any endorsement to any of the foregoing, issued, accepted, or held covered
provisionally or otherwise, by or on behalf of the Company or a Legal Entity listed
below (each, a “Legal Entity” and, collectively, the “Legal Entities”), and reinsured,
directly or indirectly, by the Company;

American Ambassador Casualty Company

American Fire and Casualty Company

America First Insurance Company

America First Lloyd’s Insurance Company

Avomark Insurance Company

Bridgefield Employers Insurance Company

Bridgefield Casualty Insurance Company

Colorado Casualty Insurance Company

Consolidated Insurance Company

Excelsior Insurance Company

Globe American Casualty Company

Golden Eagle Insurance Corporation

Hawkeye-Security Insurance Company

Indiana Insurance Company

Liberty Northwest Insurance Corporation

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Mid-American Fire and Casualty Company

Montgomery Mutual Insurance Company

National Insurance Association

North Pacific Insurance Company

Ohio Casualty of New Jersey Inc.

Ohio Security Insurance Company

Oregon Automobile Insurance Company

Peerless Indemnity Insurance Company

The Ohio Casualty Insurance Company

The Midwestern Indemnity Company

The Netherlands Insurance Company

West American Insurance Company, for business identified as belonging to the Agency Markets Group,

Employers Insurance Company of Wausau and
Wausau General Insurance Company and
Wausau Underwriters Insurance Company and
Wausau Business Insurance Company, for business identified as Wausau
Business Group Multi-State business or Business Solutions Group Multi-State business or Wausau Business Group,

Liberty Mutual Insurance Company, on behalf of; The First Liberty Insurance
Corporation, LM Insurance Corporation, Liberty Insurance Corporation and
Liberty Mutual Fire Insurance Company, for business previously identified as
Business Solutions Group and Business Solutions Group Multi-State business,

Liberty County Mutual Insurance Company, for business identified as
belonging to the Agency Markets Group,
Liberty Mutual Mid-Atlantic Insurance Company, for business identified as
belonging to the Agency Markets Group,

OneBeacon Insurance Company for Policies subject to the rewritten
Indemnity Reinsurance Agreement by and between Peerless Insurance Company and OneBeacon Insurance Company.

ARTICLE 10 — REINSURANCE PREMIUM

	A.	 	The premium hereon to be paid to the Subscribing Reinsurer shall be calculated at a
rate of 0.0389% of the gross net written premium income of the Company and the Legal
Entities during the term of this Contract on the class of business which is the
subject matter of this Contract.

	B.	 	The term “gross net written premium income” shall mean the gross premiums written
by the Company and the Legal Entities on the business covered hereunder less return
premiums for cancellations and reductions and less premiums on reinsurance which
inures to the benefit of the Subscribing Reinsurer. No deduction shall be made for
dividends declared, paid or credited to policyholders of the Company or a Legal
Entity.

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	C.	 	The Company shall pay to the Subscribing Reinsurer a minimum and deposit
premium equal to $1,163,520 payable in quarterly installments of $290,880 on
January 1st, April 1, July 1, and October 1, 2008.

	D.	 	As soon as practicable following the termination or expiration of this Contract,
the Company shall furnish the Subscribing Reinsurer a statement of its gross net
written premium income as defined herein and if the premium due calculated as
provided above, exceeds the deposit premium paid, the balance shall be due and
payable to the Subscribing Reinsurer forthwith.

	E.	 	The Company shall also provide the Subscribing Reinsurer as soon as possible after
December 31st any reports which may be necessary for annual statement purposes.

ARTICLE 11 — REINSTATEMENT

	A.	 	In the event of the whole or any portion of the coverage hereunder being exhausted
by a loss, the amount so exhausted is automatically reinstated from the time of the
loss and the Company shall pay to the Subscribing Reinsurer for such reinstatement
an additional premium calculated at pro rata of the premium hereon being pro rata
as to the fraction of the face value of this Contract (being $50,000,000)
reinstated. The additional premium shall be provisionally based on the deposit
premium and subsequently adjusted on the premium income for the term of this
Contract.

	B.	 	For purposes of calculating reinstatement premium, the reinsurance premium is deemed
to be $5,462,534, multiplied by the ratio that the Company’s reinsurance recovery
bears to the total reinsurance recovery of the Company and the LMG Companies.

	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company.

	D.	 	Notwithstanding anything contained herein to the contrary, the Subscribing
Reinsurer’s liability under this Contract shall not exceed $50,000,000 for any one
Occurrence nor $100,000,000 for all Occurrences during the term of this Contract.

ARTICLE 12 — SALVAGE AND SUBROGATION (LM-01800-2006.09.12-A)

	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or
subrogation in respect of claims and settlements under this Contract, less its share
of recovery expense. Unless the Company or a Legal Entity agrees to waive such
rights in the settlement of a disputed claim, or the Company and the Subscribing
Reinsurer agree to the

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contrary, the Company or a Legal Entities shall enforce
their right to salvage and/or subrogation and shall prosecute all claims arising out of such right. Should the Company or the Legal Entities refuse or neglect to enforce
this right, the Subscribing Reinsurer is hereby empowered and authorized to institute appropriate action in the name of the Company or a Legal Entity, as applicable.

	B.	 	Amounts recovered from salvage and/or subrogation and the expense of any salvage
and/or subrogation proceedings brought by the Company or a Legal Entity or the
Subscribing Reinsurer to enforce such rights shall be apportioned between the
Company and the Subscribing Reinsurer in the ratio of their respective interests in
the total salvage and/or subrogation recovery, and shall be in addition to the
limits hereon. In the event there is a failure to obtain a salvage and/or
subrogation recovery, the expense of the proceedings shall be apportioned between
the Company and the Subscribing Reinsurer in the ratio of their respective interests
in the total loss.

	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to
payments made by the Subscribing Reinsurer under this Contract, shall be applied as
if obtained prior to said payments and all necessary adjustments shall be made
between the Company and the Subscribing Reinsurer as soon as practicable after said
salvage and/or subrogation recovery is obtained.

	D.	 	The Company or a Legal Entity shall have the right, before the happening of the
loss, to waive its right of subrogation as to that loss.

ARTICLE 13 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006 09.07-A)

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

	B.	 	The Company or a Legal Entity may commence, continue, defend, settle, or withdraw
from actions, suits, or prosecutions and, generally, do all such things relating to
any claim or loss in which the Subscribing Reinsurer is interested as, in the
Company’s or a Legal Entity’s judgment, may be beneficial or expedient to the
Company and the Subscribing Reinsurer. The Company and the Legal Entities shall be
the sole judge as to what claims are covered under their Policies. All of the
Company’s Ultimate Net Loss, as well as all loss settlements made and judgments paid
by the Company or a Legal Entity, provided they are within the terms of this
Contract either under the strict conditions of the Policies or by way of compromise,
shall be unconditionally binding upon the Subscribing Reinsurer, who agrees to
pay all amounts for which they are liable

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

ARTICLE 14 — STRUCTURED SETTLEMENTS

	A.	 	In the event of a settlement of a loss by agreement of the Company or a Legal
Entity to make or fund periodic payments, the Company may, at its option:

	 	1.	 	Recover from the Subscribing Reinsurer in accordance with the terms
of this Contract as periodic payments are made by the Company.
	 
	 	2.	 	Settle the structured settlement loss with the Subscribing Reinsurer
(releasing the Subscribing Reinsurer from further liability) at an amount
determined as follows:

	 	a.	 	The cost of an annuity or reinsurance cover to fund
the periodic payments where such an annuity or reinsurance cover has
been purchased from an unaffiliated entity with an A+ Best rating
following competitive negotiations; or
	 
	 	b.	 	A figure agreed upon by the Subscribing Reinsurer as
representative of a competitive market price for such annuity or
reinsurance cover as would be purchased from an A+ Best-rated Company
where the Company elects to make provision for funding the periodic
payments through (an affiliated entity) means other than provided in
(a) above.

	B.	 	In any event, where annuities are used in settlements, and there is a return of
funds to the Company or a Legal Entity due to, for example, a reversionary trust
with the demise of a claimant, such return of funds shall be treated as recovery
and subject to the Subrogation Article of this Contract.

	C.	 	Notwithstanding the above, it is agreed that the Subscribing Reinsurer shall
remain liable until all the obligations of the Company or a Legal Entity for a loss
covered under this Contract through an annuity, or otherwise, have been satisfied.

ARTICLE 15 — INTEREST PENALTY
(LM-01400-2005.08.24-A)

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

	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company
is not received within 45 calendar days following the date

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of presentation to the Subscribing Reinsurer of information necessary to approve payment of the claim, and/or

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

	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective
payment obligations within the time periods as herein provided shall, as of that
date, be subject to an interest payment computed by multiplying the amount due by a
variable rate consisting of the U.S. Prime Rate as published in the Eastern Edition
of The Wall Street Journal on the first day of the calendar month in which
the amount became past due, plus 2%. The variable rate shall be adjusted monthly
thereafter to equal the U.S. Prime Rate as published in the Eastern Edition of
The Wall Street Journal on the first day of each successive month during
which the amount due remains unpaid, plus 2%. The product shall then be multiplied
by 1/365 for each day after the due date that the amount due and the interest amount
remain unpaid. Any interest that occurs pursuant to this Article shall be calculated
by the Party to which it is owed.

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

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

	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it
is owed. Further, any interest calculated pursuant to this Article that is $100 or
less shall be waived. Any waiver of any interest pursuant to this paragraph,
however, shall not affect the waiving Party’s right to claim

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and/or pursue interest for any other failure by the other Party to make payment when due under this Article.

ARTICLE 16 — DIVIDENDS AND TAXES (LM-00600-2005.06.02-A)

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

ARTICLE 17 — FEDERAL EXCISE TAX
(LM-01000-2005.08.24-A)

	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of
the United States of America, except for any Subscribing Reinsurer exempt from
Federal Excise Tax. A Subscribing Reinsurer that claims exempt status from Federal
Excise Tax shall provide to the Company, upon its request, proof that the exempt
status adequately satisfies the demands of the U.S. Internal Revenue Agency and/or
other applicable U.S. government authority.

	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium
payable hereon (as imposed under Section 4371 of the Internal Revenue Code) for the
purpose of paying Federal Excise Tax to the extent such premium is subject to such
tax.

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

ARTICLE 18 — CURRENCY
(LM-00500-2005.08.09)

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

ARTICLE 19 — ACCESS TO RECORDS
(LM-00100-2007.12.26-A)

	A.	 	Except as otherwise provided in this Article, Subscribing Reinsurer, or its
duly authorized representative, may upon reasonable prior written notice to

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

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

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

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

	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the
Subscribing Reinsurer’s access to Privileged Documents falling within (c) above, in
connection with the underlying claim reinsured hereunder following final settlement
or final adjudication of the case or cases involving such claim, with prejudice
against all claimants, and all parties to such adjudications; provided that the
Company, may defer release of such Privileged Documents if there are subrogation,
contribution, or other third party actions with respect to that claim or case, which
might jeopardize the

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Company’s or its affiliates defense by release of such Privileged Documents.
In the event that the Company shall seek to defer release of such Privileged
Documents or to withhold documents concerning Trade Secrets, it will in
consultation with the Subscribing Reinsurer take other steps as reasonably
necessary to provide the Subscribing Reinsurer with the information it reasonably
requires to indemnify the Company without causing a loss of such privileges or
protections. The Subscribing Reinsurer, however, shall not have access to
Privileged Documents relating to any dispute between the Company and the
Subscribing Reinsurer.

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

ARTICLE 20 — INSOLVENCY
(LM-01300-2005.08.24-A)

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

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

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the Subscribing Reinsurer with the consent of the direct insured or insureds
has assumed such Policy obligations of the Company as direct obligations of the
Subscribing Reinsurer to the payees under such Policies and in substitution for
the obligations of the Company to such payees.

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

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

ARTICLE 21 — ARBITRATION (LM-00200-2006.10.25-A)

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

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

	 	1.	 	Qualifications of the arbitrators and umpires shall be in
accordance with Alternative section 6.2 of the Procedures.

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	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.)
as the list to be used in the event that section 6.7(a) of the Procedures is
invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial and
disinterested. The members of the Panel may not be: (1) in the control of any Party
or its parent, affiliate, or agent, (2) a former director or officer of any Party
or its parent, affiliate, or agent, or (3) a likely witness in the arbitration. The
requirement of impartiality means that all members of the Panel shall have the same
obligation to approach the Panel’s duties and decisions with fairness and without
consideration for the fact that Panel members may have been appointed by one of the
Parties. The requirement of impartiality does not mean that any arbitrator can have
no previous knowledge of or experience with respect to issues involved in the
dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party
intends to present, discussion of the applicable law and the basis for the
requested Award or denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party) shall
have any communications concerning the arbitration or any of the issues before the
Panel with any member of the Panel that is not also disclosed to all other Parties
and all members of the Panel. Each Panel member shall have a continuing duty to
disclose promptly to all Parties and all Panel members any violation of this
prohibition and the specifics of any improper communications that occurred. This
prohibition shall remain in place until all challenges to any arbitration awards
and decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision: “The
Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later than the
close of discovery without a showing to the Panel that the amending Party could not
reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one year
of the arbitration demand, unless the Parties otherwise agree. Should a Party seek
a reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.

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

	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing
provisions of this Article, the Alternative Streamlined Procedures set forth in
section 16 of the Procedures, as modified by sections B3, B4, and B9 through B11 of
this Article, shall apply in the event that, in a consolidated proceeding or
otherwise, the Party initiating arbitration is seeking payment of a total amount
that is no greater than one million dollars ($1,000,000), or the currency
equivalent thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section
16.4 of the Alternative Streamlined Procedures shall not apply. The Parties agree
to comply with section 6.7 of the Procedures to appoint a single umpire, and hereby
designate the umpire list maintained by ARIAS (U.S.) as the list to be used in
section 6.7(a).

	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts,
unless the Parties mutually agree to a different location.

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

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

	G.	 	Consolidated Proceedings.

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

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whether a Party may add a new issue,
claim, or dispute to an
arbitration proceeding shall be the standard for amending a Position statement, as set forth in Paragraph B7 of this Article.

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

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

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

ARTICLE 22 — OFFSET
(LM-01701-2005.06.02-A)

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

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ARTICLE 23 — UNAUTHORIZED REINSURANCE
(LM-02500-2006.10.26-A)

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

	B.	 	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 and losses covered
hereunder which it shall be required by law to set up, it will forward to the
Subscribing Reinsurer a statement showing the proportion of such reserves which is
applicable to the Subscribing Reinsurer. The Subscribing Reinsurer hereby agrees to
fund such reserves in respect of unearned premium, known outstanding losses that
have been reported to the Subscribing Reinsurer and allocated loss adjustment
expense relating thereto, losses and allocated loss adjustment expense paid by the
Company or the Legal Entities but not recovered from the Subscribing Reinsurer, plus
reserves for losses incurred but not reported as determined by the Company, as shown
in the statement prepared by the Company (hereinafter referred to as “ Subscribing
Reinsurer Obligations”) by funds withheld, cash advances, or Letters of Credit.
Unless the Company and the Subscribing Reinsurer otherwise agree, and/or the method
of funding is determined by applicable law, statute, or regulation, the Subscribing
Reinsurer shall agree to fund such Subscribing Reinsurer Obligations by Letters of
Credit.

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

	D.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by
the Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn
upon at any time, notwithstanding any other provision of this Contract, and be
utilized by the Company, a Legal Entity or any successor, by operation of law, of the
Company or a Legal Entity, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution because of
the insolvency of the Company, a

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Legal Entity or the Subscribing Reinsurer
for one or more of the following purposes:

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

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

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

	E.	 	The issuing bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or a Legal Entity or the disposition of
funds withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Company or a Legal Entity as applicable.
	 
	F.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company
shall prepare a specific statement of the Subscribing Reinsurer’s Obligations, for
the sole purpose of amending the Letters of Credit, in the following manner:

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

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

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

ARTICLE 24 — SERVICE OF SUIT
(LM-01900-2005.08.24-A)

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

	B.	 	This Service of Suit Article will not be read to conflict with or override the
obligations of the parties to arbitrate their disputes as provided for in the
Arbitration Article. This Article is intended as an aid to compelling arbitration
or enforcing such arbitration or arbitral award, not as an alternative to the
Arbitration Article for resolving disputes arising out of this Contract.

	C.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed
to be due hereunder, the Subscribing Reinsurer, at the request of the Company, will
submit to the jurisdiction of a Court of competent jurisdiction within the United
States. Nothing in this Article constitutes or should be understood to constitute a
waiver of the Subscribing Reinsurer’s right to commence an action in any Court of
competent jurisdiction in the United States, to remove an action to a United States
District Court, or to seek a transfer of a case to another Court as permitted by the
laws of the United States or of any state in the United States. The Subscribing
Reinsurer, once the appropriate Court is selected, whether such court is the one
originally chosen by the Company and accepted by the Subscribing Reinsurer or is
determined by removal, transfer, or otherwise, as provided for above, will comply
with all requirements necessary to give said Court jurisdiction and, in any suit
instituted against any of them upon this Contract, will abide by the final decision
of such Court or of any Appellate Court in the event of an appeal.

	D.	 	Service of process in such suit may be made upon; Mendes & Mount, LLP, 750 Seventh
Avenue, New York, NY 10019-6829.

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

ARTICLE 25 — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)

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

	B.	 	However, this Article shall not override the application of the loss reporting
provision as set forth in the Commencement and Termination Article.

ARTICLE 26 — CONFIDENTIALITY
(LM-00400-2005.11.10-A)

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

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any other applicable privilege or protection, over certain documents contained
in the Company’s or its affiliates’ files and/or certain information.

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

	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege
pertaining to all Confidential Information provided by the Company and all knowledge
and information gained through its review of Confidential Information or discussions
with the personnel of the Company or its affiliates. The Subscribing Reinsurer further
agrees not to disclose any such Confidential Information to any other person or entity
except as such disclosure may be necessary to its retrocessionaires, accountants,
attorneys, auditors, actuaries or third party catastrophe modelers or as otherwise
required by law. The Subscribing Reinsurer agrees that no Confidential Information is
to be copied and/or removed from the Company’s or its affiliates’ premises without the
express permission of the Company.

	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure
of non-public personally identifiable information shall comply with all state and
federal statutes and regulations governing the disclosure of non-public personally
identifiable information. “Non-public personally identifiable information” is
financial or medical information of or concerning a private person which either has
been obtained from sources which are not available to the general public or obtained
from the person who is the subject and which information is included in data files
exchanged by the parties hereto. For the purposes hereof, the terms shall include data
elements such as names and addresses of individuals. Disclosing or using this
information for any purpose beyond the scope of this Contract, or beyond the
exceptions set forth above, is expressly forbidden without the prior consent of the
Company.

	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party
demand pursuant to subpoena, summons, or court or governmental order, to disclose
Confidential Information (including Non-public personally identifiable information)
that has been provided by the Company or its affiliates, the Subscribing Reinsurer
shall make commercially reasonable efforts to notify the Company promptly upon receipt
of the demand and prior to disclosure of the Confidential Information and provide the
Company a reasonable opportunity to object to the disclosure. If the Company timely
objects to the release of the Confidential Information, the Subscribing Reinsurer will
comply

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

ARTICLE 27 — GOVERNING LAW (LM-01200-2005.06.02-A)

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

ARTICLE 28 — SEVERABILITY (LM-02000-2005.06.02-A)

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

ARTICLE 29 — ENTIRE AGREEMENT
(LM 00701-2005.08.24-A)

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

ARTICLE 30 — SPECIAL CONDITIONS (LM02100-2007.12.05-A)

	A.	 	This Article applies only in the event that:

	 	1.	 	A State Insurance Department or other legal authority orders the
Subscribing Reinsurer to cease writing business or has imposed upon it any
other restrictions on or conditions relating to the Subscribing Reinsurer’s
license or conduct of business in any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed
into liquidation or receivership (whether voluntary or involuntary), or there
have been instituted against it proceedings for

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	 	 	 	the appointment of a receiver, liquidator, rehabilitator,
conservator, trustee in bankruptcy, or other agent known by whatever name,
to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has
been reduced by 25% or there has been a 25% reduction in the Subscribing
Reinsurer’s Stamp Capacity or funds at Lloyds’ at the inception of this
Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has entered into a definitive agreement to
become merged with, acquired, or controlled by any unaffiliated company,
corporation, or individual(s) not controlling the Subscribing Reinsurer’s
operations at the inception of this Contract; or
	 
	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or
downgraded below A- or Standard and Poor’s Rating has been assigned or
downgraded below A-; or
	 
	 	6.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of
at least 200% of the Subscribing Reinsurer’s Authorized Control Level
Risk-Based Capital; or
	 
	 	7.	 	The Subscribing Reinsurer announces intentions to cease underwriting
operations; or
	 
	 	8.	 	The Subscribing Reinsurer voluntarily ceases underwriting
operations; or
	 
	 	9.	 	The Subscribing Reinsurer has reinsured its entire liability under
this Contract, or has entered into a novation extinguishing its entire
liability under this Contract without the Company’s prior written consent;
or
	 
	 	10.	 	The Subscribing Reinsurer, directly or through the actions of a
parent company or an affiliated entity, has or has attempted to assign,
novate or transfer the Subscribing Reinsurer’s rights and/or obligations
under this Contract, including any attempted transfer of rights and/or
obligations under any U.S. or foreign statute, legislation or jurisprudence,
without the Company’s prior written consent; or
	 
	 	11.	 	The Subscribing Reinsurer directly or through the actions of a parent
company or an affiliated entity, has invoked any U.S. or foreign statute,
legislation or jurisprudence which purports to enable the Reinsurer to
require the Company to settle its claims liabilities, including but not
limited to any estimated or undetermined claims liabilities under this
Contract, on an accelerated basis. This condition does not apply to any
attempt to enforce a settlement of claims liabilities under a commutation
process to which the parties have agreed.

	B.	 	If one or more of the above-stated circumstances occur, the Company shall provide
the Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s
share of all paid recoverables, case reserves, loss

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

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

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

	 	2.	 	Where the Letters of Credit will expire without renewal or be
reduced or replaced by Letters of Credit for a reduced amount and
where the Subscribing Reinsurer’s entire obligations under this
Contract remain unliquidated and undischarged ten (10) days prior
to the termination date, to withdraw amounts equal to the
Subscribing Reinsurer’s share of the liabilities, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer
and exceed the amount of any reduced or replacement Letters of
Credit, and deposit those amounts in a separate account in the

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name of the Company or a Legal Entity in a qualified U.S. financial
institution apart from its general assets, in trust for such uses and
purposes as specified above as may remain after withdrawal and for any
period after the termination date.

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

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

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

	 	1.	 	The Company shall submit a statement of valuation showing the
elements considered reasonable to establish the Commutation Losses, and
the Subscribing Reinsurer shall pay the amount

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

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

ARTICLE 31 — ASSIGNMENT, NOVATION, OR
TRANSFER (LM-00300-2007.10.05-A)

This Contract shall be binding upon and inure to the benefit of the Company and the
Subscribing Reinsurer and their respective successors and assigns provided, however, that
this Contract may not be assigned, novated or transferred, including any attempted
transfer of rights and/or obligations under any U.S. or foreign statute, legislation or
jurisprudence, by either the Company or the Subscribing Reinsurer, or as the result of
the actions of a parent company or affiliated entity of

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either, without the prior written consent of the other. In the event of any
assignment, novation or transfer, the assignor, novator or transferor shall remain liable
under this Contract, and further guarantees the performance of all obligations of any
assignee, novatee or transferee under this Contract. Notwithstanding the foregoing, the
Company may assign this Contract to an affiliated entity, without the Subscribing
Reinsurer’s written consent.

ARTICLE 32 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2007.10.10-A)

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

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NUCLEAR ENERGY RISKS EXCLUSION CLAUSE

(REINSURANCE 1994 WORLDWIDE EXCLUDING U.S.A. & CANADA)

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

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

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

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

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

Except as under noted, Nuclear Energy Risks shall not include:

(i) Any insurance or reinsurance in respect of the construction or erection or
installation or replacement or repair or maintenance or decommissioning of Property as
described in (I) to (III) above (including contractors plant and equipment);

(ii) Any Machinery Breakdown or other Engineering insurance or reinsurance not coming
within the scope of (i) above;

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

However, the above exemption shall not extend to:

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

	 	(a)	 	Nuclear Material;

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

	 	(2)	 	The provision of any insurance or reinsurance for the under noted perils:

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

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

Definitions

“Nuclear Material” means:

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

(ii) Radioactive Products or Waste.

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

“Nuclear Installation” means

(i) Any Nuclear Reactor;

(ii) Any factory using nuclear fuel for the production of Nuclear Material, or any
factory for the processing of Nuclear Material, including any factory for the
reprocessing of irradiated nuclear fuel; and

(iii) Any facility where Nuclear Material is stored, other than storage incidental to the
carriage of such material.

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

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

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

“High Radioactivity Zone or Area” means:

(i) For nuclear power stations and Nuclear Reactors, the vessel or structure which
immediately contains the core (including its supports and shrouding) and all the contents
thereof, the fuel elements, the control rods and the irradiated fuel store; and

(ii) For non-reactor Nuclear Installations, any area where the level of radioactivity
requires the provision of a biological shield.

N.M.A. 1975(a)

April 1, 1994

NOTES: Wherever used herein the terms:

			
	“Reassured”	 	Shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other
term is used in the attached reinsurance document to designate the reinsured company or
companies.

			
	“Agreement”	 	shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term
is used to designate the attached reinsurance document.

			
	“Reinsurers”	 	shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is
used in the attached reinsurance document to designate the reinsurer or reinsurers.

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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE U.S.A.

	(1)	 	This reinsurance does not cover any loss or liability accruing to the Reassured as a
member of, or subscriber to, any association of insurers or reinsurers formed for the
purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such
member, subscriber or association.
	 
	(2)	 	Without in any way restricting the operation of paragraph (1) of this Clause it is
understood and agreed that for all purposes of this reinsurance all the original policies
of the Reassured (new, renewal and replacement) of the classes specified in Clause II of
this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be
deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to
(injury, sickness, disease, death or destruction (bodily injury or property damage with
respect to which an insured under the policy is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or
would be an insured under any such policy but for its termination upon exhaustion of
its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies (private
passenger automobiles, liability only), Farmers Comprehensive Personal Liability
Policies (liability only), Comprehensive Personal Liability Policies (liability only)
or policies of a similar nature; and the liability portion of combination forms related
to the four classes of policies stated above, such as the Comprehensive Dwelling Policy
and the applicable types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as described in II
above, whether new, renewal or replacement, being policies which either (a) become
effective on or after 1st May, 1960, or (b) become effective before that date and
contain the Limited Exclusion Provision set out above; provided this paragraph (2)
shall not be applicable to Family Automobile Policies, Special Automobile Policies,
	 
	 		 	or policies or combination policies of a similar nature, issued by the Reassured on New
York risks, until 90 days following approval of the Limited Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

	(3)	 	Except for those classes of policies specified in Clause II of paragraph (2) and
without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that for all purposes of this reinsurance the original liability
policies of the Reassured (new, renewal and replacement) affording the following
coverages:

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Owners, Landlords and Tenants Liability, Contractual
Liability, Elevator Liability, Owners or Contractors (including
railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice
Liability, Storekeepers Liability, Garage Liability, Automobile
Liability (including Massachusetts Motor Vehicle or Garage
Liability)

shall be deemed to include, with respect to such coverages, from the
time specified in Clause V of this paragraph (3), the following
provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

	 	I.	 	Under any Liability Coverage, to (injury, sickness, disease, death or destruction
(bodily injury or property damage

	 	(a)	 	with respect to which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and with respect to
which (1) any person or organization is required to maintain financial protection
pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the
insured is, or had this policy not been issued would be, entitled to indemnity from the
United States of America, or any agency thereof, under any agreement entered into by
the United States of America, or any agency thereof, with any person or organization.

	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments Provision
relating to (immediate medical or surgical relief, (first aid, to expenses incurred with
respect to (bodily injury, sickness, disease or death (bodily injury resulting from the
hazardous properties of nuclear material and arising out of the operation of a nuclear
facility by any person or organization.
	 
	 	III.	 	Under any Liability Coverage to (injury, sickness, disease, death or destruction (bodily
injury or property damage resulting from the hazardous properties of nuclear material, if

	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or operated by or on
behalf of, an insured or (2) has been discharged or dispersed therefrom;

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	 	(b)	 	the nuclear material is contained in spent fuel or waste at any time
possessed, handled, used, processed, stored, transported or disposed of by or on behalf
of an insured; or
	 
	 	(c)	 	the (injury, sickness, disease, death or destruction (bodily injury or property
damages out of the furnishing by an insured of services, materials, parts or equipment
in connection with the planning, construction, maintenance, operation or use of any
nuclear facility, but if such facility is located within the United States of America,
its territories, or possessions or Canada, this exclusion (c) applies only to (injury
to or destruction of property at such nuclear facility (property damage to such nuclear
facility and any property threat.

	 	IV.	 	As used in this endorsement:
	 
	 	 	 	Hazardous properties” include radioactive, toxic or explosive properties; “nuclear material”
means source material, special nuclear material or byproduct material; “source material,”
“special nuclear material,” and “byproduct material” have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a
nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of any nuclear facility included
within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear
facility” means

	 	(a)	 	any nuclear reactor,
	 
	 	(b)	 	any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste, and includes the site on which any of the foregoing is
located, all operations conducted on such site and all premises used for such
operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material;

(With respect to injury to or destruction of property, the word “injury” or
“destruction” (“property damage” includes all forms of radioactive

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contamination of property. (includes all forms of
radioactive contamination of property.

	 	V.	 	The inception dates and thereafter of all original policies affording coverages
specified in this paragraph (3), whether new, renewal or replacement, being policies
which become effective on or after 1st May, 1960, provided this paragraph (3) shall not
be applicable to
	 
	 	 	 	(i)Garage and Automobile Policies issued by the Reassured on New York risks, or
	 
	 	 	 	(ii)statutory liability insurance required under Chapter 90, General Laws of
Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

	(4)	 	Without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that paragraphs (2) and (3) above are not applicable to original
liability policies of the Reassured in Canada and that with respect to such policies this
Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted
by the Canadian Underwriters’ Association of the Independent Insurance Conference of
Canada.

*NOTE: The words printed in italics in the Limited Exclusion Provision and in the Broad
Exclusion Provision shall apply only in relation to original liability policies which include a
Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

(BRMA 35A)

21/9/67

N.M.A. 1590 (amended)

NOTES: Wherever used herein the terms:

			
	“Reassured”	 	Shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other
term is used in the attached reinsurance document to designate the reinsured company or
companies.

			
	“Agreement”	 	shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term
is used to designate the attached reinsurance document.

			
	“Reinsurers”	 	shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is
used in the attached reinsurance document to designate the reinsurer or reinsurers.

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NUCLEAR INCIDENT EXCLUSION CLAUSE-LIABILITY-REINSURANCE-CANADA

	1.	 	This Agreement does not cover any loss or liability accruing to the Reinsured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	2.	 	Without in any way restricting the operation of paragraph 1 of this clause it is agreed
that for all purposes of this Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of the following classes, namely,
	 
	 	 	Personal Liability.

Farmers’ Liability.

Storekeepers’ Liability.
	 
	 	 	which become effective on or after 31st December 1992, shall be deemed to include, from their
inception dates and thereafter, the following provision:-
	 
	 	 	Limited Exclusion Provision.
	 
	 	 	This Policy does not apply to bodily injury or property damage with respect to which the
Insured is also insured under a contract of nuclear energy liability insurance (whether the
Insured is unnamed in such contract and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such policy but for its termination upon exhaustion
of its limits of liability.
	 
	 	 	With respect to property, loss of use of such property shall be deemed to be property damage.
	 
	3.	 	Without in any way restricting the operation of paragraph 1 of this clause it is agreed
that for all purposes of this Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of any class whatsoever (other
than Personal Liability, Farmers’ Liability, Storekeepers’ Liability or Automobile
Liability contracts), which become effective on or after 31st December 1992, shall be
deemed to include from their inception dates and thereafter, the following provision:-
	 
	 	 	Broad Exclusion Provision.
	 
	 	 	It is agreed that this Policy does not apply:

	 	(a)	 	to liability imposed by or arising from any nuclear liability act, law or statute or
any law amendatory thereof; nor
	 
	 	(b)	 	to bodily injury or property damage with respect to which an Insured under this
policy is also insured under a contract of nuclear energy liability insurance (whether
the Insured is unnamed in such contract and whether or not it is legally enforceable by
the Insured) issued by the Nuclear Insurance Association of Canada or any other insurer
or group or pool of insurers or would be an Insured

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	 	 	 	under any such policy but for its termination upon exhaustion of its limit of
liability; nor
	 
	 	(c)	 	to bodily injury or property damage resulting directly or indirectly from the
nuclear energy hazard arising from:

	 	(i)	 	the ownership, maintenance, operation or use of a nuclear facility by or on
behalf of an Insured;
	 
	 	(ii)	 	the furnishing by an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation or use of any
nuclear facility; and
	 
	 	(iii)	 	the possession, consumption, use, handling, disposal or transportation of
fissionable substances, or of other radioactive material (except radioactive
isotopes, away from a nuclear facility, which have reached the final stage of
fabrication so as to be usable for any scientific, medical, agricultural, commercial
or industrial purpose) used, distributed, handled or sold by an Insured.

As used in this Policy:

	1.	 	The term “nuclear energy hazard” means the radioactive, toxic, explosive, or other
hazardous properties of radioactive material;
	 
	2.	 	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and any other
substances which may be designated by or pursuant to any law, act or statute, or law
amendatory thereof as being prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic energy;
	 
	3.	 	The term “nuclear facility” means:

	 	(a)	 	any apparatus designed or used to sustain nuclear fission in a self-supporting chain
reaction or to contain a critical mass of plutonium, thorium and uranium or any one or
more of them;
	 
	 	(b)	 	any equipment or device designed or used for (i) separating the isotopes of
plutonium, thorium and uranium or any one or more of them, (ii) processing or utilising
spent fuel, or (iii) handling, processing or packaging waste;
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of
plutonium, thorium or uranium enriched in the isotope uranium 233 or in the isotope
uranium 235, or any one or more of them if at any time the total amount of such material
in the custody of the Insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235;

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	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste radioactive material;

	 
	 	 	 	and includes the site on which any of the foregoing is located, together with all operations
conducted thereon and all premises used for such operations.

	4.	 	The term “fissionable substance” means any prescribed substance that is, or from which can
be obtained, a substance capable of releasing atomic energy by nuclear fission.
	 
	5.	 	With respect to property, loss of use of such property shall be deemed to be property
damage.

01/4/96

NMA1979a

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TERRORISM EXCLUSION CLAUSE (LM-02300-2006.04.14-A)

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

	A.	 	For risks located in the United States of America, its territories and possessions,
and at the premises of any United States mission as such terms are intended to
apply under the terms of the Terrorism Risk Insurance Act of 2002 and the
Terrorism Risk Insurance Extension Act of 2005 (“TRIA”), as it may be amended
from time-to-time:

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

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

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

In the event of an occurrence giving rise to a loss or losses payable by the Company not
being certified by Her Majesty’s government or Her Majesty’s Treasury or any successor
relevant Authority to have been an Act of Terrorism and solely by reason thereof the
Company is unable to recover such loss or losses in

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	 	 	whole or in part from Pool Reinsurance Company Limited, the Reinsurers accept that
this subparagraph B.1. above does not apply to such loss or losses.
	 
	 	 	For the purpose of this paragraph B:
	 
	 	 	“Act of Terrorism” means an act of persons acting on behalf of or in connection with any
organization that carries out activities directed towards the overthrowing or influencing
by force or violence of Her Majesty’s government in the United Kingdom.
	 
	 	 	This paragraph B shall not, however, apply to goods in transit or goods in temporary
storage while in transit.
	 
	 	 	Notwithstanding the foregoing, this paragraph B excludes loss or damage directly or
indirectly arising out of or in connection with nuclear, chemical, biological, or
radiological explosion, pollution, or contamination resulting from any Act of Terrorism.
This Contract shall extend, however, to cover insured physical loss or damage, excluding
all time-element coverages and extensions, incurred as a direct and immediate consequence
of an Act of Terrorism employing any non-nuclear weapon or device designed to disperse
chemical, biological, or radiological contaminants; but, no coverage shall be afforded for
any ensuing chemical, biological, or radiological contamination or pollution resulting
from an Act of Terrorism employing such weapon or device.
	 
	C.	 	For risks located in all other sovereignties not subject to paragraphs A or B above:
	 
	 	 	Loss or damage, directly or indirectly, caused by, contributed to by, resulting from, or
arising out of or in connection with any Act of Terrorism, as defined in this paragraph C,
regardless of any other cause or event contributing concurrently or in any other sequence
to the loss.
	 
	 	 	For the purpose of this paragraph C:
	 
	 	 	“Act of Terrorism” shall mean any violent act or act that is dangerous to human life,
property, or infrastructure that results in physical loss or damage that is committed by
an individual or individuals acting on behalf of any person or interest as part of an
effort to coerce the civilian population of any nation or to influence the policy or
affect the conduct of the government of any such sovereign nation by coercion.
	 
	 	 	Where an occurrence falling within the definition of Act of Terrorism in this paragraph C,
involving risks insured or reinsured in Consorcio, Gareat, Extremus, the Australian
Terrorism Pool (or any similar scheme formed during the term of this Contract) gives rise
to a loss or losses payable by the Company and such occurrence is not certified by the
individual authority acting respectively for Consorcio, Gareat, Extremus, the Australian
Terrorism Pool (or any similar scheme formed during the term of this Contract) having
responsibility to make such judgment, or any successor authority, as an Act of Terrorism,
the reinsurers accept that this exclusion does not apply to such loss(es).

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

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INTERESTS AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

FIRST CASUALTY EXCESS OF LOSS REINSURANCE CONTRACT

CONTRACT No. 2008158

[hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby mutually agreed by and between the Company of the one part and the Subscribing
Reinsurer of the other part, that the Subscribing Reinsurer’s share in the interests and
liabilities of the Reinsurers as set forth in the attached First Casualty Excess of Loss
Reinsurance Contract No. 2008158, effective 12:01 a.m., Local Standard Time, January 1, 2008, to
which this Agreement is attached shall be for:

100%

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

First Casualty Excess of Loss

Interest and Liabilities Agreement

Effective: 01/01/2008

Page 1 of 2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement and the attached First
Casualty Excess of Loss Reinsurance Contract to be executed in duplicate by their respective duly
authorized officers;

In Keene, New Hampshire, this 20th day of August, 2008, for and on behalf of:

	 	 	 

	ATTEST:

	 	PEERLESS INSURANCE COMPANY
	 
	 	 
	/s/ Daniel P. Baker

	 	/s/ Nancy C. Callender
	 

	 	 
	Signature

	 	Signature
	 
	 	 
	Daniel P. Baker

	 	Nancy C. Callender
	 

	 	 
	Name

	 	Name
	 
	 	 
	VP, Financial Services

	 	Agency Markets AVP — Mgr. Reinsurance Mgmt
	 

	 	 
	Title

	 	Title

And in Boston, Massachusetts, this 19th day of September, 2008, for and on
behalf of:

	 	 	 

	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY
	 
	 	 
	/s/ Lauren H. Covert

	 	/s/ Elaine Caprio Brady
	 

	 	 
	Signature

	 	Signature
	 
	 	 
	Lauren H. Covert

	 	Elaine Caprio Brady
	 

	 	 
	Name

	 	Name
	 
	 	 
	Director of Ceded Reinsurance

	 	Vice President
	 

	 	 
	Title

	 	Title

First Casualty Excess of Loss

Interest and Liabilities Agreement

Effective: 01/01/2008

Page 2 of 2exv10w161

EXHIBIT
10.161

PROPERTY PER RISK EXCESS OF LOSS

REINSURANCE CONTRACT

No. 67316

EFFECTIVE JANUARY 1, 2008

between

EMPLOYERS INSURANCE COMPANY OF WAUSAU

Wausau, Wisconsin

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

(hereinafter referred to as the “Company”)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Wausau Property per Risk Excess Contract

PRO08WAU01

 

 

PROPERTY PER RISK EXCESS OF LOSS REINSURANCE CONTRACT No. 67316

	 	 	 	 	 	 	 
	Clause	 	Article Number	 	Page	 
	ACCESS TO RECORDS
	 	XIV	 	 	8	 
	AMENDMENTS
	 	XV	 	 	9	 
	ARBITRATION
	 	XVI	 	 	9	 
	ASSIGNMENT, NOVATION OR TRANSFER
	 	XVII	 	 	11	 
	BUSINESS COVERED
	 	I	 	 	1	 
	CONFIDENTIALITY CLAUSE
	 	XVIII	 	 	12	 
	CURRENCY
	 	XIX	 	 	13	 
	DEFINITION OF RISK
	 	VI	 	 	3	 
	DIVIDENDS AND TAXES
	 	XX	 	 	13	 
	EFFECTIVE DATE AND TERMINATION
	 	II	 	 	2	 
	ENTIRE AGREEMENT
	 	XXI	 	 	13	 
	ERRORS OR OMISSIONS
	 	XXII	 	 	13	 
	EXCLUSIONS
	 	IX	 	 	4	 
	EXTRA CONTRACTUAL OBLIGATIONS
	 	VIII	 	 	4	 
	FEDERAL EXCISE TAX
	 	XXIII	 	 	14	 
	GOVERNING LAW
	 	XXIV	 	 	14	 
	INSOLVENCY
	 	XXV	 	 	14	 
	INTEREST PENALTY
	 	XXVI	 	 	15	 
	LIMIT AND RETENTION
	 	IV	 	 	2	 
	LOSS ADJUSTMENT AND SETTLEMENT
	 	XXVII	 	 	16	 
	LOSS IN EXCESS OF POLICY LIMITS
	 	VII	 	 	3	 
	LOSS OCCURRENCE
	 	XI	 	 	6	 
	MEDIATION
	 	XXVIII	 	 	16	 
	OFFSET
	 	XXIX	 	 	17	 
	REINSURANCE CLAIMS OBLIGATIONS
	 	XXX	 	 	17	 
	REINSURANCE PREMIUM
	 	XII	 	 	7	 
	REPORTS AND REMITTANCES
	 	XIII	 	 	7	 
	SALVAGE AND SUBROGATION
	 	XXXI	 	 	17	 
	SERVICE OF SUIT
	 	XXXII	 	 	18	 
	SEVERABILITY
	 	XXXIII	 	 	18	 
	SPECIAL ACCEPTANCE
	 	X	 	 	6	 
	SPECIAL CONDITIONS
	 	XXXIV	 	 	19	 
	TERRITORY
	 	III	 	 	2	 
	THIRD PARTIES
	 	XXXV	 	 	22	 
	ULTIMATE NET LOSS
	 	V	 	 	2	 
	UNAUTHORIZED REINSURANCE
	 	XXXVI	 	 	22	 

ATTACHMENTS:

EXHIBIT A — FIRST EXCESS OF LOSS

EXHIBIT B — SECOND EXCESS OF LOSS

EXHIBIT C — THIRD EXCESS OF LOSS

INSOLVENCY FUNDS EXCLUSION CLAUSE

POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE

TOTAL INSURED VALUE EXCLUSION CLAUSE

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

NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE — CANADA

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4

TERRORISM EXCLUSION CLAUSE REINSURANCE (PROPERTY)

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Wausau Property per Risk Excess Contract

 

 

PROPERTY PER RISK EXCESS OF LOSS

REINSURANCE CONTRACT

No. 67316

(hereinafter referred to as the “Contract”)

EMPLOYERS INSURANCE COMPANY OF WAUSAU

Wausau, Wisconsin

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

(hereinafter referred to as the “Company”)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

ARTICLE I — BUSINESS COVERED

	A.	 	This Contract shall indemnify the Company on an excess of loss basis in respect of the
Ultimate Net Loss paid or to be paid by the Company and the Legal Entities (as defined below)
as a result of losses occurring during the term of the Contract for Policies in force at 12:01
a.m. Local Standard Time, January 1, 2008, and new and renewal Policies becoming effective on
or after said date, subject to the terms and conditions contained herein.

	B.	 	This Contract is solely between the Company and the Subscribing Reinsurer, and nothing
contained in this Contract shall create any obligations or establish any rights against the
Subscribing Reinsurer in favor of any person or entity not a party hereto.

	C.	 	The term “Policies” shall mean each of the Company’s or a Legal Entity’s binders, policies,
endorsements and contracts of insurance or reinsurance on the business covered hereunder.

	D.	 	Under this Contract, the indemnity for reinsured loss applies only to the following Annual
Statement Lines of Business, written by the Company or ceded to the Company, directly or
indirectly, by a legal entity listed below (each, a “Legal Entity” and, collectively, the
“Legal Entities”):
	 
	 	 	Employers Insurance Company of Wausau,

Wausau General Insurance Company, 

Wausau
Underwriters Insurance Company, 

Wausau
Business Insurance Company,
	 
	 	 	Liberty County Mutual Insurance Company, for business identified as belonging to the Wausau
Business Group which includes business previously identified as Business Solutions Group,
	 
	 	 	Liberty Mutual Insurance Company (on behalf of itself and The First Liberty Insurance
Corporation, LM Insurance Corporation, Liberty Insurance Corporation and Liberty Mutual Fire
Insurance for business previously identified as Business Solutions Group only),
	 
	 	 	for business covered under this Contract and identified as belonging to the Wausau Business
Group, except as excluded under Article IX — Exclusions of this Contract.

			
	 	 	 
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	 	2008 Wausau Property per Risk Excess Contract

Page 1 of 42

 

	 	 	 
	NAIC	 	 
	CODE:	 	LINES OF BUSINESS:
	 
	 	 
	01

	 	Fire
	02

	 	Allied Lines
	03

	 	Farmowners (Section I only)
	04

	 	Homeowners (Section I only)
	05

	 	Commercial Multiple Peril (Section I only)
	09

	 	Inland Marine
	12

	 	Earthquake
	21

	 	Auto Physical Damage (not to include Collision coverage)
	26

	 	Burglary and Theft

ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective at 12:01 a.m., Local Standard Time, with respect to
losses occurring during the term of the Contract on Policies in force at 12:01a.m., Local
Standard Time, January 1, 2008, and new and renewal Policies becoming effective on or after
said date and shall remain in force until 12:01 a.m. January 1, 2009, Local Standard Time.

	B.	 	Upon termination of this Contract, the Subscribing Reinsurer shall be liable for the losses
occurring prior to the date of termination; however, the Subscribing Reinsurer shall have no
liability for losses occurring subsequent to the termination of this Contract.

	C.	 	If this Contract shall expire or terminate while a loss covered hereunder is in progress, it
is agreed that, subject to the other conditions of this Contract, the Subscribing Reinsurer
shall indemnify the Company as if the entire loss had occurred during the time this Contract
is in force provided the loss covered hereunder started before the date of termination.

ARTICLE III — TERRITORY (LM-02200-2005.06.02-A)

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

ARTICLE IV — LIMIT AND RETENTION

	A.	 	The limits and retentions provided under this Contract are as set forth in Exhibit A, B and C
attached hereto and made a part of this Contract.

	B.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Risk,
each Loss Occurrence, set forth in Section I of Exhibit A, B and C attached hereto and made
part of this Contract, shall apply irrespective of the number of Policies affected or number
of hazards in one Policy and regardless of the number of Lines of Business involved.

	C.	 	Reinsurance of the Company’s retention, set forth in Exhibit A, B and C, shall not be
deducted in arriving at the Ultimate Net Loss herein.

ARTICLE V — ULTIMATE NET LOSS (LM-02401-2006.04.26-P)

	A.	 	The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts
paid or due and payable by the Company or a Legal Entity in the investigation, appraisal,
adjustment, settlement,

			
	 	 	 
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	 	2008 Wausau Property per Risk Excess Contract

Page 2 of 42

 

	 	 	litigation, defense or appeal, or payment of claims or judgments arising from each and
every loss, and/or Loss Occurrence for which the Company or a Legal Entity is or may be
found liable under the Policies, less salvages and subrogation recoveries and amounts
recovered or recoverable under pooling agreements or other reinsurances, whether
collectible, or not. “Ultimate Net Loss” includes, but is not limited to, the following
paid or due and payable amounts: loss adjustment expenses, defense costs, court costs,
supersedeas and appeal bond costs, Post or Prejudgment Interest and Delayed Damages,
Attorneys Fees and Expenses, Claim-Specific Declaratory Judgment Expenses, a pro rata share
of salaries and expenses of the Company’s or its affiliates’ field employees according to
the time occupied in adjusting, defending, and settling such loss, and expenses of all of
the Company’s or its affiliates’ officers and employees incurred in connection with the
loss; (except that salaries of officers and employees engaged in general management of the
Company or its affiliates’ and any office expense of the Company or its affiliates’ shall
not be included), and all other costs of investigation or litigation, (2) Extra Contractual
Obligations (as defined in the Extra Contractual Obligations Article, and (3) Loss in
Excess of Original Policy Limits (as described in the Loss in Excess of Original Policy
Limits Article).

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

	C.	 	The term “Attorneys’ Fees and Expenses” as used above, means the fees and expenses of
attorneys, including the fees and expenses of the Company’s or its affiliates’ in-house
attorneys providing legal advice on coverage questions and/or defending the Company or a Legal
Entity in coverage litigation, and fees and expenses of staff counsel in the defense of
policyholder claims. Such Attorneys’ Fees and Expenses for in-house attorneys and staff
counsel shall be calculated at the rate for such attorneys plus the expenses incurred by such
attorneys, but excluding office expenses of the Company and its affiliates and salaries and
expenses of their other employees.

	D.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added to a
settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement, verdict, award, or judgment whether or not made part of the settlement, verdict,
award, or judgment.

	E.	 	Nothing in this Article shall be construed to mean that losses under this Contract are not
recoverable until the Ultimate Net Loss has been ascertained. In the event a verdict or
judgment is reduced by an appeal or a settlement subsequent to the entry of the judgment,
thereby resulting in an ultimate saving on such verdict or judgment, or in the event a
judgment is reversed outright, the loss adjustment expense incurred in securing such final
reduction or reversal shall be prorated between the Subscribing Reinsurer and the Company in
the proportion that each benefits from such reduction or reversal, and the expenses incurred
up to the time of the original verdict or judgment shall be added to the Ultimate Net Loss.
In the event there is no reduction or reversal of a verdict or judgment, the loss adjustment
expense incurred in attempting to secure such reduction or reversal shall be added to the
Ultimate Net Loss.

ARTICLE VI — DEFINITION OF RISK

The Company warrants or it shall be so deemed that the definition of Risk shall be determined as
defined by the Company’s underwriting guidelines which are on file with the Subscribing Reinsurer.
Subject to the foregoing, the Company shall be the sole judge as to what constitutes one Risk under
this Contract.

ARTICLE VII — LOSS IN EXCESS OF POLICY LIMITS (LM-01600-2005.08.24-A)

	A.	 	This Contract shall protect the Company within the limits hereof, for 90% of any Loss in excess
of

			
	 	 	 
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	 	2008 Wausau Property per Risk Excess Contract

Page 3 of 42

 

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

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

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

ARTICLE VIII — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2007.03.28-A)

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

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

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

ARTICLE IX — EXCLUSIONS

THIS CONTRACT DOES NOT COVER:

	A.	 	THE FOLLOWING GENERAL CATEGORIES

	 	1.	 	Assumed reinsurance other than inter-company agreements.
	 
	 	2.	 	Loss or damage occasioned by war, invasion, revolution, bombardment,
hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or
usurped power, martial law, or

			
	 	 	 
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	 	2008 Wausau Property per Risk Excess Contract

Page 4 of 42

 

	 	 	 	confiscation by order of any government or public authority, however this
exclusion would not apply to loss or damage covered under a standard form of Policy
containing a standard war exclusion clause.
	 
	 	3.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause, which
is made part of this Contract.
	 
	 	4.	 	Pool, Syndicate and Association business as per the attached Pools,
Associations and Syndicates Exclusion Clause, which is made part of this Contract.
	 
	 	5.	 	Risks where the Total Insured Value, per Risk, exceeds the figure specified as
per the attached Total Insured Value Exclusion Clause, which is made part of this
Contract.
	 
	 	6.	 	Business with the Peerless Insurance Company covered under the Employers
Insurance Company of Wausau Quota Share Agreement and business with the Peerless
Insurance Company covered under the Liberty Mutual Insurance Company Quota Share
Agreement

B. THE FOLLOWING CLASSES OF BUSINESS AND TYPES OF RISKS

	 	1.	 	Mortgage Impairment.
	 
	 	2.	 	Growing and/or standing crops, however this exclusion shall not apply to
nursery or green house crops.
	 
	 	3.	 	Insurance on all railroads acting as common carriers.
	 
	 	4.	 	As respects Inland Marine business:

	 	a.	 	Rolling Stock.
	 
	 	b.	 	Commercial Negative Film Insurance.
	 
	 	c.	 	Mining Equipment while underground.
	 
	 	d.	 	Cargo transported by lake and inland waterway watercraft.

	 	5.	 	Overhead and underground transmission and distribution lines other than those
within 1000 feet of an insured’s premises; it is understood and agreed that public
utilities extension and/or suppliers extension and/or contingent business interruption
coverages are not subject to this exclusion provided that these are not part of a
transmitter’s or distributor’s Policy.
	 
	 	6.	 	Credit and Surety liability.
	 
	 	7.	 	Ocean Marine except pleasure craft, marinas and/or boat dealers.

	C.	 	THE FOLLOWING PERILS

	 	1.	 	Pollution and Seepage as per the original Policies and endorsements, where
legal and applicable.
	 
	 	2.	 	Nuclear Incident Exclusion Clauses which are attached and made part of this Contract:

	 	a.	 	Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance — U.S.A.
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance — Canada
	 
	 	c.	 	Nuclear Energy Risks Exclusion Clause — Reinsurance- No. 4

			
	 	 	 
	Effective: January 1, 2008
	 	2008 Wausau Property per Risk Excess Contract

Page 5 of 42

 

	 	3.	 	Terrorism as per the attached Terrorism Exclusion Clause Reinsurance
(PROPERTY), which is made part of this Contract

ARTICLE X — SPECIAL ACCEPTANCE

It is understood and agreed the Company may submit Risks excluded above to the Subscribing
Reinsurer for coverage hereunder and, if specifically accepted by the Subscribing Reinsurer, such
Risks shall then be covered under the terms of this Contract, except as such terms shall be
modified by such acceptance. A Subscribing Reinsurer’s failure to respond within 2 full business
days shall be deemed approval of a Risk submitted for special acceptance. Once a Risk has been
accepted under the provisions of this Article, it will automatically be included at renewal unless
there have been material changes to the Risk, in which case the Risk will be resubmitted.

ARTICLE XI — LOSS OCCURRENCE

	A.	 	The term “Loss Occurrence” shall mean the sum of all individual losses directly occasioned by
any one disaster, accident or loss or series of disasters, accidents or losses arising out of
one event which occurs within the area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another. However, the duration and
extent of any one Loss Occurrence shall be limited to all individual losses sustained by the
Company or Legal Entity which occur 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 or Legal
Entity which occur during any period of 72 consecutive hours arising out of and
directly occasioned by the same event. However, the event need not be limited to one
state or province or states or provinces contiguous thereto.
	 
	 	2.	 	As regards riot, riot attending a strike, civil commotion, vandalism and
malicious mischief, all individual losses sustained by the Company or Legal Entity
which occur during any period of 72 consecutive hours within the area of one
municipality or county and the municipalities or counties contiguous thereto arising
out of and directly occasioned by the same event. The maximum duration of 72
consecutive hours may be extended in respect of individual losses which occur beyond
such 72 consecutive hours during the continued occupation of an assured’s premises by
strikers, provided such occupation commenced during the aforesaid period.
	 
	 	3.	 	As regards earthquake (the epicentre of which need not necessarily be within
the territorial confines referred to in the opening paragraph of this Article) and fire
following directly occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be included in the Loss
Occurrence.
	 
	 	4.	 	As regards freeze, only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may
be included in the Loss Occurrence.

	B.	 	Except for those Loss Occurrences referred to in 1. and 2. above, the Company may choose the
date and time when any such period of consecutive hours commences provided that it is not
earlier than the date and time of the occurrence of the first recorded individual loss
sustained by the Company or Legal Entity arising out of that disaster, accident or loss and
provided that only one such period of 168 consecutive hours shall apply with respect to one
event.

			
	 	 	 
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Page 6 of 42

 

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

ARTICLE XII — REINSURANCE PREMIUM

The rates set forth in Section 3 of the attached Exhibit A, B and C shall be applied to Subject
Earned Premium for Commercial Multi-Peril Property (ASLOB — 051), however all Property Lines of
Business shall be covered under this Contract as stated in Paragraph D. of Article I — Business
Covered.

	A.	 	The term “Earned Premium” as used herein is equal to the sum of the Net Premiums Written on
the business covered hereunder during the period under consideration, plus the unearned
premium reserve as respects premiums in force at the beginning of such period, less the
unearned premium reserve as respects premiums in force at the end of the period, said unearned
premium is to be calculated on a monthly pro rata basis.

	B.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Subscribing Reinsurer.

	C.	 	The term “Subject Earned Premium” shall mean the Earned Premium times the rates noted below.

	 	 	 	 	 
	ASLOB	 	Percentage
	Fire
	 	 	0	%
	Allied Lines
	 	 	0	%
	Homeowners
	 	 	0	%
	Farmowners
	 	 	0	%
	Commercial Multiple Peril (Property)
	 	 	100	%
	Inland Marine
	 	 	0	%
	Earthquake
	 	 	0	%
	Auto Physical Damage (Private
Passenger)
	 	 	0	%
	Auto Physical Damage (Commercial)
	 	 	0	%
	Burglary & Theft
	 	 	0	%

ARTICLE XIII — REPORTS AND REMITTANCES

	A.	 	The Company shall furnish the Subscribing Reinsurer with all necessary data respecting
premiums and losses for as long as one of the parties hereto has a claim against the other
arising from this Contract.

	B.	 	Quarterly Deposit Premiums equal
to 1/4
 of the 100% of Annual Deposit Premium will be remitted on January 15, May 15, August 15 and November 15, according to the schedule below.
For purposes of calculating minimum and deposit premium due by each of the Employers Insurance
Company of Wausau and Liberty Mutual Insurance Company, the minimum and deposit premium shall
be allocated 100% to Employers Insurance Company of Wausau. The Company shall submit finalized
accounts to the Subscribing Reinsurer on February 15, of the subsequent year, summarizing the
actual subject earned premium for the previous Contract Year. The difference between the
deposit premium and the actual subject earned premium will be settled to/from the Company
within 15 days of February 15. However, in no event shall the annual adjusted premium be
less than the Annual Minimum Premium for each layer, set forth below:

			
	 	 	 
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Page 7 of 42

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Annual	 	Annual	 	Quarterly
	Layer	 	Deposit	 	Minimum	 	Deposit
	First Layer
	 	$	1,932,120	 	 	$	1,545,696	 	 	$	483,030	 
	Second Layer
	 	$	1,345,799	 	 	$	1,076,639	 	 	$	336,450	 
	Third Layer
	 	$	328,260	 	 	$	262,608	 	 	$	82,065	 

	C.	 	Payment by the Subscribing Reinsurer of its portion of Loss and Loss Adjustment Expenses
paid by the Company or a Legal Entity shall be made by the Subscribing Reinsurer to the
Company immediately upon reasonable evidence of the amount due or to be due, being furnished
by the Company.

ARTICLE XIV — ACCESS TO RECORDS (LM-00100-2007.08.13-A)

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

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

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

	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer (1)
concerning Trade Secrets of the Company or its affiliates, (2) subject to the terms of a third
party non-disclosure agreement with the Company or its affiliates requiring third party
consent to disclosure, (3) subject to the Work Product Privilege or Attorney-Client Privilege
or (4) concerning individual private information that as a matter of law cannot be disclosed
by the Company or its affiliates (hereinafter referred to in the Contract as “Privileged
Documents”). The Company shall reasonably try to exempt the Subscribing Reinsurers from any
third party non-disclosure agreement or obtain consent from the third party to disclose to the
Subscribing Reinsurer.

	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the
Subscribing Reinsurer’s access to Privileged Documents falling within (3) above, in
connection with the underlying claim reinsured hereunder following final settlement or final
adjudication of the case or cases involving such claim, with prejudice against
all claimants, and all parties to such adjudications; provided that the Company,
may defer release of such Privileged Documents if there are subrogation, contribution, or
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	 	 	might jeopardize the Company’s or its affiliates’ defense by release of such
Privileged Documents. In the event that the Company shall seek to defer release of such
Privileged Documents or to withhold documents concerning Trade Secrets, it will in
consultation with the Subscribing Reinsurer take other steps as reasonably necessary to
provide the Subscribing Reinsurer with the information it reasonably requires to indemnify
the Company without causing a loss of such privileges or protections. The Subscribing
Reinsurer, however, shall not have access to Privileged Documents relating to any dispute
between the Company and the Subscribing Reinsurer.

	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section 1839 of
the United States Economic Espionage Act of 1996. “Attorney-Client Privilege” shall mean
communications of a confidential nature between 1) the Company or its affiliates, or anyone
retained by or in the control of the Company or its affiliates, or their in-house or
outside legal counsel, or anyone in the control of such legal counsel, and 2) any in-house
or outside legal counsel which relate to legal advice being sought by the Company or its
affiliates and/or which contains legal advice being provided to the Company or its
affiliates. “Work Product Privilege” shall mean communications, written materials and
tangible things prepared by or for in-house or outside counsel, or prepared by or for the
Company or its affiliates, in anticipation of or in connection with litigation,
arbitration, or other dispute resolution proceedings.

ARTICLE XV — AMENDMENTS

This Contract may be amended by mutual consent of the parties expressed in an addendum; and such
addendum, when executed by both parties, shall be deemed to be an integral part of this Contract
and binding on the parties hereto.

ARTICLE XVI — ARBITRATION (LM-00200-2007.05.03-A)

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

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

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
Alternative section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be
impartial and disinterested. The members of the Panel may not be: (1) in the control
of any Party or its parent, affiliate, or agent, (2) a former director or officer of
any Party or its parent, affiliate, or agent, or (3) a likely witness in the
arbitration. The requirement of impartiality means that all members of the Panel shall
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	 	 	 	decisions with fairness and without consideration for the fact that Panel members
may have been appointed by one of the Parties. The requirement of impartiality does
not mean that any arbitrator can have no previous knowledge of or experience with
respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends
to present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party)
shall have any communications concerning the arbitration or any of the issues before
the Panel with any member of the Panel that is not also disclosed to all other Parties
and all members of the Panel. Each Panel member shall have a continuing duty to
disclose promptly to all Parties and all Panel members any violation of this
prohibition and the specifics of any improper communications that occurred. This
prohibition shall remain in place until all challenges to any arbitration awards and
decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later than
the close of discovery without a showing to the Panel that the amending Party could not
reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party
seek a reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
“The Panel shall make a decision and issue an award with regard to the terms expressed
in this Contract, and the custom and practice of the property and casualty
insurance and reinsurance business. The Panel shall not be obligated to follow the
strict rules of law and evidence.”

	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as
modified by sections B3, B4, and B9 through B11 of this Article, shall apply in the event
that, in a consolidated proceeding or otherwise, the Party initiating arbitration is seeking
payment of a total amount that is no greater than one million dollars ($1,000,000), or the
currency equivalent thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section 16.4
of the Alternative Streamlined Procedures shall not apply. The Parties agree to comply with
section 6.7 of the Procedures to appoint a single umpire, and hereby designate the umpire list
maintained by ARIAS (U.S.) as the list to be used in section 6.7(a).

			
	 	 	 
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	D.	 	Hearing Location, The hearing shall be held in Boston, Massachusetts, unless
the Parties mutually agree to a different location.

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

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

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

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

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

ARTICLE XVII — ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2007.10.05-A)

This Contract shall be binding upon and inure to the benefit of the Company and the Subscribing
Reinsurer and their respective successors and assigns; provided, however, that this Contract
may not be assigned, novated or transferred, including any attempted transfer of rights and/or
obligations under any U.S. or foreign statute, legislation or jurisprudence, by either the
Company or the Subscribing Reinsurer, or as the result of the actions of a parent company or
affiliated entity of either, without the

			
	 	 	 
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prior written consent of the other. In the event of any assignment, novation or transfer,
the assignor, novator or transferor shall remain liable under this Contract, and further
guarantees the performance of all obligations of any assignee, novatee or transferee under this
Contract. Notwithstanding the foregoing, the Company may assign this Contract to an affiliated
entity, without the Subscribing Reinsurer’s written consent.

ARTICLE XVIII — CONFIDENTIALITY CLAUSE (LM-00400-2005.11.10-A)

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

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

	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to
all Confidential Information provided by the Company and all knowledge and information gained
through its review of Confidential Information or discussions with the personnel of the
Company or its affiliates. The Subscribing Reinsurer further agrees not to disclose any
such Confidential Information to any other person or entity except as such disclosure may be
necessary to its retrocessionaires, accountants, attorneys, auditors, actuaries or third party
catastrophe modelers or as otherwise required by law. The Subscribing Reinsurer agrees that no
Confidential Information is to be copied and/or removed from the Company’s or its affiliates’
premises without the express permission of the Company.

	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure of
non-public personally identifiable information shall comply with all state and federal
statutes and regulations governing the disclosure of non-public personally identifiable
information. “Non-public personally identifiable information” is financial or medical
information of or concerning a private person which either has been obtained from sources
which are not available to the general public or obtained from the person who is the subject
and which information is included in data files exchanged by the parties hereto. For the
purposes hereof, the terms shall include data elements such as names and

			
	 	 	 
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	 	 	addresses of individuals. Disclosing or using this information for any purpose beyond the
scope of this Contract, or beyond the exceptions set forth above, is expressly forbidden
without the prior consent of the Company.

	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand
pursuant to subpoena, summons, or court or governmental order, to disclose Confidential
Information (including Non-public personally identifiable information) that has been provided
by the Company or its affiliates, the Subscribing Reinsurer shall make commercially reasonable
efforts to notify the Company promptly upon receipt of the demand and prior to disclosure
of the Confidential Information and provide the Company a reasonable opportunity to object to
the disclosure. If the Company timely objects to the release of the Confidential
Information, the Subscribing Reinsurer will comply with the reasonable requests of the Company
in connection with the Company’s efforts to resist release of the Confidential Information.
The Company shall bear the cost of resisting the release of the Confidential Information.

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

ARTICLE XIX — CURRENCY (LM-00500-2005.08.09)

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

ARTICLE XX — DIVIDENDS AND TAXES (LM-00600-2005.06.02-A)

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

ARTICLE XXI — ENTIRE AGREEMENT (LM-00701-2005.08.24-A)

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

ARTICLE XXII — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)

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

			
	 	 	 
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ARTICLE XXIII — FEDERAL EXCISE TAX (LM-01000-2005.08.24-A)

	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the
United States of America, except for any Subscribing Reinsurer exempt from Federal Excise Tax.
A Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide to the
Company, upon its request, proof that the exempt status adequately satisfies the demands of
the U.S. Internal Revenue Service, Department of the Treasury, or its successor and/or other
applicable U.S. government authority.

	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable
hereon (as imposed under Section 4371 of the Internal Revenue Code) for the purpose of paying
Federal Excise Tax to the extent such premium is subject to such tax.

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

ARTICLE XXIV — GOVERNING LAW (LM-01200-2005.06.02-A)

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

ARTICLE XXV — INSOLVENCY (LM-01300-2005.08.24-A)

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

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

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

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

ARTICLE XXVI — INTEREST PENALTY (LM-01400-2005.08.24-A)

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

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

	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on
the first day of the calendar month in which the amount became past due, plus 2%. The
variable rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as published
in the Eastern Edition of The Wall Street Journal on the first day of each successive
month during which the amount due remains unpaid, plus 2%. The product shall then be
multiplied by 1/365 for each day after the due date that the amount due and the interest
amount remain unpaid. Any interest that occurs pursuant to this Article shall be calculated
by the Party to which it is owed.

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

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

	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be
waived. Any waiver of any interest pursuant to this paragraph, however, shall not affect the
waiving Party’s right to claim

			
	 	 	 
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	 	 	and/or pursue interest for any other failure by the other Party to make payment when due
under this Article.

ARTICLE XXVII — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)

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

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

ARTICLE XXVIII- MEDIATION (LM-03000-2005.12.20-A)

	A.	 	In the event of any dispute or difference of opinion arising out of or relating to this
Contract, including but not limited to the formation, interpretation, performance or breach of
this Contract, whether such dispute arises before or after the expiration of this Contract,
the Company and the Subscribing Reinsurer may mutually agree in writing that, prior to or at
any time during an arbitration proceeding, they will submit such dispute or difference of
opinion to non-binding mediation which will be held at a location mutually agreed by the
parties. The parties agree that any non-binding mediation conducted during any stage of an
arbitration process shall be conducted concurrently with such arbitration process, and that
the arbitration process or proceedings shall not be stayed unless both the Company and the
Subscribing Reinsurer otherwise agree.

	B.	 	Each party shall submit a list of not more than four (4) potential mediators to the other
party within the fourteen (14) days of reaching such mutual agreement. The two parties shall
then agree on the appointment on one (1) mediator from the combined lists within seven (7)
days. The mediator shall be a neutral, impartial third party, without past employment or
directorial relationships with the parties to the mediation. Such mediator shall make full
disclosure of all past partisan relationships with either the Company or Subscribing Reinsurer
to the parties within seven (7) days of his or her notification that he or she has been
selected as a Mediator.

	C.	 	If the Company and the Subscribing Reinsurer cannot agree on a mediator within twenty-one
(21) days from the date of a mutual agreement to mediate, then arbitration proceedings may
commence in accordance with the Arbitration Article.

	D.	 	The mediator will schedule an initial mediation session within thirty (30) days of his or her
appointment and will be responsible for the formulation of an agenda to be distributed to the
parties involved in the mediation not less than five (5) days before the mediation
commences.

	E.	 	The mediator will not have the power of enforcement of any agreement between the parties nor
will the mediator have any right to assess any damages, including punitive damages, to either
party participating in the mediation.

			
	 	 	 
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	F.	 	If, in the opinion of the mediator, the parties cannot resolve the dispute or difference
of opinion, arbitration proceedings may commence in accordance with the Arbitration Article.
In any event, the mediation shall conclude within sixty (60) days of its referral to the
mediator. Should the mediation not be resolved in sixty (60) days, then arbitration
proceedings may commence in accordance with the Arbitration Article.

	G.	 	Each party shall bear the expense of its own representatives and shall jointly and equally
bear with the other party the expenses of the mediator and the place of mediation.

ARTICLE XXIX — OFFSET
(LM-01700-2005.06.02-A)

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

ARTICLE XXX — REINSURER CLAIMS OBLIGATIONS (LM-03100-2007.10.10-A)

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

ARTICLE XXXI — SALVAGE AND SUBROGATION (LM-01800-2006.09.12-A)

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

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

			
	 	 	 
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	    	 	recovery. If the recovery expense exceeds the amount recovered, the amount recovered (if
any) shall be applied to the reimbursement of recovery expense and the remaining expense,
as well as any originally incurred loss expense, shall be added to the Ultimate Net Loss.
If no amount is recovered from salvage and/or subrogation, the expense incurred in
attempting such recovery shall be deemed loss expense and shall be added to the Ultimate
Net Loss.

	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior
to said payments and all necessary adjustments shall be made between the Company and the
Subscribing Reinsurer as soon as practicable after said salvage and/or subrogation recovery is
obtained.

	D.	 	The Company or a Legal Entity shall have the right, before the happening of the loss, to
waive its right of subrogation as to that loss.

ARTICLE XXXII — SERVICE OF SUIT (LM-01900-2005.08.24-A)

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

	A.	 	This Service of Suit Article will not be read to conflict with or override the obligations of
the parties to arbitrate their disputes as provided for in the Arbitration Article. This
Article is intended as an aid to compelling arbitration or enforcing such arbitration or
arbitral award, not as an alternative to the Arbitration Article for resolving disputes
arising out of this Contract.

	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a case
to another Court as permitted by the laws of the United States or of any state in the United
States. The Subscribing Reinsurer, once the appropriate Court is selected, whether such court
is the one originally chosen by the Company and accepted by the Subscribing Reinsurer or is
determined by removal, transfer, or otherwise, as provided for above, will comply with all
requirements necessary to give said Court jurisdiction and, in any suit instituted against any
of them upon this Contract, will abide by the final decision of such Court or of any Appellate
Court in the event of an appeal.

	C.	 	Service of process in such suit may be made upon; Mendes & Mount, LLP, 750 Seventh Avenue,
New York, NY 10019-6829.)

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

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

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

			
	 	 	 
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or enforceability of any other provision of this Contract or the enforceability of such provision
in any other jurisdiction.

ARTICLE XXXIV — SPECIAL CONDITIONS (LM-02100-2007.10.05-A)

	A.	 	This Article applies only in the event that:

	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business or has imposed upon it any other restrictions on or
conditions relating to the Subscribing Reinsurer’s license or conduct of business in
any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus has been reduced by 25% of
the amount of surplus at the inception of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has entered into a definitive agreement to become
merged with, acquired, or controlled by any company, corporation, or individual(s) not
controlling the Subscribing Reinsurer’s operations at the inception of this Contract;
or
	 
	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded
below A- or Standard and Poor’s Rating has been assigned or downgraded below A-; or
	 
	 	6.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least
200% of the Subscribing Reinsurer’s Authorized Control Level Risk-Based Capital; or
	 
	 	7.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	8.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	9.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or
	 
	 	10.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has or has attempted to assign, novate or transfer the
Subscribing Reinsurer’s rights and/or obligations under this Contract, including any
attempted transfer of rights and/or obligations under any U.S. or foreign statute,
legislation or jurisprudence, without the Company’s prior written consent; or
	 
	 	11.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has invoked any U.S. or foreign statute, legislation or
jurisprudence which purports to enable the Reinsurer to require the Company to settle
its claims liabilities, including but not limited to any estimated or undetermined
claims liabilities under this Contract, on an accelerated basis. This condition does
not apply to any attempt to enforce a settlement of claims liabilities under a
commutation process to which the parties have agreed.

	B.	 	If one or more of the above-stated circumstances occur, the Company shall provide the
Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s share of all
paid recoverables, case reserves, loss adjustment expenses, incurred but not reported losses,
reserves for unearned

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

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

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

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

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

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

			
	 	 	 
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Page 20 of 42

 

	 	 	 	by agreeing to secure an amendment to the Letters of Credit reducing the amount of
credit available by the amount of such excess credit.

	E.	 	If the Subscribing Reinsurer fails to fund such Obligations by Letters of Credit as described
above, the Company may terminate this Contract at any time by the giving of thirty (30) days
prior written notice to the Subscribing Reinsurer.

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

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

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

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

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

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

ARTICLE XXXVI — UNAUTHORIZED REINSURANCE (LM-02500-2006.10.26-A)

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

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

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

	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company, a
Legal Entity or any successor, by operation of law, of the Company or a Legal Entity,
including without limitation, any liquidator, rehabilitator, receiver, or conservator of the
Company, without diminution because of the insolvency of the Company, a Legal Entity or the
Subscribing Reinsurer for one or more of the following purposes:

	 	1.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of premiums returned to the owners of Policies reinsured under this Contract
because of cancellations of the Policies;
	 
	 	2.	 	To reimburse the Company or a Legal Entity for the Subscribing Reinsurer’s
share of surrenders and benefits or losses paid by the Company or a Legal Entity under
provisions of the Policies reinsured under this Contract;

			
	 	 	 
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	 	3.	 	To fund an account with the Company or a Legal Entity in an amount at least equal
to the deduction for reinsurance ceded from the Company’s or a Legal Entity’s
liabilities for Policies ceded under this Contract. The account shall include, but
not be limited to, amounts for Policy reserves, claims and losses incurred (including
losses incurred but not reported), loss adjustment expenses, and unearned premium
reserves; and
	 
	 	4.	 	To pay any other amounts the Company claims are due under this Contract.

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

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

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

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

			
	 	 	 
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EXHIBIT A

FIRST EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. 67316

			
	 	 	 
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EXHIBIT A — FIRST EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	26
	2

	 	REINSTATEMENT
	 	26
	3

	 	REINSURANCE PREMIUM
	 	26

			
	 	 	 
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EXHIBIT A — FIRST EXCESS OF LOSS

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

	A.	 	As respects the Lines of Business covered under this Contract, the Company shall retain the
first $5,000,000 of Ultimate Net Loss as respects each risk in any one Loss Occurrence. The
Subscribing Reinsurer shall then be liable for the amount by which the Company’s Ultimate Net
Loss exceeds the Company’s retention of $5,000,000, but the liability of the Subscribing
Reinsurer shall never exceed $5,000,000 each risk any one Loss Occurrence, nor shall the
Subscribing Reinsurer’s liability from all risks in each Loss Occurrence or in the aggregate
for the calendar year, exceed $10,000,000.

	B.	 	It is understood and agreed that the limit and retention described above applies to both
Employers Insurance Company of Wausau and Liberty Mutual Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated in the same ratio that the Ultimate Net Loss from each bears to the total Ultimate
Net Loss of the Company.

	C.	 	Notwithstanding the foregoing, Subscribing Reinsurer’s liability arising out of an Act of
Terrorism shall be limited to only $5,000,000 in the aggregate for all coverages combined, in
each calendar year.

SECTION 2 — REINSTATEMENT

	A.	 	Each claim hereunder reduces the amount of indemnity from the time of occurrence of the
loss by the sum paid, but any amount so exhausted is hereby reinstated from the time the Loss
Occurrence commences hereon.

	B.	 	Reinstatements shall be provided as follows:

	 	1.	 	Five reinstatements at no additional premium.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Cover	 	Subject Earned Premium
	All Property Lines
	 	 	2.890	%
	 
	 	 	 	 
	Estimated Subject Earned Premium to the Layer*:
	 	$	66,855,380	 

 

			
	*	 	ALL Property Lines of Business are covered under this Contract however the rate is applied
only to Commercial Multi-Peril Property (ASLOB — 051); as stipulated in Article XII,
paragraph C.

			
	 	 	 
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EXHIBIT B

SECOND EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. 67316

			
	 	 	 
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EXHIBIT B — SECOND EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	29
	2

	 	REINSTATEMENT
	 	29
	3

	 	REINSURANCE PREMIUM
	 	29

			
	 	 	 
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EXHIBIT B — SECOND EXCESS OF LOSS

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

	A.	 	As respects the Lines of Business covered under this Contract, the Company shall retain the
first $10,000,000 of Ultimate Net Loss as respects each risk in any one Loss Occurrence.
The Subscribing Reinsurer shall then be liable for the amount by which the Company’s Ultimate
Net Loss exceeds the Company’s retention of $10,000,000, but the liability of the Subscribing
Reinsurer shall never exceed $15,000,000 each risk any one Loss Occurrence, nor shall the
Subscribing Reinsurer’s liability from all risks in each Loss Occurrence or in the aggregate
for the calendar year, exceed $30,000,000.

	B.	 	It is understood and agreed that the limit and retention described above applies to both
Employers Insurance Company of Wausau and Liberty Mutual Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated in the same ratio that the Ultimate Net Loss from each bears to the total Ultimate
Net Loss of the Company.

	C. 	 	Notwithstanding the foregoing, Subscribing Reinsurer’s liability arising out of an Act of
Terrorism shall be limited to only $10,000,000 in the aggregate for all coverages combined,
in each calendar year.

SECTION 2 — REINSTATEMENT

	A.	 	Each claim hereunder reduces the amount of indemnity from the time of occurrence of the loss
by the sum paid, but any amount so exhausted is hereby reinstated from the time the Loss
Occurrence commences hereon. For purposes of calculating reinstatement premium, the
reinsurance premium shall be multiplied by the ratio that each of the Employers Insurance
Company of Wausau and Liberty Mutual Insurance Company’s reinsurance recovery bears to the
total reinsurance recovery of the Company.

B. Reinstatements shall be provided as follows:

	 	1.	 	Three reinstatements at no additional premium.
	 
	 	2.	 	One additional reinstatement for an additional premium calculated at pro rata of
the annual premium hereon, being pro rata only as to the fraction of the limit of
liability of this Agreement (i.e., the fraction of 100% of $15,000,000 so reinstated) and
100% as to the term.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	Cover	 	Rate applied to
 Subject Earned Premium
	 
	 	 	 	 
	All Property Lines
	 	 	2.013	%
	 
	 	 	 	 
	Estimated Subject Earned Premium to the Layer*:
	 	$	66,855,380	 

 

			
	*	 	ALL Property Lines of Business are covered under this Contract however the rate is applied
only to Commercial Multi-Peril Property (ASLOB — 051) as stipulated in Article XII, paragraph
C.

			
	 	 	 
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EXHIBIT C

THIRD EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. 67316

			
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EXHIBIT C — THIRD EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	32
	2

	 	REINSTATEMENT
	 	32
	3

	 	REINSURANCE PREMIUM
	 	33

			
	 	 	 
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EXHIBIT C — THIRD EXCESS OF LOSS

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

	A.	 	As respects the Lines of Business covered under this Contract, the Company shall retain the
first $25,000,000 of Ultimate Net Loss as respects each risk in any one Loss Occurrence. The
Subscribing Reinsurer shall then be liable for the amount by which the Company’s Ultimate Net
Loss exceeds the Company’s retention of $25,000,000, but the liability of the Subscribing
Reinsurer shall never exceed $75,000,000 each risk any one Loss Occurrence, nor shall the
Subscribing Reinsurer’s liability from all risks in each Loss Occurrence or in the aggregate
for the calendar year, exceed $150,000,000 and will be shared with the Agency Markets Group.

	B.	 	It is understood and agreed that the limit and retention described above applies to the
Company and to the Agency Markets Group. Any Loss Occurrence affecting both the Agency
Markets Group and the Company shall be combined with respect to the application of the limit
and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated to the Company in the same ratio that the Ultimate Net Loss bears to the total
Ultimate Net Loss of the Company and the Agency Markets Group. It is further understood,
any loss occurrence affecting each of Employers Insurance Company of Wausau and Liberty Mutual
Insurance Company shall be combined with respect to the application of the limit and retention
set forth herein. The limit, retention and reinsurance recovery will be allocated in the same
ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.

	C.	 	Notwithstanding the foregoing, Subscribing Reinsurer’s liability arising out of an Act of
Terrorism shall be limited to only $25,000,000 in the aggregate for all coverages combined, in
each calendar year.

SECTION 2 — REINSTATEMENT

	A.	 	Each claim hereunder reduces the amount of indemnity from the time of occurrence of the loss
by the sum paid, but any amount so exhausted is hereby reinstated from the time the Loss
Occurrence commences hereon. For purposes of calculating reinstatement premium for
reinstatement of losses in excess of $25,000,000 of the Company’s $25,000,000 retention, the
reinsurance premium is deemed to be $4,200,000, multiplied by the ratio that the Company’s
reinsurance recovery bears to the total reinsurance recovery of the Company and the Agency
Markets Group. For reinstatement of losses in excess of $75,000,000 of the Company’s
$50,000,000 retention, the reinsurance premium is deemed to be $2,000,000, multiplied by the
ratio that the Company’s reinsurance recovery bears to the total reinsurance recovery of the
Company and the Agency Markets Group. It is further understood, the reinsurance premium as
stated above, shall be multiplied by the ratio that each of the Employers Insurance Company of
Wausau and Liberty Mutual Insurance Company’s reinsurance recovery bears to the total
reinsurance recovery of the Company.

	B.	 	Reinstatements shall be provided as follows:

	 	1.	 	One additional reinstatement for an additional premium calculated at pro rata of
the annual premium hereon, being pro rata only as to the fraction of the limit of
liability of this Agreement (i.e., the fraction of 100% of $75,000,000 so reinstated)
and 100% as to the term.

			
	 	 	 
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SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Cover	 	Subject Earned Premium
	All Property Lines
	 	 	0.491	%
	 
	 	 	 	 
	Estimated Subject Premium to the Layer*:
	 	$	66,855,380	 

 

			
	*	 	ALL Property Lines of Business are covered under this Contract however the rate is applied only to
Commercial Multi-Peril Property (ASLOB — 051) as stipulated in Article XII, paragraph C.

			
	 	 	 
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SUPPLEMENT TO THE ATTACHMENTS

DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS

	A.	 	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever other term is used to
designate the reinsured company or companies within the various attachments to the reinsurance
Contract, the term shall be understood to mean Company or Reinsured or Reassured or whatever
other term is used in the attached reinsurance Contract to designate the reinsured company or
companies.

	B.	 	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other term is used to
designate the attached reinsurance contract within the various attachments to the reinsurance
contract, the term shall be understood to mean Agreement or Contract or Policy or whatever
other term is used to designate the attached reinsurance contract.

	C.	 	Wherever the term “Subscribing Reinsurer” or “Reinsurers” or “Underwriters” or whatever other
term is used to designate the reinsurer or reinsurers in the various attachments to the
reinsurance agreement, the term shall be understood to mean Reinsurer or Reinsurers or
Underwriters or whatever other term is used to designate the reinsuring company or
companies.

INSOLVENCY FUNDS EXCLUSION CLAUSE

This Contract excludes all liability of the Company arising by Contract, operation of law, or
otherwise from its participation or membership, whether voluntary or involuntary, in any insolvency
fund or from reimbursement of any person for any such liability. “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 any person 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.

			
	 	 	 
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POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE

Section A:

Excluding:

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

Section B:

	 	 	 	It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:
	 
	 	 	 	Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or
Petro-Chemical Plants and/or Oil or Gas Drilling Rigs, United States Aircraft
Insurance Group, Canadian Aircraft Insurance Group, Global Aerospace.

Section B does not apply:

	 	(1)	 	Where the Total Insured Value over all interests of the risk in question is
less than $250,000,000.
	 
	 	(2)	 	To interests traditionally underwritten as Inland Marine and/or
Stock and/or Contents written on a Blanket basis.
	 
	 	(3)	 	To Contingent Business Interruption, except when the Company is aware that
the key location is known at the time to be insured in any Pool, Association or
Syndicate named above, other than as provided for under Section B(1).
	 
	 	(4)	 	To risks as follows:
	 
	 	 	 	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public
Utilities (other than Railroad Schedules) and Builder’s Risks on the classes of
risks specified in this subsection (4) only.

			
	 	 	 
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TOTAL INSURED VALUE EXCLUSION CLAUSE

It is the mutual intention of the parties to exclude risks, other than Offices, Hotels,
Apartments, Hospitals, Educational Establishments, Public Utilities (except Railroad schedules)
and Builders Risk on the above classes where, at the time of the cession, the Total Insured Value
over all interests exceeds $500,000,000. However, the Company shall be protected hereunder,
subject to the other terms and conditions of this Contract, if subsequently to cession being made
the Company becomes acquainted with the true facts of the case and discovers that the mutual
intention has been inadvertently breached, the Company shall at the first opportunity, and
certainly by next anniversary of the original Policy, exclude the risk in question.

It is agreed that this mutual intention does not apply to Contingent Business Interruption or to
interest traditionally underwritten as Inland Marine or to Stock and/or Contents written on a
blanket basis except where the Company is aware that the Total Insured Value of $500,000,000 is
already exceeded for buildings, machinery, equipment and direct use and occupancy at the key
location.

It is understood and agreed that this Clause shall not apply hereunder where the Company writes
100% of the risk.

Notwithstanding anything contained herein to the contrary, it is the mutual intention of the
parties in respect of bridges and tunnels to exclude such risks where the Total Insured Value over
all interests exceeds $500,000,000.

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

N.M.A. 1119

	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 operation of paragraphs 1. and 2. of this Clause, 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 the Reassured does not have knowledge of such nuclear reactor power
plant or nuclear installation, or
	 
	 	(b)	 	where the said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive contamination, however
caused. 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 operation of paragraphs 1., 2. and 3. of this Clause, 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 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 to it by the Atomic Energy
Act of 1954 or by any law amendatory thereof.

7. Reassured to be sole judge of what constitutes:

			
	 	 	 
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Page 37 of 42

 

	 	(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.

N.M.A. 1119

			
	 	 	 
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NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE — CANADA

N.M.A. 1980

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

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

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

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

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

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

	5.	 	This clause shall not extend to risks using radioactive isotopes in any form where the
nuclear exposure is not considered by the Company to be the primary hazard.

	6.	 	The term “prescribed substances” shall have the meaning given to it by the Atomic Energy
Control Act R.S.C. 1974 or by any law amendatory thereof.

7. Company to be sole judge of what constitutes:

	 	a.	 	substantial quantities, and

			
	 	 	 
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Page 39 of 42

 

	 	b.	 	the extent of installation, plant or site.

	8.	 	Without in any way restricting the operation of paragraphs 1., 2., 3. and 4. of this clause,
this Contract does not cover any loss or liability accruing to the Company, directly or
indirectly, and whether as Insurer or Reinsurer, caused by any nuclear incident as defined in
The Nuclear Liability Act, nuclear explosion or contamination by radioactive material.

	NOTE: 	 	Without in any way restricting the operation of paragraphs 1., 2., 3. and 4. of this clause,
paragraph 8. of this clause shall apply to all original Contracts of the Company whether new,
renewal or replacement which become effective on or after December 31, 1984.

N.M.A. 1980

			
	 	 	 
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NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4

	1.	 	This Reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.

	2.	 	Without in any way restricting the operations of Nuclear Incident Exclusion Clauses, —
Liability, — Physical Damage, — Boiler and Machinery and paragraph 1. of this Clause, it is
understood and agreed that for all purposes of the reinsurance assumed by the Reinsurer from
the Reinsured, all original insurance Policies or Contracts of the Reinsured (new, renewal and
replacement) shall be deemed to include the applicable existing Nuclear Clause and/or Nuclear
Exclusion Clause(s) in effect at the time and any subsequent revisions thereto as agreed upon
and approved by the Insurance Industry and/or a qualified Advisory or Rating Bureau.

			
	 	 	 
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TERRORISM EXCLUSION CLAUSE — REINSURANCE (PROPERTY)

A) This reinsurance does not cover any loss arising out of an Act of Terrorism as defined in
Section 102 of the Terrorism Risk Insurance Act of 2002 (TRIA) as modified by the Terrorism Risk
Insurance Extension Act of 2005, (hereinafter referred to as TRIA).

B) In addition this reinsurance does not cover any loss 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 where such loss arises from a non-certified act of
terrorism.

A non-certified act of terrorism shall be defined as an act of terrorism that has not been
certified as such under the terms of TRIA. For the purposes of this section B, 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 any 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.

			
	 	 	 
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