SURETY
CANADA QUOTA SHARE TREATY
(hereinafter referred to as “Reinsurance
Agreement”)
Effective:
January 1, 2011
entered
into by and between
CONTINENTAL
CASUALTY COMPANY (Canadian Branch)
(hereinafter referred to as “Company”)
WESTERN
SURETY COMPANY
(hereinafter referred to as “Reinsurer”)
In
consideration of the mutual covenants contained herein, and upon
the terms and conditions hereinafter set forth the Company and the
Reinsurer hereby agree as follows:
ARTICLE 1
— BUSINESS COVERED
This
Reinsurance Agreement shall cover the Company’s Net Liability
on Surety Business written or renewed in Canada, by or on behalf of
the Company, during the term of this Reinsurance Agreement, and
ceded hereunder. However, if mutually agreed between the Company
and the Reinsurer, the Company may retain a Policy, or portion of a
Policy, and not be required to cede such Policy, or portion of such
Policy, associated with its Surety Business to the Reinsurer under
this Reinsurance Agreement. In the event a Policy is not ceded
hereunder, the Policy shall be identified and the exception
documented, in writing, in the underwriting file.
The
liability of the Reinsurer shall commence simultaneously with that
of the Company. In the event that a loss covered hereunder involves
more than one of the Company’s policies, this Reinsurance
Agreement shall provide coverage for each and every Policy in such
loss.
ARTICLE 2
— TERM AND CANCELLATION
This
Reinsurance Agreement is effective January 1, 2011 and shall
continue in full force and effect through December 31, 2011,
both days inclusive. Upon expiration of this Reinsurance Agreement,
the Reinsurer shall continue to cover all Policies coming within
the terms and conditions of this Reinsurance Agreement, until the
natural expiration or anniversary of such Policies.
Notwithstanding
the expiration of this Reinsurance Agreement as hereinabove
provided, the provisions of this Reinsurance Agreement shall
continue to apply to all unfinished business hereunder and that all
obligations and liabilities incurred by each party hereafter, prior
to such expiration, shall be fully performed and
discharged.
Surety
Canada Quota Share Treaty
Effective: January 1, 2011
Page 1 of 15
This
Reinsurance Agreement applies to the territory as in the
Company’s original Policies reinsured hereunder.
ARTICLE 4
— ORIGINAL CONDITIONS
All amounts
ceded hereunder shall be subject to the same gross rating and to
the same clauses, conditions, exclusions and modifications of the
Company’s Policies, subject to the limits, terms and
conditions of this Reinsurance Agreement.
Except as
specifically and expressly provided for in the Insolvency Article,
the provisions of this Reinsurance Agreement are intended solely
for the benefit of the parties to and executing this Reinsurance
Agreement, and nothing in this Reinsurance Agreement shall in any
manner create, or be construed to create, any obligations to or
establish any rights against any party to this Reinsurance
Agreement in favor of any third parties or other persons not
parties to and executing this Reinsurance Agreement.
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A.
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The
term “Extra Contractual Obligations” as used in this
Reinsurance Agreement shall mean those liabilities not covered
under any other provision of this Reinsurance Agreement and which
arise from the handling of any claim on business covered hereunder,
such liabilities arising because of, but not limited to, the
following: failure by the Company to settle within the Policy
limit, or by reason of alleged or actual negligence, fraud or bad
faith in rejecting an offer of settlement or in 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.
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B.
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The
term(s) “Loss” and “Losses” as used in this
Reinsurance Agreement shall mean that amount incurred by the
Company in respect of any settlements, awards, or judgments
(including interest where classified as loss) incurred in
connection with any Policy reinsured hereunder after deduction for
all recoveries, salvages, subrogations and other reinsurances. The
Reinsurer and Company agree that the convention to be followed when
determining when a loss is incurred is that the date of notice of
the actual event of loss or default shall be the date the loss is
incurred, except that when the date of notice of the actual event
of loss or default occurs after the expiration of a Policy then the
date immediately preceding the date the Policy expires shall be
deemed to be the date the loss is incurred.
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C.
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The
term “Loss Expenses” as used in this Reinsurance
Agreement shall mean all expenses incurred by the Company in the
investigation, appraisal, adjustment, litigation and/or defense of
claims under the business reinsured hereunder, including court
costs, interest accrued prior to final judgment if included as
expense on reinsured Policies, interest accrued after final
judgment, but excluding internal office expenses, salaries, per
diem, and other remuneration of regular Company employees unless
diverted from their normal duties to handle such Loss.
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Surety
Canada Quota Share Treaty
Effective: January 1, 2011
Page 2 of 15
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D.
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The
term “Net Premiums Written” as used in this Reinsurance
Agreement shall mean the gross written premiums on Policies
written, renewed or assumed during the term of this Reinsurance
Agreement on business the subject of this Reinsurance Agreement,
less cancellation and return premiums and less premiums ceded on
all other reinsurance which inures to the benefit of this
Reinsurance Agreement on business the subject of this Reinsurance
Agreement.
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E.
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The
term “Net Liability” as used in this Reinsurance
Agreement shall mean the remaining portion of the Company’s
gross liability on each Policy reinsured under this Reinsurance
Agreement after deduction of all reinsurance which inures to the
benefit of this Reinsurance Agreement.
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F.
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The
term(s) “Policy” and “Policies” as used in
this Reinsurance Agreement shall mean the Company’s binders,
riders, policies, endorsements, bonds and contracts providing
insurance and reinsurance on the Surety Business covered under this
Reinsurance Agreement.
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G.
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The
term “Surety Business” as used in this Reinsurance
Agreement means the issuance, writing or underwriting of policies
or licenses with respect to the following: (i) bonds required by
statutes or ordinances guaranteeing the payment of certain taxes
and fees and providing consumer protection as a condition to
granting licenses to engage in various trades or professions,
(ii) bonds required by statutes, courts or legal documents for
the protection of those on whose behalf a fiduciary acts,
(iii) bonds required by statutes or ordinances to guarantee
the lawful and faithful performance of the duties of office by
public officials, (iv) bonds required by statutes to protect
against improper actions by notaries public, and (v) bonds
which secure the payment and/or performance of an obligation under
a written contract; but it shall not include, without limitation,
financial guaranty bonds and the issuance, writing or underwriting
of bonds and licenses which cover Losses arising from employee
dishonesty.
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As outlined
in the Reports and Remittances Article, the Company shall pay to
the Reinsurer 100% of the Company’s Net Premiums Written on
its Net Liability on the business covered hereunder, less the
ceding commission.
The Company
and the Reinsurer agree that in respect of the business covered
hereunder, the Company shall not be responsible or liable to the
Reinsurer for any such amounts to the extent such amounts
constitute premiums that: (i) have not been actually collected
or received by an insurance agent, broker, intermediary or other
insurance representative of the Company, or (ii) have been
collected or received by an insurance agent, broker, intermediary
or other insurance representative of the Company but not remitted
to the Company by such agent, broker, intermediary or other
insurance representative.
It is
mutually understood and agreed by and between the Reinsurer and the
Company that the Reinsurer shall have no recourse whatsoever
against the Company for any such uncollected or unremitted
premiums.
Surety
Canada Quota Share Treaty
Effective: January 1, 2011
Page 3 of 15
ARTICLE 7
— CEDING COMMISSION
The
Reinsurer agrees to allow the Company a commission allowance per
calendar quarter of (a) the actual direct expenses incurred in
the underwriting of Canadian business, plus (b) 33.5% of Net
Premiums Written ceded under this Reinsurance Agreement. Return
commission shall be allowed on return premiums at the same
rate.
Such
commission allowance shall be the sole provision for all
commissions, brokerages, taxes, board, exchange or bureau
assessments, and for all other expenses of whatever nature,
including but not limited to rent and applicable salaries for the
use and employment of the Company’s office space and
employees, excepting loss expenses.
ARTICLE 8
— LOSS SETTLEMENTS & NOTICES
Claims
shall be adjusted and salvage and subrogation shall be handled
pursuant to the terms of the Services and Indemnity Agreement
effective January 1, 2011, between the Company and the
Reinsurer.
The
Reinsurer shall be liable for its proportionate share of all Losses
and Loss Expenses covered under this Reinsurance Agreement.
However, in the event a verdict or judgment is reduced by an appeal
or a settlement, subsequent to the entry of the judgment, resulting
in an ultimate saving on such verdict or judgment, or a judgment is
reversed outright, the expense incurred in securing such final
reduction or reversal shall be prorated between the Reinsurer and
the Company 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 shall be pro rated in proportion
to each party’s interest in such verdict.
In
addition, the Reinsurer shall also be liable for its proportionate
share of all legal expenses and other costs incurred in connection
with coverage questions and legal actions connected thereto arising
under the business covered by this Reinsurance Agreement. The
Reinsurer’s proportionate share of these costs and expenses
shall be the same as the Reinsurer’s percentage of
participation in this Reinsurance Agreement.
Nothing in
this Reinsurance Agreement shall be construed as meaning that
Losses are not recoverable hereunder until the actual Loss of the
Company has been ascertained.
ARTICLE 9
— EXCESS OF ORIGINAL POLICY LIMITS
This
Reinsurance Agreement shall protect the Company as provided in
Article 1 — Business Covered in connection with Loss in
excess of the limit of the original Policy, such Loss in excess of
the limit having been incurred because of failure by the Company to
settle within the Policy limit or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer of settlement
or in the preparation of the defense or in the trial of any action
against its insured or reinsured or in the preparation of
prosecution of an appeal consequent upon such action.
However,
this Article shall not apply where the Loss has been incurred due
to fraud by a member of the Board of Directors or a corporate
officer of the Company acting individually or
Surety
Canada Quota Share Treaty
Effective: January 1, 2011
Page 4 of 15
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