Exhibit 10.3
INTEREST AND LIABILITIES CONTRACT
(hereinafter referred to as the "Contract")
to
WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY
PROPORTIONAL REINSURANCE AGREEMENT
NYM-01/03
(hereinafter referred to as the "Agreement")
between
NEW YORK MARINE & GENERAL INSURANCE COMPANY
(hereinafter referred to as the "Company")
and
TWIN BRIDGES (BERMUDA) LTD
(▇▇▇▇▇▇▇▇, Bermuda)
(hereinafter referred to as the "Subscribing Reinsurer")
It is hereby mutually agreed that the Subscribing Reinsurer shall have a one
hundred per cent. (100%) participation in the Interests and Liabilities of the
Reinsurers as set forth in the Agreement attached hereto.
Such participation shall be several and not joint with the participation of any
other Subscribing Reinsurers, and the Subscribing Reinsurer shall under no
circumstances participate in the Interests and Liabilities of the other
Reinsurers in this Contract.
The Contract shall become effective 12:01 a.m., Eastern Daylight Time, December
1, 2003 and is subject to the provisions contained in the attached Agreement.
The Agreement to which this Contract is attached, and therefore the interests
and liabilities of the Subscribing Reinsurer therein, may be changed, altered,
or amended as the parties may agree; provided that such change, alteration, or
amendment is evidenced by endorsement to this Contract executed by the Company
and the Subscribing Reinsurer.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be signed in
duplicate by their duly authorized representatives.
Signed in New York, NY
This 24th day of December, 2003
ATTEST:
NEW YORK MARINE & GENERAL INSURANCE
COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Title: CHIEF UNDERWRITING OFFICER
Reference: TGH 01
And signed in Hamilton, Bermuda
This 24th day of December, 2003
ATTEST: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TWIN BRIDGES (BERMUDA) LTD
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: Director
Reference:
-----------------------------
WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY
PROPORTIONAL REINSURANCE AGREEMENT
NYM-01/03
(HEREINAFTER, THE "AGREEMENT")
BETWEEN
NEW YORK MARINE AND GENERAL INSURANCE COMPANY
(NEW YORK, NY)
(HEREINAFTER, THE "COMPANY")
AND
TWIN BRIDGES (BERMUDA) LIMITED
(▇▇▇▇▇▇▇▇, BERMUDA)
(HEREINAFTER, THE "REINSURER")
ARTICLE I - RECITALS AND BUSINESS COVERED
A. WHEREAS the Company has agreed to underwrite certain specific and aggregate
excess workers' compensation and employers' liability Policies for group
self-insurance Trusts managed by Compensation Risk Managers LLC
(Poughkeepsie, New York) ("CRM"); and
B. WHEREAS certain managers, owners, and/or principals of CRM have formed the
Reinsurer in order to reinsure the Company's Policies underwritten pursuant
to Article I(A); and
C. WHEREAS each Trust and CRM have entered into a management agreement,
pursuant to which CRM provides each Trust with marketing, underwriting,
loss control, claims, and accounting services, including without limitation
authority to place excess workers' compensation and employers' liability
coverage; and
D. WHEREAS CRM accepts members only in accordance with each Trust's
Underwriting Guidelines; and
E. WHEREAS CRM has effected or will effect Statutory Specific Excess Coverage
for the Trusts for Loss and Loss Adjustment Expense in excess of one
million dollars ($1,000,000) per Occurrence; and
F. NOW, therefore, in consideration of the payment of the premium displayed in
Article X, the Company agrees to cede and the Reinsurer agrees to assume
liability as displayed in Article VI during the Term as displayed in
Article III and in the Territory displayed in Article IV, subject to the
conditions and exclusions contained herein.
ARTICLE II - DEFINITONS
A. "Agreement Year" means the twelve (12) month period from the inception or
anniversary of this Agreement.
B. "Gross Ceded Premium" means the Reinsurer's proportionate share - before
allowances for ceding commission or stop loss premiums - of the Company's
Gross Net Written Premium.
C. "Gross Net Unearned Premium" means that portion of Gross Net Written
Premium accounted by the Company in its statutory filings as unearned.
D. "Gross Net Written Premium" means the direct written premium accounted by
the Company under its Policies, plus or minus audit adjustments, minus
return premiums arising from cancellations.
E. "Loss," "Loss Adjustment Expense," "Occurrence," and "Ultimate Net Loss"
have the same meanings in this Agreement as they are defined in the
Company's Policies.
F. "Net Ceded Premium" means Gross Ceded Premium minus the ceding commission
displayed in Article X (B), the premium for stop loss protection displayed
in Article X (D), and the allowance for Federal Excise Tax displayed in
Article XVII.
G. "Notice Period" means the period between the effective date of cancellation
of this Agreement and the date upon which either or both parties gave
notice of cancellation.
H. The term "Policies" means each excess workers' compensation and employers'
liability coverage agreement issued by the Company to a group
self-insurance trust managed by CRM.
ARTICLE III - EFFECTIVE DATE AND CANCELLATION
A. This Agreement shall become effective at 12:01 a.m. Eastern Standard Time
December 1, 2003, shall cover new and renewal Policies that become
effective thereafter, and shall remain in force until cancelled.
B. Except as provided in Article III (C), either party may cancel this
Agreement upon one hundred twenty (120) days prior written notice to be
effective on any anniversary date. The Company shall continue to cede new
and renewal Policies that become effective during the Notice Period for
cancellations pursuant to Article III (B).
C. Either party may cancel this Agreement upon five (5) days prior written
notice if the other party (1) becomes the subject of regulatory or
supervisory action or (2) suffers a reduction of net worth greater than
fifty percent (50%) since the date of its last audited financial
statements. The Company shall not cede new and renewal Policies that become
effective during the Notice Period for cancellations pursuant to Article
III (C).
D. Except as provided in Article III (E), termination of this Agreement will
be on a run-off basis, and the Reinsurer will remain responsible for Losses
subsequent to termination but only through the common expiration date of
each Trust's Excess Coverage Term. The Company's original Policies will be
issued for a term of one year but may be extended, with written notice to
the Reinsurer, in order to conform the excess coverage term to the Trusts'
Membership Renewal Period as defined in the Company's Policies.
E. The Company may terminate this Agreement on a cut-off basis if it effected
cancellation pursuant to Article III (C), in which case the Reinsurer will
refund its portion of Gross Unearned Premiums, and the Company will credit
the Reinsurer proportionately with the unearned Ceding Commission and
unearned stop loss premiums.
F. If any law, regulation, or ruling of the Federal government of the United
States or any State, Territory, or Local government, or the rulings of any
official having jurisdiction or supervision over insurance companies,
should render the enforcement of this Agreement, in whole or in part,
illegal within a given jurisdiction, the Company may, upon written notice
to the Reinsurer, suspend, abrogate, or amend this Agreement insofar as it
relates to such jurisdiction, to the extent necessary to comply with such
law,
regulation, or ruling. Such suspension, abrogation, or amendment of this
Agreement shall in no way affect any other portion thereof.
ARTICLE IV - TERRITORY
A. This Agreement applies wherever coverage under the Company's Policies
applies.
ARTICLE V - EXCLUSIONS
A. This Agreement does not apply and specifically excludes liability arising
from any source other than excess workers' compensation and employers'
liability Policies issued by the Company to group self-insurance trusts
managed by CRM.
B. This Agreement includes and incorporates all exclusions contained in the
Company's original Policies.
ARTICLE VI - RETENTION AND CESSION
A. The Company's original Policy limits shall not exceed (1) five hundred
thousand dollars ($500,000) per occurrence or accident, as defined in its
Policies, in respect of specific claims or (2) two million dollars
($2,000,000) in respect of aggregate claims.
B. The Company shall retain (1) fifty percent (50%) of the liability arising
from its original Policies plus (2) one hundred per cent (100%) of the
liability exceeding the Reinsurer's maximum liability displayed in Article
VI (D).
C. Subject to the limitation contained in Article VI (D), the Company shall
cede and the Reinsurer shall assume fifty per cent (50%) of the liability
arising from the Company's original Policies.
D. Article VI (C) notwithstanding, the Reinsurer's maximum liability under
this Agreement shall not exceed one hundred eighty-one and sixteen
one-hundredths percent (181.16%) of Net Ceded Premium.
ARTICLE VII - ORIGINAL CONDITIONS
A. The liability of the Reinsurer shall commence obligatorily and
simultaneously with that of the Company, subject to the terms, conditions,
and limitations set forth in this Agreement.
B. Business ceded hereunder shall include every original Policy, rewrite,
renewal, or extension (whether before or after the termination of this
Agreement) required by applicable statute or by rule or regulation.
C. The liability of the Reinsurer shall commence obligatorily and
simultaneously with that of the Company as soon as the Company becomes
liable, and the premium on account of such liability shall be credited to
the Reinsurer from the original date of the Company's liability.
D. All reinsurance for which the Reinsurer shall be liable, by virtue of this
Agreement, shall be subject, in all respects, to the same rates, terms,
conditions, interpretations, waivers, the exact proportion of premiums paid
to the Company without any deduction for brokerage, and to the same
modifications, alterations and cancellations, as the respective insurance
of the Company to which such reinsurance relates, the true intent of this
Agreement being that the Reinsurer shall, in every case to which this
Agreement applies and in the proportion specified herein, follow the
fortunes of the Company.
E. Nothing herein shall in any manner create any obligations, establish any
rights, or create any direct right of action against the Reinsurer in favor
of any third party, or other person not party to this Agreement; or create
any privity of contract between the Trusts, their members, and the
Reinsurer.
ARTICLE VIII - RESERVES
A. The Reinsurer shall fund its share of the Company's ceded unearned premium
and outstanding loss and loss adjustment expense reserves including
incurred but not reported loss reserves by:
1. Clean, unconditional, and irrevocable Letter of Credit ("LOC") issued
by any bank acceptable to the Company, and/or
2. A reinsurance trust fund ("Trust") for the benefit of the Company,
provided that such trust fund complies with Regulation 114 of the
Insurance Department of the State of New York; and/or
3. Funds withheld by the Company or cash advances by the Reinsurer
("cash").
if, without such funding, a penalty would accrue to the Company on the
financial statements it is required to file with any insurance regulatory
authority. The Reinsurer may elect any combination of funding vehicles.
B. With regard to funding in whole or in part by LOC, it is agreed that each
such LOC will be issued for a term of not less than one year and will
include a so-called "evergreen" clause which automatically extends the term
for at least one additional year at each expiration date unless thirty (30)
days prior to any expiration date, the issuing bank notifies the Company by
certified mail it elects not to consider the Letter of Credit renewed or
extended for any additional period.
1. The Company and the Reinsurer further agree, notwithstanding anything
to the contrary in this Agreement, that said LOC may be drawn upon by
the Company or its successors in interest at any time, without
diminution because of the insolvency of the Company or the Reinsurer,
but only for one or more of the following purposes:
a) To reimburse itself for the Reinsurer's share of the unearned
premium paid under this Agreement, and/or
b) To reimburse itself for the Reinsurer's share of the unearned
premium returned or returnable to insureds upon cancellation of
insurance contracts covered under this Agreement, and/or
c) To pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any liability for loss reinsured by this
Agreement, which is due to the Company and has not been otherwise
paid by the Reinsurer, and/or
d) To make refund to the Reinsurer of any sum which exceeds the
actual amounts required to pay the Reinsurer's obligations under
1, 2, and 3, above.
2. The bank issuing the LOC shall have no responsibility whatsoever in
connection with the propriety of withdrawals made by the Company or
the disposition of funds withdrawn, except to see that withdrawals are
made only upon the order of properly authorized representatives of the
Company.
C. With regard to funding in whole or in part by a Trust, the Company and the
Reinsurer will appoint a Trustee and use their best efforts to conclude a
Trust Agreement.
D. With regard to funding in whole or in part by cash, the Company will credit
the Reinsurer with interest income monthly in arrears by applying the
two-year Treasury Constant Maturity Rate (as published monthly by the
Federal Reserve Bank of Saint Louis at
▇▇▇▇://▇▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇/▇▇▇▇▇/▇▇▇▇▇▇/▇▇▇/▇▇) to the average daily
balance retained for Reinsurer's account by the Company.
E. At annual intervals -- or more frequently as determined by the Company, but
never more frequently than quarterly -- the Company shall prepare a
specific statement, for the sole purpose of amending the LOC, and/or Trust,
and/or cash, of the Reinsurer's share of any obligations.
1. If the statement shows that the Reinsurer's share of obligations exceeds
the balance of funding as of the statement date, the Reinsurer shall,
within thirty (30) days after receipt of notice of such excess, secure
delivery to the Company of an amendment of the LOC increasing the amount of
credit by the amount of such difference and/or increase the balances of the
Trust and/or make additional cash advances to eliminate the difference.
2. If, however, the statement shows that the Reinsurer's share of obligations
is less than the balance of funding as of the statement date, the Company
shall, within thirty (30) days after receipt of written request from the
Reinsurer, release such excess funding by agreeing to secure an amendment
to LOC reducing the amount of credit available, and/or releasing excess
amounts from the Trust, and/or refunding cash.
F. The rights and obligations of the Company and the Reinsurer, as set forth
in this Article, shall not be diminished in any manner whatsoever by the
insolvency of any party hereto.
ARTICLE IX - GAP FUNDING
A. In addition to Reserve funding described in Article VIII, the Reinsurer
shall also fund, in the same manner provided for in Article VIII (A), the
difference between (1) the maximum sum recoverable by the Company - that
is, one hundred eighty-one and sixteen one hundredths per cent (181.16%) of
Net Ceded Premium - and (2) the Reserve funding discussed in Article VIII.
The difference between (1) and (2) equals the "Gap."
1. Within thirty (30) days of the inception of this Agreement, the
Reinsurer will establish provisional Gap funding of one million five
hundred thousand dollars ($1,500,000).
2. During the first Agreement Year, the Reinsurer will increase
provisional Gap funding at a rate of 1.37x net premium ceded by the
Company until Reserve funding and Gap funding equal one hundred eighty
one point one six percent (181.16%) of Net Ceded premium.
B. The stipulations for funding by an LOC, a Trust, or cash described in
Article VIII shall also apply to Gap funding.
C. Thirty-six (36) months from the inception of an Agreement Year, the
Reinsurer may substitute an Indemnification Agreement for Gap funding,
provided that the Indemnification Agreement contain such covenants as the
Company may reasonably require concerning (a) the distribution of retained
earnings and/or surplus capital by the Reinsurer or (b) the use of any such
distributions by the Reinsurer's shareholders.
ARTICLE X - PREMIUM AND COMMISSION
A. The Company shall pay the Reinsurer fifty per cent (50%) of Gross Net
Written Premium for subject Policies.
B. The Reinsurer shall allow the Company to deduct a ceding commission of
twenty-eight per cent (28%) of Gross Ceded Premium.
C. In addition to the ceding commission described in Article X (B), the
Reinsurer will reimburse the Company for its proportionate share of any
profit commission or Policy taxes payable by the Company under its
Policies.
D. In consideration of limitation displayed in Article VI (C), the Reinsurer
shall pay the Company a stop loss premium of two percent (2%) of its Gross
Ceded Premium.
ARTICLE XI - REPORTS AND REMITTANCES
A. Quarterly within thirty (30) days of the end of each calendar quarter, the
Company shall submit a Policy bordereau displaying the Company's Policy
number, the identity of the Group Self-Insurance Trust, specific and
aggregate Policy retentions and limits, annual minimum and deposit premium,
and Policy adjustment rate.
B. Quarterly within thirty (30) days of the end of each calendar quarter, the
Company shall submit a premium account listing by Policy details of all
cash premium transactions during the quarter.
C. Quarterly within thirty (30) days of the end of each calendar quarter, the
Company shall submit a copy of the specific and aggregate claims bordereaux
it receives from CRM for each Trust as well as any independent evaluation
of claims it has undertaken.
D. Quarterly within thirty (30) days of the end of each calendar quarter, the
Company shall submit a loss account listing by claim details of all cash
claims transactions during the quarter.
E. Subject to the Reinsurer's simultaneous performance of its obligation
pursuant to Article IX, the Company will remit net balances due to the
Reinsurer with its account. The Reinsurer will remit net balances due to
the Company within thirty (30) days of its receipt of the Company's
account.
F. Annually within ninety (90 days, the Company and the Reinsurer will
exchange audited financial statements.
ARTICLE XII - CASH CALL
A. Article XI notwithstanding, in the event of a settlement of an individual
specific or aggregate claim, including commutation of a Policy, exceeding
two hundred thousand dollars ($200,000) for the Reinsurer's share thereof,
the Company may submit a demand for immediate funding by the Reinsurer.
B. The Reinsurer shall remit payment of demands for cash funding within five
(5) days of its receipt of the Company's demand.
ARTICLE XIII - OFFSET
A. The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Agreement.
B. The party asserting the right of offset may exercise such right any time
whether the balances due are on account of premiums, commissions, losses or
otherwise.
ARTICLE XIV - ACCESS TO RECORDS
The Reinsurer or its designated representatives shall have free access to the
books and records of the Company on matters relating to this Agreement at all
reasonable times for the purpose of obtaining information concerning this
Agreement or the subject matter hereof.
ARTICLE XV - ERRORS OR OMISSIONS
Errors and omissions on the part of the Company shall not invalidate the
coverage under this Agreement, provided such errors or omissions are corrected
promptly after discovery.
ARTICLE XVI - ARBITRATION
A. Any dispute or other matter in question between the Company and the
Reinsurer arising out of or relating to the formation, interpretation,
performance, or breach of this Agreement, whether such dispute arises
before or after termination of this Agreement, shall be settled by
arbitration.
B. The Company and the Reinsurer agree that upon the delivery of an
arbitration notice, either party to the arbitration may seek the aid of the
courts, in accordance with the provisions of Article XVIII, to obtain a
temporary restraining order, preliminary injunction, or other appropriate
relief to maintain the status quo ante or prevent the mooting of matters
that are the subject of the arbitration while the arbitration process is
pending. For purposes of this Article XVI (B), a wrongful termination of
this Agreement or a breach of the Agreement that substantially impairs the
continued operation of the Company shall be deemed to constitute
irreparable harm for the purposes of establishing the elements for the
entry of a temporary restraining order or preliminary injunction.
C. Arbitration shall be initiated by the delivery by registered mail of a
written notice of demand for arbitration by one party to the other within a
reasonable time after the dispute has arisen. The demand for arbitration
will contain details of the dispute and the identity of the arbitrator
appointed by the initiating party.
D. The party receiving notice shall appoint and identify its arbitrator to the
initiating party within sixty (60) days of its receipt of the demand for
arbitration. If the receiving party refuses or neglects to appoint an
arbitrator within sixty (60) days, the initiating party shall appoint the
second arbitrator within thirty (30) days thereafter.
E. The two party arbitrators shall appoint a third arbitrator as an umpire
(collectively, the "Arbitrators") within thirty (30) days of appointment of
the second arbitrator. If the two party arbitrators do not agree on an
umpire within thirty (30) days after the appointment of the second
arbitrator, the parties shall allow the American Arbitration Association to
select the umpire.
F. The Arbitrators shall be individuals who may be active or retired officers
of an insurance or reinsurance company, or professionals with at least ten
years' experience in insurance or reinsurance matters, other than current
or former officers, directors, or employees of any party or an affiliate of
any party.
G. Each party shall submit its case brief in writing to the arbitrators within
thirty (30) days of the selection of the umpire or within such longer
period as may be agreed by the arbitrators. The arbitrators may agree by
majority vote to permit written rebuttals from the parties and/or to hear
live testimony.
H. The arbitration hearings shall be held in New York, New York within thirty
(30) days of exchange of case briefs and rebuttals, if any.
I. The arbitrators shall not be obliged to follow judicial formalities or the
rules of evidence except to the extent required by the laws of the State of
New York. They shall make their decisions according to the practice of the
reinsurance business.
J. The written decision rendered by a majority of the arbitrators shall be
final and binding on both parties. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof.
K. Each party shall pay the fee and expenses of its own arbitrator and
one-half of the fee and expenses of the umpire. All other expenses of the
arbitration shall be equally divided between the parties.
L. Except as provided above, arbitration shall be based upon the procedures of
the American Arbitration Association.
ARTICLE XVII - TAXES
A. The Reinsurer agrees to allow the Company to deduct one per cent (1%) of
Gross Ceded Premium for the purpose of paying Federal Excise Tax (FET) to
the extent such premium is subject to FET.
B. In the event of any return of premium becoming due hereunder, the Reinsurer
will deduct the FET allowance from the return premium payable to the
Company.
C. The Reinsurer shall reimburse the Company for its proportionate share of
specific Policy taxes, if any, which the Company becomes liable to pay.
ARTICLE XVIII - GOVERNING LAW
A. This Agreement will be subject to the laws of the State of New York.
B. The Company and the Reinsurer agree to the jurisdiction of New York State
Court sitting in New York County.
ARTICLE XIX - INSOLVENCY
A. In the event of the insolvency of the Company, payments by the Reinsurer
under this Agreement shall be payable on demand, with reasonable provision
for verification, on the basis of claims allowed against the insolvent
Company by any court of competent jurisdiction or by any liquidator,
receiver, or statutory successor of the insolvent Company that has
authority to allow such claims, without diminution because of such
insolvency or because such liquidator, receiver, or statutory successor has
failed to pay all or a portion of any claims.
B. Such payments by the Reinsurer shall be made directly to the Company or its
liquidator, receiver or statutory successor, except as provided by Section
4118 (a) of the New York Insurance Law or except (a) where the Agreement
specifically provides another payee of such payments in the event of the
insolvency of the Company, or where (b) the Reinsurer with the consent of
the direct insured or insureds has assumed such Policy obligations of the
Company as direct obligations of the Reinsurer to the payees under such
Policies and
in substitution for the obligations of the Company to such payees.
C. It is agreed, however, that the liquidator, receiver, or statutory
successor of the insolvent Company shall give written notice to the
Reinsurer of the pendency of a claim against the insolvent Company on the
Policy or Policies within a reasonable time after such claim is filed in
the insolvency proceeding and that during the pendency of such claim the
Reinsurer may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator,
receiver, or statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit that may accrue to the Company solely as
a result of the defense undertaken by the Reinsurer.
ARTICLE XX - CURRENCY
A. Whenever the word "Dollars" or the "$" sign appears in this Agreement, they
shall be construed to mean United States Dollars.
B. All payments made by either party shall be made in United States Dollars.
ARTICLE XXI - INTERMEDIARY
TGH ADVISORS, INC., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, is
hereby recognized as the Broker of Record for all business hereunder. All
communications (including but not limited to notices, statements, premiums,
return premiums, commissions, taxes, losses, loss adjustment expense, salvages,
and loss settlements) relating thereto shall be transmitted to the Company or
the Reinsurer through TGH ADVISORS, INC. Payments by the Company to the Broker
of Record shall be deemed to constitute payment to the Reinsurer. Payments by
the Reinsurer to the Broker of Record shall be deemed to constitute payment to
the Company only to the extent that such payments are actually received by the
Company.
