Net Line Quota Share Reinsurance Contract
Reinsured: Amwest Surety Insurance Company & Far West
Insurance Company Both of Calabasas, California
Subject Business: Business classified as all surety classifications
written by the Reinsured.
Subject Loss: "Subject Loss" shall include all Loss, ALAE and
ECO, if any, net of excess of loss
reinsurance purchased by the company but not stop
loss reinsurance for losses with a
discovery date during the term of this
agreement and complying with the losses
discovered definition that follows.
"Losses Discovered" shall be deemed to mean new
losses first reported to the Company on or after
the effective date of the treaty on
bonds written or renewed on or after January 1,
2000. Losses discovered prior to
April 1, 2000 and development on losses
discovered prior to April 1, 2000 are
specifically excluded.
Subject Premium: Unearned premium portfolio as of April 1, 2000
(from bonds written after December
31, 1999) plus written premium during the term.
Term: Term contract: April 1, 2000 - December 31, 2001.
Cession: 35.0% Quota Share for the period 4/1/2000 -
9/30/2000. Amount may decrease at the company's
sole discretion at any calendar quarter thereafter
as long as the decreased cession is retained by
company for its net account but in no event will
the cession rate be less than 15%. The company
must decide a change in the cession within 15 days
prior to the commencement of the calendar quarter
under consideration.
Ceding Commission: Actual company expenses attributable to the surety
division of the reinsured, not to
exceed the following maximum amounts:
1) 62.5% for the period April 1, 2000 -
December 31, 2000 (including the UEP
transfer at April 1, 2000); and
2) 57.5% for the period January 1, 2001 -
December 31, 2001
The total ceding commission paid by the reinsurer
during the term of the contract shall not exceed
60% of the ceded premium during the term of the
contract, prior to the application of the Expense
Saving provision of the contract.
Expense Savings: It is understood and agreed that in the
event the actual company expenses during the
period 1/1/2001 - 12/31/2001 are less than 60%
then that percentage amount shall be a reduction
to the provisional 57.5% ceding commission payable
during the period 1/1/2001 - 12/31/2001 as
follows:
Actual Expense Reduction applied to Provisional Comm
60% - 57.5% 100% (up to 2.5%)
57.5% - 56% 50% (up to .75%)
Accounts & Remittances: Monthly within 30 days, the Reinsured shall report
the following to the reinsurer.
1. GNWPI* on Subject Business Ceded.
2. Net Earned Premiums on Subject Business Ceded.
3. Ceding Commission on (1) above.
4. Ceded Subject Loss and LAE Outstanding.
5. Ceded Subject Loss and LAE Paid.
The balance of (1) less (3) less (5) will be
payable monthly within 60 days.
* GNWPI to mean gross net written premium income
after deductions for inuring excess of loss
reinsurance but not stop loss reinsurance.
Claims Reporting: Reinsurers shall be provided promptly a detailed
written narrative report with full
particulars for all losses with potential
exposure in excess of $500,000 to the
Company.
Exclusions: The same list of exclusions that appears in the
Company's excess of loss bond reinsurance contract
(effective October 1, 1999) plus Insurance Company
Qualifying Bonds.
Special Termination: It is understood and agreed that should at any
time the Reinsured lose 25.0% or more
of its surplus; be acquired, merged with or
controlled by any other company; undergo
a significant change in management to be defined
as a change in the Chief Executive
Officer; or lose its accreditation by the
United States Treasury Department, the
Reinsurer shall have the right to immediately
terminate this Agreement by giving the
Company 15 days prior notice by certified
mail. In the event of a special
termination, the provisional ceding commission
paid through the date of termination
shall be subject to the ceding commission article.
Insolvency:
A. In the event of insolvency of the Company, the reinsurance provided by this
Agreement shall be payable by the Reinsurer on the basis of the liability
of the Company as respects Policies covered hereunder, without diminution
because of such insolvency, directly to the Company or its liquidator,
receiver, conservator or statutory successor except as provided in Sections
4118(a) (1) (A) and 1114(c) of the New York Insurance Law.
B. The Reinsurer shall be given written notice of the pendency of each claim
or loss which may involve the reinsurance provided 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 proceedings where
the claim or loss is to be adjudicated, any defense which it may deem
available to the Company, its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share
of the benefit which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurer.
C. In addition to the offset provisions set forth in the contract, 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
against the other 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 claims then in
existence and held by the other party may be offset against it.
D. Nothing contained in this contract is intended to change the relationship
or status of the parties to this Agreement or to enlarge upon the rights or
obligations of either party hereunder except as provided herein.
Special Acceptances: All contractor risk must be specially
accepted if they meet any of the following
criteria: (a) single jobs of $20,000,000 or more
are to be considered; and/or (b) Amwest
uncompleted bonded work exceeds 35,000,000; and/or
(c) the total uncompleted work on hand, both
bonded and unbonded exceeds $50,000,000.
Commercial surety risk where Swiss Re paper is
utilized with penal sums more than $15,000,000
and/or aggregate exposures exceeding $25,000,000
must be specially accepted.
Warranty: The Company warrants that the inuring excess
of loss treaty and limits will be maintained
over the life of this treaty, or so deemed.
Common Account reinsurers are to be mutually
agreed or the Company bears the risk of
uncollectable reinsurance.
Reinsurer: Swiss Reinsurance America Corporation - 100%
Agreed: _______________________________ Date:__________________
Amwest Surety Insurance Company /
Far West Insurance Company
Agreed: _______________________________ Date:__________________
Swiss Reinsurance America Corporation
