EXHIBIT 10.32
FORM OF 100% QUOTA SHARE RETROCESSION AGREEMENT
(NON-TRADITIONAL - B-1)
BY AND BETWEEN
ST. ▇▇▇▇ REINSURANCE COMPANY Limited
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE INC.
(RETROCESSIONAIRE)
DATED AS OF________, 2002
THIS QUOTA SHARE RETROCESSION AGREEMENT (this "AGREEMENT"), effective as of
12:01 a.m. London time on the later of the Business Day (such term and all other
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Formation and Separation Agreement, as defined below)
following the Closing or July 1, 2002 (the "EFFECTIVE TIME", and such date the
"EFFECTIVE DATE"), is made by and between ST. ▇▇▇▇ REINSURANCE COMPANY LIMITED,
a United Kingdom domiciled insurance company ("RETROCEDANT"), and PLATINUM
UNDERWRITERS REINSURANCE INC. (formerly known as USF&G Family Insurance
Company), a Maryland domiciled stock insurance company ("RETROCESSIONAIRE").
WHEREAS, pursuant to a Formation and Separation Agreement dated as of [ ],
2002 (the "FORMATION AND SEPARATION AGREEMENT") between Platinum Underwriters
Holdings, Ltd. ("PLATINUM HOLDINGS"), the ultimate parent of Retrocessionaire,
and The St. ▇▇▇▇ Companies, Inc. ("THE ST. ▇▇▇▇"), the ultimate parent of
Retrocedant, The St. ▇▇▇▇ agreed to cause its insurance subsidiaries to cede
specified liabilities under certain reinsured contracts of The St. Paul's
insurance subsidiaries; and Platinum Holdings agreed to cause its insurance
subsidiaries to reinsure such liabilities;
WHEREAS, Retrocedant has agreed to retrocede to Retrocessionaire, and
Retrocessionaire has agreed to assume by indemnity reinsurance, as of the
Effective Time, a one hundred percent (100%) quota share of the liabilities
arising pursuant to the Reinsurance Contracts (as defined hereunder), subject to
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises and upon
the terms and conditions set forth herein, the parties hereto agree as follows:
1. BUSINESS COVERED
Retrocedant hereby obligates itself to retrocede to Retrocessionaire and
Retrocessionaire hereby obligates itself to accept, pursuant to the terms
of this Agreement, a one hundred percent (100%) quota share of any and all
liabilities incurred by Retrocedant on or after January 1, 2002 but not
yet paid as of the Effective Time, under all reinsurance and retrocession
contracts that:
(i) are listed in Exhibit A hereto; or
(ii) are new or renewal reinsurance or retrocession contracts [of the kind
listed in Exhibit A hereto] entered into by Retrocedant pursuant to
Clause 4.2 of Part B or (to the extent provided therein) Clause 10 of
Part C of the UK Underwriting Agency and Underwriting Management
Agreement (the "AGENCY AGREEMENT") between Retrocedant and Platinum
Re (UK) Limited of even date herewith,
(together, the "REINSURANCE CONTRACTS"), provided that (for the avoidance
of doubt and save as provided in Clause 10 of Part C of the Agency
Agreement) Retrocedant shall not retrocede, and Retrocessionaire shall not
accept, any liability incurred by Retrocedant under reinsurance and
retrocession contracts to the extent that they are entered into or renewed
after the authorisation of Platinum Re UK Limited under Part IV of the
Financial Services and Markets ▇▇▇ ▇▇▇▇ of the United Kingdom to carry on
reinsurance business in the United Kingdom.
2. TERM
This Agreement shall be continuous as to the Reinsurance Contracts. Except
as mutually agreed in writing by Retrocedant and Retrocessionaire, this
Agreement shall remain continuously in force until all Reinsurance
Contracts are terminated, expired, cancelled or commuted.
3. COVERAGE
3.1 Section A (Retrospective) Coverage Period
The Section A (Retrospective) Coverage Period will be the period from and
including January 1, 2002 to but not including the Effective Time.
3.2 Section B (Prospective) Coverage Period
The Section B (Prospective) Coverage Period will be the period from and
including the Effective Time through the commutation, expiration or final
settlement of all liabilities under any of the Reinsurance Contracts
referred to in sub-paragraph (i) of Clause 1.
3.3 Coverage Limits
Coverage under this Agreement for a specific Reinsurance Contract shall be
subject to the aggregate limit specified in the Reinsurance Contract
reduced by all payments made by either Retrocedant or Retrocessionaire
pursuant to such Reinsurance Contract.
4. PREMIUMS AND ADDITIONAL CONSIDERATION
4.1 Section A (Retrospective) Coverage Period -- Premiums
(A) On the Effective Date, in respect of the Section A (Retrospective)
Coverage Period, Retrocedant shall pay to the account of
Retrocessionaire an amount (the "INITIAL SECTION A PREMIUM") equal to
one hundred percent (100%) of the carrying value on the books of
Retrocedant as of June 30, 2002, of the aggregate of all loss and
loss adjustment expense and ceding commission reserves relating to
the Reinsurance Contracts with respect to the Section A
(Retrospective) Coverage Period, determined in accordance with
statutory accounting principles on a basis consistent in all material
respects with the methods, principles, practices and policies
employed in the preparation and presentation of Retrocedant's annual
statutory financial statement as of 31st December, 2001 as filed with
the Financial Services Authority and as submitted to The St. ▇▇▇▇,
and subject to the adjustments as set forth on Exhibit B hereto (the
"LOSS RESERVE ADJUSTMENTS"), as applicable.
(B) As soon as reasonably practicable, but in no event later than [90]
days following the Effective Date, Retrocedant shall prepare and
deliver to Retrocessionaire an accounting, including the calculation
of all Loss Reserve Adjustments as provided for herein (the "PROPOSED
LOSS RESERVE ACCOUNTING") of all loss and loss adjustment expense
reserves and ceding
commission reserves relating to the Reinsurance Contracts with
respect to the Section A (Retrospective) Coverage Period, as of the
Effective Date, determined in accordance with statutory accounting
principles on a basis consistent in all material respects with the
methods, principles, practices and policies employed in the
preparation and presentation of Retrocedant's annual statutory
financial statement as of 31st December, 2001 as filed with the
Financial Services Authority and as submitted to The St. ▇▇▇▇,
adjusted to reflect the Loss Reserve Adjustments, as applicable (the
"FINAL SECTION A PREMIUM"). In the event the Final Section A Premium
is greater than the Initial Section A Premium, Retrocedant shall
promptly pay to the account of Retrocessionaire the difference plus
interest on such amount at the Applicable Rate (as defined below)
from and including the Effective Date to and including the date of
such payment. In the event the Initial Section A Premium is greater
than the Final Section A Premium, Retrocessionaire shall promptly
repay to the account of Retrocedant the difference (as an adjustment
to the amount payable pursuant to Section 4.1(A) above) plus interest
on such amount at the Applicable Rate from and including the
Effective Date to and including the date of such payment.
4.2 Section B (Prospective) Coverage Period -- Premiums
(A) On the Effective Date, in respect of the Section B (Prospective)
Coverage Period, Retrocedant shall transfer to Retrocessionaire an
amount (the "INITIAL SECTION B PREMIUM") equal to the carrying value
on the books of Retrocedant as of June 30, 2002 of one hundred
percent (100%) of the unearned premium reserves relating to the
Reinsurance Contracts for the Section B (Prospective) Coverage
Period, determined in accordance with statutory accounting principles
on a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation and
presentation of Retrocedant's annual statutory financial statement as
of 31st December, 2001 as filed with the Financial Services Authority
and as submitted to The St. ▇▇▇▇, less the applicable Ceding
Commission, as defined below, and with respect to all Reinsurance
Contracts, one hundred percent (100%) of all gross premiums written
on or after the Effective Time, net of premium returns, allowances
and cancellations and less any applicable Ceding Commission [NOTE:
WOULD IT BE BETTER TO PUT THE LAST 3 1/2 LINES IN A SEPARATE CLAUSE,
SINCE IT DOES NOT RELATE TO THE CALCULATION AS AT 30TH JUNE, 2002?],
provided, however, that all premiums written arising in respect of a
Loss Occurrence (as such term is defined in the Reinsurance
Contract), including reinstatement premiums, loss share premiums and
penalty premiums [other], shall be for the account of Retrocedant.
(B) As soon as reasonably practicable, but in no event later than [90]
days following the Effective Date, Retrocedant shall prepare and
deliver to Retrocessionaire an accounting (the "PROPOSED PREMIUM
RESERVE ACCOUNTING", together with the Proposed Loss Reserve
Accounting, the "PROPOSED ACCOUNTING") of all unearned premium
reserves relating to the Reinsurance Contracts for the Section B
(Prospective) Coverage Period, as of the Effective Date, determined
in accordance with statutory accounting principles on a basis
consistent in all material respects with the methods, principles,
practices and policies employed in the preparation and presentation
of Retrocedant's annual statutory financial
statement as of 31st December, 2001 as filed with the Financial
Services Authority and as submitted to The St. ▇▇▇▇, relating to the
Reinsurance Contracts, net of the applicable Ceding Commission, all
as of the Effective Date (the "FINAL SECTION B PREMIUM"). In the
event the Final Section B Premium is greater than the Initial Section
B Premium, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount at the
Applicable Rate from and including the Effective Date to and
including the date of such payment. In the event the Initial Section
B Premium is greater than the Final Section B Premium,
Retrocessionaire shall promptly repay to the account of Retrocedant
the difference (as an adjustment to the amount payable pursuant to
Section 4.2(A) above) plus interest on such amount at the Applicable
Rate from and including the Effective Date to and including the date
of such payment.
(C) Notwithstanding the foregoing, the parties agree that all gross
estimated premiums written prior to the Effective Date and earned but
not yet billed ("EBUB", and also referred to as "estimated premiums
receivable" or "EBNR") as of the Effective Time and relating to the
Reinsurance Contracts, as determined on or before ______, 2002, in
accordance with Retrocedant's customary practices and procedures and
as submitted to The St. ▇▇▇▇, shall be allocated to Retrocedant. All
payments received after the Effective Time by Retrocedant or
Retrocessionaire in respect of EBUB as of the Effective Time shall be
retained by Retrocedant or held on trust for and paid by
Retrocessionaire to or to the order of Retrocedant, and all rights to
collect such amounts shall be retained by or transferred to
Retrocedant. Any changes made on or after the Effective Time as to
the amount of EBUB as of the Effective Time shall be for the account
of Retrocessionaire and shall not affect the amount retained by
Retrocedant. The parties agree that as of the first anniversary of
the date hereof, Retrocessionaire shall pay to Retrocedant the
difference, if any, between the amount of EBUB as of the Effective
Time and the aggregate amount paid to and/or retained by Retrocedant
prior to that date with respect to EBUB as of the Effective Time. All
amounts, if any, in respect of EBUB which are in excess of EBUB as of
the Effective Time, calculated pursuant to the first sentence of this
Section 4.2(C), shall be for the account of Retrocessionaire and no
such amounts shall be retained by or payable to Retrocedant.
4.3 Dispute Resolution.
(A) After receipt of the Proposed Accounting, together with the work
papers used in preparation thereof, Retrocessionaire shall have 30
days (the "REVIEW PERIOD") to review such Proposed Accounting. Unless
Retrocessionaire delivers written notice to Retrocedant on or prior
to the 30th day of the Review Period stating that it has material
objections thereto, Retrocessionaire shall be deemed to have accepted
and agreed to the Proposed Accounting. Retrocessionaire shall not
object to any method, principle, practice or policy employed in the
preparation of the Proposed Accounting if such method, principle,
practice or policy is consistent in all material respects with that
employed in the preparation and presentation of Retrocedant's annual
statutory financial statement as of 31st December, 2001 as filed with
the Financial Services Authority and as submitted to The St. ▇▇▇▇. If
Retrocessionaire so notifies Retrocedant of its
material objections to the Proposed Accounting, the parties shall in
good faith attempt to resolve, within 30 days (or such longer period
as the parties may agree) following such notice (the "RESOLUTION
PERIOD"), their differences with respect to such material objections
and any resolution by them as to any disputed amounts shall be final,
binding and conclusive.
(B) Any amount remaining in dispute at the conclusion of the Resolution
Period ("UNRESOLVED CHANGES") shall be submitted to arbitration in
accordance with Clause 15 of this Agreement.
(C) Once the Proposed Accounting has been finalised in accordance with
the above process, the Final Section A Premium and the Final Section
B Premium amounts shall be as set forth in the Proposed Accounting,
as determined by the Arbiters, if applicable. In the event the sum of
such amounts is greater than the amount paid by Retrocedant to
Retrocessionaire on the Closing Date, Retrocedant shall promptly pay
to the account of Retrocessionaire the difference plus interest on
such amount at the Applicable Rate from and including the Closing
Date to and including the date of such payment. In the event the
aggregate of such amounts is lower than the amount paid by
Retrocedant to Retrocessionaire on the Closing Date, Retrocessionaire
shall promptly repay for the account of Retrocedant the difference
(as an adjustment to the amount payable pursuant to Section 4.1(A)
and/or 4.2(A) above, as applicable) plus interest on such amount at
the Applicable Rate from the Effective Date to the date of such
payment.
5. CEDING COMMISSION
With respect to the Reinsurance Contracts, Retrocessionaire shall pay the
Retrocedant a ceding commission (the "CEDING COMMISSION") with respect to
the Section B (Prospective) Coverage Period, and such Ceding Commission
shall equal one hundred percent (100%) of the actual expenses incurred in
writing each Reinsurance Contract, including actual ceding commissions and
brokerage paid, as determined in accordance with Retrocedant's customary
practices and procedures and as submitted to The St. ▇▇▇▇, all as
allocable pro rata to periods from and after the Effective Time.
6. ORIGINAL CONDITIONS
All retrocessions assumed under this Agreement shall be subject to the
same rates, terms, conditions, waivers and interpretations, and to the
same modifications and alterations, as the respective Reinsurance
Contracts.
7. INURING RETROCESSIONS
7.1 Allocation to Retrocessionaire
Retrocedant agrees that the retrocession contracts purchased from third
party retrocessionaires ("THIRD PARTY RETROCESSIONAIRES") by or on behalf
of Retrocedant prior to the Effective Time that are listed on Exhibit C
hereto (as such Exhibit may be amended from time to time by agreement
between the parties) or that are entered into after the date hereof and
relate to the Reinsurance Contracts shall inure to the benefit of
Retrocessionaire to the extent of liabilities covered under this Agreement
("INURING RETROCESSIONS"), subject to the allocations in Exhibits D, E and
F.
7.2 Transfer
[Retrocedant and Retrocessionaire shall use their respective commercially
reasonable efforts to obtain the consent of Third Party Retrocessionaires
under the Inuring Retrocessions to include Retrocessionaire as a direct
reinsured with respect to the Reinsurance Contracts.]
[IF NOT OBTAINED AT SIGNING, FURTHER AMENDMENTS WOULD BE NECESSARY. WE CAN
PROVIDE DRAFTING IF THIS WOULD BE HELPFUL.]
7.3 Inuring Retrocessions Claims
(A) Each of the parties agrees to transfer to the other party all
recoveries or any portion thereof that such party receives on or
after the Effective Time pursuant to the Inuring Retrocessions which
are allocated to the other party, in the manner set forth in Exhibit
D hereto, provided that each party shall be entitled to set off any
obligation to account for any such recovery to the other party
against any obligation arising under this Agreement owed by the other
party to the party so obliged to account. Retrocedant shall use its
commercially reasonable efforts to collect any recoveries due to
Retrocessionaire under the Inuring Retrocessions that indemnify
Retrocedant for losses or expenses payable or return of premium
allocable to Retrocessionaire and, subject to any right of set-off
which may have arisen under the foregoing provisions of this clause,
hold them on trust for, and pay them to or to the order of,
Retrocessionaire. The parties agree that Retrocessionaire's
obligations to make payments pursuant to the Inuring Retrocessions or
to reimburse Retrocedant pursuant to this Agreement shall not be
waived by non-receipt of any such amounts. Retrocessionaire shall
reimburse Retrocedant for one hundred percent (100%) of any expenses
reasonably incurred by Retrocedant in attempting to make such
collection, including all allocated expenses, as determined in
accordance with St. ▇▇▇▇ Re's customary practices and procedures.
Retrocessionaire shall have the right to associate with Retrocedant,
at Retrocessionaire's own expense, in any actions brought by
Retrocedant to make such collections.
(B) In the event claims of Retrocedant and Retrocessionaire aggregate in
excess of the applicable limit under an Inuring Retrocession, all
limits applicable to either Retrocedant or Retrocessionaire shall be
allocated between Retrocedant and Retrocessionaire in the manner set
forth in Exhibit F hereto.
7.4 Initial Consideration
On the Effective Date, Retrocessionaire shall reimburse Retrocedant for
one hundred percent (100%) of any and all unearned premiums paid by
Retrocedant under such Inuring Retrocessions net of any applicable
unearned ceding commissions paid to Retrocedant thereunder.
7.5 Additional Consideration
Retrocessionaire agrees to pay [directly to Third Party Retrocessionaires]
under the Inuring Retrocessions all future premiums Retrocedant is
obligated to pay pursuant to the terms of the Inuring Retrocessions to the
extent that such premiums are allocable to Retrocessionaire [in the manner
set forth in Exhibit E] [in a manner consistent with Retrocedant's current
practice], and to indemnify Retrocedant for all such premiums paid
directly by Retrocedant, net of any ceding commissions and similar amounts
paid by Third Party Retrocessionaires to Retrocedant.
7.6 Termination and Commutation of Inuring Retrocessions
To the extent that any Inuring Retrocessions provide coverage for both
Reinsurance Contracts and business not covered under this Agreement,
neither party shall take any action or fail to take any action that would
reasonably result in the termination or commutation of any Inuring
Retrocession, without the prior written consent of the other party, such
consent not to be unreasonably withheld.
8. LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION; FOLLOW THE FORTUNES
8.1 Retrocessionaire shall be liable for one hundred percent (100%) of all
future loss, loss adjustment expenses, incurred but not reported losses
and other payment obligations that arise under the Reinsurance Contracts
on and after January 1, 2002 and are payable as of or after the Effective
Time and shall reimburse Retrocedant for any losses, loss adjustment
expenses and other payment obligations paid by Retrocedant following the
Effective Time in respect of the Reinsurance Contracts, net of any
recoveries received by Retrocedant with respect thereto, including
recoveries under Inuring Retrocessions. Retrocessionaire shall have the
right to all salvage and subrogation on the account of claims and
settlements with respect to the Reinsurance Contracts.
8.2 In the event of a claim under a Reinsurance Contract, the Retrocedant will
assess the validity of the claim and make a determination as to payment,
consistent with the claims handling guidelines previously provided to
Retrocedant in writing by Retrocessionaire and Retrocessionaire may
exercise its rights under Section 10.1 in respect thereof. Retrocedant
shall provide prompt notice of any claim in excess of $500,000 to
Retrocessionaire. All payments made by Retrocedant, whether under strict
contract terms or by way of compromise, shall be binding on
Retrocessionaire. In addition, if Retrocedant refuses to pay a claim in
full and a legal proceeding results, Retrocessionaire will be
unconditionally bound by any settlement agreed to by Retrocedant or the
adverse judgment of any court or arbitrator (which could include any
judgment for bad faith, punitive damages, excess policy limit losses or
extra contractual obligations) and Retrocedant may recover with respect to
such settlements and judgments under this Agreement. Though Retrocedant
will settle such claims and litigation in good faith, Retrocessionaire is
bound to accept the settlements paid by Retrocedant and such settlements
may be for amounts that could be greater than the amounts that would be
agreed to by Retrocessionaire if Retrocessionaire were to settle such
claims or litigation directly. It is the intent of this Agreement that
Retrocessionaire shall in every case in which this Agreement applies and
in the proportions specified herein, "follow the fortunes" of Retrocedant
in respect of risks Retrocessionaire has accepted under this Agreement.
9. EXTRA CONTRACTUAL OBLIGATIONS
In the event Retrocedant or Retrocessionaire is held liable to pay any
punitive, exemplary, compensatory or consequential damages because of
alleged or actual bad faith or negligence related to the handling of any
claim under any Reinsurance Contract or otherwise in respect of such
Reinsurance Contract, the parties shall be liable for such damages in
proportion to their responsibility for the conduct giving rise to the
damages. Such determination shall be made by Retrocedant and
Retrocessionaire, acting jointly and in good faith, and in the event the
parties are unable to reach agreement as to such determination, recourse
shall be had to Article 15 hereof.
10. ADMINISTRATION OF REINSURANCE CONTRACTS
10.1 Administration
(A) The parties agree that, as of the Effective Time, Retrocedant shall
have the sole authority to administer the Reinsurance Contracts in
all respects, which authority shall include, but not be limited to,
authority to ▇▇▇▇ for and collect premiums, adjust all claims and
handle all disputes thereunder and to effect any and all amendments,
commutations and cancellations of the Reinsurance Contracts, subject,
however, in the case of administration of claims, to all claims
handling guidelines provided in advance in writing by
Retrocessionaire to Retrocedant. Retrocedant shall not, on its own,
settle any claim, waive any right, defense, setoff or counterclaim
relating to the Reinsurance Contracts with respect to amounts in
excess of $500,000, and shall not amend, commute or terminate any of
the Reinsurance Contracts without the prior written consent of
Retrocessionaire, not to be unreasonably withheld.
(B) Notwithstanding the foregoing, to the extent permitted by law
Retrocessionaire may, at its discretion and at its own expense,
assume the administration, defence and settlement of any claim upon
prior written notice to Retrocedant. Upon receipt of such notice,
Retrocedant shall not compromise, discharge or settle such claim
except with the prior written consent of Retrocessionaire.
Retrocessionaire shall not take any action in the administration of
such claim that would reasonably be expected to adversely affect
Retrocedant, its business or its reputation, without the prior
written consent of Retrocedant. Subject to the terms of Article 9
hereof, Retrocessionaire shall indemnify Retrocedant for all Losses,
including punitive, exemplary, compensatory or consequential damages
arising from such assumption of the conduct of such settlement
pursuant to Article 14 herein.
(C) Upon the grant to Platinum Re UK Limited of the necessary
authorisation to enable Platinum Re UK Limited lawfully to carry on
insurance business as principal in the United Kingdom of the classes
covered by this agreement, Retrocedant agrees with Retrocessionaire
that it will enter into undertakings in the terms of sub-clauses (A)
and (B) above with Platinum Re UK Limited, subject only to Platinum
Re UK Limited entering into undertakings in the same terms with
Retrocedant.
10.2 Reporting and Regulatory Matters
Each party shall provide the notices and filings required to be made by it
to relevant regulatory authorities as a result of this Agreement.
Notwithstanding the foregoing, each party shall provide to the other party
any information in its possession regarding the Reinsurance Contracts as
reasonably required by the other party to make such filings and in a form
as agreed to by the parties.
10.3 Duty to Cooperate
Upon the terms and subject to the conditions and other agreements set
forth herein, each party agrees to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other party in doing, all
things necessary or advisable to perform the transactions contemplated by
this Agreement.
10.4 Communications Relating to the Reinsurance Contracts
Following the Effective Time, Retrocedant and Retrocessionaire shall each
promptly forward to the other copies of all material notices and other
written communications it receives relating to the Reinsurance Contracts
(including, without limitation, all inquiries and complaints from relevant
insurance regulators, brokers and other service providers and reinsureds
and all notices of claims, suits and actions for which it receives service
of process).
11. REPORTS AND REMITTANCES
11.1 Report from Retrocedant
Within thirty days following the end of each month, Retrocedant shall
provide Retrocessionaire with a summary statement of account for the
previous month showing all activity relating to each of the Reinsurance
Contracts, including related administration costs and expenses incurred by
Retrocedant in the form set forth as Exhibit G hereto. The monthly
statement of account shall also provide a breakdown of any amounts due to
Retrocedant or Retrocessionaire, as the case may be, as reimbursement for
paid claims, premiums or other amounts due pursuant to the terms of this
Agreement.
11.2 Remittances
Within five Business Days after delivery of each monthly report pursuant
to Section 11.1, Retrocedant and Retrocessionaire shall settle all amounts
then due under this Agreement for that month.
11.3 Late Payments
Should any payment due to any party to this Agreement be received by such
party after the due date for such payment under this Agreement, interest
shall accrue from the date on which such payment was due until payment is
received by the party entitled thereto, at an annual rate equal to the
London Interbank Offered Rate quoted for six month
periods as reported in The Wall Street Journal on the first Business Day
of the month in which such payment first becomes due plus one hundred
basis points (the "APPLICABLE RATE").
11.4 Cost Reimbursement
Retrocessionaire shall reimburse for its allocated share of all costs and
expenses incurred by Retrocedant in administering the Reinsurance
Contracts as set forth in Exhibit H hereto.
11.5 Currency
Premiums, losses and other items payable under this agreement in
currencies other than Pounds Sterling, United States Dollars and Euros
shall be converted into United States Dollars at the rate of exchange used
by Retrocedant for the purposes of its own books and shall be included in
the United States Dollar accounts hereunder.
12. MAINTENANCE OF LICENCES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain at
all times all licences and authorisations required to undertake the
actions contemplated hereby.
13. ACCESS TO RECORDS
13.1 From and after the Closing Date, Retrocedant shall afford to
Retrocessionaire and its respective authorized accountants, counsel and
other designated representatives (collectively, "Representatives")
reasonable access (including using commercially reasonable best efforts to
give access to Persons possessing information) during normal business
hours to all data and information that is specifically described in
writing (collectively, "Information") within the possession of Retrocedant
relating to the liabilities transferred hereunder, insofar as such
information is reasonably required by Retrocessionaire. Similarly, from
and after the Closing Date, Retrocessionaire shall afford to Retrocedant,
any Post-closing Subsidiary of Retrocedant and their respective
Representatives reasonable access (including using commercially reasonable
best efforts to give access to Persons possessing information) during
normal business hours to Information within Retrocessionaire's possession
relating to Retrocedant, insofar as such information is reasonably
required by Retrocedant. Information may be requested under this Article
13 for, without limitation, audit, accounting, claims, litigation (other
than any claims or litigation between the parties hereto) and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions
contemplated hereby.
13.2 From and after the Closing Date, Retrocessionaire and Retrocedant or their
designated representatives may inspect, at the place where such records
are located, any and all data and information that is specifically
described in writing within the possession of the other party hereto
reasonably relating to this Agreement, on reasonable prior notice and
during normal business hours. The rights of the parties under this Article
13 shall survive termination of this Agreement and shall continue for as
long as there may be liabilities under the Reinsurance Contracts or
reporting or retention requirements under applicable law. In addition,
each party shall have the right to take copies (including
electronic copies) of any information held by the other party that
reasonably relates to this Agreement or the Reinsurance Contracts. Each
party shall, and shall cause its designated representative to, treat and
hold as confidential information any information it receives or obtains
pursuant to this Article 13.
14. INDEMNIFICATION
14.1 Indemnification by Retrocedant
Retrocedant agrees to indemnify, defend and hold harmless
Retrocessionaire, and its officers, directors and employees with respect
to any and all Losses arising from any breach by Retrocedant of any
representation, warranty or covenant herein. Retrocedant further agrees to
indemnify, defend and hold harmless Retrocessionaire and its officers,
directors and employees against any and all Losses arising out of
Retrocedant's administration of the Reinsurance Contracts, including but
not limited to extracontractual obligations, payments in excess of policy
limits and settlements made in respect of any such claims to the extent
arising from the gross negligence or wilful misconduct of Retrocedant
except to the extent such actions are taken with the prior consent or
direction of Retrocessionaire. Such indemnification obligations shall be
limited to the aggregate of all fees paid to Retrocedant pursuant to
Section 11.4 hereof.
14.2 Indemnification by Retrocessionaire
Retrocessionaire agrees to indemnify, defend and hold harmless
Retrocedant, and its officers, directors and employees with respect to any
and all Losses arising from any breach by Retrocessionaire of any
representation, warranty or covenant herein. Retrocessionaire further
agrees to indemnify, defend and hold harmless Retrocedant and its
officers, directors and employees against any and all Losses arising out
of Retrocessionaire's administration of the Reinsurance Contracts,
including but not limited to extracontractual obligations, payments in
excess of policy limits and settlements made in respect of any such
claims.
14.3 Indemnification Procedures
(A) If a party seeking indemnification pursuant to this Article 14 (each,
an "INDEMNITEE") receives notice or otherwise learns of the assertion
by a Person (including, without limitation, any governmental entity)
who is not a party to this Agreement or an Affiliate thereof, of any
claim or of the commencement by any such Person of any Action (a
"THIRD PARTY CLAIM") with respect to which the party from whom
indemnification is sought (each, an "INDEMNIFYING PARTY") may be
obligated to provide indemnification pursuant to this Section 14.1 or
14.2, such Indemnitee shall give such Indemnifying Party written
notice thereof promptly after becoming aware of such Third Party
Claim; PROVIDED that the failure of any Indemnitee to give notice as
provided in this Section 14.3 shall not relieve the Indemnifying
Party of its obligations under this Article 14, except to the extent
that such Indemnifying Party is prejudiced by such failure to give
notice. Such notice shall describe the Third Party Claim in as much
detail as is reasonably possible and, if ascertainable, shall
indicate the amount (estimated if necessary) of the Loss that has
been or may be sustained by such Indemnitee.
(B) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within [30]
days of the receipt of notice from an Indemnitee in accordance with
Section 14.3(A) (or sooner, if the nature of such Third Party Claim
so requires), the Indemnifying Party shall notify the Indemnitee of
its election whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the
defense of a Third Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article 14 for any legal or
other expenses (except expenses approved in writing in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED that, if the defendants
in any such claim include both the Indemnifying Party and one or more
Indemnitees and in any Indemnitee's reasonable judgment a conflict of
interest between one or more of such Indemnitees and such
Indemnifying Party exists in respect of such claim or if the
Indemnifying Party shall have assumed responsibility for such claim
with reservations or exceptions that would materially prejudice such
Indemnitees, such Indemnitees shall have the right to employ separate
counsel to represent such Indemnitees and in that event the
reasonable fees and expenses of such separate counsel (but not more
than one separate counsel for all such Indemnitees reasonably
satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify
an Indemnitee of its election as provided in this Article 14, such
Indemnitee may defend or (subject to the remainder of this Article
14) seek to compromise or settle such Third Party Claim at the
expense of the Indemnifying Party.
(C) Neither an Indemnifying Party nor an Indemnitee shall consent to
entry of any judgment or enter into any settlement of any Third Party
Claim which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee, in the case
of a consent or settlement by an Indemnifying Party, or the
Indemnifying Party, in the case of a consent or settlement by the
Indemnitee, of a written release from all liability in respect to
such Third Party Claim.
(D) If an Indemnifying Party chooses to defend or to seek to compromise
or settle any Third Party Claim, the Indemnitee shall make available
at reasonable times to such Indemnifying Party any personnel or any
books, records or other documents within its control or which it
otherwise has the ability to make available that are necessary or
appropriate for such defense, settlement or compromise, and shall
otherwise cooperate in a reasonable manner in the defense, settlement
or compromise of such Third Party Claim.
(E) Notwithstanding anything in this Article 14 to the contrary, neither
an Indemnifying Party nor an Indemnitee may settle or compromise any
claim over the objection of the other; PROVIDED that consent to
settlement or compromise shall not be unreasonably withheld or
delayed. If an Indemnifying Party notifies the Indemnitee in writing
of such Indemnifying Party's desire to settle or compromise a Third
Party Claim on the basis set forth in such notice (provided
that such settlement or compromise includes as an unconditional term
thereof the giving by the claimant or plaintiff of a written release
of the Indemnitee from all liability in respect thereof) and the
Indemnitee shall notify the Indemnifying Party in writing that such
Indemnitee declines to accept any such settlement or compromise, such
Indemnitee may continue to contest such Third Party Claim, free of
any participation by such Indemnifying Party, at such Indemnitee's
sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such Third Party Claim shall
be equal to (i) the costs and expenses of such Indemnitee prior to
the date such Indemnifying Party notifies such Indemnitee of the
offer to settle or compromise (to the extent such costs and expenses
are otherwise indemnifiable hereunder) PLUS (ii) the lesser of (A)
the amount of any offer of settlement or compromise which such
Indemnitee declined to accept and (B) the actual out-of-pocket amount
such Indemnitee is obligated to pay subsequent to such date as a
result of such Indemnitee's continuing to pursue such Third Party
Claim.
(F) In the event of payment by an Indemnifying Party to any Indemnitee in
connection with any Third Party Claim, such Indemnifying Party shall
be subrogated to and shall stand in the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee
may have any right or claim relating to such Third Party Claim
against any claimant or plaintiff asserting such Third Party Claim or
against any other Person. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and
expense of such Indemnifying Party, in prosecuting any subrogated
right or claim.
(G) Except with respect to claims relating to actual fraud, the
indemnification provisions set forth in this section are the sole and
exclusive remedy of the parties hereto for any and all claims for
indemnification under this Agreement.
14.4 Survival
This Article 14 shall survive termination of this Agreement.
15. ARBITRATION
15.1 All disputes and differences arising under or in connection with this
Agreement shall be referred to arbitration under the Arbitration Rules of
▇▇▇▇▇ (UK).
15.2 The Arbitration Tribunal shall consist of three arbitrators, one to be
appointed by the claimant party, one to be appointed by the respondent
party and the third to be appointed by the two appointed arbitrators.
15.3 The third member of the Tribunal shall be appointed as soon as practicable
(and no later than 28 days) after the appointment of the two
party-appointed arbitrators. The Tribunal shall be constituted upon the
appointment of the third arbitrator.
15.4 The Arbitrators shall be persons (including those who have retired) with
not less than ten years' experience of insurance or reinsurance within the
industry or as lawyers or other professional advisers serving the
industry.
15.5 Where a party fails to appoint an arbitrator within 14 days of being
called upon to do so or where the two party-appointed arbitrators fail to
appoint a third within 28 days of their appointment, then upon application
▇▇▇▇▇ (UK) will appoint an arbitrator to fill the vacancy. At any time
prior to the appointment by ▇▇▇▇▇ (UK) the party or arbitrators in default
may make such appointment.
15.6 The Tribunal may in its sole discretion make such orders and directions as
it considers to be necessary for the final determination of the matters in
dispute. The Tribunal shall have the widest discretion permitted under the
law governing the arbitral procedure when making such orders or
directions.
15.7 The seat of arbitration shall be London.
15.8 Each party shall bear the expense of its own arbitrator, and shall jointly
and equally bear with the other the expense of the third arbitrator and of
the arbitration unless otherwise directed by the arbitrators.
15.9 Arbitration shall not be a condition precedent to any right of action
hereunder.
15.10 This Article 15 shall survive termination of this Agreement.
16. INSOLVENCY
16.1 On the occurrence of an Insolvency Event in respect of Retrocedant, this
reinsurance shall be payable directly to Retrocedant, or to its
liquidator, receiver, conservator or statutory successor on the basis of
the liability of Retrocedant without diminution because of the insolvency
of Retrocedant or because the liquidator, receiver, conservator or
statutory successor of Retrocedant has failed to pay all or a portion of
any claim.
16.2 It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of Retrocedant shall give written notice to
Retrocessionaire of the pendency of a claim against Retrocedant indicating
the Reinsurance Contract, which claim would involve a possible liability
on the part of Retrocessionaire within a reasonable time after such claim
is filed in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, Retrocessionaire
may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses
that it may deem available to Retrocedant or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by
Retrocessionaire shall be chargeable, subject to the approval of the
court, against Retrocedant as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to Retrocedant solely as a result of the defense undertaken by
Retrocessionaire.
16.3 As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement, the reinsurance shall be payable as set forth above
by Retrocessionaire to Retrocedant or to its liquidator, receiver,
conservator or statutory successor, except (i) where the Reinsurance
Contracts specifically provide another payee on the occurrence of an
Insolvency Event in respect of Retrocedant, and (ii) where
Retrocessionaire, with the consent of the reinsured or reinsureds under
the
Reinsurance Contracts, has assumed such Reinsurance Contract obligations
of Retrocedant as direct obligations of Retrocessionaire to the payees
under such Reinsurance Contracts and in substitution for the obligations
of Retrocedant to such payees.
16.4 For the purposes of this Article 16, an Insolvency Event shall occur if:
(A) (i) a winding up petition is presented in respect of Retrocedant
or a provisional liquidator is appointed over it or if
Retrocedant goes into administration, administrative
receivership or receivership or if Retrocedant has a scheme of
arrangement or voluntary arrangement proposed in relation to all
or any part of its affairs; or
(ii) Retrocedant goes into compulsory or voluntary liquidation;
or, in each case, if Retrocedant becomes subject to any other similar
insolvency process (whether under the laws of England and Wales or
elsewhere); and
(B) Retrocedant is unable to pay its debts as and when they fall due
within the meaning of section 123 of the Insolvency ▇▇▇ ▇▇▇▇ (or any
statutory amendment or re-enactment of that section).
17. OFFSET
Retrocedant and Retrocessionaire shall have the right to offset any
balance or amounts due from one party to the other under the terms of this
Agreement. The party asserting the right of offset may exercise such right
at any time whether the balances due are on account of premiums, losses or
otherwise.
18. ERRORS AND OMISSIONS
Any inadvertent delay, omission, error or failure shall not relieve either
party hereto from any liability which would attach hereunder if such
delay, omission, error or failure had not been made provided such delay,
omission, error or failure is rectified as soon as reasonably practicable
upon discovery.
19. SECURITY
19.1 Retrocessionaire shall establish and maintain a trust fund for the benefit
of Retrocedant as security for the obligations of Retrocessionaire under
this Agreement. The trust fund shall be in a form reasonably satisfactory
to Retrocedant and shall comply with such requirements (if any) as may be
laid down by the Financial Services Authority.
19.2 At the Closing Date, Retrocessionaire shall deposit qualifying assets into
the trust account equal to all payments and proceeds received by
Retrocessionaire in respect of the Reinsurance Contracts, including but
not limited to assets related to transferred reserves, premium payments,
reinsurance recoverables and other payments. As of the end of each
calendar quarter, Retrocessionaire shall calculate the balance of the
trust fund and the aggregate loss, loss adjustment expense reserves,
unearned premium reserves, ceding commission and other reserves related to
the Reinsurance Contracts
as reported in the statutory financial statements filed by
Retrocessionaire with the Maryland Insurance Commission for such quarter
and shall provide such calculation to Retrocedant within five days of the
filing of such statutory financial statements with the Maryland Insurance
Commission. If the balance of the trust fund is less than the aggregate of
the related reserves, Retrocessionaire promptly shall deposit sufficient
qualifying assets to cause the balance of the trust fund to equal at least
one hundred percent (100%) of such aggregate reserves. If the balance of
the trust fund is greater than the aggregate of the related reserves,
Retrocessionaire may withdraw assets equal to the amount of such excess.
19.3 Upon receipt of the quarterly calculation from Retrocessionaire,
Retrocedant shall have the right to reasonably object to such calculation
and to offer a reasonable proposal for reserve amounts. If the parties in
good faith are not able to resolve the disagreement within [two weeks] of
Retrocedant's indication of disagreement, the parties shall mutually agree
upon an independent actuarial firm to determine an appropriate level of
aggregate reserves with respect to the Reinsurance Contracts, such level
to be no more than the amount proposed by Retrocedant and no less than the
amount reported by Retrocessionaire, and both parties agree to be bound by
such determination.
19.4 Retrocessionaire shall retain the investment discretion with respect to
the assets in the trust, provided, however, that all assets held in the
trust shall qualify as admissible assets for United Kingdom regulatory
purposes.
19.5 Retrocessionaire shall be permitted to liquidate the trust at the earlier
of (i) such time as Retrocessionaire's obligations under this Agreement
have been met or are terminated or waived or (ii) the reserves so reported
by Retrocessionaire do not exceed $- as of two successive calendar year
ends.
19.6 Retrocedant shall bear the costs and expenses of the trustee relating to
the trust.
20. MISCELLANEOUS PROVISIONS
20.1 Severability
If any term or provision of this Agreement shall be held void, illegal, or
unenforceable, the validity of the remaining portions or provisions shall
not be affected thereby.
20.2 Successors and Assigns
This Agreement may not be assigned by either party without the prior
written consent of the other. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns as permitted herein.
20.3 Third Party Rights
(A) Article 14 confers a benefit on the officers, directors and employees
of Retrocedant and of Retrocessionaire (the "Third Parties") and,
subject to the remaining provisions of this sub-section 20.10, is
intended to be enforceable by the Third Parties by virtue of the
Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇.
(B) The parties to this Agreement do not intend that any term of this
Agreement, apart from Article 14, should be enforceable, by virtue of
the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇, by any person who
is not a party to this Agreement.
(B) Notwithstanding the provisions of sub-section 20.10(A) above, this
Agreement may be rescinded or varied in any way and at any time by
the parties to this Agreement without the consent of any or all of
the Third Parties.
20.4 Equitable Relief
Each party hereto acknowledges that if it or its employees or agents
violate the terms of this Agreement, the other party will not have an
adequate remedy at law. In the event of such a violation, the other party
shall have the right, in addition to any other rights that may be
available to it, to obtain in any court of competent jurisdiction
injunctive relief to restrain any such violation and to compel specific
performance of the provisions of this Agreement. The seeking or obtaining
of such injunctive relief shall not foreclose or limit in any way relief
against either party hereto for any monetary damage arising out of such
violation.
20.5 Execution in Counterparts
This Agreement may be executed by the parties hereto in any number of
counterparts and by each of the parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be
deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
20.6 Notices
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered by hand (with receipt confirmed), or by facsimile (with
transmission confirmed), or by certified mail, postage prepaid and return
receipt requested, addressed as follows (or to such other address as a
party may designate by written notice to the others) and shall be deemed
given on the date on which such notice is received:
If to Retrocedant:
[ ]
Facsimile: [No. ]
Attention: [TITLE]
If to Retrocessionaire:
[ ]
Facsimile: [No. ]
Attention: Secretary
20.7 Wire Transfer
All settlements in accordance with this Agreement shall be made by wire
transfer of immediately available funds on the due date, or if such day is
not a Business Day, on the next day which is a Business Day, pursuant to
the following wire transfer instructions: [ ]. Payment may be made by
cheque payable in immediately available funds in the event the party
entitled to receive payment has failed to provide wire transfer
instructions.
20.8 Headings
Headings used herein are not a part of this Agreement and shall not affect
the terms hereof.
20.9 Further Assurances
Each of the parties shall from time to time, on being reasonably requested
to do so by the other party to this Agreement, do such acts and/or execute
such documents in a form reasonably satisfactory to the party concerned as
may be necessary to give full effect to this Agreement and securing to
that party the full benefit of the rights, powers and remedies conferred
upon it by this Agreement.
20.10 Amendments; Entire Agreement
This Agreement may be amended only by written agreement of the parties.
This Agreement, together with the Formation and Separation Agreement,
supersedes all prior discussions and written and oral agreements and
constitutes the sole and entire agreement between the parties with respect
to the subject matter hereof.
20.11 Governing Law
This Agreement shall be governed by English law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorised representatives as of the date first above
written.
ST. ▇▇▇▇ REINSURANCE COMPANY LIMITED
By
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Name:
Title:
PLATINUM UNDERWRITERS REINSURANCE, INC.
By
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Name:
Title: