EXHIBIT E-1
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PEERLESS POST-CLOSING INDEMNITY REINSURANCE AGREEMENT
by and between
ONEBEACON INSURANCE COMPANY
and
PEERLESS INSURANCE COMPANY
Dated as of November 1, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS...................................................1
ARTICLE II. COVERAGE......................................................1
ARTICLE III. GENERAL PROVISIONS............................................2
ARTICLE IV. REINSURANCE PREMIUMS, CEDING COMMISSION, RECOVERIES AND
COMMUTATIONS..................................................2
ARTICLE V. REPORTS AND REMITTANCES.......................................3
ARTICLE VI. DURATION AND TERMINATION......................................3
ARTICLE VII. INSOLVENCY....................................................4
ARTICLE VIII. DISPUTE RESOLUTION............................................4
ARTICLE IX. REINSURANCE CREDIT, REINSURANCE SECURITY......................5
ARTICLE X. MISCELLANEOUS PROVISIONS......................................6
EXHIBITS
Exhibit A Glossary of Terms
Exhibit B Form of Monthly Report
SCHEDULES
Schedule 2.1 Ceded External Reinsurance Arrangements
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PEERLESS POST-CLOSING INDEMNITY
REINSURANCE AGREEMENT
This PEERLESS POST-CLOSING INDEMNITY
REINSURANCE AGREEMENT, dated as of
November 1, 2001 (this "Agreement"), is entered into by and between OneBeacon
Insurance Company, a stock insurance company organized under the laws of the
Commonwealth of Pennsylvania ("OBIC") and Peerless Insurance Company, a stock
insurance company organized under the laws of the State of New Hampshire
("Peerless").
W I T N E S S E T H
WHEREAS, the Master Agreement, dated as of October 30, 2001 by and among
White Mountains Insurance Group, Ltd., OneBeacon Corporation and Liberty Mutual
Insurance Company contemplates the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Glossary of Terms, which is
attached hereto as Exhibit A and incorporated herein.
ARTICLE II.
COVERAGE
Section 2.1 COVERAGE. From and after the Effective Date, OBIC agrees to
cede to Peerless, and Peerless agrees to accept, 100% of the Reinsured
Liabilities incurred under the OneBeacon Post-Closing Policies which have policy
periods that become effective during the term of this Agreement (the
"Policies"), net of all reinsurance recoverables with respect to such Reinsured
Liabilities incurred under (i) the ceded external reinsurance arrangements
described on SCHEDULE 2.1 and (ii) any other ceded external reinsurance
arrangements entered into by OBIC, at the request of Peerless, which become
effective on or after the Effective Date, whether or not actually collected or
collectible (collectively, the "Ceded External Reinsurance Arrangements"), in
each case, that have not been commuted.
Section 2.2 TERRITORY. The territorial limits of this Agreement shall
apply wherever the Policies apply.
ARTICLE III.
GENERAL PROVISIONS
Section 3.1 INSPECTION. The parties to this Agreement or their designated
representatives may inspect, at the offices of Peerless, OBIC, any RAM Group
Company or any OneBeacon Insurer where such records are located, any and all
books, records or documents relating to the Policies including, without
limitation, any information necessary for Peerless to audit, on a monthly basis,
the report furnished each month pursuant to Section 5.1 to ensure that only
premiums and Reinsured Liabilities incurred under the Policies relating to the
Business are ceded to Peerless under this Agreement during normal business hours
and upon reasonable prior notice for such period as this Agreement is in effect
or for as long thereafter as any rights or obligations of any party survives;
PROVIDED, that a representative from the other party shall have the right to be
present during such inspection. The information obtained pursuant to this
provisions shall be used only for purposes relating to reinsurance under this
Agreement.
Section 3.2 UNDERWRITING. OBIC covenants and agrees that any
reinsurance
agreement between OBIC and a OneBeacon Insurer with respect to the Policies
shall provide that the Policies reinsured thereunder shall be issued or renewed
by such OneBeacon Insurer in accordance with the terms of the Post-Closing
Serviced Policies Administrative Services Agreement.
Section 3.3 COMMUTATIONS. OBIC covenants and agrees not to commute any
Ceded External Reinsurance Arrangement with respect to the Reinsured Liabilities
incurred under the Policies without the consent of Peerless.
Section 3.4 CESSION OF POLICIES TO OBIC. OBIC covenants and agrees that it
will cause each of the OneBeacon Insurers to cede to OBIC 100% of the Reinsured
Liabilities incurred under the Policies.
ARTICLE IV.
REINSURANCE PREMIUMS, CEDING COMMISSION, RECOVERIES AND
COMMUTATIONS
Section 4.1 REINSURANCE PREMIUMS. Peerless shall be entitled to receive
from OBIC a reinsurance premium equal to 100% of the written premium, premium
adjustments and Other Income with respect to the Policies less an amount equal
to reinsurance premiums payable under the Ceded External Reinsurance
Arrangements with respect to the Policies.
Section 4.2 CEDING COMMISSION. OBIC shall be entitled to receive from
Peerless a ceding commission equal to 100% of Cedent's Expenses incurred by the
OneBeacon Insurers with respect to the Policies.
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Section 4.3 RECOVERIES. Peerless shall be entitled to receive from OBIC,
and OBIC hereby assigns to Peerless, all salvage and subrogation received, if
any, by the OneBeacon Insurers with respect to the Policies relating to Losses
paid by Peerless.
Section 4.4 COMMUTATION AMOUNTS. Peerless shall be entitled to receive
from OBIC 100% of commutation amounts received by the OneBeacon Insurers with
respect to the Policies in connection with any commutation of a Ceded External
Reinsurance Arrangement.
Section 4.5 UNCOLLECTIBLE REINSURANCE. OBIC shall be entitled to receive
from Peerless 100% of any paid reinsurance recoverable under a Ceded External
Reinsurance Arrangement which becomes uncollectible and is charged off in
accordance with statutory accounting practices. Any recovery of a previously
charged off paid reinsurance recoverable shall be paid by OBIC to Peerless. Such
amounts shall be included in the monthly report delivered pursuant to Section
5.1.
ARTICLE V.
REPORTS AND REMITTANCES
Section 5.1 MONTHLY REPORTS. Within fifteen (15) calendar days after the
end of each calendar month, commencing with November 30, 2001, OBIC shall
furnish to Peerless a report (i) setting forth for such calendar month in
accordance with the provisions of this Agreement, the information, including,
without limitation, the net balance due to either party under this Agreement,
(ii) and in the format, each as set forth on Exhibit B.
Section 5.2 PAYMENT OF AMOUNTS DUE. Any balance due to either party in
accordance with the report furnished each month pursuant to Section 5.1 shall be
paid each month by the other within thirty (30) days of receipt of such report
by Peerless. Any amounts owed to or by any party hereto, shall be netted against
amounts owed to or by any such party in accordance with the Offset Agreement.
Except as otherwise specifically provided herein, the reinsurance premium shall
be remitted to Peerless on an earned basis, and Loss and Allocated Loss
Adjustment Expenses shall be remitted to OBIC on a paid basis.
Section 5.3 ADDITIONAL REPORTS AND UPDATES. For so long as this Agreement
remains in effect and thereafter until all Reinsured Liabilities incurred under
the Policies are fully and finally settled, OBIC and Peerless shall periodically
furnish to each other such other reports and information relating to the
Policies as may be reasonably required by OBIC or Peerless, as the case may be.
ARTICLE VI.
DURATION AND TERMINATION
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Section 6.1 DURATION. Except as otherwise provided herein, this Agreement
shall be continuous until terminated.
Section 6.2 PEERLESS' LIABILITY. Peerless' liability with respect to the
Reinsured Liabilities incurred under the Policies will terminate on the date
OBIC's liability with respect to such Reinsured Liabilities incurred is
terminated and all obligations of Peerless hereunder are fulfilled.
ARTICLE VII.
INSOLVENCY
Section 7.1 PAYMENTS. In the event of the insolvency of OBIC, payments due
OBIC on all reinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement shall be payable by Peerless directly to OBIC or to its
liquidator, receiver, or statutory successor on the basis of the liability of
OBIC under the policy or policies reinsured, without diminution because of the
insolvency of OBIC. It is agreed and understood, however, (i) that in the event
of the insolvency of OBIC, Peerless shall be given written notice of the
pendency of a claim against OBIC on a Policy within reasonable time after such
claim is filed in the insolvency proceeding and (ii) that during the pendency of
such claim, Peerless may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any defenses
which it may deem available to OBIC or its liquidator, receiver or statutory
successor. Nothing in this Agreement shall give any insured or any other person
any rights against Peerless with respect to any Policy reinsured hereunder or
otherwise.
Section 7.2 EXPENSES. It is further understood that any expense incurred
by Peerless pursuant to Section 7.1 shall be chargeable, subject to court
approval, against OBIC as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to OBIC solely as a result
of the defense undertaken by Peerless.
Section 7.3 SETOFF. In the event of the insolvency of OBIC or Peerless,
any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against OBIC or
Peerless, including debts or credits under the Rewritten Indemnity
Reinsurance
Agreement, are deemed mutual debts or credits, as the case may be, as between
OBIC and Peerless and, as between them, shall be setoff, and only the net
balance shall be allowed or paid.
ARTICLE VIII.
DISPUTE RESOLUTION
Section 8.1 DISPUTE RESOLUTION. As a condition precedent to any right of
action hereunder, if any dispute shall arise between OBIC and Peerless with
reference to the interpretation or performance of this Agreement, including the
formation or validity thereof, or their rights with respect to any transaction
involved, whether such dispute arises before or after
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the termination of this Agreement, such dispute, upon the written request of
either party, shall be submitted for resolution by arbitration. Within 30 days
after receipt of such written request, each party shall select one arbitrator
(for a total of two), and such selected arbitrators shall select a third
arbitrator within 60 days after receipt of such written request for arbitration.
If either party fails to select an arbitrator within such time period, the
arbitrator that was timely selected by the other party shall serve as the sole
arbitrator. If the two arbitrators fail to agree upon the selection of a third
arbitrator within the time limit allowed, the third arbitrator shall be selected
by the two arbitrators from a panel of five arbitrators proposed by the American
Arbitration Association or, if the two arbitrators fail to agree upon a
selection within 10 days, the third arbitrator shall be selected in accordance
with the rules of the American Arbitration Association. All arbitrators shall be
active or retired disinterested officers of a property and casualty insurance or
reinsurance company. No arbitrator shall be or have been affiliated with or
employed by any party hereto or their respective Affiliates.
The arbitrators shall interpret this Agreement as an honorable engagement
and not merely as a legal obligation; they are relieved of all judicial
formalities and may abstain from following the strict rules of law and they
shall make their award with a view to effecting the general purpose of this
Agreement in a reasonable manner rather than in accordance with a literal
interpretation of the language. The arbitration shall occur in Boston,
Massachusetts or a mutually acceptable location. The arbitrators shall make
their determination within 60 days after the appointment of the last arbitrator.
The decision of any two arbitrators, or of the sole arbitrator in the
event of untimely appointment, when filed with the parties hereto, shall be
final and binding on both parties and need not be in writing; PROVIDED that the
amount of the award, if any, shall be in writing by the arbitrator or
arbitrators as the case may be. Judgment may be entered upon the final decision
of the arbitrators in any court having jurisdiction. The final judgment of the
arbitrators, and any award rendered thereon, shall not be subject to appeal.
Unless otherwise provided in the arbitration award, each party shall bear
the expense of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and of the arbitration. If the
panel consists of only one arbitrator due to the failure of one party to timely
appoint an arbitrator, the party that appointed such arbitrator shall be
responsible for the fees and expenses of such arbitrator.
ARTICLE IX.
REINSURANCE CREDIT, REINSURANCE SECURITY
Section 9.1 REINSURANCE CREDIT. Notwithstanding any other provision of
this Agreement to the contrary, if Peerless is or at any time becomes
unauthorized or unaccredited in any applicable state or the District of Columbia
or any other jurisdiction where authorization or accreditation is required by
insurance regulatory authorities in order for OBIC to obtain credit on its
statutory annual statements for the reinsurance being provided under this
Agreement, then Peerless shall establish, on behalf of and at the request of
OBIC, a trust account which complies
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in all respects with the requirements of Section 114 of the Regulations of the
New York Insurance Department (or such other escrow accounts, trust accounts,
letters of credit, premiums withheld or similar funds as may be required by
applicable law) in order to permit OBIC to obtain credit for such reinsurance in
such jurisdiction. OBIC shall have the option of requesting such other escrow
accounts, trust accounts, letters of credit, premiums withheld by OBIC, similar
funds or a combination thereof as may be accepted by Peerless, such acceptance
not to be unreasonably withheld.
Section 9.2 REINSURANCE SECURITY. Notwithstanding any provision of this
Agreement to the contrary, if Peerless fails to maintain a claims paying ability
rating from A.M. Best Company, Inc. ("A.M. Best") of at least A-, Peerless
shall, within thirty (30) days of the public announcement by A.M. Best, fully
collateralize all of its outstanding reinsurance obligations to OBIC under this
Agreement. Peerless shall be released from its obligation to collateralize its
outstanding obligations to OBIC under this Section 9.2 in the event that
Peerless shall thereafter maintain a claims paying ability rating from A.M. Best
of at least A-; PROVIDED, that Peerless shall continue to have the obligation to
collateralize its outstanding reinsurance obligations pursuant to this Section
9.2 in the event that Peerless fails thereafter to maintain a claims paying
ability rating from A.M. Best of at least A-. Such collateralization shall be by
a trust account which complies in all respects with the requirements of Section
114 of the Regulations of the
New York Insurance Department or any other method
requested by OBIC which is reasonably acceptable to Peerless.
Section 9.3 NOTICES. Peerless shall promptly notify OBIC of (i) any loss
of license, authorization or accreditation, or change of condition of Peerless
which, in the reasonable judgment of Peerless, may affect the ability of OBIC to
obtain credit for reinsurance hereunder, or (ii) any downgrade or reasonably
anticipated downgrade of its claims paying ability rating from A.M. Best.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1 HEADINGS. The headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.
Section 10.2 EXHIBITS AND SCHEDULES. Any Exhibits and Schedules to this
Agreement that are specifically referred to herein are a part of this Agreement
as if fully set forth herein. All references herein to Articles, Sections,
subsections, paragraphs, subparagraphs, clauses, Exhibits and Schedules shall be
deemed references to such parts of this Agreement, unless the context shall
otherwise require.
Section 10.3 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally, by facsimile (which is confirmed) with a duplicate copy sent by
overnight courier (providing proof of
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delivery) or sent by overnight courier (providing proof of delivery), to the
parties at the following address:
If to OBIC:
OneBeacon Insurance Company
c/o
OneBeacon Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Peerless:
Peerless Insurance Company
c/o Liberty Mutual Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice given in accordance with this Section 10.3 to the
other parties, designate another address or person for receipt of notices
hereunder provided that notice of such a change shall be effective upon receipt.
Section 10.4 BINDING EFFECT; ASSIGNMENT. This Agreement will be binding
upon and inure to the benefit of Peerless and OBIC and their respective
successors, assigns and legal representatives. Neither this Agreement, nor any
rights, interests or obligations hereunder, may be assigned, in whole or in
part, by any party without the prior written consent of the other party and any
such assignment that is not consented to shall be null and void. It being
understood for the avoidance of doubt that in the event that a party shall merge
or consolidate with another Person or enter into a business combination with
another Person, such merger, consolidation or business combination shall not be
deemed to be an assignment and, accordingly, no consent of any Person shall be
required hereunder.
Section 10.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
Section 10.6 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES;
PRESERVATION OF REMEDIES. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of OBIC and Peerless or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege, nor
any single or
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partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
Section 10.7 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED AS TO
FORMATION, PERFORMANCE, INTERPRETATION AND ENFORCEMENT BY THE LAWS OF THE STATE
OF
NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.
Section 10.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no general or specific warranties, representations or other agreements by or
among the parties in connection with the entering into of this Agreement or the
subject matter hereof except as specifically set forth or contemplated herein.
Section 10.9 NEGOTIATED AGREEMENT. This Agreement has been negotiated by
the parties and the fact that the initial and final draft have been prepared by
either party or an intermediary will not give rise to any presumption for or
against any party to this Agreement or be used in any respect or forum in the
construction or interpretation of this Agreement or any of its provisions.
Section 10.10 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, OBIC and Peerless direct that such court
interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
Section 10.11 INTERPRETATION. Whenever the words "include," "includes," or
"including," are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.12 ERRORS AND OMISSIONS. Any inadvertent delay, error or
omission will not be held to relieve either party hereto from any liability that
would attach to it hereunder if such delay, error or omission had not been made,
providing such error or omission is rectified promptly upon discovery.
Section 10.13 CURRENCY. All payments made in accordance with the terms of
this Agreement shall be in the currency of the United States.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives intending thereby
to be legally bound.
ONEBEACON INSURANCE COMPANY
By:
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Name:
Title:
PEERLESS INSURANCE COMPANY
By:
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Name:
Title:
EXHIBIT A
GLOSSARY OF TERMS
EXHIBIT B
FORM OF MONTHLY REPORT
SCHEDULE 2.1
CEDED EXTERNAL REINSURANCE ARRANGEMENTS
1. The Hartford Steam Boiler 100% Quota Share Treaty
2. Facultative Placements
3. Florida Hurricane Catastrophe Fund Cessions
4. Involuntary Reinsurance Pool Cessions
5. Any other per policy reinsurance arrangement processed by and through
OBIC's existing systems as of the Effective Date.