EX-10.14 12 file011.txt SLIP AGREEMENT FOR QUOTA SHARE TREATY Exhibit 10.14 QUOTA SHARE TREATY OF WELLINGTON UNDERWRITING INC PROPERTY BUSINESS REINSURED: Wellington Reinsurance Limited, London, United Kingdom. PERIOD: Continuous contract always open in respect of risks attaching on or after the 1st January 2003, subject to six months prior notice of cancellation to be tendered by the Reinsurer and three months prior notice of cancellation to be tendered by the Reinsured, such notice to be effective at any 31st December but such notice not to be effective prior to the 31st December 2005 if tendered by the Reinsured. In the event of cancellation, all business accepted by the Reinsured to run to natural expiry or, at the option of the Reinsured, portfolio conditions as detailed hereon shall apply. TYPE: Quota Share Treaty. CLASS: All Property Facultative Reinsurance business underwritten by Wellington Underwriting Inc. on behalf of the Reinsured. TERRITORIAL SCOPE: United States of America, its territories and possessions, including incidental (as defined by the Reinsured) elswhere and Canada. World-wide in respect of all business emanating from the Factory Mutual System and other companies as agreed by the Reinsured and the Reinsurer. TREATY DETAIL: To take a 35% Quota Share of all Property Facultative Reinsurance business underwritten by Wellington Underwriting Inc on behalf of the Reinsured, but subject to maximum aggregate of Original Gross Premiums ceded of: For the period 1st January to 31st December 2003 USD28,000,000 For the period 1st January to 31st December 2004 USD56,000,000 For the period 1st January to 31st December 2005 USD84,000,000 The term "Original Gross Premiums" as used herein shall mean all Gross Premium received by the Reinsured in respect of the business reinsured hereunder before deduction of any commissions, premium taxes and similar deductions, brokerage and profit commission but after the deduction of any returned premiums. Page 1 of 11 RATE: Original Gross Premiums CEDING COMMISSION: 35% on gross other than automatics where Commission is 10.00% of net premium income. TAXES: As applicable PROFIT 20% (after Ceding Commission and Reinsurers COMMISSION: expenses of 7.50% on Gross Original Rates) to be calculated on each Underwriting Year (or GAAP accounting year as mutually agreed). Deficit carry forward for a maximum of three subsequent underwriting years of account. Profit commission including any deficit carry forward from prior years will be calculated on the business attaching to the period 1st January 2003 to 1st January 2004. First calculation of profit commission to be made 24 months after inception and annually thereafter but in the event that the Reinsured elects to effect a portfolio transfer then the final adjustment will be paid on the figures at the end of the 36th month. PORTFOLIO: At the end of the thirtieth month of each year of account, if required by the Reinsured, Reinsurers hereon agree to close the year based on the figures provided by the Reinsured and effect a portfolio transfer into the next open year of all outstanding losses as may be agreed. CASH LOSS: For losses equal to or greater than USD 100,000 for 100% of the treaty. ACCOUNTS: Quarterly accounts to be submitted within 60 days of the close of each quarter, with remittances of balances by either party 30 days thereafter. GENERAL Cessions hereunder shall be subject to the same CONDITIONS: periods, terms, clauses and and conditions and warranties as the original. Furthermore, this reinsurance is to follow original settlements and/ or agreements in all respects. Acceptances in currencies other than United States Dollars shall be at the rates of exchange as used in the books of the reinsured. Reinsurers shall beneift from recoveries under any specific reinsurances purchased by the Reassured solely to protect the business hereunder and shall be debited with their proportion of the cost of such reinsurances. Page 2 of 11 Confidentiality Clause as attached Extra Contractual Obligations Inclusion Clause NMX 100 as attached Offset Clause as attached UK Jurisdiction Clause as attached Outstanding Claims Advance Clause as attached Continuity of Agreement Clause as attached Mediation Clause as attached Arbitration Clause as attached Insolvency Event Clause Delays, Errors or Omissions Clause Alterations and Amendments Clause Access to Records Clause EXCLUSIONS: War and Civil War Exclusion Clause 1978 as attached Terrorism Exclusion Clause NMA 2930B as attached Nuclear Energy Risks Exclusion Clause (Reinsurance) 1994 NMA 1975A (Japanese Amendment) Nuclear Incidents Exclusion Clause - Reinsurance - USA and Canada Information Technology Hazards (Risk) Exclusion Clause NMA 2928 as attached Excluding Casualty business written as such Excluding Ocean Marine business Excluding Satellites and Space Risks Excluding Professional Indemnity, Bonds and Motor Liability business WORDING: As agreed by the parties Page 3 of 11 This Agreement has been signed in London, this 20th day of June 2002. For and behalf of the Reassured - Wellington Reinsurance Limited. /s/ Julian Cusack ----------------- This Agreement has been signed in Hamilton, Bermuda, this 20th day of June 2002 For and on behalf of Montpelier Reinsurance Ltd. /s/ Russell Fletcher ------------------------------- Page 4 of 11 OUTSTANDING CLAIMS ADVANCE CLAUSE Applicable to so-called US Situs business protected hereunder. In respect of all loss or losses arising in respect of that business designated above, the Reinsurer agrees within 14 days, if so requested by the Reinsured, to provide by special settlement an Outstanding Claims Advance equal to its proportionate share of outstanding losses hereunder including Incurred but not Reported (BNR) losses, by one of the following two (2) alternatives to be chosen by the Reinsured following good faith efforts to reach mutual agreement with the Reinsurer: 1. Claims to be advanced with interest to be calculated at the 3 monthly LIBOR rate for United States Dollars plus 1.50%. The three monthly LIBOR rate for each such collection shall be the rate ruling at 12:00 GMT on the date each such advance is made by the Reinsurer. Interest payments shall be made by the Reinsured to the Reinsurer 3 months after the date of the first invoice and quarterly thereafter. 2. Claims to be paid at a mutually agreed Present Value of the incurred loss including IBNR for which an Outstanding Claims Advance is requested. Such proportionate share for any loss shall be computed as at any one time by comparing the recovery due hereunder by reason of the Reinsured's paid loss and that recovery which would be due hereunder if it were permitted for such loss to also include the value of the Reinsured's notified outstanding amounts including IBNR for that same loss. The Reinsurer's undertakings are further conditioned upon the understanding that: 1. this Agreement applies only to loss reserve deposits and not to premium reserve deposits; 2. any deposits or advances hereunder will only be established for the benefit of Reinsured's ceding companies. Any amounts appropriated from any Outstanding Claims Advance provided by or on behalf of the Reinsurer shall be deemed to have been sums paid by the Reinsurer on account of its proportion of settled losses (if any) for which the Reinsurer is properly liable under this Agreement and the amount of such payments shall be brought into account in the Accounts to the credit of Reinsurer; 3. the amount of any Outstanding Claims Advance or Letter Of Credit provided by common account Reinsurers shall be netted against any Outstanding Claims Advance amount provided hereunder. The foregoing option may be exercised at any time in respect of each original incurred loss. In the event that the Reinsured requests an increase in an Outstanding Claims Advance, such adjustment shall only be made on the next applicable calendar quarter (being 1st January, 1st April, 1st July and 1st October). Page 5 of 11 CONFIDENTIALITY CLAUSE The Reinsured has designated the underwriting information used to place this Agreement as confidential and proprietary information ("confidential information"). Reinsurers hereon agree that the confidential information shall only be disclosed to those employees of the Reinsurers who need to know the information in connection with the evaluation of this risk, who have been informed of the confidential nature of the confidential information and who have agreed not to disclose the confidential information to anyone not participating in the evaluation of the risk on behalf of Reinsurers. The Reinsurers shall, unless disclosure is lawfully required by a competent court of jurisdiction, hold in confidence, and shall require its employees to hold in confidence, the confidential information. The Reinsurer shall be under a continuing non-delegable duty not to disclose, directly or indirectly or permit the disclosure of, directly or indirectly, the confidential information to any third person. EXTRA-CONTRACTUAL OBLIGATIONS CLAUSE NMX 100 This Agreement shall exclude all cover in respect of Extra-Contractual Obligations howsoever arising, such Extra-Contractual Obligations being defined as any award made by a court of competent jurisdiction against an insurer or reinsurer, which award is not within the coverage granted by any insurance and/or reinsurance contract made between the parties in dispute. Notwithstanding the foregoing, this Agreement shall extend to cover any loss arising from Claims Related Extra-Contractual Obligation: (a) awarded against the Reinsured or (b) incurred by the Reinsured where he has paid his share of a Claims Related Extra-Contractual Obligation awarded against one or more of his co-insurers. It is warranted that any recovery under this Agreement in respect of Claims Related Extra-Contractual Obligations shall be for that part of any award which corresponds to the Reinsured's share of the reinsurance and/or reinsurance policy and/or contract giving rise to the award and all proportional protection effected by the Reinsured shall provide or shall be deemed to provide pro-rata coverage for such obligation. This Agreement shall also extend to cover all loss from Extra-Contractual Obligations howsoever arising where the loss is incurred by the Reinsured as a result of his participation in any insurance reinsurance which provides cover for such loss, it being understood and agreed that such loss results from a contractual liability incurred by the Reinsured. A Claims Related Extra-Contractual Obligation shall be defined as the amount awarded against an insurer or Reinsurer found liable by a court of competent jurisdiction to pay damages to an insured or reinsured in respect of the conduct of a claim made under an Page 6 of 11 insurance and/or reinsurance policy and/or contract, where such liability has arisen because of: (a) the failure of the insurer or Reinsurer to agree or pay a claim within the policy limits or to provide defense against such claims as required by law or (b) bad faith or negligence in rejecting an offer of settlement or (c) negligence or breach of duty in the preparation of the defense or the conduct of it trial or the preparation or prosecution of any appeal and/or subrogation and/or any subsequent action resulting therefrom There shall be no liability under this Agreement in respect of: (a) any assumption of liability by way of participation in any mutual scheme designed specifically to cover Extra-Contractual Obligation; or (b) any Extra-Contractual Obligation arising from the fraud of a director, officer or employee of the Reinsured acting individually or collectively or in collusion with an individual or corporation or with any other organisation or party involved in the presentation, defense or settlement of any claim. Any loss arising under this Agreement in respect of Claims Related Extra-Contractual Obligations shall be deemed to be a loss arising from the same event as that giving rise to the claim to which the Extra-Contractual Obligation is related; but recovery hereunder is subject to the insurance and/or reinsurance policy and/or contract which gives rise to the Extra-Contractual Obligation falling within the scope of this Agreement. OFFSET CLAUSE Each party hereto shall have the right to offset any balance or balances, whether on account of premium or on account of losses, due from one party to another party under this Agreement, against any balance or balances due and payable to one party from the other under this Agreement. However, in the event of the insolvency of any party hereto, offset shall only be allowed in accordance with applicable statutes and regulations. UK JURISDICTION CLAUSE This Agreement is governed by and is to be construed according to the Law of England. All questions or disputes arising out of or in connection with this Agreement, which cannot be decided by Mediation or Arbitration, shall be referred to an English Court and litigated solely in London. MEDIATION CLAUSE In the event of any dispute or difference of opinion arising out of or relating to this Agreement, including but not limited to the formation, interpretation, validity, performance or breach of this Agreement, whether such dispute arises before or after the Page 7 of 11 expiration of this Agreement, the Reinsured and the Reinsurer agree that, prior to requesting Arbitration, they will submit such dispute to non-binding Mediation which will be held in London, England. Mediation shall be initiated by the delivery of a written notice of a request for Mediation by one party to the other. Each party shall submit a list of not more than four potential mediators to the other party within thirty days of the delivery of such written notice. The two Parties shall then agree on the appointment of one Mediator from the combined lists. The Mediator shall be an active or retired officer of an insurance or reinsurance company or an Underwriter at Lloyd's, and shall be a disinterested third party to the Mediation. The Mediator will schedule an initial Mediation session within thirty days of appointment and will be responsible for the formulation of an agenda to be distributed to the parties involved in the Mediation not less than five days before the Mediation commences. Additionally, the Mediator will arrange the neutral site where the Mediation will take place and advise the parties of the time the Mediation shall commence. The Mediator will have no power of enforcement of any decision which may be rendered nor will the Mediator have any right to the assessment of any damages, including punitive damages, to either party participating in this Mediation. If, in the opinion of the Mediator, the parties cannot resolve the dispute or difference of opinion, the dispute shall then be submitted to binding Arbitration in accordance with the Arbitration Clause. Each party shall bear the expense of its own representatives and shall jointly and equally bear with the other party the expenses of the Mediation. ARBITRATION CLAUSE For any dispute not resolved by mediation such dispute or other matter in question between the Reinsured and the Reinsures 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. Arbitration shall be initiated by the delivery of a written notice of demand for arbitration by one party to the other within a reasonable time after the dispute has arisen. Each party shall appoint an individual as arbitrator and the two so appointed shall then appoint a third arbitrator. If either party refuses or neglects to appoint an arbitrator within sixty days, the other party may appoint the second arbitrator. If the two arbitrators do not agree on a third arbitrator within sixty days of their appointment, each one of the arbitrators shall nominate three individuals. Each arbitrator shall then decline two of the nominations presented by the other arbitrator. The third arbitrator shall then be chosen from the remaining two nominations by drawing lots. The arbitrators shall be active or retired officers of insurance or reinsurance companies or Lloyd's of London Underwriters; the arbitrators shall be disinterested parties. The arbitration hearings shall be held in London, England, or such place as may be mutually agreed by the arbitrators. Each party shall submit its case to the arbitrators Page 8 of 11 within sixty days of the selection of the third arbitrator or within such longer period as may be agreed by the arbitrators. The arbitrators shall interpret this agreement as an honourable engagement and shall not be obliged to follow judicial formalities or the rules of evidence except to the extent required by English law; they shall make their decisions according to the custom and practice of the reinsurance business. The decision, rendered by a majority of the arbitrators, shall not include awards for Extra-Contractual Obligations and shall be final and binding on both parties. Such decision shall be a condition precedent to any right of legal action arising out of the arbitrated dispute which either party may have against the other. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party shall pay the fee and expenses of its own arbitrator and one half of the fee and expenses of the third arbitrator. In the event that two arbitrators are chosen by one party, as above provided, the fees and expenses of the arbitrators shall be equally divided between the two parties. All other expenses of the arbitration shall be equally divided between the parties. This arbitration agreement shall be construed as a separate and independent contract between the parties hereto and arbitration hereunder shall be a condition precedent to the commencement of any action at law. WAR EXCLUSION CLAUSE 1978 Loss or Damage directly or indirectly occasioned by, or happening through or in consequence of War, Invasion, Acts of Foreign Enemies, Hostilities (whether war be declared or not), Civil War, Rebellion, Revolution, Insurrection, Military or Usurped Power or Confiscation, or Nationalisation, or Requisition, or Destruction of or Damage to property by, or under the order of, any government or public or local authority, but this exclusion shall not apply to business written in accordance with the Market War and Civil War Risks Exclusion Agreement, nor to business outside the scope of this Agreement. NUCLEAR EXCLUSION CLAUSES Nuclear Energy Risks for those applicable classes of business and territories as appropriate in accordance with the Market clauses set out below. (a) NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A. - NMA 1590 (including amended definition of 'Waste') (b) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A. - NMA 1119 (c) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY (BOILER AND MACHINERY POLICIES) REINSURANCE - U.S.A. - NMA 1166 (d) NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - CANADA - NMA 1979 Page 9 of 11 (e) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - CANADA - NMA 1980 (f) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY (BOILER AND MACHINERY POLICIES) REINSURANCE - CANADA - NMA 1251 (g) NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994) - WORLDWIDE EXCLUDING U.S.A. AND CANADA -NMA 1975(A) Notwithstanding the provisions of the exclusion clause as set out in paragraph (g) above, it is understood and agreed that in respect of Japanese business certain liabilities the type of which by market practice and custom have not been declared to the Japanese Nuclear Pool shall not fall within the scope of this exclusion. TERRORISM EXCLUSION (PROPERTY TREATY REINSURANCE) NMA2930B Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, it is agreed that this reinsurance agreement excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss. An act of terrorism includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organisation(s) or government(s) de jure or de facto, and which: (i) involves violence against one or more persons; or (ii) involves damage to property; or (iii) endangers life other than that of the person committing the action; or (iv) creates a risk to health or safety of the public or a section of the public; or (v) is designed to interfere with or to disrupt an electronic system. This reinsurance agreement also excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism. Page 10 of 11 Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this reinsurance agreement in respect only of personal lines this reinsurance agreement will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, or nuclear pollution or contamination. INFORMATION TECHNOLOGY HAZARDS (RISK) EXCLUSION CLAUSE - NMA2928 Losses arising, directly or indirectly, out of: (i) loss of, alteration of, or damage to or (ii) a reduction in the functionality, availability or operation of a computer system, hardware, programme, software, data, information repository, microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the policyholder of the reinsured or not, are excluded hereon unless arising out of one or more of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow. Page 11 of 11