Document:

Exhibit 10.44

Note: Portions of this exhibit indicated by "[ * ]" are
    subject to a confidential treatment request, and have been omitted from this
    exhibit. Complete, unredacted copies of this exhibit have been filed with
    the Securities and Exchange Commission as part of the Company's confidential
    treatment request.

 

  INDEMNIFICATION AGREEMENT

               THIS INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of the IPO Date (as defined below), between XL Capital Assurance Inc., a New York insurer (“XLCA”) and XL America, Inc.,
a Delaware corporation (“XL America”). 

  W I T N E S S E T H:

               WHEREAS, XLCA and XL America are both indirect wholly-owned subsidiaries of XL Capital Ltd, a Cayman Islands corporation (“XL Capital”); 

               WHEREAS, the stock of XLCA will be transferred to a newly-formed holding company which will become the subject of an initial public offering (“IPO”) by XL Capital or one of its wholly-owned
subsidiaries;

               WHEREAS, XLCA issued a Financial Guaranty Insurance Policy (the “Policy”), effective [ * ] (the “Note”); 

               WHEREAS, in connection with the satisfaction of a claim under the Policy, XLCA acquired the Note that XLCA had insured; 

               WHEREAS, the Note was secured by a pool of loans made to medical providers;

               WHEREAS, the Note was partially paid down with a non-cash distribution of the loans made to one of the medical providers, [ * ];

               WHEREAS, pursuant to the [ * ], [ * ] loans were extinguished and XLCA received [ * ] (such stock, including any other instruments issued or to be issued in exchange for any thereof in connection with
further reorganizations of [ * ], “Preferred Stock”); 

               WHEREAS, XLCA will value the Note and Preferred Stock as of June 30, 2006 (“Valuation Date”) by a valuation to be done no later than the closing date of the IPO (the Guaranteed Carried
Values”);

               WHEREAS, to facilitate the IPO, XL America is prepared to indemnify XLCA in respect of (i) diminution subsequent to Valuation Date of the Guaranteed Carried Values of the Note and/or Preferred Stock;
(ii) certain potential liabilities under the Policy, and (iii) existing or future litigation, including without limitation loss adjustment expenses, pertaining to the Policy, the Note and/or Preferred Stock. 

               NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, and intending to be legally bound, the parties hereto agree as follows:

               1.           Indemnification Against Diminution in Value. Subject to the terms and conditions contained herein:

	     	          (a)         XL
          America hereby agrees to indemnify and hold harmless XLCA, its subsidiaries,
          affiliates, successors and assigns from and against any diminution
          in the value of the Note and/or the Preferred Stock below their respective
          Guaranteed Carried Values as may be determined to have occurred after
          Valuation Date pursuant to a written valuation done as of the end of
          the relevant calendar quarter and notified to XL America in writing.
          The valuation shall be conducted by XLCA in connection with preparation
          of its quarterly financial statements in its reasonable discretion
          in accordance with generally accepted accounting principles consistently
          applied and, where applicable, based upon information from its professional
          advisors) 

                (b)         XL
            America agrees, no later than thirty (30) days after receipt of a
          written demand after the close of any quarter, to be accompanied by
          a copy of the written valuation, to pay to XLCA the amounts of any
          net diminutions from the prior quarter in the estimated values of the
          Note and/or the Preferred Stock (the “Interim Carried Value”)
          to the extent such quarter’s Interim Carried Value is less than
          the least of the Guaranteed Carried Value or any prior quarter’s
          Interim Carried Value. 

                 (c)         In
          the event of appreciation in the Interim Carried Value of the Note
          and/or Preferred Stock subsequent to any payment pursuant to clause
          (b) above, XLCA will not be obligated to return any amount previously
          received from XL America pursuant to such clause (b) unless and until
          thirty (30) days after XLCA or any affiliate thereof receives cash
          or other readily marketable consideration (the amount of which shall
          be the “Sale Amount”) for the conveyance of the Note and/or
          the Preferred Stock, as the case may be, to an unaffiliated person
          and then XLCA will refund amounts previously received from XL America
          pursuant to such clause (b) only to the extent of the lesser of (i)
          the aggregate of the amounts paid in respect of diminution in Interim
          Carried Value by XL America to XLCA under clause (b), or (ii) the amount
          by which the Sale Amount received by XLCA exceeds the difference between
          the Guaranteed Carried Value and aggregate of the amounts paid in respect
          of diminution of value thereof by XL America to XLCA under clause (b).
          XLCA also shall pay XL America interest on any such amount at the simple
          annual interest rate of 5% running from the date of the payment being
          refunded (allocating the payments under clause (b) to the refund on
          a LIFO basis). 

                 (d)         If
          upon the conveyance of the Note and/or the Preferred Stock, as the
          case may be, to an unaffiliated person (i) the Sale Amount XLCA receives
          is less than (ii) the lowest Interim Carried Value for any prior quarter,
          XL America shall no later than thirty (30) days after demand pay XLCA
    the difference between (i) and (ii), without interest.

               2.           Indemnification Against Liabilities. Subject to the terms and conditions contained herein, XL America
hereby agrees to indemnify and hold harmless XLCA, its subsidiaries, affiliates, successors and assigns and their respective officers, directors and agents 

-2- 

from and against any and all losses, liabilities, claims, damages, costs, penalties, fines, and expenses (including, without limitation, reasonable attorneys’ fees and any and all expenses reasonably incurred in
investigating, preparing or defending any action, suit or proceeding, commenced or threatened and for consultants and advisors regarding preservation of value of the Note and/or Preferred Stock, collectively, “Loss Adjustment Expenses”) of
any kind and nature incurred after the date hereof (collectively, “Losses”) which relate to or arise out of any past, existing and/or future claim, action, suit or proceeding (i) arising under, out of or relating to the Policy, including,
without limitation, any recovery from any holder of the Note of any payment made pursuant thereto on the basis that such payment constituted an avoidable preference, and/or (ii) which relates to the Note and/or Preferred Stock, including, in each
case, without limitation, [ * ] (“Delaware Proceeding”); provided, however, such indemnity shall not apply to Loss
Adjustment Expenses except to the extent that such Loss Adjustment Expenses exceed the amount of XLCA’s reserve in respect thereof at the Valuation Date (in the amount of $[ * ]). 

               3.           Indemnification Procedure as Respects Liabilities. 

	     	          (a)         XL
          America shall pay to XLCA within thirty days upon demand, which demand
          shall itemize the Losses for which indemnity is claimed, any and all
          Losses paid by XLCA. If XL America shall dispute the amount owing by
          it as set forth in the demand, XL America shall nevertheless pay the
          amount in dispute to XLCA pending resolution of the dispute as provided
          in this Agreement.

                 (b)         Promptly
          after receipt by XLCA of notice of any complaint or the commencement
          of any action or proceeding with respect to which indemnification may
          be sought hereunder, XLCA will notify XL America of such complaint
          or of the commencement of such action or proceeding. XL America may,
          at its discretion, assume the defense of any such action or proceeding
          (including, without limitation, the Delaware Proceeding), including
          the employment of counsel and the payment of the fees and disbursements
          of such counsel. In the event, however, that (i) XL America elects
          not to assume the defense of the action or proceeding in a timely manner
          or (ii) the nature of any claim presents a conflict of interest between
          XLCA and XL America, then XLCA may assume and control its own defense,
          and XL America shall be liable for all reasonable costs and expenses
          paid or incurred by XLCA in connection therewith, and XLCA shall provide
          XL America with appropriate written documentation of such costs and
          expenses. In any action or proceeding with respect to which indemnification
          may be sought hereunder, XLCA or XL America, whichever is not assuming
          the defense of such action, as the case may be, will have the right
          to participate in such litigation and to retain its own counsel at
          such party’s own expense. XLCA or XL America, as the case may
          be, shall at all times use reasonable efforts to keep XL America or
          XLCA, as the case may be, reasonably apprised of the status of the
          defense of any claim the defense of which they are maintaining. 

                 (c)         XLCA
          may not settle or compromise any claim with respect to which indemnification
          is being sought hereunder without the prior written consent of XL America,
          which consent shall not be unreasonably withheld. XL America may not,
          without the prior written consent of XLCA, settle or compromise or
          consent to the entry of any judgment in any claim with respect to which
    indemnification is being sought 

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	     	hereunder unless such settlement, compromise or consent
        includes an unconditional release of XLCA from all liability arising
    out of such claim. 

               4.           Non-Inuring Reinsurance. It is agreed that the reinsurance provided by XL
Financial Assurance Ltd. is not inuring (beyond the amount of any reduction to
XLCA’s Loss Adjustment Expense net reserve at the Valuation Date) , and XLCA shall be indemnified hereunder on a gross basis and not just in
respect of its net retained interest (net of any reduction to XLCA’s Loss
Adjustment Expense reserve at the Valuation Date). 

               5.           Representations and Warranties of XL America. XL America hereby represents and warrants to XLCA that this
Agreement has been duly authorized, executed and delivered by XL America and is the legal, valid and binding agreement of XL America, enforceable against XL America in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether in equity or at law). 

               6.           Representations and Warranties of XLCA. XLCA hereby represents and warrants to XL America that this
Agreement has been duly authorized, executed and delivered by XLCA, and is the legal, valid and binding agreement of XLCA, enforceable against XLCA in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether in equity or at law). 

               7.           Notices. Unless specified otherwise in this Agreement, all requests, notices or other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, telecopy, or electronic transmission, if sent via facsimile (with confirmation of
receipt without error), to the respective Parties at the following addresses: 

	               	
      (a)         
	    
	
if to XLCA: 
	
	 	

	  
	
XL Capital Assurance Inc. 
	
	 	

	  
	
1221 Avenue of the Americas, 31st Floor 
	
	 	

	  
	
New York, New York 10020 
	
	 	

	  
	
Attn: General Counsel 
	
	 	

	  
	
Fax: (212) 478-3579 
	
	     

	
	 	
      (b) 
	    
	
if to XL America: 
	
	 	

	  
	
XL America, Inc. 
	
	 	

	  
	
Seaview House 
	
	 	

	  
	
70 Seaview Avenue 
	
	 	

	  
	
Stamford, CT 06902 
	
	 	

	  
	
Attention: General Counsel 
	
	 	

	  
	
Fax: (203) 964-5309 
	

               8.           Miscellaneous. Nothing in this Agreement is intended to or shall confer upon anyone other than the parties
hereto any legal or equitable right, remedy or claim. This 

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Agreement shall be governed by, and its provisions construed in accordance with, the laws of the State of New York applicable to contracts made and to be wholly performed within such state and may be modified only in writing
signed by each of the parties hereto. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument. Paragraph headings
contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of any term or provision hereof. 

               9.           Arbitration

	 	 
	     	          (a)         Any
          dispute or claim arising out of or relating to this Agreement, including
          its formation and validity, shall be referred to arbitration. Arbitration
          shall be initiated by the delivery, by mail, facsimile, or other reliable
          means, of a written demand for arbitration by one party to the other.
          The arbitration shall be held in New York or such other place as the
          parties may mutually agree. 

                 (b)         Arbitration
          shall be conducted before a three-person Arbitration Panel appointed
          as follows. Each party shall appoint one arbitrator, and the two arbitrators
          so appointed shall then appoint an impartial Umpire before proceeding.
          If either party fails to appoint an arbitrator within thirty (30) days
          after it receives a written request by the other party to do so, the
          other party may appoint an arbitrator for it. Should the two party-appointed
          arbitrators fail to choose an Umpire within thirty (30) days of the
          appointment of the second arbitrator, each arbitrator shall propose
          three names, of whom the other shall strike two, and the decision shall
          be made from the remaining two by drawing lots. The arbitrators and
          Umpire shall be present or former executives or officers of insurance
          or reinsurance companies or shall be arbitrators certified by ARIAS-U.S.
          The arbitrators and Umpire shall not be under the control of either
          party, and shall have no financial interest in the outcome of the arbitration. 

                 (c)         The
          decision of a majority of the Arbitration Panel shall be final and
          binding, except to the extent otherwise provided in the Federal Arbitration
          Act. The Arbitration Panel shall render its award in writing. Judgment
          upon the award may be entered in any court having jurisdiction, pursuant
          to the Federal Arbitration Act. Unless the Arbitration Panel orders
          otherwise, each party shall pay: (1) the fees and expenses of its own
          arbitrator, and (2) an equal share of the fees and expenses of the
    Umpire and of the other expenses of the arbitration. 

               10.         Severability.
If any provision of this Agreement or the application of any such provision to
any person or  circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision hereof. 

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               IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. 

	 	
XL CAPITAL ASSURANCE INC. 
	
	 	 

	
	 	 

	
	 	
By: _______________________________  
	
	 	
       Name: 
	
	 	
       Title: 
	
	 	 

	
	 	 

	
	 	
XL AMERICA, INC. 
	
	 	 

	
	 	 

	
	 	 By: _______________________________   
	 	       Name:  
	 	       Title:Exhibit 10.45 

Note: Portions of this exhibit indicated by "[ * ]" are
    subject to a confidential treatment request, and have been omitted from this
    exhibit. Complete, unredacted copies of this exhibit have been filed with
    the Securities and Exchange Commission as part of the Company's confidential
    treatment request.

ADVERSE DEVELOPMENT REINSURANCE AGREEMENT

THIS AGREEMENT is effective on [      ] (the effective date of the initial public offering of XLCA’s parent, referred to herein as the “IPO Date”) and is made and entered into by and between XL Capital Assurance
Inc., a New York insurer (hereinafter called the “Company” or “XLCA”) and XL Reinsurance America Inc., a New York insurer (hereinafter called the “Reinsurer” or “XLRA”). 

          In consideration of the mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows: 

  ARTICLE I 

  COVERAGE

          Subject to the terms, conditions, and limitations of this Agreement, the Reinsurer agrees to indemnify the Company on an aggregate excess of loss basis for Aggregate Adverse Development up to the
Maximum Liability Amount on the Subject Business (as each such term is defined in Article V). 

          No payments shall be made under this Agreement unless the Company has first paid Ultimate Net Loss in an amount in excess of the Retained Reserves. Under no circumstances shall the total
liability of the Reinsurer under this Agreement exceed the Maximum Liability Amount (as that term is defined in Article V). 

          Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third parties or any persons not parties to this Agreement except as
provided in Article XIX. 

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  ARTICLE II

  TERM 

          This Agreement shall remain in full force and effect until the expiry of all liabilities under this Agreement or Commutation as provided for in Article IX. 

          The provisions of this Agreement shall continue to apply to all obligations and liabilities of the parties incurred hereunder to the end that all such obligations and liabilities shall be fully
performed and discharged. 

  ARTICLE III 

  TERRITORY

     The territorial scope of this Agreement shall be worldwide.

  ARTICLE IV 

  [RESERVED]

  

  ARTICLE V 

  DEFINITIONS

          The following definitions shall apply in respect of all use of the defined terms in this Agreement: 

	   	 A.   	 “Aggregate Adverse Development” shall
          mean any increase in Total Incurred (as defined herein) on the Subject
          Business that will result in Ultimate Net Loss in an amount exceeding
        the Retained Reserves.

	 
	 	 B.	 “Affiliate” shall
          mean a person which, directly or indirectly, owns at least 10% but
          less than 50% of the financial guaranty insurance corporation or which
        is at least ten percent but less than fifty percent, directly or

3

	  	 	
  indirectly, owned by a financial guaranty corporation. Such definition is set forth in Section 6901(c) of the New York Insurance Laws and may be amended from time to time.

	 
	 	
C.   	
      RESERVED

	 
	 	
D.	
      RESERVED

	 
	 	
E.	
      “Loss Adjustment Expense” shall
          mean expenses of the Company, including all court costs, fees and expenses;
          fees for service of process; fees to attorneys; cost of undercover
          operative and detective services; fees and expenses for financial advisors,
          attorneys, third party servicers and consultants; fees of independent
          adjusters or attorneys for investigation or adjustment of claims beyond
          initial investigation, cost of employing experts for preparation of
          reports, photographs, diagrams, chemical or physical analysis or for
          advice, opinion or testimony concerning claims under investigation
          or in litigation; costs for legal transcripts of testimony taken at
          coroner's inquests, criminal or civil proceedings; costs for copies
          of any public records; costs of depositions and court reported or recorded
          statements; and any other similar fees; cost or expense reasonably
          chargeable to the investigation, negotiation, settlement or defense
          of a claim or loss or to the protection and perfection of the subrogation
          rights of any insured covered by the policies relating to the Subject
          Business. This amount shall not include overhead expenses of Company
          or salaries or expenses of persons employed by the Company in an administrative
    or supervisory capacity, nor for ordinary office expenses of the Company.

	 
	 	
F.	
      “Maximum Liability Amount” shall mean $100,000,000.

	 
	 	
G.	
      RESERVED

	 
	 	
H.	
      “Retained Reserves” shall mean the Company’s (a) gross case reserves of $[
    * ], calculated as of June 30, 2006 and (b) loss adjustment expense

4

	  	 	
  reserve of $[ * ] arising from the Subject Business as of the IPO Date before giving consideration to this Agreement, after giving consideration to the Third Amended and Restated Facultative Quota Share Reinsurance
  Treaty, dated as of July 1, 2006 (the “XLCA/XLFA Treaty”), between
  XLCA and XL Financial Assurance Ltd , and before giving effect to any other
  third-party reinsurance.

	 
	 	
I.	
      “Subject Business” shall
          mean risks attaching under (a) Financial Guaranty Insurance Policy
    [ * ] and (b) Financial Guaranty Insurance Policy [ * ].

	 
	 	
J.   	
      “Term” shall mean
          the period from the IPO Date until the expiry of all liabilities under
          this Agreement, both days inclusive, in which increases to the Aggregate
    Adverse Development are eligible for coverage under this Agreement.

	 
	 	
K.	
      “Total Incurred” shall
          mean the sum of (i) Ultimate Net Loss paid after the IPO Date plus
    (ii) case reserves for Ultimate Net Loss unpaid.

	 
	 	
L.	
      “Ultimate Net Loss” shall
          mean: (i) the actual amount the Company has paid or has become liable
          to pay and all Loss Adjustment Expenses with respect to the Subject
          Business and (ii) one hundred percent (100%) of the amount of any Extra
          Contractual Obligations and one hundred percent (100%) of the amount
          of any Excess Limits Liability (as each such term is defined in Article
    V), after giving effect to the XLCA/XLFA Treaty, but before any other third-party
          reinsurance and before all salvages and subrogations that are actually
      received by the Company.

	 
	 	 	
  All salvages, recoveries, or payments recovered or received subsequent to a loss settlement under this Agreement shall be applied as if recovered or received prior to the aforesaid settlement and pursuant to Article XIV and
  all necessary adjustments shall be made by the parties hereto, provided always that nothing in this definition shall be construed to mean

5

	       	that Ultimate Net Loss under this Agreement is
    not recoverable until the Company’s Ultimate Net Loss has been ascertained. 

ARTICLE VI 

EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS LIMITS LIABILITY

          This Agreement shall cover any losses arising from Extra Contractual Obligations and Excess Limits Liability. 

          “Extra Contractual Obligations” as used in this Agreement shall mean those liabilities not covered under any other provision of this Agreement, including third party claims against the
Company, which arise from the handling of any claim on business covered hereunder; such liabilities arising because of, but not limited to, the following: failure to settle within the limit of the policies relating to the Subject Business, by reason
of alleged or actual negligence, fraud, or bad faith in rejecting an offer of settlement, in the preparation of the defense, in the trial of any action against the insured or reinsured, or in the preparation or prosecution of an appeal consequent
upon such action, all as determined by the Company in its sole discretion. 

          “Excess Limits Liability” as used in this Agreement shall mean damages payable in excess of the limit of the policies relating to the Subject Business as a result of alleged or actual
negligence, fraud, or bad faith in failing to settle and/or rejecting a settlement within the limit of the policies relating to the Subject Business, in the preparation of the defense, in the trial of any action against the insured or reinsured, or
in the preparation or prosecution of an appeal consequent upon such action.  Excess Limits Liability is any amount for which the Company would have been contractually liable to pay, as determined by the Company in its sole discretion, had it not
been for the limits of the reinsured policy. 

6

          The date on which any Extra Contractual Obligation and/or Excess Limits Liability is incurred by the Company shall be deemed, in all circumstances, to be the date of the original loss. 

          In the event any provision of this Article VI is rendered illegal or unenforceable by the laws, regulations, or public policy of any jurisdiction, such provision shall be considered void as
respects that jurisdiction only, and such a consideration shall not affect the validity or enforceability of any other provision of this Article VI in that jurisdiction nor the enforceability of such provision in any other jurisdiction. 

          In no event shall coverage be provided to the extent that such coverage is not permitted under New York Law. 

  ARTICLE VII 

  REINSURANCE PREMIUM

          In consideration of coverage provided hereunder, the Company shall pay to the Reinsurer Reinsurance Premium on an installment basis in accordance with Schedule A. 

  ARTICLE VIII

  [RESERVED]

  

  ARTICLE IX 

  COMMUTATION

          This Agreement may be commuted upon the mutual agreement of the Parties and the approval of the New York Department of Insurance. Upon any commutation the Reinsurer will receive a full and final
release from all past, current and future liability under or related to this Agreement. 

7

  ARTICLE X 

  REPORTS AND REMITTANCES

	 	 	 
	  	
A.   	
      As respects the Subject Business, the Company shall furnish to the Reinsurer within forty-five (45) days after the end of each calendar quarter:

	 
	 	 	
1.     	
      The quarterly account of Ultimate Net Loss paid as of the end of the calendar quarter and on a cumulative basis from the effective date of this Agreement; and

	 
	 	 	
2.	
      The Company’s estimate
          of case reserves for Ultimate Net Loss unpaid as of the end of the
    calendar quarter.

	 
	 	
B.	
      Within thirty (30) days following
          receipt of Company’s quarterly report as called for above, the
          Reinsurer shall pay to the Company the positive amount, if any, by
          which paid Ultimate Net Loss from the effective date of this Agreement
          through the end of the calendar quarter, both dates inclusive, exceed
          the Retained Reserves, minus any Ultimate Net Loss (net of any Ultimate
          Net Loss overpayments paid by the Company) previously paid by the Reinsurer
          under this Agreement. If the Reinsurer shall dispute the amount owing
          by the debtor party as set forth in the report, the debtor party nevertheless
          shall pay the amount in dispute to the creditor party as provided in
          this paragraph pending resolution of the dispute as provided in this
    Agreement.

	 
	 	
C.	
      Notwithstanding the foregoing,
          at the option and upon the demand of the Company, when the amount due
          in the aggregate as a result of any payment(s) on a claim under the
          policies relating to the Subject Business (“Policy
  Payment”) exceeds US $500,000., the Company shall be paid by special
  remittance within five (5) business days upon receipt of a special

8

	  	 	
  account, which shall be prepared by the Company and shall contain all relevant details in connection with the claim.

	 
	 	
D.   	
      If the Reinsurer is required to post security pursuant to Article XVIII, the quarterly report shall include the amount of security required.

	 
	 	
E.	
      In addition to the foregoing,
          as soon as reasonably possible following the end of each calendar year,
          at the Reinsurer’s request the Company shall provide the Reinsurer with a copy of the Company’s
    Annual Report and/or statutory Annual Statement.

ARTICLE XI 

LOSS SETTLEMENTS AND LOSS ADJUSTMENT EXPENSES

          The Company shall be the sole judge as to what shall constitute a claim or loss covered under the Subject Business.  The Company shall, in its sole discretion, monitor, evaluate, negotiate,
adjust, investigate, settle, defend or compromise all claims or potential claims and all losses or potential losses, including Extra Contractual Obligations and Excess Limits Liability.  All such negotiations, adjustments, investigations, settlements, defenses and compromises shall be unconditionally binding on the Reinsurer.  In addition to amounts paid in settlement of losses, the Reinsurer shall be liable for its
proportionate share of all reasonable Loss Adjustment Expenses. The Reinsurer shall have the right, at its own expense and upon prior written notice to the Company, to become associated in any suit, litigation or action relating to the Subject
Business and retain counsel and advisors of their own choice. 

          The Company or the Reinsurer, as the case may be, shall at all times use reasonable best efforts to keep the Reinsurer or the Company, as the case may be, apprised of the status of any material
events with respect to the Subject Business. 

9

          Further, the Company shall provide, without limitation, the following surveillance services to the Reinsurer as part of the Company’s discharging of its own obligations under the policies
for the benefit of the Company and consistent with its fiduciary duties to its reinsurers: (a) preparation for and with the consent of the Reinsurer, representation of the interest of the Reinsurer at and follow up on matters arising from any
meetings with third parties relating to the Subject Business; (b) participation in quarterly reserving work-up discussions to develop a recommendation on reserves related to the Subject Business; and (c) preparation of reports as necessary to update
the Reinsurer on workout matters. The Reinsurer shall be liable for its share of all reasonable Loss Adjustment Expenses paid or incurred by the Company in connection with such surveillance services. 

  ARTICLE XII 

  FOLLOW THE FORTUNES

	 	 	 
	  	
A.   	
      The Reinsurer’s liability
          shall attach simultaneously with that of the Company and shall be subject
          in all respects to the same risks, terms, rates, conditions, interpretations,
          assessments, waivers, the exact proportion of premium paid to the Company
          without any deductions for brokerage and to the same modification,
          alterations and cancellations as the policies, the true intent of this
          Agreement being that the Reinsurer shall, in every case to which this
          Agreement applies, follow the underwriting fortunes of the Company
          and the Reinsurer shall be bound, without limitation, by any payments
    and settlements entered into by the Company in good faith.

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

10

  ARTICLE XIII

  OFFSET 

          In the event of insolvency of either the Company or the Reinsurer, offset shall be permitted in accordance with the terms of this Article and as otherwise permitted by Section 7427 of the
Insurance Law of the State of New York. Subject to the foregoing, each party hereto shall have, and may exercise at any time and from time to time, the right to offset any balances, whether on account of premiums or on account of losses or
otherwise, due from such party to the other party hereto under this Agreement or under any other agreement heretofore or hereafter entered into by and between them, and may offset the same against any balance or balances due or to become due to the
former from the latter under the same or any other agreement between them; and the party asserting the right of offset shall have and may exercise such right whether the balance or balances due or to become due to such party from the other are on
account of premiums or on account of losses or otherwise and regardless of the capacity, whether as Company or as Reinsurer, in which each party acted under the agreement or, if more than one, the different agreements involved. 

  ARTICLE XIV 

  SALVAGE AND SUBROGATION

           In the event of any salvage and/or subrogation received in respect of claims and settlements under the policies relating to the Subject Business, the salvage and/or subrogation shall be coordinated under this and other
applicable reinsurance of the Subject Business by reference to the order of Company’s reinsurance cessions under the definition of Article V H, Retained Reserves. First, the salvage and/or subrogation shall be paid with respect to the
reinsurance contract or contracts which are obligated to pay Company first on the Subject Business for amounts in excess of that reinsurer’s held reserves as of

11

June 30, 2006 (the “Held Reserves”).  Once such amounts paid by such reinsurers in excess of their respective Held Reserves have been fully reimbursed, any additional subrogation and/or salvage shall then be applied
to the amount of each such reinsurer’s Held Reserves, starting with the reinsurer of the Subject Business whose obligation to pay Company occurs last and proceeding to the reinsurer so obligated to pay first.  If two or more reinsurers have
obligations to pay Company on the Subject Business which occur simultaneously, the subrogation and/or salvage shall be divided between them in proportion to the amount each of them is obligated to pay as a part of the amount of their combined
obligation to pay. 

           The Company hereby agrees to enforce such subrogation rights as it may obtain by virtue of payments made under the policies relating to the Subject Business, but in case it shall refuse or neglect to do so, Reinsurer is
hereby authorized and empowered to bring any appropriate action to enforce such rights. 

           All subrogation recoveries, other recoveries, salvage or payments made subsequent to the payment of claims hereunder shall be applied as if made before such payment of claims and shall be made as soon as practicable.

  ARTICLE XV 

  DELAYS, ERRORS, AND OMISSIONS

          Any inadvertent delay, error, or omission made in connection with this Agreement or any transaction hereunder shall not relieve either party from any liability that would have attached had such
delay, error, or omission not occurred, provided that any error or omission is rectified as soon as reasonably practical. 

12

ARTICLE XVI 

  AMENDMENTS AND ALTERATIONS

          This Agreement may be changed, altered, or amended as the parties may agree, provided such change, alteration, or amendment is evidenced in writing or by endorsement executed by the Company and
  the Reinsurer and provided further that any such change, alteration or amendment has been previously filed for approval with the Superintendent of the New York Insurance Department for his review and non-objection thereto. 

  ARTICLE XVII 

  ACCESS TO RECORDS

          Provided the Reinsurer gives at least fifteen (15) days prior written notice, it or its designated representatives, provided such representatives are reasonably acceptable to the Company, shall
have the right to inspect at any reasonable time, in the office of the Company where the files are located, all records of the Company that pertain in any way to this Agreement; the Reinsurer’s right of inspection shall survive expiration or
cancellation of this Agreement, so long as any claim or premium matters remain outstanding. 

          All non-public information provided in the course of the inspection shall be kept confidential by the Reinsurer as against third parties, except as respects any obligation to do so by law or
contract. 

  ARTICLE XVIII 

  RESERVES AND FUNDING

	  	 	 
	 	
A.   	
      Reinsurer hereby agrees to establish reserves for the policies relating to the Subject Business being reinsured under this Agreement in accordance with the requirements of Article 69 of the New York Insurance Laws. With
  respect to the Subject Business, the Company agrees that, when it files with the Insurance Department or sets up on its books

13

	  	 	
  reserves for losses (including loss and loss expense paid by the Company but not recovered from the Reinsurer, and loss and loss expense reported and outstanding) and unearned premium, which it is required by law to set up,
  it shall forward to the Reinsurer a statement showing the proportion of such reserves applicable to it.

	 
	 	
B.   	
      The Reinsurer shall take all steps necessary to comply with the provisions of Article 69 of the New York Insurance Laws and all applicable laws and regulations so as to permit the Company to obtain full credit on its
  statutory financial statements for the reinsurance provided by this Agreement in all applicable jurisdictions, including, without limitation, compliance with Section 6906 of the New York Insurance Law, to the extent credit is not otherwise available
  under applicable law or regulations. It is understood and agreed that any term or condition required by such law or regulation to be included in this Agreement for the Company to receive financial credit for the reinsurance provided by this
  Agreement shall be deemed to be incorporated in this Agreement by reference.

	 
	 	
C.	
      If the Company is unable to take credit on its statutory statements for the reinsurance provided by this Agreement, the Reinsurer will post security in the form of a Letter of Credit and/or Trust Account in an amount and in a
  form which will entitle the Company to obtain such credit under the New York insurance laws and regulations.

14

  ARTICLE XIX

  INSOLVENCY

          In the event of the insolvency of the Company and the appointment of a liquidator, receiver, conservator or statutory successor, reinsurance due under this Agreement shall be payable with
reasonable provision for verification, on the basis of the liability of the Company resulting from claims allowed against the Company by any court of competent jurisdiction or by any liquidator, receiver, conservator or statutory successor 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. 

          Payments by the Reinsurer as set forth above shall be made directly and exclusively to the Company or to its liquidator, receiver, conservator or statutory successor except as provided by
subsection (a) of section 4118 of New York Insurance Law or except (a) where this Agreement specifies another payee in the event of the insolvency, or (b) the Reinsurer, with the consent of the direct insureds, has assumed such policy obligations of
the Company as direct obligations to the payees under such policies in substitution for the obligations of the Company to such payees. 

          In the event of the insolvency of the Company, the liquidator, receiver, conservator or statutory successor shall give written notice of the pendency of a claim against the Company under policies
reinsured within a reasonable time after such claim is filed in the insolvency proceeding.  During the pendency of such claim, the Reinsurer has the right but not the duty to investigate said claim and interpose in the proceeding where the claim is
to be adjudicated, at its own expense, any defense or defenses that it may deem available to the Company, or its liquidator, receiver, conservator or statutory successor.  The expense thus incurred by the Reinsurer will be chargeable against the
Company, subject to court approval, against the insolvent Company as part of the expense of

15

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 Reinsurer. 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 Agreement as though such expense had been incurred by the Company.  Should the Company go into liquidation or
should a receiver be appointed, the Reinsurer will be entitled to exercise any offset rights specifically provided by this Agreement and to offset any other sums permitted under applicable law. 

  ARTICLE XX 

  ARBITRATION

          Any and all disputes or other matter in question relating to this Agreement, including its formation, interpretation and performance or breach of this Agreement, whether the dispute arises before
or after the termination of this Agreement, shall be resolved by a panel of three arbitrators and such arbitration shall be initiated at the written request of either party within a reasonable time after dispute has arisen.

          The members of the panel shall be US citizens and shall be active or retired disinterested officers of insurance or reinsurance companies. 

          An arbitrator shall be chosen by each party and the two so chosen shall choose the third. If either party fails to appoint an arbitrator within thirty (30) days of being requested to do so by the
other party, the requesting party may choose both arbitrators who shall choose the third. In the event the two arbitrators are unable to agree upon the third arbitrator within thirty (30) days of their appointment each of them shall name five, of
whom the other shall decline four and the decision shall be made by drawing lots. 

16

          The party requesting arbitration shall submit its case within thirty (30) days of the selection of the third arbitrator and the respondent shall submit its case thirty (30) days thereafter or as
otherwise extended by the arbitration panel. The panel shall make its decision with regard to the custom and practice of the applicable insurance and reinsurance business. The panel shall not be obligated to follow all judicial formalities and may
abstain from following the strict rules of evidence and procedure except to the extent required by governing law. 

          Each party shall bear the expenses of the arbitrator it selected and shall share equally with the other in the expenses of the third arbitrator and the arbitration. The panel shall issue its
decision as promptly as possible following the completion of a hearing, if there is one, but in no event may punitive damages be awarded. The majority decision of the arbitrators shall be final and binding upon all parties to the proceeding.
Judgment may be entered upon the award of the panel in any court having jurisdiction thereof. In no event will the panel award punitive, exemplary or enhanced compensatory damages. 

          The arbitration shall take place in New York, New York.

  ARTICLE XXI

  RATING OF THE REINSURER

          If the Reinsurer is downgraded by Standard and Poor's or Moody's Investors Service (a "Downgrade") and as a result of such Downgrade, the Company is receiving less financial credit from a rating
agency with respect to the reinsurance provided by this agreement than it did prior to the Downgrade, the parties will work together and take reasonable steps to ensure that the Company receives financial credit for the reinsurance from the
applicable rating agency to the same extent as it did prior to the Downgrade.

17

ARTICLE XXII 

COVENANTS OF THE REINSURER

The Reinsurer hereby covenants that it: 

	  	
A.   	
      has and shall maintain surplus
    to policyholders of at least thirty-five million dollars (US $35,000,000);

	 
	 	
B.	
      shall establish and maintain the reserves required in Section 6903 of New York's Insurance Laws or any or any succeeding statutory provision, as such may be amended, modified or interpreted from time to time in any
  regulation, bulletin or opinion promulgated by the New York Department of Insurance;

	 
	 	
C.	
      shall comply with the provisions of Section 6904(c) of New York's Insurance Laws (except that the maximum total exposures reinsured net of retrocessions and collateral shall be one-half of that permitted for a New York
  financial guaranty insurance corporation thereunder);

	 
	 	
D.	
      for so long as the Reinsurer
          is either a parent of the insurer, another subsidiary of the parent
          of the insurer, or a subsidiary of the insurer (Section 6904(d) of
          New York’s Insurance Laws provides that direct or
  indirect ownership interests of fifty percent or more shall be deemed a parent/subsidiary
          relationship), the aggregate of all risks assumed by the Reinsurer
          shall not exceed ten percent of the Company's exposures, net of retrocessions
    and collateral;

	 
	 	
E.	
      in the event that the Reinsurer is an Affiliate of the Company, shall not assume a percentage of the Company's total exposures insured net of retrocessions and collateral in excess of its percentage of equity interest in the
  Company; and

18

	  	
F.   	
assumes, together with all other reinsurers of the Company subject to Section 6906(a)(2)(F) of New York's Insurance Law, less than fifty percent of the total exposures insured net of collateral remaining after deducting any
reinsurance placed with another financial guaranty insurance corporation or an insurer writing only financial guaranty insurance as is or would be permitted by Article 69 of New York's Insurance Law.

ARTICLE XXIII 

GOVERNING LAW

          This Agreement shall be governed by and construed according to the internal laws of the State of New York without giving effect to the principles of conflicts of laws thereof.

  ARTICLE XXIV

  CURRENCY 

          The currency to be used for all purposes of this Agreement shall be the currency of the United States of America.  And the sign “$” in this Agreement refers to United States of
America dollars. 

ARTICLE XXV

COMMUTATION OF OTHER REINSURANCE 

          The Company must give prior written notice to the Reinsurer and the Reinsurer must consent in writing to the commutation of any reinsurance provided by the XLCA/XLFA Treaty with respect to the
Subject Business. 

19

ARTICLE XXVI 

NOTICE 

           All notices (including, without limitation, notices of cancellation, commutations or amendments to policies relating to the Subject Business), requests, demands, approvals and other communications under this Adverse
Development Reinsurance Agreement shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid or sent by overnight courier or sent by email to an address
specified by one party to the other party in writing. Any such notice or other communication shall be deemed given:  (a) upon actual delivery if presented personally or sent by overnight delivery or by facsimile transmission or sent by email and (b)
three (3) business days following deposit in the United States mail, if sent by certified, registered or express mail, postage prepaid, in each case to the following addresses: 

	                    	
If to Company: 
	
	 	 

	
	 	
XL Capital Assurance Inc. 
	
	 	
1221 Avenue of the Americas, 31st Floor 
	
	 	
New York, New York 10020 
	
	 	
Attn: General Counsel 
	
	 	
Fax: (212) 478-3579 
	
	 	 

	
	 	 

	
	 	
If to Reinsurer: 
	
	 	 

	
	 	
XL Reinsurance America Inc. 
	
	 	
Seaview House 
	
	 	
70 Seaview Avenue 
	
	 	
Stamford, CT 06902 
	
	 	
Attention: General Counsel 
	
	 	
Fax: (203) 964-5309 
	

20

  ARTICLE XXVII

  ASSIGNMENT 

          This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and legal representatives. This Agreement is not assignable except
by operation of law or by mutual consent of the parties hereto; such consent not to be unreasonably withheld. 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their duly authorized representatives. 

	          	Signed at New York, New York

      

XL Reinsurance America Inc.

By: ________________________________

Name Printed: _______________________

Title: _______________________________

Signed at New York, New York

XL Capital Assurance Inc. 

By: ________________________________

Name Printed: _______________________

Title: _______________________________

21

Schedule A 

Schedule of Premium Payments

[ * ]

 

22

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