Exhibit 10.01
AG PI, CROP HAIL AND MPCI
MULTI-YEAR QUOTA SHARE REINSURANCE AGREEMENT
This Agreement is made and entered into by and between IGF INSURANCE COMPANY,
Indianapolis, Indiana, PAFCO GENERAL INSURANCE COMPANY, Indianapolis, Indiana,
SUPERIOR INSURANCE COMPANY, Atlanta, Georgia, or any other insurance company
acting on behalf of IGF INSURANCE COMPANY, Indianapolis, Indiana (hereinafter
together called the "Company") and the Reinsurer specifically identified on the
signature page of this Agreement (hereinafter called the "Reinsurer").
ARTICLE 1
BUSINESS REINSURED
This Agreement is to share with the Reinsurer the interests and liabilities of
the Company under all Policies covering business written or renewed by or on
behalf of the Company, classified by the Company as:
1. Ag PI, or
2. Crop Hail, or
3. Multi-Peril Crop Insurance (MPCI), as defined and reinsured by
the Federal Crop Insurance Corporation (FCIC) and issued by
the Company under their 1998 through 2000 plans of operations
covering the 1999 through 2001 crop Seasons, subject to the
terms and conditions herein contained.
ARTICLE 2
COVER
Section 1 - As respects Ag PI:
A. 1. The Company will cede, and the Reinsurer will accept as
reinsurance, a 100% share of all business reinsured
hereunder for the period 5/1/98-1/1/99.
2. The Company will cede, and the Reinsurer will accept as
reinsurance, a 100% share of all business reinsured hereunder,
subject to a maximum cession of $25,000,000 per sinlge state,
$12,500,000 single peril limit per crop, and further subject
to an overall maximum limit of $100,000,000 per Season for the
period 1/1/99-1/1/2000.
3. The Company will cede, and the Reinsurer will accept as
reinsurance, a 100% share of all business reinsured hereunder,
subject to a maximum cession of $25,000,000 per sinlge state,
$12,500,000 single peril limit per crop, and further subject
to an overall maximum limit of $100,000,000 per Season for the
period 1/1/2000-1/1/2001.
B. The Reinsurer's limit of liability for all paid Loss amounts
recoverable on Losses ascribed to the 5/1/98-1/1/99 period shall not
exceed 300% of Net Written Premium.
C. The Reinsurer's limit of liability for all paid Loss amounts
recoverable on Losses ascribed to the 1/1/99-1/1/2001 period shall not
exceed the lesser of:
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1. 200% of Net Written Premium for the period 1/1/99-1/1/2000; or
2. 150% of Net Written Premium for the period 1/1/99-1/1/2001.
Section 2 - As respects Crop Hail:
A. The Company will cede, and the Reinsurer will accept as reinsurance, a
100% share of all business reinsured hereunder, subject to a maximum
cession of $2,000,000 per township.
B. The Reinsurer's limit of liability for all paid Loss amounts shall not
exceed 150% of Net Written Premium.
Section 3 - As respects MPCI:
A. The Company will cede, and the Reinsurer will accept as reinsurance, a
100% quota share of all business reinsured hereunder.
B. The Reinsurer's annual limit of liability shall equal 95% of Retained
Underwriting Losses on business classified by the Company as MPCI,
subject to a maximum limit of liability to the Reinsurer that is equal
to 95% of 25% of Net Retained Premium Income in any one year of this
Agreement, and further subject to a maximum limit of liability to the
Reinsurer that is equal to 200% of the Advanced Margin for MPCI, plus
Underwriting Gain Sharing, if any, received for each respective three
year period, except as outlined in the COMMUTATION ARTICLE and PROFIT
SHARING ARTICLE of this Agreement.
ARTICLE 3
TERM
A. Section 1 - As respects Ag PI:
This Agreement shall become effective at 12:01 a.m., Central
Standard Time, 5/1/98, and shall remain in full force and
effect for 32 months, expiring 12:01 a.m., Central Standard
Time, 1/1/2001.
Section 2 - As respects Crop Hail:
This Agreement shall become effective at 12:01 a.m., Central
Standard Time, 1/1/99, and shall remain in full force and
effect for 12 months, expiring 12:01 a.m., Central Standard
Time, 1/1/2000.
Section 3 - As respects MPCI:
This Agreement shall become effective at the inception of the
FCIC 1999 standard reinsurance agreement and its amendments
which are applicable to the 1999 FCIC reinsurance year between
the Company and the FCIC (which shall be deemed to be the
inception date for purposes of this Agreement), and shall
include the FCIC 2000 and 2001 standard reinsurance agreements
and amendments which are applicable to the 2000 and 2001 FCIC
reinsurance years, and shall remain in full force and effect
until the close of the 2001 FCIC reinsurance year (as defined
by the FCIC, which shall be deemed to be the expiration date
for purposes of this Agreement).
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The term "1999 FCIC reinsurance year" as used in this
Agreement shall refer to all MPCI Policies on crops whose FCIC
approved sales closing dates occur between 7/1/98 and 6/30/99.
The term "2000 FCIC reinsurance year" as used in this
Agreement shall refer to all MPCI Policies on crops whose FCIC
approved sales closing dates occur between 7/1/99 and
6/30/2000.
The term "2001 FCIC reinsurance year" as used in this
Agreement shall refer to all MPCI Policies on crops whose FCIC
approved sales closing dates occur between 7/1/2000 and
6/30/2001.
B. In the event of termination, the Reinsurer will continue to cover all
Policies coming within the scope of this Agreement, including those
written and renewed during the period of notice, until the natural
expiration or anniversary of such Policies, whichever occurs first, but
in no event longer than 12 months from the date of termination plus odd
time, not to exceed 18 months in total.
C. Should this Agreement expire or terminate while a Loss covered
hereunder is in progress, the Reinsurer shall be responsible for the
Loss in progress in the same manner and to the same extent it would
have been responsible had the Agreement expired or terminated the day
following the conclusion of the Loss in progress.
ARTICLE 4
SEASON
Section 1 - As respects Ag PI:
A. For the period 5/1/98 to 1/1/99, the Season commences on 5/1/98 and
ends on 1/1/99.
B. For the period 1/1/99 to 1/1/2000, the Season commences on 1/1/99 and
ends on 1/1/2000.
C. For the period 1/1/2000 to 1/1/2001, the Season commences on 1/1/2000
and ends on 1/1/2001.
Section 2 - As respects Crop Hail:
A. For the period 1/1/99 to 1/1/2000, the Season commences on 1/1/99 and
ends on 1/1/2000.
Section 3 - As respects MPCI:
A. For the period 1/1/99 to 1/1/2000, the Season commences on inception of
the FCIC 1999 standard reinsurance agreement and its amendments which
are applicable to the 1999 FCIC reinsurance year between the Company
and the FCIC, expiring at the close of the 1999 FCIC reinsurance year.
B. For the period 1/1/2000 to 1/1/2001, the Season commences on inception
of the FCIC 2000 standard reinsurance agreement and its amendments
which are applicable to the 2000 FCIC reinsurance year between the
Company and the FCIC, expiring at the close of the 2000 FCIC
reinsurance year.
C. For the period 1/1/2001 to 1/1/2002, the Season commences on inception
of the FCIC 2001 standard reinsurance agreement and its amendments
which are applicable to the 2001 FCIC reinsurance year between the
Company and the FCIC, expiring at the close of the 2001 FCIC
reinsurance year.
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ARTICLE 5
TERRITORY
This Agreement applies to Losses arising out of Policies written in the United
States of America, its territories and possessions and Canada, wherever
occurring.
ARTICLE 6
EXCLUSIONS
This Agreement does not cover:
A. War Risks as excluded in the attached North American War Exclusion
Clause (Reinsurance) No. 08-45.
B. Nuclear incidents as per the attached Nuclear Incident Exclusion
Clauses - Physical Damage - Reinsurance - U.S.A. and Canada
Nos. 08-33 and 08-34.2.
C. Business excluded under the Standard Reinsurance Agreementof the FCIC,
except Ag PI.
D. Liability of the Company arising by contract, operation of law or
otherwise from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. "Insolvency fund" includes any
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which
provides for any assessment of or payment or assumption by the Company
of part or all of any claim, debt, charge, fee or other obligation of
an insurer or its successors or assigns which has been declared by any
competent authority to be insolvent or which is otherwise deemed unable
to meet any claim, debt, charge, fee or other obligation in whole or in
part.
ARTICLE 7
ACCOUNTS AND REMITTANCES
Section 1 - As respects Ag PI:
A. For the period 5/1/98 to 1/1/99:
1. At inception of this Agreement, the Company shall report Net
Written Premium. Any balance due the Reinsurer shall be paid
as soon as possible after inception of this Agreement.
2. As soon as possible after the end of the Season, but no later
than 7/31/99, the Company shall provide the Reinsurer with a
complete account, to include the following:
a.) Net Written Premium accounted for during the term of this
Agreement; less,
b.) The ceding commission as provided for in this Agreement;
less,
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c.) Losses paid and outstanding Losses which may be ascribed
to this Agreement; plus,
d.) Subrogation, salvage, or other recoveries on Losses which
may be ascribed to this Agreement.
3. Within 60 days following the end of the period the debtor
party will remit to the creditor party any balance due, and
each month thereafter the balance shall be adjusted and
settled between the parties, until all Losses have been
settled.
4. If the Losses covered hereunder exceed 200% of the Net Written
Premium, the Company shall pay an additional levy calculated
as follows:
a.) 50% of the difference between the Loss less 200% of the
Net Written Premium shall be paid to the Reinsurer on
7/31/2000.
b.) 100% of the difference between the Loss less 200% of the
Net Written Premium, less any amount paid in a.) above,
shall be paid to the Reinsurer on 7/31/2001.
c.) Adjustments to the levy will continue to be made
annually thereafter, until all Losses have been
settled The calculation shall be 100% of the
difference between the Loss less 200% of the Net
Written Premium, less any amounts previously paid.
B. For the period 1/1/99 to 1/1/2000, and for the period 1/1/2000 to 1/1/2001:
1. Within 30 days after each calendar quarter, the Company shall
report separately Net Written Premium, the ceding commission
thereon, as provided for in this Agreement, Losses paid and
outstanding Losses which may be ascribed to this Agreement.
2. As respects the period 1/1/99 to 1/1/2000, if the amount due
as respects this account, is due to the Reinsurer, the Company
shall remit 50% of the balance due within 60 days after the
end of the calendar quarter under consideration. Any positive
balance deferred shall be paid on 12/31/99.
3. As respects the period 1/1/2000 to 1/1/2001, if the amount due
as respects this account, is due to the Reinsurer, the Company
shall remit the balance due within 60 days after the end of
the calendar quarter under consideration.
4. As respects the period 1/1/99 to 1/1/2000, and for the period
1/1/2000 to 1/1/2001, if the amount due as respects this
account, is due to the Company, the Reinsurer shall remit the
balance due within 60 days following receipt and verification
of the Company's report.
5. As soon as possible after the end of each Season, but no later
than the following 7/31, the Company shall provide the
Reinsurer with a complete account, to include the following:
a.) Net Written Premium accounted for during the term of this
Agreement; less,
b.) The ceding commission as provided for in this Agreement;
less,
c.) Losses paid and outstanding Losses which may be ascribed
to this Agreement; plus,
d.) Subrogation, salvage, or other recoveries on Losses which
may be ascribed to this Agreement.
6. Within 60 days following the end of the period, the debtor
party will remit to the creditor party any balance due, and
each month thereafter the balance shall be adjusted and
settled between the parties, until all Losses have been
settled.
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7. If the Losses covered hereunder exceed 150% of the cumulative
Net Written Premium for the term 1/1/99 to 1/1/2001, the
Company shall pay the difference between the cumulative Losses
paid and 150% of the cumulative Net Written Premium for the
term 1/1/99 to 1/1/2001, to be paid on 7/31/2001. Cumulative
Losses shall equal all Losses paid by the Reinsurer after
final settlement at 7/31/2001.
As soon as possible following the expiration of this Agreement, the Company will
provide any other information which the Reinsurer may require for its Annual
Convention Statement which may be reasonably available to the Company.
Section 2 - As respects Crop Hail:
A. As soon as possible after the end of the Season, but no later than
12/15 of the annual period, the Company shall provide the Reinsurer
with an account, to include the following:
1. Net Written Premium accounted for during the term of this
Agreement; less,
2. The ceding commission as provided for in this Agreement; less,
3. Losses paid and outstanding Losses which may be ascribed to this
Agreement; plus,
4. Subrogation, salvage, or other recoveries on Losses which may be
ascribed to this Agreement.
B. Within 60 days following the end of the period or the report date, the
debtor party will remit to the creditor party any balance due. Each
month thereafter, the balance shall be adjusted and settled between the
parties, until all Losses have been settled.
C. As soon as possible following the expiration of this Agreement, the
Company will provide any other information which the Reinsurer may
require for its Annual Convention Statement which may be reasonably
available to the Company.
Section 3 - As respects MPCI:
A. For the 1999 reinsurance year as defined by the FCIC:
1. The Company will pay the Reinsurer an Advance Margin of
$8,050,000, to be paid in two installments on 12/31/99 and 60
days thereafter. The first installment shall be equal to 90%
of the Reinsurer's expense allowance of 40%, as defined in the
PROFIT SHARING ARTICLE, with the second installment being the
balance, if any, after application of the PROFIT SHARING
ARTICLE.
B. For the 2000 reinsurance year as defined by the FCIC:
1. The Company will pay the Reinsurer an Advance Margin of
$8,050,000, to be paid in two installments on 7/1/2000 and
12/31/2000. The first installment shall be equal to 90% of the
Reinsurer's expense allowance of 40%, as defined in the PROFIT
SHARING ARTICLE, with the second installment being the
balance, if any, after application of the PROFIT SHARING
ARTICLE.
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C. For the 2001 reinsurance year as defined by the FCIC:
1. The Company will pay the Reinsurer an Advance Margin of
$8,050,000, to be paid in two installments on 7/1/2001 and
12/31/2001. The first installment shall be equal to 90% of the
Reinsurer's expense allowance of 40%, as defined in the PROFIT
SHARING ARTICLE, with the second installment being the
balance, if any, after application of the PROFIT SHARING
ARTICLE.
D. Advanced Margin:
1. For the 1999 crop Season, the Company will calculate an
Advanced Margin at a rate of 7.00% multiplied by the Company's
Net Retained Premium Income for MPCI. Should the Advanced
Margin so calculated exceed the Advance Margin paid, the
Company will pay the Reinsurer the balance in accordance with
Paragraph E below.
2. For the 2000 crop Season, the Company will calculate an
Advance Margin at a rate of 7.00% multiplied by the Company's
Net Retained Premium Income for MPCI. Should the Advanced
Margin so calculated exceed the Advance Margin paid, the
Company will pay the Reinsurer the balance in accordance with
Paragraph E below. Should however cumulative outgo exceed
cumulative income the rate shall be adjusted to 8.50%
multiplied by the Company's Net Retained Premium Income for
MPCI. Should the Advanced Margin so calculated exceed the
Advance Margin paid, the Company will pay the Reinsurer the
balance in accordance with Paragraph E below.
3. For the 2001 crop Season, the Company will calculate an
Advanced Margin at a rate of 7.00% multiplied by the Company's
Net Retained Premium Income for MPCI. Should the Advanced
Margin so calculated exceed the Advance Margin paid, the
Company will pay the Reinsurer the balance in accordance with
Paragraph E below. Should however cumulative outgo exceed
cumulative income the rate shall be adjusted to 8.50%
multiplied by the Company's Net Retained Premium Income for
MPCI. Should the Advanced Margin so calculated exceed the
Advance Margin paid, the Company will pay the Reinsurer the
balance in accordance with Paragraph E below.
E. As soon as possible after the end of each Season, but no later than
5/31, or once settlement is made with the FCIC following the end of
each annual period, the Company shall provide the Reinsurer with a
complete account, to include the following:
1. Retained Underwriting Gain accounted for during the term of
this Agreement, plus the Advanced Margin; less,
2. The Reinsurer's expense allowance of 40% of the Advanced
Margin as provided for in this Agreement for the applicable
Reinsurance Year as defined by the FCIC; less,
3. Retained Underwriting Loss ascribed during the term of this
Agreement.
F. Within 60 days following the end of each annual period commencing 1/1,
the debtor party will remit to the creditor party any balance due.
G. As soon as possible following the expiration of this Agreement, the
Company will provide any other information which the Reinsurer may
require for its Annual Convention Statement which may be reasonably
available to the Company.
H. Underwriting Gain Sharing:
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1. The Reinsurer shall receive 33% of any Net Retained
Underwriting Gain between 10 - 16% of Net Retained Premium
Income, if any, for each respective period defined above. Any
Reinsurer's underwriting profit under Section 1 (Ag PI) shall
be set against this specific MPCI Underwriting Gain Sharing.
Reinsurer's underwriting profit shall be calculated as
follows:
a.) Cumulative Net Written Premium; less,
b.) Cumulative ceding commission; less,
c.) Cumulative profit commission; less,
d.) Cumulative paid Losses.
The payment to the Reinsurer shall be reduced accordingly,
provided the Reinsurer's Margin for the three year period is
above 2.8% of the cumulative Net Retained Premium Income.
An appropriate adjustment shall be prepared following the
expiration of this Agreement, wherein MPCI Underwriting Gain
Sharing paid for each respective period, prior to any
reduction from underwriting profit from Section 1 (Ag PI),
less the cumulative Reinsurer's underwriting profit under
Section 1 (Ag PI), shall determine the final adjustment, and
the debtor party will remit to the creditor party any balance
due.
ARTICLE 8
CEDING COMMISSION
Section 1 - As respects Ag PI:
A. For the period 5/1/98 to 1/1/99
1. The final ceding commission shall be determined by the Losses
paid under this Agreement. The Company will calculate a ceding
commission for the period within 45 days following the
expiration of the period, based on premiums written and Losses
paid. Adjustments for the period will continue to be made
annually until all Losses which may be ascribed to this
period, have been paid or closed, at which time the ceding
commission will become final.
2. Premium written for the Agreement shall mean all Net Written
Premium ceded to this Agreement.
3. Losses paid by the Reinsurer are as defined in ARTICLE 13,
item A., which may be ascribed to this Agreement, and plus or
minus any credit or debit carry forward as provided for in
this Article.
4. Should the ratio of Losses paid to premium written be 100% or
higher, then the ceding commission shall be 0%.
5. Should the ratio of Losses paid to premium written be less
than 100%, then the adjusted commission shall be determined by
adding one percent (1%) to the ceding commission for each one
percent reduction of loss ratio, subject to a maximum ceding
commission of 25%, at a loss ratio of 75% or less.
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6. Should the ratio of Losses paid to premium written be greater
than 100% or less than 75%, the difference between the actual
loss ratio and 100% or 75%, as the case may be, will be
multiplied by the premium written for the Agreement and
carried forward as a debit or credit to the ensuing Profit
Sharing Agreement calculation. No debit carryforward shall
affect results of Profit Sharing adjustments beyond the third
Agreement year following the Agreement giving rise to the
debit carryforward.
7. No debit or credit carryforward resulting from the calculation
for the period 5/1/98 to 1/1/99, shall affect the Ceding
Commission adjustment for the period 1/1/99 to 1/1/2000 and
for the period 1/1/2000 to 1/1/2001.
B. For the period 1/1/99 to 1/1/2000:
1. The Reinsurer will allow the Company a ceding commission of
28% on the premium due hereunder. Return commission shall be
allowed on return premiums, if any, at the same rate. Should
the ratio of Losses paid to premium written exceed 100%, then
the adjusted commission shall be determined by reducing the
ceding commission one percent (1%) for each one percent
addition of loss ratio, subject to a minimum ceding commission
of 26%, at a loss ratio of 102% or greater. An appropriate
adjustment of any ceding commission previously paid at the
rate of 28% will be made between the parties.
C. For the period 1/1/2000 to 1/1/2001:
1. The Reinsurer will allow the Company a ceding commission of
28% on the premium due hereunder. Return commission shall be
allowed on return premiums, if any, at the same rate. Should
the ratio of Losses paid to premium written from the prior
period exceed 100%, then the adjusted commission shall be
determined by reducing the ceding commission one percent (1%)
for each one percent addition of loss ratio, subject to a
minimum ceding commission of 26%, at a loss ratio of 102% or
greater. An appropriate adjustment of any ceding commission
previously paid at the rate of 28% will be made between the
parties.
Section 2 - As respects Crop Hail:
A. The Reinsurer will allow the Company a ceding commission of 31.75% on
the premium due hereunder. Return commission shall be allowed on return
premiums, if any, at the same rate.
B. Should the ratio of Losses paid to premium written be greater than 100%
for Section 1 (Ag PI) for the period 1/1/99 to 1/1/2000, the difference
between the actual loss ratio and 100% will be multiplied by the
premium written for Section 1 (Ag PI) for the period 1/1/99 to
1/1/2000. The Losses in excess of 100% for Section 1 (Ag PI) for the
period 1/1/99 to 1/1/2000 shall be added to the Losses from Section 2
(Crop Hail) for the period 1/1/99 to 1/1/2000, and the adjusted
commission shall be determined by reducing the ceding commission for
Section 2 (Crop Hail) 1% for each 1% of additional loss ratio from the
addition of Ag PI Losses to Crop Hail Losses, subject to a minimum
ceding commission of 29.75% at a loss ratio of 102% or greater.
C. An appropriate adjustment of any ceding commission previously paid at
the rate of 31.75% will be made between the parties.
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ARTICLE 9
PROFIT SHARING
Section 1 - As respects Ag PI:
The Reinsurer will pay the Company a contingent of 20% on the net profits, if
any, accruing under this Agreement for each period comprising three consecutive
Agreement years in accordance with the following formula.
A. Premiums written to be:
1. Net Written Premium ceded to the Agreement (less cancellations and
returns), during the period.
B. Losses incurred to be:
1. Losses paid by the Reinsurer as defined in ARTICLE 13, item A.,
which may be ascribed to the period; plus,
2. Outstanding Loss reserves on Losses ascribed to the period.
C. Expenses incurred to be:
1. Ceding commission paid by the Reinsurer on the Net Written Premium
ceded as in A. above; plus,
2. Reinsurer's expense margin of 10% on Net Written Premium ceded as
in A. above.
3. Deficit, if any, from prior periods.
D. Net profit to be:
1. Premiums written, as in A. above; less,
2. Losses incurred, as in B. above; less,
3. Expenses incurred, as in C. above.
E. As soon as possible following each Agreement year within each three
Agreement year period, the Company will compute and the Reinsurer will
pay a contingent on the net profit for the portion of the three
Agreement year period then expired. Any profit commission paid to that
date shall be adjusted between the parties as appropriate. Adjustments
for each three Agreement year period will continue to be made annually
until all Losses ascribed to the period have been paid or closed, at
which time the contingent profit computation will become final.
F. Should the Reinsurer's participation in this Agreement increase or
decrease within a multi-year adjustment period, the incremental
participation percentage increase or decrease shall be treated as a
separate new or terminated participation, respectively, for purposes of
calculating amounts due hereunder.
Section 2 - As respects Crop Hail:
The Reinsurer will pay the Company a contingent of 20% on the net profits, if
any, accruing under this Agreement for the period in accordance with the
following formula.
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A. Premiums written to be:
1. Net Written Premium ceded to the Agreement (less cancellations
and returns), during the period.
B. Losses incurred to be:
1. Losses paid by the Reinsurer as defined in ARTICLE 13, item A.,
which may be ascribed to the period; plus,
2. Outstanding Loss reserves on Losses ascribed to the period.
C. Expenses incurred to be:
1. Ceding commission paid by the Reinsurer on the Net Written Premium
ceded as in A. above; plus,
2. Reinsurer's expense margin of 10% on Net Written Premium ceded as
in A. above.
D. Net profit to be:
1. Premiums written, as in A. above; less,
2. Losses incurred, as in B. above; less,
3. Expenses incurred, as in C. above.
Section 3 - As respects MPCI:
In the event cumulative Income exceeds cumulative Outgo at the end of any FCIC
reinsurance year, a Profit Sharing calculation will be prepared by the Company
in accordance with the following, and a profit, if any, paid to the Company by
the Reinsurer:
A. Income
1. Retained Underwriting Gain; plus,
2. The Advanced Margin.
B. Outgo
1. Retained Underwriting Loss during the applicable reinsurance
period; plus,
2. The Reinsurer's expense allowance of 40% of the Advanced Margin
for the applicable Reinsurance Year as defined by the FCIC.
The Profit to the Company shall be 100% of the amount by which Income exceeds
Outgo.
Article 10
EXPERIENCE ACCOUNT
In the event incurred Losses from Section 1 (Ag PI) exceed 200% of Net Written
Premium for the period 5/1/98 to 1/1/99, an experience calculation will be
prepared and the Company will pay the Reinsurer interest at the rate of 12
Months LIBOR Rate as published in the Midwest Edition of "The Wall Street
Journal" on the first day of the calendar month in which the amount becomes due,
plus 1.2% multiplied by the cumulative balance which exceeds 200% of the
cumulative Net Written Premium Section 1 (Ag PI for the period 5/1/98 to 1/1/99)
101200-185 1/1/99 Page 11
during the period. The product will then be multiplied by 1/365 for each day
after the due date that the amount due remains unpaid. Any interest that occurs
pursuant to this Article will be calculated by the party to which it is owed.
ARTICLE 11
COMMUTATION
With 60 days prior written notice at 1/1/2000, or 1/1/2001, a Commutation
Agreement releasing the Reinsurer from liability may be executed by the parties
to this Agreement, providing the Reinsurer has earned a positive cumulative paid
margin balance. The paid margin balance shall be calculated as follows:
A. Section 1 - As respects Ag PI:
Reinsurer's expense Margin of 10% of Net Written Premium for Ag PI;
plus,
B. Section 2 - As respects Crop Hail:
Reinsurer's expense margin of 10% of Net Written Premium for Crop Hail;
plus,
C. Section 3 - As respects MPCI:
Reinsurer's expense margin of 40% multiplied by the Advanced Margin
for MPCI as outlined in ARTICLE 7 - ACCOUNTS AND REMITTANCES; plus,
D. Any net profit to the Reinsurer under Section 1 (Ag PI), Section 2
(Crop Hail), and Section 3 (MPCI). Net profit shall be
determined for each section of coverage as follows:
1. Section 1 (Ag PI), in accordance with ARTICLE 9 -
PROFIT SHARING , after all profit sharing.
2. Section 2 (Crop Hail), in accordance with ARTICLE 9 -
PROFIT SHARING , after all profit sharing.
3. Section 3 (MPCI), in accordance with ARTICLE 9 - PROFIT
SHARING , after all profit sharing, plus Underwriting Gain
Sharing as outlined in ARTICLE 7 - ACCOUNTS AND REMITTANCES,
section H.
Any resulting negative balance shall be included in the Commutation
calculations.
ARTICLE 12
BUYOUT CLAUSE
Should the Company be sold or acquired, the Company has the right to cancel this
Agreement by giving 90 days written notice at any time. If the acquiring Company
fails to meet minimum solvency requirements of its State of domicile, the
Company will cancel this Agreement. In the event this Agreement is cancelled,
the Company shall pay the Reinsurer 100% of any negative cash balance and the
Reinsurer shall retain any positive balance.
101200-185 1/1/99 Page 12
ARTICLE 13
DEFINITIONS
A. The terms "Loss" and "Losses" as used in this Agreement shall mean the
sum or sums paid or payable by the Company in settlement of claims and
in satisfaction of judgments rendered on account of such claims
covered under this Agreement, and will include 90% of any Extra
Contractual Obligations (and expense) as defined in the EXTRA
CONTRACTUAL OBLIGATIONS ARTICLE and 90% of any Excess of Policy Limits
amount as defined in the EXCESS OF POLICY LIMITS ARTICLE, expenses of
litigation and interest, monitoring counsel expense, claim-specific
declaratory judgment expenses, and all other loss adjustment expenses
incurred by the Company in the investigation, adjustment, appraisal or
defense of all claims under Policies reinsured hereunder, including
subrogation, salvage, and recovery expenses (office expenses and
salaries of officials and employees not classified as loss adjusters
are not chargeable as loss adjustment expenses for purposes of this
paragraph), but salvages and all recoveries, including recoveries
under all reinsurances which inure to the benefit of this Agreement
(whether recovered or not), shall be first deducted from such loss to
arrive at the amount of liability attaching hereunder. The sum of
loss, loss adjustment expense, any Extra Contractual Obligations, and
any Excess of Policy Limits is subject to the limit as stated in the
COVER ARTICLE. Nothing herein shall be construed to mean that losses
under this Agreement are not recoverable until the Company's loss has
been ascertained. Salvage recovered or recoveries received by the
Company after a loss settlement hereunder shall be applied as if
recovered or received before the said settlement, and all necessary
adjustments shall be made by the parties hereto.
The phrase "claim-specific declaratory judgment expenses," as used in
this Agreement will mean all expenses incurred by the Company in
connection with declaratory judgment actions brought to determine the
Company's defense and/or indemnification obligations that are allocable
to specific Policies and claims subject to this Agreement. Declaratory
judgment expenses will be deemed to have been incurred by the Company
on the date of the original loss (if any) giving rise to the
declaratory judgment action.
B. The term "Net Retained Premium Income" as used in this Agreement shall
mean gross premium income on business the subject of this Agreement,
classified by the Company as MPCI, less cessions to the FCIC's Assigned
Risk, Developmental and Commercial Funds, less gross premium income
paid for reinsurances, recoveries under which would inure to the
benefit of this Agreement, and net of intermediary fees from assumed
MPCI reinsurance subject to this Agreement.
C. The term "Retained Underwriting Loss" as used in this Agreement shall
mean the Net Retained Premium Income, plus underwriting losses on
business the subject of this Agreement, classified by the Company as
MPCI, after all cessions to the FCIC's Assigned Risk, Developmental and
Commercial Funds, and costs and recoveries of FCIC Stop Loss
reinsurance.
D. The term "Retained Underwriting Gain" as used in this Agreement shall
mean the Net Retained Premium Income, plus underwriting gains on
business the subject of this Agreement, classified by the Company as
MPCI, after all cessions to the FCIC's Assigned Risk, Developmental and
Commercial Funds, and costs and recoveries of FCIC Stop Loss
reinsurance.
E. The term "Net Retained Underwriting Gain" as used in this Agreement
shall mean the sum of Retained Underwriting Loss and Retained
Underwriting Gain, as defined in items C. and D. in ARTICLE 13, which
yields a positive balance.
101200-185 1/1/99 Page 13
F. The term "Net Retained Underwriting Loss" as used in this Agreement
shall mean the sum of Retained Underwriting Loss and Retained
Underwriting Gain, as defined in items C. and D. in ARTICLE 13, which
yields a negative balance.
G. As respects Section 1 (Ag PI), the term "Net Written Premium" as used
in this Agreement shall mean the written premium income on business the
subject of this Agreement, less written premium income paid for
reinsurances, recoveries under which would inure to the benefit of this
Agreement,
As respects Section 2 (Crop Hail), the term "Net Written Premium" as
used in this Agreement shall mean the written premium income on
business the subject of this Agreement, less written premium income
paid for reinsurances, recoveries under which would inure to the
benefit of this Agreement, less a deduction for intermediary fees for
assumed Crop Hail reinsurance subject to this Agreement.
H. The term "Policy" as used in this Agreement shall mean any binder,
policy, or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the
Company.
ARTICLE 14
CASH CALL
In the event incurred Losses from Section 2 (Crop Hail) exceed 68.75% of Net
Written Premium after 8/31/99, the Reinsurer will remit to the Company any
balance due within 30 days of the Company's request for payment.
ARTICLE 15
NET RETAINED LIABILITY
This Agreement applies only to that portion of any insurances or reinsurances
covered by this Agreement which the Company retains net for its own account, and
in calculating the amount of any Loss hereunder, only Loss or Losses in respect
of that portion of any insurances or reinsurances which the Company retains net
for its own account shall be included, it being understood and agreed that the
amount of the Reinsurer's liability hereunder in respect of any Loss or Losses
shall not be increased by reason of the inability of the Company to collect from
any other reinsurers, whether specific or general, any amounts which may have
become due from them, whether such inability arises from the insolvency of such
other reinsurers or otherwise.
ARTICLE 16
CURRENCY
The currency to be used for all purposes of this Agreement shall be United
States of America currency.
101200-185 1/1/99 Page 14
ARTICLE 17
ORIGINAL CONDITIONS
All insurances and reinsurances falling under this Agreement shall be subject to
the same terms, rates, conditions and waivers, and to the same modifications,
alterations and cancellations as the respective Policies of the Company (except
that in the event of the insolvency of the Company the provisions of the
INSOLVENCY ARTICLE of this Agreement shall apply).
ARTICLE 18
LOSS FUNDING
With respect to Losses, funding will be in accordance with the attached Loss
Funding Clause No. 13-01.2.
ARTICLE 19
TAXES
The Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurer hereunder.
Federal Excise Tax applies only to those Reinsurers, excepting Underwriters at
Lloyd's, London and other Reinsurers exempt from the Federal Excise Tax, who are
domiciled outside the United States of America.
The Reinsurer has agreed to allow for the purpose of paying the Federal Excise
Tax 1% of the premium payable hereon to the extent such premium is subject to
Federal Excise Tax.
In the event of any return of premium becoming due hereunder, the Reinsurer will
deduct 1% from the amount of the return, and the Company or its agent should
take steps to recover the Tax from the U.S. Government.
ARTICLE 20
NOTICE OF LOSS AND LOSS SETTLEMENTS
The Company will advise the Reinsurer promptly in the event Losses are likely to
result in claim being made upon the Reinsurer, based upon a reasonable estimate
of the Net Written Premium as respects Section 1 (Ag PI) and Section 2 (Crop
Hail) and the Company's Net Retained Premium Income as respects Section 3
(MPCI), and will continue to keep the Reinsurer informed of subsequent
developments in incurred Losses.
The Reinsurer agrees to abide by the Loss settlements of the Company. Any Loss
settlement made by the Company, whether under strict Policy conditions or by way
of compromise, shall be unconditionally binding upon the Reinsurer in proportion
to its participation, and the Reinsurer shall benefit proportionally in all
salvages and recoveries.
Should the Loss of the Company exceed the Company's estimated retention prior to
the time that the Net Written Premium as respects Section 1 (Ag PI) and Section
2 (Crop Hail) and Net Retained Premium Income as respects Section 3 (MPCI) of
the Company is known, the Reinsurer will make provisional settlement based on a
reasonable estimate of the Net Written Premium as respects Section 1 (Ag PI) and
101200-185 1/1/99 Page 15
Section 2 (Crop Hail) and Net Retained Premium Income as respects Section 3
(MPCI). Any provisional settlement will be adjusted when the Company's actual
Net Written Premium as respects Ag PI and Crop Hail and Net Retained Premium
Income as respects MPCI and are known.
In addition, the Company shall provide information regarding potential Loss
developments on each 7/15, 8/30, and 10/15, or as soon as information is
available.
ARTICLE 21
EXCESS OF POLICY LIMITS
In the event the Loss includes an amount in excess of the Company's Policy
limit, such amount, as provided for in the definition of Loss, in excess of the
Company's Policy limit shall be added to the amount of the Company's Policy
limit, and the sum thereof shall be covered hereunder, subject to the
Reinsurer's limit of liability appearing in the COVER ARTICLE of this Agreement.
However, this Article shall not apply where the Loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
For the purpose of this Article, the word "Loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original Policy.
ARTICLE 22
EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the Company, subject to the Reinsurer's limit of
liability appearing in the COVER ARTICLE of this Agreement, where the Loss
includes any Extra Contractual Obligations as provided for in the definition of
Loss. "Extra Contractual Obligations" are defined as those liabilities not
covered under any other provision of this Agreement and which arise from
handling of any claim on business covered hereunder, such liabilities arising
because of, but not limited to, the following: failure by the Company to settle
within the Policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its insured or in the preparation
or prosecution of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original Loss.
However, this Article shall not apply where the Loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
ARTICLE 23
OFFSET
The Company or the Reinsurer shall have and may exercise, at any time and from
time to time, the right to offset any balance or balances whether on account of
premiums or on account of Losses or otherwise, due from one party to the other
101200-185 1/1/99 Page 16
party hereto under the terms of this Agreement. The party asserting the right of
offset shall have and may exercise such right whether acting in the capacity of
assuming reinsurer or as ceding insurer.
ARTICLE 24
DELAY, OMISSION OR ERROR
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, providing such delay, omission or
error is rectified upon discovery.
ARTICLE 25
INSPECTION
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect, through its authorized
representatives, all books, records and papers of the Company in connection with
any reinsurance hereunder or claims in connection herewith.
ARTICLE 26
ARBITRATION
Any irreconcilable dispute between the parties to this Agreement will be
arbitrated in Indianapolis, Indiana in accordance with the attached Arbitration
Clause No. 22-01.1.
ARTICLE 27
SERVICE OF SUIT
The attached Service of Suit Clause No. 20-01.5 - U.S.A. will apply to this
Agreement.
ARTICLE 28
INSOLVENCY
In the event of the insolvency of the Company, the attached Insolvency Clause
No. 21-01 - 1/1/86 will apply.
In the event of the insolvency of any company or companies included in the
designation of "Company," this clause will apply only to the insolvent company
or companies.
101200-185 1/1/99 Page 17
ARTICLE 29
INTERMEDIARY
Sedgwick Re, Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. All communications, including notices,
premiums, return premiums, commissions, taxes, Losses, Loss adjustment expenses,
salvages and Loss settlements relating thereto shall be transmitted to the
Reinsurer or the Company through Sedgwick Re, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Payments by the Company to the Intermediary shall be
deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary shall be deemed only to constitute payment to the Company to the
extent that such payments are actually received by the Company.
101200-185 1/1/99 Page 18
ARTICLE 30
PARTICIPATION: AG PI, CROP HAIL AND MPCI MULTI-YEAR QUOTA SHARE REINSURANCE
AGREEMENT
EFFECTIVE: January 1, 1999
This Agreement obligates the Reinsurer for _______% of the interests and
liabilities set forth under this Agreement.
The participation of the Reinsurer in the interests and liabilities of this
Agreement shall be separate and apart from the participations of other
reinsurers and shall not be joint with those of other reinsurers, and the
Reinsurer shall in no event participate in the interests and liabilities of
other reinsurers.
IN WITNESS WHEREOF, the parties hereto, by their authorized representatives,
have executed this Agreement as of the following dates:
PARTICIPATING REINSURERS
------------------------------------------------------------------------------
Insurance Corporation of Hannover 12.50%
Munchener Ruckversicherungs 35.00%
R&V Verischerung 1.00%
Sedgwick Re Australia
Monde Re 3.00%
Reinsurance Australia Corporation Limited 3.00%
-----
TOTAL Sedgwick Re Placement: 54.50%
Direct Placement: Granite Re 7.50%
-----
GRAND TOTAL 62.00%
Upon completion of Reinsurers' signing, fully executed signature pages will be
forwarded to you for the completion of your file.
101200-185 1/1/99 Page 19
and in Indianapolis, Indiana, this 19th day of January, 1999.
IGF INSURANCE COMPANY
PAFCO GENERAL INSURANCE COMPANY
SUPERIOR INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
(name)
Director
---------------------------------------
(title)
AG PI, CROP HAIL AND MPCI MULTI-YEAR QUOTA SHARE REINSURANCE AGREEMENT
issued to
IGF INSURANCE COMPANY
PAFCO GENERAL INSURANCE COMPANY
SUPERIOR INSURANCE COMPANY
101200-185 1/1/99 Page 20