10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2005

Commission File Number 0-22280

PHILADELPHIA CONSOLIDATED HOLDING CORP.

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	23-2202671
(State of Incorporation)	(IRS Employer Identification No.)

One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
(610) 617-7900

(Address, including zip code and telephone number,

including area code, of registrant’s principal executive offices)

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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES: þ NO: o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of July 31, 2005.

Common Stock, no par value, 23,045,328 shares outstanding

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

INDEX
For the Quarterly Period Ended June 30, 2005

Part I — Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets – June 30, 2005 and December 31, 2004	3
Consolidated Statements of Operations and Comprehensive Income — For the three and six months ended June 30, 2005 and 2004	4
Consolidated Statements of Changes in Shareholders’ Equity — For the six months ended June 30, 2005 and year ended December 31, 2004	5
Consolidated Statements of Cash Flows — For the six months ended June 30, 2005 and 2004	6
Notes to Consolidated Financial Statements	7-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	33
Part II — Other Information
Item 1. Legal Proceedings	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	34
Item 4. Submission of Matters to a Vote of Security Holders	34-35
Item 5. Other Information	35
Item 6. Exhibits	36-38
Signatures	39
Excess Catastrophe Reinsurance Contract effective June 1, 2004
65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract effective September 1, 2004
$45 million excess of $195 million Florida Only Catastrophe Reinsurance Contract effective September 10, 2004
$6.5 million excess of $3.5 million Florida Only Fifth Event Catastrophe Reinsurance Contract effective September 24, 2004
$50 million excess of $240 million Florida Only Catastrophe Reinsurance Contract effective October 1, 2004
$40 million excess of $50 million Florida Only Third Event Catastrophe Reinsurance Contract effective October 1, 2004
$50 million excess of $140 million Florida Only Catastrophe Excess Reinsurance Contract effective October 1, 2004
Florida Hurricane Catastrophe Rund Reinsurance Contract effective June 1, 2005 (Liberty American Insurance Company)
Florida Hurricane Catastrophe Rund Reinsurance Contract effective June 1, 2005 (Mobile USA Insurance Compnay)
Excess Catastrophe Reinsurance Contract effective June 1, 2005 (Preliminary Agreement)
Reinstatement Premium Protection Reinsurance Contract effective June 1, 2005 (Preliminary Agreement)
Florida Only Excess Catastrophe Reinsurance Contract effective June 1, 2005 (Preliminary Agreement)
Florida Only Reinstatement Premium Protection Reinsurance Contract effective June 1, 2005 (Preliminary Agreement)
Third Event Catastrophe Reinsurance Contract effective September 3, 2004
Third Event Catastrophe Reinsurance Contract effective September 3, 2004
Certification of the Company's chief executive officer pursuant to Section 302
Certification of the Company's chief financial officer pursuant to Section 302
Certification of the Company's chief executive officer pursuant to Section 906
Certification of the Company's chief financial officer pursuant to Section 906

2

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

	As of
	June 30,			December 31,
	2005			2004
	(Unaudited)
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $1,591,461 AND $1,287,094)	$	1,599,748		$	1,299,704
EQUITY SECURITIES AT MARKET (COST $132,172 AND $110,601)		138,205			128,447
TOTAL INVESTMENTS		1,737,953			1,428,151
CASH AND CASH EQUIVALENTS		56,182			195,496
ACCRUED INVESTMENT INCOME		16,339			13,475
PREMIUMS RECEIVABLE		228,877			229,502
PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES		302,077			429,850
DEFERRED INCOME TAXES		29,981			14,396
DEFERRED ACQUISITION COSTS		105,697			91,647
PROPERTY AND EQUIPMENT, NET		23,051			21,281
GOODWILL		25,724			25,724
OTHER ASSETS		27,075			36,134
TOTAL ASSETS	$	2,552,956		$	2,485,656
LIABILITIES AND SHAREHOLDERS’ EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES	$	1,052,502		$	996,667
UNEARNED PREMIUMS		533,084			531,849
TOTAL POLICY LIABILITIES AND ACCRUALS		1,585,586			1,528,516
FUNDS HELD PAYABLE TO REINSURER		44,667			131,119
LOANS PAYABLE		—			33,406
PREMIUMS PAYABLE		47,879			48,111
OTHER LIABILITIES		114,812			100,347
TOTAL LIABILITIES		1,792,944			1,841,499
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
PREFERRED STOCK, $.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED, NONE ISSUED AND OUTSTANDING		—			—
COMMON STOCK, NO PAR VALUE, 100,000,000 SHARES AUTHORIZED, 23,046,184 AND 22,273,917 SHARES ISSUED AND OUTSTANDING		333,808			292,856
NOTES RECEIVABLE FROM SHAREHOLDERS		(9,082	)		(5,465	)
RESTRICTED STOCK DEFERRED COMPENSATION COST		(3,704	)		—
ACCUMULATED OTHER COMPREHENSIVE INCOME		9,309			19,796
RETAINED EARNINGS		429,681			336,970
TOTAL SHAREHOLDERS’ EQUITY		760,012			644,157
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,552,956		$	2,485,656

The accompanying notes are an integral part of the consolidated financial statements.

3

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
REVENUE:
NET EARNED PREMIUMS	$	233,136		$	189,563		$	469,891		$	360,985
NET INVESTMENT INCOME		15,373			10,800			28,864			20,773
NET REALIZED INVESTMENT GAIN (LOSS)		296			(1,061	)		11,094			717
OTHER INCOME		300			829			780			2,211
TOTAL REVENUE		249,105			200,131			510,629			384,686
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES		142,393			136,520			296,857			267,206
NET REINSURANCE RECOVERIES		(26,591	)		(29,203	)		(54,584	)		(63,646	)
NET LOSS AND LOSS ADJUSTMENT EXPENSES		115,802			107,317			242,273			203,560
ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES		57,826			51,272			121,774			98,626
OTHER OPERATING EXPENSES		6,010			2,642			9,949			4,411
TOTAL LOSSES AND EXPENSES		179,638			161,231			373,996			306,597
INCOME BEFORE INCOME TAXES		69,467			38,900			136,633			78,089
INCOME TAX EXPENSE (BENEFIT):
CURRENT		29,585			13,889			53,860			25,763
DEFERRED		(7,258	)		(1,656	)		(9,938	)		(1,101	)
TOTAL INCOME TAX EXPENSE		22,327			12,233			43,922			24,662
NET INCOME	$	47,140		$	26,667		$	92,711		$	53,427
OTHER COMPREHENSIVE INCOME, NET OF TAX:
HOLDING GAIN (LOSS) ARISING DURING PERIOD	$	13,220		$	(18,943	)	$	(3,276	)	$	(11,375	)
RECLASSIFICATION ADJUSTMENT		(192	)		690			(7,211	)		(466	)
OTHER COMPREHENSIVE INCOME (LOSS)		13,028			(18,253	)		(10,487	)		(11,841	)
COMPREHENSIVE INCOME	$	60,168		$	8,414		$	82,224		$	41,586
PER AVERAGE SHARE DATA:
BASIC EARNINGS PER SHARE	$	2.05		$	1.21		$	4.09		$	2.42
DILUTED EARNINGS PER SHARE	$	1.93		$	1.15		$	3.86		$	2.31
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		22,952,906			22,111,232			22,690,118			22,064,751
WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING		1,487,016			1,081,954			1,318,593			1,107,482
WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING		24,439,922			23,193,186			24,008,711			23,172,233

The accompanying notes are an integral part of the consolidated financial statements.

4

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

	For the Six
	Months Ended
	June 30, 2005			For the Year Ended
	(Unaudited)			December 31, 2004
COMMON SHARES:
BALANCE AT BEGINNING OF YEAR		22,273,917			22,007,552
ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		280,408			67,250
ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS, NET		491,859			199,115
BALANCE AT END OF PERIOD		23,046,184			22,273,917
COMMON STOCK:
BALANCE AT BEGINNING OF YEAR	$	292,856		$	281,088
ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		12,585			2,183
ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS		28,367			9,585
BALANCE AT END OF PERIOD		333,808			292,856
NOTES RECEIVABLE FROM SHAREHOLDERS:
BALANCE AT BEGINNING OF YEAR		(5,465	)		(5,444	)
NOTES RECEIVABLE ISSUED PURSUANT TO EMPLOYEE STOCK PURCHASE PLANS		(4,681	)		(2,326	)
COLLECTION OF NOTES RECEIVABLE		1,064			2,305
BALANCE AT END OF PERIOD		(9,082	)		(5,465	)
RESTRICTED STOCK DEFERRED COMPENSATION COST:
BALANCE AT BEGINNING OF YEAR		—			—
DEFERRED COMPENSATION COST PURSUANT TO ISSUANCE OF RESTRICTED STOCK		(3,735	)		—
AMORTIZATION OF DEFERRED COMPENSATION COST		31			—
BALANCE AT END OF PERIOD		(3,704	)		—
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF DEFERRED INCOME TAXES:
BALANCE AT BEGINNING OF YEAR		19,796			16,715
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES		(10,487	)		3,081
BALANCE AT END OF PERIOD		9,309			19,796
RETAINED EARNINGS:
BALANCE AT BEGINNING OF YEAR		336,970			253,287
NET INCOME		92,711			83,683
BALANCE AT END OF PERIOD		429,681			336,970
TOTAL SHAREHOLDERS’ EQUITY	$	760,012		$	644,157

The accompanying notes are an integral part of the consolidated financial statements.

5

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)

	For the Six Months Ended June 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME	$	92,711		$	53,427
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET REALIZED INVESTMENT GAIN		(11,094	)		(717	)
DEPRECIATION AND AMORTIZATION EXPENSE		8,075			6,508
DEFERRED INCOME TAX BENEFIT		(9,938	)		(1,101	)
CHANGE IN PREMIUMS RECEIVABLE		625			(2,278	)
CHANGE IN PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES, NET OF FUNDS HELD PAYABLE TO REINSURER		41,321			13,961
CHANGE IN OTHER RECEIVABLES		(2,864	)		(1,416	)
CHANGE IN INCOME TAXES PAYABLE		3,150			1,196
CHANGE IN DEFERRED ACQUISITION COSTS		(14,050	)		(22,482	)
CHANGE IN OTHER ASSETS		6,875			(4,498	)
CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES		55,835			99,685
CHANGE IN UNEARNED PREMIUMS		1,235			32,879
CHANGE IN OTHER LIABILITIES		(6,493	)		7,736
TAX BENEFIT FROM EXERCISE OF EMPLOYEE STOCK OPTIONS		5,172			387
NET CASH PROVIDED BY OPERATING ACTIVITIES		170,560			183,287
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF INVESTMENTS IN FIXED MATURITIES		131,447			41,734
PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED MATURITIES		98,750			83,854
PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY SECURITIES		117,951			17,236
COST OF FIXED MATURITIES ACQUIRED		(517,119	)		(259,770	)
COST OF EQUITY SECURITIES ACQUIRED		(128,791	)		(45,395	)
SETTLEMENT OF CASH FLOW HEDGE		(3,148	)		—
PURCHASE OF PROPERTY AND EQUIPMENT		(3,987	)		(4,078	)
NET CASH USED BY INVESTING ACTIVITIES		(304,897	)		(166,419	)
CASH FLOWS FROM FINANCING ACTIVITIES:
REPAYMENTS ON LOANS PAYABLE		(44,787	)		(43,435	)
PROCEEDS FROM LOANS PAYABLE		11,381			39,138
PROCEEDS FROM EXERCISE OF EMPLOYEE STOCK OPTIONS		3,679			432
PROCEEDS FROM COLLECTION OF NOTES RECEIVABLE		1,064			1,153
PROCEEDS FROM SHARES ISSUED PURSUANT TO STOCK PURCHASE PLANS		23,686			7,107
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		(4,977	)		4,395
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(139,314	)		21,263
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		195,496			73,942
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	56,182		$	95,205
CASH PAID DURING THE PERIOD FOR:
INCOME TAXES	$	45,533		$	26,435
INTEREST	$	165		$	283
NON-CASH TRANSACTIONS:
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE STOCK PURCHASE PLAN IN EXCHANGE FOR NOTES RECEIVABLE	$	4,681		$	2,326
ISSUANCE OF RESTRICTED SHARES PURSUANT TO STOCK BASED COMPENSATION PLAN	$	3,735		$	—

The accompanying notes are an integral part of the consolidated financial statements.

6

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The consolidated financial statements for the quarterly period ended June 30, 2005 are unaudited, but in the opinion of management have been prepared on the same basis as the annual audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair statement of the information set forth therein. The results of operations for the six months ended June 30, 2005 are not necessarily indicative of the operating results to be expected for the full year or any other period. Certain prior years’ amounts have been reclassified for comparative purposes.

These consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2004.

2. Stock-Based Compensation

Stock-based compensation plans are accounted for under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, no compensation expense is recognized for fixed stock option grants and the Company’s stock purchase plans. The following table illustrates the effect on net income and earnings per share as if the provisions of statement of Financial Accounting Standards (SFAS) No. 123 (as amended by SFAS No. 148), “Accounting for Stock-Based Compensation,” had been applied for the three and six months ended June 30, 2005 and 2004, respectively:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share data)	2005			2004			2005			2004
Net Income As Reported	$	47,140		$	26,667		$	92,711		$	53,427
Assumed Stock Compensation Cost		(1,533	)		(998	)		(3,027	)		(1,798	)
Pro Forma Net Income	$	45,607		$	25,669		$	89,684		$	51,629
Basic Earnings Per Share:
As Reported	$	2.05		$	1.21		$	4.09		$	2.42
Pro Forma	$	1.99		$	1.16		$	3.95		$	2.34
Diluted Earnings Per Share:
As Reported	$	1.93		$	1.15		$	3.86		$	2.31
Pro Forma	$	1.87		$	1.11		$	3.74		$	2.23

3. Investments

The carrying amount for the Company’s investments approximates their estimated fair value. The Company measures the fair value of investments based upon quoted market prices or by obtaining quotes from third party broker-dealers. Material assumptions and factors utilized by such broker-dealers in pricing these securities include: future cash flows, constant default rates, recovery rates and any market clearing activity that may have occurred since the prior month-end pricing period.

For mortgage and asset-backed securities (“structured securities”) of high credit quality, changes in expected cash flows are recognized using the retrospective method. For structured securities where the possibility of credit loss is other than remote, changes in expected cash flows are recognized on the prospective method over the remaining life of the securities. Cash flow assumptions for structured securities are obtained from broker dealer survey values or internal estimates consistent with the current interest rate and economic environments. These assumptions represent the Company’s best estimate of the amount and timing of estimated principal and

7

interest cash flows based on current information and events that a market participant would use in determining the current fair value of the security.

The Company regularly performs various analytical procedures with respect to its investments, including identifying any security whose fair value is below its cost. Upon identification of such securities, a detailed review is performed for such securities, excluding interests in securitized assets, meeting predetermined thresholds to determine whether a decline in fair value below a security’s cost basis is other than temporary. If the Company determines a decline in value to be other than temporary, the cost basis of the security is written down to its fair value with the amount of the write down included in earnings as a realized loss in the period the impairment arose. This evaluation resulted in non-cash realized investment losses of $0.1 million and $0 million, respectively, for the three months ended June 30, 2005 and 2004, and $0.2 million and $0 million, respectively, for the six months ended June 30, 2005 and 2004.

The Company’s impairment evaluation and recognition for interests in securitized assets is conducted in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board. Under this guidance, impairment losses on securities must be recognized if both the fair value of the security is less than its book value and the net present value of expected future cash flows is less than the net present value of expected future cash flows at the most recent (prior) estimation date. If these criteria are met, an impairment charge, calculated as the difference between the current book value of the security and its fair value, is included in earnings as a realized loss in the period the impairment arose. Non-cash realized investment losses recorded for the three and six months ended June 30, 2005 and 2004 were $0 million and $1.7 million, respectively, and $0 million and $2.6 million, respectively, as a result of the Company’s impairment evaluation for investments in securitized assets.

The following table (in thousands) identifies the period of time securities with an unrealized loss at June 30, 2005 have continuously been in an unrealized loss position. Included in the amounts displayed in the table are $0.1 million of unrealized losses due to non-investment grade fixed maturity securities having a fair value of $2.8 million. No issuer of securities or industry represents more than 2.7% and 14.2%, respectively, of the total estimated fair value, or 2.0% and 10.2%, respectively, of the total gross unrealized loss included in the table below. There are certain risks and uncertainties inherent in the Company’s impairment methodology, such as the financial condition of specific industry sectors and the resultant effect on any such underlying security collateral values. Should the Company subsequently determine a decline in the fair value below the cost basis to be other than temporary, the security would be written down to its fair value and the difference would be included in earnings as a realized loss for the period such determination was made.

	Less Than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Fixed Maturities:
Available for Sale
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies	$	52,440	$	371	$	23,067	$	245	$	75,507	$	616
Obligations of States and Political Subdivisions		218,131		874		40,757		377		258,888		1,251
Corporate and Bank Debt Securities		120,917		1,311		75,648		1,543		196,565		2,854
Asset Backed Securities		17,551		131		16,738		372		34,289		503
Mortgage Pass-Through Securities		99,997		762		11,084		247		111,081		1,009
Collateralized Mortgage Obligations		62,915		401		10,005		250		72,920		651
Total Fixed Maturities Available for Sale		571,951		3,850		177,299		3,034		749,250		6,884
Equity Securities		50,677		2,989		—		—		50,677		2,989
Total Investments	$	622,628	$	6,839	$	177,299	$	3,034	$	799,927	$	9,873

8

Based upon the Company’s impairment evaluation as of June 30, 2005, it was concluded that the remaining unrealized losses in the table above are not other than temporary.

4. Restricted Assets

The Insurance Subsidiaries have investments, principally U.S. Treasury securities and Obligations of States and Political Subdivisions, on deposit with the various states in which they are licensed insurers. At June 30, 2005 and December 31, 2004, the carrying value of the securities on deposit totaled $14.7 million and $15.3 million, respectively.

Additionally, the Company’s insurance subsidiaries had investments, principally Mortgage Pass-Through securities, which collateralized the borrowings from the Federal Home Loan Bank of Pittsburgh, see Note 9. The carrying value of these investments was $0 million and $46.8 million as of June 30, 2005 and December 31, 2004, respectively.

Certain of the Company’s insurance subsidiaries are required to hold a certain minimum amount of Federal Home Loan Bank of Pittsburgh common stock as a requirement of membership in the Federal Home Loan Bank of Pittsburgh. The required minimum amount of common stock is based on the amount of outstanding borrowings plus the unused maximum borrowing capacity, as defined by the Federal Home Loan Bank of Pittsburgh. The carrying value of Federal Home Loan Bank of Pittsburgh common stock was $0.2 million and $1.8 million as of June 30, 2005 and December 31, 2004, respectively.

5. Derivative Instruments

Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended, requires that derivatives be recorded on the balance sheet as either assets or liabilities measured at fair value. Changes in the fair value of derivatives are recorded either through current earnings or as other comprehensive income, depending on the type of hedge transaction. Gains and losses on the derivative instrument reported in other comprehensive income are reclassified into earnings in the periods in which earnings are impacted by the variability of the cash flow of the hedged item. The ineffective portion of all hedge transactions is recognized in current period earnings.

During the first quarter of 2005, the Company was considering the issuance of a debt offering. To manage potential interest rate risk and mitigate the impact of fluctuations in interest rates prior to any issuance, a cash flow hedge derivative instrument was purchased. Cash flow hedges are hedges that use simple derivatives to offset the variability of expected future cash flows. The cash flow hedge purchased was for a notional amount of $125 million, had an interest rate of 4.557% based on the Then-Current 10-Year Treasury interest rate, and a final settlement date of May 6, 2005. At the time of purchase, the cash flow hedge was anticipated to be highly effective in offsetting the changes in the expected future interest rate payments on the proposed debt offering attributable to fluctuations in the Treasury benchmark interest rate.

Subsequent to the purchase of the cash flow hedge the Company decided against the issuance of a debt offering. As a result, the cash flow hedge became an ineffective hedge and the change in fair value of the hedge was reported as a component of earnings immediately. For the three months ended March 31, 2005 the Company recorded the change in fair value of $0.3 million as a reduction to net realized investment gain. Subsequently, upon settlement, the loss in fair value increased to $3.2 million. The $2.9 million change in fair value since March 31, 2005 was recorded as a net realized investment loss during the three months ended June 30, 2005. The Company does not hold any not hold any other derivative instruments.

6. Goodwill

The Company performs an annual impairment analysis to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). This annual test is performed at December 31 of each year or more frequently if events or circumstance change that require the Company to perform the impairment analysis on an interim basis.

9

Goodwill impairment testing requires the evaluation of the fair value of each reporting unit to its carrying value, including the goodwill, and an impairment charge is recorded if the carrying amount of the reporting unit exceeds its estimated fair value. No change in the carrying amount of goodwill, which arose from the purchase of Liberty American Insurance Group, Inc., was recorded by the Company for the six months ended June 30, 2005.

7. Liability for Unpaid Loss and Loss Adjustment Expenses

The liability for unpaid loss and loss adjustment expenses reflects the Company’s best estimate for future amounts needed to pay losses and related settlement expenses with respect to insured events. The process of establishing the ultimate claims liability is necessarily a complex imprecise process, requiring the use of informed estimates and judgments using data currently available. The liability includes an amount determined on the basis of claim adjusters’ evaluations with respect to insured events that have occurred and an amount for losses incurred that have not been reported to the Company. In some cases significant periods of time, up to several years or more, may elapse between the occurrence of an insured loss and the reporting of such to the Company. Estimates for unpaid loss and loss adjustment expenses are based upon management’s assessment of known facts and circumstances, review of past loss experience and settlement patterns and consideration of other factors such as legal, social, and economic developments. These adjustments are reviewed regularly and any adjustments there from are made in the accounting period in which the adjustment arose. If the Company’s ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at June 30, 2005, the related adjustments could have a material adverse impact on the Company’s financial condition, and results of operations.

During the three months ended June 30, 2005, the Company increased the estimated gross unpaid loss and loss adjustment expenses for accident years 2004 and 2003 and decreased the estimated gross unpaid loss and loss adjustment expenses for accident years 2002 and prior and the estimated net unpaid loss and loss adjustment expenses for accident years 2004 and prior, by the following amounts:

	Gross Basis			Net Basis
(In millions)	increase (decrease)			increase (decrease)
Accident Year 2004	$	5.2		$	(3.4	)
Accident Year 2003		0.6			—
Accident Year 2002		(0.9	)		(1.9	)
Accident Years 2001 and prior		(0.9	)		(2.8	)
Total	$	4.0		$	(8.1	)

For accident year 2004, the increase in estimated gross unpaid loss and loss adjustment expenses was principally due to a higher gross loss estimate for professional liability excess policies due to higher than expected claim severity. The decrease in estimated net unpaid loss and loss adjustment expenses for accident year 2004 was principally due to a lower net loss estimate for commercial property policies as a result of better than expected claim frequency.

For accident year 2003, the increase in estimated gross unpaid loss and loss adjustment expenses was principally due to a higher gross loss estimate for professional liability excess loss estimates due to higher than expected claim severity.

The decrease in estimated gross and net unpaid loss and loss adjustment expenses for accident years 2002 and prior was principally due to decreased loss estimates across most commercial and specialty lines of business due to better than expected case incurred loss development.

8. Funds Held Payable To Reinsurer

Effective April 1, 2003, the Company entered into a quota share reinsurance agreement. Under this agreement, the Company ceded 22% of its net written premiums and loss and loss adjustment expenses for substantially all

10

of the Company’s lines of business on policies effective April 1, 2003 through December 31, 2003, and 10% of its commercial and specialty lines net written premiums and loss and loss adjustment expenses for policies incepting during 2004. The Company receives a provisional commission of 33.0% adjusted pro-rata based upon the ratio of losses incurred to premiums earned. Pursuant to this reinsurance agreement the Company withholds the reinsurance premium due the reinsurers reduced by the reinsurers’ expense allowance, and the Company’s ceding commission allowance in a Funds Held Payable to Reinsurer account. This Funds Held Payable to Reinsurer account is also reduced by ceded paid losses and loss adjustment expenses under this agreement, and increased by an interest credit. In addition, the agreement allows for a profit commission to be paid to the Company upon commutation. Effective January 1, 2005, the Company entered into a Reinsurance Commutation and Release Agreement with respect to the 2003 Whole Account Net Quota Share Reinsurance contract. As a result of this commutation, the Funds Held Payable to Reinsurer liability was reduced by approximately $77.9 million, offset by an increase to net Unpaid Loss and Loss Adjustment Expenses of $64.3 million, an increase to net Unearned Premiums of $0.2 million and a reduction to the profit commission receivable by approximately $13.4 million. No gain or loss was realized as a result of this commutation.

Activity for the Funds Held Payable to Reinsurer is summarized as follows (in thousands):

	As of and For the			As of and For the
	Six Months Ended			Year Ended
	June 30, 2005			December 31, 2004
Funds Held Payable to Reinsurer Balance at Beginning of Period	$	131,119		$	110,011
Net Written Premiums Ceded		(148	)		94,474
Reinsurer Expense Allowance		5			(3,318	)
Provisional Commission		(4,018	)		(48,971	)
Paid Loss and Loss Adjustment Expenses		(5,203	)		(25,585	)
Interest Credit		818			4,853
Commutation		(77,906	)		—
Other		—			(345	)
Subtotal Activity		(86,452	)		21,108
Funds Held Payable to Reinsurer Balance at End of Period	$	44,667		$	131,119

The Company has also accrued a profit commission receivable based upon the experience of the underlying business ceded to this reinsurance agreement, in the amounts of $5.3 million and $13.4 million as of June 30, 2005 and December 31, 2004, respectively. The profit commission reduces ceded written and earned premiums and increases net written and earned premiums.

9. Loans Payable

As of June 30, 2005 and December 31, 2004, the Company had aggregate borrowings of $0 million and $33.4 million, respectively, from the Federal Home Loan Bank of Pittsburgh. Any outstanding borrowings bear interest at adjusted LIBOR and mature twelve months or less from inception. The proceeds from any outstanding borrowings are invested in asset backed and collateralized mortgage obligation securities to achieve a positive spread between the rate of interest on these securities and the borrowing rates. Due to declining spreads the Company prepaid all outstanding Federal Home Loan Bank loans during the first quarter of 2005.

10. Shareholders’ Equity

The Company has established stock purchase plans including an Employee Stock Purchase Plan and a Non-Qualified Employee Stock Purchase Plan. Shares may be purchased under each of these plans by eligible employees during designated one month offering periods established by the Compensation Committee of the Board of Directors at a purchase price of the lesser of 85% of the fair market value of the shares on the first business day of the offering period or the date the shares are purchased. The Company issued 72,602 and 421,200 shares under the Employee Stock Purchase Plan and the Non-Qualified Employee Stock Purchase Plan, respectively, during the six months ended June 30, 2005.

11

During the three months ended June 30, 2005, the Company entered into Restricted Stock Award Agreements with certain employees and issued 44,805 shares pursuant to these agreements.

11. Earnings Per Share

Earnings per common share have been calculated by dividing net income for the period by the weighted average number of common shares and common share equivalents outstanding during the period. Following is the computation of earnings per share for the three and six months ended June 30, 2005 and 2004, respectively (in thousands, except per share data):

	As of and For the Three				As of and For the Six
	Months Ended June 30,				Months Ended June 30
	2005		2004		2005		2004
Weighted-Average Common Shares Outstanding		22,953		22,111		22,690		22,065
Weighted-Average Potential Shares Issuable		1,487		1,082		1,319		1,107
Weighted-Average Shares and Potential Shares Issuable		24,440		23,193		24,009		23,172
Net Income	$	47,140	$	26,667	$	92,711	$	53,427
Basic Earnings per Share	$	2.05	$	1.21	$	4.09	$	2.42
Diluted Earnings per Share	$	1.93	$	1.15	$	3.86	$	2.31

12. Income Taxes

The effective tax rate differs from the 35% marginal tax rate principally as a result of tax-exempt interest income, the dividend received deduction and other differences in the recognition of revenues and expenses for tax and financial reporting purposes.

13. Reinsurance

In the normal course of business, the Company has entered into various reinsurance contracts with unrelated reinsurers. The Company participates in such agreements for the purpose of limiting loss exposure, managing capacity constraints and diversifying business. Reinsurance contracts do not relieve the Company from its obligations to policyholders. The effect of reinsurance on premiums written and earned is as follows:

12

	For the Three Months Ended				For the Six Months Ended
	June 30, 2005				June 30, 2005
(In thousands)	Written		Earned		Written		Earned
Direct Business	$	283,378	$	279,395	$	567,445	$	566,167
Reinsurance Assumed		967		808		2,005		2,048
Reinsurance Ceded		33,995		47,067		65,314		98,324
Net Premiums	$	250,350	$	233,136	$	504,136	$	469,891

	For the Three Months Ended				For the Six Months Ended
	June 30, 2004				June 30, 2004
	Written		Earned		Written		Earned
Direct Business	$	279,535	$	256,856	$	530,396	$	495,943
Reinsurance Assumed		847		1,867		2,423		3,997
Reinsurance Ceded		56,184		69,160		106,042		138,955
Net Premiums	$	224,198	$	189,563	$	426,777	$	360,985

Certain of the Company’s reinsurance contracts have provisions whereby the Company is entitled to a return profit commission based on the ultimate experience of the underlying business ceded to the contracts. Under the terms of these contracts, the Company accrued profit commissions of $1.2 million and $4.6 million for the three months ended June 30, 2005 and 2004, respectively and $2.5 million and $8.7 million for the six months ended June 30, 2005 and 2004, respectively. The profit commissions reduce ceded written and earned premiums and increase net written and earned premiums.

Approximately $15.6 million of the Company’s reinsurance receivable balances at June 30, 2005 are with Converium Reinsurance North American Inc. (“CRNA”). During the third quarter of 2004, Converium AG (Switzerland), CRNA’s parent company, placed CRNA into an orderly runoff. Of the $15.6 million reinsurance receivable balances with CRNA, $0.5 million are receivables on paid losses and $15.1 million are receivables on unpaid loss and loss adjustment expense. The Company is monitoring CRNA’s ability to pay claims, and at this time, believes, that the amounts with CRNA will be collectible.

14. Commitments and Contingencies

The Company is subject to routine legal proceedings in connection with its property and casualty insurance business. The Company is not involved in any other pending or threatened legal or administrative proceedings which management believes can reasonably be expected to have a material adverse effect on the Company’s financial condition or results of operations.

15. Comprehensive Income

Components of comprehensive income, as detailed in the Consolidated Statements of Operations and Comprehensive Income, are net of tax. The related tax effect of Holding Gains (Losses) arising during the three and six months ended June 30, 2005 and 2004 was $7.1 million and $(10.2) million, respectively, and $(1.8) million and $(6.1) million, respectively. The related tax effect of Reclassification Adjustments for the three and six months ended June 30, 2005 and 2004 was $(0.1) million and $0.4 million, respectively, and $(3.9) million and $(0.3) million, respectively.

16. Segment Information

The Company’s operations are classified into three reportable business segments which are organized around its three underwriting divisions: The Commercial Lines Underwriting Group, which has underwriting responsibility for the Commercial Automobile and Commercial Property and Commercial multi-peril package

13

insurance products; The Specialty Lines Underwriting Group, which has underwriting responsibility for the professional liability insurance products; and The Personal Lines Group, which designs, markets and underwrites personal property and casualty insurance products for the Manufactured Housing and Homeowners markets. Each business segment’s responsibilities include: pricing, managing the risk selection process and monitoring the loss ratios by product and insured. The reportable segments operate solely within the United States and have not been aggregated.

The segments follow the same accounting policies used for the Company’s consolidated financial statements, as described in the summary of significant accounting policies. Management evaluates a segment’s performance based upon premium production and the associated loss experience, which includes paid losses, an amount determined on the basis of claim adjusters’ evaluation with respect to insured events that have occurred and an amount for losses incurred that have not been reported. Investments and investment performance, including investment income and net realized investment gain (loss), acquisition costs and other underwriting expenses, including commissions, premium taxes and other acquisition costs, and other operating expenses are managed at a corporate level by the corporate accounting function in conjunction with other corporate departments, and are included in “Corporate”.

Following is a tabulation of business segment information for the three and six months ended June 30, 2005 and 2004. Corporate information is included to reconcile segment data to the consolidated financial statements (in thousands):

14

	Three Months Ended,
	Commercial		Specialty		Personal
	Lines		Lines		Lines		Corporate			Total
June 30, 2005:
Gross Written Premiums	$	211,801	$	48,187	$	24,357		—		$	284,345
Net Written Premiums	$	198,051	$	39,608	$	12,691		—		$	250,350
Revenue:
Net Earned Premiums	$	183,457	$	36,836	$	12,843		—		$	233,136
Net Investment Income		—		—		—		15,373			15,373
Net Realized Investment Gain		—		—		—		296			296
Other Income		—		—		236		64			300
Total Revenue		183,457		36,836		13,079		15,733			249,105
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		83,238		23,878		8,686		—			115,802
Acquisition Costs and Other Underwriting Expenses		—		—		—		57,826			57,826
Other Operating Expenses		—		—		43		5,967			6,010
Total Losses and Expenses		83,238		23,878		8,729		63,793			179,638
Income Before Income Taxes		100,219		12,958		4,350		(48,060	)		69,467
Total Income Tax Expense		—		—		—		22,327			22,327
Net Income	$	100,219	$	12,958	$	4,350	$	(70,387	)	$	47,140
Total Assets		—		—	$	190,472	$	2,362,484		$	2,552,956
June 30, 2004:
Gross Written Premiums	$	198,615	$	46,438	$	35,329		—		$	280,382
Net Written Premiums	$	165,024	$	38,143	$	21,031		—		$	224,198
Revenue:
Net Earned Premiums	$	146,634	$	31,603	$	11,326		—		$	189,563
Net Investment Income		—		—		—		10,800			10,800
Net Realized Investment Loss		—		—		—		(1,061	)		(1,061	)
Other Income		—		—		660		169			829
Total Revenue		146,634		31,603		11,986		9,908			200,131
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		81,083		21,699		4,535		—			107,317
Acquisition Costs and Other Underwriting Expenses		—		—		—		51,272			51,272
Other Operating Expenses		—		—		867		1,775			2,642
Total Losses and Expenses		81,083		21,699		5,402		53,047			161,231
Income Before Income Taxes		65,551		9,904		6,584		(43,139	)		38,900
Total Income Tax Expense		—		—		—		12,233			12,233
Net Income	$	65,551	$	9,904	$	6,584	$	(55,372	)	$	26,667
Total Assets		—		—	$	304,191	$	1,775,332		$	2,079,523

15

	Six Months Ended,
	Commercial		Specialty		Personal
	Lines		Lines		Lines		Corporate			Total
June 30, 2005:
Gross Written Premiums	$	421,811	$	101,822	$	45,817		—		$	569,450
Net Written Premiums	$	402,374	$	75,909	$	25,853		—		$	504,136
Revenue:
Net Earned Premiums	$	367,175	$	72,221	$	30,495		—		$	469,891
Net Investment Income		—		—		—		28,864			28,864
Net Realized Investment Gain		—		—		—		11,094			11,094
Other Income		—		—		450		330			780
Total Revenue		367,175		72,221		30,945		40,288			510,629
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		172,924		49,741		19,608		—			242,273
Acquisition Costs and Other Underwriting Expenses		—		—		—		121,774			121,774
Other Operating Expenses		—		—		43		9,906			9,949
Total Losses and Expenses		172,924		49,741		19,651		131,680			373,996
Income Before Income Taxes		194,251		22,480		11,294		(91,392	)		136,633
Total Income Tax Expense		—		—		—		43,922			43,922
Net Income	$	194,251	$	22,480	$	11,294	$	(135,314	)	$	92,711
Total Assets		—		—	$	190,472	$	2,362,484		$	2,552,956
June 30, 2004:
Gross Written Premiums	$	373,688	$	93,830	$	65,301		—		$	532,819
Net Written Premiums	$	309,764	$	78,194	$	38,819		—		$	426,777
Revenue:
Net Earned Premiums	$	280,153	$	61,018	$	19,814		—		$	360,985
Net Investment Income		—		—		—		20,773			20,773
Net Realized Investment Gain		—		—		—		717			717
Other Income		—		—		1,803		408			2,211
Total Revenue		280,153		61,018		21,617		21,898			384,686
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		154,991		39,754		8,815		—			203,560
Acquisition Costs and Other Underwriting Expenses		—		—		—		98,626			98,626
Other Operating Expenses		—		—		1,112		3,299			4,411
Total Losses and Expenses		154,991		39,754		9,927		101,925			306,597
Income Before Income Taxes		125,162		21,264		11,690		(80,027	)		78,089
Total Income Tax Expense		—		—		—		24,662			24,662
Net Income	$	125,162	$	21,264	$	11,690	$	(104,689	)	$	53,427
Total Assets		—		—	$	304,191	$	1,775,332		$	2,079,523

16

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

General

Although the Company’s financial performance is dependent upon its own specific business characteristics, certain risk factors can affect the profitability and/or the financial condition of the Company. These include, but are not limited to:

• Business Environment and Industry factors — Historically the financial performance of the property and casualty insurance industry has tended to fluctuate in cyclical patterns of soft markets followed by hard markets. The Company’s strategy is to focus on underwriting profits, and accordingly the Company’s marketing organization is being directed into those niche businesses that exhibit the greatest potential for underwriting profits.

• Changes in taxes, governmental laws and regulations — Significant new legislation and/or regulation could adversely impact profitability.

• Competition — The Company competes in the property and casualty business with other domestic and international insurers having greater financial and other resources than the Company.

• Financial Strength Rating — If A.M. Best Company downgrades the rating of the Company’s insurance subsidiaries, the Company may not be able to compete as effectively with its commercial and specialty lines competitors.

• Regulation — The Company’s insurance subsidiaries are subject to a substantial degree of regulatory oversight, which generally is designed to protect the interests of policyholders, as opposed to shareholders.

• Litigation — Adverse rulings in any material litigation to which the Company is a party could materially affect its financial position and results of operations.

• Inflation — Property and casualty insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such amounts, is known.

• Investment Risk — Substantial future increases in interest rates could result in a decline in the market value of the Company’s investment portfolio and resulting losses and/or reduction in shareholders’ equity.

• Claims development and the process of estimating loss reserves — Estimating the Company’s ultimate liability for unpaid loss and loss adjustment expenses is necessarily a complex and judgmental process, inasmuch as the amounts of any ultimate liability of the Company with respect to such claims are based on management’s informed estimates and judgments using data currently available.

• Catastrophe Exposure — The Company’s insurance subsidiaries issue insurance policies which provide coverage for commercial and personal property and casualty risks. It is possible that a catastrophic event could greatly increase claims under the insurance policies the insurance subsidiaries issue. Catastrophes may result from a variety of events or conditions, including hurricanes, windstorms, earthquakes, hail and other severe weather conditions and may include terrorist events. It is possible that a catastrophic event could adversely impact profitability.

• Reinsurance — The adequacy of reinsurance coverage which may be obtained by the Company and the ability and willingness of the Company’s reinsurers to pay.

• Contingent Commission Arrangements — The outcome of industry-wide investigations being conducted by various insurance departments, attorneys-general and other authorities relating to the use of contingent commission arrangements.

17

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

• Finite Risk Reinsurance Arrangements — The outcome of the Securities and Exchange Commission’s industry-wide investigation relating to the use of non-traditional insurance products, including finite risk reinsurance arrangements.

• Future Terrorist Attacks — The Company’s insurance subsidiaries issue insurance policies which provide coverage for commercial and personal property and casualty risks. It is possible that a terrorist attack could greatly increase claims under the insurance policies the insurance subsidiaries issue. It is possible that a terrorist attack could adversely impact profitability.

The above risk factors should be read in conjunction with the Certain Critical Accounting Estimates and Judgments included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Investments

The Company’s investment objective is the realization of relatively high levels of after-tax net investment income while generating competitive after-tax total rates of return within a prudent level of risk and within the constraints of maintaining adequate securities in amount and duration to meet cash requirements of current operations and long-term liabilities, as well as maintaining and improving the Company’s A.M. Best rating. The Company utilizes external independent professional investment managers for its fixed maturity and equity investments. These investments consist of diversified issuers and issues, and as of June 30, 2005, approximately 90.7% and 7.5% of the total invested assets (total investments plus cash equivalents) on a cost basis consisted of investments in fixed maturity and equity securities, respectively, versus 84.9% and 7.3%, respectively, at December 31, 2004.

Of the total investments in fixed maturity securities, asset backed, mortgage pass-through, and collateralized mortgage obligation securities, on a cost basis, amounted to $95.6 million, $236.8 million and $162.6 million, respectively, as of June 30, 2005 and $96.0 million, $229.6 million and $62.6 million, respectively, as of December 31, 2004. The asset backed, mortgage pass-through, and collateralized mortgage obligation investments are amortizing securities possessing desirable prepayment risk and/or extension profiles.

The Company regularly performs various analytical procedures with respect to its investments, including identifying any security whose fair value is below its cost. Upon identification of such securities, a detailed review is performed for all securities, except interests in securitized assets, meeting predetermined thresholds to determine whether such decline is other than temporary. If the Company determines a decline in value to be other than temporary, based upon its detailed review, or if a decline in value for an equity investment has persisted continuously for nine months, the cost basis of the security is written down to its fair value. The factors considered in reaching the conclusion that a decline below cost is other than temporary include, but are not limited to: whether the issuer is in financial distress; the performance of the collateral underlying a secured investment; whether a significant credit rating action has occurred; whether scheduled interest payments have been delayed or missed; whether changes in laws and/or regulations have impacted an issuer or industry; an assessment of the timing of a security’s recovery to fair value; and an ability and intent to hold the security to recovery of fair value. The amount of any write down is included in earnings as a realized loss in the period the impairment arose. This evaluation resulted in non-cash realized investment losses of $0.1 million and $0 million, respectively, for the three months ended June 30, 2005 and 2004, and $0.2 million and $0 million, respectively, for the six months ended June 30, 2005 and 2004. The Company attributes these other than temporary declines in fair value primarily to issuer specific conditions.

Additionally, the Company conducts its impairment evaluation and recognition for interests in securitized assets in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board (the “EITF”). Under this guidance, impairment losses on securities must be recognized if both the fair value of the security is less than its book value and the net present value of expected future cash flows is less than the net present value of expected future cash flows at the most recent estimation date. If these criteria are met, an impairment charge, calculated as the difference between the current book value of the security and its fair value, is included in earnings as a realized loss in the period the impairment arose. This evaluation resulted in non-cash realized investment losses of $0 million and $1.7 million for the three months ended June 30, 2005 and 2004,

18

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

respectively, and $0 million and $2.6 million for the six months ended June 30, 2005 and 2004, respectively. These non-cash realized investment losses were from investments primarily in collateralized bond obligations which were impacted by recent years’ non investment grade default rates that were higher than historic averages and from investments in other asset backed securities which experienced extension of cash flows on the underlying collateral.

The Company’s fixed maturity portfolio amounted to $1,599.7 million and $1,229.7 million, as of June 30, 2005 and December 31, 2004, respectively, of which 99.5% and 99.3% of the portfolio as of June 30, 2005 and December 31, 2004, respectively, was comprised of investment grade securities. The Company had fixed maturity investments with gross unrealized losses amounting to $6.9 million and $4.9 million as of June 30, 2005 and December 31, 2004, respectively. Of these amounts, interests in securitized assets had gross unrealized losses amounting to $2.2 million and $1.3 million as of June 30, 2005 and December 31, 2004, respectively. The remaining unrealized losses are attributable largely to market price changes due to interest rate increases since the investments were purchased, and are not considered to be other than temporary impairments, given the ability and intent to hold the securities to recovery. As discussed above, the Company’s impairment evaluation and recognition for interests in securitized assets is conducted in accordance with the guidance provided by the EITF.

The following table identifies the period of time securities with an unrealized loss at June 30, 2005 have continuously been in an unrealized loss position. Included in the amounts displayed in the table are $0.1 million of unrealized losses due to non-investment grade fixed maturity securities having a fair value of $2.8 million. No issuer of securities or industry represents more than 2.7% and 14.2%, respectively, of the total estimated fair value, or 2.0% and 10.2%, respectively, of the total gross unrealized loss included in the table below. There are certain risks and uncertainties inherent in the Company’s impairment methodology, including, but not limited to, the financial condition of specific industry sectors and the resultant effect on any such underlying security collateral values and changes in accounting, tax, and/or regulatory requirements which may have an effect on either, or both, the investor and/or the issuer. Should the Company subsequently determine a decline in the fair value below the cost basis to be other than temporary, the security would be written down to its fair value and the difference would be included in earnings as a realized loss for the period in which such determination was made.

	Gross Unrealized Losses
	(in millions)
	Fixed Maturities
	Available for Sale				Total
	Excluding Interests		Interests in		Fixed Maturities
Continuous time in unrealized loss position	in Securitized Assets		Securitized Assets		Available for Sale		Equity Securities		Total Investments
0 – 3 months	$	0.1	$	—	$	0.1	$	1.2	$	1.3
4 – 6 months		1.0		0.6		1.6		1.6		3.2
7 – 9 months		1.2		0.6		1.8		0.2		2.0
10 – 12 months		0.3		0.1		0.4		—		0.4
13 – 18 months		2.1		0.4		2.5		—		2.5
19 – 24 months		—		0.2		0.2		—		0.2
> 24 months		—		0.3		0.3		—		0.3
Total Gross Unrealized Losses	$	4.7	$	2.2	$	6.9	$	3.0	$	9.9
Estimated fair value of securities with a gross unrealized loss	$	531.0	$	218.3	$	749.2	$	50.7	$	799.9

Based upon the Company’s impairment evaluation as of June 30, 2005, it was concluded that the remaining unrealized losses in the table above are not other than temporary.

19

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

For the three months ended June 30, 2005, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0.1 million and $1.4 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $2.3 million and $11.4 million, respectively. For the three months ended June 30, 2004, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0.1 million and $0.3 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $4.3 million and $2.4 million, respectively.

For the six months ended June 30, 2005, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0.3 million and $3.0 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $20.6 million and $31.4 million, respectively. For the six months ended June 30, 2004, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0.3 million and $0.4 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $7.1 million and $3.9 million, respectively.

$1.2 million of the $3.0 million gross loss on the sale of equity securities for the six months ended June 30, 2005 was the result of the liquidation of certain of the Company’s equity portfolios following the Company’s decision to change four of its common stock investment managers. This $1.2 million realized gross loss was in addition to the previously reported $1.4 million impairment loss recognized during the three months ended December 31, 2004 upon the Company’s initial decision to change three of its common stock investment managers and no longer hold the securities to recovery. The remaining gross loss on the sale of fixed maturity and equity securities resulted from the decision to sell securities based upon an assessment of economic conditions and ongoing portfolio management objectives of maximizing the Company’s after-tax net investment income.

Results of Operations (Six Months ended June 30, 2005 vs. June 30, 2004)

          Premiums: Premium information for the six months ended June 30, 2005 vs. June 30, 2004 for the Company’s business segments is as follows (in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2005 Gross Written Premiums	$	421.8		$	101.8		$	45.8		$	569.4
2004 Gross Written Premiums	$	373.7		$	93.8		$	65.3		$	532.8
Percentage Increase (Decrease)		12.9	%		8.5	%		(29.9	)%		6.9	%
2005 Gross Earned Premiums	$	423.0		$	94.5		$	50.7		$	568.2
2004 Gross Earned Premiums	$	370.3		$	80.8		$	48.8		$	499.9
Percentage Increase (Decrease)		14.2	%		17.0	%		3.9	%		13.7	%

The overall growth in gross written premiums is primarily attributable to the following:

• Prospecting efforts by marketing personnel in conjunction with long term relationships formed by the Company’s marketing Regional Vice Presidents continue to result in additional prospects and increased premium writings, most notably for the Company’s various commercial package and non profit management liability product lines.

• Continued expansion of marketing efforts relating to commercial lines and specialty lines products through the Company’s field organization and preferred agents.

• In-force policy counts as of June 30, 2005 versus June 30, 2004 have increased 14.8% and 22.1% for the commercial lines and specialty lines segments, respectively, primarily as a result of the factors discussed above with respect to the commercial and specialty lines segment.

20

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

• Realized average rate increases on renewal business approximating 0.8%, 2.9%, and 15.9% for the commercial, specialty and personal lines segments, respectively.

This growth was offset in part due to:

• Liberty American Insurance Group, Inc.’s planned shift in product mix of reducing mobile homeowners product policies and increasing homeowners product policies. As a result, mobile homeowners gross written premium decreased $27.6 million and homeowners gross written premium increased $5.8 million. Additionally, it is anticipated that the shift in product mix from mobile homeowners products to homeowners products will result in approximately $18.0 million of lower mobile homeowners gross written premiums during the remaining six months of 2005 compared to the same period in 2004.

• In-force policy counts for the personal lines segment decreased 31.3%, resulting from a decrease in the in-force counts for the mobile homeowners’ product of 46.7% and an increase in in-force policy counts for the homeowners’ product of 63.5%, as a result of the planned shift in product mix.

• An automobile leasing customer and an automobile excess liability customer decision to self-insure business previously written by the Company. As a result, gross written premiums for the commercial lines segment were reduced by $28.1 million. Additionally, it is anticipated that this decision to self insure will result in approximately $49.0 million of non renewed commercial automobile gross written premium during the remaining six months of 2005 compared to the same period in 2004.

• Re-underwriting the lawyers’ errors and omissions book of business, resulting in gross written premiums for the specialty lines segment being reduced by $7.0 million.

• Increased pricing competition for specialty lines segment products and for the specialty property product (commercial lines segment).

The respective net written premium and net earned premium changes for commercial lines, specialty lines and personal lines segments for the six months ended June 30, 2005 vs. June 30, 2004 were (in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2005 Net Written Premiums	$	402.3		$	75.9		$	25.9		$	504.1
2004 Net Written Premiums	$	309.8		$	78.2		$	38.8		$	426.8
Percentage Increase (Decrease)		29.9	%		(2.9	)%		(33.2	)%		18.1	%
2005 Net Earned Premiums	$	367.2		$	72.2		$	30.5		$	469.9
2004 Net Earned Premiums	$	280.2		$	61.0		$	19.8		$	361.0
Percentage Increase		31.0	%		18.4	%		54.0	%		30.2	%

The differing percentage changes in net written premiums and/or net earned premiums versus gross written premiums and/or gross earned premiums for the commercial lines, specialty lines and personal lines segments during the year results primarily from the following:

• A change in the Company’s reinsurance program whereby, effective April 1, 2003, the Company entered into a Quota Share reinsurance agreement covering substantially all of the Company’s lines of business. Under this agreement:

• The Company ceded 22% of its net written and earned premiums and loss and loss adjustment expenses for policies effective April 1, 2003 through December 31, 2003 and 10% of its commercial and specialty lines net written and earned premiums and loss and loss adjustment expenses for policies becoming effective during 2004. During the six months ended June 30, 2005 and 2004, the Company ceded $(0.4) million and $41.3 million of net written premiums, respectively, and $33.2 million and $76.1 million of net earned premiums, respectively.

21

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

• As a result of the January 1, 2005 casualty excess of loss treaty renewal, the reinsurance costs by product charged by the reinsurers are at a different level than that charged under the prior treaty to reflect their view of expected treaty experience. Accordingly, specialty lines segment product reinsurance costs were increased and commercial lines segment product reinsurance costs were decreased. The overall cost of the casualty excess of loss treaty reinsurance renewal is expected to approximate 8.1% of gross written casualty premiums.

• Certain of the Company’s reinsurance contracts have provisions whereby the Company is entitled to a return profit commission based on the ultimate experience of the underlying business ceded to the contracts. Under the terms of these contracts, the Company accrued profit commissions of $2.5 million and $8.7 million for the six months ended June 30, 2005 and 2004, respectively. The profit commissions reduce ceded written and earned premiums and increase net written and earned premiums.

• Certain of the Company’s reinsurance contracts have reinstatement provisions whereby the Company must pay additional reinsurance premiums to reinstate coverage provisions upon utilization of initial reinsurance coverage. The Company accrued $1.9 million of reinstatement reinsurance premium under its casualty excess of loss reinsurance treaty, during the six months ended June 30, 2005, as a result of changes in ultimate loss estimates. The reinstatement premium increased ceded and written premiums and reduced net written and earned premiums.

• On December 31, 2004, the Company terminated a quota share reinsurance agreement under which it ceded 15% of its mobile homeowners and homeowners business (personal lines segment). Upon termination the Company increased its unearned premium reserve and net written premium by $5.7 million.

          Net Investment Income: Net investment income approximated $28.9 million for the six months ended June 30, 2005 and $20.8 million for the same period of 2004. Total investments grew to $1,738.0 million at June 30, 2005 from $1,325.4 million at June 30, 2004. The growth in investment income is due to increased investments which arose from investing net cash flows provided from operating activities. The Company’s average duration of its fixed income portfolio was 4.1 years at June 30, 2005 and June 30, 2004. The Company’s taxable equivalent book yield on its fixed income holdings approximated 4.8% at June 30, 2005, compared to 4.7% at June 30, 2004. Net investment income was reduced by $0.8 million and $2.3 million for the six months ended June 30, 2005 and 2004, respectively, due to the interest credit on the Funds Held Account balance pursuant to the Company’s quota share reinsurance agreement (see Note 8).

          The total return, which includes the effects of both income and price returns on securities, of the Company’s fixed income portfolio was 2.26% and 0.23% for the six months ended June 30, 2005 and 2004, respectively, and was similar to the Lehman Brothers Intermediate Aggregate Bond Index (“the Index”) total return of 1.85% and 0.25% for the same periods, respectively. The Company expects some variation in its portfolio’s total return compared to the Index because of the differing sector, security and duration composition of its portfolio as compared to the Index.

          Net Realized Investment Gain: Net realized investment gains were $11.1 million for the six months ended June 30, 2005 and $0.7 million for the same period in 2004. The Company realized net investment gains of $3.6 million and $10.8 million from the sale of fixed maturity and equity securities, respectively, for the six months ended June 30, 2005, and $0 million and $0.2 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation. The $10.8 million net realized gains from the sale of equity securities included approximately $11.0 million of net realized gains as a result of the liquidation of certain of the Company’s equity portfolios following the Company’s decision to change four of its common stock investment managers. Net realized investment gain was reduced by $3.2 million for the six months ended June 30, 2005 due to the recognized loss of the change in fair value of a cash flow hedge entered into by the Company for which the forecasted transaction did not occur (see Note 5).

22

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

The Company realized net investment gains of $0.8 million and $2.5 million from the sale of fixed maturity and equity securities, respectively, for the six months ended June 30, 2004, and $2.6 million in non-cash realized investment losses for fixed maturity investments as a result of the Company’s impairment evaluation.

          Other Income: Other income approximated $0.8 million for the six months ended June 30, 2005 and $2.2 million for the same period of 2004. Other income consists primarily of commissions earned on brokered personal lines business, and to a lesser extent brokered commercial lines business. The decrease in other income is due primarily to reduced commissions earned on brokered personal lines business due to termination of certain brokering agreements during 2004.

          Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses increased $38.7 million (19.0%) to $242.3 million for the six months ended June 30, 2005 from $203.6 million for the same period of 2004, and the loss ratio decreased to 51.6% in 2005 from 56.4% in 2004. This increase in net loss and loss adjustment expenses was primarily due to:

• A 30.2% growth in net earned premiums

• A $3.0 million increase in gross and net loss and loss adjustment expenses due to estimated catastrophe losses from Florida hailstorms in March, 2005. The hailstorm losses were incurred in the personal lines segment.

These increases to the loss and loss adjustment expenses were offset in part by:

• Reserve actions taken during the six months ended June 30, 2005 wherein the estimated net unpaid loss and loss adjustment expenses for accident years 2004 and prior were decreased by $7.4 million.

	Net Basis
(In millions)	increase (decrease)
Accident Year 2004	$	(7.7	)
Accident Year 2003		(0.3	)
Accident Year 2002		(1.9	)
Accident Years 2001 and prior		2.5
Total	$	(7.4	)

The decrease in estimated net loss and loss adjustment expenses was principally due to a lower loss estimate for commercial property policies for the 2004 accident year as a result of better than expected claim frequency.

The change in the estimate for gross unpaid loss and loss adjustment expenses is as follows:

	Gross Basis
(In millions)	increase (decrease)
Accident Year 2004	$	(19.7	)
Accident Year 2003		3.0
Accident Year 2002		19.2
Accident Years 2001 and prior		4.8
Total	$	7.3

The overall increase in estimated gross unpaid loss and loss adjustment expenses was principally due to increased program umbrella loss estimates for the 2002 and 2003 accident years due to higher than expected claim severity, and increased loss estimates for general liability and commercial automobile policies for the 2001 and prior accident years. Additionally, the increase in the program umbrella loss

23

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

estimates for the 2002 accident year resulted in the Company accruing approximately $1.7 million of reinstatement reinsurance premium under its casualty excess of loss reinsurance treaty.

The decrease in estimated gross unpaid loss and loss adjustment expenses for accident year 2004 was principally due to lowering the gross loss estimate for Hurricane Jeanne and a lower loss estimate for commercial property policies as a result of better than expected claim frequency. These decreases were partially offset by a higher gross loss estimate for professional liability excess policies due to higher than expected claim severity.

During the six months ended June 30, 2005 and 2004, the Company also ceded $33.2 million and $76.1 million of net earned premium, respectively, and $15.5 million and $38.1 million in net loss and loss adjustment expenses, respectively, pursuant to quota share reinsurance agreements (see Premiums).

During the six months ended June 30, 2005, the Company revised its December 31, 2004 estimates for gross losses due to Hurricanes Charley, Frances, Ivan and Jeanne as noted below (in millions):

Hurricane:	Charley		Frances			Ivan			Jeanne			Total
Change in gross loss estimate Increase (Decrease)	$	7.9	$	(5.5	)	$	(2.4	)	$	(26.2	)	$	(26.2	)

The higher loss estimate for Hurricane Charley, which, when combined with the aggregate loss estimates for Hurricanes Frances and Jeanne, resulted in approximately an additional $0.7 million of Hurricane Jeanne losses for the six months ended June 30, 2005 to be in excess of the aggregate $80.0 million coverage limit available on the $40.0 million excess $50.0 million loss layer of the Company’s catastrophe reinsurance program. The additional $0.7 million in Hurricane Jeanne losses reduced net income for the six months ended June 30, 2005 by $0.4 million.

The multiple hurricane events in 2004 resulted in accelerating the recognition of catastrophe reinsurance premium expense during 2004 as a result of utilizing certain of the catastrophe reinsurance coverages. Based upon the June 30, 2005 hurricane gross loss estimates, approximately $1.2 million of previously accelerated reinsurance premium expense was reversed during the six months ended June 30, 2005, increasing net income by $0.8 million.

Based upon the current catastrophe loss estimates, recoveries for Hurricane Frances are near the limit of the Company’s catastrophe reinsurance program. Catastrophe reinsurance recoveries available to the Company for development on Hurricane Frances beyond current estimates are dollar for dollar for approximately the next $0.8 million of additional increase in catastrophe losses, and 34% of the next $50.0 million of additional increase in catastrophe losses. Because of the interaction of the Florida Hurricane Catastrophe Fund (FHCF) and the Company’s open market reinsurance program, development on Hurricane Charley would reduce the coverage limit available from the FHCF for Hurricane Frances. Additionally since the hurricane losses currently exceed the aggregate $80.0 million coverage limit available on the $40.0 million excess $50.0 million coverage loss layer of the Company’s catastrophe reinsurance program, each dollar of additional development on Hurricane Charley in this layer would diminish coverage available for Hurricane Jeanne losses and result in approximately an additional $.085 of losses being retained by the Company.

          Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other underwriting expenses increased $23.2 million (23.5%) to $121.8 million for the six months ended June 30, 2005 from $98.6 million for the same period of 2004 and the expense ratio decreased to 25.9% in 2005 from 27.3% in 2004. The increase in acquisition costs and other underwriting expenses was due primarily to the 30.2% growth in net earned premiums and offset in part due to the decrease in gross written premiums for the commercial automobile excess liability product which possesses a relative higher acquisition cost relative to the Company’s other products. For the six months ended June 30, 2005 and 2004 the Company ceded $33.2 million and $76.1 million, respectively, of net earned premium and earned $15.0 million and $32.5 million, respectively, in ceding commission under a quota share agreement (see Premiums).

24

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

          Other Operating Expenses: Other operating expenses increased $5.5 million to $9.9 million for the six months ended June 30, 2005 from $4.4 million for the same period of 2004. $2.0 million of the increase is due to a bonus accrual related to the terms of an employment agreement with the Company’s founder and Chairman. The remaining increase in the level of expenses is primarily due to the growth of the business, offset in part by reduced commissions paid on brokered personal lines business (see Other Income).

          Income Tax Expense: The Company’s effective tax rate for the six months ended June 30, 2005 and 2004 was 32.1% and 31.6%, respectively. The effective rates differed from the 35% statutory rate principally due to investments in tax-exempt securities and the relative proportion of tax-exempt income to total income before tax.

Results of Operations (Three Months ended June 30, 2005 vs. June 30, 2004)

          Premiums: Premium information for the three months ended June 30, 2005 vs. June 30, 2004 for the Company’s business segments is as follows (in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2005 Gross Written Premiums	$	211.8		$	48.2		$	24.3		$	284.3
2004 Gross Written Premiums	$	198.7		$	46.4		$	35.3		$	280.4
Percentage Increase (Decrease)		6.6	%		3.9	%		(31.2	)%		1.4	%
2005 Gross Earned Premiums	$	209.3		$	47.2		$	23.7		$	280.2
2004 Gross Earned Premiums	$	191.4		$	41.6		$	25.7		$	258.7
Percentage Increase (Decrease)		9.4	%		13.5	%		(7.8	)%		8.3	%

The overall growth in gross written premiums is primarily attributable to the following:

• Prospecting efforts by marketing personnel in conjunction with long term relationships formed by the Company’s marketing Regional Vice Presidents continue to result in additional prospects and increased premium writings, most notably for the Company’s various commercial package and non profit management liability product lines.

• Continued expansion of marketing efforts relating to commercial lines and specialty lines products through the Company’s field organization and preferred agents.

• In-force policy counts as of June 30, 2005 versus June 30, 2004 have increased 14.8% and 22.1% for the commercial lines and specialty lines segments, respectively, primarily as a result of the factors discussed above with respect to the commercial and specialty lines segment.

• Realized average rate increases on renewal business approximating 2.6% and 19.2% for the specialty and personal lines segments, respectively.

This growth was offset in part due to:

• Liberty American Insurance Group, Inc.’s planned shift in product mix of reducing mobile homeowners product policies and increasing homeowners product policies. As a result, mobile homeowners gross written premium decreased $16.6 million and homeowners gross written premium increased $4.2 million.

• In-force policy counts for the personal lines segment decreased 31.3%, resulting from a decrease in the mobile homeowners’ product of 46.7%, and an increase in in-force policy counts for the homeowners’ product of 63.5%, as a result of the planned shift in product mix.

25

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

• An automobile leasing customer and an automobile excess liability customer decision to self-insure business previously written by the Company. As a result, gross written premiums for the commercial lines segment were reduced by $25.1 million;

• Realized average rate decreases on renewal business approximating 0.4% for the commercial lines segment.

• Re-underwriting the professional liability excess and lawyers errors and omissions books of business, resulting in gross written premiums for the specialty lines segment being reduced by $1.6 million and $4.1 million, respectively.

• Increased pricing competition for specialty lines segment products and for the specialty property product (commercial lines segment).

The respective net written premium and net earned premium changes for commercial lines, specialty lines and personal lines segments for the three months ended June 30, 2005 vs. June 30, 2004 were (in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2005 Net Written Premiums	$	198.1		$	39.6		$	12.7		$	250.4
2004 Net Written Premiums	$	165.1		$	38.1		$	21.0		$	224.2
Percentage Increase (Decrease)		20.0	%		3.9	%		(39.5	)%		11.7	%
2005 Net Earned Premiums	$	183.5		$	36.8		$	12.8		$	233.1
2004 Net Earned Premiums	$	146.7		$	31.6		$	11.3		$	189.6
Percentage Increase (Decrease)		25.1	%		16.5	%		13.3	%		23.0	%

The differing percentage changes in net written premiums and/or net earned premiums versus gross written premiums and/or gross earned premiums for the commercial lines, specialty lines and personal lines segments during the year results primarily from the following:

• A change in the Company’s reinsurance program whereby, effective April 1, 2003, the Company entered into a Quota Share reinsurance agreement covering substantially all of the Company’s lines of business. Under this agreement:

• The Company ceded 22% of its net written and earned premiums and loss and loss adjustment expenses for policies effective April 1, 2003 through December 31, 2003 and 10% of its commercial and specialty lines net written and earned premiums and loss and loss adjustment expenses for policies becoming effective during 2004. During the three months ended June 30, 2005 and 2004, the Company ceded $(0.2) million and $21.5 million of net written premiums, respectively, and $14.4 million and $35.8 million of net earned premiums, respectively.

• As a result of the January 1, 2005 casualty excess of loss treaty renewal, the reinsurance costs by product charged by the reinsurers are at a different level than that charged under the prior treaty to reflect their view of expected treaty experience. Accordingly, specialty lines segment product reinsurance costs were increased and commercial lines segment product reinsurance costs were decreased. The overall cost of the casualty excess of loss treaty reinsurance renewal is expected to approximate 8.1% of gross written casualty premiums.

• Certain of the Company’s reinsurance contracts have provisions whereby the Company is entitled to a return profit commission based on the ultimate experience of the underlying business ceded to the contracts. Under the terms of these contracts, the Company accrued profit commissions of $1.2 million and $4.6 million for the three months ended June 30, 2005 and 2004, respectively. The profit commissions reduce ceded written and earned premiums and increase net written and earned premiums.

26

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

          Net Investment Income Net investment income approximated $15.4 million for the three months ended June 30, 2005 and $10.8 million for the same period of 2004. Total investments grew to $1,738.0 million at June 30, 2005 from $1,325.4 million at June 30, 2004. The growth in investment income is due to increased investments which arose from investing net cash flows provided from operating activities. The Company’s average duration of its fixed income portfolio was 4.1 years at June 30, 2005 and June 30, 2004. The Company’s taxable equivalent book yield on its fixed income holdings approximated 4.8% at June 30, 2005, compared to 4.7% at June 30, 2004. Net investment income was reduced by $0.3 million and $1.2 million for the three months ended June 30, 2005 and 2004, respectively, due to the interest credit on the Funds Held Account balance pursuant to the Company’s quota share reinsurance agreement (see Note 8).

          The total return, which includes the effects of both income and price returns on securities, of the Company’s fixed income portfolio was 2.56% and (1.57)% for the three months ended June 30, 2005 and 2004, respectively, and was similar to the Lehman Brothers Intermediate Aggregate Bond Index (“the Index”) total return of 2.42% and (1.98)% for the same periods, respectively. The Company expects some variation in its portfolio’s total return compared to the Index because of the differing sector, security and duration composition of its portfolio compared to the index.

          Net Realized Investment Gain (Loss): Net realized investment gains (losses) were $0.3 million for the three months ended June 30, 2005 and $(1.1) million for the same period in 2004. The Company realized net investment gains of $2.6 million and $0.6 million from the sale of fixed maturity and equity securities, respectively, for the three months ended June 30, 2005, and $0 million and $0.1 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation. The $0.6 million net realized gains from the sale of equity securities included approximately $1.6 million of net realized gains as a result of the liquidation of one of the Company’s equity portfolios following the Company’s decision to change one of its common stock investment managers during the three months ended June 30, 2005. Net realized investment gain was reduced by $2.9 million for the three months ended June 30, 2005 due to the recognized loss of the change in fair value of a cash flow hedge entered into by the Company for which the forecasted transaction did not occur (see Note 5).

The Company realized net investment gains of $0.2 million and $0.4 million from the sale of fixed maturity and equity securities, respectively, for the three months ended June 30, 2004, and $1.7 million in non-cash realized investment losses for fixed maturity investments as a result of the Company’s impairment evaluation.

          Other Income: Other income approximated $0.3 million for the three months ended June 30, 2005 and $0.8 million for the same period of 2004. Other income primarily consists of commissions earned on brokered personal lines business, and to a lesser extent brokered commercial lines business. The decrease in other income is due primarily to reduced commissions earned on brokered personal lines business due to termination of certain brokering agreements during 2004.

          Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses increased $8.5 million (8.0%) to $115.8 million for the three months ended June 30, 2005 from $107.3 million for the same period of 2004 and the loss ratio decreased to 49.7% in 2005 from 56.6% in 2004. This increase in net loss and loss adjustment expenses was primarily due to:

• A 23.0% growth in net earned premiums

     This increase to the loss and loss adjustment expenses was offset in part due to:

• Reserve actions taken during the three months ended June 30, 2005, wherein the Company decreased the estimated net unpaid loss and loss adjustment expenses for accident years 2004 and prior, respectively, by the following amounts:

27

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

	Net Basis
(In millions)	increase (decrease)
Accident Year 2004	$	(3.4	)
Accident Year 2003		—
Accident Year 2002		(1.9	)
Accident Years 2001 and prior		(2.8	)
Total	$	(8.1	)

The decrease in estimated net unpaid loss and loss adjustment expenses for accident year 2004 was principally due to a lower net loss estimate for commercial property policies as a result of better than expected claim frequency. The decrease in estimated net unpaid loss and loss adjustment expenses for accident years 2002 and prior was principally due to better than expected case incurred loss development across most commercial and specialty lines of business.

The change in the estimate for gross unpaid loss and loss adjustment expenses is as follows:

	Gross Basis
(In millions)	increase (decrease)
Accident Year 2004	$	5.2
Accident Year 2003		0.6
Accident Year 2002		(0.9	)
Accident Years 2001 and prior		(0.9	)
Total	$	4.0

The increase in estimated gross unpaid loss and loss adjustment expenses for accident years 2004 and 2003 was principally due to a higher gross loss estimate for professional liability excess policies due to higher than expected claim severity.

The decrease in estimated gross unpaid loss and loss adjustment expenses for accident years 2002 and prior was principally due to better than expected case incurred loss development across most commercial and specialty lines of business.

During the three months ended June 30, 2005, the Company revised its March 31, 2005 estimates for gross losses due to Hurricanes Charley, Frances, Ivan and Jeanne as noted below (in millions):

Hurricane:	Charley		Frances		Ivan		Jeanne			Total
Change in gross loss estimate Increase (Decrease)	$	0.7	$	0.9	$	0.8	$	(3.6	)	$	(1.2	)

The higher loss estimate for Hurricane Charley, which, when combined with the aggregate loss estimates for Hurricanes Frances and Jeanne, resulted in approximately an additional $0.1 million of Hurricane Jeanne losses in the quarter ended June 30, 2005 to be in excess of the aggregate $80.0 million coverage limit available on the $40.0 million excess $50.0 million loss layer of the Company’s catastrophe reinsurance program. The $3.6 million reduction in the loss estimate for Hurricane Jeanne increased net income for the first quarter 2005 by $0.3 million.

The multiple hurricane events in 2004 resulted in accelerating the recognition of catastrophe reinsurance premium expense during 2004 as a result of utilizing certain of the catastrophe reinsurance coverages. Based upon the June 30, 2005 hurricane gross loss estimates, approximately $0.2 million of previously accelerated reinsurance premium expense was reversed in the second quarter 2005, increasing net income by $0.1 million.

28

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

Based upon the current catastrophe loss estimates, recoveries for Hurricane Frances are approaching the limit of the Company’s catastrophe reinsurance program. Catastrophe reinsurance recoveries available to the Company for development on Hurricane Frances beyond current estimates are dollar for dollar for approximately the next $2.3 million of additional increase in catastrophe losses, and 34% of the next $50.0 million of additional increase in catastrophe losses. Because of the interaction of the Florida Hurricane Catastrophe Fund (FHCF) and the Company’s open market reinsurance program, development on Hurricane Charley would reduce the coverage limit available from the FHCF for Hurricane Frances. Additionally since the hurricane losses currently exceed the aggregate $80.0 million coverage limit available on the $40.0 million excess $50.0 million coverage loss layer of the Company’s catastrophe reinsurance program, each dollar of additional development on Hurricane Charley in this layer would diminish coverage available for Hurricane Jeanne losses and result in approximately an additional $.085 of losses being retained by the Company.

          Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other underwriting expenses increased $6.5 million (12.7%) to $57.8 million for the three months ended June 30, 2005 from $51.3 million for the same period of 2004 and the expense ratio decreased to 24.8% in 2005 from 27.0% in 2004. The increase in acquisition costs and other underwriting expenses was due primarily to the 23.0% growth in net earned premiums and offset in part due to the decrease in gross written premiums for the commercial automobile excess liability product (see Premiums) which possesses a higher acquisition cost relative to the Company’s other products. Additionally, for the three months ended June 30, 2005 and 2004 the Company ceded $14.4 million and $35.8 million, respectively, of net earned premium and earned $6.6 million and $17.3 million, respectively, in ceding commission under a quota share agreement (see Premiums).

          Other Operating Expenses: Other operating expenses increased $3.4 million to $6.0 million for the three months ended June 30, 2005 from $2.6 million for the same period of 2004. $2.0 million of the increase is due to a bonus accrual recorded during 2005 related to the terms of an employment agreement with the Company’s founder and Chairman. The remaining increase in the level of expenses is primarily due to the growth of the business, offset in part by reduced commissions paid on brokered personal lines business (see Other Income).

          Income Tax Expense: The Company’s effective tax rate for the three months ended June 30, 2005 and 2004 was 32.1% and 31.4%, respectively. The effective rates differed from the 35% statutory rate principally due to investments in tax-exempt securities and the relative proportion of tax-exempt income to total income before tax.

Liquidity and Capital Resources

          For the six months ended June 30, 2005, the Company’s investments experienced unrealized investment depreciation of $10.5 million, net of the related deferred tax benefit of $5.6 million. At June 30, 2005, the Company had total investments with a carrying value of $1,738.0 million, of which 92.0% consisted of investments in fixed maturity securities, including U.S. treasury securities and obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, corporate debt securities, collateralized mortgage, mortgage pass-through and asset backed securities. The collateralized mortgage, mortgage pass-through, and asset backed securities consist of amortized securities possessing favorable pre-payment and/or extension risk profiles. The remaining 8.0% of the Company’s total investments consisted primarily of publicly traded common stock securities.

          During 2004, the Company experienced catastrophe losses attributable to Hurricanes Charley, Frances, Ivan, and Jeanne. The catastrophe losses primarily impacted the Company’s personal lines segment and, to a lesser extent, its commercial lines segment. The gross catastrophe loss and loss adjustment expense estimates as a result of these hurricanes was $594.0 million for the personal lines segment and $40.0 million for the commercial lines segment.

          Loss estimates may still change in the future due in part to the number of claims which have not yet been completely remediated or for which the property covered by the claim has not been repaired. Under the Company’s catastrophe reinsurance programs in place at the time of these hurricane events, the Company had a $3.5 million pre-tax per occurrence loss retention for its personal lines catastrophe losses and a $7.0 million pre-tax per occurrence

29

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

loss retention for its commercial lines catastrophe losses. The Company estimates its net aggregate retention losses for the four hurricane events is $47.5 million.

          The Company’s catastrophe reinsurance program consists of its open market (“OM”) program, which has been placed principally with large reinsurers that are rated at least “A” (“Excellent”) by A.M. Best, and the Florida Hurricane Catastrophe Fund (“FHCF”). Although the Company believes that it will collect all or substantially all of its reinsurance recoverables, there can be no assurance of this. The Company believes it will have adequate funds to pay the estimated hurricane catastrophe losses noted above. The Company’s estimated total reinsurance recoverables, reinsurance recoverables on paid losses and loss adjustment expenses, catastrophe reinsurance billings and reinsurance collections with respect to its catastrophe reinsurance programs as of June 30, 2005 for the above mentioned hurricane events are summarized in the table below.

	Total
	FHCF		OM		Total
			(In Millions)
Personal Lines Segment:
Total Estimated Loss and LAE Recoverables	$	168.4	$	402.5	$	570.9
Recoverable on Catastrophe Loss and LAE Paid	$	164.9	$	391.1	$	556.0
Catastrophe Loss and LAE Billed to Reinsurers	$	168.2	$	378.6	$	546.8
Catastrophe Loss and LAE Collected from Reinsurers	$	167.8	$	378.6	$	546.4
Commercial Lines Segment:
Total Estimated Loss and LAE Recoverables	$	1.7	$	14.0	$	15.7
Recoverable on Catastrophe Loss and LAE Paid	$	1.7	$	4.6	$	6.3
Catastrophe Loss and LAE Billed to Reinsurers	$	1.7	$	4.6	$	6.3
Catastrophe Loss and LAE Collected from Reinsurers	$	1.2	$	3.7	$	4.9

          The Company produced net cash from operations of $170.6 million and $183.3 million for the six months ended June 30, 2005 and 2004, respectively. Sources of operating funds consist primarily of net premiums written and investment income. Funds are used primarily to pay claims and operating expenses and for the purchase of investments. The source of cash from operations for the six months ended June 30, 2005 was primarily generated from premium growth during the current year due to increases in the number of policies written and, to a lesser extent, price increases realized on renewal business. Net loss and loss expense payments were $143.4 million and $129.6 million, respectively, for the six months ended June 30, 2005 and 2004. Management believes that the Company has adequate liquidity to pay all claims and meet all other cash needs.

          Two of the Company’s insurance subsidiaries are members of the Federal Home Loan Bank of Pittsburgh (“FHLB”). A primary advantage of FHLB membership is the ability of members to access credit products from a reliable capital markets provider. The availability of any one member’s access to credit is based upon its FHLB eligible collateral. The insurance subsidiaries in the past have utilized a portion of their borrowing capacity to purchase a diversified portfolio in investment grade floating rate securities. These purchases were funded by floating rate FHLB borrowings to achieve a positive spread between the rate of interest on these securities and borrowing rates. At June 30, 2005 the insurance subsidiaries’ unused borrowing capacity was $347.9 million. The remaining borrowing capacity provides an immediately available line of credit. Due to declining interest rate spreads, the Company prepaid all outstanding Federal Home Loan Bank loans during the first quarter of 2005.

          The NAIC’s risk-based capital method is designed to measure the acceptable amount of capital and surplus an insurer should have, based on the inherent specific risks of each insurer. The adequacy of a company’s actual capital and surplus is evaluated by a comparison to the risk-based capital results. Insurers failing to meet minimum risk-based capital requirements may be subject to scrutiny by the insurer’s domiciliary insurance department and ultimately rehabilitation or liquidation. Based on the standards currently adopted, the Company’s insurance subsidiaries capital and surplus is in excess of the prescribed risk-based capital requirements.

30

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

New Accounting Pronouncements

          On March 29, 2005, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”), which provides guidance on accounting for share-based payments. SAB 107 summarizes the views of the SEC regarding the interaction between Statement of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123R), “Share-Based Payment” and certain SEC rules and regulations and provides the SEC’s views regarding the valuation of share-based payment arrangements for public companies. The Company will utilize the guidance provided by SAB 107 when implementing SFAS 123R.

          On April 14, 2005 the SEC announced the adoption of a new rule that amends the compliance dates for the adoption of SFAS 123R. Under SFAS 123R, public companies would have been required to implement the standard as of the beginning of the first interim or annual period that begins after June 15, 2005. The SEC’s new rule allows public companies to implement SFAS 123R at the beginning of the next fiscal year after June 15, 2005. The Company intends to adopt the provisions of SFAS 123R effective January 1, 2006.

Forward-Looking Information

          Certain information included in this report and other statements or materials published or to be published by the Company are not historical facts but are forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new and existing products, expectations for market segment and growth, and similar matters. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, results of the Company’s business, and the other matters referred to above include, but are not limited to those matters set forth under the caption “General”, above. The Company does not intend to publicly update any forward looking statement, except as may be required by law.

31

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          The Company’s financial instruments are subject to the market risk of potential losses from adverse changes in market rates and prices. The primary market risks to the Company are equity price risk associated with investments in equity securities and interest rate risk associated with investments in fixed maturities. The Company has established, among other criteria, duration, asset quality and asset allocation guidelines for managing its investment portfolio market risk exposure. The Company’s investments are held for purposes other than trading and consist of diversified issuers and issues.

          The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates and shows the effect of hypothetical changes in interest rates as of June 30, 2005. The selected hypothetical changes do not indicate what could be the potential best or worst case scenarios (dollars in thousands). The information is presented in U.S. dollar equivalents, which is the Company’s reporting currency.

				Estimated		Hypothetical Percentage
			Hypothetical Change	Fair Value after		Increase (Decrease) in
	Estimated		in Interest Rates	Hypothetical Changes					Shareholders’
Investments	Fair Value		(bp=basis points)	in Interest Rates		Fair Value			Equity
Total Fixed Maturities Available For Sale	$	1,599,748	200 bp decrease	$	1,720,295		7.5	%		10.3	%
			100 bp decrease	$	1,661,621		3.9	%		5.3	%
			50 bp decrease	$	1,631,882		2.0	%		2.8	%
			50 bp increase	$	1,566,142		(2.1	)%		(2.9	)%
			100 bp increase	$	1,532,150		(4.2	)%		(5.8	)%
			200 bp increase	$	1,465,058		(8.4	)%		(11.5	)%

32

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

Item 4. Controls and Procedures

     (a) Evaluation of Disclosure Controls and Procedures. The Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are designed with the objective of providing reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives.

     An evaluation was performed by management, with the participation of the Company’s chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

     (b) Changes in Internal Controls. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

33

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported in the Company’s Form 8-K filed with the Securities and Exchange Commission (“SEC”) on June 17, 2005, the Company received a subpoena on June 15, 2005 from the SEC requesting documents and other information regarding any non-traditional insurance arrangements entered into by certain subsidiaries of the Company with Gen Re Corporation and its affiliates. The Company has supplied documents to the SEC in response to such subpoena.

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

The Company’s purchases of its common stock during the second quarter of 2005 are shown in the following table:

						(c) Total Number of
						Shares Purchased as		(d) Approximate Dollar
						Part of Publicly		Value of Shares That May
	(a) Total Number of			(b) Average Price		Announced Plans or		Yet Be Purchased Under
Period	Shares Purchased			Paid per Share		Programs		the Plans or Programs
April 1 – April 30		175	(1)	$	53.27		—		—
								$	45,000,000	(2)
May 1 – May 31		175	(1)	$	35.93		—		—
								$	45,000,000	(2)
June 1 – June 30		100	(1)	$	57.67		—		—
								$	45,000,000	(2)
Total

(1)	Such shares were issued under the Company’s Employee Stock Purchase Plan and were repurchased by the Company upon the employee’s termination.
(2)	The Company’s total stock purchase authorization, which was publicly announced in August 1998 and subsequently increased, amounted to $75.3 million, of which $30.3 million has been utilized.

Item 3. Defaults Upon Senior Securities

Not applicable.

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

At the Company’s annual meeting of shareholders held on April 28, 2005 the following nominees were elected to the Board of Directors:

34

Name	Votes For		Votes Withheld
Michael J. Cascio		20,061,202		1,178,727
Elizabeth H. Gemmill		21,049,979		189,950
James J. Maguire		19,162,775		2,077,154
James J. Maguire, Jr.		19,163,118		2,076,811
Margaret M. Mattix		20,547,514		692,415
Michael J. Morris		18,660,963		2,528,966
Donald A. Pizer		21,050,014		189,915
Dirk A. Stuurop		21,050,014		189,915
Sean S. Sweeney		19,162,560		2,077,369

The following other matters were approved at the Annual Meeting:

	Votes For		Votes Against		Abstentions		Broker-Non Votes
Approval of the Amended and Restated Employees’ Stock Incentive and Performance Based Compensation Plan		11,191,225		8,606,304		44,789		1,397,611

	Votes For		Votes Against		Abstentions		Broker-Non Votes
Approval of the Appointment of PricewaterhouseCoopers, LLP as Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2005		21,174,451		58,144		7,334

Item 5. Other information

     Not applicable.

35

Item 6. Exhibits

Exhibits:

Exhibit No.	Description
3.1**	Amendment to the Company’s bylaws effective as of April 29, 2005
10.1*	Excess Catastrophe Reinsurance Contract effective June 1, 2004 with the Subscribing Reinsurers.
10.2*	65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract effective September 1, 2004 with the Subscribing Reinsurers.
10.3*	$45 million excess of $195 million Florida Only Catastrophe Reinsurance Contract effective September 10, 2004 with the Subscribing Reinsurers.
10.4*	$6.5 million excess of $3.5 million Florida Only Fifth Event Catastrophe Reinsurance Contract effective September 24, 2004 with the Subscribing Reinsurers.
10.5*	$50 million excess of $240 million Florida Only Catastrophe Reinsurance Contract effective October 1, 2004 with the Subscribing Reinsurers.
10.6*	$40 million excess of $50 million Florida Only Third Event Catastrophe Reinsurance Contract effective October 1, 2004 with the Subscribing Reinsurers.
10.7*	$50 million excess of $140 million Florida Only Catastrophe Excess Reinsurance Contract effective October 1, 2004 with the Subscribing Reinsurers.
10.8*	Florida Hurricane Catastrophe Fund Reinsurance Contract effective June 1, 2005 (Liberty American Insurance Company)
10.9*	Florida Hurricane Catastrophe Fund Reinsurance Contract effective June 1, 2005 (Mobile USA Insurance Company)
10.10*	Excess Catastrophe Reinsurance Contract effective June 1, 2005 (Preliminary Agreement).
	The participating reinsurers on the $5.0 million excess of $5.0 million in coverage are Aspen Insurance Limited, AXA Re, Everest Reinsurance Company, Munchener Ruckversicherungs — Gesellschaf, Quanta Reinsurance LTD, Renaissance Reinsurance Limited (Bermuda), Rosemont Reinsurance LTD and Transatlantic Reinsurance Company at varying levels of participation.
	The participating reinsurers on the $10.0 million excess of $10 million in coverage are AXA Re, AXIS Specialty Limited (Bermuda), Everest Reinsurance Company, Munchener Ruckversicherungs — Gesellschaft, Partner Re (Bermuda), PXRE Reinsurance, Quanta Reinsurance LTD, Rosemont Reinsurance LTD, Sirius International Insurance Corporation , Swiss Reinsurance America, Swiss Re Underwriting Agency Inc. and Transatlantic Reinsurance Co. at varying levels of participation.
	The participating reinsurers on the $20.0 million excess of $20.0 million in coverage are American Re Broker Market, AXA Re, AXIS Specialty Limited (Bermuda), Everest Reinsurance Company, Hannover Re (Bermuda) Ltd., Munchener Ruckversicherungs — Gesellschaft, Partner Re (Bermuda), PXRE Reinsurance, Quanta Reinsurance LTD, Rosemont Reinsurance LTD, Sirius International Insurance Corporation, Swiss Reinsurance America, Transatlantic Reinsurance Co.and XL Re Limited at varying levels of participation.
	The participating reinsurers on the $60.0 million excess of $40.0 million in coverage are American Re Broker Market, AXA Re, AXIS Specialty Limited (Bermuda), Everest Reinsurance Company, Hannover Re (Bermuda) Ltd., Munchener Ruckversicherungs — Gesellschaft, Partner Re (Bermuda), PXRE Reinsurance, Quanta Reinsurance LTD, Rosemont Reinsurance LTD, Sirius International Insurance Corporation, Swiss Reinsurance America, Swiss Re Underwriting Agency Inc., Transatlantic Reinsurance Co., Syndicate #2020 and XL Re Limited at varying levels of participation.

36

Exhibit No.	Description
10.11*	Reinstatement Premium Protection Reinsurance Contract effective June1, 2005 (Preliminary Agreement). The participating reinsurers are ACE Tempest Reinsurance LTD, AXIS Specialty Limited, Everest Reinsurance Company, Munchener Ruckversicherungs – Gesellschaft and Rosemont Reinsurance LTD at varying levels of participation.
10.12*	Florida Only Excess Catastrophe Reinsurance Contract effective June 1, 2005 (Preliminary Agreement).
	The participating reinsurers on the $3.5 million excess of $3.5 million in coverage are Aspen Insurance UK LTD, Rosemont Reinsurance LTD, Ascot Insurance Services Limited, Syndicate #2623, Syndicate #0033, Syndicate #0623, Syndicate #0780, Syndicate #0958, Syndicate #2001 and Syndicate #2791 at varying levels of participation
	The participating reinsurers on the $13.0 million excess of $7.0 million in coverage are Ascot Insurance Services Limited, Aspen Insurance UK LTD, AXIS Specialty Limited (Bermuda ), AXA Re, Montpelier Reinsurance Ltd, Platinum Underwriters Re, Partner Re (Bermuda), PXRE Reinsurance, Rosemont Reinsurance LTD, Syndicate #2623, Syndicate #0033, Syndicate #0566, Syndicate #0623, Syndicate #0780, Syndicate #0958, Syndicate #2001, Syndicate #2003, Syndicate #2010 and Syndicate #2791 at varying levels of participation.
	The participating reinsurers on the $15.0 million excess of $20 million in coverage are Ascot Insurance Services Limited , Aspen Insurance UK LTD, AXIS Specialty Limited (Bermuda ), AXA Re, General Reinsurance Corporation, Montpelier Reinsurance Ltd         , Partner Re (Bermuda), Platinum Underwriters Re, PXRE Reinsurance, Rosemont Reinsurance LTD, Syndicate #2623, Syndicate #0566, Syndicate #0623, Syndicate #0780, Syndicate #0958, Syndicate #2001, Syndicate #2003, Syndicate #2010 and Syndicate #2791 at varying levels of participation.
	The participating reinsurers on the $25.0 million excess of $35.0 million layer in coverage are Ascot Insurance Services Limited , Aspen Insurance UK LTD, AXIS Specialty Limited (Bermuda ), AXA Re, General Reinsurance Corporation, Hannover Re (Bermuda) Ltd, Montpelier Reinsurance Ltd, Partner Re (Bermuda), Platinum Underwriters Re, PXRE Reinsurance, Rosemont Reinsurance LTD, XL Re Limited , Syndicate #2623, Syndicate #0566, Syndicate #0623, Syndicate #0780 and Syndicate #2010 at varying levels of participation.
	The participating reinsurers on the $60.0 million excess of $60.0 million in coverage are American Re Broker Market, Ascot Insurance Services Limited, AXIS Specialty Limited (Bermuda ), AXA Re, General Reinsurance Corporation , Hannover Re (Bermuda) Ltd., Montpelier Reinsurance Ltd., Munchener Ruckversicherungs — Gesellschaft, Partner Re (Bermuda), PXRE Reinsurance, Rosemont Reinsurance LTD, Swiss Re Underwriting Agency Inc., Transatlantic Reinsurance Co., XL Re Limited, Syndicate #0566, Syndicate #0626, Syndicate #2001, Syndicate #2003, Syndicate #2010, Syndicate #2020 and Syndicate #2791 at varying levels of participation.
	The participating reinsurers on the $65.0 million excess of $120.0 million in coverage are American Re Broker Market, Ascot Insurance Services Limited, AXIS Specialty Limited (Bermuda), AXA Re, Hannover Re (Bermuda) Ltd., Montpelier Reinsurance Ltd., Munchener Ruckversicherungs — Gesellschaft, Partner Re (Bermuda), PXRE Reinsurance, Rosemont Reinsurance LTD, Swiss Re Underwriting Agency Inc., Transatlantic Reinsurance Co., XL Re Limited, Syndicate #2001, Syndicate #2020 and Syndicate #2791 at varying levels of

37

Exhibit No.	Description
	participation.
10.13*	Florida Only Reinstatement Premium Protection Reinsurance Contract effective June 1, 2005 (Preliminary Agreement). The participating reinsurers are ACE Tempest Reinsurance LTD, Aspen Insurance UK LTD, AXIS Specialty Limited, Hannover Re (Bermuda) Ltd., Rosemont Reinsurance LTD, Syndicate #0958 and Syndicate #2001 at varying levels of participation.
10.14*	Third Event Catastrophe Reinsurance Contract effective September 3, 2004 with the Subscribing Reinsurers for 50% share.
10.15*	Third Event Catastrophe Reinsurance Contract effective September 3, 2004 with the Subscribing Reinsurers for 50% share.
10.16**	Amendment and Restatement of the Company’s Employees’ Stock Incentive and Performance Based Compensation Plan.
10.17***	Form of Stock Option Award Agreement.
10.18***	Form of Restricted Stock Award Agreement.
31.1*	Certification of the Company’s chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Company’s chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Company’s chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Company’s chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Filed herewith.
**	Filed as an Exhibit to the Company’s Form 8-K dated April 28, 2005 and incorporated by reference
***	Filed as an Exhibit to the Company’s Form 8-K dated June 9, 2005 and incorporated by reference.

38

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.

	PHILADELPHIA CONSOLIDATED HOLDING CORP.
	Registrant
Date August 15, 2005		James J. Maguire, Jr.
		James J. Maguire, Jr.
		President and Chief Executive Officer
		(Principal Executive Officer)
Date August 15, 2005		Craig P. Keller
		Craig P. Keller
		Executive Vice President, Secretary,
		Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

39

EX-10.1

Exhibit 10.1

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory (BRMA 51A)		1
IV	Exclusions		2
V	Retention and Limit		4
VI	Reinstatement		4
VII	Definitions		5
VIII	Other Reinsurance		6
IX	Florida Hurricane Catastrophe Fund		7
X	Loss Occurrence		7
XI	Loss Notices and Settlements		8
XII	Salvage and Subrogation		9
XIII	Reinsurance Premium		9
XIV	Late Payments		10
XV	Offset (BRMA 36D)		11
XVI	Access to Records (BRMA 1D)		11
XVII	Liability of the Reinsurer		11
XVIII	Net Retained Lines (BRMA 32E)		11
XIX	Errors and Omissions (BRMA 14F)		12
XX	Currency (BRMA 12A)		12
XXI	Taxes (BRMA 50C)		12
XXII	Federal Excise Tax (BRMA 17A)		12
XXIII	Reserve Requirements		13
XXIV	Insolvency		14
XXV	Arbitration		15
XXVI	Service of Suit		16
XXVII	Agency Agreement		16
XXVIII	Governing Law		17
XXIX	Confidentiality		17
XXX	Severability		17
XXXI	Intermediary (BRMA 23A)		17
	Schedule A

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies
(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 Property 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 — Term

A. This Contract shall become effective on June 1, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.

B. If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Territory (BRMA 51A)

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

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Article IV — Exclusions

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

1.	Assumed reinsurance except for a 50.0% quota share of the First American Property and Casualty Insurance Company Florida Homeowners Program produced and underwritten by Mobile Homeowners Insurance Agencies, Inc.
2.	Financial guarantee and insolvency.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
6.	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.
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
8.	Accident and Health, Casualty, Fidelity and/or Surety business.
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.
10.	Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising

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out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, or nuclear pollution or contamination.
11.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contaminations.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

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Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

	Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.
12.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — 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 loss 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 loss occurrence.
B.	No claim shall be made under any excess layer of reinsurance coverage provided by this Contract as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	Notwithstanding the provisions above, the ultimate net loss (including loss in excess of policy limits, extra contractual obligations, and loss adjustment expense) as respects any one loss occurrence with regard to the 50.0% quota share of the First American Property and Casualty Insurance Company Florida Homeowners Program produced and underwritten by Mobile Homeowners Insurance Agencies, Inc. shall not exceed the Company’s pro rata share of the 250-year Probable Maximum Loss as modeled in RMS as of the date on which the loss occurrence commences.

Article VI — 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 loss 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

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2. The final adjusted reinsurance premium, as calculated in accordance with Article XIII, for the excess layer reinstated for the term of this Contract (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 final adjusted reinsurance premium for any excess layer for the term of this Contract has not been 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 final adjusted reinsurance premium for that excess layer for the term of this Contract has been 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 either of the following:

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 loss occurrence; or
2.	The amount, shown as “Reinsurer’s Term Limit” for that excess layer in Schedule A attached hereto, in all during the term of this Contract.

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 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 any 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.

	Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.
	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.
	If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
C.	“Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VIII — Other Reinsurance

A. The Company shall be permitted to carry excess reinsurance, recoveries under which shall inure to the benefit of this Contract.

B. The Company shall be permitted to carry quota share reinsurance and underlying excess catastrophe reinsurance, recoveries under which shall inure solely to the benefit of the Company.

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Article IX — Florida Hurricane Catastrophe Fund

A. Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (“FHCF”) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.

B. Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.

C. If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.

D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article X — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period

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	of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C. As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D. No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article XI — Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 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 “Minimum Premium” for that excess layer in Schedule A attached hereto; or
2.	The percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, of the Company’s gross earned premium for Property business during the term of this Contract.

B. The Company shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “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 June 1, September 1 and December 1 of 2004 and March 1, 2005.

C. Within 45 days after the expiration of this Contract, 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 such excess layer shall be remitted promptly.

D. “Gross earned premium” as used herein is defined as earned premium of the Company for the classes of business reinsured hereunder, before the deduction of any premiums ceded by the Company for reinsurance which inures to the benefit of this Contract. Gross earned premium will not include the Company’s earned premium for Homeowners, Manufactured Homeowners and Condominium policies that include a “No Wind/No Water” exclusion. It is understood that gross earned premium shall include catastrophe fees, but shall exclude MGA fees, DRST fees and policy surcharges to recoup residual market deficit assessments.

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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 Article XXXI (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 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 10 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 10 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.

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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 XV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

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

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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.

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 50C)

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, the District of Columbia or Canada.

Article XXII — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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.

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Article XXIII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

B.

If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

C.

With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an “evergreen clause,” which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date or longer where required by insurance regulatory authorities. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any

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time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

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.

Page 14

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

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are

Page 15

relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless otherwise mutually agreed between the Company and the Reinsurer.

G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXVI — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXV.)

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 — 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.

Page 16

Article XXVIII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Pennsylvania exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXIX — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Article XXXI — 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., 3600 West 80th Street, Minneapolis, Minnesota 55431. 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:

Bala Cynwyd, Pennsylvania, this ___13th___day of _October___in the year _2004___.

Christopher J. Maguire, Executive VP & Chied Underwriting Officer__
Philadelphia Insurance Companies (for and on behalf of the “Company”)

Page 17

Schedule A

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

	First			Second			Third			Fourth
	Excess			Excess			Excess			Excess
Company’s Retention	$	10,000,000		$	20,000,000		$	40,000,000		$	65,000,000
Reinsurer’s Per	$	10,000,000		$	20,000,000		$	25,000,000		$	50,000,000
Occurrence Limit
Reinsurer’s Term Limit	$	20,000,000		$	40,000,000		$	50,000,000		$	100,000,000
Minimum Premium	$	1,680,000		$	2,000,000		$	1,350,000		$	1,600,000
Premium Rate		1.00	%		1.19	%		0.81	%		0.96	%
Deposit Premium	$	2,100,000		$	2,500,000		$	1,687,500		$	2,000,000
Quarterly	$	525,000		$	625,000		$	421,875		$	500,000
Deposit Premium

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 — Physical Damage — Reinsurance (U.S.A.)

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

     7. Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of prescribed substances, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

6. The term “prescribed substances” shall have the meaning given to it by the Atomic Energy Control Act R.S.C. 1985(c), A-16 or by any law amendatory thereof.

7. Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980 (2/19/93)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
          Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1)	The following so-called “Coastal Pools”:
	Alabama Insurance Underwriting Association Louisiana Insurance Underwriting Association Mississippi Windstorm Underwriting Association North Carolina Insurance Underwriting Association South Carolina Windstorm and Hail Underwriting Association Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)

Page 1 of 4

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

First Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.		5.0	%
Axis Specialty Limited		10.0
Everest Reinsurance Company		10.0
Folksamerica Reinsurance Company		4.0
PXRE Reinsurance Company		5.0
Renaissance Reinsurance, Ltd.		10.0
Swiss Re Underwriters Agency, Inc.
(for Swiss Reinsurance America Corporation)		10.0
Swiss Reinsurance America Corporation		10.0
Transatlantic Reinsurance Company		8.0
XL Re Ltd		5.0
Through Benfield Limited (Placement Only)
Munchener Ruckversicherungs-Gesellschaft		2.5
Through Benfield Limited
Lloyd’s Underwriters and Companies
Per Signing Schedule(s)		20.5
Total		100.0	%

Page 2 of 4

Second Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.		5.0	%
American Re-Insurance Company, A Delaware Corporation		9.0
Axis Specialty Limited		3.0
Everest Reinsurance Company		5.0
Folksamerica Reinsurance Company		3.0
General Reinsurance Corporation		10.0
Hannover Re (Bermuda), Ltd.		2.0
Partner Reinsurance Company		6.5
PXRE Reinsurance Company		1.5
Renaissance Reinsurance, Ltd.		4.0
Swiss Re Underwriters Agency, Inc.
(for Swiss Reinsurance America Corporation)		10.0
Swiss Reinsurance America Corporation		4.0
Transatlantic Reinsurance Company		10.0
XL Re Ltd		3.0
Through Benfield Limited (Placement Only)
Munchener Ruckversicherungs-Gesellschaft		10.0
Through Benfield Limited
Lloyd’s Underwriters and Companies
Per Signing Schedule(s)		14.0
Total		100.0	%

Page 3 of 4

Third Excess Catastrophe Reinsurance

Reinsurers	Participations
American Re-Insurance Company, A Delaware Corporation		10.0	%
Everest Reinsurance Company		10.0
Folksamerica Reinsurance Company		4.0
General Reinsurance Corporation		8.0
Hannover Re (Bermuda), Ltd.		3.0
Partner Reinsurance Company		12.5
PXRE Reinsurance Company		2.0
Swiss Reinsurance America Corporation		6.5
Transatlantic Reinsurance Company		15.0
XL Re Ltd		5.0
Through Benfield Limited (Placement Only)
Munchener Ruckversicherungs-Gesellschaft		10.0
Through Benfield Limited
Lloyd’s Underwriters and Companies
Per Signing Schedule(s)		14.0
Total		100.0	%

Page 4 of 4

Fourth Excess Catastrophe Reinsurance

Reinsurers	Participations
American Re-Insurance Company, A Delaware Corporation		10.0	%
Folksamerica Reinsurance Company		3.0
Hannover Re (Bermuda), Ltd.		5.0
PXRE Reinsurance Company		2.5
Swiss Re Underwriters Agency, Inc.
(for Swiss Reinsurance America Corporation)		10.0
Swiss Reinsurance America Corporation		7.0
Tokio Millennium Re Ltd.		15.0
Transatlantic Reinsurance Company		20.0
XL Re Ltd		5.0
Through Benfield Limited (Placement Only)
Munchener Ruckversicherungs-Gesellschaft		7.5
Through Benfield Limited
Lloyd’s Underwriters and Companies
Per Signing Schedule(s)		15.0
Total		100.0	%

Page 5 of 4

Interests and Liabilities Agreement

of

ACE Tempest Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

5.0%	of the First Excess Catastrophe Reinsurance
5.0%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___3rd___day of ___January___in the year ___2005___.

          Erin Anderson, Senior Vice President
ACE Tempest Reinsurance Ltd.

Interests and Liabilities Agreement

of

American Re-Insurance Company
A Delaware Corporation
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

     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:

0%	of the First Excess Catastrophe Reinsurance
9.0%	of the Second Excess Catastrophe Reinsurance
10.0%	of the Third Excess Catastrophe Reinsurance
10.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Princeton, New Jersey, this ___28th___day of ___February___in the year ___2005___.

_Gregory Mader, Senior Vice President-Property_____
American Re-Insurance Company, A Delaware Corporation

Interests and Liabilities Agreement

of

Axis Specialty Limited
Pembroke, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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 Excess Catastrophe Reinsurance
3.0%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke, Bermuda, this _28th___day of ___October___in the year _2004___.

__Christian Dunleavy, Vice President__________
Axis Specialty Limited

Interests and Liabilities Agreement

of

Everest Reinsurance Company
A Delaware Corporation
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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 Excess Catastrophe Reinsurance
5.0%	of the Second Excess Catastrophe Reinsurance
10.0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Liberty Corner, New Jersey, this _28th___day of ___February___in the year ___2005___.

__Roger Cunningham, Vice President-Treaty Property____
Everest Reinsurance Company

Interests and Liabilities Agreement

of

Folksamerica Reinsurance Company
New York, New York
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

4.0%	of the First Excess Catastrophe Reinsurance
3.0%	of the Second Excess Catastrophe Reinsurance
4.0%	of the Third Excess Catastrophe Reinsurance
3.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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 ___10th___day of ___January___in the year ___2005___.

__Robert Kuchn, Vice President________
Folksamerica Reinsurance Company

Interests and Liabilities Agreement

of

General Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

0%	of the First Excess Catastrophe Reinsurance
10.0%	of the Second Excess Catastrophe Reinsurance
8.0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Stamford, Connecticut, this _8th___day of ___February___in the year _2005___.

Joan LaFrance, Vice President________
General Reinsurance Corporation

Interests and Liabilities Agreement

of

Hannover Re (Bermuda), Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

0%	of the First Excess Catastrophe Reinsurance
2.0%	of the Second Excess Catastrophe Reinsurance
3.0%	of the Third Excess Catastrophe Reinsurance
5.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___7th___day of _December___in the year ___2004___.

Knut Heinz, Underwriter & Daniel Duesterhaus, Assistant Vice President
Hannover Re (Bermuda), Ltd.

Interests and Liabilities Agreement

of

Partner Reinsurance Company
Pembroke Parish, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

0%	of the First Excess Catastrophe Reinsurance
6.5%	of the Second Excess Catastrophe Reinsurance
12.5%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke Parish, Bermuda, this ___25th___day of ___November___in the year _2004___.

__Brian Secrett, Senior Vice President____________________
Partner Reinsurance Company

Interests and Liabilities Agreement

of

PXRE Reinsurance Company
Hartford, Connecticut
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

5.0%	of the First Excess Catastrophe Reinsurance
1.5%	of the Second Excess Catastrophe Reinsurance
2.0%	of the Third Excess Catastrophe Reinsurance
2.5%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Edison, New Jersey, this ___4th___day of _February___in the year _2005___.

Eugene J. Sverchek, Senior Vice President_______
PXRE Reinsurance Company

Interests and Liabilities Agreement

of

Renaissance Reinsurance, Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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 Excess Catastrophe Reinsurance
4.0%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___11th___day of ___November___in the year ___2004___.

_Jon Paradine, Senior Vice President________________________
Renaissance Reinsurance, Ltd.

Interests and Liabilities Agreement

of

Swiss Reinsurance America Corporation
Armonk, New York
through
Swiss Re Underwriters Agency, Inc.
Calabasas, California
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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 Excess Catastrophe Reinsurance
10.0%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
10.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Calabasas, California, this _9th___day of ___November___in the year ___2004_.

___Dan McElvany, Vice President____________
Swiss Re Underwriters Agency, Inc.
(for Swiss Reinsurance America Corporation)

Interests and Liabilities Agreement

of

Swiss Reinsurance America Corporation
Armonk, New York
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies
(hereinafter referred to collectively as the “Company”)

It Is Hereby Agreed that 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 Excess Catastrophe Reinsurance
4.0%	of the Second Excess Catastrophe Reinsurance
6.5%	of the Third Excess Catastrophe Reinsurance
7.0%	of the Fourth Excess Catastrophe Reinsurance

It Is Further Agreed that this Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

It Is Also Agreed that 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.

It Is Also Agreed that, as respects the Subscribing Reinsurer’s share in the attached Contract, the following paragraph shall be added to and made part of Article VII — Definitions:

“Declaratory judgments’ as used herein shall mean all legal expenses incurred in the representation of the Company in litigation brought to determine the Company’s defense and/or indemnification obligations that are allocable to any specific claim or loss applicable

to policies subject to this Contract. In addition, the Company shall promptly notify the Reinsurer of any declaratory judgments subject to this Contract.”

In Witness Whereof, the parties hereto by their respective duly authorized representatives have executed this Agreement as of the dates undermentioned at:

Bala Cynwyd, Pennsylvania, this ___13th___day of ___October___in the year ___2004_.

_ChristopherJ.Maguire,ExecutiveVP&ChiefUnderwritingOfficer_
Philadelphia Insurance Companies (for and on behalf of the “Company”)

Armonk, New York, this ___4th___day of ___November___in the year ___2004___.

_Peter Thompson, Account Executive____________
Swiss Reinsurance America Corporation

Interests and Liabilities Agreement

of

Tokio Millennium Re Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

0%	of the First Excess Catastrophe Reinsurance
0%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
15.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___8^th day of ___November___in the year 2004___.

_Takayuki Sumi, Senior Underwriting Officer____________
Tokio Millennium Re Ltd.

Interests and Liabilities Agreement

of

Transatlantic Reinsurance Company
New York, New York
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

8.0%	of the First Excess Catastrophe Reinsurance
10.0%	of the Second Excess Catastrophe Reinsurance
15.0%	of the Third Excess Catastrophe Reinsurance
20.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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 ___3rd___day of _November___in the year _2004___.

__Kevin M. Chiella, Assistant Vice President_________________
Transatlantic Reinsurance Company

Interests and Liabilities Agreement

of

XL Re Ltd
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

5.0%	of the First Excess Catastrophe Reinsurance
3.0%	of the Second Excess Catastrophe Reinsurance
5.0%	of the Third Excess Catastrophe Reinsurance
5.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this _15th___day of ___December___in the year _2004___.

_Paul Simons, Vice President________
XL Re Ltd

Interests and Liabilities Agreement

of

Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

2.5%	of the First Excess Catastrophe Reinsurance
10.0%	of the Second Excess Catastrophe Reinsurance
10.0%	of the Third Excess Catastrophe Reinsurance
7.5%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Munich, Germany, this ___18th___day of ___November___in the year _2004___.

__Laurent Mathiew, Underwriter___________________________
Munchener Ruckversicherungs-Gesellschaft

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

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

9.5%	of the First Excess Catastrophe Reinsurance
7.5%	of the Second Excess Catastrophe Reinsurance
5.0%	of the Third Excess Catastrophe Reinsurance
5.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

11.0%	of the First Excess Catastrophe Reinsurance
6.5%	of the Second Excess Catastrophe Reinsurance
9.0%	of the Third Excess Catastrophe Reinsurance
10.0%	of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on June 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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. David, Managing Director (Underwriters of Lloyds)

BUREAU REFERENCE		0407200001169
BUREAU REFERENCE		0407200001177
BUREAU REFERENCE		0407200001185
BUREAU REFERENCE		0407200001193
PROPORTION	CODE	MEMBER COMPANY AND REFERENCE
%
7.0000000	W4105	WELLINGTON REINSURANCE LIMITED
		NOW KNOWN AS ASPEN INSURANCE UK LIMITED
		PW711337D0X
3.0000000	F8106	GE FRANKONA REINSURANCE LIMITED
		BX20830A04
10.0000000  % TOTAL

                                                                                Managing Director
This wording is not valid unless it bears the signature of the Managing Director of Ins-sure Services Limited.

Page 1 of 1

BUREAU REFERENCE		0407200001169
BUREAU REFERENCE		0407200001177
BUREAU REFERENCE		0407200001185
PROPORTION	CODE	MEMBER COMPANY AND REFERENCE
%
6.0000000	W4105	WELLINGTON REINSURANCE LIMITED
		NOW KNOWN AS ASPEN INSURANCE UK LIMITED
		PW711337D0X
3.0000000	F8106	GE FRANKONA REINSURANCE LIMITED
		BX20829A04
9.0000000  % TOTAL

                                                                                Managing Director
This wording is not valid unless it bears the signature of the Managing Director of Ins-sure Services Limited.

Page 1 of 1

BUREAU REFERENCE		0407200001169
BUREAU REFERENCE		0407200001177
PROPORTION	CODE	MEMBER COMPANY AND REFERENCE
%
3.5000000	W4105	WELLINGTON REINSURANCE LIMITED
		NOW KNOWN AS ASPEN INSURANCE UK LIMITED
		PW705539L0X
3.0000000	F8106	GE FRANKONA REINSURANCE LIMITED
		BX20795A04
6.5000000  % TOTAL

     [ILLEGIBLE] of its obligations.

[ILLEGIBLE] if the name of the Managing Director of Ins-sure Services Limited is subscribed on behalf of each of the Reinsurers in accordance [ILLEGIBLE] s of the Services Agreement that each of the Reinsurers has with London Processing Centre Limited (a wholly owned subsidiary of [ILLEGIBLE] -imited)

                                                                                Managing Director
This wording is not valid unless it bears the signature of the Managing Director of Ins-sure Services Limited.

Page 1 of 1

EX-10.2

Exhibit 10.2

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		5
VII	Other Reinsurance		6
VIII	Loss Occurrence		6
IX	Loss Notices and Settlements		7
X	Salvage and Subrogation		8
XI	Florida Hurricane Catastrophe Fund		8
XII	Reinsurance Premium		9
XIII	Late Payments		9
XIV	Offset (BRMA 36D)		11
XV	Access to Records (BRMA 1D)		11
XVI	Liability of the Reinsurer		11
XVII	Net Retained Lines (BRMA 32B)		11
XVIII	Errors and Omissions (BRMA 14F)		11
XIX	Currency (BRMA 12A)		12
XX	Taxes (BRMA 50C)		12
XXI	Federal Excise Tax (BRMA 17A)		12
XXII	Reserve Requirements		12
XXIII	Insolvency		14
XXIV	Arbitration		15
XXV	Service of Suit		16
XXVI	Agency Agreement		16
XXVII	Governing Law		16
XXVIII	Confidentiality		17
XXIX	Severability		17
XXX	Intermediary (BRMA 23A)		17
	Schedule A

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property 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 — Term

A. This Contract shall become effective on September 1, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.

B. If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Financial guarantee and insolvency.
2.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
3.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
4.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
5.	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.
6.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
7.	Accident and Health, Casualty, Fidelity and/or Surety business.
8.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.

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9.

Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons, or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.
10.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including,

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without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

	Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.
11.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — 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 loss 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 either of the following:

1.	The amount, shown as “Reinsurer’s Per Occurrence Limit” for that excess layer in Schedule A attached hereto, as respects any one loss occurrence; or
2.	The amount, shown as “Reinsurer’s Term Limit” for that excess layer in Schedule A attached hereto, in all during the term of this Contract.

B. No claim shall be made under any excess layer of reinsurance coverage provided by this Contract as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.

C. No claim shall be made under the underlying excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, for the underlying excess layer has been paid or scheduled to be paid by the reinsurers under Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004. No claim shall be made under any other excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, has been paid or scheduled to be paid by the reinsurers under the corresponding excess layer

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of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2004.

Article VI — 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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C.

“Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

     The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

Article VIII — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.

As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.

2.

As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.

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3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C. As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D. No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article IX — Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

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Article X — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XI — Florida Hurricane Catastrophe Fund

A. Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.

B. Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.

C. If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.

D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

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Article XII — Reinsurance Premium

A. As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the amount, shown as “Premium” for that excess layer in Schedule A attached hereto, in two equal installments of the amount, shown as “Installment Premium” for that excess layer in Schedule A attached hereto, on September 1, 2004 and March 1, 2005.

B. The Company shall remit additional premium, if any, on December 1, 2004. The additional premium shall be calculated by multiplying the “Additional Premium” for each excess layer in Schedule A attached hereto, by the following:

1.

As respects the underlying excess layer of coverage provided by this Contract, the ratio of the ultimate net loss resulting from Hurricane Frances incurred by reinsurers under Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004, to the amount, shown as “Reinsurer’s Per Occurrence Limit” in Schedule A attached hereto, for the underlying excess layer.

2.

As respects the first, second and third excess layers of coverage provided by this Contract, the ratio of ultimate net loss resulting from Hurricane Frances incurred by reinsurers under the corresponding excess layer of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2004, to the amount, shown as “Reinsurer’s Per Occurrence Limit” in Schedule A attached hereto for that excess layer.

Quarterly recalculations and remittances of the additional premium, if any, due for each excess layer shall be made until all losses subject hereto have been finally settled.

Article XIII — 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 Article XXX (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 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

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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 10 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 10 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 or control 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 XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

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 XVII — Net Retained Lines (BRMA 32B)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or

Page 12

2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

B.

If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

C.

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

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves

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	(including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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

Page 14

Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXIV — Arbitration

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.

Page 15

G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

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 XXVI — 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 XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Page 16

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

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:

Pinellas Park, Florida, this _13th___day of ___November                                         in the year ___2004_.

___Bruce Meyer, Senior Vice President                                        
Liberty American Insurance Group, Inc. (for and on behalf of the
“Company”)

Page 17

Schedule A

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

	Underlying		First		Second		Third
	Excess		Excess		Excess		Excess
Company’s Retention	$	3,500,000	$	7,000,000	$	20,000,000	$	35,000,000
Reinsurer’s Per Occurrence Limit	$	3,500,000	$	13,000,000	$	15,000,000	$	15,000,000
Reinsurer’s Term Limit	$	7,000,000	$	26,000,000	$	30,000,000	$	30,000,000
Funds Otherwise Recoverable	$	7,000,000	$	26,000,000	$	30,000,000	$	30,000,000
Premium	$	525,000	$	1,105,000	$	787,500	$	487,500
Installment Premium	$	262,500	$	552,500	$	393,750	$	243,750
Additional Premium	$	980,000	$	2,372,500	$	2,062,500	$	1,215,000

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 — Physical Damage — Reinsurance (U.S.A.)

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

7. Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

6. The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.

7. Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
               Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting Association
Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

\

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)
Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

Page 1 of 2

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Underlying Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.	30.0%
Axis Specialty Limited	25.0
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules	10.0
Total	65.0% part of 100% share in the interests and liabilities of the “Reinsurer”

First Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.	30.0%
Axis Specialty Limited	24.0
Through Benfield Limited (Placement Only)
Sirius International Insurance Corporation	1.0
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules	10.0
Total	65.0% part of 100% share in the interests and liabilities of the “Reinsurer”

Page 2 of 2

Second Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.	30.0%
Axis Specialty Limited	23.5
Through Benfield Limited (Placement Only)
Sirius International Insurance Corporation	1.5
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules	10.0
Total	65.0% part of 100% share in the interests and liabilities of the “Reinsurer”

Third Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.	30.0%
Axis Specialty Limited	23.5
Through Benfield Limited (Placement Only)
Sirius International Insurance Corporation	1.5
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules	10.0
Total	65.0% part of 100% share in the interests and liabilities of the “Reinsurer”

Page 3 of 2

Interests and Liabilities Agreement

of

ACE Tempest Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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:

30.0%             of the Underlying Excess Catastrophe Reinsurance
30.0%             of the First Excess Catastrophe Reinsurance
30.0%             of the Second Excess Catastrophe Reinsurance
30.0%             of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___22nd___day of _April                                        in the year ___2005___.

_Erin Anderson, Senior Vice President                                        
ACE Tempest Reinsurance Ltd.

Interests and Liabilities Agreement

of

Axis Specialty Limited
Pembroke, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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:

25.0%           of the Underlying Excess Catastrophe Reinsurance
24.0%           of the First Excess Catastrophe Reinsurance
23.5%           of the Second Excess Catastrophe Reinsurance
23.5%           of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke, Bermuda, this _21st___day of ___December                                         in the year ___2004___.

_Christian Dunleavy, Vice President                                        
Axis Specialty Limited

Interests and Liabilities Agreement

of

Sirius International Insurance Corporation
Stockholm, Sweden
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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:

   0%           of the Underlying Excess Catastrophe Reinsurance
1.0%           of the First Excess Catastrophe Reinsurance
1.5%           of the Second Excess Catastrophe Reinsurance
1.5%           of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Stockholm, Sweden, this _25th___day of ___February                                         in the year ___2005___.

Jonas Petersson, Underwriter and Thomas Karlsson, Underwriter
Sirius International Insurance Corporation

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

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective: September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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 Underlying Excess Catastrophe Reinsurance
10.0%           of the First Excess Catastrophe Reinsurance
10.0%           of the Second Excess Catastrophe Reinsurance
10.0%           of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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. Peter, General Manager (Underwriter
at Lloyds)

SIGNING SCHEDULE

attaching to and forming part of the

INTERESTS AND LIABILITIES AGREEMENT

of

Certain Underwriting Members of Lloyd’s
with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now or
may hereafter become member companies of
Liberty American Insurance Group, Inc.

Contract Number: B11082004M2U1108

Underlying Excess CAT Limits: USD 3,500,000 excess of USD 3,500,000

It is, with effect from inception, noted and agreed that “Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004” as referenced in Paragraph C of Article V — Retention and Limit of the Contract attached hereto relates to the “Excess Catastrophe Section” only.

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE	61389 25/10/04	BROKER NUMBER   1108
PROPORTION	SYNDICATE	UNDERWRITER’S REFERENCE
%
10.00	2791	X1104LG01591
TOTAL LINE	No. OF SYNDICATES
10.00	1

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
US3 55 2791

Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

SIGNING SCHEDULE

attaching to and forming part of the

INTERESTS AND LIABILITIES AGREEMENT

of

Certain Underwriting Members of Lloyd’s

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are
now or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Contract Number: B11082004M2U1108

First Excess Limits: USD 13,000,000 excess of USD 7,000,000

It is, with effect from inception, noted and agreed that “Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004” as referenced in Paragraph C of Article V — Retention and Limit of the Contract attached hereto relates to the “Excess Catastrophe Section” only.

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE	61391 25/10/04	BROKER NUMBER 1108
PROPORTION	SYNDICATE	UNDERWRITER’S
%		REFERENCE
10.00	2791	X1104LG01591
TOTAL LINE	No. OF SYNDICATES
10.00	1

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 2791 Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

SIGNING SCHEDULE

attaching to and forming part of the

INTERESTS AND LIABILITIES AGREEMENT

of

Certain Underwriting Members of Lloyd’s

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now or
may hereafter become member companies of Liberty
American Insurance Group, Inc.

Contract Number: B11082004M2U1108

Second Excess Limits: USD 15,000,000 excess of USD 20,000,000

It is, with effect from inception, noted and agreed that “Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004” as referenced in Paragraph C of Article V — Retention and Limit of the Contract attached hereto relates to the “Excess Catastrophe Section” only.

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE	61392 25/10/04	BROKER NUMBER 1108
PROPORTION	SYNDICATE	UNDERWRITER’S
%		REFERENCE
10.00	2791	X1104LG01591
TOTAL LINE	No. OF SYNDICATES
10.00	1

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 2791

Page 1 of 1

SIGNING SCHEDULE

attaching to and forming part of the

INTERESTS AND LIABILITIES AGREEMENT

of

Certain Underwriting Members of Lloyd’s

with respect to the

65% Florida Only Third and Fourth Event
Excess Catastrophe Reinsurance Contract
Effective September 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now or
may hereafter become member companies of Liberty
American Insurance Group, Inc.

Contract Number: B11082004M2U1108

Third Excess Limits: USD 15,000,000 excess of USD 35,000,000

It is, with effect from inception, noted and agreed that “Section I of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004” as referenced in Paragraph C of Article V — Retention and Limit of the Contract attached hereto relates to the “Excess Catastrophe Section” only.

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE	61393 25/10/04	BROKER NUMBER 1108
PROPORTION	SYNDICATE	UNDERWRITER’S
%		REFERENCE
10.00	2791	X1104LG01591
TOTAL LINE	No. OF SYNDICATES
10.00	1

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 2791

Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

EX-10.3

Exhibit 10.3

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Reinstatement		4
VII	Definitions		5
VIII	Other Reinsurance		6
IX	Loss Occurrence		6
X	Loss Notices and Settlements		7
XI	Salvage and Subrogation		8
XII	Florida Hurricane Catastrophe Fund		8
XIII	Reinsurance Premium		8
XIV	Late Payments		9
XV	Offset (BRMA 36D)		10
XVI	Access to Records (BRMA 1D)		10
XVII	Liability of the Reinsurer		10
XVIII	Net Retained Lines (BRMA 32B)		10
XIX	Errors and Omissions (BRMA 14F)		11
XX	Currency (BRMA 12A)		11
XXI	Taxes (BRMA 50C)		11
XXII	Federal Excise Tax (BRMA 17A)		11
XXIII	Reserve Requirements		12
XXIV	Insolvency		13
XXV	Arbitration		14
XXVI	Service of Suit		15
XXVII	Agency Agreement		15
XXVIII	Governing Law		16
XXIX	Confidentiality		16
XXX	Severability		16
XXXI	Intermediary (BRMA 23A)		16

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Term

A.	This Contract shall become effective on September 10, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Page 1

Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Losses incurred from Hurricane Ivan and any subsequent downgrades.
2.	Financial guarantee and insolvency.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
6.	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.
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
8.	Accident and Health, Casualty, Fidelity and/or Surety business.
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.

Page 2

10.

Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.
11.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Page 3

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

12. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — Retention and Limit

A.	The Company shall retain and be liable for the first $195,000,000 of ultimate net loss arising out of each loss 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 $45,000,000 as respects any one loss occurrence.
B.	No claim shall be made as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.

Article VI — 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 loss 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 reinsurance premium for the term of this Contract (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. 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.

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C. Notwithstanding anything stated herein, the liability of the Reinsurer hereunder shall not exceed $45,000,000 as respects loss or losses arising out of any one loss occurrence, nor shall it exceed $90,000,000 in all during the term of this Contract.

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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VIII — Other Reinsurance

The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

Article IX — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which

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commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”

4.

As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”

5.

As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B.	For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.
C.	As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article X — Loss Notices and Settlements

A.	Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.
B.	All loss settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

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Article XI — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XII — Florida Hurricane Catastrophe Fund

A.	Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.
B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer in any one loss occurrence is less than the amount previously paid by the Reinsurer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.
D.	Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article XIII — Reinsurance Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer $1,912,500 on September 10, 2004.

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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 Article XXXI (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 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 10 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 10 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.

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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 XV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 32B)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account, 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

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	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.

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 50C)

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, the District of Columbia or Canada.

Article XXII — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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.

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Article XXIII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

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

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1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

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.

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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

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The

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arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.
H.	All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXVI — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXV.)

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 — 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.

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Article XXVIII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXIX — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Article XXXI — 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:

Pinellas Park, Florida, this ___16th___day of ___December___in the year _2004___.

___Bruce Meyer, Senior Vice President___

Liberty American Insurance Group, Inc. (for and on behalf of the “Company”)

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

1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7.	Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

Any Pool, Association or Syndicate formed for the purpose of writing

               Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:

Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association

Louisiana Insurance Underwriting Association

Mississippi Windstorm Underwriting Association

North Carolina Insurance Underwriting Association

South Carolina Windstorm and Hail Underwriting Association

Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1. Electronic Data Exclusion

Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)
Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

Interests and Liabilities Agreement

of

ACE Tempest Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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 on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___21st___day of ___February___in the year ___2005___.

_Erin Anderson, Senior Vice President___
ACE Tempest Reinsurance Ltd.

Interests and Liabilities Agreement

of

American Re-Insurance Company
A Delaware Corporation
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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 on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Princeton, New Jersey, this ___23rd___day of ___May___in the year ___2005.

___Gregory Mader, Senior Vice President-Property___
American Re-Insurance Company, A Delaware Corporation

Interests and Liabilities Agreement

of

Axis Specialty Limited
Pembroke, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 22.2% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke, Bermuda, this _2nd___day of ___March___in the year _2005___.

_Christian Dunleavy, Vice President___
Axis Specialty Limited

Interests and Liabilities Agreement

of

Sirius International Insurance Corporation
Stockholm, Sweden
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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 on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Stockholm, Sweden, this _25th___day of ___February___in the year 2005___.

Jonas Petersson, Underwriter and Thomas Karlsson, Underwriter___
Sirius International Insurance Corporation

Interests and Liabilities Agreement

of

Catlin Insurance Company Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 3.3% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this _28th___day of ___January___in the year _2005___.

_Lucinda Swain, Underwriting Assistant___
Catlin Insurance Company Ltd.

Interests and Liabilities Agreement

of

Montpelier Reinsurance Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 7.5% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___12th___day of ___January___in the year 2005___.

___Barry Locke, Contract Administrator___
Montpelier Reinsurance Limited

Interests and Liabilities Agreement

of

Partner Reinsurance Company
Pembroke Parish, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

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 on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke Parish, Bermuda, this _14th___day of ___January___in the year _2005___.

___Brian Secrett, Senior Vice President___
Partner Reinsurance Company

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

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 27.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on September 10, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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.
Peter, General Manager (Underwriters at Lloyds)

$45,000,000 Excess $195,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: September 10, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.		10.0	%
American Re-Insurance Company, A Delaware Corporation		10.0
Axis Specialty Limited		22.2
Catlin Insurance Company Ltd.		3.3
Montpelier Reinsurance Limited		7.5
Partner Reinsurance Company of the U.S.		15.0
Through Benfield Limited (Placement Only)
Sirius International Insurance Corporation		5.0
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		27.0
Total		100.0	%

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE 61480 25/10/04 BROKER NUMBER 1108

PROPORTION			UNDERWRITER’S
%	SYNDICATE		REFERENCE
7.36		2791	X1104KG01590
7.36		2020	P502644K0X
3.93		33	97118HXAAKWE
4.91		2987	F0587K04A000
3.44		2003	AF2000080100

TOTAL LINE	No. OF SYNDICATES
27.00		5

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 44     9834	Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The Subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscripting reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

EX-10.4

Exhibit 10.4

$6,500,000 Excess $3,500,000 Florida Only Fifth Event
Excess Catastrophe Reinsurance Contract
Effective: September 24, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		5
VII	Other Reinsurance		6
VIII	Loss Occurrence		6
IX	Loss Notices and Settlements		7
X	Salvage and Subrogation		8
XI	Florida Hurricane Catastrophe Fund		8
XII	Reinsurance Premium		8
XIII	Late Payments		9
XIV	Offset (BRMA 36D)		11
XV	Access to Records (BRMA 1D)		11
XVI	Liability of the Reinsurer		11
XVII	Net Retained Lines (BRMA 32B)		11
XVIII	Errors and Omissions (BRMA 14F)		11
XIX	Currency (BRMA 12A)		12
XX	Taxes (BRMA 50C)		12
XXI	Federal Excise Tax (BRMA 17A)		12
XXII	Reserve Requirements		12
XXIII	Insolvency		14
XXIV	Arbitration		15
XXV	Service of Suit		16
XXVI	Agency Agreement		16
XXVII	Governing Law		16
XXVIII	Confidentiality		16
XXIX	Severability		17
XXX	Intermediary (BRMA 23A)		17

$6,500,000 Excess $3,500,000 Florida Only Fifth Event
Excess Catastrophe Reinsurance Contract
Effective: September 24, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Term

A.	This Contract shall become effective on September 24, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Financial guarantee and insolvency.
2.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
3.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
4.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
5.	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.
6.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
7.	Accident and Health, Casualty, Fidelity and/or Surety business.
8.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.

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9.

Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons, or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.
10.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including,

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without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

	Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.
11.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — Retention and Limit

A.	The Company shall retain and be liable for the first $3,500,000 of ultimate net loss arising out of each loss 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 $6,500,000 as respects any one loss occurrence.
B.	No claim shall be made under this Contract as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	No claim shall be made under this Contract unless both of the following conditions have been met:

1.

$14,000,000 has been paid or scheduled to be paid by the reinsurers under Section I only, being the Underlying Excess Catastrophe section, of the Company’s Underlying Excess Catastrophe and Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2004, the underlying layer of the Company’s 65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 1, 2004, and the underlying layer of the Company’s 35% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 2, 2004; and

2.

$12,000,000 (being for the first $3,000,000 part of $13,000,000 as respects any one loss occurrence under each of the following contracts based on a 100% placement) has been paid or scheduled to be paid by the reinsurers under the first excess layer of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2004, the first excess layer of the Company’s 65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 1, 2004, and the first excess layer of the Company’s 35% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 2, 2004.

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Article VI — 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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C.

“Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

Article VIII — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire

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	following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B.	For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.
C.	As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article IX — Loss Notices and Settlements

A.	Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.
B.	All loss settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

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Article X — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XI — Florida Hurricane Catastrophe Fund

A.	Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.
B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.
D.	Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article XII — Reinsurance Premium

A. As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer $487,500 on September 24, 2004.

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B. In the event the total amount of “Funds Otherwise Recoverable” as set forth in paragraph C of Article V for the underlying excess layer and first excess layer exceeds $19,500,000, the Company shall pay the Reinsurer an additional premium equal to the lesser of $1,300,000 or the sum of the following:

1.

20.0% of the ultimate net loss subject to the second limit of the underlying layer of the Company’s 65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 1, 2004, and 20.0% of the ultimate net loss subject to the second limit of the underlying layer of the Company’s 35% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 2, 2004; and

2.

20.0% of the ultimate net loss subject to the second limit of the first layer of the Company’s 65% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 1, 2004, and 20.0% of the ultimate net loss subject to the second limit of the first layer of the Company’s 35% Florida Only Third and Fourth Event Excess Catastrophe Reinsurance Contract, effective September 2, 2004.

C. The Company shall provide a report to the Reinsurer setting forth the premium due hereunder, calculated in accordance with paragraphs A and B above, on or before December 1, 2004, and quarterly thereafter until all premium due hereunder has been finally determined. As respects each such calculation, if the premium due exceeds premiums previously paid hereunder, the Company shall remit the difference to the Reinsurer with its report. If the premium due is less than the premiums previously paid hereunder, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report.

Article XIII — 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 Article XXX (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 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.

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	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 10 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 10 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.

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Article XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 XVII — Net Retained Lines (BRMA 32B)

A.	This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or

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3. Cash advances;

	if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved. The Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the insurance regulatory authorities involved.
B.	If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

C.

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

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) funded by means of a letter of credit which is under

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	non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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.

Page 14

Article XXIV — Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

Page 15

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties’ obligations to arbitrate their disputes in accordance with Article XXIV.)

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 XXVI — 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 XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information

Page 16

that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

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:

Pinellas Park, Florida, this ___17th___day of ___March___in the year _2005___.

___Bruce Meyer, Senior Vice President___
Liberty American Insurance Group, Inc. (for and on behalf of the “Company”)

Page 17

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

1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7.	Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
     Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting Association
Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES: Wherever used herein the terms:

“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)

Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

N.M.A. 2915 (25.1.01)

$6,500,000 Excess $3,500,000 Florida Only Fifth Event
Excess Catastrophe Reinsurance Contract
Effective: September 24, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Reinsurers	Participations
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules	100%
Total	100%

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

$6,500,000 Excess $3,500,000 Florida Only Fifth Event
Excess Catastrophe Reinsurance Contract
Effective: September 24, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 100% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on September 24, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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. Peter, General Manager (Underwriters at Lloyds)

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assumed an application.

     [ILLEGIBLE]

BUREAU REFERENCE 61354 28/10/04 BROKER NUMBER 1108

PROPORTION		SYNDICATE		UNDERWRITER’S
%				REFERENCE
	10.000		2791	X1104EG01603
	15.000		2020	P504404JOX
	15.000		2001	CAJ1997504RA
	9.000		2987	F0372X04B000
	10.000		958	YVXAXOEN8307
	5.000		2010	N04H3050A001
	5.000		2003	AF2000080502
	5.000		780	Y541C136P041
	10.000		33	97603FXAAKWE
	2.670		570	04CX49196JX
	3.330		2147	RF29004ATSA8
	1.998		510	UALF04FBUA
	1.332		557	UALA04FBUA
	6.670		4444	T06905AA
TOTAL LINE		No. OF SYNDICATES
	100.000		14

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE 3 65 23811

Page 1 of 1

EX-10.5

Exhibit 10.5

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		4
VII	Other Reinsurance		5
VIII	Loss Occurrence		5
IX	Loss Notices and Settlements		7
X	Salvage and Subrogation		7
XI	Florida Hurricane Catastrophe Fund		7
XII	Reinsurance Premium		8
XIII	Late Payments		8
XIV	Offset (BRMA 36D)		9
XV	Access to Records (BRMA 1D)		9
XVI	Net Retained Lines (BRMA 32B)		10
XVII	Errors and Omissions (BRMA 14F)		10
XVIII	Currency (BRMA 12A)		10
XIX	Taxes (BRMA 50C)		10
XX	Federal Excise Tax (BRMA 17A)		10
XXI	Reserve Requirements		11
XXII	Insolvency		12
XXIII	Arbitration		13
XXIV	Service of Suit		14
XXV	Agency Agreement		14
XXVI	Governing Law		15
XXVII	Confidentiality		15
XXVIII	Severability		15
XXIX	Intermediary (BRMA 23A)		15

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Term

A. This Contract shall become effective on October 1, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.

B. If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Page 1

Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Financial guarantee and insolvency.
2.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
3.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
4.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
5.	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.
6.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
7.	Accident and Health, Casualty, Fidelity and/or Surety business.
8.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.
9.	Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising

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out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a. Involves violence against one or more persons, or

b. Involves damage to property; or

c. Endangers life other than that of the person committing the action; or

d. Creates a risk to health or safety of the public or a section of the public; or

e. Is designed to interfere with or to disrupt an electronic system.

This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.

10. Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

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Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

11. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — Retention and Limit

A. The Company shall retain and be liable for the first $240,000,000 of ultimate net loss arising out of each loss 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 $50,000,000 as respects any one loss occurrence nor shall it exceed $50,000,000 in all during the term of this Contract.

B. No claim shall be made as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.

Article VI — 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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

Article VIII — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the

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duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C. As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is

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	included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article IX — Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

Article X — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XI — Florida Hurricane Catastrophe Fund

A. Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.

B. Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer in any one loss occurrence is less than the amount previously paid by the Reinsurer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one loss occurrence is greater than the

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	amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.
D.	Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article XII — Reinsurance Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer $2,000,000 on October 1, 2004.

Article XIII — 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 Article XXX (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 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.

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2.

Any claim or loss payment due the Company hereunder shall be deemed due 10 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 10 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 or control 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 XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

Article XV — 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.

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Article XVI — Net Retained Lines (BRMA 32B)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVII — 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 XVIII — 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 XIX — Taxes (BRMA 50C)

     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, the District of Columbia or Canada.

Article XX — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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.

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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 XXI — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

C. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an “evergreen clause,” which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration

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date or longer where required by insurance regulatory authorities. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

Article XXII — 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

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	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 XXIII — Arbitration

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

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E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.

G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXIV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

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 XXV — 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

Page 14

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 XXVI — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXVIII — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Article XXIX — 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:

Pinellas Park, Florida, this ___17th___day of ___March                     in the year ___2005___.

__Bruce Meyer, Senior Vice President                    ____________
Liberty American Insurance Group, Inc. (for and on behalf of the “Company”)

Page 15

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

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

7.    Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

6. The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.

7. Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
           Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

     Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting Association
Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES: Wherever used herein the terms:

“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

 Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)
Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

Interests and Liabilities Agreement

of

ACE Tempest Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 13.50% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda,           this ___21st___day of ___February___in the year _2005___.

__Erin Anderson, Senior Vice President___
ACE Tempest Reinsurance Ltd.

Interests and Liabilities Agreement

of

Axis Specialty Limited
Pembroke, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 9.00% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Pembroke, Bermuda, this ___2nd___day of ___March                     in the year ___2005_.

__Christian Dunleavy, Vice President_
Axis Specialty Limited

Interests and Liabilities Agreement

of

Catlin Insurance Company Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 3.25% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this ___28th___day of ___January                     in the year _2005___.

Lucinda Swain, Underwriting Assistant_____
Catlin Insurance Company Ltd.

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

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 74.25% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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.
Peter, General Manager (Underwriter at Lloyds)

$50,000,000 Excess $240,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.		13.50	%
Axis Specialty Limited		9.00
Catlin Insurance Company Ltd.		3.25
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		74.25
Total		100.00	%

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	/s/ [ILLEGIBLE]
	General Manager

BUREAU REFERENCE          61463 25/10/04                    BROKER NUMBER          1108

PROPORTION		UNDERWRITER’S
%	SYNDICATE	REFERENCE
10.00 19.50  5.25  6.50 20.00  3.00 10.00	2791 2020 1414 2003 2001  958    33	X1104HG01606 P504655F0X XC04BN168Y1X AF7000080628 CAC2006304VA YVXAX0EN8313 97602XXAAKWE
TOTAL LINE 74.25	No. OF SYNDICATES 7

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 11220

 Page 1 of 1

FFFFFFFB

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The Subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

1007(09/96)

EX-10.6

Exhibit 10.6

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		4
VII	Other Reinsurance		5
VIII	Loss Occurrence		6
IX	Loss Notices and Settlements		7
X	Salvage and Subrogation		7
XI	Florida Hurricane Catastrophe Fund		7
XII	Reinsurance Premium		8
XIII	Late Payments		8
XIV	Offset (BRMA 36D)		9
XV	Access to Records (BRMA 1D)		10
XVI	Liability of the Reinsurer		10
XVII	Net Retained Lines (BRMA 32B)		10
XVIII	Errors and Omissions (BRMA 14F)		10
XIX	Currency (BRMA 12A)		10
XX	Taxes (BRMA 50C)		11
XXI	Federal Excise Tax (BRMA 17A)		11
XXII	Reserve Requirements		11
XXIII	Insolvency		13
XXIV	Arbitration		13
XXV	Service of Suit		14
XXVI	Agency Agreement		15
XXVII	Governing Law		15
XXVIII	Confidentiality		15
XXIX	Severability		15
XXX	Intermediary (BRMA 23A)		16

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Term

A.	This Contract shall become effective on October 1, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Financial guarantee and insolvency.
2.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
3.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
4.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
5.	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.
6.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
7.	Accident and Health, Casualty, Fidelity and/or Surety business.
8.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.
9.	Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising

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Out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons, or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.
10.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

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	Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:
	Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.
	Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.
11.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — Retention and Limit

A.	The Company shall retain and be liable for the first $50,000,000 of ultimate net loss arising out of each loss 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 $40,000,000 as respects any one loss occurrence nor shall it exceed $40,000,000 in all during the term of this Contract.
B.	No claim shall be made as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	No claim shall be made under this Contract unless $80,000,000 otherwise recoverable has been paid or scheduled to be paid by the reinsurers under the fourth excess layer of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2004.

Article VI — 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 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

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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.

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.

	Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.
	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.
	If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
C.	“Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

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Article VIII — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in

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	subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.
C.	As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article IX — Loss Notices and Settlements

A.	Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.
B.	All loss settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

Article X — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XI — Florida Hurricane Catastrophe Fund

A. Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.

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B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer in any one loss occurrence is less than the amount previously paid by the Reinsurer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.
D.	Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article XII — Reinsurance Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer $1,300,000 on October 1, 2004.

Article XIII — 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 Article XXX (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 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 10 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 10 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 or control 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 XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

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Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 XVII — Net Retained Lines (BRMA 32B)

A.	This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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.

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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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

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B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

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

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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 XXIV — Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and

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	provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.
H.	All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

Page 14

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 XXVI — 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 XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Page 15

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:

Pinellas Park, Florida, this                     13th                    day of                     November                                        in the year                     2004                    .

                    Bruce Meyer, Senior Vice President                                        
Liberty American Insurance Group, Inc. (for and on behalf of the “Company”)

Page 16

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

1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A 1119
BRMA 358

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7.	Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing

          Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1)	The following so-called “Coastal Pools”:
	Alabama Insurance Underwriting Association Louisiana Insurance Underwriting Association Mississippi Windstorm Underwriting Association North Carolina Insurance Underwriting Association South Carolina Windstorm and Hail Underwriting Association Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)
Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

Interests and Liabilities Agreement

of

Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 5.64% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Munich, Germany, this                     23rd                     day of               March                             in the year              2005            .

                    Susanne Leupoid, Senior Underwriter                                        
Munchener Ruckversicherungs-Gesellschaft

Interests and Liabilities Agreement

of

Hannover Re (Bermuda), Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 14.15% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this                     17th                      day of                January                  in the year                     2005            .

Dirk Hasselkuss, Vice President/Chief Underwriter & Joerg
Schuenemann, Underwriter
Hannover Re (Bermuda), Ltd.

Interests and Liabilities Agreement

of

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

with respect to the

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 14.14% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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                     5th                      day of                May                  in the year                     2005            .

                    Andrew Hegel, Assistant Vice President                                        
Platinum Underwriters Reinsurance, Inc.

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

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 66.07% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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.
Peter, General Manager (Underwriter at Lloyds)

$40,000,000 Excess $50,000,000
Florida Only Third Event
Catastrophe Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Reinsurers	Participations
Hannover Re (Bermuda), Ltd.	14.15%
Platinum Underwriters Reinsurance, Inc.	14.14
Through Benfield Limited (Placement Only)
Munchener Ruckversicherungs-Gesellschaft	5.64
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule	66.07
Total	100.00%

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
	General Manager
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.

BUREAU REFERENCE	61443 25/10/04		BROKER NUMBER 1108
PROPORTION	SYNDICATE		UNDERWRITER’S
%			REFERENCE
10.00		2791	X1104LG01609
6.00		1414	XC04BN251G1X
4.70		33	97659EXAAKWE
4.70		566	K8083XZCXX00
9.40		2001	CAJ2007104AA
2.40		4444	T06905AB
2.82		958	YVXAX0EN8317
1.95		510	UCLF04FBUB
1.05		557	UCLA04FBUB
1.50		510	UCLN04FBUB
1.80		727	5N920X5170M0
1.50		2147	RF32904ATSA8
2.35		780	Y541C140S041
1.80		570	04CX49212DX
7.05		626	X1867VXALKWE
3.81		2623	T6323S04BNCB
3.24		623	T6323S04BNCB
TOTAL LINE	No. OF SYNDICATES
66.07		17

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 21880 Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicate whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyds referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy, Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
		General Manager
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.

SEVERAL LIABILITY NOTICE

The subscribing reinsurers’ obligations Under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

EX-10.7

Exhibit 10.7

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		4
VII	Other Reinsurance		5
VIII	Loss Occurrence		6
IX	Loss Notices and Settlements		7
X	Salvage and Subrogation		7
XI	Florida Hurricane Catastrophe Fund		7
XII	Reinsurance Premium		8
XIII	Late Payments		8
XIV	Offset (BRMA 36D)		9
XV	Access to Records (BRMA 1D)		10
XVI	Liability of the Reinsurer		10
XVII	Net Retained Lines (BRMA 32B)		10
XVIII	Errors and Omissions (BRMA 14F)		10
XIX	Currency (BRMA 12A)		10
XX	Taxes (BRMA 50C)		11
XXI	Federal Excise Tax (BRMA 17A)		11
XXII	Reserve Requirements		11
XXIII	Insolvency		13
XXIV	Arbitration		13
XXV	Service of Suit		14
XXVI	Agency Agreement		15
XXVII	Governing Law		15
XXVIII	Confidentiality		15
XXIX	Severability		15
XXX	Intermediary (BRMA 23A)		16

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.
(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 Property business, subject to the terms, conditions and limitations hereinafter set forth.

Article II — Term

A.	This Contract shall become effective on October 1, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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Article III — Territory

The liability of the Reinsurer shall be limited to losses under policies covering property located within the territorial limits of the State of Florida or extra territorial limits of the Company’s policies.

Article IV — Exclusions

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

1.	Financial guarantee and insolvency.
2.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
3.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
4.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
5.	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.
6.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
7.	Accident and Health, Casualty, Fidelity and/or Surety business.
8.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.
9.	Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising

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out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a. Involves violence against one or more persons, or

b. Involves damage to property; or

c. Endangers life other than that of the person committing the action; or

d. Creates a risk to health or safety of the public or a section of the public; or

e. Is designed to interfere with or to disrupt an electronic system.

This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical or nuclear pollution or contamination.

10. Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

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Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

11. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — Retention and Limit

A.	The Company shall retain and be liable for the first $140,000,000 of ultimate net loss arising out of each loss 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 $50,000,000 as respects any one loss occurrence nor shall it exceed $50,000,000 in all during the term of this Contract.
B.	No claim shall be made as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	No claim shall be made under this Contract unless $50,000,000 otherwise recoverable has been paid or scheduled to be paid by the reinsurers under the Company’s 66% $50,000,000 Excess $140,000,000 Florida Only Catastrophe Reinsurance Contract, effective September 3, 2004.

Article VI — 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 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

Page 4

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.

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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

The Company shall carry 15.0% quota share reinsurance on its direct personal lines business, recoveries under which shall inure to the benefit of this Contract, or so deemed.

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Article VIII — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in

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subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C.

As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D.

No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article IX — Loss Notices and Settlements

A.	Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.
B.	All loss settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

Article X — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 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 XI — Florida Hurricane Catastrophe Fund

A. Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.

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B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer in any one loss occurrence is less than the amount previously paid by the Reinsurer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.
D.	Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article XII — Reinsurance Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer $875,000 on October 1, 2004.

Article XIII — 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 Article XXX (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 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 10 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 10 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 or control 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 XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

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Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 XVII — Net Retained Lines (BRMA 32B)

A.	This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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.

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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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund, on or before December 31, 2004, its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

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B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund, on or before December 31, 2004, 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

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

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, as determined by the Company, from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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 XXIV — Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and

Page 13

provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.
H.	All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

Page 14

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 XXVI — 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 XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Page 15

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:

Pinellas Park, Florida, this               13th             day of                     November                                         in the year                     2004            .

___Bruce Meyer, Senior Vice President___
Liberty American Insurance Group, Inc. (for and on behalf of the
“Company”)

Page 16

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

1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7.	Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing

Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting Association
Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A. 2915 (25.1.01)
Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited

Interests and Liabilities Agreement

of

Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 4.92% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Munich, Germany, this __23rd___ day of ____March________________ in the year __2005_.

_Susanne Leupoid, Senior Underwriter___
Munchener Ruckversicherungs-Gesellschaft

Interests and Liabilities Agreement

of

Hannover Re (Bermuda), Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 16.32% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this _17th__ day of ____January________________ in the year __2005_.

Dirk Hasselkuss, Vice President/Chief Underwriter & Joerg
Schuenemann, Underwriter
Hannover Re (Bermuda), Ltd.

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

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

The Subscribing Reinsurer hereby accepts a 44.76% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective on October 1, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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.
Peter, General Manager (Underwriters at Lloyds)

$50,000,000 Excess $140,000,000
Florida Only Catastrophe
Reinsurance Contract
Effective: October 1, 2004

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Mobile USA Insurance Company
Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of
Liberty American Insurance Group, Inc.

Reinsurers	Participations
Hannover Re (Bermuda), Ltd.		16.32	%
Through Benfield Limited (Placement Only) Munchener Ruckversicherungs-Gesellschaft		4.92
Through Benfield Limited Lloyd’s Underwriters Per Signing Schedule		44.76
Total	66.00% part of 100% share in The interests and Liabilities of the “Reinsurer”

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE 61423 25/10/04 BROKER NUMBER 1108

PROPORTION			UNDERWRITER’S
%	SYNDICATE		REFERENCE
10.000		2791	X1104CG01610
5.000		1414	XC04BN252R1X
8.040		33	97658VXAAKWE
1.628		510	UDLF04FBUC
0.850		557	UDLA04FBUC
1.252		510	UDLN04FBUC
1.500		727	5N920X5171M0
1.250		2147	RF33104ATSA8
1.640		780	Y541C141A041
1.500		570	04CX49213BX
6.100		626	X1868EXALKWE
3.240		2623	T6629D04BNCB
2.760		623	T6629D04BNCB

TOTAL LINE	No. OF SYNDICATES
44.760		13

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55     13911	Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ (ILLEGIBLE)
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The Subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are Several and not joint and are limited solely to the extent of their individual subscriptions. The subscription reinsurers are not responsible for the subscription of any co-subscribing reinsurer who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating syndicate shown herein is AA-112 followed by a four digit number that can be derived by adding 6000 to the syndicate number.

LSW 1007 (09/96)

EX-10.8

Exhibit 10.8

STATE BOARD OF ADMINISTRATION
OF FLORIDA

1801 Hermitage Boulevard-Suite 100
Tallahassee, Florida 332308
(850) 488-4406

Post Office Box 13300
32317-3300

REIMBURSEMENT CONTRACT
Effective: June 1, 2005
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL

NAIC # 10955

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

PREAMBLE

The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes “Statute”, which directs the SBA to administer the FHCF. This Contract is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.

In consideration of the promises set forth in this Contract, the parties agree as follows:

ARTICLE I — SCOPE OF AGREEMENT

As a condition precedent to the SBA’s obligations under this Contract, the Company, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies.

The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies in excess of the Company’s Retention as a result of each Loss Occurrence commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

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ARTICLE II — PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or any claimant against an insured of the Company, or any other third party, have any rights under this Contract, except as provided in Article XIV. The SBA will only disburse funds to the Company, except as provided for in Article XIV of this Contract.

ARTICLE III — TERM

This Contract shall apply to Loss Occurrences which commence during the period from 12:01 a.m., Eastern Time, June 1, 2005, to 12:01 a.m., Eastern Time, June 1, 2006 (Contract Year).

The Company must designate a coverage level, make the required selections, and return this fully executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time, June 1, 2005. Failure to do so will result in a referral to the Office of Insurance Regulation within the Department of Financial Services for administrative action. Furthermore, the Company’s coverage level under this Contract will be deemed as follows:

(1)	For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.
(2)	For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be deemed.
(3)	For New Participants that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.
(4)	For New Participants, as that term is defined in Article V(21) herein, that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45% coverage level shall be deemed.

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be responsible for such Loss Occurrence in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Loss Occurrence in progress.

ARTICLE IV — LIABILITY OF THE FHCF

(1)	The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, plus 5% of the reimbursed losses for Loss Adjustment Expense Reimbursement.
(2)	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under ARTICLE XVIII herein.
(3)	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this contract year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding loss reimbursement calculations, see section (3)(c) of ARTICLE X herein.
(4)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.
(5)	After the end of each calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the

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SBA shall publish in the Florida Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity and the projected Balance of the Fund as of December 31.

(6) The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.). If Reimbursement Premiums are used for debt service in the event of a temporary shortfall in the collection of emergency assessments, then the amount of the Premiums so used will be reimbursed to the SBA when sufficient emergency assessments are received.

ARTICLE V — DEFINITIONS

(1) Actual Claims-Paying Capacity of the FHCF

This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.

(2) Actuarially Indicated

This term means, with respect to Premiums paid by Companies for reimbursement provided by the FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a), Florida Statutes.

(3) Additional Living Expense (ALE)

ALE losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential Structure or its contents based on the coverage provided in the policy. Fair rental value, loss of use, loss of rents, or business interruption losses are not covered by the FHCF.

(4) Administrator

This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 3600 American Boulevard West, Suite 700, Minneapolis, Minnesota 55431. The telephone number is (800) 689-3863, and the facsimile number is (800) 264-0492.

(5) Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6) Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves.

(7) Citizens Property Insurance Corporation (Citizens)

This term means the entity formed under Section 627.351(6), Florida Statutes and refers to both Citizens Property Insurance Corporation High Risk Account and Citizens Property Insurance Corporation Personal Lines and Commercial Lines Accounts.

(8) Contract

This term means this Reimbursement Contract for the current Contract Year.

(9) Covered Event

This term means any one storm declared to be a hurricane by the National Hurricane Center, which causes insured losses in Florida, both while it is still a hurricane and throughout any subsequent downgrades in storm status by the National Hurricane Center. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.

(10) Covered Policy or Covered Policies

(a) Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure,

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as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida, or ALE coverage as defined in definition (3) herein.

(b) Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as:

— Fire
— Allied Lines
— Farmowners Multiple Peril
— Homeowners Multiple Peril
— Commercial Multiple Peril (non liability portion, covering condominiums and apartments)
— Inland Marine

Note that where particular insurance exposures, e.g. mobile homes, are reported on an annual statement is not dispositive of whether or not the exposure is a Covered Policy.

(c)

This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.

(d)

Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available. (e) See Article VI of this Contract for specific exclusions.

(11) Deductible Buy-Back Policies

This term means a specific policy that provides coverage to a policyholder for some portion of the policyholder’s deductible under a policy issued by another insurer.

(12) Estimated Claims-Paying Capacity of the FHCF

This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.

(13) Excess Policies

This term, for the purposes of this Contract, means a policy that provides insurance protection for large commercial property risks that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.

(14) Florida Department of Financial Services (Department)

This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida Insurance Code.

(15) Florida Insurance Code

This term means those chapters identified in Section 624.01, Florida Statutes, which are designated as the Florida Insurance Code.

(16) Formula or the Premium Formula

This term means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula.

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(17) Fund Balance or Balance of the Fund as of December 31

These terms mean the “Net assets: Unrestricted” as indicated on the unconsolidated FHCF Statement of Net Assets for the then current Contract Year, to which is added: reported FHCF losses (including Loss Adjustment Expense) for the then current Contract Year, whether paid or unpaid by FHCF, as of December 31, and from which is subtracted: any reinsurance recovered prior to, or recoverable as of, December 31; any obligations paid or expected to be paid with bonding proceeds or receipts from emergency assessments; amounts needed for administration for the then current State of Florida fiscal year which have not been spent and which are not reflected on the FHCF Statement of Net Assets; and the amount of undispersed mitigation funds appropriated for the then current State of Florida fiscal year.

(18) Insurer Group

For purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the National Association of Insurance Commissioners (NAIC) for purposes of filing consolidated financial statements. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group recognized by the NAIC.

(19) Loss Occurrence

This term means the sum of individual insured losses incurred under Covered Policies resulting from the same Covered Event. “Losses” means direct incurred losses under Covered Policies and excludes Loss Adjustment Expenses.

(20) Loss Adjustment Expense Reimbursement

(a)	Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
(b)	To the extent that loss reimbursements are limited to the Payout Multiple applied to each Company, the 5% Loss Adjustment Expense is included in the total Payout Multiple applied to each Company.

(21) New Participant(s)

This term means all Companies which begin writing Covered Policies on or after the beginning of the Contract Year. A Company that removes exposure from either Citizens entity, as that term is defined in (7) above, pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.

(22) Office of Insurance Regulation

This term means that office within the Department of Financial Services and which was created in Section 20.121(3), Florida Statutes.

(23) Payout Multiple

This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes, which is derived by dividing the Claims-Paying Capacity of the FHCF by the total industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.

(24) Premium

This term means the same as Reimbursement Premium.

(25) Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.

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(26) Reimbursement Premium

This term means the Premium determined by multiplying each $1,000 of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.

(27) Residential Structures

This term means dwelling units used as a home or residence for other than transient occupancy, as that term is defined in Section 83.43(10), Florida Statutes. These include the primary structure and appurtenant structures insured under the same policy and any other structures covered under endorsements associated with a policy covering a residential structure, the principal function of which at the time of loss was as a primary or secondary residence. Covered Residential Structures do not include any structures listed under Article VI herein.

(28) Retention

The Company’s Retention means the amount of hurricane losses incurred by the Company below which the Company is not entitled to reimbursement from the FHCF. The Company is eligible for reimbursement only after its paid covered losses exceed its full Retention for each event. The Company’s Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.

(29) Retention Multiple

(a)

The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2005-2006 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2004/2005 Contract Year divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.

(b)

The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:

1.	If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;
2.	If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or
3.	If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.

(30) Ultimate Net Loss

(a)	This term means all losses of the Company under Covered Policies, prior to the application of the Company’s FHCF Retention and reimbursement percentage, and excluding loss adjustment expense, arising from each Loss Occurrence during the Contract Year, provided, however, that the Company’s loss shall be determined in accordance with the deductible levels reported to the FHCF for the exposure sustaining the loss.
(b)	Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.
(c)	All salvages, recoveries or payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
(d)	Nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.
(e)	The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.

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ARTICLE VI — EXCLUSIONS

This Contract does not provide reimbursement for:

(1)	Any losses not defined as being within the scope of a Covered Policy.
(2)	Any policy which excludes wind or hurricane coverage.
(3)	Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking.
(4)	Any liability of the Company attributable to losses for fair rental value, loss of use, loss of rents, or business interruption.
(5)	Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d) herein.
(6)	Any reinsurance assumed by the Company.
(7)	Any exposure for: hotels, motels, timeshares, or other similar structures that are rented out daily, weekly, or monthly; homeowner associations, if no habitational structures are insured under the policy; shelters, camps or retreats; vacant properties insured under a commercial policy; and boats or related equipment insured under a separate policy or endorsement.
(8)	Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(9)	Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g. a policy covering only the pool of an apartment complex).
(10)	Personal contents in a commercial storage facility covered under a policy that covers only those personal contents.
(11)	Policies covering only Additional Living Expense.
(12)	Any liability of the Company for extra contractual obligations and excess of original policy limits liabilities.
(13)	Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
(14)	Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception:

Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Authorized Insurer and Citizens are covered by this Contract.

(15)	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, howsoever 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.
(16)	Any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(17)	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(18)	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.

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ARTICLE VII — MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. All payments of claims or losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIII relating to inspection of records and examinations.

ARTICLE VIII — LOSS REIMBURSEMENT ADJUSTMENTS

(1) Offsets

The SBA reserves the right to offset amounts payable to the SBA from the Company against any reimbursement or advance amounts due and payable to the Company from the SBA as a result of the liability of the SBA.

(2) Reimbursement Adjustments

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements or advances which have been paid to the Company along with interest thereon. Excess loss reimbursements or advances are those payments or advances made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess loss reimbursements or advances may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest credits, and for interest charges for adjustments beyond the Company’s control, will be the average rate earned by the SBA for the FHCF for the first five months of the Contract Year. The applicable interest rate for interest charges due to adjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%. Interest will continue to accrue if not paid by the due date.

ARTICLE IX — REIMBURSEMENT PREMIUM

(1)

The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).

(2)

Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF

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for the first five months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%.

ARTICLE X — REPORTS AND REMITTANCES

(1) Exposures

(a)	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCFD1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)	If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than March 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of December 31 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)	If the Company first begins writing Covered Policies on or after December 1 but through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)	The requirement that a report is due on a certain date means that the report shall be in the physical possession of the FHCF’s Administrator in Minneapolis no later than 5 p.m. on the due date. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Reports sent to the SBA in Tallahassee, Florida, will be returned to the sender. Reports not in the physical possession of the FHCF’s Administrator by 5 p.m., Central Time, on the applicable due date are late.
(e)	Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution.

(2) Reimbursement Premium

(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year. In addition, if a company has been placed under regulatory supervision by a State or control of the Company has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator (referred to in the aggregate as “State action”), the full annual provisional Reimbursement Premium as billed and any outstanding balances will be due on August 1, or the date that such State action occurs after August 1 and before May 31 of the Contract Year.

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(b)	A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 upon execution of this Contract. The Administrator shall calculate the Company’s actual Reimbursement Premium for the period based on its actual exposure as of December 31 of the Contract Year, as reported on or before March 1. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than May 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Premium due as calculated above.
(c)	A New Participant that first begins writing Covered Policies on or after December 1 but through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 upon execution of this Contract.
(d)	The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be in the physical possession of the FHCF no later than 5 p.m., Eastern Time, on the due date applicable to the particular installment. If remitted by check to the FHCF’s Post Office Box, the check shall be physically in the Post Office Box 550261, Tampa, FL 33655- 0261, as set out on the invoice sent to the Company. If remitted by check by hand delivery, the check shall be physically on the premises of the FHCF’s bank in Tampa, Florida, as set out on the invoice sent to the Company. If remitted electronically, the wire transfer shall have been completed to the FHCF’s account at its bank in Tampa, Florida, as set out on the invoice sent to the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Premium checks sent to the SBA in Tallahassee, Florida, or to the FHCF’s Administrator in Minneapolis, Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical possession of the FHCF by 5 p.m., Eastern Time, on the applicable due date are late.
(e)	Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for losses attributable to Covered Events occurring in that Contract Year or for losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past losses or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)1., Florida Statutes, Premiums, or earnings thereon, may be used for payments relating to revenue bonds in the event Emergency Assessments are insufficient. If Premiums are used for debt service, then the amount of the Premiums so used shall be returned, without interest, to the Fund when Emergency Assessments remain available after making payment relating to the revenue bonds and any other purposes for which Emergency Assessments were levied.

(3) Claims and Losses

     (a) In General

1. Claims and losses resulting from Loss Occurrences commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreement(s) with Citizens Property Insurance Corporation High Risk Account, Citizens and the Company shall report only their respective portion of losses under the quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to

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pay for losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.

     (b) Loss Reports

1.	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence to provide information to the SBA in determining any potential liability for possible reimbursable losses under the Contract on the Interim Loss Report, Form FHCF-L1A, as adopted in Rule 19-8.029, F.A.C.
2.	FHCF loss reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, as adopted in Rule 19- 8.029, F.A.C. To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the report. While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a Loss Occurrence, all Companies shall submit a mandatory Proof of Loss Report for each Loss Occurrence no earlier than December 15 and no later than December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss reimbursements or advances already received. Reports may be faxed only if the Company does not qualify for a reimbursement.
3.	Quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred, the Company shall submit updated Proof of Loss Reports for each Loss Occurrence, as applicable. If the Company’s Retention must be recalculated as the result of an exposure resubmission, and if the recalculated Retention changes the FHCF’s reimbursement obligations, then the Company shall submit additional Proof of Loss Reports for recalculation of the FHCF’s obligations.
4.	Annually thereafter, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable, using the most current data available. This Proof of Loss Report shall be filed no earlier than December 15 and no later than December 31 of each year and shall continue until the earlier of the expiration of the commutation period described in (3)(d) below or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries.
5.	The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of losses. The FHCF shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements submitted by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.
6.	If a Covered Event occurs during the Contract Year, but after December 31, at the direction of the SBA, Companies shall file an Interim Loss Report within 30 days after the Covered Event and Proof of Loss Reports quarterly thereafter. Subparagraphs 2-5 above regarding Proof of Loss Reports shall apply.
7.	All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4. above, Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will

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be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s premium, retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.

     (c) Loss Reimbursement Calculations

1.

In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. Each Company sustaining reimbursable losses will receive the amount of reimbursement due under the Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.

2.

In determining reimbursements under this Contract, the SBA shall:

a.	First, reimburse Companies qualified as limited apportionment companies under Section 627.351(2)(b)3., Florida Statutes, for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed the lesser of $10 million or an amount equal to 10 times the individual Company’s Reimbursement Premium for the Contract Year. This provision does not apply if the projected Balance of the Fund as of December 31 of the Contract Year, exclusive of any bonding capacity of the FHCF, exceeds $2 billion. Further, if the Company is a member of an NAIC group, the Company may not receive reimbursement under this provision if any other member of the NAIC group has received reimbursement under this provision.
b.	Next, reimburse each of the Companies for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed for all Loss Occurrences, an amount equal to the Projected Payout Multiple or the Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year. For a limited apportionment company, any amount payable under this provision shall be reduced by the amount (if any) payable under (a) above.
c.	Thereafter, pursuant to Section 215.555(4)(d)2.c., Florida Statutes, establish the prorated reimbursement level at the highest level for which any remaining fund balance or bond proceeds (as limited by Section 215.555(4)(c), Florida Statutes) are sufficient to reimburse entities created pursuant to Section 627.351(6), Florida Statutes, for reimbursable losses exceeding the amounts payable pursuant to (b) above for the Contract Year. The proration shall be determined based on each entity’s share of their aggregate reimbursable losses exceeding the amounts payable pursuant to (b) above. Any additional reimbursements pursuant to this paragraph shall not include losses under an entity’s FHCF Retention and will be at the 90% Reimbursement Percentage. In order to determine the amount available for additional reimbursements, the SBA will review reported loss information from all Companies and determine that all Companies which received payments for reimbursable losses but which did not exceed their projected payout have settled all, or substantially all, of their claims eligible for reimbursement. The SBA will then determine the remaining amount of Claims-Paying Capacity available for such additional reimbursements. Such additional reimbursement amounts shall not be limited due to the transitional provision created for the 2004-2005 Contract Year.

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3. Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable losses for the previous Contract Year, based on the length of time the losses have been outstanding, the amount of losses already paid, the percentage of incurred losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.

     (d) Commutation

1.	Not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall report to the FHCF all claims and losses, both reported and unreported, for the Contract Year which are not finally settled and which may be reimbursable losses under this Contract. The Company and the SBA or their respective representatives may, by mutual agreement, determine the capitalized value of all claims and losses, both reported and unreported, resulting from Loss Occurrences commencing during the Contract Year, and the Company shall provide the SBA with a copy of a written opinion on such capitalized value by the Company’s certifying actuary. Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA in respect of all claims and losses, both reported and unreported, under this Contract.
2.	If agreement on capitalized value cannot be reached within 60 days after the Company reports its claims and losses to the FHCF, the Company and the SBA may mutually appoint an actuary or appraiser to investigate, determine and capitalize such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the capitalized value of such claims or losses.
3.	If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, one to be chosen by each party and the third by the two so chosen. If either party does not appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of a third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries. None of the actuaries shall be under the control of either party to this Contract. Each party shall submit its case to its actuary within 30 days of the appointment of the third actuary. The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties.
4.	The reasonable and customary expense of the actuaries and of the commutation (as a result of 2. and 3. above) shall be equally divided between the two parties. Said commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.

     (4) Advances

(a) In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s Ultimate Net Loss, on an incurred basis, as reported on a Proof of Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under paragraph (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under subparagraph (c) below. All

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reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon.

(b)

The market interest rate shall be the average rate earned by the SBA for the FHCF for the first five months of the Contract Year. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue on the outstanding balance of the advance(s) until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). If an advance is offset entirely by loss reimbursements before the average rate earned for the first five months of the Contract Year can be determined, the interest on the advance(s) shall be invoiced once the interest rate has been determined. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment. If it is determined that an excess reimbursement or advance has occurred before the average rate earned for the first five months of the Contract Year can be determined, the Company shall be invoiced for the amount of the excess reimbursement or advance, and the interest thereon will be invoiced once the interest rate has been determined.

(c)

The specific type of advances enumerated in the Section 215.555, Florida Statutes, follow.

1. Advances to Companies to prevent insolvency, as defined under Article XIV of this Contract.

a.

Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.

b.

In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates that it is likely to qualify for reimbursement, that the Company demonstrates that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and that the Company provides the following information:

i. Current assets;

ii. Current liabilities other than liabilities due to the Covered Event;

iii. Current surplus as to policyholders;

iv. Estimate of other expected liabilities not due to the Covered Event; and

v. Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.

c. The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.

a.	Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes are

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that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

3. Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.

(d) In determining whether or not to grant an advance, the SBA:

1.	Must determine whether its assets are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.	Shall review and consider all the information submitted by such Companies;
3.	Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.	Shall consult with all relevant regulatory agencies to seek all relevant information;
5.	Shall review the damage caused by the Covered Event and when that Covered Event occurred; and
6.	Shall consider any other factors deemed relevant.

(e)

In situations where a Company has been placed under regulatory supervision by a State, or where control has been transferred through any legal or regulatory proceeding to a state regulator, court appointed receiver or rehabilitator, or a state insurance guarantee association, all requirements of the Company outlined herein shall remain applicable and must be met prior to the issuance of any advance of reimbursements for which the Company may be eligible to receive under the Contract.

(f)

Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event or Covered Events which have precipitated the immediate need to continue to pay additional claims as they become due.

(5) Delinquent Premium Payments

Failure to submit a Premium or Premium installment when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set forth in Article IX(2) of this Contract.

(6) Inadequate Data Submissions

If exposure data or other information required to be reported by the Company under the terms of this Contract is not received by the FHCF in the format specified by the FHCF and is inadequate to the extent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000. The $1,000 fee is also applicable to exposure resubmissions made as a result of examinations of the Company’s exposure and claims data. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.

(7) Delinquent Submissions

Failure to submit an exposure submission or resubmission when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes.

ARTICLE XI — TAXES

In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Premium herein when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII — ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made.

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ARTICLE XIII — INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data on Covered Policies and applicable ceded reinsurance contracts. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or loss examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss examination file once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. All discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, shall be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (10)(d) of Article V herein, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy.

(1) Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail, of all exposure data submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred losses until the completion of the loss reimbursement examination for that Contract Year. The records to be retained shall include the exam file which supports the exposure reported to the SBA and any other information which would allow for a complete examination of the Company’s reported exposure data. The exam file shall be prepared according to the SBA Exam File Specifications outlined in the Data Call. The Company must also have available, at the time of the examination, a copy of its underwriting manual, a copy of its rating manual, and staff to respond to the questions of the SBA or its agents. The Company is also required to retain declarations pages and policy applications to support reported exposure. To meet the requirement that the application must be retained, the Company may retain either the actual application or may retain the actual application in an electronic format.

(2) Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported losses and/or advances submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable losses. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B, adopted in Rule 19-8.029, F.A.C. The Company must also retain the required exposure exam file for the Contract Year in which the loss occurred, and must have available any other information which would allow for a complete examination of the Company’s losses.

(3) Examination Procedures

(a)

The FHCF will send an examination notice to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF upon request. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

(b)

The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is

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on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site.

(c)	At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward a preliminary draft of the examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations.
(d)	If the Company accepts the examination findings and recommendations, and there is no recommendation for resubmission of the Company’s exposure data, the examination report will be finalized and the exam file closed.
(e)	If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(f)	1. The recommendation of a loss reimbursement examination could require the Company to resubmit its loss reports or exposure data.

2.

If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. The resubmission will include a data file to be submitted to the FHCF’s Administrator and an exam file to be submitted to the offices of the SBA. The resubmission is also required to be accompanied by a detailed written description of the specific changes made to the resubmitted data. Once the resubmission is received by the FHCF’s Administrator, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the FHCF’s Administrator will send the Company an invoice for any Reimbursement Premium and interest due or to refund Reimbursement Premium, as the case may be. Once the resubmission has been approved, the exam file is closed.

3.

If the recommendation of the examiner is either to resubmit the Company’s exposure data for the Contract Year in question or giving the option to pay the estimated Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIII(3)(f)2. apply.

(g)

If the Company continues to dispute the examiner’s findings and/or recommendations and no resolution of the disputed matters is obtained through discussions between the Company and FHCF management, then the process within the SBA is at an end and further administrative remedies may be obtained under Chapter 120, Florida Statutes.

(h)

The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies rather than the whole universe of the Company’s Covered Policy exposure, the error list is not intended to provide a complete list of errors but is intended to indicate what Covered Policy information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business to ensure more complete and accurate reporting in the resubmission if required and for any future submissions.

(4) Costs of the Examinations

The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive for a Company to delay preparations for an examination, the SBA shall be reimbursed by the Company for any examination expenses incurred in addition to the usual and customary costs, which additional expenses were incurred as a result of the Company’s failure, despite proper notice, to be prepared for the examination or as a result of a Company’s failure to provide requested

17

information. All requested information must be complete and accurate. The Company shall be notified of any administrative remedies which may be obtained under Chapter 120, Florida Statutes.

ARTICLE XIV — INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolvent insurer to the Florida Insurance Guaranty Association for the benefit of Florida policyholders. For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction.

ARTICLE XV — TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules.

ARTICLE XVI — VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of the Florida. Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract.

ARTICLE XVII — APPLICABLE LAW

(1)

Applicable Law: This Contract shall be governed by and construed according to the laws of the State of Florida in respect of any matter relating to or arising out of this Contract.

(2)

Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the Uniform Rules of Procedure, codified as Chapters 28-101 through 28-111, F.A.C., a person whose substantial interests are affected by a decision of the SBA regarding the FHCF may request a hearing within 21 days shall have waived his or her right to a hearing. The hearing may be a formal hearing or an informal hearing pursuant to the provisions of Sections 120.569 and 120.57, Florida Statutes. The petition must be filed (received) in the office of the Agency Clerk, General Counsel’s Office, State Board of Administration of Florida, P.O. Box 13300, Tallahassee, FL 32317-3300, within the 21 day period.

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ARTICLE XVIII — REIMBURSEMENT CONTRACT ELECTIONS

Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company is a member of an NAIC group, all members must elect the same reimbursement percentage, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same reimbursement percentage as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90% reimbursement percentage. The Company shall not be permitted to change its reimbursement percentage during the Contract Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the issuance of revenue bonds, until the bonds have been fully repaid.

The Reimbursement Percentage elected by the Company for the prior Contract Year effective
June 1, 2004 was as follows: Liberty American Insurance Company — 90%

(a) NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group:

TBM

(b) Reimbursement Percentage Election: The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:01 a.m., Eastern Time, June 1, 2005, to 12:01 a.m., Eastern Time, June 1, 2006, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company):

45% OR 75 % OR TBM 90 %

Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and Commercial Non-Habitational Exposure, Written on a Commercial Policy

This section is applicable to all Companies which either have exposure for single structures with a mix of commercial habitational and commercial non-habitational exposure written under a Commercial Policy, or have the authority to write such policies. If the Company does not have the authority to write this type of exposure, this section does not apply; initial the N/A box on the next page, which completes this ARTICLE. If the Company does write, or has the authority to write, this type of exposure, please read and complete the remainder of this ARTICLE.

Commercial-Residential Class Code

If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial-residential class code (based on a classification plan on file with and reviewed by the Administrator), the entire exposure for the structure should be reported to the FHCF under the Data Call, and the FHCF will reimburse losses for the entire structure as well.

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Commercial Non-Residential/Business Class Code

If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial non-residential or business class code (based on a classification plan on file with and reviewed by the Administrator), the habitational portion of that structure should be identified and reported to the FHCF under the Data Call.

However, in recognition of the unusual nature of commercial structures with incidental habitational exposure and the hardship some companies may face in having to carve out such incidental habitational exposure, as well as the losses to such structures, the FHCF will accommodate these companies by allowing them to exclude the entire exposure for the single structure from their Data Call submission, providing the following two conditions are met:

(1)	The decision to not carve out and report the incidental habitational exposure shall apply to all such structures insured by the Company; and
(2)	If the incidental habitational exposure is not reported to the FHCF, the Company agrees it shall not report losses to the structure and the FHCF shall not reimburse any losses to the structure.

Initial the CARVING box below if the Company is able to carve out and report its incidental habitational exposure, OR, if this requirement presents a hardship, the Company must communicate its decision to not carve out and to not report the incidental exposure by having the individual executing this Contract on behalf of the Company placing his or her initials in the NOT CARVING box below. If the Company does not currently write such policies, but has the authority to write such policies after the start date of this Contract, the decision to carve or not carve out the incidental habitational exposure must be indicated below.

	OR	TBM	OR
CARVING		NOT CARVING		NA

By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable decision for the corresponding Contract Year Data Call submission and any subsequent resubmissions.

Important Note: Since this election will impact your Data Call submission, please share this decision with the individual(s) responsible for compiling your Data Call submission.

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ARTICLE XIX — SIGNATURES

Approved by:

Florida Hurricane Catastrophe Fund
By: State Board of Administration of the State of Florida
By:
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
By:
	Linda Lettera	Date
	General Counsel
	FL Bar ID#311911
Liberty American Insurance Company
	Company
By:	T. Bruce Meyer, Sr VP& Treasurer	5/18/2005
	Name/Title	Date

EX-10.9

Exhibit 10.9

STATE BOARD OF ADMINISTRATION
OF FLORIDA
1801 Hermitage Boulevard-Suite 100
Tallahassee, Florida 332308
(850) 488-4406

Post Office Box 13300
32317-3300

REIMBURSEMENT CONTRACT
Effective: June 1, 2005
(Contract)

between

MOBILE USA INSURANCE COMPANY
Pinellas Park, FL

NAIC # 32760

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

PREAMBLE

The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes “Statute”, which directs the SBA to administer the FHCF. This Contract is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.

In consideration of the promises set forth in this Contract, the parties agree as follows:

ARTICLE I — SCOPE OF AGREEMENT

As a condition precedent to the SBA’s obligations under this Contract, the Company, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies.

The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies in excess of the Company’s Retention as a result of each Loss Occurrence commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

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ARTICLE II — PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or any claimant against an insured of the Company, or any other third party, have any rights under this Contract, except as provided in Article XIV. The SBA will only disburse funds to the Company, except as provided for in Article XIV of this Contract.

ARTICLE III — TERM

This Contract shall apply to Loss Occurrences which commence during the period from 12:01 a.m., Eastern Time, June 1, 2005, to 12:01 a.m., Eastern Time, June 1, 2006 (Contract Year).

The Company must designate a coverage level, make the required selections, and return this fully executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time, June 1, 2005. Failure to do so will result in a referral to the Office of Insurance Regulation within the Department of Financial Services for administrative action. Furthermore, the Company’s coverage level under this Contract will be deemed as follows:

(1) For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.

(2) For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be
deemed.

(3) For New Participants that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.

(4) For New Participants, as that term is defined in Article V(21) herein, that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45% coverage level shall be deemed.

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be responsible for such Loss Occurrence in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Loss Occurrence in progress.

ARTICLE IV — LIABILITY OF THE FHCF

(1)	The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, plus 5% of the reimbursed losses for Loss Adjustment Expense Reimbursement.
(2)	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under ARTICLE XVIII herein.
(3)	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this contract year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding loss reimbursement calculations, see section (3)(c) of ARTICLE X herein.
(4)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.
(5)	After the end of each calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the

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SBA shall publish in the Florida Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity and the projected Balance of the Fund as of December 31.

(6) The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.). If Reimbursement Premiums are used for debt service in the event of a temporary shortfall in the collection of emergency assessments, then the amount of the Premiums so used will be reimbursed to the SBA when sufficient emergency assessments are received.

ARTICLE V — DEFINITIONS

(1) Actual Claims-Paying Capacity of the FHCF

This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.

(2) Actuarially Indicated

This term means, with respect to Premiums paid by Companies for reimbursement provided by the FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a), Florida Statutes.

(3) Additional Living Expense (ALE)

ALE losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential Structure or its contents based on the coverage provided in the policy. Fair rental value, loss of use, loss of rents, or business interruption losses are not covered by the FHCF.

(4) Administrator

This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 3600 American Boulevard West, Suite 700, Minneapolis, Minnesota 55431. The telephone number is (800) 689-3863, and the facsimile number is (800) 264-0492.

(5) Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6) Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves.

(7) Citizens Property Insurance Corporation (Citizens)

This term means the entity formed under Section 627.351(6), Florida Statutes and refers to both Citizens Property Insurance Corporation High Risk Account and Citizens Property Insurance Corporation Personal Lines and Commercial Lines Accounts.

(8) Contract

This term means this Reimbursement Contract for the current Contract Year.

(9) Covered Event

This term means any one storm declared to be a hurricane by the National Hurricane Center, which causes insured losses in Florida, both while it is still a hurricane and throughout any subsequent downgrades in storm status by the National Hurricane Center. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.

(10) Covered Policy or Covered Policies

(a) Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure,

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as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida, or ALE coverage as defined in definition (3) herein.

(b)

Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as:

— Fire

— Allied Lines

— Farmowners Multiple Peril

— Homeowners Multiple Peril

— Commercial Multiple Peril (non liability portion, covering condominiums and apartments)

— Inland Marine

Note that where particular insurance exposures, e.g. mobile homes, are reported on an annual
statement is not dispositive of whether or not the exposure is a Covered Policy.

(c)

This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.

(d)

Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.

(e)    See Article VI of this Contract for specific exclusions.

(11) Deductible Buy-Back Policies

This term means a specific policy that provides coverage to a policyholder for some portion of the policyholder’s deductible under a policy issued by another insurer.

(12) Estimated Claims-Paying Capacity of the FHCF

This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.

(13) Excess Policies

This term, for the purposes of this Contract, means a policy that provides insurance protection for large commercial property risks that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.

(14) Florida Department of Financial Services (Department)

This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida Insurance Code.

(15) Florida Insurance Code

This term means those chapters identified in Section 624.01, Florida Statutes, which are designated as the Florida Insurance Code.

(16) Formula or the Premium Formula

This term means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula.

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(17) Fund Balance or Balance of the Fund as of December 31

These terms mean the “Net assets: Unrestricted” as indicated on the unconsolidated FHCF Statement of Net Assets for the then current Contract Year, to which is added: reported FHCF losses (including Loss Adjustment Expense) for the then current Contract Year, whether paid or unpaid by FHCF, as of December 31, and from which is subtracted: any reinsurance recovered prior to, or recoverable as of, December 31; any obligations paid or expected to be paid with bonding proceeds or receipts from emergency assessments; amounts needed for administration for the then current State of Florida fiscal year which have not been spent and which are not reflected on the FHCF Statement of Net Assets; and the amount of undispersed mitigation funds appropriated for the then current State of Florida fiscal year.

(18) Insurer Group

For purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the National Association of Insurance Commissioners (NAIC) for purposes of filing consolidated financial statements. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group recognized by the NAIC.

(19) Loss Occurrence

This term means the sum of individual insured losses incurred under Covered Policies resulting from the same Covered Event. “Losses” means direct incurred losses under Covered Policies and excludes Loss Adjustment Expenses.

(20) Loss Adjustment Expense Reimbursement

(a)	Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
(b)	To the extent that loss reimbursements are limited to the Payout Multiple applied to each Company, the 5% Loss Adjustment Expense is included in the total Payout Multiple applied to each Company.

(21) New Participant(s)

This term means all Companies which begin writing Covered Policies on or after the beginning of the Contract Year. A Company that removes exposure from either Citizens entity, as that term is defined in (7) above, pursuant to an assumption agreement effective on or after June 1 and had
written no other Covered Policies before June 1 is also considered a New Participant.

(22) Office of Insurance Regulation

This term means that office within the Department of Financial Services and which was created in Section 20.121(3), Florida Statutes.

(23) Payout Multiple

This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes, which is derived by dividing the Claims-Paying Capacity of the FHCF by the total industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.

(24) Premium

     This term means the same as Reimbursement Premium.

(25) Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.

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(26) Reimbursement Premium

This term means the Premium determined by multiplying each $1,000 of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.

(27) Residential Structures

This term means dwelling units used as a home or residence for other than transient occupancy, as that term is defined in Section 83.43(10), Florida Statutes. These include the primary structure and appurtenant structures insured under the same policy and any other structures covered under endorsements associated with a policy covering a residential structure, the principal function of which at the time of loss was as a primary or secondary residence. Covered Residential Structures do not include any structures listed under Article VI herein.

(28) Retention

The Company’s Retention means the amount of hurricane losses incurred by the Company below which the Company is not entitled to reimbursement from the FHCF. The Company is eligible for reimbursement only after its paid covered losses exceed its full Retention for each event. The Company’s Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.

(29) Retention Multiple

(a)

The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2005-2006 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2004/2005 Contract Year divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.

(b)

The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:

1.	If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;
2.	If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or
3.	If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.

(30) Ultimate Net Loss

(a)	This term means all losses of the Company under Covered Policies, prior to the application of the Company’s FHCF Retention and reimbursement percentage, and excluding loss adjustment expense, arising from each Loss Occurrence during the Contract Year, provided, however, that the Company’s loss shall be determined in accordance with the deductible levels reported to the FHCF for the exposure sustaining the loss.
(b)	Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.
(c)	All salvages, recoveries or payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
(d)	Nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.
(e)	The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.

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ARTICLE VI – EXCLUSIONS

This Contract does not provide reimbursement for:

(1)	Any losses not defined as being within the scope of a Covered Policy.
(2)	Any policy which excludes wind or hurricane coverage.
(3)	Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking.
(4)	Any liability of the Company attributable to losses for fair rental value, loss of use, loss of rents, or business interruption.
(5)	Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d) herein.
(6)	Any reinsurance assumed by the Company. (7) Any exposure for: hotels, motels, timeshares, or other similar structures that are rented out daily, weekly, or monthly; homeowner associations, if no habitational structures are insured under the policy; shelters, camps or retreats; vacant properties insured under a commercial policy; and boats or related equipment insured under a separate policy or endorsement.
(8)	Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(9)	Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g. a policy covering only the pool of an apartment complex).
(10)	Personal contents in a commercial storage facility covered under a policy that covers only those personal contents.
(11)	Policies covering only Additional Living Expense.
(12)	Any liability of the Company for extra contractual obligations and excess of original policy limits liabilities.
(13)	Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
(14)	Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Authorized Insurer and Citizens are covered by this Contract.
(15)	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, howsoever 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.
(16)	Any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(17)	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(18)	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.

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ARTICLE VII — MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. All payments of claims or losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIII relating to inspection of records and examinations.

ARTICLE VIII – LOSS REIMBURSEMENT ADJUSTMENTS

(1) Offsets

The SBA reserves the right to offset amounts payable to the SBA from the Company against any reimbursement or advance amounts due and payable to the Company from the SBA as a result of the liability of the SBA.

(2) Reimbursement Adjustments

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements or advances which have been paid to the Company along with interest thereon. Excess loss reimbursements or advances are those payments or advances made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess loss reimbursements or advances may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest credits, and for interest charges for adjustments beyond the Company’s control, will be the average rate earned by the SBA for the FHCF for the first five months of the Contract Year. The applicable interest rate for interest charges due to adjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%. Interest will continue to accrue if not paid by the due date.

ARTICLE IX — REIMBURSEMENT PREMIUM

(1)

The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).

(2)

Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF

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for the first five months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%.

ARTICLE X — REPORTS AND REMITTANCES

(1) Exposures

(a)	If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCFD1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)	If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than March 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of December 31 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)	If the Company first begins writing Covered Policies on or after December 1 but through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)	The requirement that a report is due on a certain date means that the report shall be in the physical possession of the FHCF’s Administrator in Minneapolis no later than 5 p.m. on the due date. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Reports sent to the SBA in Tallahassee, Florida, will be returned to the sender. Reports not in the physical possession of the FHCF’s Administrator by 5 p.m., Central Time, on the applicable due date are late.
(e)	Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution.

(2) Reimbursement Premium

(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year. In addition, if a company has been placed under regulatory supervision by a State or control of the Company has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator (referred to in the aggregate as “State action”), the full annual provisional Reimbursement Premium as billed and any outstanding balances will be due on August 1, or the date that such State action occurs after August 1 and before May 31 of the Contract Year.

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(b)	A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 upon execution of this Contract. The Administrator shall calculate the Company’s actual Reimbursement Premium for the period based on its actual exposure as of December 31 of the Contract Year, as reported on or before March 1. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than May 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Premium due as calculated above.
(c)	A New Participant that first begins writing Covered Policies on or after December 1 but through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 upon execution of this Contract.
(d)	The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be in the physical possession of the FHCF no later than 5 p.m., Eastern Time, on the due date applicable to the particular installment. If remitted by check to the FHCF’s Post Office Box, the check shall be physically in the Post Office Box 550261, Tampa, FL 33655- 0261, as set out on the invoice sent to the Company. If remitted by check by hand delivery, the check shall be physically on the premises of the FHCF’s bank in Tampa, Florida, as set out on the invoice sent to the Company. If remitted electronically, the wire transfer shall have been completed to the FHCF’s account at its bank in Tampa, Florida, as set out on the invoice sent to the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Premium checks sent to the SBA in Tallahassee, Florida, or to the FHCF’s Administrator in Minneapolis, Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical possession of the FHCF by 5 p.m., Eastern Time, on the applicable due date are late.
(e)	Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for losses attributable to Covered Events occurring in that Contract Year or for losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past losses or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)1., Florida Statutes, Premiums, or earnings thereon, may be used for payments relating to revenue bonds in the event Emergency Assessments are insufficient. If Premiums are used for debt service, then the amount of the Premiums so used shall be returned, without interest, to the Fund when Emergency Assessments remain available after making payment relating to the revenue bonds and any other purposes for which Emergency Assessments were levied.

(3) Claims and Losses

(a) In General

1. Claims and losses resulting from Loss Occurrences commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreement(s) with Citizens Property Insurance Corporation High Risk Account, Citizens and the Company shall report only their respective portion of losses under the quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to

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pay for losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.

(b) Loss Reports

1.	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence to provide information to the SBA in determining any potential liability for possible reimbursable losses under the Contract on the Interim Loss Report, Form FHCF-L1A, as adopted in Rule 19-8.029, F.A.C.
2.	FHCF loss reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, as adopted in Rule 19- 8.029, F.A.C. To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the report. While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a Loss Occurrence, all Companies shall submit a mandatory Proof of Loss Report for each Loss Occurrence no earlier than December 15 and no later than December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss reimbursements or advances already received. Reports may be faxed only if the Company does not qualify for a reimbursement.
3.	Quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred, the Company shall submit updated Proof of Loss Reports for each Loss Occurrence, as applicable. If the Company’s Retention must be recalculated as the result of an exposure resubmission, and if the recalculated Retention changes the FHCF’s reimbursement obligations, then the Company shall submit additional Proof of Loss Reports for recalculation of the FHCF’s obligations.
4.	Annually thereafter, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable, using the most current data available. This Proof of Loss Report shall be filed no earlier than December 15 and no later than December 31 of each year and shall continue until the earlier of the expiration of the commutation period described in (3)(d) below or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries.
5.	The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of losses. The FHCF shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements submitted by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.
6.	If a Covered Event occurs during the Contract Year, but after December 31, at the direction of the SBA, Companies shall file an Interim Loss Report within 30 days after the Covered Event and Proof of Loss Reports quarterly thereafter. Subparagraphs 2-5 above regarding Proof of Loss Reports shall apply.
7.	All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4. above, Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will

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be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s premium, retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.

(c) Loss Reimbursement Calculations

1.	In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention
	for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. Each Company sustaining reimbursable losses will receive the amount of reimbursement due under the Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
2.	In determining reimbursements under this Contract, the SBA shall:

a.	First, reimburse Companies qualified as limited apportionment companies under Section 627.351(2)(b)3., Florida Statutes, for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed the lesser of $10 million or an amount equal to 10 times the individual Company’s Reimbursement Premium for the Contract Year. This provision does not apply if the projected Balance of the Fund as of December 31 of the Contract Year, exclusive of any bonding capacity of the FHCF, exceeds $2 billion. Further, if the Company is a member of an NAIC group, the Company may not receive reimbursement under this provision if any other member of the NAIC group has received reimbursement under this provision.
b.	Next, reimburse each of the Companies for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed for all Loss Occurrences, an amount equal to the Projected Payout Multiple or the Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year. For a limited apportionment company, any amount payable under this provision shall be reduced by the amount (if any) payable under (a) above.
c.	Thereafter, pursuant to Section 215.555(4)(d)2.c., Florida Statutes, establish the prorated reimbursement level at the highest level for which any remaining fund balance or bond proceeds (as limited by Section 215.555(4)(c), Florida Statutes) are sufficient to reimburse entities created pursuant to Section 627.351(6), Florida Statutes, for reimbursable losses exceeding the amounts payable pursuant to (b) above for the Contract Year. The proration shall be determined based on each entity’s share of their aggregate reimbursable losses exceeding the amounts payable pursuant to (b) above. Any additional reimbursements pursuant to this paragraph shall not include losses under an entity’s FHCF Retention and will be at the 90% Reimbursement Percentage. In order to determine the amount available for additional reimbursements, the SBA will review reported loss information from all Companies and determine that all Companies which received payments for reimbursable losses but which did not exceed their projected payout have settled all, or substantially all, of their claims eligible for reimbursement. The SBA will then determine the remaining amount of Claims-Paying Capacity available for such additional reimbursements. Such additional reimbursement amounts shall not be limited due to the transitional provision created for the 2004-2005 Contract Year.

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3. Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable losses for the previous Contract Year, based on the length of time the losses have been outstanding, the amount of losses already paid, the percentage of incurred losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.

(d) Commutation

1.	Not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall report to the FHCF all claims and losses, both reported and unreported, for the Contract Year which are not finally settled and which may be reimbursable losses under this Contract. The Company and the SBA or their respective representatives may, by mutual agreement, determine the capitalized value of all claims and losses, both reported and unreported, resulting from Loss Occurrences commencing during the Contract Year, and the Company shall provide the SBA with a copy of a written opinion on such capitalized value by the Company’s certifying actuary. Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA in respect of all claims and losses, both reported and unreported, under this Contract.
2.	If agreement on capitalized value cannot be reached within 60 days after the Company reports its claims and losses to the FHCF, the Company and the SBA may mutually appoint an actuary or appraiser to investigate, determine and capitalize such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the capitalized value of such claims or losses.
3.	If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, one to be chosen by each party and the third by the two so chosen. If either party does not appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of a third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries. None of the actuaries shall be under the control of either party to this Contract. Each party shall submit its case to its actuary within 30 days of the appointment of the third actuary. The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties.
4.	The reasonable and customary expense of the actuaries and of the commutation (as a result of 2. and 3. above) shall be equally divided between the two parties. Said commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.

(4) Advances

(a) In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s Ultimate Net Loss, on an incurred basis, as reported on a Proof of Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under paragraph (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under subparagraph (c) below. All

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	reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon.
(b)	The market interest rate shall be the average rate earned by the SBA for the FHCF for the first five months of the Contract Year. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue on the outstanding balance of the advance(s) until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). If an advance is offset entirely by loss reimbursements before the average rate earned for the first five months of the Contract Year can be determined, the interest on the advance(s) shall be invoiced once the interest rate has been determined. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment. If it is determined that an excess reimbursement or advance has occurred before the average rate earned for the first five months of the Contract Year can be determined, the Company shall be invoiced for the amount of the excess reimbursement or advance, and the interest thereon will be invoiced once the interest rate has been determined.
(c)	The specific type of advances enumerated in the Section 215.555, Florida Statutes, follow.

1. Advances to Companies to prevent insolvency, as defined under Article XIV of this Contract.

a.

Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.

b.

In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates that it is likely to qualify for reimbursement, that the Company demonstrates that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and that the Company provides the following information:

i.Current assets;

ii.Current liabilities other than liabilities due to the Covered Event;

iii.Current surplus as to policyholders;

iv.Estimate of other expected liabilities not due to the Covered Event; and

v.Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.

c. The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.

a.	Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.	In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes are

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that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

3. Advances to limited apportionment companies. Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.

(d) In determining whether or not to grant an advance, the SBA:

1.	Must determine whether its assets are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.	Shall review and consider all the information submitted by such Companies;
3.	Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.	Shall consult with all relevant regulatory agencies to seek all relevant information;
5.	Shall review the damage caused by the Covered Event and when that Covered Event occurred; and
6.	Shall consider any other factors deemed relevant.

(e)

In situations where a Company has been placed under regulatory supervision by a State, or where control has been transferred through any legal or regulatory proceeding to a state regulator, court appointed receiver or rehabilitator, or a state insurance guarantee association, all requirements of the Company outlined herein shall remain applicable and must be met prior to the issuance of any advance of reimbursements for which the Company may be eligible to receive under the Contract.

(f)

Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event or Covered Events which have precipitated the immediate need to continue to pay additional claims as they become due.

(5) Delinquent Premium Payments

Failure to submit a Premium or Premium installment when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set forth in Article IX(2) of this Contract.

(6) Inadequate Data Submissions

If exposure data or other information required to be reported by the Company under the terms of this Contract is not received by the FHCF in the format specified by the FHCF and is inadequate to the extent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000. The $1,000 fee is also applicable to exposure resubmissions made as a result of examinations of the Company’s exposure and claims data. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.

(7) Delinquent Submissions

Failure to submit an exposure submission or resubmission when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes.

ARTICLE XI — TAXES

In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Premium herein when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII — ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made.

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ARTICLE XIII — INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data on Covered Policies and applicable ceded reinsurance contracts. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or loss examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss examination file once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. All discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, shall be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (10)(d) of Article V herein, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy.

(1) Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail, of all exposure data submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred losses until the completion of the loss reimbursement examination for that Contract Year. The records to be retained shall include the exam file which supports the exposure reported to the SBA and any other information which would allow for a complete examination of the Company’s reported exposure data. The exam file shall be prepared according to the SBA Exam File Specifications outlined in the Data Call. The Company must also have available, at the time of the examination, a copy of its underwriting manual, a copy of its rating manual, and staff to respond to the questions of the SBA or its agents. The Company is also required to retain declarations pages and policy applications to support reported exposure. To meet the requirement that the application must be retained, the Company may retain either the actual application or may retain the actual application in an electronic format.

(2) Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported losses and/or advances submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable losses. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B, adopted in Rule 19-8.029, F.A.C. The Company must also retain the required exposure exam file for the Contract Year in which the loss occurred, and must have available any other information which would allow for a complete examination of the Company’s losses.

(3) Examination Procedures

(a)

The FHCF will send an examination notice to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF upon request. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

(b)

The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is

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	on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site.
(c)	At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward a preliminary draft of the examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations.
(d)	If the Company accepts the examination findings and recommendations, and there is no recommendation for resubmission of the Company’s exposure data, the examination report will be finalized and the exam file closed.
(e)	If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(f)1.	The recommendation of a loss reimbursement examination could require the Company to resubmit its loss reports or exposure data.

2.

If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. The resubmission will include a data file to be submitted to the FHCF’s Administrator and an exam file to be submitted to the offices of the SBA. The resubmission is also required to be accompanied by a detailed written description of the specific changes made to the resubmitted data. Once the resubmission is received by the FHCF’s Administrator, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the FHCF’s Administrator will send the Company an invoice for any Reimbursement Premium and interest due or to refund Reimbursement Premium, as the case may be. Once the resubmission has been approved, the exam file is closed.

3.

If the recommendation of the examiner is either to resubmit the Company’s exposure data for the Contract Year in question or giving the option to pay the estimated Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIII(3)(f)2. apply.

(g)

If the Company continues to dispute the examiner’s findings and/or recommendations and no resolution of the disputed matters is obtained through discussions between the Company and FHCF management, then the process within the SBA is at an end and further administrative remedies may be obtained under Chapter 120, Florida Statutes.

(h)

The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies rather than the whole universe of the Company’s Covered Policy exposure, the error list is not intended to provide a complete list of errors but is intended to indicate what Covered Policy information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business to ensure more complete and accurate reporting in the resubmission if required and for any future submissions.

(4) Costs of the Examinations

The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive for a Company to delay preparations for an examination, the SBA shall be reimbursed by the Company for any examination expenses incurred in addition to the usual and customary costs, which additional expenses were incurred as a result of the Company’s failure, despite proper notice, to be prepared for the examination or as a result of a Company’s failure to provide requested

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information. All requested information must be complete and accurate. The Company shall be notified of any administrative remedies which may be obtained under Chapter 120, Florida Statutes.

ARTICLE XIV — INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolvent insurer to the Florida Insurance Guaranty Association for the benefit of Florida policyholders. For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction.

ARTICLE XV — TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules.

ARTICLE XVI — VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of the Florida. Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract.

ARTICLE XVII — APPLICABLE LAW

(1)

Applicable Law: This Contract shall be governed by and construed according to the laws of the State of Florida in respect of any matter relating to or arising out of this Contract.

(2)

Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the Uniform Rules of Procedure, codified as Chapters 28-101 through 28-111, F.A.C., a person whose substantial interests are affected by a decision of the SBA regarding the FHCF may request a hearing within 21 days shall have waived his or her right to a hearing. The hearing may be a formal hearing or an informal hearing pursuant to the provisions of Sections 120.569 and 120.57, Florida Statutes. The petition must be filed (received) in the office of the Agency Clerk, General Counsel’s Office, State Board of Administration of Florida, P.O. Box 13300, Tallahassee, FL 32317-3300, within the 21 day period.

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ARTICLE XVIII – REIMBURSEMENT CONTRACT ELECTIONS

Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company is a member of an NAIC group, all members must elect the same reimbursement percentage, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same reimbursement percentage as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90% reimbursement percentage. The Company shall not be permitted to change its reimbursement percentage during the Contract Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the issuance of revenue bonds, until the bonds have been fully repaid.

The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2004 was as follows: Mobile USA Insurance Company – 90%

(a) NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group:

TBM

(b) Reimbursement Percentage Election: The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:01 a.m., Eastern Time, June 1, 2005, to 12:01 a.m., Eastern Time, June 1, 2006, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company):

45% OR 75 % OR TBM 90 %

Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and Commercial Non-Habitational Exposure, Written on a Commercial Policy

This section is applicable to all Companies which either have exposure for single structures with a mix of commercial habitational and commercial non-habitational exposure written under a Commercial Policy, or have the authority to write such policies. If the Company does not have the authority to write this type of exposure, this section does not apply; initial the N/A box on the next page, which completes this ARTICLE. If the Company does write, or has the authority to write, this type of exposure, please read and complete the remainder of this ARTICLE.

Commercial-Residential Class Code

If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial-residential class code (based on a classification plan on file with and reviewed by the Administrator), the entire exposure for the structure should be reported to the FHCF under the Data Call, and the FHCF will reimburse losses for the entire structure as well.

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Commercial Non-Residential/Business Class Code

If a single structure is used for both habitational and non-habitational purposes and the structure has a commercial non-residential or business class code (based on a classification plan on file with and reviewed by the Administrator), the habitational portion of that structure should be identified and reported to the FHCF under the Data Call.

However, in recognition of the unusual nature of commercial structures with incidental habitational exposure and the hardship some companies may face in having to carve out such incidental habitational exposure, as well as the losses to such structures, the FHCF will accommodate these companies by allowing them to exclude the entire exposure for the single structure from their Data Call submission, providing the following two conditions are met:

(1)	The decision to not carve out and report the incidental habitational exposure shall apply to all such structures insured by the Company; and
(2)	If the incidental habitational exposure is not reported to the FHCF, the Company agrees it shall not report losses to the structure and the FHCF shall not reimburse any losses to the structure.

Initial the CARVING box below if the Company is able to carve out and report its incidental habitational exposure, OR, if this requirement presents a hardship, the Company must communicate its decision to not carve out and to not report the incidental exposure by having the individual executing this Contract on behalf of the Company placing his or her initials in the NOT CARVING box below. If the Company does not currently write such policies, but has the authority to write such policies after the start date of this Contract, the decision to carve or not carve out the incidental habitational exposure must be indicated below.

	OR	TBM	OR
CARVING		NOT CARVING		NA

By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable decision for the corresponding Contract Year Data Call submission and any subsequent resubmissions.

Important Note: Since this election will impact your Data Call submission, please share this decision with the individual(s) responsible for compiling your Data Call submission.

20

ARTICLE XIX – SIGNATURES

Approved by:

Florida Hurricane Catastrophe Fund
By:	State Board of Administration of the State of Florida
By:
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
By:
	Linda Lettera	Date
	General Counsel
	FL Bar ID#311911
Mobile USA Insurance Company
	Company
By:	T. Bruce Meyer, Sr VP& Treasurer	5/18/2005
	Name/Title	Date

EX-10.10

Exhibit 10.10

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies
Hereinafter referred to as the “Company”

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2005

Reinsurance Confirmation

Business Reinsured

Business classified by the Company as Property business. In force, new and renewal business.

Commencement and Termination

Effective June 1, 2005, with respect to losses arising out of loss occurrences commencing on or after that date, through May 31, 2006 both days inclusive. Extended expiration in the event a loss occurrence is in progress at termination or expiration.

The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 7 below and upon discovery for subparagraph 8 below:

1.	The Subscribing Reinsurer’s policyholders’ surplus after the date lines are bound for this Contract 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 between the date lines are bound and the date of termination of this Contract 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 date lines are bound for this Contract; 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+ at any time between the date lines are bound and the date of termination of this Contract; 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

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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 or renewal property or casualty treaty reinsurance business.

The Reinsurer shall have no liability hereunder with respect to losses arising out of loss occurrences commencing after the effective date of termination.

Territory (BRMA 51A)

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

Exclusions

See attached.

Retention and Limit

Based on the Company’s ultimate net loss each loss occurrence. Layers, retentions and limits as set forth in the attached Schedule A.

No claim shall be made under any excess layer of coverage provided by this Contract in any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the sole judge of what constitutes one risk.

Florida Hurricane Catastrophe Fund

Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract.

Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract between the Company and the State Board of Administration of the State of Florida, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.

If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence commencing during the term of this Contract, the total FHCF reimbursement received by the Company shall be allocated to individual loss occurrences in chronological order of the dates such loss occurrences

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commence, beginning with the first such loss occurrence commencing during the term of this Contract, provided that:

1.	The portion of the total FHCF reimbursement amount to be allocated by the Company to any individual loss occurrence shall be equal to the lesser of (a) the amount of FHCF reimbursement to which the Company would be entitled for that loss occurrence alone, or (b) the remaining FHCF reimbursement which has not been allocated by the Company to prior loss occurrences; and
2.	The total amount allocated by the Company to all such loss occurrences shall be equal to the total FHCF reimbursement received by the Company for such loss occurrences.

Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Other Reinsurance

Company shall be permitted to carry excess per risk reinsurance, recoveries under which shall inure to the benefit of this Contract.

Company shall be permitted to carry net quota share reinsurance recoveries under which shall inure solely to the benefit of the Company.

Definitions

UNL includes LAE (See attached).

Loss Occurrence

No reinstatement same wind event. 96 hours as respects hurricane and tropical storm. (See attached).

Reinstatement

Number of full reinstatement(s) for each layer as set forth in Schedule A, with additional premium calculated 100% as to time and pro rata as to amount.

If this Contract is terminated, any reinstatement premium paid or otherwise due the Reinsurer for losses arising out of loss occurrences commencing on or prior to the date of termination shall be considered fully earned, however, the Reinsurer shall pay the loss prior to receiving the reinstatement premium.

Loss Notices and Settlements

Individual loss notices and settlements.

Premium

Rates based on gross earned premium (GEP). Annual deposit premium and annual minimum premium as set forth in the attached Schedule A.

Annual deposit premium for each layer payable in four equal installments on June 1, 2005, September 1, 2005, December 1, 2005 and March 1, 2006. Adjusted within 45 days after the end of the contract term.

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If this Contract is terminated, the Reinsurer shall return the unearned portion of any reinsurance premium paid hereunder and the minimum premium provision shall be waived.

“Gross earned premium” as used herein is defined as earned premium of the Company for the classes of business reinsured hereunder, before the deduction of any premiums ceded by the Company for reinsurance which inures to the benefit of this Contract.

Late Payments

See attached. Interest penalty based on 6-month United States Treasury Bill Rate. Interest penalty of less than $100 shall be waived.

Subject Premium

Estimated subject gross earned premium for June 1, 2005 through May 31, 2006 is $262,872,000.

Brokerage: 10% of gross reinsurance premium, 5% of reinstatement premium.

Other Provisions

Salvage and Subrogation
Offset (BRMA 36D)
Access to Records (BRMA 1D)
Liability of the Reinsurer
Net Retained Lines (BRMA 32E)
Errors and Omissions (BRMA 14F)
Currency (BRMA 12A)
Taxes (BRMA 50C)
Federal Excise Tax
Reserves
Insolvency
Arbitration
Service of Suit
Agency Agreement
Governing Law (State of Pennsylvania)
Confidentiality
Severability
Intermediary (BRMA 23A)

Allocation of Final Shares

The Company shall have the right to review all authorizations and the full authority to allocate final shares. Such decisions will be at the sole discretion of the Company and may result in other than a “proportional signdown” of authorizations. As respects signdowns within the London marketplace, the final allocation of shares to individual companies or syndicates may not be proportionate to the original authorizations.

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Exclusions

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

1.	Financial Guarantee and Insolvency;
2.	Mortgage Impairment insurances and similar kinds of insurances, however styled.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage – Reinsurance – U.S.A.” and the “Nuclear Incident Exclusion Clause — Physical Damage - Reinsurance — Canada,” attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause;
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract;
6.	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;
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures, other than those on or within 1,000 feet of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ Policy;
8.	Accident and Health, Casualty, Fidelity and/or Surety business;
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract;
10.	Notwithstanding any provision to the contrary within this Contract or any addendum thereto, loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or

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c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

Loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines, this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, radioactive, or nuclear pollution or contamination or explosion.

11. Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination”. This includes:

a.	Any supervision, instruction, recommendations, warnings, or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply.

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

12. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (NMA 2915) attached to and forming part of this Contract.

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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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

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

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

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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 herein (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 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 10 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 10 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 in accordance with the provisions of the Loss Notices and Settlements Article, 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.

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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.

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Non BRMA Articles

Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards hurricane and tropical storm, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
3.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
4.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
5.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
6.	As regards firestorms, brush fires, and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs 3 and 4 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 3 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and

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provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 96 consecutive hours shall apply with respect to one event, regardless of the duration of the event and subparagraph 2 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C.

As respects those “loss occurrences” referred to in subparagraph 3 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D.

No individual losses occasioned by an event that would be covered by 72 hours and 96 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

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.

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.

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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.

Reserves

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, its share of the Company’s ceded United States outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

if the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia having jurisdiction over the Company and if, without such funding a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.

B. The Reinsurer agrees to fund, within 30 days of the Company’s request, 115% of its share of the Company’s Canadian ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2.	Cash advances for the remaining balance of the funding required;

if the Reinsurer is unauthorized in any province or jurisdiction of Canada having jurisdiction over the Company and if, with such funding, a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.

C. The Reinsurer, at its sole option, may fund in other than cash if its method of funding is acceptable to the Company and to the insurance regulatory authorities involved.

For the purpose of this Contract, the Lloyd’s U.S. Credit for Reinsurance Trust Fund shall be considered an acceptable funding instrument.

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

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of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

1.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
3.	To fund a cash account in an amount equal to the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
4.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company), if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned deposit premium paid to the Reinsurer.

It is understood and agreed that with respect to subparagraphs 3, 4 and 5 of this paragraph, the provisions pertaining to reimbursement for unearned deposit premium apply only in the circumstance of a rating-related obligation of the Reinsurer to fund the unearned portion of the deposit premium; the remaining provisions of subparagraphs 3, 4 and 5 of this paragraph, as well as the provisions of subparagraphs 1 and 2 of this paragraph, apply in any and all circumstances the Reinsurer is required to provide funding under paragraph A of this Article.

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

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.

Page 13

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.

Arbitration

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania unless otherwise mutually agreed between the Company and the Reinsurer.

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G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

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.

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Pennsylvania exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly, communicate, disclose or divulge to any third party, any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other dully-issued order of a court or other governmental agency or regulatory authority.

Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Service of Suit

(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. This Article is not intended to conflict with or override the parties’ obligations to arbitrate their disputes in accordance with the Arbitration Article)

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 any 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 therefore, 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

Page 15

in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.

Page 16

Schedule A

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2005

issued to

Philadelphia Insurance Companies

				Reinsurer’s				Number of
				Per				Full		Reinsurer’s		Annual					Annual		Quarterly
	Coverage			Occurrence		Company’s		Reinstate-		Annual		Minimum					Deposit		Deposit
Layer	Percent			Limit		Retention		ments		Limit		Premium		Rate			Premium		Premium
First		100	%	$	5,000,000	$	5,000,000		1	$	10,000,000	$	1,200,000		0.57062	%	$	1,500,000	$	375,000
Second		100	%	$	10,000,000	$	10,000,000		1	$	20,000,000	$	1,500,000		0.71327	%	$	1,875,000	$	468,750
Third		100	%	$	20,000,000	$	20,000,000		1	$	40,000,000	$	1,568,000		0.74561	%	$	1,960,000	$	490,000
Fourth		100	%	$	60,000,000	$	40,000,000		1	$	120,000,000	$	2,280,000		1.08418	%	$	2,850,000	$	712,500

Page 17

EX-10.11

Exhibit 10.11

Philadelphia Insurance Company

Bala Cynwyd, Pennsylvania

Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of

Philadelphia Insurance Companies

Hereinafter referred to as the “Company”

Reinstatement Premium Protection Reinsurance Contract
Effective: June 1, 2005

Reinsurance Confirmation

Business Cover

By this Contract the Reinsurer agrees to indemnify the Company for 100% of any reinstatement premium which the Company pays or becomes liable to pay as a result of loss occurrences commencing during the term of this Contract under the provisions of the Company’s Excess Catastrophe Reinsurance Contract effective June 1, 2005 (hereinafter referred to as the “Underlying Contract” and described in Schedule A attached to and forming part of this Contract), subject to the terms and conditions set forth herein. However, the liability of the Reinsurer shall not exceed $8,185,000 during the term of this Contract.

Commencement & Termination

Effective June 1, 2005, with respect to losses arising out of loss occurrences commencing on or after that date, through May 31, 2006 both days inclusive. Extended expiration in the event a loss occurrence is in progress at termination or expiration.

The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 7 below and upon discovery for subparagraph 8 below:

1.	The Subscribing Reinsurer’s policyholders’ surplus after the date lines are bound for this Contract 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 between the date lines are bound and the date of termination of this Contract 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 date lines are bound for this Contract; 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+ at any time between the date lines are bound and the date of termination of this Contract; 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

Page 1

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 or renewal property or casualty treaty reinsurance business.

The Reinsurer shall have no liability hereunder with respect to losses arising out of loss occurrences commencing after the effective date of termination.

Concurrency of Conditions

It is agreed that this Contract will follow the terms, conditions, exclusions, definitions, warranties and settlements of the Company under the Underlying Contract, which are not inconsistent with the provisions of this Contract.

The Company shall advise the Reinsurer of any material changes in the Underlying Contract which may affect the liability of the Reinsurer under this Contract.

Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer the following:

Layer 1: $540,000
Layer 2: $412,500
Layer 3: $205,000
Layer 4: $142,500

The sum of the above amounts shall be payable in four equal installments of $325,000 on June 1, 2005, September 1, 2005, December 1, 2005 and March 1, 2006.

Loss Notices and Settlements

Whenever reinstatement premium settlements made by the Company under the Underlying Contract appear likely to result in a claim hereunder, the Company shall notify the Reinsurer. The Reinsurer shall be advised of all subsequent developments relating to such claims which, in the opinion of the Company, may materially affect the position of the Reinsurer.

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

Page 2

Late Payments

See attached. Interest penalty based on 6-month United States Treasury Bill Rate. Interest penalty of less than $100 shall be waived.

Brokerage

10% of gross reinsurance premium.

Other Provisions

Offset (BRMA 36D)
Access to Records (BRMA 1D)
Net Retained Lines (BRMA 32E)
Errors and Omissions (BRMA 14F)
Currency (BRMA 12A)
Taxes (BRMA 50C)
Federal Excise Tax
Reserves
Insolvency
Arbitration
Service of Suit
Agency Agreement
Governing Law (State of Pennsylvania)
Confidentiality
Severability
Intermediary (BRMA 23A)

Page 3

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 herein (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 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 10 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 10 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.

Page 4

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.

Reserves

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, its share of the Company’s ceded United States outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

	if the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia having jurisdiction over the Company and if, without such funding a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.
B.	The Reinsurer agrees to fund, within 30 days of the Company’s request, 115% of its share of the Company’s Canadian ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2.	Cash advances for the remaining balance of the funding required;

	if the Reinsurer is unauthorized in any province or jurisdiction of Canada having jurisdiction over the Company and if, with such funding, a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.
C.	The Reinsurer, at its sole option, may fund in other than cash if its method of funding is acceptable to the Company and to the insurance regulatory authorities involved.
	For the purpose of this Contract, the Lloyd’s U.S. Credit for Reinsurance Trust Fund shall be considered an acceptable funding instrument.
D.	With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an “evergreen clause,” which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

Page 5

1.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
3.	To fund a cash account in an amount equal to the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
4.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company), if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned deposit premium paid to the Reinsurer.

It is understood and agreed that with respect to subparagraphs 3, 4 and 5 of this paragraph, the provisions pertaining to reimbursement for unearned deposit premium apply only in the circumstance of a rating-related obligation of the Reinsurer to fund the unearned portion of the deposit premium; the remaining provisions of subparagraphs 3, 4 and 5 of this paragraph, as well as the provisions of subparagraphs 1 and 2 of this paragraph, apply in any and all circumstances the Reinsurer is required to provide funding under paragraph A of this Article.

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

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.

Page 6

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.

Arbitration

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless otherwise mutually agreed between the Company and the Reinsurer.

G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Page 7

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.

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Pennsylvania exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly, communicate, disclose or divulge to any third party, any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other dully-issued order of a court or other governmental agency or regulatory authority.

Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Service of Suit

(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. This Article is not intended to conflict with or override the parties’ obligations to arbitrate their disputes in accordance with the Arbitration Article)

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 any 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 therefore, 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.

Page 8

Schedule A

Reinstatement Premium Protection Reinsurance Contract
Effective: June 1, 2005

issued to

Philadelphia Insurance Companies
Bala Cynwyd, Pennsylvania

				Reinsurer’s				Number of
				Per				Full				Annual					Annual		Quarterly
	Coverage			Occurrence		Company’s		Reinstate-		Reinsurer’s		Minimum					Deposit		Deposit
Layer	Percent			Limit		Retention		ments		Annual Limit		Premium		Rate			Premium		Premium
First		100	%	$	5,000,000	$	5,000,000		1	$	10,000,000	$	1,200,000		0.57062	%	$	1,500,000	$	375,000
Second		100	%	$	10,000,000	$	10,000,000		1	$	20,000,000	$	1,500,000		0.71327	%	$	1,875,000	$	468,750
Third		100	%	$	20,000,000	$	20,000,000		1	$	40,000,000	$	1,568,000		0.74561	%	$	1,960,000	$	490,000
Fourth		100	%	$	60,000,000	$	40,000,000		1	$	120,000,000	$	2,280,000		1.08418	%	$	2,850,000	$	712,500

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EX-10.12

Exhibit 10.12

Liberty American Insurance Company

Pinellas Park, Florida

Mobile USA Insurance Company

Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of

Liberty American Insurance Group, Inc.

Hereinafter referred to collectively as the “Company”

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2005

Reinsurance Confirmation

Business Reinsured

Business classified by the Company as Property business. In force, new and renewal business.

Commencement and Termination

Effective June 1, 2005, with respect to losses arising out of loss occurrences commencing on or after that date, through May 31, 2006 both days inclusive. Extended expiration in the event a loss occurrence is in progress at termination or expiration.

The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 7 below and upon discovery for subparagraph 8 below:

1.	The Subscribing Reinsurer’s policyholders’ surplus after the date lines are bound for this Contract 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 between the date lines are bound and the date of termination of this Contract 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 date lines are bound for this Contract; 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+ at any time between the date lines are bound and the date of termination of this Contract; 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

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	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 or renewal property or casualty treaty reinsurance business.

The Reinsurer shall have no liability hereunder with respect to losses arising out of loss occurrences commencing after the effective date of termination.

Territory (BRMA 51A)

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

Exclusions

See attached.

Retention and Limit

Based on the Company’s ultimate net loss each loss occurrence. Layers, retentions and limits as set forth in the attached Schedule A.

No claim shall be made under any excess layer of coverage provided by this Contract in any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes hereof, the Company shall be the sole judge of what constitutes one risk.

Florida Hurricane Catastrophe Fund

Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (FHCF) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract.

Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract between the Company and the State Board of Administration of the State of Florida, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.

If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence commencing during the term of this Contract, the total FHCF reimbursement received by the Company shall be allocated to individual loss occurrences in chronological order of the dates such loss occurrences commence, beginning with the first such loss occurrence commencing during the term of this Contract, provided that:

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1.	The portion of the total FHCF reimbursement amount to be allocated by the Company to any individual loss occurrence shall be equal to the lesser of (a) the amount of FHCF reimbursement to which the Company would be entitled for that loss occurrence alone, or (b) the remaining FHCF reimbursement which has not been allocated by the Company to prior loss occurrences; and
2.	The total amount allocated by the Company to all such loss occurrences shall be equal to the total FHCF reimbursement received by the Company for such loss occurrences.

Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Definitions

UNL includes LAE. See attached.

Loss Occurrence

No reinstatement same wind event. See attached.

Reinstatement

Number of full reinstatement(s) for each layer as set forth in Schedule A, with additional premium calculated 100% as to time and pro rata as to amount.

If this Contract is terminated, any reinstatement premium paid or otherwise due the Reinsurer for losses arising out of loss occurrences commencing on or prior to the date termination shall be considered fully earned, however, the Reinsurer shall pay the loss prior to receiving the reinstatement premium.

Loss Notices and Settlements

Individual loss notices and settlements.

Premium

Rates based on gross earned premium (GEP). Annual deposit premium and annual minimum premium as set forth in the attached Schedule A.

Annual deposit premium for each layer payable in four equal installments on June 1, 2005, September 1, 2005, December 1, 2005 and March 1, 2006. Adjusted within 45 days after the end of the contract term.

If this Contract is terminated, the Reinsurer shall return the unearned portion of any reinsurance premium paid hereunder and the minimum premium provision shall be waived.

“Gross earned premium” as used herein is defined as earned premium of the Company for the classes of business reinsured hereunder, before the deduction of any premiums ceded by the Company for reinsurance which inures to the benefit of this Contract. GEP will not include the Company’s earned premium for Homeowners, Manufactured Homeowners, Dwelling and Condo Policies that include a “No Wind/No Water” exclusion. It is understood the GEP includes CAT fees, but excludes MGA fees, Department of Revenue Special Tax (DRST) fees and policy surcharges to recoup residual market deficit assessments.

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Late Payments

See attached. Interest penalty based on 6-month United States Treasury Bill Rate. Interest penalty of less than $100 shall be waived.

Subject Premium

Estimated subject gross earned premium for June 1, 2005 through May 31, 2006 is:
Manufactured Housing: $20,822,000
Homeowner/Dwelling/Condo: $44,018,000

Brokerage: 10% of gross reinsurance premium, 5% of reinstatement premium.

Other Provisions

Salvage and Subrogation
Offset (BRMA 36D)
Access to Records (BRMA 1D)
Liability of the Reinsurer
Net Retained Lines (BRMA 32B)
Errors and Omissions (BRMA 14F)
Currency (BRMA 12A)
Taxes (BRMA 50C)
Federal Excise Tax
Reserves
Insolvency
Arbitration
Service of Suit
Agency Agreement
Governing Law (State of Florida)
Confidentiality
Severability
Intermediary (BRMA 23A)

Allocation of Final Shares

The Company shall have the right to review all authorizations and the full authority to allocate final shares. Such decisions will be at the sole discretion of the Company and may result in other than a “proportional signdown” of authorizations. As respects signdowns within the London marketplace, the final allocation of shares to individual companies or syndicates may not be proportionate to the original authorizations.

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Exclusions

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

1.	Financial Guarantee and Insolvency.
2.	Mortgage Impairment insurances and similar kinds of insurances, however styled.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.) attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
6.	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.
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures, other than those on or within 1,000 feet of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ Policy.
8.	Accident and Health, Casualty, Fidelity and/or Surety business.
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.
10.	Notwithstanding any provision to the contrary within this Contract or any addendum thereto, loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	An “act of terrorism” includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or

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d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

	Loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any act of terrorism.
	Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines, this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, radioactive, or nuclear pollution or contamination or explosion.
11.	Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contamination”. This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi, mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

	Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.
12.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (NMA 2915) attached to and forming part of this Contract.

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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 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 any 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.

	Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.
	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.
	If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
C.	“Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

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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 herein (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 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 10 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 10 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, in accordance with the provisions of the Loss Notices and Settlements Article, 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.

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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.

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Non BRMA Articles

Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

B. For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

C. As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period

Page 10

commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D. No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

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.

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.

Reserves

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, its share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities

Page 11

	Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

	if the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia having jurisdiction over the Company and if, without such funding, a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.
	The Reinsurer, at its sole option, may fund in other than cash if its method of funding is acceptable to the Company and to the insurance regulatory authorities involved.
	For the purpose of this Contract, the Lloyd’s U.S. Credit for Reinsurance Trust Fund shall be considered an acceptable funding instrument.
B.	With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an “evergreen clause,” which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

1.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
3.	To fund a cash account in an amount equal to the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
4.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company), if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned deposit premium paid to the Reinsurer.

It is understood and agreed that with respect to subparagraphs 3, 4 and 5 of this paragraph, the provisions pertaining to reimbursement for unearned deposit premium apply only in the circumstance of a rating-related obligation of the Reinsurer to fund the unearned portion of the deposit premium; the remaining provisions of subparagraphs 3, 4 and 5 of this paragraph, as well as the provisions of subparagraphs 1 and 2 of this paragraph, apply in any and all circumstances the Reinsurer is required to provide funding under paragraph A of this Article.

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

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.

Arbitration

A. As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.

B. 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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.

C. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance

Page 13

     companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D. The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.

E. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.

F. The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Pinellas Park, Florida unless otherwise mutually agreed between the Company and the Reinsurer.

G. This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

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.

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly, communicate, disclose or divulge to any third party, any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other dully-issued order of a court or other governmental agency or regulatory authority.

Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Page 14

Service of Suit

(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. This Article is not intended to conflict with or override the parties’ obligations to arbitrate their disputes in accordance with the Arbitration Article)

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 any 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 therefore, 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.

Page 15

Schedule A

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2005

issued to

Liberty American Insurance Group, Inc.

														Homeowner/
	Reinsurer’s				Number of									Dwelling/
	Per				Full				Annual		MHO			Condo			Annual		Quarterly
Coverage	Occurrence		Company’s		Reinstate-		Reinsurer’s		Minimum		Premium			Premium			Deposit		Deposit
Percent	Limit		Retention		ments		Annual Limit		Premium		Rate			Rate			Premium		Premium
100%	$	3,500,000	$	3,500,000		1	$	7,000,000	$	1,260,000		3.644	%		1.855	%	$	1,575,000	$	393,750
100%	$	13,000,000	$	7,000,000		1	$	26,000,000	$	3,640,000		10.526	%		5.358	%	$	4,550,000	$	1,137,500
100%	$	15,000,000	$	20,000,000		1	$	30,000,000	$	2,940,000		8.502	%		4.327	%	$	3,675,000	$	918,750
100%	$	25,000,000	$	35,000,000		1	$	50,000,000	$	2,400,000		6.940	%		3.532	%	$	3,000,000	$	750,000
100%	$	60,000,000	$	60,000,000		1	$	120,000,000	$	4,320,000		12.492	%		6.358	%	$	5,400,000	$	1,350,000
100%	$	65,000,000	$	120,000,000		1	$	130,000,000	$	3,640,000		10.526	%		5.358	%	$	4,550,000	$	1,137,500

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EX-10.13

Exhibit 10.13

Liberty American Insurance Company

Pinellas Park, Florida

Mobile USA Insurance Company

Pinellas Park, Florida
and
any and all other companies which are now
or may hereafter become member companies of

Liberty American Insurance Group, Inc.

Hereinafter referred to collectively as the “Company”

Reinstatement Premium Protection
Reinsurance Contract

Effective: June 1, 2005

Reinsurance Confirmation

Business Cover

By this Contract the Reinsurer agrees to indemnify the Company for 100% of any reinstatement premium which the Company pays or becomes liable to pay as a result of loss occurrences commencing during the term of this Contract under the provisions of the Company’s Florida Only Excess Catastrophe Reinsurance Contract effective June 1, 2005 (hereinafter referred to as the “Underlying Contract” and described in Schedule A attached to and forming part of this Contract), subject to the terms and conditions set forth herein. However, the liability of the Reinsurer shall not exceed $21,175,000 during the term of this Contract.

Commencement & Termination

Effective June 1, 2005, with respect to losses arising out of loss occurrences commencing on or after that date, through May 31, 2006 both days inclusive. Extended expiration in the event a loss occurrence is in progress at termination or expiration.

The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur as clarified by public announcement for subparagraphs 1 through 7 below and upon discovery for subparagraph 8 below:

1.	The Subscribing Reinsurer’s policyholders’ surplus after the date lines are bound for this Contract 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 between the date lines are bound and the date of termination of this Contract 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 date lines are bound for this Contract; 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+ at any time between the date lines are bound and the date of termination of this Contract; 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

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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 or renewal property or casualty treaty reinsurance business.

The Reinsurer shall have no liability hereunder with respect to losses arising out of loss occurrences commencing after the effective date of termination.

Concurrency of Conditions

It is agreed that this Contract will follow the terms, conditions, exclusions, definitions, warranties and settlements of the Company under the Underlying Contract, which are not inconsistent with the provisions of this Contract.

The Company shall advise the Reinsurer of any material changes in the Underlying Contract which may affect the liability of the Reinsurer under this Contract.

Premium

As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer the following:

Layer 2: $1,950,000
Layer 3: $1,150,000
Layer 4: $525,000
Layer 5: $600,000
Layer 6: $400,000

The sum of the above amounts shall be payable in four equal installments of $1,156,250 on June 1, 2005, September 1, 2005, December 1, 2005 and March 1, 2006.

Loss Notices and Settlements

Whenever reinstatement premium settlements made by the Company under the Underlying Contract appear likely to result in a claim hereunder, the Company shall notify the Reinsurer. The Reinsurer shall be advised of all subsequent developments relating to such claims which, in the opinion of the Company, may materially affect the position of the Reinsurer.

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

Late Payments

See attached. Interest penalty based on 6-month United States Treasury Bill Rate. Interest penalty of less than $100 shall be waived.

Page 2

Brokerage

10% of gross reinsurance premium.

Other Provisions

Offset (BRMA 36D)
Access to Records (BRMA 1D)
Net Retained Lines (BRMA 32B)
Errors and Omissions (BRMA 14F)
Currency (BRMA 12A)
Taxes (BRMA 50C)
Federal Excise Tax
Reserves
Insolvency
Arbitration
Service of Suit
Agency Agreement
Governing Law (State of Florida)
Confidentiality
Severability
Intermediary (BRMA 23A)

Page 3

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 herein (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 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 10 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 10 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.

Page 4

Reserves

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, its share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

if the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia having jurisdiction over the Company and if, without such funding, a penalty would accrue to the Company on any financial statement, including but not limited to quarterly filings, it is required to file with the insurance regulatory authorities involved.

The Reinsurer, at its sole option, may fund in other than cash if its method of funding is acceptable to the Company and to the insurance regulatory authorities involved.

For the purpose of this Contract, the Lloyd’s U.S. Credit for Reinsurance Trust Fund shall be considered an acceptable funding instrument.

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

1.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
3.	To fund a cash account in an amount equal to the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
4.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves for known loss occurrences established by the Company), if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned deposit premium paid to the Reinsurer.

It is understood and agreed that with respect to subparagraphs 3, 4 and 5 of this paragraph, the provisions pertaining to reimbursement for unearned deposit premium apply only in the circumstance of a rating-related obligation of the Reinsurer to fund the unearned portion of the deposit premium; the remaining

Page 5

provisions of subparagraphs 3, 4 and 5 of this paragraph, as well as the provisions of subparagraphs 1 and 2 of this paragraph, apply in any and all circumstances the Reinsurer is required to provide funding under paragraph A of this Article.

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

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.

Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held

Page 6

to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.

D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.
H.	All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

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.

Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all states shall apply.

Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly, communicate, disclose or divulge to any third party, any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other dully-issued order of a court or other governmental agency or regulatory authority.

Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

Service of Suit

(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

Page 7

authorities. This Article is not intended to conflict with or override the parties’ obligations to arbitrate their disputes in accordance with the Arbitration Article)

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 any 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 therefore, 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.

Page 8

Schedule A

Reinstatement Premium Protection Reinsurance Contract

Effective June 1, 2005

Issued to

Liberty American Insurance Group, Inc.
Pinellas Park, Florida

														Condo/
		Reinsurer’s				Number of								Dwelling/
		Per				Full			Annual		MHO			Homeowner/	Annual		Quarterly
	Coverage	Occurrence		Company’s		Reinstate-	Reinsurer’s		Minimum		Premium			Premium	Deposit		Deposit
Layer	Percent	Limit		Retention		ments	Annual Limit		Premium		Rate			Rate	Premium		Premium
First	100%	$	3,500,000	$	3,500,000	1	$	7,000,000	$	1,260,000		3.644	%	1.855%	$	1,575,000	$	393,750
Second	100%	$	13,000,000	$	7,000,000	1	$	26,000,000	$	3,640,000		10.526	%	5.358%	$	4,550,000	$	1,137,500
Third	100%	$	15,000,000	$	20,000,000	1	$	30,000,000	$	2,940,000		8.502	%	4.327%	$	3,675,000	$	918,750
Fourth	100%	$	25,000,000	$	35,000,000	1	$	50,000,000	$	2,400,000		6.940	%	3.532%	$	3,000,000	$	750,000
Fifth	100%	$	60,000,000	$	60,000,000	1	$	120,000,000	$	4,320,000		12.492	%	6.358%	$	5,400,000	$	1,350,000
Sixth	100%	$	65,000,000	$	120,000,000	1	$	130,000,000	$	3,640,000		10.526	%	5.358%	$	4,550,000	$	1,137,500

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EX-10.14

Exhibit 10.14

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory (BRMA 51A)		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		5
VII	Other Reinsurance		6
VIII	Florida Hurricane Catastrophe Fund		6
IX	Loss Occurrence		7
X	Loss Notices and Settlements		8
XI	Salvage and Subrogation		8
XII	Reinsurance Premium		9
XIII	Late Payments		9
XIV	Offset (BRMA 36D)		11
XV	Access to Records (BRMA 1D)		11
XVI	Liability of the Reinsurer		11
XVII	Net Retained Lines (BRMA 32B)		11
XVIII	Errors and Omissions (BRMA 14F)		11
XIX	Currency (BRMA 12A)		12
XX	Taxes (BRMA 50C)		12
XXI	Federal Excise Tax (BRMA 17A)		12
XXII	Reserve Requirements		12
XXIII	Insolvency		14
XXIV	Arbitration		15
XXV	Service of Suit		16
XXVI	Agency Agreement		16
XXVII	Governing Law		16
XXVIII	Confidentiality		16
XXIX	Severability		17
XXX	Intermediary (BRMA 23A)		17
	Schedule A

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies
(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 Property 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 — Term

A.	This Contract shall become effective on September 3, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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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

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

1.	Assumed reinsurance except for a 50.0% quota share of the First American Property and Casualty Insurance Company Florida Homeowners Program produced and underwritten by Mobile Homeowners Insurance Agencies, Inc.
2.	Financial guarantee and insolvency.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
6.	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.
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
8.	Accident and Health, Casualty, Fidelity and/or Surety business.
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.

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10. Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, or nuclear pollution or contamination.

11. Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contaminations.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi,

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mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

12. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — 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 loss occurrence. Subject to the provisions of paragraph B and C below, 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 Limit” for that excess layer in Schedule A attached hereto, as respects any one loss occurrence or in all during the term of this Contract.
B.	No claim shall be made under any excess layer of reinsurance coverage provided by this Contract as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	No claim shall be made under the underlying excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, for the underlying excess layer has been paid or scheduled to be paid by the reinsurers under the underlying excess layer of the Company’s Underlying Excess Catastrophe Reinsurance Contract, effective July 1, 2004. No claim shall be made under the first excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, has been paid or scheduled to be paid by the reinsurers under the first excess layer of the Company’s Excess Catastrophe Reinsurance Contract, effective June 1, 2004.

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Article VI — 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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such

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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.

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

A.	The Company shall be permitted to carry excess reinsurance, recoveries under which shall inure to the benefit of this Contract.
B.	The Company shall be permitted to carry net quota share reinsurance, recoveries under which shall inure solely to the benefit of the Company.

Article VIII — Florida Hurricane Catastrophe Fund

A.	Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (“FHCF”) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.
B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.

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D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article IX — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

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B.	For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.
C.	As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article X — Loss Notices and Settlements

A.	Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.
B.	All loss settlements made by the Company, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

Article XI — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

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Article XII — Reinsurance Premium

A.	As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the amount, shown as “Premium” for that excess layer in Schedule A attached hereto, in two equal installments of the amount, shown as “Installment Premium” for that excess layer in Schedule A attached hereto, on September 3, 2004 and March 1, 2005.
B.	The Company shall remit additional premium, if any, on December 1, 2004. The additional premium shall be calculated by multiplying the “Additional Premium” for each excess layer in Schedule A attached hereto, by the following:

1.	As respects the underlying excess layer of coverage provided by this Contract, the ratio of the ultimate net loss resulting from Hurricane Frances incurred by reinsurers under the underlying layer of the Company’s Underlying Excess Catastrophe Reinsurance Contract, effective July 1, 2004, to the amount, shown as “Reinsurer’s Limit” in Schedule A attached hereto, for the underlying excess layer.
2.	As respects the first excess layer of coverage provided by this Contract, the ratio of ultimate net loss resulting from Hurricane Frances incurred by reinsurers under the first excess layer of the Company’s Excess Catastrophe Reinsurance Contract, effective June 1, 2004, to the amount, shown as “Reinsurer’s Limit” in Schedule A attached hereto for the first excess layer.

Quarterly recalculations and remittances of the additional premium, if any, due for each excess layer shall be made until all losses subject hereto have been finally settled.

Article XIII — 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 Article XXX (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 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.

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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 10 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 10 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.

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Article XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 XVII — Net Retained Lines (BRMA 32B)

A.	This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or

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3. Cash advances;

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

B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

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

1.	To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;
2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) funded by means of a letter of credit which is under

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non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;

5. To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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.

Page 14

Article XXIV — Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.

Page 15

H. All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

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 XXVI — 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 XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Pennsylvania exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information

Page 16

that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

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:

Bala Cynwyd, Pennsylvania, this _15th___day of ___March___in the year _2005___.

_Christopher J. Maguire, Executive Vice President and Chief Underwriting Officer___
Philadelphia Insurance Companies (for and on behalf of the “Company”)

Page 17

Schedule A

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

	Underlying		First
	Excess		Excess
Company’s Retention	$	7,000,000	$	10,000,000
Reinsurer’s Limit	$	3,000,000	$	10,000,000
Funds Otherwise Recoverable	$	6,000,000	$	20,000,000
Premium	$	465,000	$	1,100,000
Installment Premium	$	232,500	$	550,000
Additional Premium	$	735,000	$	1,900,000

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 — Physical Damage — Reinsurance (U.S.A.)

1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.

Nuclear reactor power plants including all auxiliary property on the site, or

II.

Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or III. Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note. — Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7.	Reinsured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
     Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:

Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1) The following so-called “Coastal Pools”:

Alabama Insurance Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting Association
Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES:	Wherever used herein the terms:
	“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
	“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
	“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

N.M.A 2915 (25.1.01)

Interests and Liabilities Agreement

of

Da Vinci Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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 Underlying Excess Catastrophe Reinsurance
20.0% of the First Excess Catastrophe Reinsurance

This Agreement shall become effective on September 3, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda,           this ___11th___day of ___April___in the year _2005___.

___Rebecca Roberts, Assistant Vice President___
Da Vinci Reinsurance Ltd.

Interests and Liabilities Agreement

of

Renaissance Reinsurance, Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

30.0% of the Underlying Excess Catastrophe Reinsurance
30.0% of the First Excess Catastrophe Reinsurance

This Agreement shall become effective on September 3, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this _11th___day of ___April___in the year _2005___.

Rebecca Roberts, Assistant Vice President___
Renaissance Reinsurance, Ltd.

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

Underlying Excess Catastrophe Reinsurance

Reinsurers	Participations
Da Vinci Reinsurance Ltd.	20.0%
Renaissance Reinsurance, Ltd.	30.0
Total	50.0% part of
	100% share in
	the interests and
	liabilities of the
	“Reinsurer”

First Excess Catastrophe Reinsurance

Reinsurers	Participations
Da Vinci Reinsurance Ltd.	20.0%
Renaissance Reinsurance, Ltd.	30.0
Total	50.0% part of
	100% share in
	the interests and
	liabilities of the
	“Reinsurer”

EX-10.15

Exhibit 10.15

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Term		1
III	Territory (BRMA 51A)		2
IV	Exclusions		2
V	Retention and Limit		4
VI	Definitions		5
VII	Other Reinsurance		6
VIII	Florida Hurricane Catastrophe Fund		6
IX	Loss Occurrence		7
X	Loss Notices and Settlements		8
XI	Salvage and Subrogation		8
XII	Reinsurance Premium		9
XIII	Late Payments		9
XIV	Offset (BRMA 36D)		11
XV	Access to Records (BRMA 1D)		11
XVI	Liability of the Reinsurer		11
XVII	Net Retained Lines (BRMA 32B)		11
XVIII	Errors and Omissions (BRMA 14F)		12
XIX	Currency (BRMA 12A)		12
XX	Taxes (BRMA 50C)		12
XXI	Federal Excise Tax (BRMA 17A)		12
XXII	Reserve Requirements		12
XXIII	Insolvency		14
XXIV	Arbitration		15
XXV	Service of Suit		16
XXVI	Agency Agreement		16
XXVII	Governing Law		17
XXVIII	Confidentiality		17
XXIX	Severability		17
XXX	Intermediary (BRMA 23A)		17
	Schedule A

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies
(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 Property 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 — Term

A.	This Contract shall become effective on September 3, 2004, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until May 31, 2005, both days inclusive.
B.	If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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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

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

1.	Assumed reinsurance except for a 50.0% quota share of the First American Property and Casualty Insurance Company Florida Homeowners Program produced and underwritten by Mobile Homeowners Insurance Agencies, Inc.
2.	Financial guarantee and insolvency.
3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)” attached to and forming part of this Contract.
4.	Loss or damage caused by or resulting from 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, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.
5.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.
6.	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.
7.	Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 300 meters (or 1,000 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy.
8.	Accident and Health, Casualty, Fidelity and/or Surety business.
9.	Pollution and seepage coverages excluded under the provisions of the “Pollution and Seepage Exclusion Clause (BRMA 39A)” attached to and forming part of this Contract.

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10. Notwithstanding any other provision to the contrary within this Contract or any amendment thereto, it is agreed that this Contract excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

An “act of terrorism” includes any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a.	Involves violence against one or more persons; or
b.	Involves damage to property; or
c.	Endangers life other than that of the person committing the action; or
d.	Creates a risk to health or safety of the public or a section of the public; or
e.	Is designed to interfere with or to disrupt an electronic system.

This Contract also excludes loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines this Contract will pay actual loss or damage (but not related cost or expense) caused by any act of terrorism provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, or nuclear pollution or contamination.

11. Loss or liability in any way or to any extent arising out of the actual or alleged presence or actual, alleged or threatened presence of fungi including, but not limited to, mold, mildew, mycotoxins, microbial volatile organic compounds or other “microbial contaminations.” This includes:

a.	Any supervision, instruction, recommendations, warnings or advice given or which should have been given in connection with the above; and
b.	Any obligation to share damages with or repay someone else who must pay damages because of such injury or damage.

For purposes of this exclusion, “microbial contamination” means any contamination, either airborne or surface, which arises out of or is related to the presence of fungi,

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mold, mildew, mycotoxins, microbial volatile organic compounds or spores, including, without limitation, Penicillium, Aspergillus, Fusarium, Aspergillus Flavus and Stachybotrys chartarum.

Losses resulting from the above causes do not in and of themselves constitute an event unless arising out of one or more of the following perils, in which case this exclusion does not apply:

Fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.

Notice of any claims for mold-related losses must be given by the Company to the Reinsurer, in writing, within 24 months after the commencement date of the loss occurrence to which such claims relate.

12. Loss or liability excluded under the provisions of the “Electronic Data Endorsement B” (N.M.A. 2915) attached to and forming part of this Contract.

Article V — 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 loss occurrence. Subject to the provisions of paragraph B and C below, 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 Limit” for that excess layer in Schedule A attached hereto, as respects any one loss occurrence or in all during the term of this Contract.
B.	No claim shall be made under any excess layer of reinsurance coverage provided by this Contract as respects any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence. For purposes of this Contract, the Company shall be the sole judge of what constitutes one risk.
C.	No claim shall be made under the underlying excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, for the underlying excess layer has been paid or scheduled to be paid by the reinsurers under the underlying excess layer of the Company’s Underlying Excess Catastrophe Reinsurance Contract, effective July 1, 2004. No claim shall be made under the first excess layer of coverage provided by this Contract unless the amount, shown as “Funds Otherwise Recoverable” in Schedule A attached hereto, has been paid or scheduled to be paid by the reinsurers under the first excess layer of the Company’s Excess Catastrophe Reinsurance Contract, effective June 1, 2004.

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Article VI — 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 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 any 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.

Notwithstanding anything stated herein, the amount included in the ultimate net loss for any one loss occurrence as respects loss in excess of policy limits and extra contractual obligations shall not exceed 25.0% of the Company’s indemnity loss hereunder arising out of that loss occurrence.

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.

If any provision of this paragraph B shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such

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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.

C. “Loss adjustment expense” as used herein shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense and/or appeal of specific claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, declaratory judgments, interest on judgments, expenses of outside adjusters, and a pro rata share of the salaries and expenses of the Company’s field employees according to the time occupied adjusting such losses and expenses of the Company’s officials incurred in connection with the losses, but shall not include office expenses or salaries of the Company’s regular employees.

Article VII — Other Reinsurance

A.	The Company shall be permitted to carry excess reinsurance, recoveries under which shall inure to the benefit of this Contract.
B.	The Company shall be permitted to carry net quota share reinsurance, recoveries under which shall inure solely to the benefit of the Company.

Article VIII — Florida Hurricane Catastrophe Fund

A.	Any loss reimbursement paid or payable to the Company under the Florida Hurricane Catastrophe Fund (“FHCF”) as a result of loss occurrences commencing during the term of this Contract shall inure to the benefit of this Contract. Further, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the reimbursement contract between the Company and the State Board of Administration of the State of Florida at the full payout level set forth therein and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.
B.	Prior to the determination of the Company’s FHCF retention and payout, if any, under the reimbursement contract, the Reinsurer’s liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C.	If an FHCF reimbursement amount is based on the Company’s losses in more than one loss occurrence and the FHCF does not designate the amount allocable to each loss occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Company’s losses in each loss occurrence bear to the Company’s total losses arising out of all loss occurrences to which the FHCF reimbursement applies.

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D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.

Article IX — Loss Occurrence

A. The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss occurrence” shall be further defined as follows:

1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an insured’s premises by strikers, provided such occupation commenced during the aforesaid period.
3.	As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.”
4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company’s “loss occurrence.”
5.	As regards firestorms, brush fires, and other fires or series of fires, irrespective of origin (except as provided in subparagraphs 2 and 3 above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which occur during any period of 168 consecutive hours within a 100-mile radius of any one fixed point selected by the Company may be included in the Company’s “loss occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “loss occurrence.”

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B.	For all those “loss occurrences,” other than those referred to in subparagraph 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any “loss occurrence” referred to in subparagraph 1 of paragraph A above where only one such period of 72 consecutive hours shall apply with respect to one event, regardless of the duration of the event.
C.	As respects those “loss occurrences” referred to in subparagraph 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

Article X — Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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

Article XI — 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) on account of claims and settlements involving reinsurance hereunder. Salvage 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 relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

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Article XII — Reinsurance Premium

A.	As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the amount, shown as “Premium” for that excess layer in Schedule A attached hereto, in two equal installments of the amount, shown as “Installment Premium” for that excess layer in Schedule A attached hereto, on September 3, 2004 and March 1, 2005.
B.	In the event of incurred losses resulting from Hurricane Frances under the Company’s Excess Catastrophe Reinsurance Contract, effective June 1, 2004 and/or the underlying layer of the Company’s Underlying Excess Catastrophe Reinsurance Contract, effective July 1, 2004, additional premium shall be due the Reinsurer as provided in paragraph C below.
C.	The Company shall remit additional premium, if any, on December 1, 2004. The additional premium shall be calculated by multiplying the “Additional Premium” for each excess layer in Schedule A attached hereto, by the following:

1.	As respects the underlying excess layer of coverage provided by this Contract, the ratio of the ultimate net loss resulting from Hurricane Frances incurred by reinsurers under the underlying layer of the Company’s Underlying Excess Catastrophe Reinsurance Contract, effective July 1, 2004, to the amount, shown as “Reinsurer’s Limit” in Schedule A attached hereto, for the underlying excess layer.
2.	As respects the first excess layer of coverage provided by this Contract, the ratio of ultimate net loss resulting from Hurricane Frances incurred by reinsurers under the first excess layer of the Company’s Excess Catastrophe Reinsurance Contract, effective June 1, 2004, to the amount, shown as “Reinsurer’s Limit” in Schedule A attached hereto for the first excess layer.

Quarterly recalculations and remittances of the additional premium, if any, due for each excess layer shall be made until all losses subject hereto have been finally settled.

Article XIII — 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 Article XXX (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 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 10 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 10 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.

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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 XIV — Offset (BRMA 36D)

The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

Article XV — 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 XVI — 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. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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 XVII — Net Retained Lines (BRMA 32B)

A.	This Contract applies only to that portion of any policy which the Company retains net for its own account, 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 XVIII — 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 XIX — 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 XX — Taxes (BRMA 50C)

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, the District of Columbia or Canada.

Article XXI — Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

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 XXII — Reserve Requirements

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund its share of the Company’s ceded United States unearned premium and outstanding loss and loss adjustment expense reserves (including

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all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.	Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.	Escrow accounts for the benefit of the Company; and/or
3.	Cash advances;

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

B. If the Reinsurer is unauthorized in any province or jurisdiction of Canada, the Reinsurer agrees to fund 115% of its share of the Company’s ceded Canadian unearned premium and outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences) by:

1.

A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or

2.

Cash advances for the remaining balance of the funding required;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved.

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

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

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2.	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;
3.	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;
4.	To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported, from known loss occurrences) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
5.	To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer’s share of the Company’s ceded unearned premium and/or outstanding loss and loss adjustment expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known loss occurrences), if so requested by the Reinsurer.

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

Article XXIII — 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.

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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 XXIV — Arbitration

A.	As a condition precedent to any right of action hereunder, any dispute or difference between the Company and any Reinsurer relating to the interpretation or performance of this Contract, including its formation or validity, or any transaction under this Contract, whether arising before or after termination, shall be submitted to arbitration.
B.	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 provided that communication shall be made by the Company to each of the reinsurers constituting the one party, and provided, however, that nothing therein 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 Reinsurer under the terms of this Contract from several to joint.
C.	Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within 30 days of their appointment, the Company shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of a court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator. All arbitrators shall be active or retired officers of insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days of the appointment of the third arbitrator.
D.	The parties hereby waive all objections to the method of selection of the arbitrators, it being the intention of both sides that all the arbitrators be chosen from those submitted by the parties.
E.	The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration including but not limited to inspection of documents, examination of witnesses and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Contract as an honorable engagement and not as merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs. Each party shall bear the expense of its own

Page 15

	arbitrator and shall share equally with the other party the expenses of the third arbitrator and of the arbitration.
F.	The decision in writing of the majority of the arbitrators shall be final and binding upon both parties. Judgment may be entered upon the final decision of the arbitrators in any court having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless otherwise mutually agreed between the Company and the Reinsurer.
G.	This Article shall remain in full force and effect in the event any other provision of this Contract shall be found invalid or non-binding.
H.	All time limitations stated in this Article may be amended by mutual consent of the parties, and will be amended automatically to the extent made necessary by any circumstances beyond the control of the parties.

Article XXV — Service of Suit

(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. This Article is not intended to conflict with or override the parties obligations to arbitrate their disputes in accordance with Article XXIV.)

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 XXVI — 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.

Page 16

Article XXVII — Governing Law

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Pennsylvania exclusive of the rules with respect to conflicts of law, except as to rules with respect to credit for reinsurance in which case the applicable rules of all the states shall apply.

Article XXVIII — Confidentiality

The Reinsurer, except with the express prior written consent of the Company, shall not directly or indirectly communicate, disclose or divulge to any third party any knowledge or information that may be acquired either directly or indirectly as a result of the inspection of the Company’s books, records and papers. The restrictions as outlined in this Article shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XXIX — Severability

If any provision of this Contract should be invalid under applicable laws, the latter shall control but only to the extent of the conflict without affecting the remaining provisions of this Contract.

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:

Bala Cynwyd, Pennsylvania, this ___15th___day of ___March___in the year ___2005___.

__Christopher J. Maguire, Vice President and Chief Underwriting Officer_
Philadelphia Insurance Companies (for and on behalf of the “Company”)

Page 17

Schedule A

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

	Underlying		First
	Excess		Excess
Company’s Retention	$	7,000,000	$	10,000,000
Reinsurer’s Limit	$	3,000,000	$	10,000,000
Funds Otherwise Recoverable	$	6,000,000	$	20,000,000
Premium	$	540,000	$	1,200,000
Installment Premium	$	270,000	$	600,000
Additional Premium	$	660,000	$	1,550,000

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.

Schedule A

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

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I.	Nuclear reactor power plants including all auxiliary property on the site, or
II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7.	Reassured to be sole judge of what constitutes:

(a)	substantial quantities, and
(b)	the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance (Canada)

1. This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

(a)	nuclear reactor power plants including all auxiliary property on the site, or
(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:

(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

6.

The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.

7.

Reinsured to be sole judge of what constitutes:

     (a) substantial quantities, and

     (b) the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(2)	by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured, whether new, renewal or replacement, which become effective on or after December 31, 1992.

N.M.A. 1980a (1/4/96)

Pools, Associations and Syndicates Exclusion Clause

Section A:

Excluding:

(a)	All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
(b)	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:

Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of writing
   Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.

Section B does not apply:

(a)	Where The Total Insured Value over all interests of the risk in question is less than $250,000,000.
(b)	To interests traditionally underwritten as Inland Marine or stock and/or contents written on a blanket basis.
(c)	To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under Section B(a).
(d)	To risks as follows:
	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public Utilities (other than railroad schedules) and builder’s risks on the classes of risks specified in this subsection (d) only.

Where this clause attaches to Catastrophe Excesses, the following Section C is added:

Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in residual market mechanisms including but not limited to:

(1)	The following so-called “Coastal Pools”:
	Alabama Insurance Underwriting Association Louisiana Insurance Underwriting Association Mississippi Windstorm Underwriting Association North Carolina Insurance Underwriting Association South Carolina Windstorm and Hail Underwriting Association Texas Windstorm Insurance Association

AND

(2) All “Fair Plan” and “Rural Risk Plan” business

Page 1 of 2

AND

(3) Citizens Property Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except, however, that this reinsurance does not include any increase in such liability resulting from:

(i)	The inability of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its liability.
(ii)	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or “Rural Risk Plan” and/or Residual Market Mechanisms, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract).

Section D:

(1)	Notwithstanding Section C above, in respect of the CEA, where an assessment is made against the Company by the CEA, the Company may include in its Ultimate Net Loss only that assessment directly attributable to each separate loss occurrence covered hereunder. The Company’s initial capital contribution to the CEA shall not be included in the Ultimate Net Loss.
(2)	Notwithstanding Section C above, in respect of CPIC, where an assessment is made against the Company by CPIC, the maximum loss that the Company may include in the Ultimate Net Loss in respect of any loss occurrence hereunder shall not exceed the lesser of:

(a)	The Company’s assessment from CPIC for the accounting year in which the loss occurrence commenced, or
(b)	The product of the following:

(i)	The Company’s percentage participation in CPIC for the accounting year in which the loss occurrence commenced; and
(ii)	CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss occurrence commenced may not be included in the Ultimate Net Loss hereunder. Moreover, notwithstanding Section C above, in respect of CPIC, the Ultimate Net Loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of CPIC. For the purposes of this Contract, the Company may not include in the Ultimate Net Loss any assessment or any percentage assessment levied by CPIC to meet the obligations of an insolvent insurer member or other party, or to meet any obligations arising from the deferment by CPIC of the collection of monies.

NOTES: Wherever used herein the terms:

“Company”	shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Agreement”	shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurers”	shall be understood to mean “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Page 2 of 2

Pollution and Seepage Exclusion Clause

This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original policy.

BRMA 39A

Electronic Data Endorsement B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-

a)	This Contract does not insure loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
	ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programs, software and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.
	COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorized instructions or code including a set of maliciously introduced unauthorized instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to “Trojan Horses,” “worms” and “time or logic bombs.”
b)	However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Contract, subject to all its terms, conditions and exclusions, will cover physical damage occurring during the Contract period to property insured by this Contract directly caused by such listed peril.
	Listed Perils
	Fire Explosion

2.	Electronic Data Processing Media Valuation
	Notwithstanding any provision to the contrary within the Contract or any endorsement thereto, it is understood and agreed as follows:-
	Should electronic data processing media insured by this Contract suffer physical loss or damage insured by this Contract, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Contract does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Assured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

     N.M.A. 2915 (25.1.01)

Interests and Liabilities Agreement

of

Catlin Insurance Company Ltd.
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

7.4% of the Underlying Excess Catastrophe Reinsurance
7.4% of the First Excess Catastrophe Reinsurance

This Agreement shall become effective on September 3, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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:

Hamilton, Bermuda, this _17th___day of ___May___in the year _2005___.

___Andrew Crichton, Property Underwriter_
Catlin Insurance Company Ltd.

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

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to and duly executed by

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

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:

42.6% of the Underlying Excess Catastrophe Reinsurance
42.6% of the First Excess Catastrophe Reinsurance

This Agreement shall become effective on September 3, 2004, and shall continue in force until May 31, 2005, both days inclusive.

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,

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedules attached hereto.
Peter, General Manager (Underwriters at Lloyds)

Third Event Excess Catastrophe Reinsurance Contract
Effective: September 3, 2004

issued to

Philadelphia Insurance Company
Bala Cynwyd, Pennsylvania
Philadelphia Indemnity Insurance Company
Bala Cynwyd, Pennsylvania
and
any and all other companies which are now
or may hereafter become member companies of
Philadelphia Insurance Companies

Underlying Excess Catastrophe Reinsurance

Reinsurers	Participations
Catlin Insurance Company Ltd.		7.4	%
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules		42.6
Total	50.0% part of 100% share in the interests and liabilities of the “Reinsurer”

First Excess Catastrophe Reinsurance

Reinsurers	Participations
Catlin Insurance Company Ltd.		7.4	%
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedules		42.6
Total	50.0% part of 100% share in the interests and liabilities of the “Reinsurer”

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE	61390 05/11/04	BROKER NUMBER	1108
BUREAU REFERENCE	61391 05/11/04	BROKER NUMBER	1108

PROPORTION	SYNDICATE		UNDERWRITER'S
%			REFERENCE
8.10		2623	T4924D04BNCB
6.90		623	T4924D04BNCB
11.00		33	97269ZXAAKWE
7.40		958	YVXAXTEN8297
9.20		2791	X1104WG01597
TOTAL LINE	No. OF SYNDICATES
42.60		5

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 7028

Page 1 of 1

     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

BUREAU REFERENCE 61390 05/11/04 BROKER NUMBER 1108

PROPORTION	SYNDICATE		UNDERWRITER’S
%			REFERENCE
8.10		2623	T7138S04BNCB
6.90		623	T7138S04BNCB
11.00		33	97268KXAAKWE
7.40		958	YVXAXTEN8297
9.20		2791	X1104WG01597
TOTAL LINE	No. OF SYNDICATES
42.60		5

THE LIST OF UNDERWRITING MEMBERS
OF LLOYDS IS IN RESPECT OF 2004
YEAR OF ACCOUNT

BUREAU USE ONLY
USE3 55 7028

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     Now Know Up that We the Underwriters, Members of the Syndicates whose definitive numbers in the after-mentioned List of Underwriting Members of Lloyd’s are set out in the attached Table, hereby bind ourselves each for his own part and not one for another, our Executors and Administrators, and in respect of his due proportion only, to pay or make good to the Assured or to the Assured’s Executors or Administrators or to indemnify him or them against all such loss, damage or liability as herein provided, such payment to be made after such loss, damage or liability is proved and the due proportion for which each of us, the Underwriters, is liable shall be ascertained by reference to his share, as shown in the said List, of the Amount, Percentage or Proportion of the total sum insured hereunder which is in the Table set opposite the definitive number of the Syndicate of which such Underwriter is a Member AND FURTHER THAT the List of Underwriting Members of Lloyd’s referred to above shows their respective Syndicates and Shares therein, is deemed to be incorporated in and to form part of this policy, bears the number specified in the attached Table and is available for inspection at Lloyd’s Policy Signing Office by the Assured or his or their representatives and a true copy of the material parts of the said List certified by the General Manager of Lloyd’s Policy Signing Office will be furnished to the Assured on application.

     In Witness whereof the General Manager of Lloyd’s Policy Signing Office has subscribed his name on behalf of each of us.

(NM)	LLOYD’S POLICY SIGNING OFFICE,
	/s/ [ILLEGIBLE]
Definitive Numbers of Syndicates and Amount, Percentage or Proportion of the Total Sum insured hereunder shared between the Members of those Syndicates.	General Manager

SEVERAL LIABILITY NOTICE

The subscribing reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing reinsures are not responsible for the subscription of any co-subscribing reinsure who for any reason does not satisfy all or part of its obligations.

LSW1001 (Reinsurance) 08/94

The NAIC Identification Number for each participating

syndicate shown herein is AA-112 followed by a four digit

number that can be derived by adding 6000 to the syndicate
number.

LSW 1007 (09/96)

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James J. Maguire, Jr., Chief Executive Officer of Philadelphia Consolidated Holding Corp, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Philadelphia Consolidated Holding Corp.
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 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(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 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.

	Signed:	James J. Maguire, Jr. Name: James J. Maguire, Jr.
August 15, 2005		Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Craig P. Keller, Chief Financial Officer of Philadelphia Consolidated Holding Corp, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Philadelphia Consolidated Holding Corp.
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 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(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 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.

	Signed:	Craig P. Keller Name: Craig P. Keller
August 15, 2005		Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Philadelphia Consolidated Holding Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Maguire, Jr., chief executive officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(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.

James J. Maguire, Jr.

James J. Maguire, Jr.

President and Chief Executive Officer

August 15, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Philadelphia Consolidated Holding Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig P. Keller, chief financial officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(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.

Craig P. Keller

Craig P. Keller

Chief Financial Officer

August 15, 2005