10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

Commission file number: 000-51520

AMERISAFE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Texas	75-2069407
(State of Incorporation)	(I.R.S. Employer Identification Number)

2301 Highway 190 West, DeRidder, Louisiana	70634
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (337) 463-9052

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o                 Accelerated filer o                 Non-accelerated filer þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of August 10, 2006, there were 17,446,110 shares of the Registrant’s common stock, par value $.01 per share, outstanding.

TABLE OF CONTENTS

		Page
		No.
PART I — FINANCIAL INFORMATION
	Forward-Looking Statements		3
Item 1	Financial Statements		4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3	Quantitative and Qualitative Disclosures About Market Risk		15
Item 4	Controls and Procedures		15
PART II — OTHER INFORMATION
Item 1	Legal Proceedings		16
Item 1A	Risk Factors		16
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		16
Item 3	Defaults Upon Senior Securities		16
Item 4	Submission of Matters to a Vote of Security Holders		16
Item 5	Other Information		16
Item 6	Exhibits		17
First Casualty Excess of Loss Reinsurance Contract
Second Casualty Excess of Loss Reinsurance Contract
Third Casualty Excess of Loss Reinsurance Contract
Workers' Compensation Per Person Excess of Loss Reinsurance Contract
Casualty Catastrophe Excess of Loss Reinsurance Contract
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906

2

FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and the insurance industry in general. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

• greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;

• changes in rating agency policies or practices;

• the cyclical nature of the workers’ compensation insurance industry;

• changes in the availability, cost or quality of reinsurance and the failure of our reinsurers to pay claims in a timely manner or at all;

• negative developments in the workers’ compensation insurance industry;

• decreased level of business activity of our policyholders;

• decreased demand for our insurance;

• increased competition on the basis of coverage availability, claims management, safety services, payment terms, premium rates, policy terms, types of insurance offered, overall financial strength, financial ratings and reputation;

• changes in regulations or laws applicable to us, our policyholders or the agencies that sell our insurance;

• changes in legal theories of liability under our insurance policies;

• developments in capital markets that adversely affect the performance of our investments;

• loss of the services of any of our senior management or other key employees;

• the effects of U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts; and

• changes in general economic conditions, including interest rates, inflation and other factors.

     The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission, including the information in Item 1A, “Risk Factors” of Part I to our Annual Report on Form 10-K for the year ended December 31, 2005. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

	June 30,			December 31,
	2006			2005
	(unaudited)
Assets
Investments:
Fixed maturity securities—held-to-maturity, at amortized cost	$	515,784		$	465,648
Fixed maturity securities—available-for-sale, at fair value		682			1,695
Equity securities—available-for-sale, at fair value		69,102			66,275
Total investments		585,568			533,618
Cash and cash equivalents		31,187			49,286
Amounts recoverable from reinsurers		118,899			122,562
Premiums receivable, net		143,839			123,934
Deferred income taxes		25,518			22,413
Accrued interest receivable		5,432			4,597
Property and equipment, net		6,029			6,321
Deferred policy acquisition costs		19,630			16,973
Deferred charges		4,101			3,182
Other assets		15,942			9,434
	$	956,145		$	892,320
Liabilities, redeemable preferred stock and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	505,060		$	484,485
Unearned premiums		148,337			124,524
Reinsurance premiums payable		—			694
Amounts held for others		1,889			1,484
Policyholder deposits		38,069			38,033
Insurance-related assessments		39,739			35,135
Federal income tax payable		—			1,677
Accounts payable and other liabilities		24,451			22,852
Subordinated debt securities		36,090			36,090
Total liabilities		793,635			744,974
Redeemable preferred stock		50,000			50,000
Shareholders’ equity:
Common stock:
Voting—$0.01 par value; issued and outstanding shares—17,446,110 in 2006 and 17,424,054 in 2005		174			174
Additional paid-in capital		145,667			145,206
Accumulated deficit		(39,292	)		(54,346	)
Accumulated other comprehensive income		5,961			6,312
		112,510			97,346
	$	956,145		$	892,320

See accompanying notes.

4

AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
	(unaudited)
Revenues
Gross premiums written	$	92,151		$	88,949		$	172,969		$	160,524
Ceded premiums written		(4,724	)		(4,862	)		(9,175	)		(9,697	)
Net premiums written	$	87,427		$	84,087		$	163,794		$	150,827
Net premiums earned	$	72,107		$	63,115		$	139,981		$	125,032
Net investment income		5,843			3,932			11,816			7,650
Net realized gains on investments		1,081			547			2,235			774
Fee and other income		198			144			355			306
Total revenues		79,229			67,738			154,387			133,762
Expenses
Loss and loss adjustment expenses incurred		50,376			64,518			98,246			110,436
Underwriting and certain other operating costs		9,329			6,653			17,435			14,697
Commissions		4,564			4,016			8,886			7,822
Salaries and benefits		4,207			3,948			8,209			7,048
Interest expense		843			686			1,656			1,326
Policyholder dividends		175			215			347			386
Total expenses		69,494			80,036			134,779			141,715
Income (loss) before income taxes		9,735			(12,298	)		19,608			(7,953	)
Income tax expense (benefit)		1,917			(4,777	)		4,554			(3,669	)
Net income (loss)		7,818			(7,521	)		15,054			(4,284	)
Preferred stock dividends		—			(2,381	)		—			(4,720	)
Net income (loss) available to common shareholders	$	7,818		$	(9,902	)	$	15,054		$	(9,004	)
Earnings per share
Basic	$	0.39		$	(33.03	)	$	0.76		$	(30.04	)
Diluted	$	0.39		$	(33.03	)	$	0.76		$	(30.04	)
Shares used in computing earnings per share
Basic		17,422,406			299,774			17,421,569			299,774
Diluted		17,427,662			299,774			17,426,347			299,774

See accompanying notes.

5

AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
				(unaudited)
Operating Activities
Net income (loss)	$	7,818		$	(7,521	)	$	15,054		$	(4,284	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		478			576			928			1,154
Net amortization of investments		769			506			1,310			999
Deferred income taxes		(1,522	)		(6,602	)		(2,916	)		(7,427	)
Net realized gains on investments		(1,081	)		(547	)		(2,235	)		(774	)
Gain on sale of asset		(43	)		—			(43	)		—
Share-based compensation		318			—			458			—
Changes in operating assets and liabilities:
Premiums receivable		(13,229	)		(20,839	)		(19,905	)		(30,812	)
Accrued interest receivable		294			540			(835	)		(304	)
Deferred policy acquisition costs and deferred charges		(2,084	)		(2,675	)		(3,576	)		(7,292	)
Other assets		(5,421	)		(3,068	)		(6,508	)		(2,229	)
Reserves for loss and loss adjustment expenses		11,075			15,273			20,575			24,947
Unearned premiums		15,320			20,972			23,813			25,795
Reinsurance balances		4,919			15,865			2,969			23,560
Amounts held for others and policyholder deposits		582			2,493			441			2,611
Accounts payable and other liabilities		642			4,532			4,526			9,552
Net cash provided by operating activities		18,835			19,505			34,056			35,496
Investing Activities
Purchases of investments held-to-maturity		(41,308	)		(34,375	)		(97,992	)		(39,222	)
Purchases of investments available-for-sale		(6,352	)		(3,982	)		(19,123	)		(25,047	)
Proceeds from maturities of investments held-to-maturity		9,081			13,266			45,709			19,202
Proceeds from sales and maturities of investments available-for-sale		6,468			7,004			19,841			12,336
Purchases of property and equipment		(418	)		(315	)		(638	)		(727	)
Proceeds from sales of property and equipment		45			3			45			3
Net cash used in investing activities		(32,484	)		(18,399	)		(52,158	)		(33,455	)
Financing Activities
Tax benefit from share-based payments		3			—			3			—
Net cash provided by financing activities		3			—			3			—
Change in cash and cash equivalents		(13,646	)		1,106			(18,099	)		2,041
Cash and cash equivalents at beginning of period		44,833			26,356			49,286			25,421
Cash and cash equivalents at end of period	$	31,187		$	27,462		$	31,187		$	27,462

See accompanying notes.

6

AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

          AMERISAFE, Inc. (the “Company”) is an insurance holding company incorporated in the state of Texas. Based on voting shares, the Company is 40.7% owned by Welsh, Carson, Anderson and Stowe VII L.P. and its affiliate WCAS Healthcare Partners, L.P. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries: American Interstate Insurance Company (“AIIC”), Silver Oak Casualty, Inc. (“SOCI”), American Interstate Insurance Company of Texas (“AIICTX”), Amerisafe Risk Services, Inc. (“RISK”) and Amerisafe General Agency, Inc. (“AGAI”). AIIC and SOCI are property and casualty insurance companies organized under the laws of the state of Louisiana. AIICTX is a property and casualty insurance company organized under the laws of the state of Texas. RISK, a wholly-owned subsidiary of the Company, is a claims and safety service company servicing only affiliate insurance companies. AGAI, a wholly-owned subsidiary of the Company, is a general agent for the Company. AGAI sells insurance, which is underwritten by AIIC, SOCI and AIICTX, as well as by nonaffiliated insurance carriers. The assets and operations of AGAI are not significant to that of the Company and its consolidated subsidiaries. The terms “AMERISAFE,” the “Company,” “we,” “us,” or “our” refer to AMERISAFE, Inc. and its consolidated subsidiaries, as the context requires.

          The Company provides workers’ compensation and general liability insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking and logging. Assets and revenues of AIIC represent more than 99% of comparable consolidated amounts of the Company for each of 2006 and 2005.

          In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934 and therefore do not include all information and footnotes to be in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005.

     The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Certain prior year amounts have been reclassified to conform with the current year presentation.

Note 2. Stock Options and Restricted Stock

     In connection with the initial public offering of shares of the Company’s common stock in November 2005, the Company’s shareholders approved the Amerisafe 2005 Equity Incentive Plan (the “2005 Incentive Plan”) and the Amerisafe 2005 Non-Employee Director Restricted Stock Plan (the “2005 Restricted Stock Plan”). See Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005 for additional information regarding the Company’s incentive plans.

     On March 10, 2006, the compensation committee of the board approved incentive compensation awards to each of the Company’s executive officers for services rendered in 2005. The awards were composed of cash bonuses and grants of restricted common stock. The restricted stock awards were made pursuant to the Company’s 2005 Incentive Plan, and will vest on the first anniversary of the date of grant. The fair value of the restricted stock granted was $170,000.

7

     In accordance with the terms of the Company’s 2005 Restricted Stock Plan, the 3,332 shares of restricted common stock issued to non-employee directors on November 17, 2005 vested on May 15, 2006, the date of the first annual shareholders’ meeting after the issuance of the restricted common stock. On May 15, 2006, the Company issued an additional 6,110 shares of restricted common stock to non-employee directors. These shares will vest on the date of the annual shareholders’ meeting to be held in 2007. The fair value of the restricted stock issued on May 15, 2006 was $75,000.

     For the six months ended June 30, 2006, we recognized stock-based compensation expense of $458,000 related to options granted under the 2005 Incentive Plan and restricted stock issued under the 2005 Restricted Stock Plan.

8

AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Earnings Per Share

     We compute earnings per share in accordance with SFAS No. 128, “Earnings per Share.” Additionally, we apply the “two-class method” in computing basic and diluted earnings per share. The two-class method was introduced in SFAS 128, and further clarified in Emerging Issues Task Force (EITF) No. 03-06, “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share, (Issue 03-6).” Under the two-class method, net income is allocated between common stock and any securities other than common stock that participate in dividends with common stock. Our redeemable preferred stock qualifies as “participating securities” under SFAS 128 and EITF 03-06.

     The two-class method allocates net income available to common shareholders and participating securities to the extent that each security shares in earnings as if all earnings for the period had been distributed. The amount of earnings allocable to common shareholders is divided by the weighted-average number of common shares outstanding for the period. Participating securities that are convertible into common stock are included in the computation of basic earnings per share if the effect is dilutive.

     Diluted earnings per share includes potential common shares assumed issued under the “treasury stock method,” which reflects the potential dilution that would occur if any outstanding options are exercised. Diluted earnings per share also includes the “if converted” method for participating securities if the result is dilutive. The two-class method of calculating diluted earnings per share is used whether the “if converted” result is dilutive or anti-dilutive.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
	(in thousands, except share and per share data)
	(unaudited)
Basic EPS:
Net income (loss) available to common shareholders	$	7,818		$	(9,902	)	$	15,054		$	(9,004	)
Portion allocable to common shareholders		87.8	%		100.0	%		87.8	%		100.0	%
Net income (loss) allocable to common shareholders	$	6,862		$	(9,902	)	$	13,212		$	(9,004	)
Basic weighted average common shares		17,422,406			299,774			17,421,569			299,774
Basic earnings per common share	$	0.39		$	(33.03	)	$	0.76		$	(30.04	)
Diluted EPS:
Net income (loss) allocable to common shareholders	$	6,862		$	(9,902	)	$	13,212		$	(9,004	)
Diluted weighted average common shares:
Weighted average common shares		17,422,406			299,774			17,421,569			299,774
Stock options		—			—			—			—
Restricted stock		5,256			—			4,778			—
Diluted weighted average common shares		17,427,662			299,774			17,426,347			299,774
Diluted earnings per common share	$	0.39		$	(33.03	)	$	0.76		$	(30.04	)

9

     The table below sets forth the calculation of the percentage of net income allocable to common shareholders, or the “portion allocable to common shareholders.” Under the two-class method, unvested stock options, and out-of-the-money vested stock options are not considered to be participating securities. For the periods presented, the Company did not have any in-the-money, vested stock options outstanding. As a result, the Company’s outstanding stock options are not included in this calculation.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2006		2005			2006		2005
	(unaudited)
Numerator:
Basic weighted average common shares		17,422,406		299,774			17,421,569		299,774
Add: Other common shares eligible for common dividends:
Weighted average restricted shares (including tax benefit component)		5,256		—			4,778		—
Weighted average participating common shares		17,427,662		299,774			17,426,347		299,774
Denominator:
Weighted average participating common shares		17,427,662		299,774			17,426,347		299,774
Add: Other classes of securities, including contingently issuable common shares and convertible preferred shares:
Weighted average common shares issuable upon conversion of Series C preferred shares		1,457,724		—	(1)		1,457,724		—	(1)
Weighted average common shares issuable upon conversion of Series D preferred shares		971,817		—	(1)		971,817		—	(1)
Weighted average participating shares		19,857,203		299,774			19,855,888		299,774

(1) Not applicable as impact is antidilutive.

     Portion allocable to common shareholders for the second quarter of 2006 was 87.8%, or 17,427,662 divided by 19,857,203. Portion allocable to common shareholders for the second quarter of 2005 was 100.0%. Portion allocable to common shareholders for the first six months of 2006 was 87.8%, or 17,426,347 divided by 19,855,888. Portion allocable to common shareholders for the first six months of 2005 was 100.0%.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

          The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2005.

     We begin our discussion with an overview of our company to give you an understanding of our business and the markets we serve. We then discuss our critical accounting policies. This is followed with a discussion of our results of operations for the three and six months ended June 30, 2006 and 2005. This discussion includes an analysis of certain significant period-to-period variances in our consolidated statements of operations. Our cash flows and financial condition are discussed under the caption Liquidity and Capital Resources.

Business Overview

     AMERISAFE is a holding company that markets and underwrites workers’ compensation insurance through its subsidiaries. Workers’ compensation insurance covers statutorily prescribed benefits that employers are obligated to provide to their employees who are injured in the course and scope of their employment. Our business strategy is focused on providing this coverage to small to mid-sized employers engaged in hazardous industries, principally construction, trucking and logging. Employers engaged in hazardous industries pay substantially higher than average rates for workers’ compensation insurance compared to employers in other industries, as measured per payroll dollar. The higher premium rates are due to the nature of the work performed and the inherent workplace danger of our target employers. Hazardous industry employers also tend to have less frequent but more severe claims as compared to employers in other industries due to the nature of their businesses. We provide proactive safety reviews of employers’ workplaces. These safety reviews are a vital component of our underwriting process and also promote safer workplaces. We utilize intensive claims management practices that we believe permit us to reduce the overall cost of our claims. In addition, our audit services ensure that our policyholders pay the appropriate premiums required under the terms of their policies and enable us to monitor payroll patterns or aberrations that cause underwriting, safety or fraud concerns. We believe that the higher premiums typically paid by our policyholders, together with our disciplined underwriting and safety, claims and audit services, provide us with the opportunity to earn attractive returns on equity.

     We market our insurance in 27 states and the District of Columbia through independent agencies, as well as through our wholly owned insurance agency subsidiary. We are also licensed in an additional 18 states and the U.S. Virgin Islands.

Critical Accounting Policies

     It is important to understand our accounting policies in order to understand our financial statements. Management considers some of these policies to be critically important to the presentation of our financial results because they require us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of our assets, liabilities, revenues and expenses and the related disclosures. Some of the estimates result from judgments that can be subjective and complex and, consequently, actual results in future periods might differ from these estimates.

     Management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from reinsurers, assessments, deferred policy acquisition costs, deferred income taxes and the impairment of investment securities. These critical accounting policies are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10-K for the year ended December 31, 2005.

11

Results of Operations

     The following table summarizes our consolidated financial results for the three months and six months ended June 30, 2006.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
	(dollars in thousands, except per share data)
	(unaudited)
Gross premiums written	$	92,151		$	88,949		$	172,969		$	160,524
Net premiums earned		72,107			63,115			139,981			125,032
Net investment income		5,843			3,932			11,816			7,650
Total revenues		79,229			67,738			154,387			133,762
Total expenses		69,494			80,036			134,779			141,715
Net income (loss)		7,818			(7,521	)		15,054			(4,284	)
Diluted earnings per common share		0.39			(33.03	)		0.76			(30.04	)
Other Key Measures
Net combined ratio (1)		95.2	%		125.7	%		95.1	%		112.2	%
Return on average equity (2)		19.6	%		(34.1	%)		19.4	%		(9.9	%)

(1)	The net combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, underwriting and certain other operating costs, commissions, salaries and benefits, and policyholder dividends by the current year’s net premiums earned.
(2)	Return on average equity is calculated by dividing the annualized net income by the average shareholders’ equity, including redeemable preferred stock for the applicable period.

Consolidated Results of Operations for Three Months Ended June 30, 2006 Compared to June 30, 2005

     Gross Premiums Written. Gross premiums written for the three months ended June 30, 2006 were $92.2 million, compared to $88.9 million for the same period in 2005, an increase of 3.6%. The increase was attributable primarily to a $2.9 million increase in annual premiums on voluntary policies written during the period and a $2.6 million increase in premiums resulting from payroll audits and related premium adjustments. These increases were offset by an $870,000 decrease in direct assigned risk premiums and a $1.3 million decrease in assumed premiums from mandatory pooling arrangements.

     Net Premiums Written. Net premiums written for the three months ended June 30, 2006 were $87.4 million, compared to $84.1 million for the same period in 2005, an increase of 4.0%. The increase was attributable to the growth in gross premiums written and a $138,000 decrease in premiums ceded to reinsurers for the second quarter of 2006, as compared to the prior-year period. As a percentage of gross premiums written, ceded premiums were 5.1% for the second quarter of 2006, compared to 5.5% for the second quarter of 2005.

     Net Premiums Earned. Net premiums earned for the three months ended June 30, 2006 were $72.1 million, compared to $63.1 million for the same period in 2005, an increase of 14.2%. The increase was attributable to growth in net premiums written in the previous four quarters.

     Net Investment Income. Net investment income for the second quarter of 2006 was $5.8 million, compared to $3.9 million for the same period in 2005, an increase of 48.6%. The change was attributable to a 46.3% increase in our investment portfolio, including cash and cash equivalents, from an average of $416.0 million in the second quarter of 2005 to an average of $608.8 million for the same period of 2006. Also contributing to this growth was an increase in the tax-equivalent yield on our investment portfolio, from 4.4% per annum as of June 30, 2005, to 5.7% per annum as of June 30, 2006.

12

     Net Realized Gains on Investments. Net realized gains on investments for three months ended June 30, 2006 totaled $1.1 million, compared to $547,000 for the same period in 2005. The increase was attributable to the timing of the sale of equity securities in accordance with our investment guidelines.

     Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $50.4 million for the three months ended June 30, 2006, compared to $64.5 million for the same period in 2005, a decrease of $14.1 million, or 21.9%. The decrease was the result of $19.2 million in additional prior accident year reserves recorded in the second quarter of 2005, which amount included $13.2 million related to the commutation of certain reinsurance contracts. We experienced no prior accident year development in the second quarter of 2006. The decrease in loss and LAE incurred resulting from additional prior accident year reserves recorded in 2005 was partially offset by an increase in loss and LAE incurred resulting from increased net premiums earned in the second quarter of 2006 as compared to the same period in 2005.

     Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the second quarter of 2006 were $18.1 million, compared to $14.6 million for the same period in 2005, an increase of 23.8%. This increase was partially due to a $1.4 million increase in loss-based assessments, which primarily related to assessments in the State of South Carolina, and a $604,000 increase in premium-based assessments. In addition, commissions increased $548,000, which was attributable to the increase in gross premiums earned, and salary and benefits increased $259,000. The change in salary and benefits expense included a $318,000 increase in salary expense attributable to share-based compensation.

     Interest expense. Interest expense for the second quarter of 2006 was $843,000, compared to $686,000 for the comparable period of 2005. Our weighted average borrowings for both periods were $36.1 million. The weighted average interest rate increased to 9.0% per annum for the second quarter of 2006 from 7.0% per annum for the second quarter of 2005.

     Income tax expense (benefit). Income tax expense for the three months ended June 30, 2006 was $1.9 million, compared to a tax benefit of $4.8 million for the same period in 2005. The increase in tax expense was attributable to $9.7 million of pre-tax income in 2006, as compared to a $12.3 million pre-tax net loss for the same period in 2005. This increase was offset by a $571,000 decrease in a tax accrual related to the resolution of prior year taxes.

Consolidated Results of Operations for Six Months Ended June 30, 2006 Compared to June 30, 2005

     Gross Premiums Written. Gross premiums written for the six months ended June 30, 2006 were $173.0 million, compared to $160.5 million for the same period in 2005, an increase of 7.8%. The increase was attributable primarily to a $13.7 million increase in annual premiums on voluntary policies written during the period and a $1.8 million increase in premiums resulting from payroll audits and related premium adjustments. These increases were offset by a $1.7 million decrease in assumed premiums from mandatory pooling arrangements and a $1.3 million decrease in direct assigned risk premiums.

     Net Premiums Written. Net premiums written for the six months ended June 30, 2006 were $163.8 million, compared to $150.8 million for the same period in 2005, an increase of 8.6%. The increase was attributable to growth in gross premiums written and a $522,000 decrease in premiums ceded to reinsurers for the first six months of 2006 compared to the prior-year period. As a percentage of gross premiums written, ceded premiums were 5.3% for the first six months of 2006 compared to 6.0% for same period in 2005.

     Net Premiums Earned. Net premiums earned for the six months ended June 30, 2006 were $140.0 million, compared to $125.0 million for the same period in 2005, an increase of 12.0%. The increase was attributable to growth in net premiums written in the previous four quarters.

     Net Investment Income. Net investment income for the first six months of 2006 was $11.8 million, compared to $7.7 million for the same period in 2005, an increase of 54.5%. The change was attributable to a 47.3% increase

13

in our investment portfolio, including cash and cash equivalents, from an average of $407.2 million in the first six months of 2005 to an average of $599.8 million for the same period of 2006. Also contributing to this growth was an increase in the tax-equivalent yield on our investment portfolio, from 4.4% per annum as of June 30, 2005, to 5.7% per annum as of June 30, 2006.

     Net Realized Gains on Investments. Net realized gains on investments for the first six months of 2006 totaled $2.2 million, compared to $774,000 for the same period in 2005. The increase was attributable to the timing of the sale of equity securities in accordance with our investment guidelines.

     Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $98.2 million for the six months ended June 30, 2006, compared to $110.4 million for the same period in 2005, a decrease of $12.2 million, or 11.0%. The decrease was the result of $21.9 million in additional prior accident year reserves recorded in the second quarter of 2005, which amount included $13.2 million related to the commutation of certain reinsurance contracts. We experienced no prior accident year development in the first six months of 2006. The decrease in loss and LAE incurred resulting from additional prior accident year reserves recorded in 2005 was partially offset by an increase in loss and LAE incurred resulting from increased net premiums earned in the first six months of 2006 as compared to the same period in 2005.

     Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the first six months in 2006 were $34.5 million, compared to $29.6 million for the same period in 2005, an increase of 16.8%. This increase was partially due to a $1.4 million increase in deferred policy acquisition costs, a $1.2 million increase in salaries and benefits, which included a $458,000 increase in salary expense attributable to share-based compensation, and a $1.1 million increase in commissions. In addition, we experienced a $1.0 million increase in premium-based assessments, which resulted from growth in our gross premiums earned, and an $831,000 increase in loss-based assessments, which primarily related to assessments in the State of South Carolina. Offsetting these increases was an $885,000 increase in ceding commissions, which acts to reduce underwriting expenses.

     Interest expense. Interest expense for the first six months of 2006 was $1.7 million, compared to $1.3 million for the comparable period of 2005. Our weighted average borrowings for both periods were $36.1 million. The weighted average interest rate increased to 8.7% per annum for the first six months of 2006 from 6.7% per annum for the same period of 2005.

     Income tax expense (benefit). Income tax expense for the six months ended June 30, 2006 was $4.6 million, compared to a tax benefit $3.7 million for the same period in 2005. The increase in tax expense was attributable to $19.6 million of pre-tax income in the first six months of 2006, as compared to a $8.0 million pre-tax net loss for the same period in 2005. This increase was offset by a $571,000 decrease in a tax accrual related to the resolution of prior year taxes

Liquidity and Capital Resources

     Our principal sources of operating funds are premiums, investment income and proceeds from sales and maturities of investments. Our primary uses of operating funds include payments of claims and operating expenses. Currently, we pay claims using cash flow from operations and invest our excess cash in fixed maturity and equity securities.

     Net cash provided by operating activities was $34.1 million for the first six months of 2006, which represented a $1.4 million decrease in cash provided by operating activities from $35.5 million in the first six months of 2005. Premiums collected for the first six months of 2006 increased $24.7 million versus the same period in 2005. This increase was offset by a $12.1 million reduction in recoveries from reinsurers, a $10.9 million increase in federal income taxes paid, a $2.3 million increase in expense disbursements and a $813,000 decrease in claim payments. Net cash used in investing activities was $52.2 million for the six months ended June 30, 2006, compared to $33.5 million for the same period in 2005.

14

     As of June 30, 2006, our investment portfolio, including cash and cash equivalents, totaled $616.8 million, an increase of 45.4% from June 30, 2005. Our fixed maturity securities are primarily classified as held-to-maturity, as defined by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” As such, the reported value of those securities is equal to their amortized cost, and is not impacted by changing interest rates. Our equity securities, including redeemable preferred stocks, are classified as available-for-sale, as defined by SFAS 115. These securities are reported at fair value.

     The composition of our investment portfolio, including cash and cash equivalents, as of June 30, 2006 is shown in the following table.

			Percentage of
	Carrying Value		Portfolio
	(in thousands)
Fixed maturity securities:
State and political subdivisions	$	301,292		48.8	%
Mortgage-backed securities		106,543		17.3	%
U.S. Treasury securities and obligations of U.S. Government agencies		79,257		12.8	%
Corporate bonds		22,796		3.7	%
Asset-backed securities		5,896		1.0	%
Redeemable preferred stocks		682		0.1	%
Total fixed maturity securities		516,466		83.7	%
Equity securities:
Common stocks		65,700		10.7	%
Nonredeemable preferred stocks		3,402		0.6	%
Total equity securities		69,102		11.3	%
Cash and cash equivalents		31,187		5.0	%
Total investments, including cash and cash equivalents	$	616,755		100.0	%

          We regularly evaluate our investment portfolio to identify other-than-temporary impairments in the fair values of the securities held in our investment portfolio. As of June 30, 2006, there were no other-than-temporary declines in the fair values of the securities held in our investment portfolio.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk affecting us are credit risk, interest rate risk and equity price risk. We currently have no exposure to foreign currency risk.

     Since December 31, 2005, there have been no material changes in the quantitative or qualitative aspects of our market risk profile. For information regarding the Company’s exposure to certain market risks, see Item 7A “—Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed with the SEC.

Item 4. Controls and Procedures.

     Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms specified by the SEC. We note that the design of any system of controls is based in

15

part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.

     There have not been any changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 1A. Risk Factors.

     None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

Item 4. Submission of Matters to a Vote of Security Holders.

     At the annual meeting of shareholders held on May 15, 2006, two directors were elected to the board of directors to serve until the 2009 annual meeting of shareholders. The vote with respect to the election of these directors was as follows:

			Total Vote
			Withheld
	Total Vote for		from Each
	Each Director		Director
Thomas W. Hallagan		16,634,760		1,011,621
Paul B. Queally		17,574,001		72,380

     At the same meeting, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2006 was ratified with the following votes:

For	17,639,431
Against	6,300
Abstain	650

Item 5. Other Information.

     None.

16

Item 6. Exhibits.

Exhibit No.	Description
10.1	First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.2	Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.3	Third Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.4	Workers’ Compensation Per Person Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.5	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
31.1	Certification of C. Allen Bradley filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Geoffrey R. Banta filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of C. Allen Bradley and Geoffrey R. Banta filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMERISAFE, INC.
August 14, 2006	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
August 14, 2006	/s/ Geoffrey R. Banta
	Geoffrey R. Banta
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

18

EXHIBIT INDEX

Exhibit No.	Description
10.1	First Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.2	Second Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.3	Third Casualty Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.4	Workers’ Compensation Per Person Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
10.5	Casualty Catastrophe Excess of Loss Reinsurance Contract, effective as of January 1, 2006, issued to the Registrant by the reinsurers named therein
31.1	Certification of C. Allen Bradley filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Geoffrey R. Banta filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of C. Allen Bradley and Geoffrey R. Banta filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

19

EX-10.1

Exhibit 10.1

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Table of Contents

Article		Page
I	Classes of Business Reinsured	1
II	Commencement and Termination	1
III	Territory (BRMA 51A)	3
IV	Exclusions	3
V	Special Acceptances	7
VI	Retention and Limit	7
VII	Definitions	8
VIII	Annuities at Company’s Option	10
IX	Claims	11
X	Commutation	11
XI	Special Commutation	12
XII	Salvage and Subrogation	13
XIII	Reinsurance Premium	14
XIV	Late Payments	14
XV	Offset (BRMA 36A)	15
XVI	Access to Records (BRMA 1D)	16
XVII	Liability of the Reinsurer	16
XVIII	Net Retained Lines (BRMA 32E)	16
XIX	Errors and Omissions (BRMA 14F)	16
XX	Currency (BRMA 12A)	16
XXI	Taxes (BRMA 50B)	17
XXII	Federal Excise Tax	17
XXIII	Reserves and Letters of Credit	17
XXIV	Insolvency	19
XXV	Arbitration (BRMA 6J)	19
XXVI	Service of Suit (BRMA 49C)	20
XXVII	Entire Agreement	21
XXVIII	Governing Law (BRMA 71B)	21
XXIX	Agency Agreement	21
XXX	Intermediary (BRMA 23A)	21

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group
(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

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”) in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Workers’ Compensation, Employers Liability, including coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and General Liability business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

A. This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, with respect to losses arising out of occurrences commencing at or after that time and date, and shall continue in force thereafter until terminated.

B. Either party may terminate this Contract at 12:01 a.m., Local Standard Time, on any January 1 by giving the other party not less than 90 days prior notice by certified or registered mail.

Page 1

C. Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 6 below and upon discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of applicable public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. The effective date of special termination shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice of its election to specially terminate, unless mutually agreed otherwise:

1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that date; or
2.	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract year has been reduced by more than 20.0% 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 beginning of the contract year; or
3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	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
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or
8.	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance business.

D. Unless the Company elects that the Reinsurer have no liability for losses arising out of occurrences commencing after the effective date of termination, and so notifies the Reinsurer prior to or as promptly as possible 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 exceeding 18 months in all) following the effective date of termination.

Page 2

Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s policies.

Article IV — Exclusions

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

1.	Lines of business not identified in the Classes of Business Reinsured Article.
2.	All excess of loss reinsurance assumed by the Company.
3.	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a.	Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and
b.	Intercompany reinsurance between any of the reinsured companies under this Contract.

4.	Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.
5.	Business written to apply in excess of a deductible of more than $25,000, and business issued to apply specifically in excess over underlying insurance. However, if the Company is required, by any state regulation, to provide a deductible of more than $25,000, this exclusion shall not apply.
6.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability - Reinsurance (U.S.A.)” attached to and forming part of this Contract.
7.	As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the Fifty States of the Union, the District of Columbia, and including bridges between the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.
8.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.

Page 3

9.

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.

10.

Workers’ Compensation where the principal exposures, as defined by the governing class code, include:

a.	Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;
b.	Railroad, subway or street railway operations;
c.	Operation or navigation of vessels or barges;
d.	Manufacture, production or refining of gas, natural or artificial fuel, or other liquefied petroleum fuel, but only if the annual estimated policy premium is $250,000 or more;
e.	Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000;
f.	Wrecking or demolition of structures, but only if the annual estimated policy premium is $250,000 or more;
g.	Underground mining.

11. As respects Workers’ Compensation and Employers Liability only, unless otherwise excluded as set forth above, the reinsurance provided under this Contract shall not apply to any loss, cost or expense arising out of or related to, either directly or indirectly, any “terrorist activity,” as defined herein, but this exclusion shall only apply when the activity includes, involves or is associated with the use of any biological, chemical, radioactive or nuclear agent, material, device or weapon, or when the predominant business of the policyholder, as defined by the governing class code, is:

a.	The operation of: airports and aircraft; flight schools; bridges, dams, tunnels or locks; department stores; shopping malls; chain retail stores; casinos and casino hotels; cruise lines; railroads; ports/public transit authorities; security services; stadiums; convention/exhibition centers; or theme/amusement parks;
b.	The manufacture and distribution of: automobiles; chemicals, petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major defense/aerospace products; or high-tech equipment, but only if the policyholder

Page 4

	employs more than 20 personnel at the location of a terrorist activity at the time of its occurrence;
c.	The management or operation of the following type of structures, but only if greater than 25 stories in height: apartments/condominiums/co-ops; hotels/motels; or office buildings;
d.	Businesses primarily engaged in the entertainment, media or transportation industry limited to the following: major media providers (NBC, FOX, ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major internet companies (AOL, Yahoo, etc.); professional sports teams; major telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common carriers (J.B. Hunt, Red Arrow, etc.);
e.	Policyholders primarily located in, or predominantly doing business as: hospitals; universities; nuclear facilities; financial institutions; or governmental buildings and national landmarks.

“Terrorist activity” shall mean any deliberate, unlawful act that:

a.	Is declared by any authorized government official to be or to involve terrorism, terrorist activity or acts of terrorism; or
b.	Includes, involves, or is associated with the use or threatened use of force, violence or harm against any person, tangible or intangible property, the environment, or any natural resources, where the act or threatened act is intended, in whole or in part, to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator; or
ii.	Influence, disrupt or interfere with any government related operations, activities or policies; or
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy; or

c. Includes, involves, or is associated with, in whole or in part, any of the following activities, or the threat thereof:

i.	Hijacking or sabotage of any form of transportation or conveyance, including but not limited to spacecraft, satellite, aircraft, train, vessel or motor vehicle;
ii.	Hostage taking or kidnapping;
iii.	The use of any bomb, incendiary device, explosive or firearm;

Page 5

iv.	The interference with or disruption of basic public or commercial services and systems, including but not limited to the following services or systems: electricity, natural gas, power, postal, communications, telecommunications, information, public transportation, water, fuel, sewer or waste disposal;
v.	The injuring or assassination of any elected or appointed government official or any government employee;
vi.	The seizure, blockage, interference with, disruption of, or damage to any government buildings, institutions, functions, events, tangible or intangible property or other assets; or
vii.	The seizure, blockage, interference with, disruption of, or damage to tunnels, roads, streets, highways, or other places of public transportation or conveyance.

d. Any of the activities listed in subparagraph c, above, shall be considered terrorist activity, except where the Company can demonstrate to the Reinsurer that the foregoing activities or threats thereof were motivated solely by personal objectives of the perpetrator that are unrelated, in whole or in part, to any intention to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator;
ii.	Influence, disrupt or interfere with any government-related operations, activities or policies;
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy.

12. As respects General Liability policies, exposures, other than those identified below, as included in the General Liability section of the Company’s Commercial Lines Manual:

a.	Class 97111 — Logging;
b.	Class 58873 — Sawmill;
c.	Class 59984 — Woodyard and Drivers;
d.	Class 95410 — Grading of Land;
e.	Class 45819 — Lumber Yard;
f.	Class 10073 — Repair Shops and Drivers;

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g.	Class 43822 — Timber Cruiser;
h.	Class 99793 — Truckmen Not Otherwise Classified;
i.	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
j.	Class 49452 — Vacant Land.

B. Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived automatically when, in the opinion of the Company, the exposure excluded therein is incidental to the principal exposure on the risk in question.

C. If the Company is bound, without the knowledge and contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the exclusion shall be suspended with respect to such business until the Company has the first opportunity to cancel the policy in compliance with governmental requirements.

D. If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the minimum limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside the scope of the provisions set forth in this Contract. If each Subscribing Reinsurer whose share in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to their respective shares. If such agreement is not achieved, such special acceptance shall be made to this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer who agrees to the special acceptance. In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

A. The Company shall retain and be liable for the first $1,000,000 of ultimate net loss arising out of each occurrence. The Reinsurer shall then be liable (subject to the provisions of paragraph B below) for the amount by which such ultimate net loss exceeds the Company’s retention, but the liability of the Reinsurer shall not exceed $1,000,000 as respects any one occurrence, nor shall it exceed an annual aggregate limit of 2.500% of net earned premium for the contract year.

B. Notwithstanding the provisions of paragraph A above, no claim shall be made under this Contract during any contract year unless and until cumulative subject excess losses paid from losses arising out of occurrences commencing during the contract year (being losses which would be recoverable from the Reinsurer under paragraph A above were it not for the

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provisions of this paragraph) exceed an annual aggregate retention of 5.000% of net earned premium. The Company shall retain and be liable for such annual aggregate retention in addition to its initial loss retention stipulated in paragraph A above.

C. As respects any loss or losses arising out of terrorist activity, the liability of the Reinsurer shall not exceed $1,000,000 each contract year. Terrorism losses that apply to the annual aggregate deductible will also reduce the liability of the Reinsurer as respects the aggregate terrorism limit.

D. The Company shall be permitted to carry quota share and excess reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.

E. The Company shall purchase or be deemed to have purchased inuring excess facultative reinsurance to limit its ultimate net loss under any one coverage, any one policy (exclusive of loss in excess of policy limits or extra contractual obligations) to $2,000,000 each occurrence as respects General Liability and Employers Liability business subject hereto.

F.	The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, recoveries under which shall inure to the benefit of this Contract.
	Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.
	In the event the Company accrues liability that is not provided by any inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure such excess liability.

Article VII — Definitions

A. “Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined) 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.

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

1. “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.

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2. “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 any 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.

If any provision of this Article 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.

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 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.

C. “Occurrence” as used herein is defined as an accident or occurrence or a series of accidents or occurrences arising out of or caused by one event, except that:

1.

As respects General Liability policies where the Company’s limit of liability for Products and Completed Operations coverages is determined on the basis of the insured’s aggregate losses during a policy period, all such losses proceeding from or traceable to the same causative agency shall, at the Company’s option, be deemed to have been caused by one occurrence commencing at the beginning of the policy period, it being understood and agreed that each renewal or annual anniversary date of the policy involved shall be deemed the beginning of a new policy period;

2.

Each occupational or industrial disease case or cumulative trauma case contracted by an employee of an insured shall be deemed to have been caused by a separate occurrence, commencing on:

a.	The date of disability for which compensation is payable if the case is compensable under the Workers’ Compensation Law;
b.	The date disability due to the disease actually began if the case is not compensable under the Workers’ Compensation Law;
c.	The date of cessation of employment if claim is made after employment has ceased.

3. Notwithstanding the provisions of subparagraph 2 above, as respects losses resulting from occupational or industrial disease or cumulative trauma suffered by employees of

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an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, all such losses shall be considered one occurrence and may be combined with losses classified as other than occupational or industrial disease or cumulative trauma which arise out of the same event and the combination of such losses shall be considered as one occurrence within the meaning hereof.

D. “Occupational or industrial disease” is any abnormal condition that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has been caused by exposure to a disease producing agent or agents present in the workers’ occupational environment.
3.	It has resulted in disability or death.

E. “Cumulative trauma” is an injury that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has occurred from and has been aggravated by a repetitive employment related activity.
3.	It has resulted in disability or death.

F. “Loss adjustment expense” as used herein shall mean expenses allocable to the investigation, defense and/or settlement of specific claims, including litigation expenses, interest on judgments, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, and salaries and expenses of salaried adjusters associated with claims covered under policies of the Company reinsured hereunder but not including office expenses or salaries of the Company’s regular employees.

G. “Contract year” as used in this Contract shall mean the period from 12:01 a.m. Local Standard Time, January 1, 2006 to 12:01 a.m. Local Standard Time, January 1, 2007, and each respective 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated, the final contract year shall be from the beginning of the then current contract year through the date of termination if this Contract is terminated on a “cutoff” basis, or the end of the runoff period if this Contract is terminated on a “runoff” basis.

Article VIII — Annuities at Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s ultimate net loss.

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B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby. In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

Article IX — Claims

A. Whenever a claim is reserved by the Company for an amount greater than 50.0% of its retention hereunder and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage, brain damage, blindness or extensive burns, regardless of liability, if the policy limits or statutory benefits applicable to the claim are greater than the Company’s retention hereunder. The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit or proceeding involving this reinsurance.

B. All claim settlements made by the Company, provided they are within the terms of this Contract (including but not limited to ex-gratia payments), shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.

Article X — Commutation

A. Upon mutual agreement, the Company may commute the contract year.

B. Unless otherwise mutually agreed, the calculation for the commutation shall be calculated in accordance with the following formula:

1.	The net reinsurance premium earned for the contract year; less
2.	The Reinsurer’s paid losses and loss adjustment expense on losses arising out of occurrences commencing during the contract year; less
3.	The Reinsurer’s margin at 25.0% of the net reinsurance premium earned for the contract year; equals
4.	The Company’s net profit.

C. Payment to the Company of the Company’s net profit will result in a full and final commutation of all known and unknown losses and shall constitute a complete and final release of the Reinsurer and the Company in respect of any and all liabilities on business covered under this Contract during the contract year commuted.

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D. Should the calculation be zero or negative, no payment shall be made and the Company shall have the option to provide a full and final commutation of all known and unknown losses, which shall constitute a complete and final release of the Reinsurer and the Company with respect to any and all liabilities on business covered under this Contract during the contract year commuted.

Article XI — Special Commutation

A. In the event a Subscribing Reinsurer meets the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense.

1.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
2.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply unless the outstanding claim or claims is for an amount not less than $5,000.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the excess loss.

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D. In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.

E. If the parties cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.

F. Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.

G. The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

1.	Is regularly engaged in the valuation of claims resulting from lines of business subject to this Contract; and
2.	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of Actuaries; and
3.	Is disinterested and impartial regarding this commutation.

H. Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this commutation may continue on a mutually agreed basis.

I. Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for outstanding claim or claims, known or unknown, under this Contract, which shall release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.

J. In the event of any conflict between this Article and any other Article of this Contract, the terms of this Article shall control.

K. This Article shall survive the termination of this Contract.

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Article XII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or subrogation thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation where it is economically reasonable in the judgment of the Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XIII — Reinsurance Premium

A. As premium for the reinsurance provided hereunder during each contract year, the Company shall pay the Reinsurer 0.600% of its net earned premium.

B. Within 30 days after the end of each month, the Company shall report its net earned premium for the month. The premium due the Reinsurer, at the rate shown in paragraph A, shall be paid by the Company with its report. In the event this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article, no payments shall be due as respects each Subscribing Reinsurer after the effective date of termination.

C. Within 60 days after the end of each contract year, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for the contract year, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. “Net earned premium” as used herein is defined as the Company’s gross earned premium collected on the classes of business subject to this Contract, less only the earned portion of premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends incurred.

Article XIV — Late Payments

A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times

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2.	1/365ths of the sum of 400 basis points plus the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3.	The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

C. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1.	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2.	Any claim or loss payment due the Company hereunder shall be deemed due 45 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 45 days, interest will accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 days following transmittal of written notification that the provisions of this Article have been invoked.

For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

E. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

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Article XV — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall not be affected by the insolvency of either party to this Contract.

Article XVI — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to all records of the Company which pertain in any way to this reinsurance.

Article XVII — Liability of the Reinsurer

A. 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.

B. 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.

Article XVIII — Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XIX — Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

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Article XX — Currency (BRMA 12A)

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

Article XXI — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXII — Federal Excise Tax

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.

B. 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.

Article XXIII — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated “B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

A. As regards policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the Reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the Reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having

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jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of funding shall be mutually agreed.

B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

C. The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and 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 for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1.	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;
2.	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
3.	To fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
4.	To pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

E. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

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1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.
2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

Article XXIV — Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.

C. It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXV — Arbitration (BRMA 6J)

A. 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

Page 19

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.

B. 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.

C. 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.

D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.

E. 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 in which the Company has its principal office.

Article XXVI — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

Page 20

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, 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 its 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 Contract.

Article XXVII — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract will be made by amendment to this Contract and signed by the parties.

Article XXVIII — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of Louisiana.

Article XXIX — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXX — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to

Page 21

constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 18th day of May in the year 2006.

/s/ Allan E. Farr

American Interstate Insurance Company

American Interstate Insurance Company of Texas

Silver Oak Casualty, Inc.

Page 22

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)
(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2)

Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

I.	It is agreed that the policy does not apply under any liability coverage, to           (injury, sickness, disease, death or destruction           (bodily injury or property damage with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.
II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a)	become effective on or after 1st May, 1960, or
(b)	become effective before that date and contain the Limited Exclusion Provision set out above;

provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage to
          (injury, sickness, disease, death or destruction
          (bodily injury or property damage

(a)

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b)

resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II.

Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to           (immediate medical or surgical relief           (first aid, to expenses incurred with respect to           (bodily injury, sickness, disease or death           (bodily injury resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III.

Under any Liability Coverage to           (injury, sickness, disease, death or destruction           (bodily injury or property damage resulting from the hazardous properties of nuclear material, if

(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(c)	the           (injury, sickness, disease, death or destruction           (bodily injury or property damage arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to           (injury to or destruction of property at such nuclear facility           (property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:
“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material; (With respect to injury to or destruction of property, the word “injury” or “destruction,” (“property damage” includes all forms of radioactive contamination of property, (includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or
(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67
N.M.A. 1590

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Reinsurers	Participations
Hannover Ruckversicherungs-Aktiengesellschaft		25.0%
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		50.0
Total		75.0% part of
		100% share in the
		interests and
		liabilities of the
		“Reinsurer”

Interests and Liabilities Agreement

of

Hannover Ruckversicherungs-Aktiengesellschaft
Hannover, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 25.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Hannover, Germany, this      30th day of      June in the year      2006.

/s/ A. Freiboth                                        /s/ S. Eberhardt

Hannover Ruckversicherungs-Aktiengesellschaft

Interests and Liabilities Agreement

of

Certain Insurance Companies
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s
shown in the Signing Schedule attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

First Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

EX-10.2

Exhibit 10.2

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Commencement and Termination		1
III	Territory (BRMA 51A)		3
IV	Exclusions		3
V	Special Acceptances		7
VI	Retention and Limit		8
VII	Definitions		9
VIII	Annuities at Company’s Option		11
IX	Claims		11
X	Commutation		12
XI	Special Commutation		12
XII	Salvage and Subrogation		14
XIII	Reinsurance Premium		15
XIV	Late Payments		15
XV	Offset (BRMA 36A)		17
XVI	Access to Records (BRMA 1D)		17
XVII	Liability of the Reinsurer		17
XVIII	Net Retained Lines (BRMA 32E)		17
XIX	Errors and Omissions (BRMA 14F)		18
XX	Currency (BRMA 12A)		18
XXI	Taxes (BRMA 50B)		18
XXII	Federal Excise Tax		18
XXIII	Reserves and Letters of Credit		18
XXIV	Insolvency		20
XXV	Arbitration (BRMA 6J)		21
XXVI	Service of Suit (BRMA 49C)		22
XXVII	Entire Agreement		22
XXVIII	Governing Law (BRMA 71B)		23
XXIX	Agency Agreement		23
XXX	Intermediary (BRMA 23A)		23

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group
(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

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”) in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Workers’ Compensation, Employers Liability, including coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and General Liability business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

A. This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, with respect to losses arising out of occurrences commencing at or after that time and date, and shall continue in force thereafter until terminated.

Page 1

B. Either party may terminate this Contract at 12:01 a.m., Local Standard Time, on any January 1 by giving the other party not less than 90 days prior notice by certified or registered mail.

C. Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 6 below and upon discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of applicable public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. The effective date of special termination shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice of its election to specially terminate, unless mutually agreed otherwise:

1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that date; or
2.	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract year has been reduced by more than 20.0% 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 beginning of the contract year; or
3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	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
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or
8.	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance business.

D. Unless the Company elects that the Reinsurer have no liability for losses arising out of occurrences commencing after the effective date of termination, and so notifies the

Page 2

Reinsurer prior to or as promptly as possible 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 exceeding 18 months in all) following the effective date of termination.

Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s policies.

Article IV — Exclusions

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

1.	Lines of business not identified in the Classes of Business Reinsured Article.
2.	All excess of loss reinsurance assumed by the Company.
3.	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a.	Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and
b.	Intercompany reinsurance between any of the reinsured companies under this Contract.

4.	Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.
5.	Business written to apply in excess of a deductible of more than $25,000, and business issued to apply specifically in excess over underlying insurance. However, if the Company is required, by any state regulation, to provide a deductible of more than $25,000, this exclusion shall not apply.
6.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)” attached to and forming part of this Contract.
7.	As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the Fifty States of the Union, the District of Columbia, and including bridges between

Page 3

the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.

8.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.
9.	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.
10.	Workers’ Compensation where the principal exposures, as defined by the governing class code, include:

a.	Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;
b.	Railroad, subway or street railway operations;
c.	Operation or navigation of vessels or barges;
d.	Manufacture, production or refining of gas, natural or artificial fuel, or other liquefied petroleum fuel, but only if the annual estimated policy premium is $250,000 or more;
e.	Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000;
f.	Wrecking or demolition of structures, but only if the annual estimated policy premium is $250,000 or more;
g.	Underground mining.

11. As respects Workers’ Compensation and Employers Liability only, unless otherwise excluded as set forth above, the reinsurance provided under this Contract shall not apply to any loss, cost or expense arising out of or related to, either directly or indirectly, any “terrorist activity,” as defined herein, but this exclusion shall only apply when the activity includes, involves or is associated with the use of any biological,

Page 4

chemical, radioactive or nuclear agent, material, device or weapon, or when the predominant business of the policyholder, as defined by the governing class code, is:

a.	The operation of: airports and aircraft; flight schools; bridges, dams, tunnels or locks; department stores; shopping malls; chain retail stores; casinos and casino hotels; cruise lines; railroads; ports/public transit authorities; security services; stadiums; convention/exhibition centers; or theme/amusement parks;
b.	The manufacture and distribution of: automobiles; chemicals, petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major defense/aerospace products; or high-tech equipment, but only if the policyholder employs more than 20 personnel at the location of a terrorist activity at the time of its occurrence;
c.	The management or operation of the following type of structures, but only if greater than 25 stories in height: apartments/condominiums/co-ops; hotels/motels; or office buildings;
d.	Businesses primarily engaged in the entertainment, media or transportation industry limited to the following: major media providers (NBC, FOX, ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major internet companies (AOL, Yahoo, etc.); professional sports teams; major telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common carriers (J.B. Hunt, Red Arrow, etc.);
e.	Policyholders primarily located in, or predominantly doing business as: hospitals; universities; nuclear facilities; financial institutions; or governmental buildings and national landmarks.

“Terrorist activity” shall mean any deliberate, unlawful act that:

a.	Is declared by any authorized government official to be or to involve terrorism, terrorist activity or acts of terrorism; or
b.	Includes, involves, or is associated with the use or threatened use of force, violence or harm against any person, tangible or intangible property, the environment, or any natural resources, where the act or threatened act is intended, in whole or in part, to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator; or
ii.	Influence, disrupt or interfere with any government related operations, activities or policies; or

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iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy; or

c. Includes, involves, or is associated with, in whole or in part, any of the following activities, or the threat thereof:

i.	Hijacking or sabotage of any form of transportation or conveyance, including but not limited to spacecraft, satellite, aircraft, train, vessel or motor vehicle;
ii.	Hostage taking or kidnapping;
iii.	The use of any bomb, incendiary device, explosive or firearm;
iv.	The interference with or disruption of basic public or commercial services and systems, including but not limited to the following services or systems: electricity, natural gas, power, postal, communications, telecommunications, information, public transportation, water, fuel, sewer or waste disposal;
v.	The injuring or assassination of any elected or appointed government official or any government employee;
vi.	The seizure, blockage, interference with, disruption of, or damage to any government buildings, institutions, functions, events, tangible or intangible property or other assets; or
vii.	The seizure, blockage, interference with, disruption of, or damage to tunnels, roads, streets, highways, or other places of public transportation or conveyance.

d. Any of the activities listed in subparagraph c, above, shall be considered terrorist activity, except where the Company can demonstrate to the Reinsurer that the foregoing activities or threats thereof were motivated solely by personal objectives of the perpetrator that are unrelated, in whole or in part, to any intention to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator;
ii.	Influence, disrupt or interfere with any government-related operations, activities or policies;
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or

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iv. Disrupt or interfere with a national economy or any segment of a national economy.

12. As respects General Liability policies, exposures, other than those identified below, as included in the General Liability section of the Company’s Commercial Lines Manual:

a.	Class 97111 — Logging;
b.	Class 58873 — Sawmill;
c.	Class 59984 — Woodyard and Drivers;
d.	Class 95410 — Grading of Land;
e.	Class 45819 — Lumber Yard;
f.	Class 10073 — Repair Shops and Drivers;
g.	Class 43822 — Timber Cruiser;
h.	Class 99793 — Truckmen Not Otherwise Classified;
i.	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
j.	Class 49452 — Vacant Land.

B. Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived automatically when, in the opinion of the Company, the exposure excluded therein is incidental to the principal exposure on the risk in question.

C. If the Company is bound, without the knowledge and contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the exclusion shall be suspended with respect to such business until the Company has the first opportunity to cancel the policy in compliance with governmental requirements.

D. If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the minimum limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside the scope of the provisions set forth in this Contract. If each Subscribing Reinsurer whose share in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special

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acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to their respective shares. If such agreement is not achieved, such special acceptance shall be made to this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer who agrees to the special acceptance. In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

A. The Company shall retain and be liable for the first $2,000,000 of ultimate net loss arising out of each occurrence. The Reinsurer shall then be liable (subject to the provisions of paragraph B below) for the amount by which such ultimate net loss exceeds the Company’s retention, but the liability of the Reinsurer shall not exceed $3,000,000 as respects any one occurrence, nor shall the liability of the Reinsurer exceed $39,000,000 in all for the contract year.

B. Notwithstanding the provisions of paragraph A above, no claim shall be made under this Contract during any contract year unless and until cumulative subject excess losses paid from losses arising out of occurrences commencing during the contract year (being losses which would be recoverable from the Reinsurer under paragraph A above were it not for the provisions of this paragraph) exceed an annual aggregate retention of 2.500% of net earned premium. The Company shall retain and be liable for such annual aggregate retention in addition to its initial loss retention stipulated in paragraph A above.

C. As respects any loss or losses arising out of terrorist activity, the liability of the Reinsurer shall not exceed $3,000,000 each contract year. Terrorism losses that apply to the annual aggregate deductible will also reduce the liability of the Reinsurer as respects the aggregate terrorism limit.

D. The Company shall be permitted to carry quota share and excess reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.

E. The Company shall purchase or be deemed to have purchased inuring excess facultative reinsurance to limit its ultimate net loss under any one coverage, any one policy (exclusive of loss in excess of policy limits or extra contractual obligations) to $2,000,000 each occurrence as respects General Liability and Employers Liability business subject hereto.

F.

The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, recoveries under which shall inure to the benefit of this Contract. Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.

Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.

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In the event the Company accrues liability that is not provided by any inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure such excess liability.

Article VII — Definitions

A. “Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined) 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.

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

1.

“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.

2.

“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 any 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.

If any provision of this Article 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.

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 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

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organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

C. “Occurrence” as used herein is defined as an accident or occurrence or a series of accidents or occurrences arising out of or caused by one event, except that:

1. As respects General Liability policies where the Company’s limit of liability for Products and Completed Operations coverages is determined on the basis of the insured’s aggregate losses during a policy period, all such losses proceeding from or traceable to the same causative agency shall, at the Company’s option, be deemed to have been caused by one occurrence commencing at the beginning of the policy period, it being understood and agreed that each renewal or annual anniversary date of the policy involved shall be deemed the beginning of a new policy period;

2. Each occupational or industrial disease case or cumulative trauma case contracted by an employee of an insured shall be deemed to have been caused by a separate occurrence, commencing on:

a.	The date of disability for which compensation is payable if the case is compensable under the Workers’ Compensation Law;
b.	The date disability due to the disease actually began if the case is not compensable under the Workers’ Compensation Law;
c.	The date of cessation of employment if claim is made after employment has ceased.

3. Notwithstanding the provisions of subparagraph 2 above, as respects losses resulting from occupational or industrial disease or cumulative trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, all such losses shall be considered one occurrence and may be combined with losses classified as other than occupational or industrial disease or cumulative trauma which arise out of the same event and the combination of such losses shall be considered as one occurrence within the meaning hereof.

D. “Occupational or industrial disease” is any abnormal condition that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has been caused by exposure to a disease producing agent or agents present in the workers’ occupational environment.
3.	It has resulted in disability or death.

E. “Cumulative trauma” is an injury that fulfills all of the following conditions:

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1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has occurred from and has been aggravated by a repetitive employment related activity.
3.	It has resulted in disability or death.

F. “Loss adjustment expense” as used herein shall mean expenses allocable to the investigation, defense and/or settlement of specific claims, including litigation expenses, interest on judgments, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, and salaries and expenses of salaried adjusters associated with claims covered under policies of the Company reinsured hereunder but not including office expenses or salaries of the Company’s regular employees.

G. “Contract year” as used in this Contract shall mean the period from 12:01 a.m., Local Standard Time, January 1, 2006 to 12:01 a.m., Local Standard Time, January 1, 2007, both days inclusive, and each respective 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated, the final contract year shall be from the beginning of the then current contract year through the date of termination if this Contract is terminated on a “cutoff” basis, or the end of the runoff period if this Contract is terminated on a “runoff” basis.

Article VIII — Annuities at Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s ultimate net loss.

B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby. In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

Article IX — Claims

A. Whenever a claim is reserved by the Company for an amount greater than 50.0% of its retention hereunder and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the

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Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage, brain damage, blindness or extensive burns, regardless of liability, if the policy limits or statutory benefits applicable to the claim are greater than the Company’s retention hereunder. The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit or proceeding involving this reinsurance.

B. All claim settlements made by the Company, provided they are within the terms of this Contract (including but not limited to ex-gratia payments), shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.

Article X — Commutation

A.	Upon mutual agreement, the Company may commute the contract year.
B.	Unless otherwise mutually agreed, the calculation for the commutation shall be calculated in accordance with the following formula:

1.	The net reinsurance premium earned (i.e., the gross reinsurance premium earned less the ceding commission allowed) for the contract year; less
2.	The Reinsurer’s paid losses and loss adjustment expense on losses arising out of occurrences commencing during the contract year; less
3.	The Reinsurer’s margin at 25.0% of the net reinsurance premium earned (i.e., the gross reinsurance premium earned less the ceding commission allowed) for the contract year; equals
4.	The Company’s net profit.

C. Payment to the Company of the Company’s net profit will result in a full and final commutation of all known and unknown losses and shall constitute a complete and final release of the Reinsurer and the Company in respect of any and all liabilities on business covered under this Contract during the contract year commuted.

D. Should the calculation be zero or negative, no payment shall be made and the Company shall have the option to provide a full and final commutation of all known and unknown losses, which shall constitute a complete and final release of the Reinsurer and the Company with respect to any and all liabilities on business covered under this Contract during the contract year commuted.

Article XI — Special Commutation

A. In the event a Subscribing Reinsurer meets the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense.

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1.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
2.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply unless the outstanding claim or claims is for an amount not less than $5,000.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the excess loss.

D. In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.

E. If the parties cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed

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independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.

F. Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.

G. The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

1.	Is regularly engaged in the valuation of claims resulting from lines of business subject to this Contract; and
2.	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of Actuaries; and
3.	Is disinterested and impartial regarding this commutation.

H. Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this commutation may continue on a mutually agreed basis.

I. Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for outstanding claim or claims, known or unknown, under this Contract, which shall release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.

J. In the event of any conflict between this Article and any other Article of this Contract, the terms of this Article shall control.

K. This Article shall not apply to a Subscribing Reinsurer which is rated “A+” or better by A.M. Best at the beginning of any Contract year.

L. This Article shall survive the termination of this Contract.

Article XII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or subrogation thereon shall always be used to reimburse the excess

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carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation where it is economically reasonable in the judgment of the Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XIII — Reinsurance Premium

A.	As premium for the reinsurance provided hereunder during each contract year, the Company shall pay the Reinsurer 4.286% (3.000% net) of its net earned premium.
	The Reinsurer shall allow the Company a 30.0% commission on all premiums ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer return commission on return premiums at the same rate.

B. Within 30 days after the end of each month, the Company shall report its net earned premium for the month. The premium due the Reinsurer, at the rate shown in paragraph A, shall be paid by the Company with its report. In the event this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article, no payments shall be due as respects each Subscribing Reinsurer after the effective date of termination.

C. Within 60 days after the end of each contract year, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for the contract year, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. “Net earned premium” as used herein is defined as the Company’s gross earned premium collected on the classes of business subject to this Contract, less only the earned portion of premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends incurred.

Article XIV — Late Payments

A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times

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2. 1/365ths of the sum of 400 basis points plus the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times

     3. The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

C. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1.	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2.	Any claim or loss payment due the Company hereunder shall be deemed due 45 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 45 days, interest will accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 days following transmittal of written notification that the provisions of this Article have been invoked.

For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

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E. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

Article XV — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall not be affected by the insolvency of either party to this Contract.

Article XVI — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to all records of the Company which pertain in any way to this reinsurance.

Article XVII — Liability of the Reinsurer

A. 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.

B. 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.

Article XVIII — Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

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Article XIX — Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

Article XX — Currency (BRMA 12A)

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

Article XXI — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXII — Federal Excise Tax

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.

B. 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.

Article XXIII — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated “B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

A. As regards policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority

Page 18

or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the Reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the Reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of funding shall be mutually agreed.

B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

C. The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and 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 for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1.	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;
2.	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
3.	To fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
4.	To pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the

Page 19

actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

E. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.
2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

F. This Article shall not apply to a reinsurer which satisfies both of the following conditions:

1.	Qualifies for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves; and
2.	Is rated “A+” or better by A.M. Best at the beginning of any contract year.

Article XXIV — Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the

Page 20

approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.

C. It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXV — Arbitration (BRMA 6J)

A. 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.

B. 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.

C. 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

Page 21

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.

D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.

E. 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 in which the Company has its principal office.

Article XXVI — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, 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 its 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 Contract.

Article XXVII — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract will be made by amendment to this Contract and signed by the parties.

Page 22

Article XXVIII — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of Louisiana.

Article XXIX — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXX — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 18th day of May in the year 2006.

/s/ Allan E. Farr

American Interstate Insurance Company
American Interstate Insurance Company of Texas
Silver Oak Casualty, Inc.

Page 23

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)

(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2) Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

     Limited Exclusion Provision.*

I. It is agreed that the policy does not apply under any liability coverage, to

(injury, sickness, disease, death or destruction
(bodily injury or property damage

	with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.
II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a)

become effective on or after 1st May, 1960, or

(b)

become effective before that date and contain the Limited Exclusion Provision set out above; provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

     Broad Exclusion Provision.*

     It is agreed that the policy does not apply:

I. Under any Liability Coverage to

	(injury, sickness, disease, death or destruction (bodily injury or property damage
(a)	with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or
(b)	resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to

	(immediate medical or surgical relief (first aid,
to expenses incurred with respect to
	bodily injury, sickness, disease or death (bodily injury
resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III. Under any Liability Coverage to

	(injury, sickness, disease, death or destruction (bodily injury or property damage
resulting from the hazardous properties of nuclear material, if
(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(c)	the
	(injury, sickness, disease, death or destruction           (bodily injury or property damage arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to           (injury to or destruction of property at such nuclear facility           (property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:
“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material; (With respect to injury to or destruction of property, the word “injury” or “destruction,” (“property damage” includes all forms of radioactive contamination of property, (includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or
(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67
N.M.A. 1590

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Reinsurers	Participations
Hannover Ruckversicherungs-Aktiengesellschaft		30.0	%
Partner Reinsurance Company of the U.S.		25.0
Through Benfield Limited (Placement Only)
AXA RE		10.0
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		35.0
Total		100.0	%

Interests and Liabilities Agreement

of

Hannover Ruckversicherungs-Aktiengesellschaft
Hannover, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Hannover, Germany, this      30th day of      June in the year      2006.

/s/ A. Freiboth                                        /s/ S. Eberhardt

Hannover Ruckversicherungs-Aktiengesellschaft

Interests and Liabilities Agreement

of

AXA RE
Paris, France
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 10.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Paris, France, this      21st day of      June in the year      2006.

/s/ Allison Janisch

AXA RE

Interests and Liabilities Agreement

of

Certain Insurance Companies
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached

Interests and Liabilities Agreement

of

Partner Reinsurance Company of the U.S.
New York, New York
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 25.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Greenwich, Connecticut, this 13th day of June in the year 2006.

/s/ Giuseppe A. Ruggieri, VP

Partner Reinsurance Company of the U.S.

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s
shown in the Signing Schedule attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Second Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 15.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

EX-10.3

Exhibit 10.3

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Table of Contents

Article		Page
I	Classes of Business Reinsured	1
II	Commencement and Termination	1
III	Territory (BRMA 51A)	3
IV	Exclusions	3
V	Special Acceptances	7
VI	Retention and Limit	7
VII	Reinstatement	8
VIII	Definitions	9
IX	Annuities at Company’s Option	11
X	Claims	11
XI	Sunset	12
XII	Special Commutation	12
XIII	Salvage and Subrogation	14
XIV	Federal Terrorism Coverage	14
XV	Reinsurance Premium	14
XVI	Late Payments	15
XVII	Offset (BRMA 36A)	16
XVIII	Access to Records (BRMA 1D)	16
XIX	Liability of the Reinsurer	17
XX	Net Retained Lines (BRMA 32E)	17
XXI	Errors and Omissions	17
XXII	Currency (BRMA 12A)	17
XXIII	Taxes (BRMA 50B)	17
XXIV	Federal Excise Tax	18
XXV	Reserves and Letters of Credit	18
XXVI	Insolvency	19
XXVII	Arbitration (BRMA 6J)	20
XXVIII	Service of Suit (BRMA 49C)	21
XXIX	Entire Agreement	22
XXX	Governing Law (BRMA 71B)	22
XXXI	Agency Agreement	22
XXXII	Intermediary (BRMA 23A)	22

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group
(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

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”) in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Workers’ Compensation, Employers Liability, including coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and General Liability business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

A.	This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, with respect to losses arising out of occurrences commencing at or after that time and date, and shall continue in force thereafter until terminated.
B.	Either party may terminate this Contract at 12:01 a.m., Local Standard Time on any January 1 by giving the other party not less than 90 days prior notice by certified or registered mail.

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C. Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 6 below and upon discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of applicable public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. The effective date of special termination shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice of its election to specially terminate, unless mutually agreed otherwise:

1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that date; or
2.	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract year has been reduced by more than 20.0% 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 beginning of the contract year; or
3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	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
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or
8.	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance business.

D. Unless the Company elects that the Reinsurer have no liability for losses arising out of occurrences commencing after the effective date of termination, and so notifies the Reinsurer prior to or as promptly as possible 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 exceeding 18 months in all) following the effective date of termination.

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Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s policies.

Article IV — Exclusions

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

1.	Lines of business not identified in the Classes of Business Reinsured Article.
2.	All excess of loss reinsurance assumed by the Company.
3.	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a.	Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and
b.	Intercompany reinsurance between any of the reinsured companies under this Contract.

4.	Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.
5.	Business written to apply in excess of a deductible of more than $25,000, and business issued to apply specifically in excess over underlying insurance. However, if the Company is required, by any state regulation, to provide a deductible of more than $25,000, this exclusion shall not apply.
6.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)” attached to and forming part of this Contract.
7.	As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the Fifty States of the Union, the District of Columbia, and including bridges between the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.
8.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.
9.	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.

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“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.

10.

Workers’ Compensation where the principal exposures, as defined by the governing class code, include:

a.	Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;
b.	Railroad, subway or street railway operations;
c.	Operation or navigation of vessels or barges;
d.	Manufacture, production or refining of gas, natural or artificial fuel, or other liquefied petroleum fuel, but only if the annual estimated policy premium is $250,000 or more;
e.	Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000;
f.	Wrecking or demolition of structures, but only if the annual estimated policy premium is $250,000 or more;
g.	Underground mining.

11. As respects Workers’ Compensation and Employers Liability only, unless otherwise excluded as set forth above, the reinsurance provided under this Contract shall not apply to any loss, cost or expense arising out of or related to, either directly or indirectly, any “terrorist activity,” as defined herein, but this exclusion shall only apply when the activity includes, involves or is associated with the use of any biological, chemical, radioactive or nuclear agent, material, device or weapon, or when the predominant business of the policyholder, as defined by the governing class code, is:

a.	The operation of: airports and aircraft; flight schools; bridges, dams, tunnels or locks; department stores; shopping malls; chain retail stores; casinos and casino hotels; cruise lines; railroads; ports/public transit authorities; security services; stadiums; convention/exhibition centers; or theme/amusement parks;
b.	The manufacture and distribution of: automobiles; chemicals, petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major defense/aerospace products; or high-tech equipment, but only if the policyholder employs more than 20 personnel at the location of a terrorist activity at the time of its occurrence;

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c.	The management or operation of the following type of structures, but only if greater than 25 stories in height: apartments/condominiums/co-ops; hotels/motels; or office buildings;
d.	Businesses primarily engaged in the entertainment, media or transportation industry limited to the following: major media providers (NBC, FOX, ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major internet companies (AOL, Yahoo, etc.); professional sports teams; major telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common carriers (J.B. Hunt, Red Arrow, etc.);
e.	Policyholders primarily located in, or predominantly doing business as: hospitals; universities; nuclear facilities; financial institutions; or governmental buildings and national landmarks.

“Terrorist activity” shall mean any deliberate, unlawful act that:

a.	Is declared by any authorized government official to be or to involve terrorism, terrorist activity or acts of terrorism; or
b.	Includes, involves or is associated with the use or threatened use of force, violence or harm against any person, tangible or intangible property, the environment, or any natural resources, where the act or threatened act is intended, in whole or in part, to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator; or
ii.	Influence, disrupt or interfere with any government related operations, activities or policies; or
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy; or

c. Includes, involves, or is associated with, in whole or in part, any of the following activities, or the threat thereof:

i.	Hijacking or sabotage of any form of transportation or conveyance, including but not limited to spacecraft, satellite, aircraft, train, vessel or motor vehicle;
ii.	Hostage taking or kidnapping;
iii.	The use of any bomb, incendiary device, explosive or firearm;
iv.	The interference with or disruption of basic public or commercial services and systems, including but not limited to the following services or systems:

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	electricity, natural gas, power, postal, communications, telecommunications, information, public transportation, water, fuel, sewer or waste disposal;
v.	The injuring or assassination of any elected or appointed government official or any government employee;
vi.	The seizure, blockage, interference with, disruption of, or damage to any government buildings, institutions, functions, events, tangible or intangible property or other assets; or
vii.	The seizure, blockage, interference with, disruption of, or damage to tunnels, roads, streets, highways, or other places of public transportation or conveyance.

d. Any of the activities listed in subparagraph c, above, shall be considered terrorist activity, except where the Company can demonstrate to the Reinsurer that the foregoing activities or threats thereof were motivated solely by personal objectives of the perpetrator that are unrelated, in whole or in part, to any intention to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator;
ii.	Influence, disrupt or interfere with any government-related operations, activities or policies;
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy.

12. As respects General Liability policies, exposures, other than those identified below, as included in the General Liability section of the Company’s Commercial Lines Manual:

a.	Class 97111 — Logging;
b.	Class 58873 — Sawmill;
c.	Class 59984 — Woodyard and Drivers;
d.	Class 95410 — Grading of Land;
e.	Class 45819 — Lumber Yard;
f.	Class 10073 — Repair Shops and Drivers;
g.	Class 43822 — Timber Cruiser;
h.	Class 99793 — Truckmen Not Otherwise Classified;

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i.	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
j.	Class 49452 — Vacant Land.

B.	Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived automatically when, in the opinion of the Company, the exposure excluded therein is incidental to the principal exposure on the risk in question.
C.	If the Company is bound, without the knowledge and contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the exclusion shall be suspended with respect to such business until the Company has the first opportunity to cancel the policy in compliance with governmental requirements.
D.	If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the minimum limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside the scope of the provisions set forth herein. As respects each layer of this Contract separately, if each Subscribing Reinsurer whose share in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to their respective shares of each such layer. In the event agreement is not achieved, such special acceptance shall be made to a layer or layers of this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer on such layer or layers who agrees to such special acceptance. In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

A.	The Company shall retain and be liable for the first $5,000,000 of ultimate net loss, arising out of each 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 $5,000,000, as respects any one occurrence.
B.	In the Event that a loss is recoverable under this Contract and under the Company’s Workers’ Compensation Per Person Excess of Loss Reinsurance Contract or Casualty Catastrophe Excess of Loss Reinsurance Contract, both effective January 1, 2006, the Company shall be the sole judge in effecting recovery under any one or more of the aforementioned contracts, including this Contract. However, in no event shall this be constructed to mean that the Company may recover an amount from the Reinsurer which exceeds the total amount for any one loss, subject to the provisions of the applicable contract(s).
C.	The Company shall be permitted to carry excess of loss and quota share reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.
D.	The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, recoveries under which shall inure to the benefit of this Contract.

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	Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.
	In the event the Company accrues liability that is not provided by any inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure such excess liability.
E.	As respects Workers’ Compensation business, the Company’s ultimate net loss, for the purpose of this Contract, shall be deemed to be a maximum of $5,000,000 any one life.

Article VII — Reinstatement

A. In the event all or any portion of the reinsurance hereunder is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the occurrence commences hereon. For each amount so reinstated the Company agrees to pay additional premium equal to the product of the following:

1.	The percentage of the occurrence limit reinstated (based on the loss paid by the Reinsurer); times
2.	The earned reinsurance premium for the contract year (exclusive of reinstatement premium).

B.	Whenever the Company requests payment by the Reinsurer of any loss hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer. If the earned reinsurance premium for the contract year has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due shall be based on the annual deposit premium and shall be readjusted when the earned reinsurance premium for the contract year has been finally determined. Any reinstatement premium shown to be due the Reinsurer as reflected by any such statement (less prior payments, if any) shall be payable by the Company concurrently with payment by the Reinsurer of the requested loss. Any return reinstatement premium shown to be due the Company shall be remitted by the Reinsurer as promptly as possible after receipt and verification of the Company’s statement.
C.	Notwithstanding anything stated herein, the liability of the Reinsurer hereunder shall not exceed $5,000,000 as respects loss or losses arising out of any one occurrence, nor shall it exceed $10,000,000 in all during the contract year.
D.	In the event this Contract is terminated on a runoff basis, additional reinstatement coverage shall be negotiated on or prior to the effective date of termination.

Article VIII — Definitions

A. “Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined) 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

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

1.

“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.

2.

“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 any 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.

If any provision of this Article 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.

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 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.

C. “Occurrence” as used herein is defined as an accident or occurrence or a series of accidents or occurrences arising out of or caused by one event, except that:

1. As respects General Liability policies where the Company’s limit of liability for Products and Completed Operations coverages is determined on the basis of the insured’s aggregate losses during a policy period, all such losses proceeding from or traceable to the same causative agency shall, at the Company’s option, be deemed to have been caused by one occurrence commencing at the beginning of the policy period, it being understood and agreed that each renewal or annual anniversary date of the policy involved shall be deemed the beginning of a new policy period;

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2. Each occupational or industrial disease case or cumulative trauma case contracted by an employee of an insured shall be deemed to have been caused by a separate occurrence, commencing on:

a.	The date of disability for which compensation is payable if the case is compensable under the Workers’ Compensation Law;
b.	The date disability due to the disease actually began if the case is not compensable under the Workers’ Compensation Law;
c.	The date of cessation of employment if claim is made after employment has ceased.

3. Notwithstanding the provisions of subparagraph 2 above, as respects losses resulting from occupational or industrial disease or cumulative trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, all such losses shall be considered one occurrence and may be combined with losses classified as other than occupational or industrial disease or cumulative trauma which arise out of the same event and the combination of such losses shall be considered as one occurrence within the meaning hereof.

D. “Occupational or industrial disease” is any abnormal condition that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has been caused by exposure to a disease producing agent or agents present in the workers’ occupational environment.
3.	It has resulted in disability or death.

E. “Cumulative trauma” is an injury that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has occurred from and has been aggravated by a repetitive employment related activity.
3.	It has resulted in disability or death.

F. “Loss adjustment expense” as used herein shall mean expenses allocable to the investigation, defense and/or settlement of specific claims, including litigation expenses, interest on judgments, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, and salaries and expenses of salaried adjusters associated with claims covered under policies of the Company reinsured hereunder but not including office expenses or salaries of the Company’s regular employees.

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G. “Contract year” as used in this Contract shall mean the period from 12:01 a.m., Local Standard Time, January 1, 2006 to 12:01 a.m., Local Standard Time, January 1, 2007, both days inclusive, and each respective 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated on a “cutoff” basis, the final contract year shall be from the beginning of the then current contract year through the effective date of termination. If this Contract is terminated on a “runoff” basis, the period from the effective date of termination through the end of the “runoff” period shall be a separate contract year and referred to as the “runoff contract year.”

Article IX — Annuities at Company’s Option

A.	Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s ultimate net loss.
B.	The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.
C.	In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby. In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

Article X — Claims

A.

Whenever a claim is reserved by the Company for an amount greater than 50.0% of its retention hereunder and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage, brain damage, blindness or extensive burns, regardless of liability, if the policy limits or statutory benefits applicable to the claim are greater than the Company’s retention hereunder. The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit or proceeding involving this reinsurance.

B.

All claim settlements made by the Company, provided they are within the terms of this Contract (including but not limited to ex-gratia payments), shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.

Article XI — Sunset

Ten years after the effective date of termination of this Contract (or after the end of the runoff period, if applicable), the Company shall advise the Reinsurer of any outstanding claims and/or occurrences (each hereinafter referred to as a “claim”) arising during any contract year, which have not been finally settled and which may cause a recovery under this Contract. Unless

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mutually agreed, no liability shall attach hereunder for any claim not reported to the Reinsurer within 90 days following the 10-year period.

Article XII — Special Commutation

A. In the event a Subscribing Reinsurer meets the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense.

1.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
2.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply unless the outstanding claim or claims is for an amount not less than $5,000.

B.	If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.
C.	If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the excess loss.
D.	In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.

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E.	If the parties cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.
F.	Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.
G.	The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

1.	Is regularly engaged in the valuation of claims resulting from lines of business subject to this Contract; and
2.	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of Actuaries; and
3.	Is disinterested and impartial regarding this commutation.

H.	Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this commutation may continue on a mutually agreed basis.
I.	Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for outstanding claim or claims, known or unknown, under this Contract, which shall release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.
J.	In the event of any conflict between this Article and any other Article of this Contract, the terms of this Article shall control.
K.	This Article shall survive the termination of this Contract.

Article XIII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or subrogation thereon shall always be used to reimburse the excess

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carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation where it is economically reasonable in the judgment of the Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XIV — Federal Terrorism Coverage

A.	Except as provided in paragraphs B and C below, any loss reimbursement the Company receives from the United States Government under the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Extension Act of 2005 (together the “Terrorism Act”) as a result of loss occurrences commencing during the term of this Contract shall inure solely to the benefit of the Company and shall be entirely disregarded in applying all of the provisions of this Contract.
B.	If one or more loss occurrences commencing during the term of this Contract result(s) in recoveries made by the Company for insured losses (as defined in the Terrorism Act) under this Contract and under the Terrorism Act, and such recoveries, together with any other reinsurance recoveries made by the Company for insured losses applicable to said loss occurrence(s), exceed the total amount of insured losses, a percentage of any amount in excess thereof shall reduce the ultimate net loss subject to this Contract for the loss occurrence(s) to which the recoveries apply. The Company shall determine how such percentage is calculated.
C.	For purposes hereof, if a loss reimbursement received by the Company under the Terrorism Act is based on the Company’s insured losses in more than one loss occurrence and the United States Government does not designate the amount allocable to each loss occurrence, the reimbursement shall be determined by the Company and in accordance with paragraph B above.

Article XV — Reinsurance Premium

A.	As premium for the reinsurance provided hereunder during each contract year (except the runoff contract year, if any), the Company shall pay the Reinsurer 0.225% of its net earned premium for the contract year, subject to an annual minimum premium of $504,000 (or a pro rata portion thereof if this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article).
B.	The Company shall pay the Reinsurer an annual deposit premium of $630,000 in four equal installments of $157,500 on January 1, April 1, July 1 and October 1 of each contract year (except the runoff contract year, if any). However, in the event this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article, no deposit premium shall be due after the effective date of termination (except as provided in paragraph D below).
C.	Within 60 days after the end of each contract year (and 60 days after the end of the runoff contract year, if any), the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for the contract year, computed in accordance with paragraph A,

Page 14

	and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.
D.	In the event this Contract is terminated on a runoff basis, the reinsurance premium for the runoff contract year shall be calculated by multiplying the unearned portion of premium in force at the effective date of termination by 0.225%, and paid semi-annually, and no minimum premium shall apply.
E.	“Net earned premium” as used herein is defined as the Company’s gross earned premium collected on the classes of business subject to this Contract, less only the earned portion of premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends incurred.

Article XVI — Late Payments

A.

The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

B.

In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2.	1/365ths of the sum of 400 basis points plus the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3.	The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

C. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1.	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2.	Any claim or loss payment due the Company hereunder shall be deemed due 45 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 45 days, interest will accrue on the

Page 15

payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.

3.

As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 days following transmittal of written notification that the provisions of this Article have been invoked.

For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

D.

Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

E.

Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

Article XVII — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall not be affected by the insolvency of either party to this Contract.

Article XVIII — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to all records of the Company which pertain in any way to this reinsurance.

Article XIX — Liability of the Reinsurer

A. 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.

Page 16

B. 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.

Article XX — Net Retained Lines (BRMA 32E)

A.

This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B.

The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XXI — Errors and Omissions

Except as provided in the Sunset Article, inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

Article XXII — Currency (BRMA 12A)

A.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.
B.	Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

Article XXIII — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXIV — Federal Excise Tax

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

Page 17

	the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B.	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.

Article XXV — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated “B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

A.	As regards policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the Reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the Reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of funding shall be mutually agreed.
B.	When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.
C.	The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and 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 for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1. To reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;

Page 18

2.	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
3.	To fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
4.	To pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.
E.	At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.
2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

Article XXVI — Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency

Page 19

	of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.
B.	Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.
C.	It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXVII — Arbitration (BRMA 6J)

A.	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.
B.	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.
C.	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

Page 20

	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.
D.	Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.
E.	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 in which the Company has its principal office.

Article XXVIII — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A.

It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B.

Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, 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 its 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 Contract.

Article XXIX — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract will be made by amendment to this Contract and signed by the parties.

Article XXX — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of Louisiana.

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Article XXXI — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXXII — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 18th day of May in the year 2006.

/s/ Allan E. Farr

American Interstate Insurance Company

American Interstate Insurance Company of Texas

Silver Oak Casualty, Inc.

Page 22

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)
(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

(1)

This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2)

Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

I. It is agreed that the policy does not apply under any liability coverage, to

(injury, sickness, disease, death or destruction
(bodily injury or property damage

	with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.
II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either
	(a)     become effective on or after 1st May, 1960, or
	(b)     become effective before that date and contain the Limited Exclusion Provision set out above;
	provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage to

(injury, sickness, disease, death or destruction
(bodily injury or property damage

(a)

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b)

resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to

(immediate medical or surgical relief
(first aid,

to expenses incurred with respect to

(bodily injury, sickness, disease or death
(bodily injury

resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III. Under any Liability Coverage to

(injury, sickness, disease, death or destruction
(bodily injury or property damage

resulting from the hazardous properties of nuclear material, if

(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(c)	the

(injury, sickness, disease, death or destruction
(bodily injury or property damage

arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to

(injury to or destruction of property at such nuclear facility
(property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:
“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;
	(With respect to injury to or destruction of property, the word “injury” or “destruction,”
	(“property damage” includes all forms of radioactive contamination of property, (includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or
(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67
N.M.A. 1590

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Reinsurers	Participations
Platinum Underwriters Reinsurance, Inc.		5.0	%
Through Benfield Limited (Placement Only)
AXA RE		7.0
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		88.0
Total		100.0	%

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s
shown in the Signing Schedule attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 68.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

Interests and Liabilities Agreement

of

AXA RE
Paris, France
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 7.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Paris, France, this      21st day of      June in the year      2006.

/s/ Allison Janisch

AXA RE

Interests and Liabilities Agreement

of

Certain Insurance Companies
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

Interests and Liabilities Agreement

of

Platinum Underwriters Reinsurance, Inc.
Baltimore, Maryland
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Casualty Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 5.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this      8th day of      June in the year  2006.

/s/ Jeffrey Gearheart

Platinum Underwriters Reinsurance, Inc.

EX-10.4

Exhibit 10.4

Workers’ Compensation
Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Commencement and Termination		1
III	Territory (BRMA 51A)		3
IV	Exclusions		3
V	Special Acceptances		7
VI	Retention and Limit		7
VII	Reinstatement		7
VIII	Definitions		8
IX	Annuities at Company’s Option		10
X	Claims		11
XI	Sunset		11
XII	Commutation		11
XIII	Special Commutation		12
XIV	Salvage and Subrogation		14
XV	Federal Terrorism Coverage		14
XVI	Reinsurance Premium		14
XVII	Late Payments		15
XVIII	Offset (brma 36A)		16
XIX	Access to Records (brma 1D)		16
XX	Liability of the Reinsurer		17
XXI	Net Retained Lines (brma 32E)		17
XXII	Errors and Omissions		17
XXIII	Currency (brma 12A)		17
XXIV	Taxes (brma 50B)		17
XXV	Federal Excise Tax		18
XXVI	Reserves and Letters of Credit		18
XXVII	Insolvency		19
XXVIII	Arbitration (brma 6J)		21
XXIX	Service of Suit (brma 49C)		21
XXX	Entire Agreement		21
XXXI	Governing Law (brma 71B)		22
XXXII	Agency Agreement		22
XXXIII	Intermediary (brma 23A)		22

Workers’ Compensation
Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group
(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

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”) in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Workers’ Compensation business, including coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Commencement and Termination

A.	This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, with respect to losses arising out of occurrences commencing at or after that time and date, and shall continue in force thereafter until terminated.
B.	Either party may terminate this Contract at 12:01 a.m., Local Standard Time on any January 1 by giving the other party not less than 90 days prior notice by certified or registered mail.

Page 1

C. Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 6 below and upon discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of applicable public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. The effective date of special termination shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice of its election to specially terminate, unless mutually agreed otherwise:

1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that date; or
2.	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract year has been reduced by more than 20.0% 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 beginning of the contract year; or
3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	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
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or
8.	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance business.

D. Unless the Company elects that the Reinsurer have no liability for losses arising out of occurrences commencing after the effective date of termination, and so notifies the Reinsurer prior to or as promptly as possible 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 exceeding 18 months in all) following the effective date of termination.

Page 2

Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s policies.

Article IV — Exclusions

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

1.	Lines of business not identified in the Classes of Business Reinsured Article.
2.	All excess of loss reinsurance assumed by the Company.
3.	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a.	Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and
b.	Intercompany reinsurance between any of the reinsured companies under this Contract.

4.	Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.
5.	Business written to apply in excess of a deductible of more than $25,000, and business issued to apply specifically in excess over underlying insurance. However, if the Company is required, by any state regulation, to provide a deductible of more than $25,000, this exclusion shall not apply.
6.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)” attached to and forming part of this Contract.
7.	As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the Fifty States of the Union, the District of Columbia, and including bridges between the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.
8.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.
9.	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.

Page 3

“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.

10.

Workers’ Compensation where the principal exposures, as defined by the governing class code, include:

a.	Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;
b.	Railroad, subway or street railway operations;
c.	Operation or navigation of vessels or barges;
d.	Manufacture, production or refining of gas, natural or artificial fuel, or other liquefied petroleum fuel, but only if the annual estimated policy premium is $250,000 or more;
e.	Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000;
f.	Wrecking or demolition of structures, but only if the annual estimated policy premium is $250,000 or more;
g.	Underground mining.

11. Unless otherwise excluded as set forth above, the reinsurance provided under this Contract shall not apply to any loss, cost or expense arising out of or related to, either directly or indirectly, any “terrorist activity,” as defined herein, but this exclusion shall only apply when the activity includes, involves or is associated with the use of any biological, chemical, radioactive or nuclear agent, material, device or weapon, or when the predominant business of the policyholder, as defined by the governing class code, is:

a.	The operation of: airports and aircraft; flight schools; bridges, dams, tunnels or locks; department stores; shopping malls; chain retail stores; casinos and casino hotels; cruise lines; railroads; ports/public transit authorities; security services; stadiums; convention/exhibition centers; or theme/amusement parks;
b.	The manufacture and distribution of: automobiles; chemicals, petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major defense/aerospace products; or high-tech equipment, but only if the policyholder employs more than 20 personnel at the location of a terrorist activity at the time of its occurrence;

Page 4

c.	The management or operation of the following type of structures, but only if greater than 25 stories in height: apartments/condominiums/co-ops; hotels/motels; or office buildings;
d.	Businesses primarily engaged in the entertainment, media or transportation industry limited to the following: major media providers (NBC, FOX, ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major internet companies (AOL, Yahoo, etc.); professional sports teams; major telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common carriers (J.B. Hunt, Red Arrow, etc.);
e.	Policyholders primarily located in, or predominantly doing business as: hospitals; universities; nuclear facilities; financial institutions; or governmental buildings and national landmarks.

“Terrorist activity” shall mean any deliberate, unlawful act that:

a.	Is declared by any authorized government official to be or to involve terrorism, terrorist activity or acts of terrorism; or
b.	Includes, involves or is associated with the use or threatened use of force, violence or harm against any person, tangible or intangible property, the environment, or any natural resources, where the act or threatened act is intended, in whole or in part, to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator; or
ii.	Influence, disrupt or interfere with any government related operations, activities or policies; or
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy; or

c. Includes, involves, or is associated with, in whole or in part, any of the following activities, or the threat thereof:

i.	Hijacking or sabotage of any form of transportation or conveyance, including but not limited to spacecraft, satellite, aircraft, train, vessel or motor vehicle;
ii.	Hostage taking or kidnapping;
iii.	The use of any bomb, incendiary device, explosive or firearm;
iv.	The interference with or disruption of basic public or commercial services and systems, including but not limited to the following services or systems:

Page 5

	electricity, natural gas, power, postal, communications, telecommunications, information, public transportation, water, fuel, sewer or waste disposal;
v.	The injuring or assassination of any elected or appointed government official or any government employee;
vi.	The seizure, blockage, interference with, disruption of, or damage to any government buildings, institutions, functions, events, tangible or intangible property or other assets; or
vii.	The seizure, blockage, interference with, disruption of, or damage to tunnels, roads, streets, highways, or other places of public transportation or conveyance.

d. Any of the activities listed in subparagraph c, above, shall be considered terrorist activity, except where the Company can demonstrate to the Reinsurer that the foregoing activities or threats thereof were motivated solely by personal objectives of the perpetrator that are unrelated, in whole or in part, to any intention to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator;
ii.	Influence, disrupt or interfere with any government-related operations, activities or policies;
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy.

Page 6

B. Any exclusion set forth in subparagraph 10 of paragraph A shall be waived automatically when, in the opinion of the Company, the exposure excluded therein is incidental to the principal exposure on the risk in question.

C. If the Company is bound, without the knowledge and contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in subparagraph 10 of paragraph A, the exclusion shall be suspended with respect to such business until the Company has the first opportunity to cancel the policy in compliance with governmental requirements.

D. If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the minimum limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside the scope of the provisions set forth in this Contract. If each Subscribing Reinsurer whose share in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to their respective shares. In the event agreement is not achieved, such special acceptance shall be made to this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer who agrees to such special acceptance. In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

A. The Company shall retain and be liable for the first $5,000,000 of ultimate net loss as respects each person, each 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 $5,000,000 as respects each person, each occurrence.

B. In the event that a loss is recoverable under this Contract and under the Company’s Third Casualty Excess of Loss Reinsurance Contract or Casualty Catastrophe Excess of Loss Reinsurance Contract, both effective January 1, 2006, the Company shall be the sole judge in effecting recovery under any one or more of the aforementioned contracts, including this Contract. However, in no event shall this be construed to mean that the Company may recover an amount from the Reinsurer which exceeds the total amount for any one loss, subject to the provisions of the applicable contract(s).

C. The Company shall be permitted to carry excess of loss and quota share reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.

D. The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, recoveries under which shall inure to the benefit of this Contract.

Page 7

Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.

In the event the Company accrues liability that is not provided by any inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure such excess liability.

Article VII — Reinstatement

A. In the event all or any portion of the reinsurance hereunder is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the occurrence commences hereon. For each amount so reinstated the Company agrees to pay additional premium equal to the product of the following:

1.	The percentage of the occurrence limit reinstated (based on the loss paid by the Reinsurer); times
2.	The earned reinsurance premium for the contract year (exclusive of reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any loss hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer. If the earned reinsurance premium for the contract year has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due shall be based on the annual deposit premium and shall be readjusted when the earned reinsurance premium for the contract year has been finally determined. Any reinstatement premium shown to be due the Reinsurer as reflected by any such statement (less prior payments, if any) shall be payable by the Company concurrently with payment by the Reinsurer of the requested loss. Any return reinstatement premium shown to be due the Company shall be remitted by the Reinsurer as promptly as possible after receipt and verification of the Company’s statement.

C. Notwithstanding anything stated herein, the liability of the Reinsurer hereunder shall not exceed $5,000,000 as respects each person, each occurrence, nor shall it exceed $10,000,000 in all during the contract year.

D. In the event this Contract is terminated on a runoff basis, additional reinstatement coverage shall be negotiated on or prior to the effective date of termination.

Article VIII — Definitions

A. “Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined) 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.

Page 8

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

1. “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.

2.	“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 any 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.
If any provision of this Article 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.
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 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.

C. “Occurrence” as used herein is defined as an accident or occurrence or a series of accidents or occurrences arising out of or caused by one event, except that:

1. Each occupational or industrial disease case or cumulative trauma case contracted by an employee of an insured shall be deemed to have been caused by a separate occurrence, commencing on:

Page 9

a.	The date of disability for which compensation is payable if the case is compensable under the Workers’ Compensation Law;
b.	The date disability due to the disease actually began if the case is not compensable under the Workers’ Compensation Law;
c.	The date of cessation of employment if claim is made after employment has ceased.

2. Notwithstanding the provisions of subparagraph 2 above, as respects losses resulting from occupational or industrial disease or cumulative trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, all such losses shall be considered one occurrence and may be combined with losses classified as other than occupational or industrial disease or cumulative trauma which arise out of the same event and the combination of such losses shall be considered as one occurrence within the meaning hereof.

D. “Occupational or industrial disease” is any abnormal condition that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has been caused by exposure to a disease producing agent or agents present in the workers’ occupational environment.
3.	It has resulted in disability or death.

E. “Cumulative trauma” is an injury that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has occurred from and has been aggravated by a repetitive employment related activity.
3.	It has resulted in disability or death.

F. “Loss adjustment expense” as used herein shall mean expenses allocable to the investigation, defense and/or settlement of specific claims, including litigation expenses, interest on judgments, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, and salaries and expenses of salaried adjusters associated with claims covered under policies of the Company reinsured hereunder but not including office expenses or salaries of the Company’s regular employees.

G. “Contract year” as used in this Contract shall mean the period from 12:01 a.m., Local Standard Time, January 1, 2006 to 12:01 a.m., Local Standard Time, January 1, 2007, both days inclusive, and each respective 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated on a “cutoff” basis, the final contract year shall be from the beginning of the then current contract year

Page 10

through the effective date of termination. If this Contract is terminated on a “runoff” basis, the period from the effective date of termination through the end of the “runoff” period shall be a separate contract year and referred to as the “runoff contract year.”

Article IX — Annuities at Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s ultimate net loss.

B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby. In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

Article X — Claims

A. Whenever a claim is reserved by the Company for an amount greater than 50.0% of its retention hereunder and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage, brain damage, blindness or extensive burns, regardless of liability, if the policy limits or statutory benefits applicable to the claim are greater than the Company’s retention hereunder. The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit or proceeding involving this reinsurance.

B. All claim settlements made by the Company, provided they are within the terms of this Contract (including but not limited to ex-gratia payments), shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.

Article XI — Sunset

Five years after the effective date of termination of this Contract (or after the end of the runoff period, if applicable), the Company shall advise the Reinsurer of any outstanding claims and/or occurrences (each hereinafter referred to as a “claim”) arising during any contract year, which have not been finally settled and which may cause a recovery under this Contract. Unless mutually agreed, no liability shall attach hereunder for any claim not reported to the Reinsurer within 90 days following the five-year period.

Page 11

Article XII — Commutation

A. As mutually agreed, the Company may commute the contract year.

B. Unless otherwise mutually agreed, the calculation for the commutation shall be calculated in accordance with the following formula:

1.	The net reinsurance premium earned for the contract year; less
2.	The Reinsurer’s paid losses and loss adjustment expense on losses arising out of occurrences commencing during the contract year; less
3.	The Reinsurer’s margin at 25.0% of the net reinsurance premium earned for the contract year; equals
4.	The Company’s net profit.

C. Payment to the Company of the Company’s net profit will result in a full and final commutation of all known and unknown losses and shall constitute a complete and final release of the Reinsurer and the Company in respect of any and all liabilities on business covered under this Contract during the contract year commuted.

D. Should the calculation be zero or negative, no payment shall be made and the Company shall have the option to provide a full and final commutation of all known and unknown losses, which shall constitute a complete and final release of the Reinsurer and the Company with respect to any and all liabilities on business covered under this Contract during the contract year commuted.

Article XIII — Special Commutation

A. In the event a Subscribing Reinsurer meets the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense.

1.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
2.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply unless the outstanding claim or claims is for an amount not less than $5,000.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to

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require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the excess loss.

D. In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.

E. If the parties cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.

F. Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.

G. The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

1. Is regularly engaged in the valuation of claims resulting from lines of business subject to this Contract; and

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2.	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of Actuaries; and
3.	Is disinterested and impartial regarding this commutation.

H. Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this commutation may continue on a mutually agreed basis.

I. Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for outstanding claim or claims, known or unknown, under this Contract, which shall release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.

J.	In the event of any conflict between this Article and any other Article of this Contract, the terms of this Article shall control.
K.	This Article shall survive the termination of this Contract.

Article XIV — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or subrogation thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation where it is economically reasonable in the judgment of the Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XV — Federal Terrorism Coverage

A. Except as provided in paragraphs B and C below, any loss reimbursement the Company receives from the United States Government under the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Extension Act of 2005 (together the “Terrorism Act”) as a result of loss occurrences commencing during the term of this Contract shall inure solely to the benefit of the Company and shall be entirely disregarded in applying all of the provisions of this Contract.

B. If one or more loss occurrences commencing during the term of this Contract result(s) in recoveries made by the Company for insured losses (as defined in the Terrorism Act) under this Contract and under the Terrorism Act, and such recoveries, together with any other reinsurance recoveries made by the Company for insured losses applicable to said loss occurrence(s), exceed the total amount of insured losses, a percentage of any amount in excess thereof shall reduce the ultimate net loss subject to this Contract for the loss

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occurrence(s) to which the recoveries apply. The Company shall determine how such percentage is calculated.

C. For purposes hereof, if a loss reimbursement received by the Company under the Terrorism Act is based on the Company’s insured losses in more than one loss occurrence and the United States Government does not designate the amount allocable to each loss occurrence, the reimbursement shall be determined by the Company and in accordance with paragraph B above.

Article XVI — Reinsurance Premium

A. As premium for the reinsurance provided hereunder during each contract year (except the runoff contract year, if any), the Company shall pay the Reinsurer 0.536% of its net earned premium for the contract year, subject to an annual minimum premium of $1,500,000 (or a pro rata portion thereof if this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article).

B. The Company shall pay the Reinsurer an annual deposit premium of $1,500,000 in four equal installments of $375,000 on January 1, April 1, July 1 and October 1 of each contract year (except the runoff contract year, if any). However, in the event this Contract is terminated in accordance with paragraph C of the Commencement and Termination Article, no deposit premium shall be due after the effective date of termination (except as provided in paragraph D below).

C. Within 60 days after the end of each contract year (and 60 days after the end of the runoff contract year, if any), the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for the contract year, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.

D. In the event this Contract is terminated on a runoff basis, the reinsurance premium for the runoff contract year shall be calculated by multiplying the unearned portion of premium in force at the effective date of termination by 0.536%, and paid semi-annually, and no minimum premium shall apply.

E. “Net earned premium” as used herein is defined as the Company’s gross earned premium collected on the classes of business subject to this Contract, less only the earned portion of premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends incurred.

Article XVII — Late Payments

A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party

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agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2.	1/365ths of the sum of 400 basis points plus the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3.	The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

C. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1.	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2.	Any claim or loss payment due the Company hereunder shall be deemed due 45 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 45 days, interest will accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 days following transmittal of written notification that the provisions of this Article have been invoked.

For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

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E. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

Article XVIII — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall not be affected by the insolvency of either party to this Contract.

Article XIX — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to all records of the Company which pertain in any way to this reinsurance.

Article XX — Liability of the Reinsurer

A. 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.

B. 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.

Article XXI — Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XXII — Errors and Omissions

Except as provided in the Sunset Article, inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any

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liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

Article XXIII — Currency (BRMA 12A)

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

Article XXIV — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXV — Federal Excise Tax

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.

B. 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.

Article XXVI — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated “B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

A. As regards policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the Reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the Reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the

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Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of funding shall be mutually agreed.

B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date unless 30 days (60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

C. The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and 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 for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1.	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;
2.	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
3.	To fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
4.	To pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

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E. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.
2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

Article XXVII — Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.

C. It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

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Article XXVIII — Arbitration (BRMA 6J)

A. 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.

B. 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.

C. 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.

D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.

E. 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 in which the Company has its principal office.

Article XXIX — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or

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should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, 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 its 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 Contract.

Article XXX — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract will be made by amendment to this Contract and signed by the parties.

Article XXXI — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of Louisiana.

Article XXXII — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXXIII — Intermediary (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to

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constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 18th day of May in the year 2006.

/s/ Allan E. Farr

American Interstate Insurance Company

American Interstate Insurance Company of Texas

Silver Oak Casualty, Inc.

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Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)
(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.

(2)

Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

I.	It is agreed that the policy does not apply under any liability coverage, to      (injury, sickness, disease, death or destruction      (bodily injury or property damage with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.
II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either
	(a) become effective on or after 1st May, 1960, or
	(b) become effective before that date and contain the Limited Exclusion Provision set out above;
	provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage to
          (injury, sickness, disease, death or destruction
          (bodily injury or property damage

(a)

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b)

resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II.

Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to      (immediate medical or surgical relief      (first aid, to expenses incurred with respect to      (bodily injury, sickness, disease or death      (bodily injury resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III.

Under any Liability Coverage to      (injury, sickness, disease, death or destruction      (bodily injury or property damage resulting from the hazardous properties of nuclear material, if

(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(c)	the      (injury, sickness, disease, death or destruction      (bodily injury or property damage arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to      (injury to or destruction of property at such nuclear facility      (property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:
“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material; (With respect to injury to or destruction of property, the word “injury” or “destruction,” (“property damage” includes all forms of radioactive contamination of property, (includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or
(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

21/9/67
N.M.A. 1590

Workers’ Compensation
Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Reinsurers	Participations
Hannover Ruckversicherungs-Aktiengesellschaft		20.0%
Through Benfield Limited
Lloyd’s Underwriters and Companies
Per Signing Schedule(s)		60.0
Total		80.0% part of
		100% share in the
		interests and
		liabilities of the
		“Reinsurer”

Interests and Liabilities Agreement

of

Certain Insurance Companies
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

Interests and Liabilities Agreement

of

Hannover Ruckversicherungs-Aktiengesellschaft
Hannover, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 20.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Hannover, Germany, this      30th day of      June in the year      2006.

/s/ A. Freiboth                                        /s/ S. Eberhardt

Hannover Ruckversicherungs-Aktiengesellschaft

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s
shown in the Signing Schedule attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Per Person Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

EX-10.5

Exhibit 10.5

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Commencement and Termination		1
III	Territory (BRMA 51A)		3
IV	Exclusions		3
V	Special Acceptances		7
VI	Retention and Limit		7
VII	Reinstatement		8
VIII	Definitions		9
IX	Annuities at Company’s Option		11
X	Claims		12
XI	Sunset		12
XII	Special Commutation		12
XIII	Salvage and Subrogation		14
XIV	Federal Terrorism Coverage		14
XV	Reinsurance Premium		14
XVI	Late Payments		15
XVII	Offset (BRMA 36A)		17
XVIII	Access to Records (BRMA 1D)		17
XIX	Liability of the Reinsurer		17
XX	Net Retained Lines (BRMA 32E)		17
XXI	Errors and Omissions		17
XXII	Currency (BRMA 12A)		18
XXIII	Taxes (BRMA 50B)		18
XXIV	Federal Excise Tax		18
XXV	Reserves and Letters of Credit		18
XXVI	Insolvency		20
XXVII	Arbitration (BRMA 6J)		20
XXVIII	Service of Suit (BRMA 49C)		21
XXIX	Entire Agreement		22
XXX	Governing Law (BRMA 71B)		22
XXXI	Agency Agreement		22
XXXII	Intermediary		22
	Schedule A

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group
(hereinafter referred to collectively as the “Company”)

by

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the “Reinsurer”)

Article I — Classes of Business Reinsured

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”) in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Workers’ Compensation, Employers Liability, including coverage provided under the U.S. Longshore and Harbor Workers’ Compensation Act and the Jones Act, and General Liability business, subject to the terms, conditions and limitations set forth herein and in Schedule A attached to and forming part of this Contract.

Article II — Commencement and Termination

A. This Contract shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, with respect to losses arising out of occurrences commencing at or after that time and date, and shall continue in force thereafter until terminated.

B. Either party may terminate this Contract at 12:01 a.m., Local Standard Time, on any January 1 by giving the other party not less than 90 days prior notice by certified or registered mail.

Page 1

C. Notwithstanding the provisions of paragraph B above, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 6 below and upon discovery for subparagraphs 7 and 8 below. The Company has 120 days from the date of applicable public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. The effective date of special termination shall not be sooner than one day after the Company provides the Subscribing Reinsurer notice of its election to specially terminate, unless mutually agreed otherwise:

1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any contract year has been reduced by more than 20.0% of the amount of surplus 12 months prior to that date; or
2.	The Subscribing Reinsurer’s policyholders’ surplus at any time during any contract year has been reduced by more than 20.0% 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 beginning of the contract year; or
3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	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
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or
8.	The Subscribing Reinsurer has ceased assuming new and renewal treaty reinsurance business.

D. Unless the Company elects that the Reinsurer have no liability for losses arising out of occurrences commencing after the effective date of termination, and so notifies the Reinsurer prior to or as promptly as possible 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 exceeding 18 months in all) following the effective date of termination.

Page 2

Article III — Territory (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the Company’s policies.

Article IV — Exclusions

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

1.	Lines of business not identified in the Classes of Business Reinsured Article.
2.	All excess of loss reinsurance assumed by the Company.
3.	Reinsurance assumed by the Company under obligatory reinsurance agreements, except:

a.	Agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date; and
b.	Intercompany reinsurance between any of the reinsured companies under this Contract.

4.	Business written by the Company on a co-indemnity basis where the Company is not the controlling carrier.
5.	Business written to apply in excess of a deductible of more than $25,000, and business issued to apply specifically in excess over underlying insurance. However, if the Company is required, by any state regulation, to provide a deductible of more than $25,000, this exclusion shall not apply.
6.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Liability - Reinsurance (U.S.A.)” attached to and forming part of this Contract.
7.	As regards interests which at time of loss or damage are on shore, no liability shall attach hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority. This War Exclusion Clause shall not, however, apply to interests which at time of loss or damage are within the territorial limits of the United States of America (comprising the Fifty States of the Union, the District of Columbia, and including bridges between the United States of America and Mexico provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided such interests are insured under policies containing a standard war or hostilities or warlike operations exclusion clause.
8.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but this exclusion shall not apply to Assigned Risk Plans or similar plans.
9.	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.

Page 3

“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.

10. Workers’ Compensation where the principal exposures, as defined by the governing class code, include:

a.	Operation of aircraft, but only if the annual estimated policy premium is $250,000 or more;
b.	Railroad, subway or street railway operations;
c.	Operation or navigation of vessels or barges;
d.	Manufacture, production or refining of gas, natural or artificial fuel, or other liquefied petroleum fuel, but only if the annual estimated policy premium is $250,000 or more;
e.	Manufacturing, assembly, packing or processing of fireworks, fuses, nitroglycerine, magnesium, pyroxylin, ammunition or explosives. This exclusion does not apply to the assembly, packing or processing of explosives when the estimated annual premium is under $250,000;
f.	Wrecking or demolition of structures, but only if the annual estimated policy premium is $250,000 or more;
g.	Underground mining.

11. As respects Workers’ Compensation and Employers Liability only, unless otherwise excluded as set forth above, the reinsurance provided under this Contract shall not apply to any loss, cost or expense arising out of or related to, either directly or indirectly, any “terrorist activity,” as defined herein, but this exclusion shall only apply when the activity includes, involves or is associated with the use of any biological, chemical, radioactive or nuclear agent, material, device or weapon, or when the predominant business of the policyholder, as defined by the governing class code, is:

a.	The operation of: airports and aircraft; flight schools; bridges, dams, tunnels or locks; department stores; shopping malls; chain retail stores; casinos and casino hotels; cruise lines; railroads; ports/public transit authorities; security services; stadiums; convention/exhibition centers; or theme/amusement parks;
b.	The manufacture and distribution of: automobiles; chemicals, petrochemicals or pharmaceuticals; utilities (electric, gas, water and sewer); major defense/aerospace products; or high-tech equipment, but only if the policyholder employs more than 20 personnel at the location of a terrorist activity at the time of its occurrence;

Page 4

c.	The management or operation of the following type of structures, but only if greater than 25 stories in height: apartments/condominiums/co-ops; hotels/motels; or office buildings;
d.	Businesses primarily engaged in the entertainment, media or transportation industry limited to the following: major media providers (NBC, FOX, ABC, CBS, etc.); television and motion picture studios; Broadway theaters; major internet companies (AOL, Yahoo, etc.); professional sports teams; major telecommunications companies (AT&T, WorldCom/MCI, etc.); national truck rental companies (Ryder, Penske, U-Haul, etc.); or major national motor freight common carriers (J.B. Hunt, Red Arrow, etc.);
e.	Policyholders primarily located in, or predominantly doing business as: hospitals; universities; nuclear facilities; financial institutions; or governmental buildings and national landmarks.

“Terrorist activity” shall mean any deliberate, unlawful act that:

a.	Is declared by any authorized government official to be or to involve terrorism, terrorist activity or acts of terrorism; or
b.	Includes, involves, or is associated with the use or threatened use of force, violence or harm against any person, tangible or intangible property, the environment, or any natural resources, where the act or threatened act is intended, in whole or in part, to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator; or
ii.	Influence, disrupt or interfere with any government related operations, activities or policies; or
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy; or

c. Includes, involves, or is associated with, in whole or in part, any of the following activities, or the threat thereof:

i.	Hijacking or sabotage of any form of transportation or conveyance, including but not limited to spacecraft, satellite, aircraft, train, vessel or motor vehicle;
ii.	Hostage taking or kidnapping;
iii.	The use of any bomb, incendiary device, explosive or firearm;
iv.	The interference with or disruption of basic public or commercial services and systems, including but not limited to the following services or systems:

Page 5

	electricity, natural gas, power, postal, communications, telecommunications, information, public transportation, water, fuel, sewer or waste disposal;
v.	The injuring or assassination of any elected or appointed government official or any government employee;
vi.	The seizure, blockage, interference with, disruption of, or damage to any government buildings, institutions, functions, events, tangible or intangible property or other assets; or
vii.	The seizure, blockage, interference with, disruption of, or damage to tunnels, roads, streets, highways, or other places of public transportation or conveyance.

d. Any of the activities listed in subparagraph c, above, shall be considered terrorist activity except where the Company can demonstrate to the Reinsurer that the foregoing activities or threats thereof were motivated solely by personal objectives of the perpetrator that are unrelated, in whole or in part, to any intention to:

i.	Promote or further any political, ideological, philosophical, racial, ethnic, social or religious cause or objective of the perpetrator or any organization, association or group affiliated with the perpetrator;
ii.	Influence, disrupt or interfere with any government-related operations, activities or policies;
iii.	Intimidate, coerce or frighten the general public or any segment of the general public; or
iv.	Disrupt or interfere with a national economy or any segment of a national economy.

12. As respects General Liability policies, exposures, other than those identified below, as included in the General Liability section of the Company’s Commercial Lines Manual:

a.	Class 97111 — Logging;
b.	Class 58873 — Sawmill;
c.	Class 59984 — Woodyard and Drivers;
d.	Class 95410 — Grading of Land;
e.	Class 45819 — Lumber Yard;
f.	Class 10073 — Repair Shops and Drivers;
g.	Class 43822 — Timber Cruiser;
h.	Class 99793 — Truckmen Not Otherwise Classified;

Page 6

i.	Class 91591 — Contractors — Subcontracted Work Other Than Construction;
j.	Class 49452 — Vacant Land.

B.	Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall be waived automatically when, in the opinion of the Company, the exposure excluded therein is incidental to the principal exposure on the risk in question.
C.	If the Company is bound, without the knowledge and contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in subparagraphs 10 and/or 12 of paragraph A, the exclusion shall be suspended with respect to such business until the Company has the first opportunity to cancel the policy in compliance with governmental requirements.
D.	If the Company is required to accept an assigned risk which conflicts with one or more of the exclusions set forth in subparagraph 10 of paragraph A, reinsurance shall apply, but only for the difference between the Company’s retention and the minimum limit required by the applicable state statute, and in no event shall the Reinsurer’s liability exceed the limit set forth in the Retention and Limit Article.

Article V — Special Acceptances

From time to time the Company may request a special acceptance of reinsurance falling outside the scope of the provisions set forth herein. As respects each layer of this Contract separately, if each Subscribing Reinsurer whose share in the interests and liabilities of the Reinsurer is 20.0% or greater agrees to a special acceptance, such special acceptance shall be binding on all Subscribing Reinsurers with respect to their respective shares of each such layer. In the event agreement is not achieved, such special acceptance shall be made to a layer or layers of this Contract only with respect to the interests and liabilities of each Subscribing Reinsurer on such layer or layers who agrees to such special acceptance. In the event a reinsurer becomes a party to this Contract subsequent to one or more special acceptances hereunder, the new reinsurer shall automatically accept such special acceptance(s) as being covered hereunder.

Article VI — Retention and Limit

A. As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as “Company’s Retention” for that excess layer in Schedule A attached hereto, arising out of each occurrence. The Reinsurer shall then be liable, as respects each excess layer, for the amount by which such ultimate net loss exceeds the Company’s applicable retention, but the liability of the Reinsurer under each excess layer shall not exceed the amount shown as “Reinsurer’s Per Occurrence Limit” for that excess layer in Schedule A attached hereto, as respects any one occurrence.

B. As respects Workers’ Compensation business, the Company’s ultimate net loss, for the purpose of this Contract, shall be deemed to be a maximum of $10,000,000 any one life.

Page 7

C.	In the event that a loss is recoverable under this Contract and under the Company’s Third Casualty Excess of Loss Reinsurance Contract or Workers’ Compensation Per Person Excess of Loss Reinsurance Contract, both effective January 1, 2006, the Company shall be the sole judge in effecting recovery under any one or more of the aforementioned contracts, including this Contract. However, in no event shall this be construed to mean that the Company may recover an amount from the Reinsurer which exceeds the total amount for any one loss, subject to the provisions of the applicable contract(s).
D.	The Company shall be permitted to carry excess of loss and quota share reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.
E.	The Company shall be permitted to carry excess of loss reinsurance applying to Workers’ Compensation risks in the State of Minnesota, recoveries under which shall inure to the benefit of this Contract.
	Such coverage shall be provided through the Minnesota Workers’ Compensation Reinsurance Association. It is understood that the liability of the Reinsurer for Minnesota Workers’ Compensation risks is not released.
	In the event the Company accrues liability that is not provided by any inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure such excess liability.
F.	In the event this Contract is terminated on a “runoff” basis, additional reinstatement coverage shall be negotiated on or prior to the effective date of termination.

Article VII — Reinstatement

A. In the event all or any portion of the reinsurance under any excess layer of reinsurance coverage provided by this Contract is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the occurrence commences hereon. For each amount so reinstated the Company agrees to pay additional premium equal to the product of the following:

1.	The percentage of the occurrence limit for the excess layer reinstated (based on the loss paid by the Reinsurer under that excess layer); times
2.	The earned reinsurance premium for the excess layer reinstated for the contract year (exclusive of reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any loss under any excess layer hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer for that excess layer. If the earned reinsurance premium for any excess layer for the contract year has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due for that excess layer shall be based on the annual deposit premium for that excess layer and shall be readjusted when the earned reinsurance premium for that excess layer for the contract year has been finally determined. Any reinstatement premium shown to be due the Reinsurer for any excess layer as reflected by any such statement (less prior payments, if any, for that excess layer) shall be payable by the Company concurrently with payment by the Reinsurer of the requested loss for that excess layer. Any return reinstatement premium shown to be due the Company shall be remitted by the Reinsurer as promptly as possible after receipt and verification of the Company’s statement.

C. Notwithstanding anything stated herein, the liability of the Reinsurer under any excess layer of reinsurance coverage provided by this Contract shall not exceed any of the following:

Page 8

1.	The amount, shown as “Reinsurer’s Per Occurrence Limit” for that excess layer in Schedule A attached hereto, as respects loss or losses arising out of any one occurrence; or
2.	The amount, shown as “Reinsurer’s Contract Year Limit” for that excess layer in Schedule A attached hereto, in all during the contract year.

Article VIII — Definitions

A. “Ultimate net loss” as used herein is defined as the sum or sums (including loss in excess of policy limits, extra contractual obligations and any loss adjustment expense, as hereinafter defined) 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.

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

1.

“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.

2.

“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 any 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.

If any provision of this Article 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.

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 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

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organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

C. “Occurrence” as used herein is defined as an accident or occurrence or a series of accidents or occurrences arising out of or caused by one event, except that:

1.

As respects General Liability policies where the Company’s limit of liability for Products and Completed Operations coverages is determined on the basis of the insured’s aggregate losses during a policy period, all such losses proceeding from or traceable to the same causative agency shall, at the Company’s option, be deemed to have been caused by one occurrence commencing at the beginning of the policy period, it being understood and agreed that each renewal or annual anniversary date of the policy involved shall be deemed the beginning of a new policy period;

2.

Each occupational or industrial disease case or cumulative trauma case contracted by an employee of an insured shall be deemed to have been caused by a separate occurrence commencing on:

a.	The date of disability for which compensation is payable if the case is compensable under the Workers’ Compensation Law;
b.	The date disability due to the disease actually began if the case is not compensable under the Workers’ Compensation Law;
c.	The date of cessation of employment if claim is made after employment has ceased.

3. Notwithstanding the provisions of subparagraph 2 above, as respects losses resulting from occupational or industrial disease or cumulative trauma suffered by employees of an insured for which the employer is liable, as a result of a sudden and accidental event not exceeding 72 hours in duration, all such losses shall be considered one occurrence and may be combined with losses classified as other than occupational or industrial disease or cumulative trauma which arise out of the same event and the combination of such losses shall be considered as one occurrence within the meaning hereof.

D. “Occupational or industrial disease” is any abnormal condition that fulfills all of the following conditions:

1.	It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.
2.	It has been caused by exposure to a disease producing agent or agents present in the workers’ occupational environment.
3.	It has resulted in disability or death.

E. “Cumulative trauma” is an injury that fulfills all of the following conditions:

1. It is not traceable to a definite compensable accident occurring during the employee’s past or present employment.

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2.	It has occurred from and has been aggravated by a repetitive employment related activity.
3.	It has resulted in disability or death.

F. “Loss adjustment expense” as used herein shall mean expenses allocable to the investigation, defense and/or settlement of specific claims, including litigation expenses, interest on judgments, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, and salaries and expenses of salaried adjusters associated with claims covered under policies of the Company reinsured hereunder but not including office expenses or salaries of the Company’s regular employees.

G. “Contract year” as used in this Contract shall mean the period from 12:01 a.m., Local Standard Time, January 1, 2006 to 12:01 a.m., Local Standard Time, January 1, 2007, both days inclusive, and each respective 12-month period thereafter that this Contract continues in force. However, if this Contract is terminated on a “cutoff” basis, the final contract year shall be from the beginning of the then current contract year through the effective date of termination. If this Contract is terminated on a “runoff” basis, the period from the effective date of termination through the end of the “runoff” period shall be a separate contract year and referred to as the “runoff contract year.”

Article IX — Annuities at Company’s Option

A. Whenever the Company is required, or elects, to purchase an annuity or to negotiate a structured settlement, either in satisfaction of a judgment or in an out-of-court settlement or otherwise, the cost of the annuity or the structured settlement, as the case may be, shall be deemed part of the Company’s ultimate net loss.

B. The terms “annuity” or “structured settlement” shall be understood to mean any insurance policy, lump sum payment, agreement or device of whatever nature resulting in the payment of a lump sum by the Company in settlement of any or all future liabilities which may attach to it as a result of an occurrence.

C. In the event the Company purchases an annuity which inures in whole or in part to the benefit of the Reinsurer, it is understood that the liability of the Reinsurer is not released thereby. In the event the Company is required to provide benefits not provided by the annuity for whatever reason, the Reinsurer shall pay its share of any loss.

Article X — Claims

A. Whenever a claim is reserved by the Company for an amount greater than 50.0% of its retention hereunder and/or whenever a claim appears likely to result in a claim under this Contract, the Company shall notify the Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim involves a fatality, major limb amputation, spinal cord damage, brain damage, blindness or extensive burns, regardless of liability, if the policy limits or statutory benefits applicable to the claim are greater than the Company’s retention hereunder. The Reinsurer shall have the right to participate, at its own expense, in the defense of any claim or suit or proceeding involving this reinsurance.

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B. All claim settlements made by the Company, provided they are within the terms of this Contract (including but not limited to ex-gratia payments), shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of satisfactory evidence of the amount paid by the Company.

Article XI — Sunset

Ten years after the effective date of termination of this Contract (or after the end of the runoff period, if applicable), the Company shall advise the Reinsurer of any outstanding claims and/or occurrences (each hereinafter referred to as a “claim”) arising during any contract year, which have not been finally settled and which may cause a recovery under this Contract. Unless mutually agreed, no liability shall attach hereunder for any claim not reported to the Reinsurer within 90 days following the 10-year period.

Article XII — Special Commutation

A. In the event a Subscribing Reinsurer meets the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense.

1.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (inclusive of “Not Rated” ratings); or
2.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims. However, unless otherwise mutually agreed, this paragraph shall not apply unless the outstanding claim or claims is for an amount not less than $5,000.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is

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later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the excess loss.

D. In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.

E. If the parties cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 15 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.

F. Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.

G. The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

1.	Is regularly engaged in the valuation of claims resulting from lines of business subject to this Contract; and
2.	Is either a Fellow of the Casualty Actuarial Society or of the American Academy of Actuaries; and
3.	Is disinterested and impartial regarding this commutation.

H. Notwithstanding paragraph A, B and C above, in the event that the Subscribing Reinsurer no longer meets the conditions set forth in subparagraph 1 or 2 in paragraph A above, this commutation may continue on a mutually agreed basis.

I. Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for outstanding claim or claims, known or unknown, under this Contract, which shall release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.

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J. In the event of any conflict between this Article and any other Article of this Contract, the terms of this Article shall control.

K. This Article shall survive the termination of this Contract.

Article XIII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) or subrogation on account of claims and settlements involving reinsurance hereunder. Salvage or subrogation thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation where it is economically reasonable in the judgment of the Company, relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XIV — Federal Terrorism Coverage

A. Any loss reimbursement the Company receives from the United States Government under the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Extension Act of 2005 (together the “Terrorism Act”) as a result of occurrences commencing during the contract year shall inure to the benefit of this Contract in the proportion that the Company’s insured losses (as defined in the Terrorism Act) in that occurrence under policies reinsured under this Contract bear to the Company’s total insured losses in that occurrence.

B. If a loss reimbursement received by the Company under the Terrorism Act is based on the Company’s insured losses in more than one occurrence and the United States Government does not designate the amount allocable to each occurrence, the reimbursement shall be prorated in the proportion that the Company’s insured losses in each occurrence bear to the Company’s total insured losses arising out of all occurrences to which the recovery applies.

Article XV — Reinsurance Premium

A. As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the greater of the following:

1.	The amount, shown as “Annual Minimum Premium” for that excess layer in Schedule A attached hereto (or a pro rata portion thereof if the contract year is less than 12 months); or
2.	The percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, of the Company’s net earned premium for the contract year (except the runoff contract year, if any).

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B. The Company shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “Annual Deposit Premium” for that excess layer in Schedule A attached hereto, in four equal installments of the amount, shown as “Quarterly Deposit Premium” for that excess layer in Schedule A attached hereto, on January 1, April 1, July 1 and October 1 of each contract year (except the runoff contract year, if any). However, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination (except as provided in paragraph D below).

C. Within 60 days after the end of each contract year (and 60 days after the end of the runoff contract year, if any), the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for each excess layer, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company for each excess layer shall be remitted promptly.

D. In the event this Contract is terminated on a runoff basis, the reinsurance premium for the runoff contract year shall be calculated by multiplying the unearned portion of premium in force at the effective date of termination by the percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, and paid semi-annually, and no minimum premium shall apply.

E. “Net earned premium” as used herein is defined as the Company’s gross earned premium collected on the classes of business subject to this Contract, less only the earned portion of premiums, if any, ceded by the Company for reinsurance which inures to the benefit of this Contract and less dividends incurred.

Article XVI — Late Payments

A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to whom payment is due, may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2.	1/365ths of the sum of 400 basis points plus the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3.	The amount past due, including accrued interest.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

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C. The establishment of the due date shall, for purposes of this Article, be determined as follows:

1.	As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2.	Any claim or loss payment due the Company hereunder shall be deemed due 45 business days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 45 days, interest will accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 business days following transmittal of written notification that the provisions of this Article have been invoked.

For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.

D. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

E. Interest penalties arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.

Article XVII — Offset (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company. This provision shall not be affected by the insolvency of either party to this Contract.

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Article XVIII — Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any reasonable time to all records of the Company which pertain in any way to this reinsurance.

Article XIX — Liability of the Reinsurer

A. 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.

B. 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.

Article XX — Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XXI — Errors and Omissions

Except as provided in the Sunset Article, inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

Article XXII — Currency (BRMA 12A)

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

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Article XXIII — Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXIV — Federal Excise Tax

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.

B. 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.

Article XXV — Reserves and Letters of Credit

[Applies only to a reinsurer which does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, which is or becomes rated “B++” or lower by A.M. Best (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating is or becomes “BBB+” or lower (inclusive of “Not Rated” ratings).]

A. As regards policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for losses covered hereunder which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund such reserves in respect of known outstanding losses that have been reported to the Reinsurer and allocated loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by the Company but not recovered from the Reinsurer, plus reserves for losses incurred but not reported, as shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”) by funds withheld, cash advances or a Letter of Credit. The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves with regards to unauthorized reinsurers; or, should the Reinsurer be downgraded, the method of funding shall be mutually agreed.

B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an “evergreen” clause, which automatically extends the term for one year from its date of expiration or any future expiration date unless 30 days

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(60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.

C. The Reinsurer and Company agree that the Letters of Credit provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and 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 for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1.	To reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;
2.	To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;
3.	To fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer;
4.	To pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

In the event the amount drawn by the Company on any Letter of Credit is in excess of the actual amount required for subparagraphs 1 or 3, or in the case of subparagraph 4, the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

E. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations, for the sole purpose of amending the Letter of Credit, in the following manner:

1.	If the statement shows that the Reinsurer’s Obligations exceed the balance of credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference.
2.	If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of credit as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

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Article XXVI — Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.

C. It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXVII — Arbitration (BRMA 6J)

A. 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.

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B. 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.

C. 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.

D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.

E. 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 in which the Company has its principal office.

Article XXVIII — Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, 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 its 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 Contract.

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Article XXIX — Entire Agreement

This written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract will be made by amendment to this Contract and signed by the parties.

Article XXX — Governing Law (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of the State of Louisiana.

Article XXXI — Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXXII — Intermediary

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications relating thereto (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 18th day of May in the year 2006.

/s/ Allan E. Farr

American Interstate Insurance Company

American Interstate Insurance Company of Texas

Silver Oak Casualty, Inc.

Page 22

Schedule A

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

	First			Second
	Excess			Excess
Company’s Retention	$	10,000,000		$	20,000,000
Reinsurer’s Per Occurrence Limit	$	10,000,000		$	10,000,000
Reinsurer’s Contract Year Limit	$	20,000,000		$	20,000,000
Annual Minimum Premium	$	800,000		$	560,000
Premium Rate		0.357	%		0.250	%
Annual Deposit Premium	$	1,000,000		$	700,000
Quarterly Deposit Premium	$	250,000		$	175,000

The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.

Nuclear Incident Exclusion Clause — Liability — Reinsurance (U.S.A.)
(Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association)

(1)	This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.
(2)	Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):
	Limited Exclusion Provision.*

I.	It is agreed that the policy does not apply under any liability coverage, to           (injury, sickness, disease, death or destruction           (bodily injury or property damage with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.
II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a)	become effective on or after 1st May, 1960, or
(b)	become effective before that date and contain the Limited Exclusion Provision set out above;

provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the policy does not apply:

I. Under any Liability Coverage to
          (injury, sickness, disease, death or destruction
          (bodily injury or property damage

(a)

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b)

resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

II.

Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to           (immediate medical or surgical relief           (first aid, to expenses incurred with respect to           (bodily injury, sickness, disease or death           (bodily injury resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III.

Under any Liability Coverage to           (injury, sickness, disease, death or destruction           (bodily injury or property damage resulting from the hazardous properties of nuclear material, if

(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(c)	the           (injury, sickness, disease, death or destruction           (bodily injury or property damage arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories, or possessions or Canada, this exclusion (c) applies only to           (injury to or destruction of property at such nuclear facility           (property damage to such nuclear facility and any property thereat.

IV. As used in this endorsement:
“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;
	(With respect to injury to or destruction of property, the word “injury” or “destruction,” (“property damage” includes all forms of radioactive contamination of property, (includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or
(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion Provision or a Broad Exclusion Provision containing those words.

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

First Workers’ Compensation Catastrophe Reinsurance

Reinsurers	Participations
Harbor Point Insurance Services, Inc.
(for Federal Insurance Company)		10.0	%
IOA RE, Inc.
(for Catlin Insurance Company Ltd.)		10.0
Platinum Underwriters Reinsurance, Inc.		10.0
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		70.0
Total		100.0	%

Second Workers’ Compensation Catastrophe Reinsurance

Reinsurers	Participations
Harbor Point Insurance Services, Inc.
(for Federal Insurance Company)		20.0	%
IOA RE, Inc.
(for Catlin Insurance Company Ltd.)		10.0
Platinum Underwriters Reinsurance, Inc.		10.0
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		60.0
Total		100.0	%

Interests and Liabilities Agreement

of

Certain Insurance Companies
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

20.0% of the First Workers’ Compensation Catastrophe Reinsurance
20.0% of the Second Workers’ Compensation Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

Interests and Liabilities Agreement

of

Federal Insurance Company
Indianapolis, Indiana
through
Harbor Point Insurance Services, Inc.
Bernardsville, New Jersey
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

10.0% of the First Workers’ Compensation Catastrophe Reinsurance
20.0% of the Second Workers’ Compensation Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Bernardsville, New Jersey, this      28th day of      June in the year      2006.

/s/ William Pentony

Harbor Point Insurance Services, Inc. (for and on behalf of Federal

Insurance Company)

Interests and Liabilities Agreement

of

Catlin Insurance Company Ltd.
Hamilton, Bermuda
by
IOA RE, Inc.
Plymouth Meeting, Pennsylvania
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

10.0% of the First Workers’ Compensation Catastrophe Reinsurance
10.0% of the Second Workers’ Compensation Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Plymouth Meeting, Pennsylvania, this      13th day of      June in the year  2006.

/s/ William Reichert

IOA RE, Inc. (for and on behalf of

Catlin Insurance Company Ltd.)

Interests and Liabilities Agreement

of

Platinum Underwriters Reinsurance, Inc.
Baltimore, Maryland
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

10.0% of the First Workers’ Compensation Catastrophe Reinsurance
10.0% of the Second Workers’ Compensation Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this      8th day of      June in the year      2006.

/s/ Jeffrey Gearheart

Platinum Underwriters Reinsurance, Inc.

Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd’s
shown in the Signing Schedules attached hereto
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Casualty Catastrophe Excess of Loss
Reinsurance Contract
Effective: January 1, 2006

issued to and duly executed by

American Interstate Insurance Company
DeRidder, Louisiana
American Interstate Insurance Company of Texas
Austin, Texas
Silver Oak Casualty, Inc.
DeRidder, Louisiana
and
any other insurance companies which are now or
hereafter come under the ownership, control or management of
Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

50.0% of the First Workers’ Compensation Catastrophe Reinsurance
40.0% of the Second Workers’ Compensation Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, January 1, 2006, and shall continue in force until terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer’s obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedules attached hereto.

EX-31.1

Exhibit 31.1

CERTIFICATIONS

          I, C. Allen Bradley, Jr., certify that:

          1. I have reviewed this quarterly report on Form 10-Q of AMERISAFE, Inc.;

          2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) [Not Applicable]

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

          5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2006	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

          I, Geoffrey R. Banta, certify that:

          1. I have reviewed this quarterly report on Form 10-Q of AMERISAFE, Inc.;

          2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) [Not Applicable]

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

          5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2006	/s/ Geoffrey R. Banta
	Geoffrey R. Banta
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO § 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the filing of the Quarterly Report on Form 10-Q of AMERISAFE, Inc., a Texas corporation (the ”Company”), for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

     1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: August 14, 2006	/s/ C. Allen Bradley, Jr.
	C. Allen Bradley, Jr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Geoffrey R. Banta
	Geoffrey R. Banta
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

     The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.