Document:

exv10w162

EXHIBIT
10.162

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

EFFECTIVE JANUARY 1, 2007

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

2007 Workers’ Compensation Clash            

Excess of Loss Contract — January 1, 2007

CAS0700003

 

 

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS REINSURANCE — CONTRACT No. 2000290

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE
	I
	 	BUSINESS COVERED

	 	 	1	 
	II
	 	EFFECTIVE DATE AND TERMINATION

	 	 	3	 
	III
	 	TERRITORY

	 	 	4	 
	IV
	 	LIMIT AND RETENTION

	 	 	4	 
	V
	 	WARRANTIES

	 	 	5	 
	VI
	 	ULTIMATE NET LOSS

	 	 	5	 
	VII
	 	LOSS IN EXCESS OF POLICY LIMITS

	 	 	6	 
	VIII
	 	EXTRA CONTRACTUAL OBLIGATIONS

	 	 	6	 
	IX
	 	EXCLUSIONS

	 	 	7	 
	X
	 	SPECIAL ACCEPTANCES

	 	 	12	 
	XI
	 	LOSS OCCURRENCE

	 	 	12	 
	XII
	 	REINSURANCE PREMIUM

	 	 	14	 
	XIII
	 	REPORTS AND REMITTANCES

	 	 	14	 
	XIV
	 	LOSS ADJUSTMENTS AND SETTLEMENTS

	 	 	15	 
	XV
	 	SALVAGE AND SUBROGATION

	 	 	15	 
	XVI
	 	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE

	 	 	16	 
	XVII
	 	ACCESS TO RECORDS

	 	 	16	 
	XVIII
	 	DIVIDENDS AND TAXES

	 	 	17	 
	XIX
	 	FEDERAL EXCISE TAX

	 	 	17	 
	XX
	 	GOVERNING LAW

	 	 	18	 
	XXI
	 	CURRENCY

	 	 	18	 
	XXII
	 	OFFSET

	 	 	18	 
	XXIII
	 	ERRORS OR OMISSIONS

	 	 	18	 
	XXIV
	 	INSOLVENCY

	 	 	18	 
	XXV
	 	MEDIATION

	 	 	19	 
	XXVI
	 	ARBITRATION

	 	 	20	 
	XXVII
	 	SPECIAL CONDITIONS

	 	 	23	 
	XXVIII
	 	COMMUTATION

	 	 	25	 
	XXIX
	 	THIRD PARTIES

	 	 	26	 
	XXX
	 	UNAUTHORIZED REINSURENCE

	 	 	26	 
	XXXI
	 	SERVICE OF SUIT

	 	 	28	 
	XXXII
	 	CONFIDENTIALITY CLAUSE

	 	 	28	 
	XXXIII
	 	AMENDMENTS

	 	 	30	 
	XXXIV
	 	SEVERABILITY

	 	 	30	 
	XXXV
	 	INTEREST PENALTY

	 	 	30	 
	XXXVI
	 	ASSIGNMENT

	 	 	31	 
	XXXVII
	 	ENTIRE AGREEMENT

	 	 	31	 

ATTACHMENTS:

APPENDIX A — DEFINITION OF PROFIT CENTER

APPENDIX B — PHARMACEUTICAL/MEDICAL RISKS

INSOLVENCY FUNDS EXCLUSION CLAUSE

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A. N.M.A. 1590

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA. N.M.A. 1979

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4.

2007 Workers’ Compensation Clash            

Excess of Loss Contract — January 1, 2007

 

 

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

(hereinafter referred to as the “Subscribing Reinsurer”)

ARTICLE I — BUSINESS COVERED

	A.	 	The Subscribing Reinsurer 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 or claims made during the term of the Contract for
Policies in force as of January 1, 2007, and new and renewal Policies becoming effective on
or after said date, subject to the terms and conditions contained herein.
	 
	C.	 	The term “Policies” shall mean each of the Company’s or a Legal Entity’s binders, policies
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 and Classes of Insurance 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”)
	 
	 	 	American Ambassador Casualty Company, Lisle, Illinois

America First Insurance Company, Keene, New Hampshire, 

America First Lloyd’s Insurance Company, Richardson, Texas,

Colorado Casualty Insurance Company, Englewood, Colorado, 

Consolidated Insurance Company, Indianapolis, Indiana, 

Excelsior Insurance Company, Keene, New Hampshire, 

Globe American Casualty Company, Loveland, Ohio, 

Golden Eagle Insurance Corporation, San Diego, California, 

Hawkeye-Security Insurance Company, Waukesha, Wisconsin, 

Indiana Insurance Company, Indianapolis, Indiana,

	 
	 	 	Liberty Mutual Mid-Atlantic Insurance Company, Camp Hill, Pennsylvania, for business written
by the Liberty Mutual Agency Markets Profit Centers covered under this Contract as defined in
Appendix A
	 
	 	 	Liberty Northwest Insurance Corporation, Portland, Oregon,

Mid-American Fire and Casualty Company, Loveland, Ohio,

Montgomery Mutual Insurance Company, Columbia, Maryland,

National Insurance Association, Indianapolis, Indiana,

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North Pacific Insurance Company, Portland, Oregon,

Oregon Automobile Insurance Company, Portland, Oregon,

Peerless Indemnity Insurance Company, Lisle, Illinois,

The Midwestern Indemnity Company, Loveland, Ohio,

The Netherlands Insurance Company, Keene, New Hampshire,

Employers Insurance Company of Wausau, Wausau, Wisconsin, and

Wausau General Insurance Company, Wausau, Wisconsin, and

Wausau Underwriters Insurance Company, Wausau, Wisconsin, and

Wausau Business Insurance Company, Wausau, Wisconsin, for business classified as Business Solutions Group or Wausau Business Unit only,

Liberty Mutual Insurance Company, Boston, Massachusetts (on behalf of The First Liberty Insurance
Corporation, LM Insurance Corporation, both of West Des Moines, Iowa, Liberty Insurance
Corporation, South Burlington, Vermont, Liberty Mutual Fire Insurance Company, Wausau, Wisconsin,
for business classified as Business Solutions Group only)

Liberty County Mutual Insurance Company, Irving, Texas, for business written by the Liberty Mutual
Agency Markets Profit Centers covered under this Contract as defined in Appendix A,

Bridgefield Employers Insurance Company, Lakeland, Florida

Bridgefield Casualty Insurance Company, Lakeland, Florida

OneBeacon Insurance Company, Boston, Massachusetts, for Policies subject to the rewritten Indemnity
Reinsurance Agreement by and between Peerless Insurance Company and OneBeacon Insurance Company,
collectively identified as Liberty Mutual Agency Markets Profit Centers covered under this Contact
as defined in Appendix A except as excluded under Article IX -Exclusions of this Contract.

	 	 	 
	NAIC	 	 
	CODE:	 	LINES OF BUSINESS:
	 
	 	 
	03

	 	Farmowners (Section II only)
	 
	 	 
	04

	 	Homeowners (Section II only)
	 
	 	 
	05.2

	 	Commercial Multiple Peril (Section II only)
	 
	 	 
	16

	 	Workers Compensation
	 
	 	 
	17

	 	Other Liability, excluding Umbrella
	 
	 	 
	18

	 	Products Liability
	 
	 	 
	19.1, 19.2

	 	Private Passenger Automobile Liability
	 
	 	 
	19.3, 19.4

	 	Commercial Automobile Liability
	 
	 	 
	21

	 	Automobile Physical Damage (Auto Physical Damage Collision, only)

Coverage is provided, as respects the Profit Centers’ Underwriting Guidelines as follows:

	 	1.	 	Automobile Liability includes; Bodily Injury Liability, Property Damage
Liability, Medical Payments, Uninsured Motorists, Underinsured Motorists,
No-Fault Coverage and Auto Physical Damage Collision.
	 
	 	2.	 	Other Liability including Professional Liability, Bodily Injury Liability, Property
Damage Liability, Personal and Advertising Injury Liability and Medical Payments Coverage
when written as part of a Commercial or Personal Package Policy or on a monoline basis.
However, Advertising Injury Liability shall only apply to this Agreement when written as
part of a Commercial Package Policy or a Commercial General Liability Coverage Form.

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	 	3.	 	Workers Compensation and Employers Liability.
	 
	 	4.	 	Clash of multiple Policies involved in the same occurrence.

ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective at 12:01 a.m., Local Standard Time, with respect to
Policies in force at 12:01 a.m., Local Standard Time, January 1, 2007, and new and renewal
Policies becoming effective on or after said date. Subject to Article XXVII — Special
Conditions below, this Contract may be terminated at the close of any calendar year by either
party giving to the other 90 days prior written notice by certified mail of its intention to
do so.

	B.	 	This Contract shall apply to loss occurrence and claims made Policies in accordance with the
following provisions:

	 	1.	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	This Contract shall apply with respect to losses occurring on or after the inception
date of this Contract.
	 
	 	2.	 	As respects Policies written on a claims made basis:
	 
	 	 	 	“Claims Made” shall be understood to mean losses arising under Policies in which the
date when the claim is made determines under which Policy the loss is collectible. Such
losses are covered hereunder irrespective of the date on which the loss occurs provided
that the date the claim is made falls within the period of this Contract.
	 
	 	 	 	For the purposes of the foregoing, the date a claim is first made shall be the date
applicable to the entire loss and the Subscribing Reinsurer shall be liable for its
proportion of the entire loss irrespective of the expiry date of the Contract, provided
that such date falls within the period of this Contract.
	 
	 	 	 	In the event of a Loss Occurrence arising hereunder which involves Policies (or sections
thereof) which respond on both a losses occurring and Claims Made basis, the date of the
Loss Occurrence will be deemed to be the earlier of the dates, namely the date of the
occurrence of the loss.

	C.	 	In the event of termination of this Contract, the Company shall have the option of continuing
or terminating the liability in force at the date of termination as set forth below. The
Company may exercise such option provided written notice of the Company’s election is given by
certified mail to the Subscribing Reinsurer prior to the date of termination. If the Company
does not choose to exercise its option prior to the date of termination, such option shall
revert to the Subscribing Reinsurer.

	 	1.a.  	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	Upon termination of this Contract, all Policies covered hereunder and in force at the
date of termination of this Contract shall continue until their natural expiry,
cancellation or next anniversary of such business, whichever first occurs; but in no
case shall this reinsurance be extended for longer than one year, plus odd time not
exceeding 18 months in all, after the termination date.
	 
	 	1.b.  	 	As respects Policies written on a claims made basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall continue to be liable
for claims received or recorded by the Company or by the insured with respect to
Policies in force

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	 	 	 	at the date of termination for the full original policy period until the natural
expiry, cancellation or next anniversary of such Policies, not to exceed one year,
whichever comes first. However, if the Company or a Legal Entity, as applicable, has
provided an Extended Reporting Period within one year after the date of termination on
Policies in force at the date of termination or if the Extended Reporting Period is in
force at the date of termination, the Subscribing Reinsurer shall continue to be liable
for such extended reporting period.
	 
	 	2.a.  	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall be liable for 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.
	 
	 	2.b.  	 	As respects Policies written on a claims made basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall not be liable for
claims received or recorded by the Company or a Legal Entity, as applicable, or insured
after the effective date of termination unless such claim is received and recorded by
the Company or a Legal Entity, as applicable, or the insured during an Extended
Reporting Endorsement Period in force at the date of termination.

ARTICLE III — TERRITORY

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

ARTICLE IV — LIMIT AND RETENTION

	A.	 	The Company shall retain the first $5,000,000 of Ultimate Net Loss as respects any one Loss
Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Ultimate Net Loss exceeds the Company’s retention of $5,000,000 but the Subscribing Reinsurer
shall never exceed $5,000,000 any one Loss Occurrence.

	B.	 	Notwithstanding any other provisions of this Contract, the Company shall retain all Ultimate
Net Loss otherwise recoverable from the Subscribing Reinsurer under this Contract until the
Company has retained Ultimate Net Loss otherwise recoverable from the Subscribing Reinsurer
under this Contract equal to $5,000,000 for the current calendar year.

	C.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability arising out of an Act of
Terrorism shall be limited to $5,000,000 in the aggregate.

	D.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Loss
Occurrence, 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.

	E.	 	An “Act of Terrorism” for purposes of this Contract shall mean:

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	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
intimidating, coercing or putting in fear a civilian population or section thereof for the
purpose of establishing or advancing a specific ideological, religious or political system
of thought, perpetrated by a specific individual or group directly or indirectly through
agents acting on behalf of said individual or group or (c) retaliating against any country
for direct or vicarious support by that country of any other government or political
system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to be
terrorism or a terrorist act shall also be considered an “Act of Terrorism” for purposes
of this Contract.

	F.	 	Reinsurance of the Company’s retention, set forth in each Exhibit, shall not be deducted
in arriving at the Ultimate Net Loss herein,

ARTICLE V — WARRANTIES

Notwithstanding any other provision of this Contract, the maximum amount included in the Ultimate
Net Loss under this Contract shall be:

	1.	 	$5,000,000 each Life as respects for Workers’ Compensation business

ARTICLE VI — ULTIMATE NET LOSS

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 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, and (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).

“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.

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.

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“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.

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.

ARTICLE VII — LOSS IN EXCESS OF POLICY LIMITS

This Contract shall protect the Company within the limits hereof, for 90% of any Loss in excess of
the original Policy limit where Loss in excess of the limit has been incurred because of a failure
by the Company 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.

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.

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 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.

ARTICLE VIII — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 90% of Extra Contractual
Obligations. “Extra Contractual Obligations” are defined as those liabilities not covered under
any other provision of this Contract, which arise from the handling of any claim on business
covered hereunder, 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 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.

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

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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 AGREEMENT DOES NOT COVER:

	A.	 	THE FOLLOWING GENERAL CATEGORIES

	 	1.	 	Loss or damage caused directly or indirectly by: (a) enemy attack by armed forces
including action taken by military, naval or air forces in resisting an actual or an
immediately impending enemy attack; (b) invasion; (c) insurrection; (d) rebellion; (e)
revolution; (f) intervention; (g) civil war; and (h) usurped power.
	 
	 	2.	 	Reinsurance assumed by the Company, except intercompany reinsurance.
	 
	 	3.	 	Business derived from any Pool, Association, including Joint
Underwriting Association, Syndicate, Exchange, Plan, Fund or other facility
directly as a member, subscriber or participant, or indirectly by way of reinsurance or
assessments; provided this exclusion shall not apply to Automobile liability or Workers
Compensation assigned risks which may be currently or subsequently covered hereunder.
	 
	 	4.	 	Pollution Liability, to the extent excluded in the original Policies and
endorsements, except when a judicial entity invalidates the Policies’ exclusion or in any
jurisdiction whose regulatory authorities have prohibited the exclusion.
	 
	 	5.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.
	 
	 	6.	 	Pharmaceutical/Medical Risks per the attached Appendix B
	 
	 	7	 	Nuclear Incident Exclusion Clauses which are attached and made part of this Agreement:

	 	a.	 	Nuclear Incident Exclusion Clause — Liability- Reinsurance — U.S.A. N.M.A. 1590
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada N.M.A. 1979
	 
	 	c.	 	Nuclear Incident Exclusion Clause — Reinsurance — No. 4.

	 	8.	 	Personal or Commercial Umbrella risks.

B. THE FOLLOWING INSURANCE COVERAGES

	 	1.	 	Fiduciary Liability.
	 
	 	2.	 	Surety and Credit insurance.
	 
	 	3.	 	Fidelity Bonds.
	 
	 	4.	 	Credit and Financial Guarantee.
	 
	 	5.	 	Securities and Exchange Liability.

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	 	6.	 	Malpractice insurance, Directors and Officers Liability insurance or any form of
Errors and Omissions or Professional Liability insurance, except as provided for under
the Profit Centers’ Underwriting Guidelines
	 
	 	7.	 	Advertisers’, Broadcasters’ and Telecasters’ Liability as respects Personal Injury
Liability except as provided for under the Profit Centers’ Underwriting Guidelines.
	 
	 	8.	 	Kidnap, Extortion and Ransom Liability.
	 
	 	9.	 	Protection and Indemnity (Ocean Marine) except for hulls under 50 feet.
	 
	 	10.	 	Media business, defined as Feature Film and Major Motion Picture Studios,
Commercial Negative Film Coverages, Cast Coverage, Completion Bond and Television
Productions, with annual gross receipts greater than $25,000,000.
	 
	 	11.	 	Asbestos liability to the extent excluded in the original Policies and endorsements
except when a judicial entity invalidates the Policies’ exclusion or in any jurisdiction
whose regulatory authorities have prohibited the exclusion.

	C.	 	THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY AND AUTOMOBILE COLLISION

	 	1.	 	Autos as used in or being prepared for, any professional or organized racing or
demolition contest or stunting activity except as provided for under Insurance Services
Organization’s Business Auto and Garage Policy.
	 
	 	2.	 	All vehicles classified as “Public Automobiles” except school buses, church buses,
social service agency automobiles, van pools, vehicles used for the transportation of
employees and courtesy vans and buses.
	 
	 	3.	 	All rental operations. An exception for rental vehicles shall apply as respects
auto dealerships when customer’s vehicle is being serviced.
	 
	 	4.	 	Vehicles regularly used to haul property of others and operating beyond a 500 mile radius.
	 
	 	5.	 	Newspaper delivery trucks except in non-metropolitan locations with a population of
less than 50,000.
	 
	 	6.	 	Vehicles engaged in the transportation or distribution of fireworks,
fuses, explosives, ammunitions, natural or artificial fuel gas, or liquefied petroleum
gases or gasoline, except when written as incidental coverage, as defined in the Profit
Centers’ Underwriting Guidelines. This exclusion shall not apply to vehicles engaged in
the transportation of natural or artificial fuel gas or liquefied petroleum gases or
gasoline when operations are within a 500 mile radius.

D. THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

	 	1.	 	Liability as respects Products and Completed
Operations:

	 	a.	 	The manufacture, importation, labeling
or re-labeling of:

	 	(i)	 	Drugs or Pharmaceuticals.
	 
	 	(ii)	 	Cosmetics, defined as:

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	 	(1)	 	articles intended to be rubbed, poured, sprinkled or sprayed on, introduced
into, or otherwise applied to the human body or any part thereof for cleansing,
beautifying, promoting attractiveness, or altering the appearance, and
	 
	 	(2)	 	articles intended for use as a component of any such article;
except that such term shall not include soap, and
	 
	 	(3)	 	and other cosmetic within the meaning of Section 201 (i) of the
Federal Food, Drug and Cosmetic Act (21 U.S.C. 321 (i)).

	 	(iii)	 	Herbicides, insecticides or pesticides, except as respects risks
involved in a farming operation.

	 	b.	 	The manufacture or importing of motorized or self-propelled vehicles and equipment.
	 
	 	c.	 	The manufacture, sale, distribution, handling, servicing or maintenance of
aircraft, aerospacecraft, missiles, satellites or any component or components thereof.

	 	2.	 	All railway operations except Railroad Protective Liability coverage as respects jobs which
do not involve track work or service disruptions.
	 
	 	3.	 	Amusement parks, carnivals or circuses, except county or country fairs, incidental family fun
centers ice or roller skating rinks, miniature golf courses and excursions to camps or parks.
	 
	 	4.	 	Public assembly exposure in excess of 5,000 except for schools and colleges.
	 
	 	5.	 	Gas or electric companies.
	 
	 	6.	 	Subaqueous operations.
	 
	 	7.	 	Mining and quarrying operations, if blasting is involved
	 
	 	8.	 	Demolition of buildings or structures in excess of three stories or 50 feet in height
	 
	 	9.	 	Shoring, underpinning or moving of buildings or structures.
	 
	 	10.	 	Manufacture, sale, rental, lease or repair of scaffolds. This exclusion shall not apply to
incidental exposure on construction risks.
	 
	 	11.	 	Construction of bridges unless the span is less than 75 feet between pillars, and tunnels or
dams.
	 
	 	12.	 	a.    Manufacturers or importers of fireworks, fuses, or any substance, as defined and noted
below, intended for use as an explosive.

	 	b.	 	Loading of fireworks, fuses, or any explosive substance defined below into
containers for use as explosive objects, propellant charges or detonation devices and the
storage thereof.
	 
	 	c.	 	Manufacturers or importers of any product in which fireworks, fuses, or any
explosive substance defined below is an ingredient.
	 
	 	d.	 	Handling, storage, transportation or use of fireworks, fuses, or any explosive
substance defined below.

NOTE: An explosive substance is defined as any substance manufactured for the express purpose
of exploding as differentiated from commodities used industrially and which are only
incidentally explosive.

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	 	13.	 	Manufacture, production, refining, storage, wholesale distribution or
transportation of natural or artificial fuel gas, butane, propane or liquefied petroleum
gases or gasoline, except when written as incidental coverage, as defined in the Profit
Centers’ Underwriting Guidelines, or when operations are within a 500 mile radius. This
exclusion is not to apply to the construction and maintenance of such exposures which
shall include, but not be limited to, landscaping, road construction, excavation and
water hauling, plumbing and electrical services.
	 
	 	14.	 	Onshore and offshore gas and oil drilling operations. This exclusion is not to
apply to the construction and maintenance of such exposures which shall include, but not
be limited to, landscaping, road construction, plumbing and electrical services.
	 
	 	15.	 	Ownership, maintenance, use or entrustment of any aircraft, owned, operated, rented
or loaned including fueling, or any device or machine intended for and/or aiding in the
achievement of atmospheric flight, projection or orbit, to the extent excluded in the
original Policies and endorsements.
	 
	 	16.	 	Municipalities except for those with a population less than 100,000.

	E.	 	THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION AND EMPLOYERS LIABILITY

	 	1.	 	For all Profit Centers other than Liberty Northwest Profit center, operations
under the jurisdiction of the U.S. Longshoremen’s and Harbor Workers’ Act, the Jones Act
and the Maritime Employers Liability Act except when written as incidental coverages as
defined in the Profit Centers’ Underwriting Guidelines
	 
	 	2.	 	For the Liberty Northwest Profit Center, operations under the jurisdiction of the
Jones Act and the Maritime Employers Liability Act except when written as incidental
coverages as defined in their Underwriting Guidelines.
	 
	 	3.	 	Operation of docks or wharves, other than small marinas or pleasure docks.
	 
	 	4.	 	The manufacturing, mining, refining, processing, distribution,
installation, removal or encapsulment of asbestos.
	 
	 	5.	 	Risks involving known exposure to asbestos.
	 
	 	6.	 	All railway operations except sidetrack agreements.
	 
	 	7.	 	Amusement parks, carnivals or circuses, except county or country fairs, incidental
family fun centers, ice or roller skating rinks, miniature golf courses and excursions to
camps or parks.
	 
	 	8.	 	Subaqueous operations.
	 
	 	9.	 	Mining and quarrying operations, if blasting is involved
	 
	 	10.	 	Demolition of buildings or structures in excess of three stories or 50 feet in height.
	 
	 	11.	 	Shoring, underpinning or moving of buildings or structures.
	 
	 	12.	 	Manufacture, sale, rental, lease, erection or repair of scaffolds. This exclusion
shall not apply to incidental exposure on construction risks.

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	 	13.	 	Construction of bridges unless the span is less than 75 feet between pillars, and
tunnels or dams.
	 
	 	14.	 	a.    Manufacturers or importers of fireworks, fuses, or any substance, as defined and
noted
below, intended for use as an explosive.

	 	b.	 	Loading of fireworks, fuses, or any explosive substance defined below
into containers for use as explosive objects, propellant charges or detonation
devices and the storage thereof.
	 
	 	c.	 	Manufacturers or importers of any product in which fireworks,
fuses, or any explosive substance defined below is an ingredient.
	 
	 	d.	 	Handling, storage, transportation or use of fireworks, fuses, or any
explosive substance defined below.

NOTE: An explosive substance is defined as any substance manufactured for the express
purpose of exploding as differentiated from commodities used industrially and which are
only incidentally explosive.

	 	15.	 	Manufacture, production, refining, storage, wholesale distribution or
transportation of natural or artificial fuel gas, butane, propane or liquefied petroleum
gases or gasoline, except when written as incidental coverages as defined in the Profit
Centers’ Underwriting Guidelines. This exclusion is not to apply to the construction and
maintenance of such exposures which shall include, but not be limited to, landscaping,
road construction, plumbing and electrical services.
	 
	 	16.	 	Onshore and offshore gas and oil drilling operations. This exclusion is not to
apply to the construction and maintenance of such exposures which shall include, but not
be limited to, landscaping, road construction, plumbing and electrical services.
	 
	 	17.	 	Ownership, maintenance or use or entrustment of any airport or aircraft, owned,
operated, rented or loaned including fueling, or any device or machine intended for
and/or aiding in the achievement of atmospheric flight, projection or orbit except as
respects corporate owned aircraft up to six passengers.
	 
	 	18.	 	Municipalities, except for those with a population less than 100,000.

	F.	 	THE FOLLOWING RISKS AS RESPECTS TERRORISM
	 
	 	 	Terrorism losses arising from Airports, Bridges, Government Buildings, Nuclear Facilities,
Office Buildings over 25 stories, Security Services, Stadiums and Tunnels, Nuclear,
Biological and Chemical exposures, Explosive Manufacturing risks, Fertilizer mixing plants,
Railroads, Amusement/ 
	 
	 	 	Theme parks with greater than 5,000 person capacity, Distribution and manufacturing of
weapons/munitions.
	 
	G.	 	The Company and the Subscribing Reinsurer have agreed on the Profit Centers’ Underwriting
Guidelines, as respects Policies; covered under this Agreement. The Company shall advise the
Subscribing Reinsurer of any change in such Underwriting Guidelines.
	 
	H.	 	In the event the Company or a Legal Entity is inadvertently bound on any risk which is
excluded under this Agreement, the reinsurance provided under this Agreement shall apply to
such risk until discovery by the Company within its Home Office of the existence of such risk
and for 45 days

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thereafter or for the period required by statutes, and shall then cease unless within such
period, the Company has received from the Subscribing Reinsurer written notice of its
approval of such risk.

ARTICLE X — SPECIAL ACCEPTANCES

	A.	 	Risks which are beyond the terms, conditions or limitations of this Contract submitted to
each Subscribing Reinsurer identified on the attached Interests and Liabilities Agreement for
special acceptance hereunder. Upon receipt of approval from all Subscribing Reinsurers, such
acceptance shall bind each Subscribing Reinsurer for its respective share in the interests and
liabilities of said risk

	B.	 	When a risk is specially accepted, such risk shall be covered under the terms and conditions
of this Contract, except as such terms shall be modified by such acceptance. Premiums and
losses derived from any special acceptance shall be included with other data for rating
purposes of this Contract. 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

The provisions under this Article are set forth in the following Parts I, II and III:

Part I — As respects Policies written on an occurrence basis:

The term “Loss Occurrence” shall mean any accident, disaster, casualty or happening or series of
accidents, disasters, casualties or happenings arising out of or following the same cause or a
series of similar causes. The term “Loss Occurrence” shall be held to include:

	A.	 	As respects Products Bodily Injury and Products Property Damage Liability, injuries to all
persons and all damage to property of others occurring during a Policy Period and proceeding
from or traceable to the same cause or series of similar causes, shall be deemed to arise out
of one Loss Occurrence, and the date of such Loss Occurrence shall be deemed to be the
commencing date of the Policy Period. For the purpose of this provision, each annual period
of a Policy which continues in force for more than one year shall be deemed to be a separate
Policy Period.

	B.	 	As respects Bodily Injury Liability (other than Automobile and Products), said term shall
also be understood to mean, as regards each original assured, injuries to one or more than one
person resulting from infection, contagion, poisoning, or contamination proceeding from or
traceable to the same cause or series of similar causes.

	C.	 	As respects Property Damage Liability (other than Automobile and Products), Loss Occurrence
shall also, subject to provisions 1. and 2. below, be understood to mean loss or losses caused
by a series of operations, events, or occurrences arising out of operations at one specific
site and which cannot be attributed to any single one of such operations, events or
occurrences, but rather to the cumulative effect of the same. In assessing each and every
Loss Occurrence within the foregoing definition, it is understood and agreed that:

	 	1.	 	The series of operations, events or occurrences shall not extend over a period
longer than 12 consecutive months; and

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	 	2.	 	The Company may elect the date on which the period of not exceeding 12
consecutive months shall be deemed to have commenced.

	 	 	In the event that the series of operations, events or occurrences extend over a period longer
than 12 consecutive months, then each consecutive period of 12 months, the first of which
commences on the date elected under 2. above, shall form the basis of claim under this
Contract.
	 
	D.	 	As respects those Policies which provide aggregate limits of liability, the total of all
individual losses occurring during any one Policy year which proceed from or are traceable to
the same cause or a series of similar causes.
	 
	E.	 	As respects an occupational or other disease or cumulative injury under Workers Compensation
and Employers Liability, each case of an employee contracting any disease for which the
Company or a Legal Entity may be liable shall be considered a separate and distinct occurrence
and the date of each occurrence shall be deemed to be as follows:

	 	1.	 	If the case is compensable under the Workers Compensation Law or any Occupational
Disease Compensation Act, the date of the beginning of the disability for which
compensation is payable;
	 
	 	2.	 	If the case is not compensable under the Workers Compensation Law or any
Occupational Disease Compensation Act, the date of the disability due to said disease
actually began;
	 
	 	3.	 	Where claim is made after employment has ceased, then the date of the cessation of
employment shall be deemed to be the date of disability;
	 
	 	4.	 	Notwithstanding the foregoing, in the incidence of a sudden catastrophic event not
exceeding 24 hours in duration including traumatic injury or death, all losses to all
employers shall be deemed a Loss Occurrence.

Part II — As respects Policies written on a claims made basis:

	A.	 	The term “Loss Occurrence” shall mean each claim or series of claims made to the Company or a
Legal Entity, or the insured, during the term of this Contract arising out of or following the
same cause or series of similar causes.

	B.	 	As respects a Loss Occurrence involving one or more Policies written on a claims made basis,
the date of Loss Occurrence for purposes of reinsurance, shall be considered the earliest date
when notice of claims is first received and recorded by the Company or a Legal Entity or the
insured, whichever comes first, and any related claims reported subsequent to such date shall
be included in such loss. However, if notice of claims is first received and recorded by the
Company or a Legal Entity or the insured during an Extended Reporting Period, the date of
occurrence shall be deemed to be the last day of the policy period.

Part III — As respects loss occurrence and claims-made Policies involved in the same Loss
Occurrence:

In the event a Loss Occurrence involving one or more Policies written on an occurrence basis and
one or more Policies written on a claims-made basis, it is understood that the earliest date on
which bodily injury or property damage occurs, and any related claims reported subsequent to such
date shall be included in such loss whether they are covered under occurrence or claims-made
Policies.

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ARTICLE XII — REINSURANCE PREMIUM

	A.	 	The Company shall pay to the Subscribing Reinsurer a rate of .095% of the Subject Earned
Premium for the Business Covered hereunder, as stated in Paragraph D. of Article I — Business
Covered.
	 
	B.	 	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.
	 
	C.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Subscribing Reinsurer.
	 
	D.	 	The term “Subject Earned Premium” shall mean the Earned Premium times the rates noted below.

	 	 	 	 	 
	ASLOB	 	Percentage
	Homeowners
	 	 	0	%
	Farmowners
	 	 	0	%
	Commercial Multiple Peril (liability)
	 	 	0	%
	Workers Compensation
	 	 	100	%
	Other Liability, excluding Umbrella
	 	 	0	%
	Products Liability
	 	 	0	%
	Private Passenger & Commercial
Auto Liability
	 	 	0	%
	Private Passenger & Commercial
Auto Physical Damage
	 	 	0	%

	E.	 	Each claim reduces the amount of indemnity from the time the loss occurred by the sum paid.
Any amount exhausted is reinstated form the time the Loss Occurrence begins. Reinstatement
will be provided as follows: One at 25%, one at 50% and two at 100% of the original premium.
The additional premium will be calculated pro rata of the annual premium, as to the fraction
of the limit of liability reinstated and 100% as to the term.

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. 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:

	 	 	 	 	 
	Annual	 	Annual	 	Quarterly
	Minimum	 	Deposit	 	Deposit
	$1,842,400

	 	$2,303,000
	 	$575,750

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	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 paid, being furnished by the
Company.

ARTICLE XIV — LOSS ADJUSTMENT AND SETTLEMENT

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.

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
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 and conditions of the
original policies and within the terms and conditions 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.

The Company shall advise the Subscribing Reinsurer of all claims which:

	 	1.	 	Are reserved by the Company for an amount in excess of 50% of its retention.

ARTICLE XV — SALVAGE AND SUBROGATION

The Reinsurers shall be credited with their share of salvage and/or subrogation in respect of
claims and settlements under this Contract, less their share of recovery expense. Unless the
Company and the Reinsurers agree to waive such rights in the settlement of a disputed claim, or
the Company and Reinsurers 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 Reinsurers
are hereby empowered and authorized to institute appropriate action in the name of the Company or
the Legal Entities, as applicable.

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

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ARTICLE XVI — FEDERAL TERRORISM EXCESS RECOVERY CLAUSE

Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 (“TRIA”) as amended by the Terrorism Risk Insurance Extension
Act of 2005 (“TRIEA”), as a result of Loss Occurrences commencing during the term of this Contract
shall apply as follows:

Except as provided below, any loss reimbursement under TRIA/TRIEA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions of this
Contract.

If one or more Loss Occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA/TRIEA, and
such amounts, together with any other reinsurance recoveries to the Company for said Loss
Occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount in excess
thereof shall be held by the Company. The Company shall then reimburse the Subscribing Reinsurer a
portion of such excess recovery in an amount equal to the proportion that the Subscribing
Reinsurer’s payment under this Contract bears to the total treaty reinsurance recoveries to the
Company for Insured Losses for said Loss Occurrence(s). Provided, however, that in no event shall
such reimbursement exceed the amount paid by the Subscribing Reinsurer to the Company under this
Contract.

For purposes hereof, if a loss reimbursement received by the Company under TRIA/TRIEA is based on
the Company’s Insured Losses in more than one Loss Occurrence and neither the Secretary of the
Treasury nor his delegatee specifies the amount of loss allocable to each respective Loss
Occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s Insured
Losses in each Loss Occurrence bears to the Company’s total Insured Losses resulting from all Loss
Occurrences to which the reimbursement applies.

For purposes of this Article, “Insured Loss (es)” shall have the same meaning as set forth in
definitions section 102(5) of TRIA.

ARTICLE XVII — ACCESS TO RECORDS

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.

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

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the Subscribing Reinsurer to seek discovery of relevant information in an arbitration proceeding
pursuant to the Arbitration Article of this Contract.

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.

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 or its affiliates (hereinafter referred to in the Contract as “Privileged Documents”). The
Company shall reasonably try to exempt the Subscribing Reinsurer from any third party
non-disclosure agreement or obtain consent from the third party to disclose to the Subscribing
Reinsurer.

Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents 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 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, 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. The Subscribing Reinsurer, however, shall not have
access to Privileged Documents relating to any dispute between the Company and the Subscribing
Reinsurer.

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 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 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 XVIII — DIVIDENDS AND TAXES

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 XIX — FEDERAL EXCISE TAX

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

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that the exempt status adequately satisfies the demands of the U.S. Internal Revenue Agency and/or
other applicable U.S. government authority.

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.

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 XX — GOVERNING LAW

The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the State of New Hampshire.

ARTICLE XXI — CURRENCY

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 XXII — OFFSET

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 under this Contract, 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 XXIII — ERRORS AND OMISSIONS

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 and provided no liability shall be
imposed on either party greater than would have attached hereunder had such delay, error or
omission not occurred.

ARTICLE XXIV — INSOLVENCY

(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.)

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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.

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.

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.

With respect to California Workers Compensation loss (es), it is agreed that in the event of any
delinquency proceeding, receivership, or insolvency of the Company and/or the failure of the
Subscribing Reinsurer, for any reason, to make payments under this Contract, the Insurance
Commissioner of California may, upon 30-days notice, draw upon any sums from the deposit made by
the Subscribing Reinsurer in accordance with the provisions of sections 11691 — 11703 of the
California Insurance Code.

ARTICLE XXV — MEDIATION

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.

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

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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.

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.

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.

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.

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.

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 XXVI — ARBITRATION

	A.	 	Disputes to be Arbitrated. As a condition precedent to any right of legal
action hereunder 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 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,

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	 		 	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.
	 
	 	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

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	 	 	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
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.

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	I.	 	Option to Litigate. Notwithstanding the foregoing provisions of this Article, to the
extent that the
Company has demanded payment of a total amount of at least twenty million dollars
($20,000,000) or the currency equivalent thereof from any Subscribing Reinsurer or from the
Reinsurers, the Company reserves the right to initiate litigation to resolve any disputes
arising from such demand.
	 
	J.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.

ARTICLE XXVII — SPECIAL CONDITIONS

This Article applies only in the event that:

	 	A.	 	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
	 
	 	B.	 	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
	 
	 	C.	 	The Subscribing Reinsurer’s policyholders’ surplus has been reduced by 25% of
the amount of surplus at the inception of this Contract; or
	 
	 	D.	 	The Subscribing Reinsurer has 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
	 
	 	E.	 	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
	 
	 	F.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least
200% of the Subscribing Reinsurer’s Risk-Based Capital; or
	 
	 	G.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or

	 
	 	H.	 	
The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	I.	 	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.

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
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 any
distinct legal entities within the Company covered

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under this Contract. 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 by certified mail that the issuing bank elects not to extend any Letter of Credit for
any additional period.

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 or any
successor, by operation of law, of the Company, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution because of the
insolvency of the Company or the Subscribing Reinsurer for one or more of the following purposes:

	 	A.	 	To pay or reimburse the Company for:

	 	1.	 	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
	 
	 	2.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or liabilities paid by the Company, but not yet
recovered from the Subscribing Reinsurer, under the terms and provisions of the
Policies reinsured under this Contract; and
	 
	 	3.	 	Any other amounts necessary to secure the credit or reduction
from liability for reinsurance taken by the Company.

	 	B.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s 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 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.

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:

	 	A.	 	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.
	 
	 	B.	 	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.

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.

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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.

ARTICLE XXVIII — COMMUTATION

Eighty-four months after the expiration of this Contract, the Company and any Subscribing
Reinsurer may agree to commute any and/or all claims, both reported and unreported for the
Contract Year and not finally settled which are likely to result in a claim under this Contract.
In that case, the Company and the Subscribing Reinsurer shall attempt to reach settlement by
mutual agreement. The Worker’s Compensation commutation value shall be calculated in accordance
with the following criteria:

	 	A.	 	Mortality assumptions shall be calculated from the latest available United
States Census tables as follows:

	 
	 	 	 	
Survivor Benefits — Total female or male, whichever applies;
	 
	 	 	 	Disability Benefits — Total population.
	 
	 	 	 	The mortality assumptions should reflect:

	 	1.	 	The mortality improvement since the most recent U.S. Census tables,
	 
	 	2.	 	The life impairment of the injured worker (using the
expectation from the Society of Actuaries’ Study.)

	 	B.	 	Remarriage expectations shall be in accordance with the assumptions used in the
National Council on Compensation Insurance in its statistical tables, adjusted for the
gender of the survivor.
	 
	 	C.	 	For all future medical costs, projected cash payments shall be based
upon the Company’s evaluation of long term medical care and rehabilitation
requirements, using the average annual Medical Consumer Price Index (CPI) escalation
rate of the past 20 years using the most recently published tables, going back 20
years.
	 
	 	D.	 	For all future indemnity costs, projected cash payments shall be calculated
based upon the average historical actual cost of living adjustment (COLA) over the past
10 — 20 years, however many years available up to 20 years, up through the most recent
published data which is available from the State/Federal governing body over Workers
Compensation whichever may apply.
	 
	 	E.	 	The annual interest discount percentage shall be the yield of a Treasury Bill
maturing 10 years from the commutation date.
	 
	 	F.	 	The commutation value shall be the amount of cash payments made and/or that the
parties estimate shall be made above the attachment point of this Contract pursuant to
A. through E. of this Article, subject to the per occurrence limits on an undiscounted
basis. The amount of cash payments made and/or estimated shall then be discounted by
applying the percentage as defined in item E above to the expected loss payout pattern
above the attachment point.

If agreement as outlined above cannot be reached, the effort can be postponed or abandoned.
Alternately, if mutually agreed, the Company and the Subscribing Reinsurer may mutually agree to
appoint

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an actuary or appraiser to investigate, determine and capitalize such claims or claims. If both
parties agree with the determination of the actuary or appraiser, the Subscribing Reinsurer shall
pay its proportion of the amount so determined to be the capitalized value of such claim or
claims.

If the parties, as outlined in the paragraphs above, fail to agree, they may abandon the effort or
they may agree to settle any difference using a panel of three actuaries, one to be chosen by each
party and the third by the two so chosen. If either party refuses or neglects to appoint an
actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to
agree on the selection of a third actuary within 30 days of their appointment, each of them shall
name two, of whom the other shall decline one and the decision shall be made by drawing lots. All
the actuaries shall be regularly engaged in the valuation of Workers Compensation claims and shall
be Fellows of the Casualty Actuarial Society or of the American Academy of Actuaries. None of the
actuaries shall be under the control of either party to this Contract.

Each party shall submit its case to its actuary within 30 days of the appointment of the third
actuary. The decision in writing of any two actuaries, when filed with the parties hereto, shall
be final and binding on both parties. The expense of the actuaries and of the commutation shall be
equally divided between the two parties. Said commutation shall take place in Boston,
Massachusetts, unless some other place is mutually agreed upon by the Company and the Subscribing
Reinsurer.

By mutual agreement the Company or Subscribing Reinsurer shall have the option not to commute any
single loss, should the claimant not be medically stable (no Life Care Plan performed) or should
the claimant be subject to ongoing structured settlement negotiations. Under such circumstances,
the Subscribing Reinsurer shall continue to carry an appropriate reserve on its books and/or pay
any loss and/or expense recoverable under this Contract until such time as an agreement to commute
is reached or until the claim is paid and settled.

ARTICLE XXIX — THIRD PARTIES

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 XXX — UNAUTHORIZED REINSURANCE

(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.)

As regards Policies or bonds issued 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 Letters of Credit unless the method of funding is determined
by applicable law, statute, or regulation.

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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, the Subscribing Reinsurer will agree to
provide separate Letters of Credit for any Legal Entities and the Company covered under this
Contract. 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 Company by certified
mail that the issuing bank elects not to consider the Letters of Credit extended for any
additional period.

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 or any
successor, by operation of law, of the Company, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution because of the
insolvency of the Company or the Subscribing Reinsurer for one or more of the following purposes:

	 	A.	 	To reimburse the Company for the Subscribing Reinsurer’s share of premiums
returned to the owners of Policies reinsured under this Contract because of
cancellations of the Policies;
	 
	 	B.	 	To reimburse the Company for the Subscribing Reinsurer’s share of surrenders and
benefits or losses paid by the Company under provisions of the Policies reinsured under
this Contract;
	 
	 	C.	 	To fund an account with the Company in an amount, at least, equal to the
deduction for reinsurance ceded from the Company 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
	 
	 	D.	 	To pay any other amounts the Company claims are due under this Contract.

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

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:

	 	A.	 	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.
	 
	 	B.	 	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.

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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 XXXI — SERVICE OF SUIT

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

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.

In the event of the failure of the Subscribing Reinsurer to honor an Arbitration award 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.

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

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 XXXII — CONFIDENTIALITY CLAUSE

Confidential Information. The submission materials, and any policy, financial,
underwriting, accounting, and claims information, data statements, representations, and other
materials provided by the Company 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. Subscribing Reinsurer acknowledges and agrees that with respect
to any review of Confidential Information by Subscribing Reinsurer, and/or discussion of
Confidential Information, Company does not waive and does not intend to waive any available
privilege or protection. The review of Confidential Information by Subscribing

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Reinsurer and/or discussion of Confidential Information with Company 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 Company personnel, whether reviewed by and/or
discussed with Subscribing Reinsurer intentionally or inadvertently, nor does the review of the
Confidential Information and/or discussion of Confidential Information with Company constitute an
estoppel or waiver of Company’s rights to assert the attorney-client or work-product privileges, or
any other applicable privilege or protection, over certain documents contained in the Company files
and/or certain information.

The Company and 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 Subscribing Reinsurer from a source, other than Company,
its affiliates or their personnel, that is not subject to a confidentiality obligation, (3) was
developed independently by Subscribing Reinsurer prior to disclosure by Company, its affiliates or
their personnel, as demonstrated by Subscribing Reinsurer’s records, or (4) is required to be
disclosed by law, regulation, court, or regulatory agency action.

Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to all
Confidential Information provided by Company and all knowledge and information gained through its
review of Confidential Information or discussions with Company personnel. 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.
Subscribing Reinsurer agrees that no Confidential Information is to be copied and/or removed from
Company’s premises without the express permission of Company.

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.

Third-Party Demand. Should 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, 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.

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

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ARTICLE XXXIII — 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 XXXIV — SEVERABILITY

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

ARTICLE XXXV — INTEREST PENALTY

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

	 	A.	 	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
	 
	 	B.	 	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
	 
	 	C.	 	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
	 
	 	D.	 	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.

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.

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.

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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.

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 $1,000 or less shall be waived.
Any waiver of any interest pursuant to this paragraph, however, shall not affect the waiving
Party’s right to claim and/or pursue interest for any other failure by the other Party to make
payment when due under this Article.

ARTICLE XXXVI — ASSIGNMENT

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 by either the Company or the Subscribing Reinsurer without the prior written
consent of the other. In the event of any assignment, the assignor shall remain liable.

ARTICLE XXXVII — ENTIRE AGREEMENT

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.

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Appendix A

Definition of Profit Centers:

For purposes of Article I or any Articles, wherever the word Profit Centers is used, the
Profit Centers are defined to include the following Profit Centers of Liberty Mutual Agency
Market (LMAM).

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	America First Insurance:

	 	America First Insurance Co.
	 	AK, LA, OK, TX
	 

	 	America First Lloyd’s Insurance Co.
	 	AK, LA, OK, TX
	 

	 	Peerless Insurance Co.
	 	AK, LA, OK, TX
	 
	 	 	 	 
	 

	 	Liberty County Mutual Insurance Co.
	 	For business classified as
LMAM and produced by this
Profit Center only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business **)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business **)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business **)
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	Golden Eagle Insurance Corp.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.
	 	CA
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	CA
	 

	 	Peerless Insurance Co.
	 	CA
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security Insurance:

	 	Hawkeye-Security Insurance Co.
	 	IA, KS, MN, MO, NE, ND,
SD, WI
	 

	 	Consolidated Insurance Co.
	 	IA, KS, MN, MO, NE, ND,
SD, WI
	 

	 	Indiana Insurance Co.
	 	IA, KS, MN, MO, NE, ND,
SD, WI
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND,
SD, WI
	 

	 	Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND,
SD, WI
	 

	 	The Midwestern Indemnity Co
	 	IA, KS, MN, MO, NE, ND,
SD, WI

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Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Hawkeye-Security
Continued:
	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Consolidated Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Mid-American Fire and Casualty Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	The Midwestern Indemnity Co.
	 	IL, IN, KY, MI, OH, TN
	 
	 	 	 	 
	 

	 	Globe American Casualty Co.
	 	All States
	 

	 	National Insurance Association
	 	All States
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest
Insurance:

	 	Liberty Northwest Insurance Corp.
	 	All States
	 

	 	North Pacific Insurance Company
	 	All States
	 

	 	Oregon Automobile Insurance Co.
	 	All States
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA, MD,
MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance:

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,
PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,
PA, RI, VT

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Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Peerless Insurance
Continued:

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,
PA, RI, VT
	 

	 	One Beacon Insurance Co. Cessions to
Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,
PA, RI, VT
	 

	 	Liberty Mutual Mid-Atlantic Insurance Co.
	 	For business classified as
LMAM and produced by this
Profit Center only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Summit:

	 	Bridgefield Casualty Insurance Co.
Bridgefield Employers Insurance Co.
	 	All states, for WC and Employers Liability business,
classified as LMAM and
produced by this Profit Center
only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business **)
	 
	 	 	 	 
	Wausau Insurance:

(including Business
Solutions Group)

	 	Employers Insurance Co. of Wausau
Wausau General Insurance Co. 

Wausau Underwriters Insurance Co.

Wausau Business Insurance Co. 

Liberty County Mutual Insurance Co.

Liberty Mutual Insurance Co. 

Liberty Mutual Fire Insurance Co.

LM Insurance Corp. 

Liberty Insurance Corp.

The First Liberty Insurance Corp.
	 	All states, for business
classified as LMAM and
produced by this Profit Center
only, excluding business
classified as Multi-State
business

 

			
	*	 	Wausau/Business Solutions Group consists of: Liberty Mutual Insurance Co., Liberty Mutual Fire
Insurance Co., LM Insurance Corp., Liberty Insurance Corp., The First Liberty Insurance Corp.,
Liberty County Mutual Insurance Co., Employers Insurance Co. of Wausau, Wausau General insurance
Co., Wausau Underwriters Insurance Co., and Wausau Business Insurance Co.
	 
	**	 	Agent responsible for the risk resides in the Profit Center but the risk is located in
multiple states both in and outside of states assigned to the Profit Center.

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Appendix B

	 	 	 

	Pharmaceutical / medical risks

	 	(Version 2005-Apr)

	 	 	 	 	 
	#	 	Company Name	 	Headquarter location
	 
	 	 	 	 
	1

	 	ABBOTT LABORATORIES
	 	USA
	2

	 	AKZO NOBEL
	 	Netherlands
	3

	 	ALLERGAN
	 	USA
	4

	 	ALPHARMA
	 	USA
	5

	 	ALTANA AG
	 	Germany
	6

	 	AMGEN
	 	USA
	7

	 	ASTELLAS
	 	Japan
	8

	 	ASTRAZENECA
	 	UK
	9

	 	BARR LABORATORIES
	 	USA
	10

	 	BAXTER INTERNATIONAL
	 	USA
	11

	 	BAYER
	 	Germany
	12

	 	BEAUFOUR IPSEN
	 	France
	13

	 	BIOGEN
	 	USA
	14

	 	BIOMET
	 	USA
	15

	 	B0EHRINGER INGELHEIM
	 	Germany
	16

	 	BOSTON SCIENTIFIC CORPORATION
	 	USA
	17

	 	BRISTOL-MYERS SQUIBB
	 	USA
	18

	 	CHIRON
	 	USA
	19

	 	CSL
	 	Australia
	20

	 	DAIICHI PHARMACEUTICAL
	 	Japan
	21

	 	DAINIPPON PHARMACEUTICAL
	 	Japan
	22

	 	EDWARDS LIFESCIENCES
	 	USA
	23

	 	EISAI
	 	Japan
	24

	 	ELAN
	 	Ireland
	25

	 	FOREST LABORATORIES
	 	USA
	26

	 	GENENTECH
	 	USA
	27

	 	GENERAL ELECTRIC Healthcare
	 	USA
	28

	 	GENZYME
	 	USA
	29

	 	GLAXOSMITHKLINE
	 	UK
	30

	 	GUIDANT
	 	USA
	31

	 	HOSPIRA
	 	USA
	32

	 	IVAX
	 	USA
	33

	 	JOHNSON & JOHNSON
	 	USA
	34

	 	KING PHARMACEUTICALS
	 	USA
	35

	 	KYOWA HAKKO KOGYO
	 	Japan
	36

	 	LABORATOIRE SERVIER
	 	France
	37

	 	LILLY (ELI)
	 	USA
	38

	 	LUNDBECK
	 	Denmark
	39

	 	MEDIMMUNE
	 	USA
	40

	 	MEDTRONIC
	 	USA
	41

	 	MERCK & CO
	 	USA
	42

	 	MERCK KGAA
	 	Germany
	43

	 	MINNESOTA MINING & MANUFACTURING
	 	USA
	44

	 	MYLAN LABORATORIES
	 	USA
	45

	 	NOVARTIS
	 	Switzerland
	46

	 	NOVO NORDISK
	 	Denmark
	47

	 	OTSUKA PHARMACEUTICAL
	 	Japan
	48

	 	PFIZER
	 	USA
	49

	 	PLIVA
	 	Croatia
	50

	 	PROCTER & GAMBLE
	 	USA

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	#	 	Company Name	 	Headquarter location
	 
	 	 	 	 
	51

	 	PURDUE FREDERICK / PRA Holding
	 	USA
	52

	 	ROCHE
	 	Switzerland
	53

	 	SANKYO
	 	Japan
	54

	 	SANOFI-AVENTIS
	 	France
	55

	 	SCHERING AG
	 	Germany
	56

	 	SCHERING-PLOUGH
	 	USA
	57

	 	SCHWARZ PHARMA
	 	Germany
	58

	 	SERONO
	 	Switzerland
	59

	 	SHIONOGI
	 	Japan
	60

	 	SHIRE PHARMACEUTICALS
	 	UK
	61

	 	SMITH & NEPHEW
	 	UK
	62

	 	SOLVAY
	 	Belgium
	63

	 	ST. JUDE MEDICAL
	 	USA
	64

	 	STRYKER
	 	USA
	65

	 	SUMITOMO PHARMACEUTICALS
	 	Japan
	66

	 	SYNTHES-STRATEC
	 	Switzerland
	67

	 	TAKEDA
	 	Japan
	68

	 	TANABE
	 	Japan
	69

	 	TAP Pharmaceutical Products
	 	USA
	70

	 	TEVA PHARMACEUTICAL
	 	Israel
	71

	 	TYCO Healthcare
	 	USA
	72

	 	UCB
	 	Belgium
	73

	 	WATSON PHARMACEUTICAL
	 	USA
	74

	 	WYETH
	 	USA
	75

	 	ZIMMER
	 	USA

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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
agreement, the term shall be understood to mean Company or Reinsured or Reassured or whatever
other term is used in the attached reinsurance agreement 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 “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 Agreement, 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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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A. N.M.A. 1590

	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. in 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
Liabilities 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:
	 
	 	 	Owners, Landlords and Tenants Liability, Agreementual Liability, Elevator Liability, Owners or
Agreementors (including railroad) Protective Liability, Manufacturers and Agreementors
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):

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     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 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 question 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;
	 
	 	(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 damage
arises 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 other than the tailings or wastes produced by the extraction or
concentration of uranium or thorium from any ore processed for its source material

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content 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” includes all forms of radioactive contamination of property;
“property damage” 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 operations 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 or the Independent Insurance Conference of Canada.

	*NOTE: 	 	The words printed in BOLD TYPE 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.

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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA N.M.A. 1979

	1.	 	This Contract does not cover any loss or liability accruing to the Company 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 Contract all the original liability Contracts of the Company,
whether new, renewal or replacement, of the following classes, namely,

Personal Liability

Farmers’ Liability

Storekeepers’ Liability

	 	 	which become effective on or after 31st December 1984, 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 Contract all the original liability Contracts of the Company,
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 1984, 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 under the Nuclear Liability Act; 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 Association of Canada or any other insurer or group or
pool of insurers or would be an Insured 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 of an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation or use of
any nuclear facility; and

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	 	(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 that the Atomic Energy Control Board may, by regulation, designate 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 utilizing
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;
	 
	 	(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.

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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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INTEREST AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities of the
Reinsurers as set forth in the attached Workers’ Compensation Clash Excess of Loss Reinsurance
Contract No. 2000290 effective 12:01 a.m., Local Standard Time, January 1, 2007, to which this
Agreement is attached hereto shall be 80%.

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 other Reinsurers participating in said Contract.

Workers’ Compensation Clash

Excess of Loss Reinsurance Contract

January 1, 2007

Interest & Liabilities Agreement

Page 1 of 2

 

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

In Keene,
New Hampshire, this
20th day of August, 2007.

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Douglas Benedict
 

Signature

	 	 
	 	/s/ Nancy C. Callender
 

Signature
	 	 
	 
	 	 	 	 	 	 
	Douglas Benedict

	 	 	 	Nancy C. Callender	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	Vice President and Chief Actuary 

	 	 	 	Asst. Vice President-Reinsurance Mgmt. 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

And in Boston, Massachusetts, this 13th day of September,
2007.

	 	 	 	 	 	 	 

	ATTEST:

	 	 	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ John C. MacLean Jr.
 

Signature

	 	 
	 	/s/ Elaine Caprio Brady
 

Signature
	 	 
	 
	 	 	 	 	 	 
	John C. MacLean Jr. 

	 	 	 	Elaine Caprio Brady 	 	 
	 

	 	 	 	 	 	 
	Name

	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	Director-Ceded Reinsurance 

	 	 	 	Vice President 	 	 
	 

	 	 	 	 	 	 
	Title

	 	 	 	Title	 	 

Workers’ Compensation Clash

Excess of Loss Reinsurance Contract

January 1, 2007

Interest & Liabilities Agreement

Page 2 of 2exv10w163

EXHIBIT
10.163

Property Catastrophe Excess of Loss

Reinsurance Contract No. 2000240

$300,000,000 xs $50,000,000

Effective: January 1, 2007

In consideration of the premium and subject to the 
terms and
conditions hereinafter set forth

The Reinsurers executing the

Interests and Liabilities Agreement

attached to this Contract

do hereby indemnify, as herein provided and specified, the

PEERLESS INSURANCE COMPANY

	 	 	 

	 

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Appendix A — Definition of Profit Center

Pools, Syndicates, Associations

War Risk Exclusion Clause

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (USA)

Nuclear Incident Exclusion Clause — Physical Damage Reinsurance (Canada)

Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994)

Worldwide Excluding U.S.A. & Canada)

Insolvency Funds Exclusion Clause

Terrorism Exclusion Clause

Terrorism Exclusion Clause (Losses Occurring After December 31, 2005)

Mold Exclusion

	 	 	 

	 

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Table of Contents

	 	 	 	 	 	 	 
	Article	 	 	 	Page
	I	 	Business Covered
	 	1
	II	 	Exclusions
	 	2
	III	 	Term
	 	3
	IV	 	Ultimate Net Loss
	 	4
	V	 	Loss Occurrence
	 	5
	VI	 	Net Retained Lines
	 	6
	VII	 	Other Reinsurance
	 	7
	VIII	 	Territory (LM-02201-2005.06.02-A)
	 	7
	IX	 	Loss Adjustment and Settlement
	 	7
	X	 	Salvage and Subrogation (LM-01800-2006.09.12-A)
	 	8
	XI	 	Interest Penalty (LM-01400-2005.08.24-A)
	 	8
	XII	 	Unauthorized Reinsurance (LM-02502-2006.10.26-A)
	 	9
	XIII	 	Currency (LM-00500-2005.08.09-A)
	 	11
	XIV	 	Access to Records (LM-00100-2005.11.01-A)
	 	11
	XV	 	Errors and Omissions (LM-00800-2005.06.02-A)
	 	12
	XVI	 	Alterations
	 	12
	XVII	 	Arbitration (LM-00200-2006.10.25-A)
	 	12
	XVIII	 	Insolvency (LM-01300-2005.08.24-A)
	 	15
	XIX	 	Dividends and Taxes (LM-00600-2005.06.02-A)
	 	16
	XX	 	Federal Excise Tax (LM-01000-2005.08.24-A)
	 	16
	XXI	 	Service of Suit (LM-01900-2005.08.24-A)
	 	16
	XXII	 	Offset (LM-01700-2005.06.02-A)
	 	17
	XXIII	 	Governing Law (LM-01200-2005.06.02-A)
	 	17
	XXIV	 	Confidentiality (LM-00400-2005.11.10-A)
	 	17
	XXV	 	Severability(LM-02000-2005.06.02-A)
	 	18
	XXVI	 	Special Conditions (LM-02100-2006.09.29-A)
	 	19
	XXVII	 	Agency Agreement (LM-02800-2006.04.12-A)
	 	22
	XXVIII	 	Entire Agreement (LM-00701-2005.08.24-A)
	 	22
	XXIX	 	Third Parties (LM-02700-2005.09.27-A)
	 	22

Attachments:

Exhibit A — Layer 1

Exhibit B — Layer 2

Exhibit C — Layer 3

Exhibit D — Layer 4

Exhibit E — Layer 5

Exhibit F — Layer 6

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe 

Excess of Loss Contract —

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Property Catastrophe Excess of Loss

Reinsurance Contract No. 2000240

$300,000,000 xs $50,000,000

Effective: January 1, 2007

(hereinafter referred to as the “Contract”)

In consideration of the premium and subject to the

terms and conditions hereinafter set forth

This Contract is entered into by and between

PEERLESS INSURANCE COMPANY, Keene, NH

(hereinafter referred to as the “Company”) on the one part, and the various Reinsurers as

identified by the Interests and Liabilities Agreements attaching to and forming a part of this

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

referred to as the “Reinsurers”) on the other part.

Article I — Business Covered

By this Contract the Subscribing Reinsurer agrees to reinsure the Company under the policies,
contracts agreements, certificates, other obligations and binders, whether oral or written, of
insurance or reinsurance and/or any endorsements to any of the foregoing, issued, accepted or held
covered provisionally or otherwise, by and on behalf of the Company or a Legal Entity listed in
Appendix A (each, a “Legal Entity” and, collectively, the “Legal Entities”) (hereinafter called
“Policies”) and reinsured, directly or indirectly, by the Company and in force at the effective
date hereof or issued or renewed on or after that date, and classified by the Company or a Legal
Entity as the Property coverages including but not limited to;

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

subject to the terms, conditions and limitations set forth herein and in the Exhibits attached to
and forming part of this Contract.

Under this Contract, the indemnity for reinsured loss applies only to business written through the
Profit Centers, as defined in Exhibit A — Definition of Profit Center.

	 	 	 

	 

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Article II — Exclusions

This Contract does not apply to:

	A.	(1)	 	Treaty reinsurance assumed by the Company except for any agency reinsurance, or
business written by affiliates of the Company and reinsured internally within the
companies that comprise the Liberty Mutual Agency Markets strategic business unit, and
specifically any reinsurance transacted among or between the companies that comprise
Liberty Mutual Agency Markets (shown in Exhibit A), or any reinsurance between OneBeacon
Insurance Company, its affiliates and Peerless Insurance Company; or
	 
	 	(2)	 	Insurance or reinsurance accepted by the Company in the London market.

	B.	 	Loss or damage as excluded in the Pools, Associations and Syndicates Exclusion Clause, as
attached hereto and forming part of this Contract.
	 
	C.	 	Loss or damage caused by flood except under Inland Marine policies and except limited flood
coverage as provided for by the standard Homeowners policies, Manufacturers Output and
Mercantile or Commercial Block policies or other multiple peril policies whether under the
same Policy or a separate Policy covering the same risk.
	 
	D.	 	Loss or damage as excluded in the War Risk Exclusion Clause, as attached hereto and forming
part of this Contract.
	 
	E.	 	Loss or damage excluded by the following Nuclear Incident Exclusion Clauses as attached
hereto and forming part of this Contract:

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

	F.	 	Loss or damage as excluded in the Insolvency Funds Exclusion Clause, as attached hereto and
forming part of this Contract.
	 
	G.	 	Policies classified as Insolvency or Financial Guarantee.
	 
	H.	 	Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or
contamination, other than contamination from smoke damage. Nevertheless, this exclusion does
not preclude any payment of the cost of the removal of debris of property damaged by a loss
otherwise covered hereunder.
	 
	I.	 	Losses in respect of overhead transmission and distribution lines and their supporting
structures, other than those on or within 300 meters (or 1,000 feet) of the insured premises.
It is understood and agreed that public utilities extension and/or supplier’s extension
and/or contingent business interruption coverages are not subject to this exclusion, provided
these are not part of a transmitters’ or distributors’ Policy.
	 
	J.	 	Losses arising out of “extra contractual obligations” or “loss in excess of Policy limits.”

	 	 	 

	 

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	 	(1)	 	The term “extra contractual obligations” shall mean any
punitive, exemplary, compensatory, or consequential damages paid or payable by the
Company or a Legal Entity as a result of an action against it by its insured or its
insured’s assignee or a third party claimant.
	 
	 	(2)	 	The term “loss in excess of Policy limits” shall mean any amount paid or payable by
the Company or a Legal Entity in excess of its Policy limits, but otherwise within the
terms of its Policy, as a result of an action against the Company or a Legal Entity by its
insured or its insured’s assignee to recover damages the insured is legally obligated to
pay to a third party claimant because of the Company’s or a Legal Entity’s alleged or
actual negligence or bad faith in rejecting a settlement within Policy limits, or in
discharging its duty to defend or prepare the defense in the trial of an action against
its insured, or in discharging its duty to prepare or prosecute an appeal consequent upon
such action.

	K.	 	All business underwritten by Liberty International Canada, with the exception of those
locations and risks situated in the United States.
	 
	L.	 	Terrorism-related losses excluded by the Terrorism Exclusion Clauses, both of which are
attached hereto and forming part of this Contract.
	 
	M.	 	Mold — as attached hereto and forming part of this Contract.
	 
	N.	 	Boiler and Machinery.
	 
	O.	 	Aircraft hull.
	 
	P.	 	Motor Cargo (Legal Liability).
	 
	Q.	 	Property coverages classified by the Company as “Casualty,” other than burglary, theft and
robbery when afforded under an Inland Marine Policy or under the Property insurance section
of a multiple peril policy.
	 
	R.	 	Fidelity and Surety.
	 
	S.	 	Ocean Marine (other than Yacht policies).
	 
	T.	 	Hail damage to growing or standing crops.

Article III — Term

	A.	 	This Contract applies only to losses arising out of loss occurrences commencing during its
effective period. This Contract is effective at 12:01 a.m., January 1, 2007, Local Standard
Time, and shall end at 12:01 a.m., January 1, 2008, Local Standard Time.

	B.	 	If this Contract should expire or terminate while a Loss Occurrence is in progress, the
Subscribing Reinsurer shall nevertheless be liable to the extent of their interest, subject to
the other conditions of this Contract, for all losses in the Loss Occurrence whether happening
before or after such expiration or termination, provided that no claim is made against such
Loss Occurrence on any renewal of this Contract.

	 	 	 

	 

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Article IV — Ultimate Net Loss

	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: all amounts paid or due and
payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies, less salvages and subrogation recoveries and
amounts recovered or recoverable under pooling agreements or other reinsurances, whether
collectible, or not. “Ultimate Net Loss” includes, but is not limited to, the following paid
or due and payable amounts: Allocated Loss Adjustment Expenses, defense costs, court costs,
supersedeas and appeal bond costs, post and prejudgment interest, Attorneys’ Fees and
Expenses, Claim-Specific Declaratory Judgment Expenses, Field Employee Salaries and Expenses,
Unallocated Loss Adjustment Expenses calculated at 7.0% of any loss, and all other costs of
investigation or litigation. Nothing herein shall be construed to mean that losses under this
Contract are not recoverable until the Company’s or a Legal Entity’s “Ultimate Net Loss” has
been ascertained.
	 
	B.	 	“Allocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or
due and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies, including but not limited to Claim-Specific
Declaratory Judgment Expenses, Attorneys’ Fees and Expenses, Field Employee Salaries and
Expenses, court costs, supersedeas and appeal bond costs, post and prejudgment interest, and
expenses of outside adjusters or other third party administrators.
	 
	C.	 	“Unallocated Loss Adjustment Expense” as used herein shall mean any and all expenses paid or
due and payable by the Company or a Legal Entity in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, payment or subrogation of claims or judgments
arising from each and every loss or loss occurrence for which the Company or a Legal Entity is
or may be found liable under the Policies that do not constitute Allocated Loss Adjustment
Expense.
	 
	D.	 	“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 or loss occurrence (if any) giving
rise to the action, unless otherwise provided for within this Contract.
	 
	E.	 	The term “Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of
attorneys, including but not limited to the fees and expenses of the Company’s or its
affiliates’ in-house attorneys providing legal advice on coverage questions and/or defending
the Company or a Legal Entity in coverage litigation, and fees and expenses of outside
attorneys and/or 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 its other employees which
constitute Unallocated Loss Adjustment Expense.

	 	 	 

	 

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	F.	 	The term “Field Employee Salaries and Expenses” as used above, shall mean 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 losses or loss occurrences, and of
expenses of all of the Company’s or its affiliates’ officers and employees incurred in
connection with the loss; except that salaries of officers and employees engaged in general
management and located in the home office of the Company or its affiliates and any office
expense of the Company or its affiliates do not constitute Field Employee Salaries and
Expenses, but rather Unallocated Loss Adjustment Expense.

Article V — Loss Occurrence

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

	 	1.	 	As regards windstorm, hail, tornado, cyclone including ensuing collapse and water
damage, all individual losses sustained by the Company or a Legal Entity occurring during
any period of 72 consecutive hours arising out of and directly occasioned by the same
event. However, as respects named hurricanes or tropical storms within the 48 contiguous
states and Canada, all individual losses sustained by the Company or a Legal Entity
occurring during any period of 168 consecutive hours arising out of and directly
occasioned by the same event. However, the event need not be limited to one state or
province or states or provinces contiguous thereto.
	 
	 	2.	 	As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company or a Legal Entity occurring
during any period of 72 consecutive hours within the area of one municipality or county
and the municipalities or counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur beyond such 72 consecutive hours
during the continued occupation of an assured’s premises by strikers, provided such
occupation commenced during the aforesaid period.
	 
	 	3.	 	As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the introductory portion of this paragraph A) and
fire following directly occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be included in a
Company’s or a Legal Entity’s “Loss Occurrence.”
	 
	 	4.	 	As regards “freeze,” only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be
included in the Company’s or Legal Entity’s “Loss Occurrence.”
	 
	 	5.	 	As regards firestorms, brush fires and any other fires or series of fires,
irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread
through trees, grassland or other vegetation, all individual losses sustained by the
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a Legal Entity which commence during any period of 168 consecutive hours and within
a 150-mile radius of any fixed point selected by the Company may be included in the
Company’s or a Legal Entity’s “Loss Occurrence.” However, an individual loss subject to
this subparagraph 5 cannot be included in more than one “Loss Occurrence.”

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

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

Article VI — Net Retained Lines

	A.	 	This Contract applies only to such portion of any Policy that the Company, directly or
indirectly, whether insurer or reinsurer, retains net for its own respective account (prior
to the deduction of any underlying reinsurance specifically permitted in this Contract). In
calculating the amount of any loss hereunder and in computing the amount in excess of which
this Contract attaches only loss or losses in respect of that portion of any insurance,

	 	 	 

	 

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

Article VII — Other Reinsurance

	A.	 	It is understood and agreed that the Company may purchase underlying property per risk
excess of loss covers which will inure to the benefit of this Contract.

	B.	 	The Company may have in force other excess catastrophe reinsurances, recoveries under which
shall inure solely to the benefit of the Company.

Article VIII — Territory (LM-02201-2005.06.02-A)

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

Article IX — Loss Adjustment and Settlement

	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 such Legal
Entity’s judgment, may be beneficial or expedient to the Company or such Legal Entity, as
applicable, 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 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 Company’s or Legal Entities’ Policies or by way of compromise, shall be
unconditionally binding upon the Subscribing Reinsurer, who agrees to pay all amounts for
which it is liable 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.

	 	 	 

	 

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Article X — 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 Subscribing Reinsurer agree to the contrary, the Company or the Legal Entities
shall enforce this right to salvage and/or subrogation and shall prosecute all claims arising
out of such right. Should the Company or a Legal Entity 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 shall always be used to reimburse the
excess Reinsurers (and the Company, should it carry a portion of excess coverage net) in the
reverse order of their participation in the loss before being used in any way to reimburse the
Company or a Legal Entity for its primary loss. If the amount recovered exceeds the recovery
expense, the recovery expense shall be borne by each party in proportion to its benefit from
the recovery. If the recovery expense exceeds the amount recovered, the amount recovered (if
any) shall be applied to the reimbursement of recovery expense and the remaining expense, as
well as any originally incurred loss expense, shall be added to the Ultimate Net Loss. If no
amount is recovered from salvage and/or subrogation, the expense incurred in attempting such
recovery shall be deemed loss expense and shall be added to the Ultimate Net 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 shall have the right, before the happening of the loss, to waive its right of
subrogation as to that loss.

Article XI — 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
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	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 2.0%. 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 2.0%. 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 and/or pursue interest for any other failure by the other Party
to make payment when due under this Article.

Article XII — Unauthorized Reinsurance (LM-02502-2006.10.26-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.)

As regards policies or bonds issued, 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 Letters of Credit, unless the method of funding is
determined by applicable law, statute, or regulation.

	 	 	 

	 

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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 any Legal Entities and the Company covered under this Contract. 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 Company by certified
mail that the issuing bank elects not to consider the Letters of Credit extended for any additional
period.

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 or any
successor, by operation of law, of the Company, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution because of the
insolvency of the Company or the Subscribing Reinsurer for one or more of the following purposes:

	A.	 	To pay or reimburse the Company for:

	 	1.	 	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
	 
	 	2.	 	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
	 
	 	3.	 	Any other amounts necessary to secure the credit or reduction from liability for
reinsurance taken by the Company.

	B.	 	Where the Letters of Credit will expire without renewal or be reduced or replaced by Letters
of Credit for a reduced amount and where the Subscribing Reinsurer’s 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 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.

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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Article XIII — Currency (LM-00500-2005.08.09-A)

Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars (“USD”). All amounts paid or received 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 XIV — Access to Records (LM-00100-2005.11.01-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 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 Reinsurer from any
third party non-disclosure agreement or obtain consent from the third party to disclose to the
Subscribing Reinsurer.
	 
	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents 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

	 	 	 

	 

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	 	 	if there are subrogation, contribution, or other third party actions with respect to that claim
or case, which 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, 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. 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 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 — Errors and Omissions (LM-00800-2005.06.02-A)

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

Article XVI — Alterations

The Contract may at any time be altered by mutual consent of the parties by addendum or by
correspondence, either of which to be authorized and signed by a responsible official of the
parties and such addendum or correspondence shall be binding on the parties and be deemed to be an
integral part of this Contract.

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

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
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 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.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.

	 	 	 

	 

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	 	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 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
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	 	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 XVIII — 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 (1) where the Contract specifically provides another
payee of such reinsurance in the event of the insolvency of the Company, or (2) 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 their 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

	 	 	 

	 

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	 	 	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 XIX — 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 or Canada.

Article XX — 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 XXI — 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 rights 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

	 	 	 

	 

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	 	 	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 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, New York 10019.
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of
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 designate 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 XXII — 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 XXIII — 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 XXIV — 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 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. Subscribing Reinsurer
acknowledges and agrees that with respect to any review of Confidential Information by
Subscribing Reinsurer, and/or discussion of Confidential Information, Company does not waive
and does not intend to waive any available privilege or protection. The review of

	 	 	 

	 

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	 	 	Confidential Information by Subscribing Reinsurer and/or discussion of Confidential
Information with Company 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 Company personnel, whether reviewed by and/or discussed with Subscribing Reinsurer
intentionally or inadvertently, nor does the review of the Confidential Information and/or
discussion of Confidential Information with Company constitute an estoppel or waiver of
Company’s rights to assert the attorney-client or work-product privileges, or any other
applicable privilege or protection, over certain documents contained in the Company files
and/or certain information.
	 
	B.	 	The Company and 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 Subscribing Reinsurer from a source, other
than Company, its affiliates or their personnel, that is not subject to a confidentiality
obligation, (3) was developed independently by Subscribing Reinsurer prior to disclosure by
Company, its affiliates or their personnel, as demonstrated by Subscribing Reinsurer’s
records, or (4) is required to be disclosed by law, regulation, court, or regulatory agency
action.
	 
	C.	 	Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to all
Confidential Information provided by Company and all knowledge and information gained through
its review of Confidential Information or discussions with Company personnel. 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. Subscribing Reinsurer agrees that no
Confidential Information is to be copied and/or removed from Company’s premises without the
express permission of Company.
	 
	D.	 	Third-Party Demand. Should 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, the Subscribing Reinsurer shall make commercially reasonable efforts to notify
the Company promptly upon receipt of the demand and prior to disclosure of the Confidential
Information and provide the Company a reasonable opportunity to object to the disclosure. If
the Company timely objects to the release of the Confidential Information, the Subscribing
Reinsurer will comply with the reasonable requests of the Company in connection with the
Company’s efforts to resist release of the Confidential Information. The Company shall bear
the cost of resisting the release of the Confidential Information.
	 
	E.	 	Survival. The parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.

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

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

	 	 	 

	 

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Article XXVI — Special Conditions (LM-02100-2006.09.29-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 25.0% of the
amount of surplus at the inception of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has 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 & 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 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.

	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 premium, and ceding commissions due under this Contract (collectively
“Obligations”). Within 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 any distinct legal entities within the Company covered under this
Contract. 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 60 days prior to any expiration date the issuing bank shall notify
the Company by certified mail that the issuing bank elects not to extend any Letter of Credit
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	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 or
any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution because
of the insolvency of the Company or the Subscribing Reinsurer for one or more of the following
purposes:

	 	1.	 	To pay or reimburse the Company 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, 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.

	 	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 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 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 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 30 days prior
written notice to the Subscribing Reinsurer.

	 	 	 

	 

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	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
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 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 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 XXVII — Agency Agreement (LM-2800-2006.04.12A)

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

Article XXVIII — 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 specially set forth
in this Contract. Notwithstanding the foregoing, this Contract may be amended or modified only by
a writing signed by both the Company and the Subscribing Reinsurer.

Article XXIX — 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.

	 	 	 

	 

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Exhibit A

First Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured
by the Company are involved in such loss occurrence. For purposes hereof, the Company shall be
the sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate
Net Loss above an initial net loss of $50,000,000 provided, however, that the Subscribing
Reinsurer shall not be liable for more than $50,000,000 of each and every such Loss Occurrence,
nor more that $100,000,000 in the aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the
Subject Earned Premium income of the Company and the Legal Entities for all classes of Business
Covered, as stated in Article I — Business Covered a rate of 0.681%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $9,500,000
remitted in four equal quarterly installments of $2,375,000 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective
date of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Subscribing Reinsurer within
15 days of February 15, 2007.

The term Subject Earned premium shall mean the premiums earned by the Company or the Legal
Entities, on classes of business covered under this Contract, times the rates below. No
deduction shall be made for dividends declared, paid or credited to policyholders of the Company
or the Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire
	 	 	100	%	 	 	0	%
	Allied Lines
	 	 	100	%	 	 	0	%
	Homeowners
	 	 	90	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 23 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions
	 	 	Other than Wausau	 	Group Profit Center
	ASLOB	 	Percentage	 	Percentage
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000 in
respect of any one loss occurrence nor $100,000,000 in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment when the
developed premium is finally established

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 24 of 50

 

Exhibit B

Second Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate Net
Loss above an initial net loss of $100,000,000 provided, however, that the Subscribing Reinsurer
shall not be liable for more than $50,000,000 of each and every such Loss Occurrence, nor more
that $100,000,000 in the aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered,
as stated in Article I — Business Covered a rate of 0.537%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $7,500,000
remitted in four equal quarterly installments of $1,875,000 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective
date of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Subscribing Reinsurer within 15
days of February 15, 2007.

The term Subject Earned Premium shall mean the premiums earned by the Company or the Legal
Entities on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the
Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire

	 	 	100	%	 	 	0	%
	Allied Lines

	 	 	100	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 25 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions Group
	 	 	Other than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Homeowners
	 	 	90	%	 	 	0	%
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium: $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000 in
respect of any one loss occurrence nor $100,000,000 in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment when the
developed premium is finally established.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 26 of 50

 

Exhibit C

Third Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate Net
Loss above an initial net loss of $150,000,000 provided, however, that the Subscribing Reinsurer
shall not be liable for more than $50,000,000 of each and every such Loss Occurrence, nor more
that $100,000,000 in the aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered, as
stated in Article I — Business Covered a rate of 0.448%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $6,250,000
remitted in four equal quarterly installments of $1,562,500 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective date
of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Reinsurers within 15 days of
February 15, 2008.

The term Subject Earned Premium shall mean the premiums earned by the Company or the Legal
Entities on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the
Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions Group
	 	 	Other than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire
	 	 	100	%	 	 	0	%
	Allied Lines
	 	 	100	%	 	 	0	%
	Homeowners
	 	 	90	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 27 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium: $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000
in respect of any one loss occurrence nor $100,000,000 in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment when the
developed premium is finally established.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 28 of 50

 

Exhibit D

Fourth Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate Net
Loss above an initial net loss of $200,000,000 provided, however, that the Subscribing Reinsurer
shall not be liable for more than $50,000,000 of each and every such Loss Occurrence, nor more
that $100,000,000 in the aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered,
as stated in Article I — Business Covered a rate of 0.376%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $5,250,000
remitted in four equal quarterly installments of $1,312,500 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective
date of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Reinsurers within 15 days of
February 15, 2007.

The term Subject Earned Premium shall mean the premiums earned by the Company or the Legal
Entities on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the
Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire
	 	 	100	%	 	 	0	%
	Allied Lines
	 	 	100	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 29 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions Group
	 	 	Other than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Homeowners
	 	 	90	%	 	 	0	%
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium: $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000
in respect of any one loss occurrence nor $100,000,000in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment
when the developed premium is finally established.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 30 of 50

 

Exhibit E

Fifth Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured
by the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, for the Ultimate Net
Loss above an initial net loss of $250,000,000 provided, however, that the Subscribing Reinsurer
shall not be liable for more than $50,000,000 of each and every such Loss Occurrence, nor more
that $100,000,000 in the aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered, as
stated in Article I — Business Covered a rate of 0.322%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $4,500,000
remitted in four equal quarterly installments of $1,125,500 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective
date of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Reinsurers within 15 days of
February 15, 2007.

The term Subject Earned Premium shall mean the premiums earned by the Company or the Legal
Entities on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the
Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire
	 	 	100	%	 	 	0	%
	Allied Lines
	 	 	100	%	 	 	0	%
	Homeowners
	 	 	90	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 31 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions Group
	 	 	Other than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium: $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000
in respect of any one loss occurrence nor $100,000,000in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment
when the developed premium is finally established.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 32 of 50

 

Exhibit F

Sixth Property Catastrophe Excess of Loss

Retention and Limit

All catastrophe losses will qualify as losses towards the retention.

No claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the
sole judge of what constitutes one risk.

The Subscribing Reinsurer shall be liable in each and every Loss Occurrence, irrespective of the
number and kinds of Policies involved, for 100% of the excess Ultimate Net Loss above an initial
net loss of $300,000,000 provided, however, that the Subscribing Reinsurer shall not be liable for
more than $50,000,000 of each and every such Loss Occurrence, nor more that $100,000,000 in the
aggregate during the term of this Contract.

Rates and Premium

The Company shall pay to the Subscribing Reinsurer a premium calculated by applying to the Subject
Earned Premium income of the Company and the Legal Entities for all classes of Business Covered, as
stated in Article I — Business Covered a rate of 0.312%%.

Reports and Remittances

The Company shall pay to the Subscribing Reinsurer a minimum and deposit premium of $4,350,000
remitted in four equal quarterly installments of $1,087,500 on January 1, April 1, July 1 and
October 1, 2007. In the event this Contract is terminated prior to January 1, 2008, the minimum
premium shall be prorated and no deposit premium installments shall be due after the effective date
of termination.

The Company shall submit finalized accounts to the Subscribing Reinsurer on February 15, 2008
summarizing the actual subject earned premium for the January 1, 2007 through December 31, 2007
coverage period. If such developed premium is greater than the minimum and deposit premium
stipulated herein the additional premium shall be paid to/from the Reinsurers within 15 days of
February 15, 2007.

The term Subject Earned Premium shall mean the premiums earned by the Company or the Legal
Entities on classes of business covered under this Contract, times the rates below. No deduction
shall be made for dividends declared, paid or credited to policyholders of the Company or the
Legal Entities.

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers Other	 	Wausau/Business Solutions Group
	 	 	than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Fire
	 	 	100	%	 	 	0	%
	Allied Lines
	 	 	100	%	 	 	0	%
	Homeowners
	 	 	90	%	 	 	0	%

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 33 of 50

 

	 	 	 	 	 	 	 	 	 
	 	 	All Profit Centers	 	Wausau/Business Solutions Group
	 	 	Other than Wausau	 	Profit Center
	ASLOB	 	Percentage	 	Percentage
	Farmowners
	 	 	90	%	 	 	0	%
	Commercial Multiple Peril
(Property)
	 	 	100	%	 	 	100	%
	Inland Marine
	 	 	100	%	 	 	0	%
	Auto Physical Damage
(Private Passenger)
	 	 	35	%	 	 	0	%
	Auto Physical Damage
(Commercial)
	 	 	35	%	 	 	0	%
	Burglary & Theft
	 	 	100	%	 	 	0	%

Estimated Subject Earned Premium: $1,256,392,137

Reinstatement

It is hereby understood and agreed that each claim hereon reduces the amount of indemnity from the
time of the loss occurrence by the sum paid, but any amount so exhausted is hereby automatically
reinstated from the time of the loss occurrence.

One reinstatement will be provided at an additional premium calculated at 100% of the developed
premium hereon, but pro rata as to the fraction of the face value of this Contract (i.e., the
fraction of $50,000,000) reinstated. Such reinstatement premium shall be payable simultaneously
with each loss settlement.

Nevertheless, the liability of the Subscribing Reinsurer hereunder shall never exceed $50,000,000
in respect of any one loss occurrence nor $100,000,000 in all during the period of this Contract.

If at the time of a loss settlement hereon the developed premium is unknown, the above calculation
of reinstatement premium shall be based upon the deposit premium, subject to adjustment when the
developed premium is finally established.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 34 of 50

 

Appendix A

Definition of Profit Centers:

For purposes of Article I or any Articles, wherever the word Profit Centers is used, the Profit
Centers are defined to include the following Profit Centers of Liberty Mutual Agency Market (LMAM).

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	America First Insurance:

	 	America First Insurance Co.

America First Lloyd’s Insurance Co.

Peerless Insurance Co.

	 	AK, LA, OK, TX

AK, LA, OK, TX

AK, LA, OK, TX
	 
	 	 	 	 
	 

	 	Liberty County Mutual Insurance Co.
	 	For business classified as

LMAM and produced by this Profit

Center only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business **)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business **)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business **)
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	Golden Eagle Insurance Corp.
	 	AZ, CO, NM, NV, WY, UT
	 

	 	One Beacon Insurance Co. Cession to	 	 
	 

	 	Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.
	 	CA
	 

	 	One Beacon Insurance Co. Cession to	 	 
	 

	 	Peerless Insurance Co.
	 	CA
	 

	 	Peerless Insurance Co.
	 	CA
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	Hawkeye-Security Insurance:

	 	Hawkeye-Security Insurance Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 

	 	Consolidated Insurance Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 

	 	Indiana Insurance Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cession to

Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 

	 	Peerless Insurance Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 

	 	The Midwestern Indemnity Co.
	 	IA, KS, MN, MO, NE, ND,

SD, WI
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 35 of 50

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Indiana Insurance:

	 	Indiana Insurance Co.

Consolidated Insurance Co.

Mid-American Fire and Casualty Co.

One Beacon Insurance Co. Cession to

Peerless Insurance Co.

Peerless Insurance Co.

The Midwestern Indemnity Co.

Globe American Casualty Co. 

National Insurance Association 

Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co. 

The Netherlands Insurance Co.
	 	IL, IN, KY, MI, OH, TN

IL, IN, KY, MI, OH, TN

IL, IN, KY, MI, OH, TN

IL, IN, KY, MI, OH, TN

IL, IN, KY, MI, OH, TN

IL, IN, KY, MI, OH, TN

All States

All States

(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest Insurance:

	 	Liberty Northwest Insurance Corp.

North Pacific Insurance Company

Oregon Automobile Insurance Co.

Wausau/Business Solutions Group*
	 	All States

All States

All States

(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cession to

Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance:

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,

PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,

PA, RI, VT
	 

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,

PA, RI, VT
	 

	 	One Beacon Insurance Co. Cessions to

Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,

PA, RI, VT
	 
	 	 	 	 
	 

	 	Liberty Mutual Mid-Atlantic Insurance Co.
	 	For business classified as LMAM

and produced by this Profit Center

only

	 	 	 

	 

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Page 36 of 50

 

Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Peerless Insurance
Continued:
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Wausau Insurance:

(including Business 

Solutions Group)

	 	Employers Insurance Co. of Wausau

Wausau General Insurance Co.

Wausau Underwriters Insurance Co.

Wausau Business Insurance Co.

Liberty County Mutual Insurance Co.

Liberty Mutual Insurance Co.
Liberty Mutual Fire Insurance Co.

LM Insurance Corp.

Liberty Insurance Corp.

The First Liberty Insurance Corp.
	 	All states, for business

classified as LMAM and

produced by this Profit Center

only, excluding Business

Solutions Group business

classified as Multi-State

business

 

			
	*	 	Wausau/Business Solutions Group consists of the legal entities of: Liberty Mutual
Insurance Co., Liberty Mutual Fire Insurance Co., LM Insurance Corp., Liberty Insurance Corp.,
The First Liberty Insurance Corp., Liberty County Mutual Insurance Co., Employers Insurance
Company of Wausau, Wausau General Insurance Co., Wausau Underwriters Insurance Co. and Wausau
Business Insurance Co..
	 
	**	 	Agent responsible for the risk resides in the Profit Center but the risk is located in
multiple states both in and outside of states assigned to the Profit Center.

	 	 	 

	 

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Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

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

Section B:

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

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

Any Pool, Association or Syndicate formed for the purpose of writing

Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

Section B does not apply:

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

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

Section C:

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

	 	(1)	 	The following so-called “Coastal Pools”:
	 
	 	 	 	Alabama Insurance Underwriting Association

Louisiana Citizens Property Insurance Corporation

Mississippi Windstorm Underwriting Association

North Carolina Insurance Underwriting Association

South Carolina Windstorm and Hail Underwriting Association

Texas Windstorm Insurance Association

AND

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

	 	 	 

	 

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AND

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

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

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

Section D:

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

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

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

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

 

NOTES:   Wherever used herein the terms:

			
	“Company”	 	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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War Risk Exclusion Clause

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

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

	 	 	 

	 

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Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)

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

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

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

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

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

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

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

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

12/12/57

N.M.A. 1119 BRMA35B

	 	 	 

	 

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Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

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

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

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

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

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

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

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

	6.	 	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and any other
substances which may be designated by or pursuant to any law, act or statute, or any law
amendatory thereof as being prescribed substances capable of releasing atomic energy, or as
being requisite for the production, use or application of atomic energy.

7. Reinsured to be sole judge of what constitutes:

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

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

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

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

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

	 	 	 

	 

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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 undernoted, Nuclear Energy Risks shall not include:-

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

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

However, the above exemption shall not extend to:-

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

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

	 	(2)	 	The provision of any insurance or reinsurance for the undernoted 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.

	 	 	 

	 

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Definitions:

“Nuclear Material” means:-

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

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

“Nuclear Installation” means:-

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

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

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

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

“High Radioactivity Zone or Area” means:-

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

N.M.A. 1975(a)

	 	 	 

	 

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Insolvency Funds Exclusion Clause

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

	 	 	 

	 

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TERRORISM EXCLUSION CLAUSE

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, 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 the Terrorism Risk Insurance Act of 2002 as it may be
amended from time-to-time.
	 
	 	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 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.

	 	 	 

	 

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	 	 	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).
	 
	 	 	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.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 47 of 50

 

Terrorism Exclusion Clause

(APPLICABLE TO LOSSES OCCURRING AFTER 31 DECEMBER 2005 FOR RISKS

LOCATED IN THE UNITED STATES OF AMERICA, ITS TERRITORIES AND

POSSESSIONS, AND AT THE PREMISES OF ANY UNITED STATES MISSION.)

	A.	 	In the event that the Terrorism Risk Insurance Act of 2002 (“TRIA”) is extended, renewed, or
succeeded without interruption beyond 31 December 2005, and without revision or adaptation
beyond 31 December 2005 to the definitions set forth in subsections 102 (1)(A), (14), and (15)
of TRIA, this Contract shall not cover:

	 	1.	 	“Insured Losses” resulting directly or indirectly from a “Certified Act of
Terrorism” under the terms of TRIA, as it may be amended from time-to-time.
	 
	 	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; however, 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. 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.	 	If TRIA is: (a) not extended, renewed, or succeeded without interruption beyond 31
December 2005, or (b) extended, renewed, or succeeded beyond 31 December 2005, but with
revision or adaptation to one or more of the definitions set forth in subsections 102 (1) (A),
(14), and (15) of TRIA, then, in respect of any losses occurring after 31 December 2005, this
contract shall not cover:

	 	1.	 	Losses resulting directly or indirectly from an Act of Terrorism.
	 
	 	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; however, no coverage shall be
afforded for any ensuing chemical, biological, or radiological contamination or pollution
resulting from employing such weapon or device.

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 48 of 50

 

“Act of Terrorism” as used in subparagraph B.1. shall mean any violent act or act that is
dangerous to human life, property, or infrastructure; that results in physical loss or damage
within the United States; and that is committed by an individual or individuals acting on behalf of
any foreign person or foreign interest as part of an effort to coerce or put in fear the civilian
population of the United States or to influence the policy or affect the conduct of the United
States government by coercion.

“Other Act of Terrorism” as used in subparagraph B (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 an “Act of Terrorism.”

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 49 of 50

 

Mold Exclusion

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

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

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

Losses resulting from the above causes do not in and of themselves constitute an event unless
arising out of one or more of the following perils, in which case this exclusion does not apply:

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

	 	 	 

	 

	 	Peerless 2007 Property Catastrophe
	 

	 	Excess of Loss Contract —
	 

	 	$300,000,000 xs $50,000,000

Page 50 of 50

 

INTERESTS AND LIABILITIES AGREEMENT

(hereinafter
referred to as the “Agreement”)

to the

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

$300,000,000 XS $50,000,000

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby mutually agreed by and between the Company of the one part and the Subscribing
Reinsurer of the other part, that the Subscribing Reinsurer shall have a 100% share in the
interests and liabilities of the Subscribing Reinsurer as set forth in the Contract attached
hereto.

This Agreement shall be effective for the period commencing 12:01 a.m., Local Standard Time,
January 1, 2007 and ending 12:01 a.m., Local Standard Time, January 1, 2008.

Property Catastrophe Excess Of Loss Reinsurance Contract

Effective: 01/01/2007

Contract No. 2000240

Page 1 of 2

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement and the attached Property
Catastrophe Excess of Loss Reinsurance Contract $300,000,000 xs $50,000,000 to be executed in
duplicate by their respective duly authorized officers;

In Keene, New Hampshire,
this 29th day of May, 2007, for and on behalf of:

PEERLESS INSURANCE COMPANY

	 	 	 

	/s/ Nancy C. Callendar
 

Signature

	 	 
	 
	 	 
	Nancy C. Callender
 

Name

	 	 
	 
	 	 
	Assistant Vice President, AM Reinsurance Mgmt.
 

Title

	 	 

And in
Boston, Massachusetts, this
31st day of May, 2007, for and on behalf of:

LIBERTY MUTUAL INSURANCE COMPANY

	 	 	 

	/s/ J. Eric Brosius
 

Signature

	 	 
	 
	 	 
	J. Eric Brosius
 

Name

	 	 
	 
	 	 
	Senior Vice President
 

Title

	 	 

Property Catastrophe Excess Of Loss Reinsurance Contract

Effective: 01/01/2007

Contract No. 2000240

Page 2 of 2

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