EXHIBIT 99(m)
ADVERSE DEVELOPMENT
AGREEMENT OF REINSURANCE NO. 8888
between
POTOMAC INSURANCE COMPANY
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(herein referred to as the "Reinsurer")
and
GENERAL REINSURANCE CORPORATION
a Delaware corporation
having its principal offices at
Financial Centre
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ P.O. Box 10350
Stamford, Connecticut 06904-2350
(herein referred to as the "Retrocessionaire")
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In consideration of the promises set forth in this Agreement, the parties agree
as follows:
ARTICLE I - CONDITIONS PRECEDENT
The following are conditions precedent to the Retrocessionaire's obligations
under this Agreement:
(1) Acquisition of CGU INSURANCE COMPANY and its affiliated
companies by White Mountains Insurance Group, Ltd. by no later
than July 1, 2001;
(2) Execution of the Original Contract; and
(3) Payment by the Reinsurer to the Retrocessionaire on the Closing
Date of 100% of the reinsurance premium due to the Reinsurer on
the Closing Date.
ARTICLE II - SCOPE OF AGREEMENT
The Reinsurer shall retrocede to the Retrocessionaire the business described in
this Agreement, and the Retrocessionaire shall accept such business as a
retrocession from the Reinsurer. The terms of this Agreement shall determine the
rights and obligations of the Reinsurer and the Retrocessionaire.
ARTICLE III - PARTIES TO THE AGREEMENT
This Agreement is solely between the Reinsurer and the Retrocessionaire.
Performance of the obligations of each party under this Agreement shall be
rendered solely to the other party. However, if the Reinsurer becomes insolvent,
the liability of the Retrocessionaire shall be modified to the extent set forth
in the article entitled INSOLVENCY OF THE REINSURER. In no instance shall any
insured or reinsured of the Reinsurer or any claimant against an insured or
reinsured of the Reinsurer have any rights under this Agreement.
ARTICLE IV - BUSINESS COVERED
This Agreement shall apply to Ultimate Net Loss assumed by the Reinsurer under
the Adverse Development Agreement of Reinsurance (hereinafter referred to as the
"Original Contract") between the Reinsurer and the Company, as defined in the
Original Contract. Capitalized terms used in this Agreement which are not
defined in this Agreement shall have the meanings defined in the Original
Contract.
A copy of the Original Contract and Endorsements, if any, thereto are attached
to and made a part of this Agreement.
The Reinsurer warrants that it shall enforce all of the terms and conditions of
the Original Contract.
Further, the Reinsurer shall obtain the Retrocessionaire's approval:
(a) Of any change in, or waiver of, the terms and conditions of the
Original Contract;
(b) Before giving its approval with respect to (i) any one
settlement in excess of $10,000,000 and (ii) every settlement in
excess of $3,000,000, once the aggregate of all settlements in
excess of $10,000,000 made after the Closing Date reaches
$40,000,000, as required under Article XI - MANAGEMENT OF CLAIMS
AND LOSSES of the Original Contract;
(c) Before giving its approval to the modification or purchase of
any reinsurance as described in Article XIII - OTHER REINSURANCE
of the Original Contract, and
(d) Before giving its approval to the form of release to be
delivered in connection with a commutation pursuant to Article
XVII - COMMUTATION of the Original Contract.
ARTICLE V - TERM
This Agreement will be effective on the Closing Date, as defined in the Original
Contract, and continue in full force until all obligations and liabilities
incurred by each party under the Agreement are fully performed and discharged,
unless sooner terminated by commutation or by mutual agreement.
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ARTICLE VI - LIABILITY OF THE RETROCESSIONAIRE
The Retrocessionaire shall pay to the Reinsurer 100% of the amount of Ultimate
Net Loss, as defined in the Original Contract, paid by the Reinsurer under the
terms and conditions of the Original Contract.
The liability of the Retrocessionaire shall follow that of the Reinsurer and
shall be subject to all of the general and specific terms and conditions,
including all definitions and exclusions, of the Original Contract, except
insofar as they are inconsistent with the express terms of this Agreement.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
When requested by the Retrocessionaire, the Reinsurer shall permit the
Retrocessionaire, at the expense of the Retrocessionaire, to be associated with
the Reinsurer in the defense or control of any claim, loss, or legal proceeding
which involves or is likely to involve the Retrocessionaire. All payments of
claims or losses by the Reinsurer within the terms and limits of the Original
Contract shall be binding on the Retrocessionaire, subject to the terms of this
Agreement.
ARTICLE VIII - RECOVERIES
The Reinsurer shall pay to or credit the Retrocessionaire with the
Retrocessionaire's portion of any recovery obtained from salvage, subrogation,
or other insurance.
The Retrocessionaire shall be subrogated to the rights of the Reinsurer to the
extent of its loss payments to the Reinsurer.
ARTICLE IX - RETROCESSIONAL PREMIUM
On the Closing Date, the Reinsurer shall pay to the Retrocessionaire 100% of the
reinsurance premium due to the Reinsurer on the Closing Date.
In addition, within 95 days after the close of each calendar quarter after the
Closing Date, the Reinsurer shall pay to the Retrocessionaire 100% of the
Optional Retrospective Premium received during the quarter.
Any amounts due the Retrocessionaire may be remitted by wire transfer to:
Bankers Trust
ABA ▇▇▇▇▇▇▇▇▇
For Credit to Acct #▇▇-▇▇▇-▇▇▇
Account Name: General Reinsurance
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ARTICLE X - REPORTS AND REMITTANCES
(a) CLAIMS AND LOSSES
Within 35 days after the close of each calendar quarter, the
Reinsurer shall render to the Retrocessionaire a report of the
Ultimate Net Loss payable by the Reinsurer at the end of the
quarter under the Original Contract and the Retrocessionaire's
portion, if any, thereof. Any amount payable by the
Retrocessionaire to the Reinsurer shall be paid within 5
business days after receipt of such report.
(b) GENERAL
The Reinsurer shall provide the Retrocessionaire with copies of
all reports received by the Reinsurer from the Company under the
Original Contract, if requested by the Reinsurer.
In addition to the reports required by (a) above, the Reinsurer
shall furnish such other information as may be required by the
Retrocessionaire for the completion of the Retrocessionaire's
quarterly and annual statements and internal records.
All reports shall be rendered on forms or in format acceptable
to the Reinsurer and the Retrocessionaire.
ARTICLE XI - ASSIGNEE
The Reinsurer designates the Retrocessionaire as its "assignee" with respect to
Article XVI - OPTION FOR ADDITIONAL CEDED BUSINESS of the Original Contract.
Therefore, if there are Significant Negative Results, the Retrocessionaire has
the option, but not the obligation, to cause the Company to enter into a first
dollar quota share reinsurance agreement, as described in said Article XVI of
the Original Contract, with the Retrocessionaire, subject to the terms and
conditions of said Article XVI.
The Reinsurer also designates the Retrocessionaire as its "assignee" with
respect to Article XXIII - INSPECTION OF RECORDS of the Original Contract.
Therefore, the Retrocessionaire shall have the right to inspect the records of
the Company relevant to the business reinsured under the Original Agreement in
accordance with the provisions of said Article XXIII.
The Reinsurer also designates the Retrocessionaire as its "assignee" with
respect to Article XXIV - ARBITRATION of the Original Contract. Therefore, if
there is an unresolved difference of opinion between the Company and the
Retrocessionaire relating to the Original Contract, the Reinsurer shall cause
the Company to arbitrate with the Retrocessionaire in accordance with the
provisions of said Article XXIV.
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ARTICLE XII - COMMUTATION
This Agreement shall automatically commute upon commutation of the Original
Contract, subject to:
(1) Payment of the Experience Balance, as defined in the Original
Contract, by the Retrocessionaire to the Reinsurer on or before
the Commutation Date, as defined in the Original Contract, and
(2) Delivery by the Reinsurer to the Retrocessionaire of a signed
release in a form satisfactory to the Retrocessionaire, on or
before the Commutation Date.
ARTICLE XIII - ERRORS AND OMISSIONS
The Retrocessionaire shall not be relieved of liability because of an error or
accidental omission of the Reinsurer in reporting any claim or loss or any
business reinsured under this Agreement, provided that the error or omission is
rectified promptly after discovery.
ARTICLE XIV - RESERVES
The Retrocessionaire shall maintain the required reserves as to the
Retrocessionaire's portion of unearned premium, if any, claims, losses, and
allocated and unallocated loss adjustment expense.
ARTICLE XV - OFFSET
The Reinsurer or the Retrocessionaire may offset any balance, whether on account
of premium, commission, claims or losses, allocated and unallocated loss
adjustment expense, salvage, or otherwise, due from one party to the other under
this Agreement or under any other agreement heretofore or hereafter entered into
between the Reinsurer and the Retrocessionaire.
ARTICLE XVI - INSPECTION OF RECORDS
The Reinsurer shall allow the Retrocessionaire to inspect, at reasonable times,
the records of the Reinsurer relevant to the business reinsured under this
Agreement, including the Reinsurer's files concerning claims, losses, or legal
proceedings which involve or are likely to involve the Retrocessionaire.
ARTICLE XVII - ARBITRATION
All unresolved differences of opinion between the Reinsurer and the
Retrocessionaire relating to this Agreement, including its formation and
validity, shall be submitted to arbitration consisting of one arbitrator chosen
by the Reinsurer, one arbitrator chosen by the Retrocessionaire, and a third
arbitrator chosen by the first two arbitrators.
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The party demanding arbitration shall communicate its demand for arbitration to
the other party by registered or certified mail, identifying the nature of the
dispute and the name of its arbitrator, and the other party shall then be bound
to name its arbitrator within 30 days after receipt of the demand.
Failure or refusal of the other party to so name its arbitrator shall empower
the demanding party to name the second arbitrator. If the first two arbitrators
are unable to agree upon a third arbitrator after the second arbitrator is
named, each arbitrator shall name three candidates, two of whom shall be
declined by the other arbitrator, and the choice shall be made between the two
remaining candidates by drawing lots. The arbitrators shall be impartial and
shall be active or retired officers of property or casualty insurance or
reinsurance companies.
The arbitrators shall adopt their own rules and procedures and are relieved from
judicial formalities. In addition to considering the rules of law and the
customs and practices of the insurance and reinsurance business, the arbitrators
shall make their award with a view to effecting the intent of this Agreement.
The decision of the majority of the arbitrators shall be in writing and shall be
final and binding upon the parties.
Each party shall bear the cost of its own arbitrator and shall jointly and
equally bear with the other party the expense of the third arbitrator and other
costs of the arbitration. In the event both arbitrators are chosen by one party,
the fees of all arbitrators shall be equally divided between the parties.
The arbitration shall be held at the times and places agreed upon by the
arbitrators.
ARTICLE XVIII - INSOLVENCY OF THE REINSURER
In the event of the insolvency of the Reinsurer, the reinsurance proceeds will
be paid to the Reinsurer or the liquidator, with reasonable provision for
verification, on the basis of the claim allowed in the insolvency proceeding
without diminution by reason of the inability of the Reinsurer to pay all or
part of the claim, except as otherwise specified in the statutes of any state
having jurisdiction of the insolvency proceedings or except where the Agreement,
or other written agreement, specifically provides another payee of such
reinsurance in the event of insolvency.
The Retrocessionaire shall be given written notice of the pendency of each claim
against the Reinsurer on the Original Contract within a reasonable time after
such claim is filed in the insolvency proceedings. The Retrocessionaire shall
have the right to investigate each such claim and to interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any defenses
which it may deem available to the Reinsurer or its liquidator. The expense thus
incurred by the Retrocessionaire shall be chargeable, subject to court approval,
against the insolvent Reinsurer as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Reinsurer
solely as a result of the defense undertaken by the Retrocessionaire.
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ARTICLE XIX - NOTICES
All notices and communications hereunder shall be in writing and shall become
effective when received. Any written notice shall be by either certified or
registered mail, return receipt requested, or overnight delivery service
(providing for delivery receipt) or delivered by hand. All notices or
communications under this Agreement shall be addressed as follows:
If to the Reinsurer:
c/o CGU Corporation
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Attention: General Counsel
If to the Retrocessionaire:
c/o General Reinsurance Corporation
Financial Centre
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▇.▇. ▇▇▇ ▇▇▇▇▇
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Attention: General Counsel
or in each case at such other address as either party shall provide to the other
within the provisions of this article.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate,
this day of , 200__,
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POTOMAC INSURANCE COMPANY
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Attest:
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and this day of , 200__.
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GENERAL REINSURANCE CORPORATION
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Vice President
Attest:
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Agreement No. 8888
TABLE OF CONTENTS
to
ADVERSE DEVELOPMENT
AGREEMENT OF REINSURANCE NO. 8888
between
POTOMAC INSURANCE COMPANY
and
GENERAL REINSURANCE CORPORATION
PAGE
Article I CONDITIONS PRECEDENT..................................................................1
Article II SCOPE OF AGREEMENT....................................................................1
Article III PARTIES TO THE AGREEMENT..............................................................2
Article IV BUSINESS COVERED......................................................................2
Article V TERM..................................................................................2
Article VI LIABILITY OF THE RETROCESSIONAIRE.....................................................3
Article VII MANAGEMENT OF CLAIMS AND LOSSES.......................................................3
Article VIII RECOVERIES............................................................................3
Article IX RETROCESSIONAL PREMIUM................................................................3
Article X REPORTS AND REMITTANCES...............................................................4
Article XI ASSIGNEE..............................................................................4
Article XII COMMUTATION...........................................................................5
Article XIII ERRORS AND OMISSIONS..................................................................5
Article XIV RESERVES..............................................................................5
Article XV OFFSET................................................................................5
Article XVI INSPECTION OF RECORDS.................................................................5
Article XVII ARBITRATION...........................................................................5
Article XVIII INSOLVENCY OF THE REINSURER...........................................................6
Article XIX NOTICES...............................................................................7
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Agreement No. 8888