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Exhibit 10.36
BINDER OF REINSURANCE
Between
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Rensselaer, New York
And
AMERICAN PHOENIX LIFE & REASSURANCE COMPANY
Hartford, Connecticut
(hereinafter referred to collectively as the "Company")
And
EUROPEAN REINSURANCE COMPANY OF ZURICH (BERMUDA BRANCH)
▇▇▇▇▇▇▇▇, Bermuda
(hereinafter referred to as the "Reinsurer")
TYPE: Aggregate Excess of Loss Reinsurance
INTERESTS AND LIABILITIES: The interests and liabilities of the
companies referred to collectively herein
as the Company, arising under the terms
and conditions of this Agreement, are
joint and not several. It is agreed that
all communications and payments to or
from the Company may be made,
respectively, to or from Phoenix Home
Life Mutual Insurance Company, which will
act as paymaster and agent for all
transactions and communications under
this Agreement.
EFFECTIVE DATE: September 30, 1999
TERM OF THIS AGREEMENT: The Term of this Agreement shall be from
the Effective Date until the Commutation
Date.
COMMUTATION: Commutation by the Company: This
Agreement may be commuted by the Company
at any time after September 30, 2004,
subject to ninety (90) days prior written
notice, by registered mail, return
receipt requested, to the Reinsurer.
Automatic Commutation: Unless this
Agreement has been previously commuted by
the Company as
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set forth herein, this Agreement will be
commuted automatically effective
September 30, 2019.
Liability Upon Commutation:
If the Company commutes this Agreement
prior to September 30, 2019 and the EAB
is negative, the Company shall pay to the
Reinsurer, on the first business day on
or after the Commutation Date, a
Commutation Settlement equal to
one-hundred percent (100%) of the
absolute value of the EAB.
If the Company commutes this Agreement
prior to September 30, 2019 and the EAB
is positive, the Reinsurer shall pay to
the Company, on the first business day on
or after the Commutation Date, a
Commutation Settlement equal to
one-hundred percent (100%) of the EAB.
Upon Automatic Commutation, if the
Agreement has not previously been
commuted, the Reinsurer shall pay to the
Company, on the first business day on or
after the Commutation Date, one-hundred
percent (100%) of any positive EAB.
Upon commutation, the Reinsurer shall be
released from all current and future
liabilities under this Agreement.
COVERAGE: Section A: The Reinsurer shall indemnify
the Company for Section A Covered Losses
paid by the Company.
Section B: The Reinsurer shall indemnify
the Company for Section B Covered Losses
paid by the Company.
SUBJECT BUSINESS: Section A: Section A Subject Business
means:
(1) all individually underwritten
ordinary life insurance policies
issued by the Company with
effective dates prior to October 1,
1999 which are administered on the
Company's Servidata system as of
the Effective Date, excluding any
such policies numbered 9,000,000
and above; and
(2) all individually underwritten
ordinary life insurance policies
issued by the Company with
effective dates prior to October 1,
1999 which are administered on the
Company's Homecomm
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System as of the Effective Date.
Section B: Section B Subject Business
means all reinsurance treaty business
assumed by the Company prior to October
1, 1999 and classified by the Company as
Accident & Health business (including,
but not limited to, personal accident,
occupational accident, and workers'
compensation carve-out business).
DEFINITIONS:
(1) "Accounting Period" means each
calendar quarter, or portion
thereof, during the Term of this
Agreement. Notwithstanding the
above, the first Accounting Period
shall be from September 30, 1999 to
December 31, 1999.
(2) "Allocated Loss Adjustment
Expenses" ("ALAE") means all
allocated expenses incurred by the
Company in connection with the
investigation, settlement, defense
or mitigation of any claims or loss
which is the subject matter of
Section B Subject Business, and
shall exclude the salaries of
Company employees, office expenses,
and any other overhead expenses.
(3) "Commutation Date" means the date
this Agreement is commuted in
accordance with the COMMUTATION
Section herein.
(4) "Cover Year" means each consecutive
twelve-month period, or portion
thereof, commencing at October 1st
and ending at September 30th, both
dates inclusive, during the Term of
this Agreement. Each Cover Year
shall be named for the calendar
year in which it commences. For the
avoidance of doubt, Cover Year 1999
means the period from October 1,
1999 to September 30, 2000, both
dates inclusive.
(5) "Cumulative A&H Losses" means the
total Ultimate Net Loss incurred by
the Company, including Repudiation
Losses, on Section B Subject
Business.
(6) "Inuring Reinsurance Agreement"
means each outward reinsurance
agreement entered into by the
Company that is listed on Exhibit A
attached hereto and incorporated
herein.
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(7) "Repudiation Loss" means any loss
incurred by the Company on Section
B Subject Business that would
otherwise be recoverable by the
Company as cedent from a reinsurer
under an Inuring Reinsurance
Agreement but for:
(a) failure by that reinsurer to
remit a reinsurance loss
payment when due in accordance
with the terms of that Inuring
Reinsurance Agreement; or
(b) nullification in whole or
in part of that Inuring
Reinsurance Agreement through
an act of that reinsurer.
(8) "Settlement Date" means, for each
Accounting Period, the thirtieth
(30th) day following the end of
that Accounting Period.
SUBJECT LOSSES: Section A: For each Cover Year, Section A
Subject Losses means the death benefits
paid by the Company during that Cover
Year on Section A Subject Business,
subject to a maximum death benefit of
eight-million dollars ($8,000,000) on any
one life and ten-million dollars
($10,000,000) on any joint life.
Section B: Section B Subject Losses means
the Cumulative A&H Losses reported to the
Company on or after October 1, 1999 and
prior to September 30, 2009, and paid by
the Company during the Term of this
Agreement.
COVERED LOSSES: Section A: Section A Covered Losses mean,
for each Cover Year, twenty percent (20%)
of Section A Subject Losses paid by the
Company for that Cover Year in excess of
the Section A Annual Retention for that
Cover Year, subject to the Section A
Aggregate Limit and the Contract
Aggregate Limit.
Section B: Section B Covered Losses mean
one-hundred percent (100%) of Section B
Subject Losses paid by the Company in
excess of the Section B Aggregate
Retention, subject to the Section B
Aggregate Limit and the Contract
Aggregate Limit.
Any losses paid by the Reinsurer that are
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subsequently recovered by the Company,
shall be reimbursed to the Reinsurer and
Covered Losses shall be reduced
accordingly.
SUBSTITUTION OF REPUDIATION
LOSSES: If Repudiation Losses have been paid by
the Reinsurer under Section B of this
Agreement and Section B Subject Losses
other than Repudiation Losses are
incurred subsequent to such payment, then
such non-Repudiation Losses shall be
substituted, in equal dollar amounts, for
the Repudiation Losses already paid by
the Reinsurer. After such substitution,
it will be as if the Repudiation Losses
thus substituted had not occurred, and
they will not count towards any limits or
retentions of this Agreement.
COMPANY RETENTIONS: Section A: For each Cover Year, the
Section A Annual Retention shall equal
(x) multiplied by (y), where (x) is equal
to the expected death benefits for that
Cover Year; and (y) is the greater of:
(a) one-hundred-fifteen percent (115%)
of the average ratio of actual
death benefits to expected death
benefits for the five calendar
years immediately preceding that
Cover Year; and
(b) one-hundred-fifty percent (150%) of
the ratio of actual death benefits
to expected death benefits in the
calendar year immediately preceding
that Cover Year;
where expected death benefits are
computed using seventy percent (70%) of
the "1975-80 Select and Ultimate
Mortality Table", or another standard
mortality table agreed to in writing by
the Company and the Reinsurer.
Section B: The Section B Aggregate
Retention shall equal (x) minus (y),
where:
(x) is equal to premiums collected by
the Company on or after October 1,
1999 on Section B Subject Business,
net of that portion of such
premiums paid by the Company on or
after October 1, 1999 for
reinsurance that inures to the
benefit of the Reinsurer hereunder
on Section B Subject Business; and
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(y) is equal to any fees and/or
commissions paid by the Company on
or after October 1, 1999 to
entities not affiliated with the
Company that are contractually
required and directly related to
(x) above.
SECTION A AND SECTION B
AGGREGATE LIMITS: Section A: Subject to the Contract
Aggregate Limit, the liability of the
Reinsurer for the sum of all Section A
Covered Losses indemnified under this
Agreement shall not exceed the Section A
Aggregate Limit of
two-hundred-thirty-million dollars
($230,000,000). In no event shall the
Reinsurer pay more than this amount under
Coverage Section A.
Section B: Subject to the Contract
Aggregate Limit, the liability of the
Reinsurer for the sum of all Section B
Covered Losses indemnified under this
Agreement shall not exceed the Section B
Aggregate Limit of
two-hundred-thirty-million dollars
($230,000,000). In no event shall the
Reinsurer pay more than this amount under
Coverage Section B.
CONTRACT AGGREGATE LIMIT: No losses will be paid by the Reinsurer
under this Agreement that would cause any
of the following:
(1) The sum of Section A Covered
Losses and Section B Covered
Losses to exceed
four-hundred-million dollars
($400,000,000) for the Term of
this Agreement; or
(2) The Experience Account Balance
to be less than negative
forty-million dollars
(-$40,000,000) in any Accounting
Period; or
(3) If the Experience Account
Balance is negative, the sum of
the absolute value of any negative
Experience Account Balance and the
market value of any security
provided by the Reinsurer to the
Company in accordance with the
Security Section herein to exceed
one-hundred-million dollars
($100,000,000) at the end of any
Accounting Period; or
(4) If the Experience Account
Balance is positive, the market
value of any security provided by
the Reinsurer to the Company in
accordance
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with the Security Section herein
less the positive Experience
Account Balance to exceed
one-hundred-million dollars
($100,000,000) at the end of any
Accounting Period.
REINSURANCE PREMIUM: Deposit Premium: The Deposit Premium
shall equal one-hundred-thirty-million
($130,000,000), due and payable by the
Company to the Reinsurer on the Effective
Date. If the Company fails to pay the
Deposit Premium in full and in accordance
with the terms of this Section, this
Agreement shall not come into effect and
shall not in any way bind the Reinsurer.
Additional Premium: The Additional
Premium for calendar year 2000, and for
each calendar year thereafter, shall
equal twelve-million dollars
($12,000,000) per calendar year;
provided, however, the Additional Premium
for any one calendar year shall not
exceed:
(a) the premiums collected by the
Company on Section B Subject
Business for that calendar year,
net of premiums paid for other
reinsurance and net of any fees
and/or commissions that are
contractually required and
directly related to premiums
collected by the Company on
Section B Subject Business for
that calendar year, plus
(b) eight percent (8%) of the
expected death benefits on Section
A Subject Business for that
calendar year;
where expected death benefits are
computed using seventy percent (70%) of
the "1975-80 Select and Ultimate
Mortality Table", or another standard
mortality table agreed to in writing by
the Company and the Reinsurer.
The Additional Premium for each calendar
year shall be due and payable by the
Company to the Reinsurer in equal
installments of three-million dollars
($3,000,000) each on the first business
day on or after January 1, April 1, July
1 and October 1 of that calendar year,
commencing on the first business day on
or after January 1, 2000.
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The Deposit Premium and Additional
Premium shall be paid by wire transfer in
non-reversible United States federal
funds to an account specified by the
Reinsurer.
REINSURER'S MARGIN: The Reinsurer's Margin on the Deposit
Premium shall equal five-million dollars
($5,000,000). The Reinsurer's Margin on
Additional Premium shall equal
one-million dollars ($1,000,000) for each
calendar year. The Reinsurer's Margin on
the Deposit Premium and the Reinsurer's
Margin on Additional Premiums shall be
part of, not in addition to, the
respective Deposit Premium and Additional
Premiums.
EXPERIENCE ACCOUNT BALANCE: At the end of each Accounting Period, the
Experience Account Balance ("EAB") shall
be equal to:
(a) the EAB at the end of prior
Accounting Period, plus
(b) the Deposit Premium and
Additional Premium received by the
Reinsurer during that Accounting
Period, less
(c) the Reinsurer's Margin on item
(b), less
(d) Section A Covered Losses and
Section B Covered Losses paid by
the Reinsurer during that
Accounting Period, plus
(e) the Total Investment Return
for that Accounting Period.
For the Accounting Period ending December
31, 1999, the value of item (a) above
shall be equal to zero (0).
TOTAL INVESTMENT RETURN: The Total Investment Return for an
Accounting Period shall be determined as
follows:
(a) For periods when the EAB is
positive, the Total Investment
Return shall equal the EAB at the
beginning of the Accounting Period
multiplied by the Total Return
Rate. The Total Return Rate shall
equal the total investment return
on the assets held in the Citibank
Custodian Account [*] (and/or in
any other
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account with Citibank that
subsequently holds assets from
that account) for the Accounting
Period divided by the fair market
value of such assets at the
beginning of the Accounting
Period. Total investment return
shall equal (i) the investment
income received, plus (ii) any
realized and unrealized capital
gains, less (iii) any realized and
unrealized capital losses, less
(iv) investment expenses equal to
a fixed rate of thirteen (13)
basis points per annum;
[*]: THE CONFIDENTIAL PORTION HAS
BEEN OMITTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND THE
OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
For the Accounting Period ending
December 31, 1999, both the EAB at
the beginning of the Accounting
Period and the market value of the
assets in the Custodian Account at
the beginning of the Accounting
Period shall be equal to the
Deposit Premium less the
Reinsurer's Margin on the Deposit
Premium plus any interest earned
on such net amount prior to
deposit into the Custodian
Account.
(b) For periods when the EAB is
negative, the Total Investment
Return shall equal the EAB
multiplied by:
(1) the 90-day LIBOR rate on the
first day of the Accounting
Period plus fifty (50) basis
points, if the Company's
Insurer Financial Strength
Ratings are "A-" or better
from S&P and "A3" or better
from ▇▇▇▇▇'▇; or
(2) the 90-day LIBOR rate on
the first day of the
Accounting Period plus
one-hundred (100) basis
points, if the Company's
Insurer Financial Strength
Ratings are less than "A-"
from S&P and/or "A3" from
▇▇▇▇▇'▇;
where both (1) and (2) above are
prorated by the ratio that the
number of days for which the EAB
is negative bears to
three-hundred-sixty (360) days.
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LOSS SETTLEMENTS: For each Accounting Period, the Reinsurer
shall pay any Covered Losses due to the
Company on the Settlement Date for that
Accounting Period.
REINSURANCE INTERMEDIARY: Reinsurance Intermediary: Swiss Re Atrium
Corporation, 55 East 52 Street, 42nd
Floor, New York, New York 10055, U.S.A.,
is hereby recognized as the Reinsurance
Intermediary negotiating this Agreement.
Communications: All communications,
including but not limited to notices,
reports, and statements, relating to this
Agreement shall be transmitted to the
Company and the Reinsurer through the
Intermediary.
Payments: All payments, including but not
limited to premiums, return premiums,
commissions, return commissions, taxes,
losses, loss adjustment expense, and
salvages and settlements, relating to
this Agreement shall be made directly
between the Company and the Reinsurer,
and not through any Intermediary.
TAXES: The Company shall be liable for its own
taxes on amounts paid or received under
the terms of this Agreement, and the
Reinsurer shall be liable for its own
taxes on amounts paid or received under
the terms of this Agreement. The Company
shall indemnify and hold the Reinsurer
harmless for any taxes which the
Reinsurer may become obligated to pay on
the Company's behalf.
FEDERAL EXCISE TAXES: In the event that any Federal Excise Tax
is due with respect to any premiums due
under this Agreement, the Company agrees
to pay such tax in addition to any
premiums due under this Agreement and
agrees to remit such tax to the United
States Internal Revenue Service and shall
indemnify and hold the Reinsurer harmless
for any such taxes which the Reinsurer
may become obligated to pay.
DISCLOSURES AND APPROVALS: The Company represents and warrants with
respect to this Agreement and the
transactions hereunder, and with respect
to any insurance and reinsurance written
by the Company which is covered by this
Agreement and all transactions
thereunder, that all
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disclosures and approvals which are
necessary or appropriate under any
applicable law or regulation have been
made or obtained, or will be made or
obtained in a timely manner.
EXCLUSIONS: Unallocated Loss Adjustment Expenses
Noncontractual Damages, except as
respects Coverage Section B
Losses in Excess of Policy Limits, except
as respects Coverage Section B
War Exclusion
OTHER: Exhibit A
Arbitration (attached)
Insolvency (attached)
Definition of Noncontractual Damages
(attached)
Definition of Loss in Excess of Policy
Limits (attached)
Original Conditions (attached)
Security (attached)
Service of Suit (attached)
Ultimate Net Loss (attached)
Counterparts
Currency (United States Dollars)
Disintermediation
Entire Agreement
Errors and Omissions
Inspection of Records
Mirror Reserving
Net Accounting
Offset
Parties to this Agreement
Reports and Remittances
Reliance on Information Supplied by the
Company
WORDING: To Be Agreed.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives,
In Rensselaer, New York, this 30th day of September, 1999
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PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Attest: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Notary Public Title: Executive Vice President
--------------------------------- ----------------------------
and Chief Financial Officer
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And in Hartford, Connecticut, this 30th day of September, 1999
AMERICAN PHOENIX LIFE & REASSURANCE COMPANY
Attest: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------- -----------------------------
Title: Notary Public Title: Executive Vice President
--------------------------------- ----------------------------
and Chief Financial Officer
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And in Hamilton, Bermuda, this 30th day of September, 1999
EUROPEAN REINSURANCE COMPANY OF ZURICH (BERMUDA BRANCH)
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Member of Senior Title: Member of Senior
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Management Management
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SECURITY ARTICLE
(1) Security: Upon the Company's written request, the Reinsurer shall
provide security to the Company for its obligations to the Company in
an amount equal to the Reinsurer's liabilities to the Company under
this Agreement.
As security for the Reinsurer's liabilities under this Agreement up to
the amount of any positive Experience Account Balance, the Reinsurer
shall provide access to funds held in Trust for the benefit of the
Company in accordance with the provisions set forth in this Security
Article. The Reinsurer shall provide security to the Company for any
liabilities of the Reinsurer under this Agreement in excess of the
Experience Account Balance, by providing access to funds held in Trust
or Letters of Credit for the benefit of the Company, in accordance with
the provisions set forth in this Security Article, or by providing any
other form of security that would permit the Company to take credit for
the reinsurance ceded hereunder.
(2) Letter of Credit:
(a) Upon the written request of the Company, the Reinsurer agrees
that it will be the applicant for and provide the Company with
a Letter or Letters of Credit, in a form acceptable to the
Company and in conformity with Regulation 133 (11 NYCRR 79) of
the New York Insurance Department, in an amount no less than
the Reinsurer's remaining liability to the Company, as
determined by the Company, to secure the obligations of the
Reinsurer to the Company under this Agreement. The cost of
such Letter(s) of Credit, if any, shall be borne by the
Company.
(b) The Reinsurer and the Company agree that the Letter(s) of
Credit provided by the Reinsurer pursuant to the provisions of
this Agreement may be drawn upon at any time, notwithstanding
any other provisions in this Agreement, and shall be utilized
by the Company or any successor by operation of law of the
Company including, without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company only
for one or more of the following purposes:
(i) to reimburse the Company for the Reinsurer's share of
premiums returned to the owners of policies reinsured
under this Agreement, on account of cancellations of
such policies;
(ii) to reimburse the Company for the Reinsurer's share of
surrenders and benefits or losses paid by the Company
pursuant to the provisions of the policies reinsured
under this Agreement;
(iii) to fund an account with the Company in an amount at
least equal to the deduction, for reinsurance ceded,
from the
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Company's liabilities for reinsurance ceded under
this Agreement. Such amount shall include, but not be
limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred
but not reported), reserves for loss adjustment
expenses and reserves for unearned premiums; and
(iv) to pay any other amounts the Company claims are due
under this Agreement.
All of the foregoing shall be applied without diminution
because of insolvency on the part of the Company or the
Reinsurer.
(c) Should amounts be held pursuant to (b)(iii) above, then the
Company shall pay interest at the Prime Rate on such funds as
may be held from time to time.
(d) Should any amounts drawn down on the Letters of Credit be in
excess of the actual amounts required for (b)(i), (b)(ii), or
(b)(iii) above, or should any amounts subsequently be
determined not to be due under (b)(iv) above, then such excess
amounts and amounts not due shall be returned to the Reinsurer
forthwith and the Company shall pay interest at the Prime Rate
on such funds from the date they were drawn down to the date
they are returned.
(e) Any interest calculated pursuant to the provisions of
paragraphs (c) and (d) above shall be offset against any other
obligations of the Reinsurer.
(3) Trust Funds:
(a) Upon the written request of the Company, the Reinsurer may at
its option provide funds in Trust for the benefit of the
Company as an alternative or supplement to Letter(s) of
Credit. Any such Trust Funds shall be held in accordance with
New York Insurance Department Regulation 114 (11 NYCRR 126),
as amended. The cost of such Trust Funds, if any, shall be
borne by the Company.
(b) The assets deposited in the trust account shall be valued,
according to their current fair market value, and shall
consist only of cash (United States legal tender),
certificates of deposit (issued by a United States bank and
payable in United States legal tender), and investments of the
types specified in paragraphs (1), (2), (3), (8) and (10) of
subsection (a) of Section 1404 of the New York Insurance Law,
provided that such investments are issued by an institution
that is not the parent, subsidiary, or affiliate of either the
Reinsurer or the Company.
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(c) Prior to depositing assets into the Trust account, the
Reinsurer shall execute assignments, endorsements in blank, or
transfer legal title to the trustee of all shares, obligations
or any other assets requiring assignments, in order that the
Company, or the trustee upon the direction of the Company, may
whenever necessary negotiate any such assets without consent
or signature from the Reinsurer or any other entity.
(d) All settlements of account between the Company and the
Reinsurer shall be made in cash or its equivalent.
(e) The Reinsurer and the Company agree that the assets in the
Trust account, established by the Reinsurer pursuant to the
provisions of this Agreement, may be withdrawn by the Company
at any time, notwithstanding any other provisions in this
Agreement, and shall be utilized and applied by the Company or
any successor by operation of law of the Company including,
without limitation, any liquidator, rehabilitator, receiver or
conservator of the Company only for one or more of the
following purposes:
(i) to reimburse the Company for the Reinsurer's share of
premiums returned to the owners of policies reinsured
under this Agreement, on account of cancellations of
such policies;
(ii) to reimburse the Company for the Reinsurer's share of
surrenders and benefits or losses paid by the Company
pursuant to the provisions of the policies reinsured
under this Agreement;
(iii) to fund an account with the Company in an amount at
least equal to the deduction, for reinsurance ceded,
from the Company's liabilities for reinsurance ceded
under this Agreement. Such amount shall include, but
not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including
losses incurred but not reported), reserves for loss
adjustment expenses and reserves for unearned
premiums; and
(iv) to pay any other amounts the Company claims are due
under this Agreement.
All of the foregoing shall be applied without diminution
because of insolvency on the part of the Company or the
Reinsurer.
(f) The Company shall give the Reinsurer the right to seek
approval from the Company to withdraw from the aforementioned
Trust account all or any part of the assets contained therein
and transfer such assets to the Reinsurer, provided:
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(i) The Reinsurer shall at the time of such withdrawal,
replace the withdrawn assets with other qualified
assets having a market value equal to the market
value of the assets withdrawn so as to maintain at
all times the deposit in the required amount, or
(ii) after such withdrawal and transfer, the market value
of the Trust account is no less than one-hundred-two
percent (102%) of the required amount.
(g) Should amounts be held pursuant to (e)(iii) above, then the
Company shall pay interest at the Prime Rate on such funds as
may be held from time to time.
(h) Should any amounts withdrawn from the Trust account be in
excess of the actual amounts required for (e)(i), (e)(ii), or
(e)(iii) above, or should any amounts subsequently be
determined not to be due under (e)(iv) above, then such excess
amounts and amounts not due shall be returned to the Reinsurer
forthwith and the Company shall pay interest at the Prime Rate
on such funds from the date they were withdrawn to the date
they are returned.
(i) Any interest calculated pursuant to the provisions of
paragraphs (g) and (h) above shall be offset against any other
obligations of the Reinsurer.
(4) Other Forms of Security: The Reinsurer may, at its option, as an
alternative or supplement to Letter(s) of Credit and Trust Funds,
provide security in any other form that would permit the Company to
take credit for the reinsurance ceded hereunder. Any such other form of
security shall be in accordance with New York Insurance Department
regulations. The cost of such other form(s) of security shall be borne
by the Company.
(5) Prime Rates: Prime Rates shall be determined for each business day in
New York City, and for non-business days shall equal the Prime Rate as
determined for the most recent preceding business day. The PRIME RATES
as published in The Wall Street Journal (Eastern Edition) shall be the
primary source for the Prime Rates. If The Wall Street Journal does not
publish such a rate for a business day, the Prime Rate shall be the
maximum of the rates publicly announced by major banks in New York City
as their "Prime Rates" applicable to such day.
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ARBITRATION ARTICLE
(1) Resolution of Disputes: As a condition precedent to any right arising
under this Agreement, any dispute between the Company and the Reinsurer
arising out of the provisions of this Agreement, or concerning its
interpretation or validity, whether arising before or after termination
of this Agreement, shall be submitted to arbitration in the manner set
forth in this Article. Either party may initiate arbitration of any
dispute arising out of the provisions of this Agreement by giving
written notice to the other party, by registered or certified mail,
return receipt requested, of its intention to arbitrate and of its
appointment of an arbitrator in accordance with paragraph (3) of this
Article.
(2) Composition of Panel: Unless the parties agree upon a single arbitrator
within fifteen (15) days after the receipt of a notice of intention to
arbitrate, all disputes shall be submitted to an arbitration panel
composed of two arbitrators and an umpire, chosen in accordance with
paragraphs (3) and (4) of this Article.
(3) Appointment of Arbitrators: The members of the arbitration panel shall
be chosen from persons knowledgeable in the insurance and reinsurance
business. The party requesting arbitration (hereinafter referred to as
the "claimant") shall appoint an arbitrator and give written notice
thereof, by registered or certified mail, return receipt requested, to
the other party (hereinafter referred to as the "respondent") together
with its notice of intention to arbitrate. Unless a single arbitrator
is agreed upon within fifteen (15) days after the receipt of the notice
of intention to arbitrate, the respondent shall, within thirty (30)
days after receiving such notice, also appoint an arbitrator and notify
the claimant thereof in a like manner. Before instituting a hearing,
the two arbitrators so appointed shall choose an umpire. If, within
twenty (20) days after they are both appointed, the arbitrators fail to
agree upon the appointment of an umpire, the umpire shall be appointed
by the President of the American Arbitration Association.
(4) Failure of Party to Appoint Arbitrator: If the respondent fails to
appoint an arbitrator within thirty (30) days after receiving a notice
of intention to arbitrate, such arbitrator shall be appointed by the
President of the American Arbitration Association, and shall then,
together with the arbitrator appointed by the claimant, choose an
umpire as provided in paragraph (3) of this Article.
(5) Choice of Law and Forum: Any arbitration instituted pursuant to this
Article shall be held in New York, New York, or in a location to be
mutually agreed upon by the Company and the Reinsurer and the laws of
the State of New York, without regard to its conflict of laws rules,
shall govern the interpretation and application of this Agreement.
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(6) Submission of Dispute to Panel: Unless otherwise extended by the
arbitration panel, or agreed to by the parties, each party shall submit
its case to the panel within thirty (30) days after the selection of an
umpire.
(7) Procedure Governing Arbitration: All proceedings before the panel shall
be informal and the panel shall not be bound by the formal rules of
evidence. The panel shall have the power to fix all procedural rules
relating to the arbitration proceeding. In reaching any decision, the
panel shall give due consideration to the customs and usage of the
insurance and reinsurance business.
(8) Arbitration Award: The arbitration panel shall render its decision
within sixty (60) days after termination of the proceeding, which
decision shall be in writing, stating the reasons therefor. The
decision of the majority of the panel shall be final and binding on the
parties to the proceeding.
(9) Cost of Arbitration: Unless otherwise allocated by the panel, each
party shall bear the expense of its own arbitrator and its own
witnesses and shall jointly and equally bear with the other parties the
expense of the umpire and the arbitration.
(10) Limit of Jurisdiction: The arbitration panel does not have the
jurisdiction to authorize any punitive damage awards between the
parties.
INSOLVENCY ARTICLE
(1) Reinsurer's Obligation: In the event of the insolvency of the Company,
the reinsurance afforded by this Agreement shall be payable by the
Reinsurer on the basis of the liability of the Company under the
Subject Business, without diminution because of such insolvency,
directly to the Company or its liquidator, receiver, conservator, or
statutory successor.
(2) Reinsurer's Notice and Defense of Claims: The Reinsurer shall be given
written notice of the pendency of each claim or loss which may involve
the reinsurance afforded by this Agreement within a reasonable time
after such claim or loss is filed in the insolvency proceedings. The
Reinsurer shall have the right to investigate each such claim or loss
and interpose at its own expense, in the proceeding where the claim or
loss is to be adjudicated, any defense which it may deem available to
the Company or its liquidator, receiver, conservator, or statutory
successor. If more than one Reinsurer is involved, they may designate
one Reinsurer to act for all.
(3) Defense Expense: 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 which may accrue to the Company solely as a result
of the defense undertaken by the Reinsurer.
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(4) Offset: Any debts or credits, liquidated or unliquidated, in favor of
or against either party on the date of the receivership or liquidation
order (except where the obligation was purchased by or transferred to
be used as an offset) are deemed mutual debts or credits and shall be
set off with the balance only to be allowed or paid. Although such
claim on the part of either party may be unliquidated or undetermined
in amount on the date of the entry of the receivership or liquidation
order, such claim will be regarded as being in existence as of such
date and any credits or claims then in existence and held by the other
party may be offset against it.
(5) Rights of Parties: Nothing hereinabove set forth in this Insolvency
Article shall in any way change the relationship or status of the
parties hereto, nor enlarge the obligations of any party to any other
except as specifically hereinabove provided, to wit, to pay the
statutory successor on the basis of the amount of liability determined
in the liquidation or receivership proceeding, rather than on the basis
of the actual amount of loss (dividends) paid by the liquidator,
receiver, conservator, or statutory successor to allowed claimants.
Nor, except as hereinabove specifically provided, shall anything in
this Insolvency Article in any manner create any obligation or
establish any right against the Reinsurer in favor of any third parties
or any other persons not parties to this Agreement.
SERVICE OF SUIT
(1) Submission To Jurisdiction: It is agreed that in the event of the
failure of the Reinsurer to pay any amount claimed to be due under this
Agreement, the Reinsurer, at the request of the Company, will submit to
the jurisdiction of any Court of competent jurisdiction within the
United States of America and will comply with all requirements
necessary to give such Court jurisdiction; and all matters arising
hereunder shall be determined in accordance with the law and practice
of such Court.
(2) Service of Process: It is further agreed that service of process in any
suit instituted against the Reinsurer arising out of this Agreement,
may be made upon ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, U.S.A., Attention: ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and
that in such suit the Reinsurer will abide by the final decision of
such Court or of any Appellate Court in the event of an appeal.
(3) Appearance: ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP are authorized and directed to
accept service of process on behalf of the Reinsurer in any such suit
and/or upon the request of the Company to give a written undertaking to
the Company that they will enter a general appearance upon the
Reinsurer's behalf in the event such a suit shall be instituted.
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(4) Insurance Official As Attorney For Service of Process: Further,
pursuant to any statute of any State, Territory or District of the
United States of America which makes provision therefor, the Reinsurer
hereby designates the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit
or proceeding instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Agreement, and hereby
designates ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP as the party to whom the said
officer is authorized to mail such process or a true copy thereof.
ULTIMATE NET LOSS
Ultimate Net Loss as used herein shall mean the actual sum paid or to be paid by
the Company in settlement of losses or liability after making deductions for all
recoveries, all salvage, and all claims upon other reinsurances, which inure to
the benefit of the Reinsurer under this Agreement, whether collected or not, and
shall include Allocated Loss Adjustment Expenses incurred by the Company.
Notwithstanding the above, it is understood and agreed that Ultimate Net Loss
shall include Repudiation Losses as defined herein.
All salvages, recoveries or payments recovered or received subsequent to a loss
settlement under this Agreement shall be applied as if recovered or received
prior to the aforesaid settlement and all necessary adjustments shall be made by
the parties hereto.
Nothing in this definition shall be construed to mean that losses are not
recoverable hereunder until the Ultimate Net Loss of the Company has been
ascertained.
NONCONTRACTUAL DAMAGES:
Noncontractual Damages as used herein shall mean those liabilities of the
Company or its affiliates, or their agents, brokers, or representatives, arising
from actual or alleged misconduct in their handling of claims or losses, or in
any of their dealings with their insureds or any other person. Such liabilities
shall include, but are not limited to, exemplary, compensatory, and
consequential damages. Such misconduct shall include, but is not limited to,
failure to settle within the policy limit, 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 or in the preparation or prosecution of any appeal
consequent upon any action.
LOSS IN EXCESS OF POLICY LIMITS:
Loss in Excess of Policy Limits as used herein shall mean any loss in excess of
the limit of the Company's original policy, such loss in excess of the limit
having been
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incurred because of failure by the Company to settle within the policy limit or
by reason of alleged or actual negligence in rejecting an offer of settlement or
in the preparation of the defense or in the trial of any action against its
insured or reinsured or in the preparation or prosecution of an appeal
consequent upon such action.
For purposes of this definition, 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.
ORIGINAL CONDITIONS:
All reinsurance under this Agreement shall be subject to the same rates, terms,
conditions and waivers and to the same modifications, alterations and
interpretations as the respective policies and contracts of the Company, and the
liability of the Reinsurer shall follow that of the Company in every case,
subject, however, to the terms and conditions of this Agreement. It is the
intent of this Agreement that the Reinsurer shall follow the fortunes of the
Company in all matters falling under this Agreement, subject, however, to the
terms and conditions of this Agreement.
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