Reinsurance Placement Slip relating to Medical Professional Liability Excess of Loss Reinsurance Contract, effective January 1, 2006, issued to Member Companies of FPIC Insurance Group, Inc. including First Professionals Insurance Company, Inc., Anesthesiologists Professional Assurance Company and Intermed Insurance Company (by Lloyd's Reinsurers)

By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the Company under its policies, contracts and binders of insurance or reinsurance (hereinafter called “policies”) issued or renewed on or after the effective date hereof and classified by the Company as follows:

Professional Liability business and ancillary coverages, covering physicians, surgeons, dentists, chiropractors, podiatrists and other allied medical practitioners and their professional associations;

Health Care Facilities Liability and ancillary coverages, including employed medical technicians, partnerships, corporations and limited liability companies;

Coverage hereunder may include prior acts coverage and/or extended discovery or reporting coverage when provided on original policies.

Notwithstanding the provisions of paragraph A, the Reinsurer agrees to reinsurer the excess liability which may accrue to the Company resulting from:

Claims first made to the Company during the underwriting year on occurrence form policies issued by Intermed Insurance Company prior to January 1, 2000; and

Claims first made to the Company during the underwriting year on Extended Reporting Endorsements on claims made policies issued by Intermed Insurance Company prior to January 1, 2000;

This Contract shall become effective on January 1, 2006, with respect to claims made against or reported to the Company on or after that date. This is with respect to new and renewal policies incepting during underwriting years commencing on or after that date and with respect to business covered under paragraph C of the Business Reinsured Article. This coverage shall continue in force thereafter until terminated.

Either party may terminate this Contract on any December 31 by giving the other party not less than 90 days prior written notice by certified mail.

Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving not less than 30 days written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:

The Subscribing Reinsurer’s policyholders’ surplus at the inception of any underwriting year has been reduced by more than 25.0% of the amount of surplus 12 months prior to that date; or

The Subscribing Reinsurer’s policyholders’ surplus at any time during any underwriting year has been reduced by more than 25.0% of the amount of surplus at the date of the Subscribing Reinsurer’s most recent financial statement filed with regulatory authorities and available to the public as of the inception of this Contract; or

The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or Standard & Poor’s Financial Strength rating is assigned or downgraded below A-; or

A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or

The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or

The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

Unless the Company elects to reassume the unearned reinsurance premium in force on the effective date of termination, and so notifies the Reinsurer prior to or within 30 days after the effective date of termination, reinsurance hereunder on business in force on the effective date of termination shall remain in full force and effect until expiration, cancellation or next premium anniversary of such business, whichever first occurs, but in no event beyond 12 months, plus odd time (not to exceed 18 months in total) and plus any extension of coverage for extended discovery or reporting coverage, following the effective date of termination.

Notwithstanding the provisions of paragraph D above, in the event that any policy subject to this Contract is required by statute, regulation, or by order of an insurance department to be continued in force, the Reinsurer agrees to extend reinsurance coverage hereunder with respect to such policy until such policy may be canceled or non-renewed by the Company.

“Underwriting year” as used herein shall mean the period from January 1, 2006 through December 31, 2006, and each subsequent 12-month period thereafter shall be a separate underwriting year, unless this Contract is terminated, in which event the final underwriting year shall be from the beginning of the then current underwriting year through the date of termination. All premiums and all claims or losses from new and renewal policies incepting during a given underwriting year shall be credited or charged, respectively, to such underwriting year, regardless of the date said premiums earn or such claims are made or losses occur (subject to the “cutoff” provisions of paragraph D above).

Any claims made under the extended reporting coverage provision shall be deemed to have been made on the date the original policy expired or was cancelled. Premium for such extended reporting coverage shall be considered fully earned by the reinsurer on the last date the original policy was in force.

  1.

As respects all business covered hereunder, the Company shall retain and be liable for the first $500,000 of ultimate net loss each insured, each claim or occurrence. The Reinsurer shall then be liable for the amount by which such ultimate net loss exceeds the Company’s retention, but the liability of the Reinsurer shall not exceed $2,500,000 as respects each insured, each claim or occurrence.

The Company shall purchase or be deemed to have purchased inuring excess reinsurance to limit its ultimate net loss subject hereto from any one coverage any one policy (exclusive of loss in excess of policy limits or extra contractual obligations) to $1,000,000 per claim or occurrence.

As respects extra contractual obligations and/or loss in excess of policy limits, the maximum amount of ultimate net loss (as defined in paragraph A of Definitions) recoverable by the Company hereunder shall be $15,000,000 for any one underwriting year.

As respects all business covered hereunder with policy limits exceeding $1,000,000 (excepting business covered under paragraph C of the Business Reinsured Article), the Company shall retain and be liable for the first $1,000,000 of ultimate net loss each insured, each claim or occurrence. The Reinsurer shall then be liable for the amount by which such ultimate net loss exceeds the Company’s retention, but the liability of the Reinsurer shall not exceed the following:

$4,000,000 as respects each insured, each claim or occurrence, for:

Health Care Facilities Liability and ancillary coverages, including employed medical technicians, partnerships, corporations and limited liability companies, and

Dentists and their professional associations, and

Physicians and surgeons in Arkansas and their professional associations.

$1,000,000 as respects each insured, each claim or occurrence, for business reinsured not included in (a) above.

Provided that a policy cession has been made to Coverage B, a separate limit shall be payable by the Reinsurer for extra contractual obligations (‘ECO’) and loss in excess of policy limits (‘XPL’), without an additional retention by the Company (other than its 10.0% co-participation as respects ECO and XPL losses hereunder).

The Company shall purchase or be deemed to have purchased inuring excess reinsurance to limit its ultimate net loss subject hereto from any one coverage, any one policy (exclusive of loss in excess of policy limits or extra contractual obligations) to $5,000,000 each insured, each claim or occurrence, and to $7,000,000 each insured in the annual aggregate.

As respects any declaratory judgment action regarding a claim on a policy subject hereto, if the Company is successful or settles prior to judgment, the Company shall retain the first $70,000 of declaratory judgment expense and the Reinsurer shall be liable for 80.0% of the amount excess of the Company’s retention. However, the liability of the Reinsurer for successful declaratory judgment expense shall not exceed $1,000,000 arising out of policies allocated to any one underwriting year.

Coverage B shall inure to the benefit of Coverage A.

As respects business written in the State of Kansas, the Company’s retention shall be deemed to include coverage provided by the Healthcare Stabilization Fund.

Whenever a claim is reserved by the Company for an amount greater than $250,000 and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. All cases of serious injury which, regardless of considerations of liability or coverage, shall be reported to the Reinsurer, including, but not limited to the following:

Brain injury with significant cognitive, behavioral or physical residual damages;

Quadriplegia or paraplegia including Cauda Equina Syndrome;

Fatalities or significantly diminished life expectancy of wage earners or parents with minor children;

Any claim where the Company sustains a verdict for loss in excess of the policy limit and/or any action alleging extra contractual or bad faith obligations against the Company;

Any declaratory judgment action brought by or against the Company where the expense amount is greater than $50,000.

The Company will provide individual claim reports on reported claims to the Reinsurer and will provide updates as needed.

The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit involving this reinsurance.

All claim settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid by the Company.

In the event of loss hereunder, loss adjustment expense incurred by the Company in connection therewith which does not reduce the Company’s limit of liability under the policy involved shall be shared by the Company and the Reinsurer in the proportion the ultimate net loss paid or payable by the Reinsurer bears to the total loss paid or payable by the Company, prior to any reinsurance recoveries, but after deduction of all salvage, subrogation and other recoveries. However, if a verdict or judgment is reduced by any process other than by the trial court, resulting in an ultimate saving to the Reinsurer, or a judgment is reversed outright, the expenses incurred in securing such reduction or reversal shall be shared by the Company and the Reinsurer in the proportion that each benefits from such reduction or reversal, and the expenses incurred up to the time of the original verdict or judgment which do not reduce the Company’s limit of liability under the policy involved shall be shared in proportion to each party’s interest in such original verdict or judgment. The Reinsurer’s liability for such loss adjustment expense shall be in addition to its liability for ultimate net loss.

    1.  

As premium for the reinsurance provided under Coverage A, the Company shall pay the Reinsurer 10.0% of the Company’s gross net written premium applicable to subject business for the underwriting year.

Company shall pay the Reinsurer an annual deposit premium of $24,000,000 in four equal installments of $6,000,000 on January 1, April 1, July 1 and October 1 of each underwriting year. In the event this Contract is terminated prior to any December 31, no deposit premium installments shall be due after the effective date of termination.

As respects Coverage A, within 60 days after the end of each underwriting year, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for the underwriting year, computed in accordance with the paragraphs above, and any additional premium due the Reinsurer shall be paid by the Company with its report, and any return premium due the Company shall be remitted promptly. In the event this Contract is terminated prior to any December 31, premium due shall be pro rated accordingly.

As premium for the reinsurance provided under Coverage B, the Company shall pay the Reinsurer 100% of its excess limits gross net written premium applicable to subject business, less ceding commission thereon for each underwriting year.

As respects Coverage B, within 30 days following the end of each calendar quarter, the Company shall report its excess limits gross net written premium applicable to subject business. The premium due the Reinsurer, less any commission thereon, shall be paid by the Company with its report.

Regardless of the option chosen by the Company at expiration or cancellation in accordance with the provisions of the Commencement and Termination Article, in the event the Company is bound by statute or regulation to continue coverage, the Reinsurer shall continue to receive premium as set forth above on such policies quarterly as written.

“Gross net written premium” as used herein is defined as gross written premium of the Company for primary policy limits of $1,000,000 each claim or less for the classes of business reinsured hereunder, less cancellations and return premiums, and less premiums ceded by the Company for inuring facultative reinsurance, if any.

“Excess limits gross net written premium” as used herein is defined as the portion of the full gross written premium charged by the Company to its original insureds and allocated to the subject policy limit greater than $1,000,000 each claim for the classes of business reinsured hereunder, less cancellations and return premiums, and less premiums ceded by the Company for inuring facultative reinsurance, if any.

As respects Coverage B, the Reinsurer shall allow the Company a 17.5% commission on all premiums ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer return commission on return premiums at the same rate.

It is expressly agreed that the ceding commission allowed the Company includes provision for all dividends, commissions, taxes, assessments, and all other expenses of whatever nature, except loss adjustment expense and successful declaratory judgment expense.

As respects Coverage A, the Reinsurer shall pay the Company profit sharing equal to 35.0% of the net profit, if any, in accordance with the provisions of paragraphs B and C hereunder, accruing to the Reinsurer for each underwriting year. The Reinsurer’s net profit for each underwriting year shall be calculated in accordance with the following formula, it being understood that a positive balance equals net profit and a negative balance equals net loss:

Premiums earned for policies allocated to the underwriting year; less

Expenses incurred by the Reinsurer at 30.0% of premiums earned for policies allocated to the underwriting year; less

Losses incurred for policies allocated to the underwriting year; less

Incurred but not reported loss reserves (“IBNR”) as original (to correspond with IBNR funding by Letter of Credit); less

The Reinsurer’s net loss, if any, from the immediately preceding underwriting year of this Contract and/or the Reinsurer’s net loss, if any, carried forward from the following agreements:

First Professionals Insurance Company Casualty Excess of Loss Reinsurance Agreement CXS-3014(1994) for calendar years 1994 and 1995; and/or

First Professionals Insurance Company Physicians, Dentists, and Chiropractors Casualty First through Fourth and Clash Excess of Loss Reinsurance Agreement AR 4302 for calendar year 1996; and/or

First Professionals Insurance Company Physicians, Dentists, and Chiropractors Casualty First through Fourth and Clash Excess of Loss Reinsurance Agreement AR 4373 for calendar years 1997 through 1999; and/or

FPIC Insurance Group Medical Malpractice and Lawyers Professional Liability Excess of Loss Reinsurance Agreement AR 12427 for calendar years 2000, 2001, 2002 and 2003 and the Medical Excess of Loss Reinsurance Contract for calendar years 2004 and 2005; less

The Reinsurer’s net loss, if any, from Coverage B of this Contract, calculated as follows:

Premiums earned for policies allocated to the underwriting year; less

Ceding commission allowed on (a) above; less

Expenses incurred by the Reinsurer at 30.0% of net premiums earned (premiums earned less ceding commission thereon) for policies allocated to the underwriting year; less

Losses incurred for policies allocated to the underwriting year; less

IBNR as original (to correspond with IBNR funding by Letter of Credit); less

The Reinsurer’s net loss, if any, from the immediately preceding underwriting year (beginning with the Medical Malpractice Liability Excess of Loss Reinsurance Agreement, effective January 1, 2003, as respects the second layer of coverage therein). It is understood that the net loss, if any, from an underwriting year shall be carried forward to extinction.”

B.  

The Company shall calculate and report the Reinsurer’s net profit within 45 days after 24 months following the end of each underwriting year, and within 45 days after the end of each 12-month period thereafter until all losses subject hereto have been finally settled. Profit sharing shall be payable upon receipt and verification of the profit sharing statement, based on the following schedule:

At the first calculation, one-third of the profit sharing shown to be due the Company will be payable by the Reinsurer.

At the second calculation, (first recalculation), two-thirds (less any amount previously paid) will be payable by the Reinsurer.

At the third and subsequent calculations, the full amount (less any amounts previously paid) will be payable by the Reinsurer.

Any return profit sharing shown to be due the Reinsurer shall be paid by the Company with its report.

“Premiums earned” as used herein shall mean the ceded written premiums for policies (or endorsements) allocated to the underwriting year, less the unearned portion thereof as of the effective date of calculation, it being understood that all premium from policies (or endorsements) allocated to an underwriting year shall be credited to that underwriting year, unless this Contract is terminated on a “cutoff” basis and the Company reassumes the unearned premium as of the effective date of termination.

The Company may purchase individual facultative reinsurance, which may inure to the benefit of this Contract. Premiums for inuring reinsurance, if any, shall be deducted from the subject premiums.

Recoveries under any insurance or reinsurance which indemnifies or protects the Company against claims for loss in excess of policy limits or extra contractual obligations and any contribution or subrogation under such insurance or reinsurance shall inure to the benefit of this Contract.

This Contract does not apply to and specifically excludes the following:

Reinsurance assumed by the Company other than:

Intra-company reinsurance; and

Policies underwritten by the Company but issued by another carrier at the Company’s request and reinsured 100% by the Company.

Business produced and underwritten by others.

Hospital Professional Liability and related General Liability Business.

Occurrence form policies except for those policies noted in paragraph C of the Business Reinsured Article.

Insureds written under the Company’s Non-Standard Medical and Dental Malpractice Quota Share Reinsurance Agreement (or replacement thereof).

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Liability - Reinsurance” attached to and forming part of this Contract.

All 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 guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however 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.

Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association.

Business falling within the scope of one or more of the exclusions set forth in paragraph A or not within the terms, conditions or limitations of this Contract may be submitted to the Reinsurer for special acceptance and, if accepted by the Reinsurer, shall be subject to all the terms of this Contract except as modified by the special acceptance.

“Ultimate net loss” as used herein is defined as the sum or sums (including deductibles of $250,000 or less paid by the Company or the insured, loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined, which reduces the Company’s limit of liability under the policy involved) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all salvage, all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company’s ultimate net loss has been ascertained.

“Loss in excess of policy limits” and “extra contractual obligations” as used herein shall be defined as follows:

“Loss in excess of policy limits” shall mean 90.0% of any amount paid or payable by the Company in excess of its policy limits, but otherwise within the terms of its policy, such loss in excess of the Company’s policy limits having been incurred because of, but not limited to, failure by the Company to settle within the policy limits or by reason of the Company’s 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 an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action.

“Extra contractual obligations” shall mean 90.0% of any punitive, exemplary, compensatory or consequential damages paid or payable by the Company, not covered by any other provision of this Contract and which arise from the handling of any claim on business subject to this Contract, such liabilities arising because of, but not limited to, failure by the Company to settle within the policy limits or by reason of the Company’s 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 an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action. An extra contractual obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the policy.

Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess of policy limits or any extra contractual obligation incurred by the Company as a result of any deliberately fraudulent and/or criminal act by any officer or director 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.

If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.

“Insured” as used herein shall mean any party or parties provided with a separate policy limit by the Company.

“Claim” and “occurrence” shall have the same meaning as the term occurrence, claim, medical incident, wrongful act or such similar term, as applicable, under the Company’s policy forms.

“Losses incurred” as used herein shall mean ceded losses and loss adjustment expense paid as of the effective date of calculation, plus the Company’s ceded reserves for losses and loss adjustment expense outstanding as of the same date, it being understood and agreed that all losses and related loss adjustment expense under policies allocated to an underwriting year shall be charged to that underwriting year, regardless of the date said losses actually occur, unless this Contract is terminated on a “cutoff” basis, in which event the Reinsurer shall have no liability for claims made or occurrences commencing after the effective date of termination.

The liability of the Reinsurer shall follow that of the Company in every case and be subject in all respects to all the general and specific stipulations, clauses, waivers and modifications of the Company’s policies and any endorsements thereon. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third party or any persons not parties to this Contract.

If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) by:

Escrow accounts for the benefit of the Company; and/or

Cash advances;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.  The Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the insurance regulatory authorities involved.

With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an “evergreen clause,” which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date.  The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;

    2.  

To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;

To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves), if so requested by the Reinsurer.

In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for B(1), B(2) or B(4), or in the case of B(3), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn.

As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active or retired disinterested executive officers of insurance or reinsurance companies or Lloyd’s London Underwriters. In the event that either party should fail to choose an Arbiter within 30 days following a written request by the other party to do so, the requesting party may choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration. If the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of whom the other shall decline, and the decision shall be made by drawing lots.

Each party shall present its case to the Arbiters within 30 days following the date of appointment of the Umpire. The Arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the Umpire and the decision of the majority shall be final and binding upon both parties. Judgment upon the final decision of the Arbiters may be entered in any court of competent jurisdiction.

If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint.

Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

In the event that any Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business and fails to pay any amount claimed to be due hereunder, the Company may, at its sole option, by giving not less than 30 days written notice to the Subscribing Reinsurer, elect to bypass this Article, and the Reinsurer hereby expressly waives the requirements of this Arbitration Article.

In the event any payment due the Company is not received by the Intermediary by the payment due date, the Inactive Reinsurer agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last day of each month as follows:

A.

The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon as imposed under Section 4371 of the Internal Revenue Code to the extent such premium is subject to the Federal Excise Tax.

In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

2.

Lloyd’s and Company Reinsurers hereon authorise Xchanging Ins-sure Services (XIS) to sign Contract Wording on a FDO basis.                                             

Lloyd’s Reinsurers hereon authorize XCS to waive the deferred settlement system in the event of presentation of settlement with first advice;

All loss settlements within or equal to a previously agreed reserve shall be automatically payable by Reinsurers. Where losses are advised and/or settled on a “block” or “bordereaux” basis, this shall still apply in relation to each individual loss comprising the “block” or bordereaux;

On any claim agreed by the Claims Leaders any action to subrogate, pursue or investigate a claim against a third party shall not delay settlement hereon;

A request for further information shall not delay payment of a claim once it has been approved by the Claims Leaders but such information request will still be pursued after payment;

XIS companies to agree settlement request on a Claims Electronic Settlements (CES) basis via the Class system;

In the event of the Leaders receiving an arbitration request or wishing to commence arbitration, each subscribing Reinsurer agrees EITHER to follow the Leaders’ conduct of such arbitration and be bound by its outcome OR to elect to pay their share of any claim and/or reject going to arbitration.

The Broker to enter claims advices into relevant market CLASS system, where applicable. All Reinsurers to use their respective CLASS system for claims agreement, where relevant. E-mail or other electronic means to be used by the Broker for distribution of claims information to Reinsurers in support of the CLASS entry, where possible.

Reinsurers will respond to claims matters to the Broker via CLASS, where relevant.

Not applicable.

Where possible, the Broker will submit delinked accounts to XIS. Premium payment requirements deemed met if accounts are correctly released for settlement to XIS in line with bureau procedures before settlement due date.

Reinsurers hereon note and agree to a disproportionate sign down of Written Lines, if required. XIS are authorised to accept as presented.

Any following Reinsurer non-renewing or discontinuing participation at any anniversary, re-signing or renewal date (as applicable), for any reason, agrees (a) to continue to follow the decisions of the Slip Leader(s) or any other Claims/Contract Agreement Parties (collectively “the Leaders”) hereon in all areas where it previously vested authority to any such Leaders, and (b) that the Broker may note any documents so agreed by the Leaders as being “agreed” on such non-continuing Reinsurer’s behalf without further reference. However, the Broker agrees to keep such non-continuing Reinsurers advised of any such agreements for information purposes only.

First Professionals Insurance Company

 Company

No accounting splits required