Common use of Funds Withheld Clause in Contracts

Funds Withheld. a. Under the circumstances described in the ‘TOTAL SECURITY’ section of this Agreement, THE REINSURER may provide to THE COMPANY an amount of cash to be held on deposit (“Funds Withheld”) with respect to all the amounts recoverable from THE REINSURER under this Agreement so as to avoid triggering THE COMPANY’s right of recapture under the ‘RECAPTURE’ section of this Agreement. If THE REINSURER elects to do so, the Funds Withheld must satisfy the requirements of subsections b., c., and d. of this ‘FUNDS WITHHELD’ section. b. THE REINSURER and THE COMPANY agree that any Funds Withheld provided by THE REINSURER pursuant to the provisions of this Agreement may be drawn upon by THE COMPANY in full or in part at any time, notwithstanding any other provisions of this Agreement, and may be utilized by THE COMPANY or any successor by operation of law of THE COMPANY including without limitation, any liquidator, rehabilitator, receiver or conservator of THE COMPANY for any of the following purposes: i. to reimburse THE COMPANY for unearned reinsurance premiums on returned to the owners of policies reinsured under this Agreement on account of cancellations of such policies; ii. to reimburse THE COMPANY for THE REINSURER’s share of benefits or losses paid by THE COMPANY under the terms and provisions of the policies reinsured under this Agreement; iii. Any other amount necessary under THE COMPANY’s state of domicile to secure reserve credit for THE REINSURER’s proportionate share of the statutory reserves; iv. to pay any other amounts THE COMPANY claims are due under this Agreement: All of the foregoing will be applied without diminution because of insolvency on the part of THE REINSURER. c. At the end of each calendar quarter, THE COMPANY will credit interest on the Funds Withheld during the previous quarter. The amount of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over the quarter. The interest rate will be equal to the sum of the London Interbank Office Rate, U.S. Denomination-Fixed Twelve-month, (LIBOR) as of the beginning of the calendar quarter, plus ninety (90) basis points. d. THE COMPANY agrees to return to THE REINSURER any Funds Withheld that are in excess of the actual amounts required. The Funds Withheld shall remain in effect until the later of the termination of this Reinsurance Agreement or the full satisfaction and discharge of any and all liabilities and obligations owed by THE REINSURER to THE COMPANY, unless THE REINSURER and THE COMPANY mutually agree in writing to terminate the Funds Withheld at an earlier date. If any Funds Withheld remain after the parties have mutually agreed in writing to terminate the Funds Withheld, THE COMPANY shall remit such amounts plus any interest due thereon to THE REINSURER within fifteen (15) days of the termination of the Funds Withheld.

Funds Withheld. a. Under the circumstances described in the ‘TOTAL SECURITY’ section Section 42 of this Agreement, THE REINSURER COMPANY may provide withhold premium payments to THE COMPANY an amount of cash to be held REINSURER and maintain such amounts on deposit (as “Funds Withheld”) with respect to all the amounts recoverable from THE REINSURER under this Agreement so as to avoid triggering THE COMPANY’s right of recapture under the ‘RECAPTURE’ section of this Agreement. If THE REINSURER elects to do so, the .” Any Funds Withheld must satisfy the requirements of subsections b., c., d., and d. e. b. As soon as a Risk Trigger Event occurs, THE COMPANY will notify THE REINSURER that THE COMPANY intends to withhold premiums. Around the time that THE COMPANY would normally pay the reinsurance premiums, THE COMPANY will send THE REINSURER a statement showing the amount of the funds being withheld and the reason the funds are withheld. c. In addition, THE COMPANY will indicate the maximum amount that may be withheld in accordance with Section 42 of this ‘FUNDS WITHHELD’ sectionAgreement. Such maximum amount shall be an amount equal to the deduction for reinsurance ceded from THE COMPANY’s liabilities for policies ceded under this Agreement plus a provision for adverse deviation. Such amount shall include, but not be limited to, reinsurance reserves credits, reserves for claims and losses incurred (including losses incurred but not reported), loss adjustment expenses, and unearned premiums. The amount included for adverse deviation in claims and losses over the subsequent 3-month period shall be no more than ten percent (10%) of expected claims. Claims in dispute will not be included in this calculation. b. d. THE COMPANY will credit interest on the Funds Withheld during the calendar quarter. The amount of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over the quarter. The interest rate used will be based on the sum of the London Interbank Office Rate, U.S. Denomination-Fixed Twelve-month, (LIBOR) as of the beginning of the calendar quarter, plus 9▇ ▇▇▇▇▇ ▇▇▇▇▇▇. ▇-▇▇▇▇▇-▇▇▇▇-▇▇▇▇▇ (▇▇▇▇▇’S 50%)-PLAZ 3/21/2007 e. THE COMPANY shall return to THE REINSURER any Funds Withheld which are in excess of the maximum amounts required. f. THE REINSURER and THE COMPANY agree that any Funds Withheld provided by THE REINSURER pursuant to the provisions of this Agreement may be drawn upon by THE COMPANY in full or in part at any time, notwithstanding any other provisions of this Agreement, and may be utilized by THE COMPANY or any successor by operation of law of THE COMPANY including without limitation, any liquidator, rehabilitator, receiver or conservator of THE COMPANY for any of the following purposes: i. (i) to reimburse THE COMPANY for unearned reinsurance premiums on THE REINSURER’s share of premium returned to the owners of policies reinsured under this the Agreement on account of cancellations of such policies; (ii. ) to reimburse THE COMPANY for THE REINSURER’s share of claims, benefits or losses paid by THE COMPANY under the terms and provisions of the policies reinsured under this Agreement; iii. Any other amount necessary under THE COMPANY’s state of domicile to secure reserve credit for , provided such claims are not disputed by THE REINSURER’s proportionate share of the statutory reserves;; and iv. (iii) to pay any other amounts THE COMPANY claims are due under this Agreement: Agreement that THE REINSURER does not dispute. All of the foregoing will be applied without diminution because of insolvency on the part of THE REINSURER. c. At the end of each calendar quarter, THE COMPANY will credit interest on the Funds Withheld during the previous quarter. The amount of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over the quarter. The interest rate will be equal to the sum of the London Interbank Office Rate, U.S. Denomination-Fixed Twelve-month, (LIBOR) as of the beginning of the calendar quarter, plus ninety (90) basis points. d. THE COMPANY agrees to return to THE REINSURER any Funds Withheld that are in excess of the actual amounts required. The Funds Withheld shall remain in effect until the later of the termination of this Reinsurance Agreement or the full satisfaction and discharge of any and all liabilities and obligations owed by THE REINSURER to THE COMPANYcircumstances described in Section 42 are no longer applicable, unless THE REINSURER and THE COMPANY have successfully agreed to resolution of the issue using the procedure outlined in the Issue Resolution section of Section 26, or have mutually agree agreed in writing to terminate the Funds Withheld at an earlier date. If any Funds Withheld remain after the parties have mutually agreed in writing to terminate the Funds Withheld, THE COMPANY shall remit such amounts plus any interest due thereon to THE REINSURER within fifteen (15) days of the termination of the Funds Withheld.

Funds Withheld. a. Under The Ceding Company and the circumstances Reinsurer have entered into the "Accounts Receivable Agreement" attached to this Agreement as Exhibit A. Pursuant to the terms of the Accounts Receivable Agreement, the Ceding Company will withhold on behalf of the Reinsurer the amounts described in Paragraphs 1 and 2 above. The amount withheld by the ‘TOTAL SECURITY’ section of this Agreement, THE REINSURER may provide Ceding Company will be credited to THE COMPANY the Reinsurer and will be considered as an amount of cash to be held on deposit (“Funds Withheld”) behalf of the Reinsurer. The Reinsurer will consider such amount as a receivable and the Ceding Company will consider such amount as a payable. Such amount withheld will be subject to repayment in accordance with respect to all the amounts recoverable from THE REINSURER under this Agreement so as to avoid triggering THE COMPANY’s right terms of recapture under the ‘RECAPTURE’ section of this Accounts Receivable Agreement. If THE REINSURER elects to do so, the The Funds Withheld must satisfy the requirements of subsections b., c., and d. of this ‘FUNDS WITHHELD’ section. b. THE REINSURER and THE COMPANY agree that any Funds Withheld provided by THE REINSURER pursuant to the provisions of this Agreement may be drawn upon by THE COMPANY in full or in part at any time, notwithstanding any other provisions of this Agreement, and may be utilized by THE COMPANY or any successor by operation of law of THE COMPANY including without limitation, any liquidator, rehabilitator, receiver or conservator of THE COMPANY for any of the following purposes: i. to reimburse THE COMPANY for unearned reinsurance premiums on returned to the owners of policies reinsured under this Agreement on account of cancellations of such policies; ii. to reimburse THE COMPANY for THE REINSURER’s share of benefits or losses paid by THE COMPANY under the terms and provisions of the policies reinsured under this Agreement; iii. Any other amount necessary under THE COMPANY’s state of domicile to secure reserve credit for THE REINSURER’s proportionate share of the statutory reserves; iv. to pay any other amounts THE COMPANY claims are due under this Agreement: All of the foregoing will be applied without diminution because of insolvency on the part of THE REINSURER. c. At the end of each calendar quarter, THE COMPANY will credit interest on the Funds Withheld during the previous quarter. The amount of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over the quarter. The interest rate Accounting Period will be equal to the sum of the London Interbank Office Rate(i) plus (ii) minus (iii), U.S. Denomination-Fixed Twelve-month, where: (LIBORi) as of the beginning of the calendar quarter, plus ninety (90) basis points. d. THE COMPANY agrees to return to THE REINSURER any Funds Withheld that are in excess of the actual amounts required. The Funds Withheld shall remain in effect until the later of the termination of this Reinsurance Agreement or the full satisfaction and discharge of any and all liabilities and obligations owed by THE REINSURER to THE COMPANY, unless THE REINSURER and THE COMPANY mutually agree in writing to terminate equals the Funds Withheld at an earlier date. If any the end of the preceding Accounting Period; (ii) equals the Funds Withheld remain after Rate, as described in Schedule E, Paragraph 1, times the parties have mutually agreed Reinsurance Premiums, determined in writing accordance with Paragraph 2 above, but not to terminate exceed $6 million for the current calendar year; and (iii) equals any payment by the Ceding Company to the Reinsurer of any amount withheld, as described in items (i) and (ii) above, during the Accounting Period in accordance with the Accounts Receivable Agreement. With respect, however, to the Accounting Period during which the Effective Date of this Agreement occurs, the reference in (i) above to "the Funds Withheld, THE COMPANY shall remit such amounts plus any interest due thereon to THE REINSURER within fifteen (15) days Withheld at the end of the termination preceding Accounting Period" means 3.2 percent of the Initial Consideration, determined in accordance with Paragraph 1 above, but not to exceed $15 million. In no event will the Funds WithheldWithheld at the end of any Accounting Period exceed 50 percent of the Ceding Company's total statutory capital and surplus as of the end of the preceding calendar year.

Funds Withheld. a. Under To secure Reinsurer’s obligations to the circumstances described Company, the Company shall retain exclusive control of the net ceded premium. The net ceded premium collected by the Company and retained hereunder plus any additional cash collateral provided to the Company shall be known as the “Funds Withheld” and shall be held in the ‘TOTAL SECURITY’ section “Funds Withheld Account” (as such terms are hereinafter defined). As used herein, the following terms shall have the following meanings: A. The Funds Withheld Account shall be comprised of funds that may, depending on loss experience, become due to Reinsurer, to be held by the Company subject to the terms and conditions of this Agreement, THE REINSURER may provide to THE COMPANY an amount . (i) The average monthly balance of cash to be held on deposit (“Funds Withheld”) with respect to all the amounts recoverable from THE REINSURER under this Agreement so as to avoid triggering THE COMPANY’s right of recapture under the ‘RECAPTURE’ section of this Agreement. If THE REINSURER elects to do so, the Funds Withheld must satisfy the requirements of subsections b., c., and d. of this ‘FUNDS WITHHELD’ section. b. THE REINSURER and THE COMPANY agree that any Funds Withheld provided by THE REINSURER pursuant to the provisions of this Agreement may be drawn upon by THE COMPANY in full or in part at any time, notwithstanding any other provisions of this Agreement, and may be utilized by THE COMPANY or any successor by operation of law of THE COMPANY including without limitation, any liquidator, rehabilitator, receiver or conservator of THE COMPANY for any of the following purposes: i. to reimburse THE COMPANY for unearned reinsurance premiums on returned to the owners of policies reinsured under this Agreement on account of cancellations of such policies; ii. to reimburse THE COMPANY for THE REINSURER’s share of benefits or losses paid by THE COMPANY under the terms and provisions of the policies reinsured under this Agreement; iii. Any other amount necessary under THE COMPANY’s state of domicile to secure reserve credit for THE REINSURER’s proportionate share of the statutory reserves; iv. to pay any other amounts THE COMPANY claims are due under this Agreement: All of the foregoing will be applied without diminution because of insolvency on the part of THE REINSURER. c. At the end of each calendar quarter, THE COMPANY will credit interest on the Funds Withheld during the previous quarter. The amount of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over the quarter. The interest rate will Account shall be equal to the sum of the London Interbank Office Rate, U.S. Denomination-Fixed Twelve-beginning balance and the ending balance of the Funds Withheld Account for such month, divided by two. (LIBORii) as Monthly interest shall be calculated by the Company on the average monthly balance of the beginning Funds Withheld Account for a particular month. The monthly interest so calculated shall equal the interest rate for a three-month U.S. Treasury Note, as said interest shall appear on the first calendar day of the calendar quarter. However, in the event the insured’s losses exceed the aggregate coverage provided herein, the Company shall not owe or pay any such interest. B. Reinsurer hereby agrees to provide additional cash collateral, letters of credit or other financial instruments acceptable to the Company (the “Assets”) and to maintain such Assets in the Funds Withheld Account in sums at least equal to the reserves the Company has determined to be required on the business which is the subject of this Agreement on a monthly basis, hereby called the “Required Account Balance.” For purposes of this Agreement, the Required Account Balance shall be ninety percent (90%) of eighty-seven and one-half percent (87.5%) of AGP plus ten percent (10%) of twenty percent (20%) of AGP. At no time shall the Required Account Balance be allowed to be less than said ninety percent (90%) of eighty-seven and one-half percent (87.5%) of AGP plus ten percent (10%) of twenty percent (20%) of AGP. C. Reinsurer authorizes the Company to deposit and maintain in the Funds Withheld Account any funds ceded by the Company to Reinsurer under this Reinsurance Agreement, plus ninety (90) basis pointsall collateral funds received by the Company from Reinsurer. Reinsurer authorizes the Company to withdraw from the Funds Withheld Account any amounts owed by Reinsurer to the Company under this Agreement. d. THE COMPANY agrees D. Within forty-five (45) days after the end of each month, the Company shall furnish to return to THE REINSURER any Reinsurer a statement for such month that sets forth the actual balance of the Funds Withheld that are in excess Account and the amount of the actual Required Account Balance for such month. Thirty (30) days after the delivery of such statement, Reinsurer may request in writing that the Company release that portion of the Funds Withheld Account that exceeds the Required Account Balance set forth in such statement, if any. Such request shall state the amount to be released from the Funds Withheld Account and the recipient of such payment. Reinsurer may reduce any claims payments due the Company by an offset against the excess funds, if any, in the Funds Withheld Account and Reinsurer authorizes the withdrawal of such amounts requiredfrom the Funds Withheld Account. The Company shall have no obligation to release or allow the withdrawal of any funds from the Funds Withheld shall remain Account if such release or withdrawal would result in effect until the later amount in the Funds Withheld Account falling below the Required Account Balance. E. The Company will credit to the balance of the termination of this Reinsurance Agreement or the full satisfaction and discharge of Funds Withheld Account any and all liabilities and obligations owed Assets deposited by THE REINSURER to THE COMPANY, unless THE REINSURER and THE COMPANY mutually agree in writing to terminate Reinsurer with the Company under the terms of this Agreement. If upon written notice by the Company the amount of the Funds Withheld at an earlier date. If any Funds Withheld remain after Account is less than the parties have mutually agreed in writing to terminate the Funds WithheldRequired Account Balance, THE COMPANY shall remit such amounts plus any interest due thereon to THE REINSURER Reinsurer agrees, within fifteen (15) days of receiving notice, to increase the termination Assets deposited in the Funds Withheld Account to equal or exceed the Required Account Balance, as otherwise required in Subsection (B) of this Section 6. Reinsurer authorizes the Company to commingle any cash with its own funds, provided suitable account balance identification is maintained, and to invest the funds in any investment allowed under South Carolina insurance regulations, subject to the provisions of Article 7 below. F. The Company shall be under no duty or responsibility with respect to the Funds Withheld Account, except to hold the Assets in the Funds Withheld Account, to accurately report and provide notice as required hereunder, to release funds from the Funds Withheld Account only to extent allowed or required by the Funds Withheld Account provisions of this Agreement, and to otherwise fulfill its obligations under this Agreement. G. The Company shall credit Reinsurer with interest based on the interest rate for three-month U.S. Treasury Notes calculated on the average monthly balance of the Funds WithheldWithheld Account. Interest will accrue and will be credited to the Funds Withheld Account on a monthly basis, commencing on the first day of the first calendar month following the date that this Agreement is entered into and continuing on the first day of every calendar month thereafter while the Agreement is in effect. All of the Assets in the Funds Withheld Account shall be available to be used towards the satisfaction of all claims and losses up to the amount of the aggregate hereunder. In no event shall investment income be earned by or accredited to the Reinsurer if losses are equal to or exceed the aggregate. Nothing contained herein shall be construed as other than requiring payment in full of collateral into the Funds Withheld Account, promptly upon the execution of this Agreement, as stated above, in the form of Assets acceptable to the Company.

Funds Withheld. a. Under (a) It is hereby agreed that the circumstances described Reinsurer shall be allowed to pay to the Reinsured, and the Reinsured shall thereafter retain, Aggregate Ultimate Net Losses, in whole or in part, in advance of the ‘TOTAL SECURITY’ section of date due and payable hereunder. The advance Aggregate Ultimate Net Losses so retained shall be defined as Funds Withheld under this Agreement, THE REINSURER may provide to THE COMPANY an and the cumulative amount of cash retained advance Aggregate Ultimate Net Losses, subject to the adjustments described below, shall be held on referred to as the Funds Withheld Balance. The Reinsurer may terminate this Funds Withheld provision in whole or in part, at its sole option, at any time, subject to the re-institution, in advance of such termination, of all security and deposit (“Funds Withheld”) with respect to all the amounts recoverable from THE REINSURER under this Agreement so as to avoid triggering THE COMPANY’s right of recapture under the ‘RECAPTURE’ section of requirements set forth elsewhere in this Agreement. If THE REINSURER elects to do so, the This Funds Withheld must provision does not relieve the Reinsurer of its obligations to provide security and/or make deposits required elsewhere in this Agreement to the extent that Funds Withheld are insufficient to satisfy the requirements of subsections b., c., and d. of this ‘FUNDS WITHHELD’ sectionsuch requirements. b. THE REINSURER and THE COMPANY agree (b) The Reinsured agrees that any Funds Withheld provided by THE REINSURER pursuant to the provisions of this Agreement may be drawn upon by THE COMPANY in full or in part at any time, notwithstanding any other provisions of this Agreement, and may be utilized by THE COMPANY or any successor by operation of law of THE COMPANY including without limitation, any liquidator, rehabilitator, receiver or conservator of THE COMPANY for any of the following purposes: i. to reimburse THE COMPANY for unearned reinsurance premiums on returned to the owners of policies reinsured under this Agreement on account of cancellations of such policies; ii. shall be applied to reimburse THE COMPANY for THE REINSURER’s share of benefits satisfy, in whole or losses paid by THE COMPANY under in part, to the terms and provisions maximum extent possible given the amount of the policies reinsured under Funds Withheld Balance, any security and deposit requirements associated with this Agreement; iiiAgreement imposed by any regulatory authority having jurisdiction over the Reinsured. Any other amount necessary under THE COMPANY’s state If this Funds Withheld provision is not acceptable to any such regulatory authority, upon receipt of domicile a written demand from such regulatory authority to secure reserve credit for THE REINSURER’s proportionate share eliminate all or part of the statutory reserves; iv. Funds Withheld Balance, the Reinsurer agrees that the Reinsured shall have the right to pay any other amounts THE COMPANY claims are due under this Agreement: All return to the Reinsurer that part of the foregoing will be applied without diminution because of insolvency on then current Funds Withheld Balance that is at issue, at which time the part of THE REINSURER. c. Reinsurer shall provide security for the reinsurance herein, and other statutorily prescribed security deposits, satisfactory to the regulatory authorities, at the Reinsurer's expense. At the end of each calendar quarter the Funds Withheld Balance shall be equal to: (i) The Funds Withheld Balance at the end of the prior quarter plus, (ii) Increases in Aggregate Ultimate Net Losses ceded under this Agreement that the Reinsurer chooses to pay in advance as Funds Withheld, minus (iii) Decreases in Aggregate Ultimate Net Losses ceded under this Agreement that the Reinsurer chooses to apply as a credit against Funds Withheld, minus (iv) Aggregate Ultimate Net Losses paid by Reinsurer's Set-Off (as defined below) for the quarter, THE COMPANY will credit minus (v) Funds Withheld Balance repaid, if any, by the Reinsured to the Reinsurer, plus (vi) Interest at the rate of interest actually earned (gross of taxes) by the Reinsured on the Funds Withheld Balance during the previous quarter. (c) The Reinsured agrees that the Funds Withheld Balance may, at the Reinsurer's option, be set off by the Reinsurer (the "Reinsurer's Set-Off") against liability of any nature whatsoever (whether then contingent, due and payable, or in the future becoming due) that it may then have, or in the future may have under this Agreement, and such set off shall occur as a condition precedent to any further payments by the Reinsurer hereunder. The amount Reinsurer shall have no obligation whatsoever to pay Aggregate Ultimate Net Losses ceded under this Agreement directly to the Reinsured to the extent of interest that THE COMPANY will credit will be based on the average amount of Funds Withheld over Balance already held by the quarter. The interest rate will be equal to the sum of the London Interbank Office Rate, U.S. Denomination-Fixed Twelve-month, (LIBOR) as of the beginning of the calendar quarter, plus ninety (90) basis pointsReinsured. d. THE COMPANY (d) To secure its obligations hereunder, the Reinsured agrees to return to THE REINSURER any pay the Funds Withheld into the Reinsured's statutory workers' compensation pledged asset trust account (or such other account as may be agreed from time to time by the Reinsurer), and that are in excess of the actual amounts required. The Funds Withheld shall remain be maintained in effect until a segregated account and shall not be co-mingled with the later of the termination of this Reinsurance Agreement or the full satisfaction and discharge of any and all liabilities and obligations owed by THE REINSURER to THE COMPANY, unless THE REINSURER and THE COMPANY mutually agree in writing to terminate Reinsured's general account assets. The Reinsured agrees that the Funds Withheld at an earlier dateBalance shall be invested pursuant to investment guidelines agreed to from time to time by the Reinsurer. If any Funds Withheld remain after paid to the parties have mutually agreed in writing Reinsured through the Reinsurer's Set-Off shall be immediately transferred from the segregated account to terminate the Reinsured's general accounts. To the extent the Funds WithheldWithheld Balance exceeds the Aggregate Ultimate Net Losses ceded under this Agreement, THE COMPANY shall remit such amounts plus any interest due thereon to THE REINSURER within fifteen the Reinsured shall, on five (155) days of advance written notice from the termination of Reinsurer, pay such excess to the Funds WithheldReinsurer in accordance with the Reinsurer's instructions.