Exhibit 10.1
INTER-COMPANY REINSURANCE AGREEMENT
THIS INTER-COMPANY REINSURANCE AGREEMENT ("Agreement") is made and
effective January 1, 2006, by and between Star Insurance Company ("Star"), and
Ameritrust Insurance Corporation, Savers Property and Casualty Insurance Company
and Williamsburg National Insurance Company, (hereinafter collectively referred
to as "Affiliated Companies").
RECITALS
WHEREAS, the parties hereto are engaged in the transaction of various
forms of property, casualty, medical malpractice, commercial auto and workers'
compensation insurance business in the United States and are a member of the
Insurance Company Holding System of Meadowbrook Insurance Group, Inc.;
WHEREAS, Star shall be considered the lead company for the purposes of
this Agreement;
WHEREAS, the parties wish to enter into an Inter-Company Reinsurance
Agreement to conform with state legal requirement;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
APPLICATION OF AGREEMENT
This Agreement is effective as of 12:01 a.m. on January 1, 2006, (the
"Effective Date") and applies to all insurance risks of the Affiliated Companies
located in the United States as of the Effective Date, as well as to all such
risks written and assumed thereafter.
ARTICLE II
REINSURANCE AGREEMENT
(a) The Affiliated Companies hereby agree to cede to Star and Star agrees to
reinsure 100% of the liabilities and expenses of the Affiliated
Companies existing as of January 1, 2005 including any development on
loss reserves relating to these liabilities and expenses occurring on or
after January 1, 2006, as well as 100% of the liabilities and expenses
of the Affiliated Companies during the term of this Agreement, each
relating to all insurance and reinsurance policies assumed, written or
issued by of on behalf of the Affiliated Companies.
(b) Star hereby agrees to cede and the Affiliated Companies hereby agree
to reinsure Star, their Respective Percentages (as set forth in Appendix
A) of the liabilities and expenses of the Affiliated Companies existing
as of January 1, 2005 including any development on loss reserves
relating to these liabilities and expenses occurring on or after January
1, 2005, as well as 100% of the liabilities and expenses of the
Affiliated Companies during the term of the Agreement, each relating to
all insurance and
Page 1 of 8
reinsurance policies assumed, written or issued by or on behalf of the
Affiliated Companies.
The liabilities ceded under this Article II(b) shall be net of
reinsurance ceded to excess of loss and/or quota share reinsurers, excluding
the parties hereto and shall not include liabilities for federal income
taxes, liabilities incurred in connection with investment transactions,
liabilities for dividends and other liabilities not incurred in connection
with underwriting and claim operations.
ARTICLE III
PREMIUMS AND RESERVES
(a) The Affiliated Companies agree to transfer to Star, and Star agrees to
accept, all premium and reserves related to the business ceded to Star
under Article II.
(b) Star agrees to transfer to the Affiliated Companies their Respective
Percentages of the premium received and reserves maintained by Star for
its own account and for business reinsured by it under Article II.
The premium ceded under this Article II(b) shall be net of reinsurance
premium placed with unaffiliated quota share or excess of loss reinsurers.
Until Williamsburg National Insurance Company receives authority to write
disability insurance in California and Michigan, disability insurance will
be excluded from this Agreement.
ARTICLE IV
INVESTMENT EXPENSES
Notwithstanding anything to the contrary in this Agreement, no
investment expenses of any party (including costs of personnel) shall be
allocated based on premium volume, but such expenses shall be allocated on a
cost basis among the parties.
ARTICLE V
RESPECTIVE PERCENTAGE
The term "Respective Percentage" as used in this Agreement shall be as
stated in Appendix A hereto.
ARTICLE VI
OTHER REINSURANCE AGREEMENTS
Star and Affiliated Companies agree that all reinsurance to be ceded to
excess of loss and quota share reinsurers, excluding the parties hereto
shall be ceded by and in the name of Star.
Star assumes all premium responsibilities associated with any and all
unaffiliated reinsurance agreements in effect on January 1, 2005 with
Ameritrust, Savers and/or Williamsburg named separately or collectively
inclusive of Star. In return for the payment of such premiums Ameritrust,
Williamsburg and Savers agree to assign all reinsurance recoverables under
said unaffiliated reinsurance agreements to Star.
Page 2 of 8
ARTICLE VII
ACCOUNTING
Accounts, including reports for premiums and losses, and payment of
losses shall be made no less frequently than on a quarterly basis, unless
there is no activity during the period. The report of premiums and losses
shall set forth the ceding Company's total loss and loss expense reserves on
the policy obligations subject to this agreement. A ceding company may make
a request at any time for immediate payment of a recovery and the funds will
be made available without delay.
ARTICLE VIII
POLICY AND CLAIMS HANDLING
As of the Effective Date of this Agreement, the Affiliated Companies
hereby authorize and empower Star to collect and receive all premium and
other recoverable amounts, and to take charge of, adjust and pay all losses
with respect to any and all contracts and policies of insurance issued by
the Affiliated Companies and to reinsure, administer or terminate all such
contracts and policies as appropriate.
ARTICLE IX
ASSIGNMENT
Each of the Affiliated Companies assign to Star all right and interest
of such Affiliated Company in its agents' balances and uncollected premium
whether due or overdue underwriting expenses, as well as all right, title
and interest in regulatory pools, associations or assessments, and any other
underwriting assets and related liabilities. In turn, Star hereby transfers
and assigns to each Affiliated Company their Respective Percentage of all
premium, underwriting expenses and all title and interest in regulatory
pools, associations or assessments and other underwriting assets and
liabilities.
Each of the Affiliated Companies assign to Star all right and interest
of such Affiliated Company in reinsurance agreements entered into by it, and
authorizes Star to take such actions as may be necessary to execute
transactions pursuant to such reinsurance agreements.
ARTICLE X
RIGHT TO OFFSET
The obligation of each party under this Agreement to transfer
underwriting assets and liabilities to another party may be offset by the
reciprocal obligations of such other party so that only the net amount of
such underwriting assets and liabilities shall be required to be
transferred.
ARTICLE XI
CREDIT FOR REINSURANCE
Each participant to this Agreement shall take full credit for all
liabilities ceded to the other participants. To the extent that any
participant is not identically licensed in the other participants' states of
domicile, the ceding company will either retain sufficient funds withheld
trusts or will obtain adequate letters of credit from the assuming party to
secure reinsurance recoveries.
Page 3 of 8
ARTICLE XII
ORIGINAL TERMS
The terms and conditions of the reinsurance hereunder shall in all cases
be identical with the terms and conditions of the original insurance.
ARTICLE XIII
INDEPENDENT OPERATION
Notwithstanding any other provision of this Agreement, Star and the
Affiliated Companies agree: (a) that each company owns, has custody of and
keeps its own general corporate accounts; (b) that each company owns all the
records of its business; (c) that each company has the ultimate veto right
on its underwriting; (d) that each company has the ultimate right to cancel
its risks; (e) that each company has the ultimate responsibility for and
control of claims adjustment and claims payment and investment management;
(f) that premium collected by Star as provided for in the Agreement shall be
held and paid by Star in a fiduciary capacity under this Agreement; (g) that
each company retains the right to cancel this Agreement at any time as
stated in Article XIV; and (h) this Agreement may not be assigned by any
party without the written consent of all other parties and applicable
regulatory agencies.
ARTICLE XIV
INSOLVENCY
In the event of the insolvency of any company that is a party to this
Agreement, this reinsurance shall be payable directly to the company, or to
its liquidator, receiver or conservator or statutory successor on the basis
of the liability of the company without diminution because of the insolvency
of the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim. It
is agreed, however, that the liquidator, receiver, conservator or statutory
successor of the company shall give written notice to the reinsurers of the
pendency of a claim against the company indicating the policy or bond
reinsurance which claim would involve a possible liability on the part of
the reinsurers within a reasonable time after that claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of that claim the reinsurers may investigate that claim
and interpose, at their own expense, in the proceeding where that claim is
to be adjudicated any defense (s) they may deem available to the company or
its liquidator, receiver, conservator or statutory successor. This expense
incurred by the reinsurers shall be chargeable, subject to the approval of
the court, against the company as part of the expense conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to the company solely as a result of the defense undertaken by the
reinsurers.
Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to that claim, the expense
shall be apportioned in accordance with the terms of the reinsurance
agreement as though that expense had been incurred by the company.
This insolvency clause shall not preclude the reinsurer from asserting
any excuse of defense to payment of this reinsurance other than the excuses
or defenses of the insolvency of the company and the failure of the
company's liquidator, receiver, conservator or statutory successor to pay
all or a portion of the claim.
Page 4 of 8
ARTICLE XV
AMENDMENT OR CANCELLATION
This Agreement may be amended by mutual agreement expressed in writing
by the parties hereto. If this Agreement is amended, the parties shall
provide the applicable regulatory agency thirty (30) days advance notice of
such amendment.
This Agreement shall remain in force until canceled by written notice
given by any party to the others, at least ninety (90) days in advance of
the effective date of cancellation. In addition, written notice shall be
provided by the parties to the applicable regulatory agency thirty (30) days
in advance of the cancellation date. In the event of such cancellation, all
rights and obligations of the parties hereto with respect to policies which
are then reinsured hereunder shall continue to be governed by this
Agreement, until such liabilities are fully satisfied.
ARTICLE XVI
SOLE BENEFIT
This Agreement is solely between and for the benefit of the parties
hereto, and the acceptance of reinsurance hereunder shall not create any
right or legal relation whatsoever between any third-party, such as,
policyholder, unaffiliated quota share reinsurer or excess of loss
reinsurer.
ARTICLE XVII
GOVERNING LAW
This Agreement is made in the State of Michigan and shall be construed
according to the laws of the State of Michigan.
ARTICLE XVIII
PERIODIC REVIEW
This Agreement shall be reviewed by the parties annually and its terms
renegotiated as the parties may mutually agree.
ARTICLE XIX
PRIOR INTERCOMPANY REINSURANCE AGREEMENTS
The Inter-Company Reinsurance Agreement dated January 1, 2005 shall be
terminated on a "run-off" basis.
ARTICLE XX
JURISDICTION
If a party fails to perform its obligations under the terms of this
Agreement, the party may be sued in a court of competent jurisdiction
located in any state in which the party is domiciled to enforce an
arbitration award issued pursuant to Article XXIV.
Page 5 of 8
ARTICLE XXI
ENTIRE CONTRACT
This Agreement represents the entire agreement and understanding among
the parties. No other oral or written agreements or contracts relating to
the risks reinsured hereunder currently exist and/or contemplated between
parties.
ARTICLE XXII
ERRORS AND OMISSIONS
The position of either party to this Agreement shall not be prejudiced
by any error or omission in reporting cessions or cancellations of premiums,
commissions, losses, loss adjustment expenses or other underwriting expenses
under this Agreement, or in claiming payments collectible hereunder for
whatever cause.
ARTICLE XXIII
ACCESS TO RECORDS
Each party shall have the right, at any reasonable time, to examine all
records and documents in the possession of the other party which relate to
insurance business ceded under this Agreement.
ARTICLE XXIV
ARBITRATION
Should a dispute arise between the parties relating to this Agreement,
it is hereby mutually agreed that, as a condition precedent to any right of
action hereunder, such difference shall be submitted to arbitration. Each
party shall name their arbitrator within twenty (20) days of receiving a
notice of appointment of arbitrator. The two (2) appointed arbitrators shall
appoint the umpire. If they cannot agree, the umpire shall be selected by
the Circuit Court for the County of Oakland. If either side fails to appoint
its arbitrator, the other party may appoint the other arbitrator.
Thereafter, the two (2) appointed arbitrators will appoint a neutral within
ten (10) days of the appointment of the second arbitrator. The decision of
the arbiters shall be final and binding upon the parties and enforceable in
a court of competent jurisdiction. The parties shall bear the expense of its
arbitrator and jointly and equally bear the expense of the umpire.
In witness whereof, the parties hereto have caused this Agreement to be
executed this 1st day of January, 2006.
STAR INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Page 6 of 8
AMERITRUST INSURANCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
SAVERS PROPERTY AND CASUALTY INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
WILLIAMSBURG NATIONAL INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Page 7 of 8
APPENDIX A
INTERCOMPANY REINSURANCE AGREEMENT
Appendix A to the Inter-Company Reinsurance Agreement (the "Agreement")
is made and effective January 1, 2006 by and between Star Insurance Company
(Star), and Ameritrust Insurance Corporation, Savers Property and Casualty
Insurance Company and Williamsburg National Insurance Company, (hereinafter
collectively referred to as "Affiliated Companies"). The Affiliated Companies'
share in the attached Agreement shall be joint and several.
1. Effective January 1, 2006, the Respective Percentage(s) shall be as
follows:
Company Respective Percentage
---------------------------------------------- ---------------------
Star Insurance Company 56.6%
Ameritrust Insurance Corporation 10.0%
Savers Property and Casualty Insurance Company 22.0%
Williamsburg National Insurance Company 11.4%
2. The initial participation percentages listed above may be adjusted from
time to time by mutual agreement of the Parties. Any changes to the
Parties' participation percentages will only be made after receipt of
appropriate regulatory approval.
Page 8 of 8