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 September 30, 2007

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES: o NO: þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 31, 2007.

Common Stock, no par value, 71,952,809 shares outstanding

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

INDEX

For the Quarterly Period Ended September 30, 2007

Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets –September 30, 2007 and December 31, 2006	3
Consolidated Statements of Operations and Comprehensive Income - For the three and nine months ended September 30, 2007 and 2006	4
Consolidated Statements of Changes in Shareholders’ Equity - For the nine months ended September 30, 2007 and the year ended December 31, 2006	5
Consolidated Statements of Cash Flows - For the nine months ended September 30, 2007 and 2006	6
Notes to Consolidated Financial Statements	7-18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19-36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38
Part II - Other Information
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Submission of Matters to a Vote of Security Holders	39
Item 5. Other Information	39
Item 6. Exhibits	40
Signatures	41
Casualty (Clash) Excess of Loss Reinsurance Agreement
Property Per Risk Excess of Loss Agreement
Interest and Liabilities Agreement
Terrorism Catastrophe Excess of Loss Reinsurance Contract
Terrorism Catastrophe Excess of Loss Reinsurance Contract - 20% Share
Excess Catastrophe Reinsurance Contract
Reinstatement Premium Protection Reinsurance
Florida Only Excess Catastrophe Reinsurance Contract
First and Second Excess Reinstatement Premium Protection Reinsurance Contract
Third Excess Reinstatement Premium Protection
Florida Hurricane Catastrophe Fund Reimbursement Contract
Florida Hurricane Catastrophe Fund Reimbursement Contract
Certification of the Company's chief executive officer
Certification of the Company's chief financial officer
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
	September 30,			December 31,
	2007			2006
	(Unaudited)
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $2,503,942 AND $2,136,231)	$	2,495,045		$	2,129,609
EQUITY SECURITIES AT MARKET (COST $319,000 AND $259,184)		362,238			304,033
TOTAL INVESTMENTS		2,857,283			2,433,642
CASH AND CASH EQUIVALENTS		122,486			108,671
ACCRUED INVESTMENT INCOME		24,303			20,083
PREMIUMS RECEIVABLE		406,481			346,836
PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES		276,849			272,798
DEFERRED INCOME TAXES		47,926			26,657
DEFERRED ACQUISITION COSTS		188,144			158,805
PROPERTY AND EQUIPMENT, NET		26,813			26,999
OTHER ASSETS		47,502			44,046
TOTAL ASSETS	$	3,997,787		$	3,438,537
LIABILITIES AND SHAREHOLDERS’ EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES	$	1,394,834		$	1,283,238
UNEARNED PREMIUMS		871,842			759,358
TOTAL POLICY LIABILITIES AND ACCRUALS		2,266,676			2,042,596
PREMIUMS PAYABLE		88,082			66,827
OTHER LIABILITIES		196,353			161,847
TOTAL LIABILITIES		2,551,111			2,271,270
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, 71,511,222 AND 70,848,482 SHARES ISSUED AND OUTSTANDING		402,010			376,986
NOTES RECEIVABLE FROM SHAREHOLDERS		(16,787	)		(17,074	)
ACCUMULATED OTHER COMPREHENSIVE INCOME		22,321			24,848
RETAINED EARNINGS		1,039,132			782,507
TOTAL SHAREHOLDERS’ EQUITY		1,446,676			1,167,267
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,997,787		$	3,438,537

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 Nine Months
	Ended September 30,						Ended September 30,
	2007			2006			2007			2006
REVENUE:
NET EARNED PREMIUMS	$	359,149		$	296,366		$	1,015,182		$	861,706
NET INVESTMENT INCOME		30,199			23,833			85,694			65,572
NET REALIZED INVESTMENT GAIN (LOSS)		2,817			(6,976	)		32,638			(9,782	)
OTHER INCOME		980			795			2,660			1,703
TOTAL REVENUE		393,145			314,018			1,136,174			919,199
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES		146,389			95,662			479,142			353,289
NET REINSURANCE RECOVERIES		(1,584	)		(10,956	)		(35,243	)		(16,163	)
NET LOSS AND LOSS ADJUSTMENT EXPENSES		144,805			84,706			443,899			337,126
ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES		101,252			89,052			299,902			251,406
OTHER OPERATING EXPENSES		2,992			3,364			9,128			8,644
TOTAL LOSSES AND EXPENSES		249,049			177,122			752,929			597,176
INCOME BEFORE INCOME TAXES		144,096			136,896			383,245			322,023
INCOME TAX EXPENSE (BENEFIT):
CURRENT		53,198			49,725			146,528			116,448
DEFERRED		(5,346	)		(2,719	)		(19,908	)		(9,493	)
TOTAL INCOME TAX EXPENSE		47,852			47,006			126,620			106,955
NET INCOME	$	96,244		$	89,890		$	256,625		$	215,068
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
HOLDING GAIN ARISING DURING PERIOD	$	21,727		$	29,929		$	18,688		$	10,608
RECLASSIFICATION ADJUSTMENT		(1,831	)		4,534			(21,215	)		6,358
OTHER COMPREHENSIVE INCOME (LOSS)		19,896			34,463			(2,527	)		16,966
COMPREHENSIVE INCOME	$	116,140		$	124,353		$	254,098		$	232,034
PER AVERAGE SHARE DATA:
NET INCOME – BASIC	$	1.37		$	1.28		$	3.65		$	3.08
NET INCOME – DILUTED	$	1.30		$	1.22		$	3.46		$	2.94
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		70,457,765			69,991,728			70,323,834			69,717,194
WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING		3,599,654			3,488,999			3,856,902			3,470,645
WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING		74,057,419			73,480,727			74,180,736			73,187,839

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 Nine
	Months Ended
	September 30, 2007			For the Year Ended
	(Unaudited)			December 31, 2006
COMMON SHARES:
BALANCE AT BEGINNING OF YEAR		70,848,482			69,266,016
ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS, NET		92,469			613,320
ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		570,271			969,146
BALANCE AT END OF PERIOD		71,511,222			70,848,482
COMMON STOCK:
BALANCE AT BEGINNING OF YEAR	$	376,986		$	332,757
ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS		3,550			19,521
EFFECTS OF ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		20,912			24,301
OTHER		562			407
BALANCE AT END OF PERIOD		402,010			376,986
NOTES RECEIVABLE FROM SHAREHOLDERS:
BALANCE AT BEGINNING OF YEAR		(17,074	)		(7,217	)
NOTES RECEIVABLE ISSUED PURSUANT TO EMPLOYEE STOCK PURCHASE PLANS		(3,287	)		(12,391	)
COLLECTION OF NOTES RECEIVABLE		3,574			2,534
BALANCE AT END OF PERIOD		(16,787	)		(17,074	)
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF DEFERRED INCOME TAXES:
BALANCE AT BEGINNING OF YEAR		24,848			(2,702	)
OTHER COMPREHENSIVE INCOME (LOSS) INCOME, NET OF TAXES		(2,527	)		27,550
BALANCE AT END OF PERIOD		22,321			24,848
RETAINED EARNINGS:
BALANCE AT BEGINNING OF YEAR		782,507			493,658
NET INCOME		256,625			288,849
BALANCE AT END OF PERIOD		1,039,132			782,507
TOTAL SHAREHOLDERS’ EQUITY	$	1,446,676		$	1,167,267

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 Nine Months Ended September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME	$	256,625		$	215,068
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET REALIZED INVESTMENT (GAIN) LOSS		(32,638	)		9,782
AMORTIZATION OF INVESTMENT PREMIUMS, NET OF DISCOUNT		4,414			7,452
AMORTIZATION OF INTANGIBLE ASSETS		2,217			—
DEPRECIATION		5,755			4,297
DEFERRED INCOME TAX BENEFIT		(19,908	)		(9,493	)
CHANGE IN PREMIUMS RECEIVABLE		(59,645	)		(55,462	)
CHANGE IN PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES, NET OF FUNDS HELD PAYABLE TO REINSURER		(4,051	)		84,189
CHANGE IN ACCRUED INVESTMENT INCOME		(4,220	)		(410	)
CHANGE IN DEFERRED ACQUISITION COSTS		(29,339	)		(27,971	)
CHANGE IN INCOME TAXES PAYABLE		8,085			11,957
CHANGE IN OTHER ASSETS		8,459			(8,126	)
CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES		111,596			(2,352	)
CHANGE IN UNEARNED PREMIUMS		112,484			126,673
CHANGE IN OTHER LIABILITIES		36,503			26,164
FAIR VALUE OF STOCK BASED COMPENSATION		11,341			9,780
EXCESS TAX BENEFIT FROM ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		(4,368	)		(8,411	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		403,310			383,137
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF INVESTMENTS IN FIXED MATURITIES		185,559			133,439
PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED MATURITIES		183,600			206,316
PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY SECURITIES		213,854			71,858
COST OF FIXED MATURITIES ACQUIRED		(725,502	)		(603,243	)
COST OF EQUITY SECURITIES ACQUIRED		(241,526	)		(156,679	)
PURCHASE OF PROPERTY AND EQUIPMENT		(5,569	)		(6,852	)
PURCHASE OF INTANGIBLES		(12,726	)		—
NET CASH USED BY INVESTING ACTIVITIES		(402,310	)		(355,161	)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM EXERCISE OF EMPLOYEE STOCK OPTIONS		4,604			6,474
PROCEEDS FROM COLLECTION OF SHAREHOLDER NOTES RECEIVABLE		3,574			1,978
PROCEEDS FROM SHARES ISSUED PURSUANT TO STOCK PURCHASE PLANS		269			1,746
EXCESS TAX BENEFIT FROM ISSUANCE OF SHARES PURSUANT TO STOCK BASED COMPENSATION PLANS		4,368			8,411
COST OF SHARES WITHHELD TO SATISFY MINIMUM REQUIRED TAX WITHHOLDING OBLIGATION ARISING UPON EXERCISE OF OPTIONS		—			(4,676	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		12,815			13,933
NET INCREASE IN CASH AND CASH EQUIVALENTS		13,815			41,909
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		108,671			74,385
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	122,486		$	116,294
NON-CASH TRANSACTIONS:
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE STOCK PURCHASE PLANS IN EXCHANGE FOR NOTES RECEIVABLE	$	3,287		$	4,879

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 September 30, 2007 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 nine months ended September 30, 2007 are not necessarily indicative of the operating results to be expected for the full year or any other period.
	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, 2006.
2.	Investments
	The carrying amount for the Company’s investments approximates their estimated fair value. The Company’s external fixed income investment manager provides pricing of the Company’s investments based on a pricing methodology approved by the investment manager’s pricing committee. Pricing is primarily obtained from market vendors based on a pre-established provider list. For non-investment grade structured securities for which a vendor price is not available, broker pricing is obtained from either the lead manager of the issue or from the broker used at the time the security was purchased. Material assumptions and factors considered by the independent vendors and brokers in pricing these securities may include: cash flows, collateral performance including delinquencies, defaults, and recoveries and any market clearing activity and/or liquidity circumstances in the security or other benchmark securities 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 a primary market provider of such information. These assumptions represent a market based best estimate of the amount and timing of estimated principal and interest cash flows based on current information and events.
	The Company regularly performs impairment reviews with respect to its investments. 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. For investments other than interests in securitized assets, these reviews include identifying any security whose fair value is below its cost and an analysis of securities meeting predetermined impairment thresholds to determine whether such decline is other than temporary. If the Company determines that it does not intend to hold a security to maturity or 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 investment loss in the period the impairment arose. This evaluation resulted in non-cash realized investment losses of $1.1 million and $5.7 million, respectively, for the three months ended September 30, 2007 and 2006, and $3.7 million and $7.0 million, respectively, for the nine months ended September 30, 2007 and 2006. The Company’s impairment review also includes an impairment evaluation for interests in securitized assets conducted in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board. There were no non-cash realized investment losses recorded for the three or nine months ended September 30, 2007 or 2006 as a result of the Company’s impairment evaluation for investments in securitized assets.
	The following table identifies the period of time securities with an unrealized loss at September 30, 2007 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 $0.9 million. No issuer of securities or industry represents more than 2.4% and 25.8%, respectively, of the total estimated fair

7

value, or 4.7% and 26.3%, respectively, of the total gross unrealized loss included in the table below. The industry concentration represents investments in “AAA” rated Mortgage Backed Securities issued by Agencies of the U.S. Government which are collateralized by pools of residential mortgage loans.

	Less Than 12 Months				12 Months or More				Total
September 30, 2007			Unrealized				Unrealized				Unrealized
Fixed Maturities Available for Sale	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In Thousands)
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies	$	450	$	2	$	7,406	$	59	$	7,856	$	61
Obligations of States and Political Subdivisions		468,977		4,700		291,944		3,350		760,921		8,050
Corporate and Bank Debt Securities		4,070		52		82,883		1,500		86,953		1,552
Asset Backed Securities		80,871		360		25,271		153		106,142		513
Mortgage Pass-Through Securities		278,402		3,223		152,690		4,614		431,092		7,837
Collateralized Mortgage Obligations		63,831		401		101,998		1,501		165,829		1,902
Total Fixed Maturities Available for Sale	$	896,601	$	8,738	$	662,192	$	11,177	$	1,558,793	$	19,915
Equity Securities		108,771		9,822		—		—		108,771		9,822
Total Investments	$	1,005,372	$	18,560	$	662,192	$	11,177	$	1,667,564	$	29,737

The Company’s impairment evaluation as of September 30, 2007 for fixed maturities available for sale excluding interests in securitized assets resulted in the following conclusions:

US Treasury Securities and Obligations of U.S. Government Agencies:

The unrealized losses on the Company’s Aaa/AAA rated investments in U.S. Treasury Securities and Obligations of U.S. Government Agencies are attributable to the general level of interest rates. Of the 32 investment positions held, approximately 46.9% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Obligations of States and Political Subdivisions:

The unrealized losses on the Company’s investments in long term tax exempt securities which have ratings of A1/A+ to Aaa/AAA are attributable to the general level of interest rates. Of the 791 investment positions held, approximately 62.1% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Corporate and Bank Debt Securities:

The unrealized losses on the Company’s long term investments in Corporate bonds which have ratings from Baa3/BBB to Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 89 investment positions held, the average rating was A2/A and approximately 82.0% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of September 30, 2007 for interests in securitized assets resulted in the following conclusions:

8

Asset Backed Securities:

The unrealized losses on the Company’s investments in Asset Backed Securities which have ratings of Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 122 investment positions held, the average rating was Aaa/AAA and approximately 54.1% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Mortgage Pass-Through Securities:

The unrealized losses on the Company’s investments in U.S. government agency issued Mortgage Pass-Through Securities which have ratings of Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 150 investment positions held, the average rating was Aaa/AAA and approximately 64.0% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Collateralized Mortgage Obligations:

The unrealized losses on the Company’s investments in Collateralized Mortgage Obligations which have ratings of Aa2/AA+ to Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 175 investment positions held, the average rating was Aaa/AAA and approximately 55.4% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of September 30, 2007 for equity securities resulted in the conclusion that the Company does not consider any of the equity security positions to be other than temporarily impaired. Of the 2,642 investment positions held, approximately 25.2% were in an unrealized loss position.

The following table identifies the period of time securities with an unrealized loss at December 31, 2006 have continuously been in an unrealized loss position. None of the amounts displayed in the table are due to non-investment grade fixed maturity securities. No issuer of securities or industry represents more than 3.5% and 23.6%, respectively, of the total estimated fair value, or 2.8% and 28.7%, respectively, of the total gross unrealized loss included in the table below. The industry concentration represents investments in “AAA” rated mortgage backed securities issued by agencies of the U.S. Government which are collateralized by pools of residential mortgage loans. As previously discussed, 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 such determination was made.

9

	Less Than 12 Months				12 Months or More				Total
December 31, 2006			Unrealized				Unrealized				Unrealized
Fixed Maturities Available for Sale	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In Thousands)
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies	$	1,354	$	19	$	12,707	$	226	$	14,061	$	245
Obligations of States and Political Subdivisions		164,444		831		321,194		5,020		485,638		5,851
Corporate and Bank Debt Securities		28,439		119		96,794		2,574		125,233		2,693
Asset Backed Securities		45,478		187		31,654		380		77,132		567
Mortgage Pass-Through Securities		109,877		921		174,327		5,026		284,204		5,947
Collateralized Mortgage Obligations		72,686		347		109,789		2,440		182,475		2,787
Total Fixed Maturities Available for Sale	$	422,278	$	2,424	$	746,465	$	15,666	$	1,168,743	$	18,090
Equity Securities		37,371		2,626		—		—		37,371		2,626
Total Investments	$	459,649	$	5,050	$	746,465	$	15,666	$	1,206,114	$	20,716

The Company’s impairment evaluation as of December 31, 2006 for fixed maturities available for sale excluding interests in securitized assets resulted in the following conclusions:

US Treasury Securities and Obligations of U.S. Government Agencies:

The unrealized losses on the Company’s Aaa/AAA rated investments in U.S. Treasury Securities and Obligations of U.S. Government Agencies are attributable to interest rate increases. Of the 32 investment positions held, approximately 71.9% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Obligations of States and Political Subdivisions:

The unrealized losses on the Company’s investments in long term tax exempt securities which have ratings of A1/A+ to AAA/Aaa are generally caused by interest rate increases. Of the 736 investment positions held, approximately 49.3% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Corporate and Bank Debt Securities:

The unrealized losses on the Company’s long term investments in Corporate bonds which have ratings from Baa3/BBB to Aaa/AAA are generally caused by interest rate increases. Of the 114 investment positions held, approximately 87.7% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of December 31, 2006 for interests in securitized assets resulted in the following conclusions:

Asset Backed Securities:

The unrealized losses on the Company’s investments in Asset Backed Securities which have ratings of Aaa/AAA are generally caused by interest rate increases. Of the 132 investment positions held,

10

approximately 49.2% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Mortgage Pass-Through Securities:

The unrealized losses on the Company’s investments in Mortgage Pass-Through Securities which have ratings of Aaa/AAA are generally caused by interest rate increases. Of the 130 investment positions held, approximately 58.5% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Collateralized Mortgage Obligations:

The unrealized losses on the Company’s investments in Collateralized Mortgage Obligations which have ratings of Aa2/AA to Aaa/AAA are generally caused by interest rate increases. Of the 155 investment positions held, approximately 66.5% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

	The Company’s impairment evaluation as of December 31, 2006 for equity securities resulted in the conclusion that the Company does not consider the equity securities to be other than temporarily impaired. Of the 3,555 investment positions held, approximately 14.8% were in an unrealized loss position.
3.	Restricted Assets
	The Insurance Subsidiaries have investments, principally U.S. Treasury securities, Obligations of U.S. Government Corporations and Agencies and Obligations of States and Political Subdivisions, on deposit with the various states in which they are licensed insurers. As of September 30, 2007 and December 31, 2006, the carrying value of the securities on deposit totaled $16.2 million and $15.1 million, respectively.
4.	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 a complex and 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 been reported to the Company and an amount for losses incurred that have not yet 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 internal and external factors. These factors include, but are not limited to, the Company’s growth, changes in the Company’s operations, and legal, social, and economic developments. These estimates are reviewed regularly and any resulting adjustments 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 as of September 30, 2007, the related adjustments could have a material adverse impact on the Company’s financial condition and results of operations.
	During the three months ended September 30, 2007, the Company decreased the estimated net unpaid loss and loss adjustment expenses for accident years 2006 and prior by the following amounts:

11

	Net Decrease
	(In millions)
Accident Year 2006	$	7.5
Accident Year 2005		11.9
Accident Year 2004		9.2
Accident Years 2003 and prior		10.9
Total	$	39.5

	For accident years 2006 and 2005, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for management liability and professional liability coverages due to better than expected case incurred loss development primarily as a result of claim severity emergence being less than anticipated.
	For accident years 2004 and prior, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for management liability, professional liability, and commercial general liability coverages due to better than expected case incurred loss development as a result of claim severity emergence being less than anticipated.
5.	Shareholders’ Equity
	The Philadelphia Consolidated Holding Corp Amended and Restated Employees’ Stock Incentive and Performance Based Compensation Plan (the “Plan”) provides incentives and awards to those employees and members of the Board (“participants”) largely responsible for the long term success of the Company. Under the Plan, the Company issued 436,607 and 949,000 stock settled appreciation rights (“SARS”) during the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively. The Company also issued 146,884 and 47,080 shares of restricted stock awards during the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively.
6.	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 nine months ended September 30, 2007 and 2006, respectively (in thousands, except per share data):

	As of and For the Three				As of and For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Weighted-Average Common Shares Outstanding		70,458		69,992		70,324		69,717
Weighted-Average Share Equivalents		3,599		3,489		3,857		3,471
Weighted-Average Shares and Share Equivalents		74,057		73,481		74,181		73,188
Net Income	$	96,244	$	89,890	$	256,625	$	215,068
Basic Earnings per Share	$	1.37	$	1.28	$	3.65	$	3.08
Diluted Earnings per Share	$	1.30	$	1.22	$	3.46	$	2.94

12

7.	Income Taxes
	On January 1, 2007 the Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” As a result of the implementation, no adjustment to the beginning balance of retained earnings was deemed necessary. As of January 1, 2007, the Company’s liability for its unrecognized tax benefits was $0.2 million. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $0.2 million. There were no material changes to this amount during the quarter ended September 30, 2007.
	Interest and penalties accrued for the underpayment of taxes are recorded as a component of income tax expense. The liability for interest and penalties amounted to $1.6 million and $1.5 million as of January 1, 2007 and September 30, 2007, respectively.
	The Company and its subsidiaries file Federal and State income tax returns as required, and is subject to Federal and State examinations for tax years 2002 through 2005, and 2003 through 2005, respectively.
	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.
8.	Reinsurance
	In the normal course of business, the Company has entered into various reinsurance contracts with unrelated reinsurers. The Company’s participation in such agreements allows the Company to limit its loss exposure and diversify its 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:

(In thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007						September 30, 2007
	Written			Earned			Written			Earned
Direct Business	$	503,078		$	410,264		$	1,294,438		$	1,181,840
Reinsurance Assumed		1,550			1,393			2,816			2,931
Reinsurance Ceded		(62,138	)		(52,508	)		(178,143	)		(169,589	)
Net Premiums	$	442,490		$	359,149		$	1,119,111		$	1,015,182

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2006						September 30, 2006
	Written			Earned			Written			Earned
Direct Business	$	455,446		$	348,926		$	1,122,553		$	996,011
Reinsurance Assumed		1,145			1,048			3,444			3,312
Reinsurance Ceded		(64,525	)		(53,608	)		(149,723	)		(137,617	)
Net Premiums	$	392,066		$	296,366		$	976,274		$	861,706

9.	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.

13

	Credit Agreement:
	Effective June 29, 2007, the Company amended its unsecured Credit Agreement (the “Credit Agreement”) which establishes a revolving credit facility providing for loans to the Company of up to $50.0 million in principal amount outstanding at any one time. The amended Credit Agreement has a maturity date of June 27, 2008 and contains an annual commitment fee of 6.0 basis points per annum on the unused commitments under the Credit Agreement. Each loan under the amended Credit Agreement will bear interest at a per annum rate equal to, at the Company’s option, (i) Libor plus 0.35% or (ii) the higher of the administrative agent and lender’s prime rate and the Federal Funds rate plus 0.50%. As of September 30, 2007, no borrowings have been made by the Company under this Credit Agreement.
	The Credit Agreement contains various representations, covenants and events of default typical for credit facilities of this type. As of September 30, 2007, the Company was in compliance with all covenants contained in the Credit Agreement.
	State Insurance Guaranty Funds:
	As of September 30, 2007 and December 31, 2006, included in Other Liabilities in the Consolidated Balance Sheets were $13.6 million and $15.1 million, respectively, of liabilities for state insurance guaranty funds. As of September 30, 2007 and December 31, 2006, included in Other Assets in the Consolidated Balance Sheets were $0.2 million of related assets for premium tax offsets or policy surcharges. The related asset is limited to the amount that is determined based upon future premium collections or policy surcharges from policies in force.
	State Insurance Facility Assessments:
	The Company continually monitors developments with respect to state insurance facilities. The Company is required to participate in various state insurance facilities that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Because of the Company’s participation, it may be exposed to losses that surpass the capitalization of these facilities and/or to assessments from these facilities.
	Florida Hurricane Catastrophe Fund
	The Company and other insurance companies writing residential property policies in Florida must participate in the Florida Hurricane Catastrophe Fund (“FHCF”). If the FHCF does not have sufficient funds to pay its ultimate reimbursement obligations to participating insurance companies, it has the authority to issue bonds, which are funded by assessments on generally all property and casualty premiums in Florida. By law, these assessments are the obligation of insurance policyholders, which insurance companies must collect. The FHCF assessments are limited to 6% of premiums per year beginning the first year in which reimbursements require bonding, and up to a total of 10% of premiums per year for assessments in the second and subsequent years, if required to fund additional bonding. Upon the order of the Florida Office of Insurance Regulation (“FOIR”), companies are required to collect the FHCF assessments directly from residential property policyholders and remit them to the FHCF as they are collected.
10.	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 arising during the three and nine months ended September 30, 2007 and 2006 was $11.7 million and $16.1 million, respectively, and $10.1 million and $5.7 million, respectively. The related tax effect of Reclassification Adjustments for the three and nine months ended September 30, 2007 and 2006 was $(1.0) million and $2.4 million, respectively, and $(11.4) million and $3.4 million, respectively.

14

11.	Segment Information
	The Company’s operations are classified into the following three reportable business segments:

• The Commercial Lines Underwriting Group, which has underwriting responsibility for the commercial multi-peril package, commercial automobile, specialty property and inland marine, and antique/collector car insurance products;

• The Specialty Lines Underwriting Group, which has underwriting responsibility for the professional and management liability insurance products; and

• The Personal Lines Underwriting Group, which has underwriting responsibility for personal property insurance products for the homeowners and manufactured housing market in Florida, and the National Flood Insurance Program for both personal and commercial policyholders.

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; 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 nine months ended September 30, 2007 and 2006. Corporate information is included to reconcile segment data to the consolidated financial statements (in thousands):

15

	As of and For The Three Months Ended September 30,
	Commercial		Specialty			Personal
	Lines		Lines			Lines			Corporate			Total
2007:
Gross Written Premiums	$	425,131	$	68,476		$	11,021			—		$	504,628
Net Written Premiums	$	389,298	$	55,930		$	(2,738	)		—		$	442,490
Revenue:
Net Earned Premiums	$	303,381	$	48,675		$	7,093			—		$	359,149
Net Investment Income		—		—			—			30,199			30,199
Net Realized Investment Gain		—		—			—			2,817			2,817
Other Income		—		—			530			450			980
Total Revenue		303,381		48,675			7,623			33,466			393,145
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		146,416		(3,149	)		1,538			—			144,805
Acquisition Costs and Other Underwriting Expenses		—		—			—			101,252			101,252
Other Operating Expenses		—		—			291			2,701			2,992
Total Losses and Expenses		146,416		(3,149	)		1,829			103,953			249,049
Income Before Income Taxes		156,965		51,824			5,794			(70,487	)		144,096
Total Income Tax Expense		—		—			—			47,852			47,852
Net Income	$	156,965	$	51,824		$	5,794		$	(118,339	)	$	96,244
Total Assets		—		—		$	100,385		$	3,897,402		$	3,997,787
2006:
Gross Written Premiums	$	367,785	$	62,602		$	26,204			—		$	456,591
Net Written Premiums	$	339,409	$	50,217		$	2,440			—		$	392,066
Revenue:
Net Earned Premiums	$	246,905	$	45,415		$	4,046			—		$	296,366
Net Investment Income		—		—			—			23,833			23,833
Net Realized Investment Loss		—		—			—			(6,976	)		(6,976	)
Other Income		—		—			677			118			795
Total Revenue		246,905		45,415			4,723			16,975			314,018
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		54,841		26,385			3,480			—			84,706
Acquisition Costs and Other Underwriting Expenses		—		—			—			89,052			89,052
Other Operating Expenses		—		—			508			2,856			3,364
Total Losses and Expenses		54,841		26,385			3,988			91,908			177,122
Income Before Income Taxes		192,064		19,030			735			(74,933	)		136,896
Total Income Tax Expense		—		—			—			47,006			47,006
Net Income	$	192,064	$	19,030		$	735		$	(121,939	)	$	89,890
Total Assets		—		—		$	143,860		$	3,185,561		$	3,329,421

16

	As of and For The Nine Months Ended September 30,
	Commercial		Specialty		Personal
	Lines		Lines		Lines			Corporate			Total
2007:
Gross Written Premiums	$	1,058,407	$	189,182	$	49,665			—		$	1,297,254
Net Written Premiums	$	968,264	$	155,827	$	(4,980	)		—		$	1,119,111
Revenue:
Net Earned Premiums	$	861,926	$	141,969	$	11,287			—		$	1,015,182
Net Investment Income		—		—		—			85,694			85,694
Net Realized Investment Gain		—		—		—			32,638			32,638
Other Income		—		—		1,978			682			2,660
Total Revenue		861,926		141,969		13,265			119,014			1,136,174
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		385,122		51,651		7,126			—			443,899
Acquisition Costs and Other Underwriting Expenses		—		—		—			299,902			299,902
Other Operating Expenses		—		—		1,087			8,041			9,128
Total Losses and Expenses		385,122		51,651		8,213			307,943			752,929
Income Before Income Taxes		476,804		90,318		5,052			(188,929	)		383,245
Total Income Tax Expense		—		—		—			126,620			126,620
Net Income	$	476,804	$	90,318	$	5,052		$	(315,549	)	$	256,625
Total Assets		—		—	$	100,385		$	3,897,402		$	3,997,787
2006:
Gross Written Premiums	$	875,386	$	175,097	$	75,514			—		$	1,125,997
Net Written Premiums	$	814,543	$	140,081	$	21,650			—		$	976,274
Revenue:
Net Earned Premiums	$	706,445	$	129,278	$	25,983			—		$	861,706
Net Investment Income		—		—		—			65,572			65,572
Net Realized Investment Loss		—		—		—			(9,782	)		(9,782	)
Other Income		—		—		1,459			244			1,703
Total Revenue		706,445		129,278		27,442			56,034			919,199
Losses and Expenses:
Net Loss and Loss Adjustment Expenses		250,013		74,580		12,533			—			337,126
Acquisition Costs and Other Underwriting Expenses		—		—		—			251,406			251,406
Other Operating Expenses		—		—		1,022			7,622			8,644
Total Losses and Expenses		250,013		74,580		13,555			259,028			597,176
Income Before Income Taxes		456,432		54,698		13,887			(202,994	)		322,023
Total Income Tax Expense		—		—		—			106,955			106,955
Net Income	$	456,432	$	54,698	$	13,887		$	(309,949	)	$	215,068
Total Assets		—		—	$	143,860		$	3,185,561		$	3,329,421

17

12.

Subsequent Event

During October 2007, southern California was affected by wildfires impacting seven counties. The Company’s insurance subsidiaries write commercial property and casualty insurance policies on risks located in California. Losses resulting from the California wildfires are subject to the Company’s open-market commercial lines catastrophe reinsurance program, which provides coverage of $245 million in excess of a $10.0 million per occurrence retention. As of November 5, 2007, fewer than 25 claims related to the California wildfires have been reported to the Company. At this time, the Company does not yet have sufficient information to develop a meaningful loss estimate for the California wildfires.

18

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

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 below include, but are not limited to those matters referred to under the caption “General”, below. The Company does not intend to publicly update any forward looking statement, except as may be required by law.

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, the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

These 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, 2006.

During October 2007, southern California was affected by wildfires impacting seven counties. The Company’s insurance subsidiaries write commercial property and casualty insurance policies on risks located in California. Losses resulting from the California wildfires are subject to the Company’s open-market commercial lines catastrophe reinsurance program, which provides coverage of $245 million in excess of a $10.0 million per occurrence retention. As of November 5, 2007, fewer than 25 claims related to the California wildfires have been reported to the Company. At this time, the Company does not yet have sufficient information to develop a meaningful loss estimate for the California wildfires.

Critical Accounting Estimates

The preparation of the Company’s financial statements and related disclosures in conformity with generally accepted accounting principles, or GAAP, requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Accounting policies and estimates are periodically reviewed and adjustments are made when facts and circumstances dictate. Critical accounting policies that are affected by accounting estimates include:

• Investments – fair value;

• Other than temporary impairments;

• Liability for unpaid loss and loss adjustment expenses;

• Reinsurance receivables;

• Liability for preferred agent profit sharing; and

• Share-based compensation expense.

Such accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements. Actual results could differ materially from these estimates. For a discussion of how these estimates and other factors may affect the Company’s business, see the Risk Factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

19

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

Results of Operations (Nine Months ended September 30, 2007 vs. September 30, 2006)

          Premiums: Premium information for the nine months ended September 30, 2007 vs. September 30, 2006 for the Company’s business segments is as follows (dollars in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2007 Gross Written Premiums	$	1,058.4		$	189.2		$	49.7		$	1,297.3
2006 Gross Written Premiums	$	875.4		$	175.1		$	75.5		$	1,126.0
Percentage Increase (Decrease)		20.9	%		8.1	%		(34.2	)%		15.2	%
2007 Gross Earned Premiums	$	946.0		$	175.1		$	63.7		$	1,184.8
2006 Gross Earned Premiums	$	761.8		$	161.0		$	76.5		$	999.3
Percentage Increase (Decrease)		24.2	%		8.8	%		(16.7	)%		18.6	%

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 in existing product offerings, most notably for the Company’s condominium and homeowners associations, non-profit, real estate, specialty schools, and golf and country clubs commercial package product lines, as well as the inland marine specialty property product line. These product offerings accounted for approximately $113.1 million of the $183.0 million total commercial lines segment gross written premiums increase.

• The introduction of several new niche product offerings, most notably the antique/collector vehicle product, professional sports and entertainment and religious organizations commercial package products, and the camp operators product. These new product offerings accounted for approximately $66.0 million of the $183.0 million total commercial lines segment gross written premiums increase.

• An increase in the Company’s marketing personnel as well as an increase in the number of preferred agents.

• The introduction of a Company branded agent program to promote the Company’s product offerings and underwriting philosophy in producers’ offices.

• As a result of the factors noted above:

§	The commercial lines segment in-force policy counts increased by 107.3% for the nine months ended September 30, 2007. The introduction of the antique/collector vehicle program accounted for 72.7% of the 107.3% total policy count increase for the period. The other factors discussed above accounted for the remaining 27.3% increase in the policy counts for the period.
§	The specialty lines segment in-force policy counts increased by 12.9% for the nine months ended September 30, 2007.

• A $2.3 million increase in gross written premium by the personal lines segment for the National Flood Insurance Program (“NFIP”) for the nine months ended September 30, 2007, compared to the same period in 2006. Gross written premiums for the NFIP accounted for 53.7% and 32.3% of the total personal lines segment gross written premiums for the nine months ended September 30, 2007 and 2006, respectively.

20

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

The growth in gross written premiums was partially offset by:

• Restriction of personal lines business production due to the significant increase in catastrophe reinsurance rates and restricted availability of reinsurance catastrophe coverage experienced at the June 1, 2006 catastrophe reinsurance program renewal. This restriction included non-renewing all homeowners and rental dwelling policies providing windstorm coverage which expire between June 15, 2007 and December 31, 2007. The Company has submitted mandatory rate filings with the Florida Department of Insurance (“FLDOI”), which are currently under review by the FLDOI. The mandatory rate filings seek to increase existing premium rates to reflect the actual reinsurance costs incurred by the Company in its June 1, 2007 reinsurance renewal, as well as other factors. As of September 30, 2007, there were approximately 3,300 such homeowners policies with an aggregate in-force premium of approximately $7.2 million which expire before January 1, 2008, and approximately 450 such rental dwelling policies with an aggregate in-force premium of approximately $0.6 million which expire before January 1, 2008.

• A decrease in the lawyers professional liability gross written premium of $10.3 million as a result of non-renewing policies due to unacceptable underwriting results. For the nine months ended September 30, 2007, gross written premium for the lawyers professional liability product was $0.3 million. The Company anticipates that it will continue to non-renew its remaining lawyers professional liability business throughout 2007, which approximated $1.3 million of gross written premium for the three months ended December 31, 2006.

• An increase in price competition during the nine months ended September 30, 2007, particularly with respect to the following:

§	Large commercial property-driven accounts located in the non-coastal areas of the country;
§	Commercial package business with annual premiums in excess of $100,000; and
§	Professional liability accounts at all premium levels.

The Company believes its marketing strategy is a strength in that it provides the flexibility to quickly deploy its marketing efforts from soft market segments to market segments with emerging opportunities. However, the Company will “walk away” from writing business that does not meet its established underwriting standards and pricing guidelines.

• Realized average rate decreases on renewal business approximating 1.7% and 3.2% for the specialty lines and commercial lines segments, respectively.

The respective net written premiums and net earned premiums for commercial lines, specialty lines and personal lines segments for the nine months ended September 30, 2007 vs. September 30, 2006 were as follows (dollars in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2007 Net Written Premiums	$	968.3		$	155.8		$	(5.0	)	$	1,119.1
2006 Net Written Premiums	$	814.5		$	140.1		$	21.7		$	976.3
Percentage Increase (Decrease)		18.9	%		11.2	%		(123.0	)%		14.6	%
2007 Net Earned Premiums	$	861.9		$	142.0		$	11.3		$	1,015.2
2006 Net Earned Premiums	$	706.4		$	129.3		$	26.0		$	861.7
Percentage Increase (Decrease)		22.0	%		9.8	%		(56.5	)%		17.8	%

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 period results primarily from the following:

21

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

• The Company experienced higher property catastrophe reinsurance rates, increased catastrophe loss retentions, and decreased catastrophe coverage limits for its annual June 1, 2006 reinsurance renewal compared to the June 1, 2005 renewal. This resulted in increased property catastrophe costs for the nine month period ended September 30, 2007, compared to the nine month period ended September 30, 2006. For the June 1, 2007 commercial lines segment property catastrophe reinsurance renewal, the Company experienced lower reinsurance rates, purchased increased catastrophe limits due to higher exposures primarily in the Northeast part of the country, and maintained the same catastrophe loss retention compared to the June 1, 2006 renewal. For the June 1, 2007 personal lines segment property catastrophe reinsurance renewal, the Company experienced reduced reinsurance rates, a lower catastrophe loss retention and purchased decreased catastrophe coverage limits due to lower exposures, compared to the June 1, 2006 renewal. The Company’s property catastrophe reinsurance coverage effective June 1, 2007 through May 31, 2008 is as follows:

§ For its commercial lines segment property catastrophe program:

o The Company’s open-market catastrophe reinsurance coverage is $245 million in excess of a $10.0 million per occurrence retention. The open-market catastrophe program (the coverage provided by large reinsurers that are rated at least “A –” (Excellent) by A.M. Best Company) includes one mandatory reinstatement.

o A reinstatement premium protection contract for the First and Second Excess Layers of the commercial lines segment open-market catastrophe contract was also purchased, effective June 1, 2007, providing coverage for reinstatement premium which the Company may become liable to pay as a result of loss occurrence between $10.0 million and $50.0 million on the First and Second Excess Layers of the commercial lines segment open-market catastrophe reinsurance program.

§ For its personal lines segment property catastrophe program:

o The Company’s reinsurance coverage is approximately $121.0 million in excess of a $3.5 million per occurrence retention. Of this total amount, the Florida Hurricane Catastrophe Fund (“FHCF”) provides on an aggregate basis for Liberty American Select Insurance Company and Liberty American Insurance Company, 90% coverage for approximately $78.3 million in excess of $15.4 million. The FHCF coverage inures to the benefit of the Company’s open-market catastrophe program. The coverage provided by the open-market catastrophe program (the coverage provided by large reinsurers that are rated at least “A –” (Excellent) by A.M. Best Company) includes one mandatory reinstatement, but the FHCF coverage does not reinstate. Since the FHCF reimbursement coverage cannot be reinstated, the Company’s open-market program is structured such that catastrophe reinsurance coverage in excess of the FHCF coverage will “drop down” and fill in any portion of the FHCF which has been utilized.

o Reinstatement premium protection contracts for the First, Second and Third Excess Layers of its personal lines open-market catastrophe reinsurance contracts were purchased, effective June 1, 2007, providing coverage for reinstatement premium which the Company may become liable to pay as a result of loss occurrences between $3.5 million and $24.0 million on the First, Second and Third Excess Layers of the personal lines segment open-market catastrophe reinsurance program.

• The Company experienced rate decreases on its annual January 1, 2007 renewals of its casualty excess of loss and property excess of loss reinsurance agreements compared to the rates on its January 1, 2006 renewals of these agreements.

22

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

• Certain of the Company’s reinsurance contracts have reinstatement or additional premium provisions under which the Company must pay reinstatement or additional reinsurance premiums to reinstate coverage provisions after utilization of initial reinsurance coverage. As of September 30, 2007 and 2006, the Company accrued $2.6 million ($1.1 million for the commercial lines segment and $1.5 million for the specialty lines segment) and $3.4 million ($1.4 million for the commercial lines segment and $2.0 million for the specialty lines segment) respectively, of reinstatement or additional reinsurance premium under its casualty excess of loss reinsurance treaties, as a result of changes in ultimate loss estimates. The reinstatement premium increased ceded written and earned premiums and reduced net written and earned premiums.

• Effective for the two-year period beginning March 1, 2007, the Company purchased Terrorism Catastrophe Excess of Loss reinsurance coverage for its Commercial Lines segment which provides, on an annual basis, in the aggregate, $50.0 million of coverage for losses arising from acts of terrorism incurred in excess of $10.0 million, after all applicable inuring reinsurance coverages. The agreement providing this coverage allows one reinstatement on an annual basis at the same cost as the initial coverage. The Company did not purchase similar reinsurance coverage in the prior period.

          Net Investment Income: Net investment income approximated $85.7 million for the nine months ended September 30, 2007 and $65.6 million for the same period of 2006. Total investments grew to $2,857.3 million as of September 30, 2007 from $2,321.5 million as of September 30, 2006. The growth in investment income is primarily due to increased investments, which arose from investing net cash flows provided from operating activities, during a period in which the Company increased the average duration of its fixed income portfolio.

          The Company’s average duration of its fixed income portfolio was 4.9 years and 3.9 years as of September 30, 2007 and September 30, 2006, respectively. The decision to increase the average duration of the fixed maturity portfolio was based upon enterprise risk management analyses completed during 2006. The analyses indicated the capacity to further refine the risk/return profile of the investment portfolio. Based upon the analyses, the following actions were implemented:

• The portfolio duration target was increased;

• The targeted percentage of the fixed maturity portfolio allocated to municipal security investments was increased; and

• The targeted percentage of the investment portfolio allocated to common stock investments was increased.

          The Company’s taxable equivalent book yield on its fixed income holdings approximated 5.5% as of September 30, 2007, compared to 5.3% as of September 30, 2006.

          The total pre-tax return, which includes the effects of both income and price returns on securities, of the Company’s fixed income portfolio was 3.31% and 3.33% for the nine months ended September 30, 2007 and 2006, respectively, compared to the Lehman Brothers Intermediate Aggregate Bond Index (“the Index”) total return of 4.01% and 3.27% 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 (Loss): Net realized investment gains (losses) were $32.6 million for the nine months ended September 30, 2007 and $(9.8) million for the same period in 2006. The Company realized net investment gains of $0.7 million and $35.6 million from the sale of fixed maturity and equity securities, respectively, for the nine months ended September 30, 2007, and $0.5 million and $3.2 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation. The $35.6 million net realized gains from the sale of equity securities included approximately $22.2 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.

23

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 losses of $1.3 million and $1.5 million from the sale of fixed maturity and equity securities, respectively, for the nine months ended September 30, 2006, and $4.6 million and $2.4 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation.

          Other Income: Other income was $2.7 million and $1.7 million for the nine months ended September 30, 2007 and 2006, respectively. Other income consists primarily of commissions and fees earned on servicing and brokering personal lines business, and to a lesser extent commissions earned on brokered commercial lines business.

          Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses increased $106.8 million (31.7%) to $443.9 million for the nine months ended September 30, 2007 from $337.1 million for the same period of 2006, and the loss ratio increased to 43.7% in 2007 from 39.1% in 2006.

The increase in net loss and loss adjustment expenses was primarily due to:

• The growth in net earned premiums.

• An increase in the current accident year net ultimate loss and loss adjustment expense ratio for the nine months ended September 30, 2007, compared to the same period in 2006. During the nine months ended September 30, 2007, a net ultimate loss and loss adjustment expense ratio estimate of 50.9% was recorded for the 2007 accident year. During the nine months ended September 30, 2006, a net ultimate loss and loss adjustment expense ratio estimate of 48.2% was recorded for the 2006 accident year.

• Net reserve actions taken during the nine months ended September 30, 2007 whereby net estimated unpaid loss and loss adjustment expenses for accident years 2006 and prior were decreased by $73.2 million compared to net reserve actions taken during the nine months ended September 30, 2006 whereby the estimated net unpaid loss and loss adjustment expenses for accident years 2005 and prior were decreased by $78.3 million. Changes in the estimated net unpaid loss and loss adjustment expenses by accident year during the nine months ended September 30, 2007 were as follows:

	Net Decrease
	(In millions)
Accident Year 2006	$	19.8
Accident Year 2005		21.3
Accident Year 2004		13.4
Accident Years 2003 and prior		18.7
Total	$	73.2

For accident year 2006, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

§	commercial property, professional liability and commercial automobile coverages due to better than expected case incurred loss development, primarily as a result of both claim frequency and severity emergence being less than anticipated, and
§	management liability coverages due to better than expected incurred loss development primarily as a result of claim severity being less than anticipated.

For accident year 2005, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

§ general liability and commercial automobile coverages due to better than expected case incurred loss development, primarily as a result of both claim frequency and severity emergence being less than anticipated, and

24

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

§ professional liability and management liability coverages due to better than expected case incurred loss development, primarily as a result of claim severity being less than anticipated.

For accident year 2004, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for commercial general liability, professional liability, rental leasing and management liability coverages due to better than expected case incurred loss development, primarily as a result of claim severity being less than anticipated.

For accident years 2003 and prior, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

§	commercial general liability, coverages due to better than expected case incurred loss development, primarily as a result of both claim frequency and severity emergence being less than anticipated, and
§	professional liability, and management liability coverages due to better than expected case incurred loss development primarily as a result of claim severity being less than anticipated.

Establishing loss reserve estimates is a necessarily complex and imprecise process. The Company’s methodology employs several generally accepted actuarial methods to determine net unpaid loss and loss adjustment expenses. Over time, more reliance is placed on actuarial methods based on actual loss development, and accordingly, over time, less reliance is placed on actuarial methods based on expected loss development.

          Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other underwriting expenses increased $48.5 million (19.3%) to $299.9 million for the nine months ended September 30, 2007 from $251.4 million for the same period of 2006, and the expense ratio increased to 29.6% in 2007 from 29.2% in 2006. The increase in acquisition costs and other underwriting expenses was due primarily to:

• The growth in net earned premiums

The increase in the expense ratio for the nine months ended September 30, 2007 was due primarily to:

• Higher property catastrophe reinsurance costs experienced by the Company for its annual June 1, 2006 reinsurance renewal. This resulted in higher ceded earned premiums and lower net earned premiums without a corresponding decrease in acquisition and other underwriting expenses for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, which contributed to the increase in the expense ratio.

These increases were offset in part by a decrease in state insurance guaranty fund assessments.

          Other Operating Expenses: Other operating expenses increased $0.5 million to $9.1 million for the nine months ended September 30, 2007 from $8.6 million for the same period of 2006.

          Income Tax Expense: The Company’s effective tax rate for the nine months ended September 30, 2007 and 2006 was 33.0% and 33.2%, 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 September 30, 2007 vs. September 30, 2006)

          Premiums: Premium information for the three months ended September 30, 2007 vs. September 30, 2006 for the Company’s business segments is as follows (dollars in millions):

25

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

	Commercial Lines			Specialty Lines			Personal Lines			Total
2007 Gross Written Premiums	$	425.1		$	68.5		$	11.0		$	504.6
2006 Gross Written Premiums	$	367.8		$	62.6		$	26.2		$	456.6
Percentage Increase (Decrease)		15.6	%		9.4	%		(58.0	)%		10.5	%
2007 Gross Earned Premiums	$	332.8		$	60.0		$	18.9		$	411.7
2006 Gross Earned Premiums	$	268.7		$	56.0		$	25.3		$	350.0
Percentage Increase (Decrease)		23.9	%		7.1	%		(25.3	)%		17.6	%

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 in existing product offerings, most notably for the Company’s condominium and homeowners associations, non-profit, real estate, specialty schools, and golf and country clubs commercial package product lines as well as the inland marine specialty property product line. These product offerings accounted for approximately $35.5 million of the $57.3 million total commercial lines segment gross written premiums increase.

• The introduction of several new niche product offerings, most notably the antique/collector vehicle product, professional sports and entertainment and religious organizations commercial package products, and the camp operators product. These new product offerings accounted for approximately $20.9 million of the $57.3 million total commercial lines segment gross written premiums increase.

• An increase in the Company’s marketing personnel, as well as an increase in the number of preferred agents.

• The Company’s branded agent program, which promotes the Company’s product offerings and underwriting philosophy in producers’ offices.

• As a result of the factors noted above:

§	The commercial lines segment in-force policy counts increased by 25.2% for the three months ended September 30, 2007. The introduction of the antique/collector vehicle program accounted for 57.7% of the 25.2% total policy count increase for the period. The other factors discussed above accounted for the remaining 42.3% increase in the policy counts for the period.
§	The specialty lines segment in-force policy counts increased by 6.4% for the three months ended September 30, 2007.

• A $0.4 million increase in gross written premiums by the personal lines segment for the NFIP for the three months ended September 30, 2007, compared to the same period in 2006. Gross written premiums for the NFIP accounted for 94.5% and 38.2% of the total personal lines segment gross written premiums for the three months ended September 30, 2007 and 2006, respectively.

The growth in gross written premiums was partially offset by:

• Restriction of personal lines business production due to the significant increase in catastrophe reinsurance rates and restricted availability of reinsurance catastrophe coverage experienced at the June 1, 2006 catastrophe reinsurance program renewal. This restriction included non-renewing all homeowners and rental dwelling policies providing windstorm coverage which expire between June 15, 2007 and December 31, 2007. The Company has submitted mandatory rate filings with the FLDOI, which are currently under

26

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

	review by the FLDOI. The mandatory rate filings seek to increase existing premium rates to reflect the actual reinsurance costs incurred by the Company in its June 1, 2007 reinsurance renewal, as well as other factors. As of September 30, 2007, there were approximately 3,300 such homeowners policies with an aggregate in-force premium of approximately $7.2 million which expire before January 1, 2008, and approximately 450 such rental dwelling policies with an aggregate in-force premium of approximately $0.6 million which expire before January 1, 2008.
•	A decrease in the lawyer’s professional liability gross written premium of $2.4 million as a result of non-renewing policies due to unacceptable underwriting results. For the three months ended September 30, 2007, gross written premium for the lawyer’s professional liability product was $0.1 million. The Company anticipates that it will continue to non-renew its remaining lawyers professional liability business throughout 2007, which approximated $1.3 million of gross written premium for the three months ended December 31, 2006.
•	An increase in price competition during the three months ended September 30, 2007, particularly with respect to the following:

§	Large commercial property-driven accounts located in the non-coastal areas of the country;
§	Commercial package business with annual premiums in excess of $100,000; and
§	Professional liability accounts at all premium levels.

• Realized average rate decreases on renewal business approximating 1.8% and 3.8% for the specialty lines and commercial lines segments, respectively.

The respective net written premiums and net earned premiums for commercial lines, specialty lines and personal lines segments for the three months ended September 30, 2007 vs. September 30, 2006 were as follows (dollars in millions):

	Commercial Lines			Specialty Lines			Personal Lines			Total
2007 Net Written Premiums	$	389.3		$	55.9		$	(2.7	)	$	442.5
2006 Net Written Premiums	$	339.4		$	50.2		$	2.5		$	392.1
Percentage Increase (Decrease)		14.7	%		11.4	%		(208.0	)%		12.9	%
2007 Net Earned Premiums	$	303.3		$	48.7		$	7.1		$	359.1
2006 Net Earned Premiums	$	246.9		$	45.4		$	4.1		$	296.4
Percentage Increase (Decrease)		22.8	%		7.3	%		73.2	%		21.2	%

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 period results primarily from the following:

• For the June 1, 2007 commercial lines segment property catastrophe reinsurance renewal, the Company experienced lower reinsurance rates, but purchased increased catastrophe limits due to higher exposures primarily in the Northeast part of the country, and maintained the same catastrophe loss retentions compared to the June 1, 2006 renewal. For the June 1, 2007 personal lines segment property catastrophe reinsurance renewal, the Company experienced reduced reinsurance rates, lower catastrophe loss retention and purchased decreased catastrophe coverage limits due to lower exposures, compared to the June 1, 2006 renewal. This resulted in decreased property catastrophe costs for the three month period ended September 30, 2007, compared to the three month period ended September 30, 2006.

• The Company experienced rate decreases on its annual January 1, 2007 renewals of its casualty excess of loss and property excess of loss reinsurance agreements compared to the rates on its January 1, 2006 renewals of these agreements.

27

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

• Effective for the two-year period beginning March 1, 2007, the Company purchased Terrorism Catastrophe Excess of Loss reinsurance coverage for its Commercial Lines segment which provides, on an annual basis, in the aggregate, $50.0 million of coverage for losses arising from acts of terrorism incurred in excess of $10.0 million, after all applicable inuring reinsurance coverages. The agreement providing this coverage allows one reinstatement on an annual basis at the same cost as the initial coverage. The Company did not purchase similar reinsurance coverage in the prior period.

          Net Investment Income: Net investment income approximated $30.2 million for the three months ended September 30, 2007 and $23.8 million for the same period of 2006. Total investments grew to $2,857.3 million as of September 30, 2007 from $2,321.5 million as of September 30, 2006. The growth in investment income is primarily due to increased investments which arose from investing net cash flows provided from operating activities, during a period in which the Company increased the average duration of its fixed income portfolio.

          The Company’s average duration of its fixed income portfolio was 4.9 years and 3.9 years as of September 30, 2007 and September 30, 2006, respectively. The decision to increase the average duration of the fixed maturity portfolio was based upon enterprise risk management analyses completed during 2006. The analyses indicated the capacity to further refine the risk/return profile of the investment portfolio. Based upon the analyses, the following actions were implemented:

• The portfolio duration target was increased;

• The targeted percentage of the fixed maturity portfolio allocated to municipal security investments was increased; and

• The targeted percentage of the investment portfolio allocated to common stock investments was increased.

          The Company’s taxable equivalent book yield on its fixed income holdings approximated 5.5% as of September 30, 2007, compared to 5.3% as of September 30, 2006.

          The total pre-tax return, which includes the effects of both income and price returns on securities, of the Company’s fixed income portfolio was 2.52% and 3.01% for the three months ended September 30, 2007 and 2006, respectively, compared to the Lehman Brothers Intermediate Aggregate Bond Index (“the Index”) total return of 2.76% and 3.41% 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 (Loss): Net realized investment gains (losses) were $2.8 million for the three months ended September 30, 2007 and $(7.0) million for the same period in 2006. The Company realized net investment gains of $0.6 million and $3.3 million from the sale of fixed maturity and equity securities, respectively, for the three months ended September 30, 2007, and $0 million and $1.1 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation.

          The Company realized net investment losses of $0 million and $1.3 million from the sale of fixed maturity and equity securities, respectively, for the three months ended September 30, 2006, and $4.5 million and $1.2 million in non-cash realized investment losses for fixed maturity and equity securities, respectively, as a result of the Company’s impairment evaluation.

          Other Income: Other income approximated $1.0 million and $0.8 million for the three months ended September 30, 2007 and 2006, respectively. Other income consists primarily of commissions and fees earned on servicing and brokering personal lines business, and to a lesser extent commissions earned on brokered commercial lines business.

          Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses increased $60.1 million (71.0%) to $144.8 million for the three months ended September 30, 2007 from $84.7 million for the same period of 2006, and the loss ratio increased to 40.3% in 2007 from 28.6% in 2006.

28

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

The increase in net loss and loss adjustment expenses was primarily due to:

• The growth in net earned premiums.

• An increase in the current accident year net ultimate loss and loss adjustment expense ratio for the three months ended September 30, 2007, compared to the same period in 2006. During the three months ended September 30, 2007, a net ultimate loss and loss adjustment expense ratio estimate of 51.3% was recorded for the 2007 accident year. During the three months ended September 30, 2006, a net ultimate loss and loss adjustment expense ratio estimate of 43.0% was recorded for the 2006 accident year.

• Net reserve actions taken during the three months ended September 30, 2007 whereby net estimated unpaid loss and loss adjustment expenses for accident years 2006 and prior were decreased by $39.5 million as compared to net reserve actions taken during the three months ended September 30, 2006 whereby the estimated net unpaid loss and loss adjustment expenses for accident years 2005 and prior were decreased by $42.7 million. Changes in the estimated net unpaid loss and loss adjustment expenses by accident year during the three months ended September 30, 2007 were as follows:

	Net Decrease
	(In millions)
Accident Year 2006	$	7.5
Accident Year 2005		11.9
Accident Year 2004		9.2
Accident Years 2003 and prior		10.9
Total	$	39.5

For accident years 2006 and 2005, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for management liability and professional liability coverages due to better than expected case incurred loss development, primarily as a result of claim severity emergence being less than anticipated.

For accident years 2004 and prior, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for management liability, professional liability, and commercial general liability coverages due to better than expected case incurred loss development as a result of claim severity emergence being less than anticipated.

          Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other underwriting expenses increased $12.2 million (13.7%) to $101.3 million for the three months ended September 30, 2007 from $89.1 million for the same period of 2006, and the expense ratio decreased to 28.2% in 2007 from 30.0% in 2006. The increase in acquisition costs and other underwriting expenses was due primarily to:

• The growth in net earned premiums

The decrease in the expense ratio for the three months ended September 30, 2007 was due primarily to:

• Lower property catastrophe reinsurance costs experienced by the Company for its annual June 1, 2007 reinsurance renewal. This resulted in higher net earned premiums without a corresponding increase in acquisition and other underwriting expenses for the three months ended September 30, 2007 compared to the three months ended September 30, 2006, which contributed to the decrease in the expense ratio.

• A decrease in state insurance guaranty fund assessments.

29

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 decreased $0.4 million to $3.0 million for the three months ended September 30, 2007 from $3.4 million for the same period of 2006.

          Income Tax Expense: The Company’s effective tax rate for the three months ended September 30, 2007 and 2006 was 33.2% and 34.3%, 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.

Investments

The Company’s investment objectives are the realization of relatively high levels of after-tax net investment income with competitive after-tax total rates of return, subject to established specific guidelines and objectives. 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 September 30, 2007 approximately 86.3% and 11.0% 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 86.0% and 10.4%, respectively, at December 31, 2006.

Of the total investments in fixed maturity securities, asset backed, mortgage pass-through, and collateralized mortgage obligation securities, on a cost basis, amounted to $210.1 million, $618.2 million and $344.3 million, respectively, as of September 30, 2007, and $202.1 million, $425.5 million and $293.1 million, respectively, as of December 31, 2006.

The Company regularly performs impairment reviews with respect to its investments. For investments other than interests in securitized assets, these reviews include identifying any security whose fair value is below its cost and an analysis of securities meeting predetermined impairment thresholds to determine whether such decline is other than temporary. If the Company determines that it does not intend to hold a security to maturity or 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 $1.1 million and $5.7 million, respectively, for the three months ended September 30, 2007 and 2006, and $3.7 million and $7.0 million, respectively, for the nine months ended September 30, 2007 and 2006. The Company’s impairment review also includes an impairment evaluation for interests in securitized assets conducted in accordance with the guidance provided by the Emerging Issues Task Force of the Financial Accounting Standards Board. There were no non-cash realized investment losses recorded for the three and nine months ended September 30, 2007 and 2006, respectively, as a result of the Company’s impairment evaluation for investments in securitized assets.

The Company’s fixed maturity portfolio amounted to $2,495.0 million and $2,129.6 million, as of September 30, 2007 and December 31, 2006, respectively, of which 99.9% as of September 30, 2007 and December 31, 2006 was comprised of investment grade securities. The Company had fixed maturity investments with gross unrealized losses amounting to $19.9 million and $18.1 million as of September 30, 2007 and December 31, 2006, respectively. Of these amounts, interests in securitized assets had gross unrealized losses amounting to $10.3 million and $9.3 million as of September 30, 2007 and December 31, 2006, respectively.

The following table identifies the period of time securities with an unrealized loss at September 30, 2007 have continuously been in an unrealized loss position. None of the amounts displayed in the table relate to non-investment grade fixed maturity securities. No issuer of securities or industry represents more than 2.4% and 25.8%, respectively, of the total estimated fair value, or 4.7% and 26.3%, respectively, of the total gross unrealized loss included in the table below. The industry concentration represents investments in “AAA” rated Mortgage Backed Securities issued by agencies of the U.S. Government which are collateralized by pools of residential mortgage loans. The unrealized losses on these securities are generally attributable to the general level of interest rates and prevailing market spreads over U.S. Treasury Securities. The contractual repayment of these securities is guaranteed by agencies of the U.S. Government, and it is therefore expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. At the present time the Company has the

30

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

ability and intent to hold these securities until a recovery of fair value, which may be maturity; therefore the Company does not consider these investments to be other than temporarily impaired as of September 30, 2007.

	Gross Unrealized Losses as of September 30, 2007
	(in millions)
	Fixed Maturities
Continuous	Available for Sale				Total
time in unrealized	Excluding Interests		Interests in		Fixed Maturities
loss position	in Securitized Assets		Securitized Assets		Available for Sale		Equity Securities		Total Investments
0 – 3 months	$	—	$	0.1	$	0.1	$	2.2	$	2.3
4 – 6 months		1.8		1.8		3.6		6.5		10.1
7 – 9 months		2.2		0.9		3.1		1.1		4.2
10 – 12 months		0.6		1.3		1.9		—		1.9
13 – 18 months		0.1		—		0.1		—		0.1
19 – 24 months		0.1		0.5		0.6		—		0.6
> 24 months		4.8		5.7		10.5		—		10.5
Total Gross Unrealized Losses	$	9.6	$	10.3	$	19.9	$	9.8	$	29.7
Estimated fair value of securities with a gross unrealized loss	$	855.7	$	703.1	$	1,558.8	$	108.8	$	1,667.6

The Company’s impairment evaluation as of September 30, 2007 for fixed maturities available for sale excluding interests in securitized assets resulted in the following conclusions:

US Treasury Securities and Obligations of U.S. Government Agencies:

The unrealized losses on the Company’s Aaa/AAA rated investments in U.S. Treasury Securities and Obligations of U.S. Government Agencies are attributable to the general level of interest rates. Of the 32 investment positions held, approximately 46.9% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments.

Obligations of States and Political Subdivisions:

The unrealized losses on the Company’s investments in long term tax exempt securities which have ratings of A1/A+ to Aaa/AAA are generally attributable to the general level of interest rates. Of the 791 investment positions held, the average rating was Aaa/AAA, and approximately 62.1% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments.

Corporate and Bank Debt Securities:

The unrealized losses on the Company’s long term investments in corporate bonds which have ratings from Baa3/BBB to Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 89 investment positions held, the average rating was A2/A, and approximately 82.0% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of September 30, 2007 for interests in securitized assets resulted in the following conclusions:

Asset Backed Securities:

The unrealized losses on the Company’s investments in Asset Backed Securities which have ratings of Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S.

31

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

Treasury Securities. Of the 122 investment positions held, the average rating was Aaa/AAA, and approximately 54.1% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Mortgage Pass-Through Securities:

The unrealized losses on the Company’s investments in U.S. government agency issued Mortgage Pass-Through Securities which have ratings of Aaa/AAA, are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 150 investment positions held, the average rating was Aaa/AAA, and approximately 64.0% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Collateralized Mortgage Obligations:

The unrealized losses on the Company’s investments in Collateralized Mortgage Obligations which have ratings of Aa2/AA+ to Aaa/AAA are attributable to the general levels of interest rates and prevailing market spreads over U.S. Treasury Securities. Of the 175 investment positions held, the average rating was Aaa/AAA and approximately 55.4% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of September 30, 2007 for equity securities resulted in the conclusion that the Company does not consider any of the equity security positions to be other than temporarily impaired. Of the 2,642 investment positions held, approximately 25.2% were in an unrealized loss position.

The fair value of the Company’s structured securities investment portfolio (Asset Backed, Mortgage Pass-Through and Collateralized Mortgage Obligation securities) amounted to $1,167.8 million as of September 30, 2007. AAA rated securities represented approximately 99.8% of the September 30, 2007 structured securities portfolio. Approximately $969.4 million of the structured securities investment portfolio is backed by residential collateral, consisting of $612.2 million of U.S. government agency backed Mortgage Pass-Through Securities, $243.3 million of U.S. government agency backed Collateralized Mortgage Obligations, $78.1 million of non-U.S. government agency Collateralized Mortgage Obligations backed by pools of prime loans (generally consists of loans made to the highest credit quality borrowers with Fair Isaac Corporation (“FICO”) scores generally greater than 720), $26.9 million of structured securities backed by pools of ALT A loans (loans with low documentation and borrowers with FICO scores in the range of 650 to the low 700’s), and $8.8 million of structured securities backed by pools of sub-prime loans (loans with low documentation, higher combined loan-to-value ratios and borrowers with FICO scores capped at approximately 650). As of September 30, 2007, the Company holds no investments in Collateralized Debt Obligations or Net Interest Margin securities.

Given a combination of recent events in the housing and mortgage finance sectors, and the resulting impact on illiquidity in various markets and sectors, the Company believes that fixed income markets in general may experience more volatility than during recent historical reporting periods. As of September 30, 2007, the Company had no impairments or surveillance issues related to these market conditions. However, the Company expects that ongoing volatility in these sectors, in particular, and in spread related sectors, in general, may impact the prices of securities held in its overall Aaa/AAA rated investment portfolio.

The Company’s $35.7 million ALT-A and sub-prime overall AAA rated loan portfolio is comprised of 23 securities with net unrealized losses of $0.1 million as of September 30, 2007. These securities are either first to pay or among the first cash flow tranches of their respective transactions, have a weighted average life of 1.8 years, are spread across multiple vintages (origination year of underlying collateral pool) and have not experienced any ratings downgrades or surveillance issues as of September 30, 2007.

32

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

The following table identifies the period of time securities with an unrealized loss at December 31, 2006 have continuously been in an unrealized loss position. None of the amounts displayed in the table are due to non-investment grade fixed maturity securities. No issuer of securities or industry represents more than 3.5% and 23.6%, respectively, of the total estimated fair value, or 2.8% and 28.7%, respectively, of the total gross unrealized loss included in the table below. The industry concentration represents investments in “AAA” rated mortgage backed securities issued by agencies of the U.S. Government which are collateralized by pools of residential mortgage loans. As previously discussed, 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 the underlying 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 such determination was made.

	Gross Unrealized Losses as of December 31, 2006
	(in millions)
	Fixed Maturities
Continuous	Available for Sale				Total
time in unrealized	Excluding Interests		Interests in		Fixed Maturities
loss position	in Securitized Assets		Securitized Assets		Available for Sale		Equity Securities		Total Investments
0 – 3 months	$	0.8	$	1.2	$	2.0	$	1.1	$	3.1
4 – 6 months		—		0.1		0.1		0.6		0.7
7 – 9 months		0.1		—		0.1		0.9		1.0
10 – 12 months		0.1		0.2		0.3		—		0.3
13 – 18 months		2.1		4.6		6.7		—		6.7
19 – 24 months		2.6		1.5		4.1		—		4.1
> 24 months		3.1		1.7		4.8		—		4.8
Total Gross Unrealized Losses	$	8.8	$	9.3	$	18.1	$	2.6	$	20.7
Estimated fair value of securities with a gross unrealized loss	$	624.9	$	543.8	$	1,168.7	$	37.4	$	1,206.1

The Company’s impairment evaluation as of December 31, 2006 for fixed maturities available for sale, excluding interests in securitized assets, resulted in the following conclusions:

US Treasury Securities and Obligations of U.S. Government Agencies:

The unrealized losses on the Company’s Aaa/AAA rated investments in U.S. Treasury Securities and Obligations of U.S. Government Agencies are attributable to interest rate increases. Of the 32 investment positions held, approximately 71.9% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Obligations of States and Political Subdivisions:

The unrealized losses on the Company’s investments in long term tax exempt securities which have ratings of A1/A+ to AAA/Aaa are generally caused by interest rate increases. Of the 736 investment positions held, approximately 49.3% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

33

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

Corporate and Bank Debt Securities:

The unrealized losses on the Company’s long term investments in corporate bonds which have ratings from Baa3/BBB to Aaa/AAA are generally caused by interest rate increases. Of the 114 investment positions held, approximately 87.7% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of December 31, 2006 for interests in securitized assets resulted in the following conclusions:

Asset Backed Securities:

The unrealized losses on the Company’s investments in Asset Backed Securities which have ratings of Aaa/AAA are generally caused by interest rate increases. Of the 132 investment positions held, approximately 49.2% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Mortgage Pass-Through Securities:

The unrealized losses on the Company’s investments in Mortgage Pass-Through Securities which have ratings of Aaa/AAA are generally caused by interest rate increases. Of the 130 investment positions held, approximately 58.5% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

Collateralized Mortgage Obligations:

The unrealized losses on the Company’s investments in Collateralized Mortgage Obligations which have ratings of Aa2/AA to Aaa/AAA are generally caused by interest rate increases. Of the 155 investment positions held, approximately 66.5% were in an unrealized loss position. The contractual terms of the investments do not permit the issuer to settle the security at a price less than the amortized cost of the investments. Therefore, it is expected that the securities would not be settled at a price less than the amortized cost of the investments.

The Company’s impairment evaluation as of December 31, 2006 for equity securities resulted in the conclusion that the Company does not consider the equity securities to be other than temporarily impaired. Of the 3,555 investment positions held, approximately 14.8% were in an unrealized loss position.

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 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 that it does not intend to hold the security until maturity or should it determine that 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 as a realized loss for the period in which such determination was made, thereby reducing earnings for such period by the amount of such realized loss.

For the three months ended September 30, 2007, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0 million and $0.4 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $0 million and $3.4 million, respectively.

For the three months ended September 30, 2006, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0 million and $2.3 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $0.4 million and $10.8 million, respectively.

For the nine months ended September 30, 2007, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $0.3 million and $2.5 million, respectively. The fair value of the fixed maturity and equity

34

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

securities at the time of sale was $33.7 million and $31.3 million, respectively. A total of $1.2 million of the $2.5 million gross loss on the sale of equity securities for the nine months ended September 30, 2007 was 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. The $1.2 million realized gross loss on the sale of equity securities was in addition to the $1.6 million impairment loss recognized during the three months ended March 31, 2007 upon the Company’s initial decision to change one of its common stock investment managers and no longer hold the securities to recovery.

For the nine months ended September 30, 2006, the Company’s gross loss on the sale of fixed maturity and equity securities amounted to $1.3 million and $6.7 million, respectively. The fair value of the fixed maturity and equity securities at the time of sale was $55.3 million and $37.0 million, respectively.

Liquidity and Capital Resources

          For the nine months ended September 30, 2007, the Company’s fixed maturity investments experienced unrealized investment depreciation of $1.5 million, net of the related deferred tax benefit of $0.8 million, and its equity investments experienced unrealized investment depreciation of $1.0 million, net of the related deferred tax benefit of $0.6 million. For the nine months ended September 30, 2007, net realized investment gains from the sale of equity securities were $35.6 million, of which approximately $22.2 million was as a result of the liquidation of one of the Company’s equity portfolios due to a change in common stock investment managers.

          As of September 30, 2007, the Company had total investments with a carrying value of $2,857.3 million, of which 87.3% 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 remaining 12.7% of the Company’s total investments consisted primarily of publicly traded common stock securities.

          The Company produced net cash from operations of $403.3 million and $383.1 million for the nine months ended September 30, 2007 and 2006, 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. Cash from operations for the nine months ended September 30, 2007 was primarily generated from premium growth during the current year as a result of increases in the number of policies written. Net loss and loss expense payments were $321.0 million and $256.7 million, respectively, for the nine months ended September 30, 2007 and 2006. Management believes that the Company has adequate liquidity to pay all claims and meet all other cash needs.

          The Company generated $12.8 million of net cash from financing activities during the nine months ended September 30, 2007. Cash provided from financing activities consisted of a $4.4 million excess tax benefit from the issuance of shares pursuant to stock based compensation plans; $4.8 million of proceeds from the issuance of shares pursuant to the Company’s stock based compensation plans and $3.6 million from the collection of notes receivable associated with the Company’s employee stock purchase plans.

          Effective June 29, 2007, the Company amended its unsecured Credit Agreement (“the Credit Agreement”) to extend the maturity date to June 27, 2008. The Credit Agreement provides capacity for working capital and other general corporate purposes. As of September 30, 2007, no borrowings have been made by the Company under the Credit Agreement. The Credit Agreement contains various representations, covenants and events of default typical for credit facilities of this type.

          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 of 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

35

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

borrowing rates. As of September 30, 2007, the insurance subsidiaries’ unused borrowing capacity was $718.1 million. The borrowing capacity provides an immediately available line of credit.

          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.

36

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 tables 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 September 30, 2007 and 2006. The selected hypothetical changes do not indicate what could be the potential best or worst case scenarios. 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’
	Fair Value		(bp=basis points)	in Interest Rates		Fair Value			Equity
	(Dollars in Thousands)
September 30, 2007:
Investments
Total Fixed Maturities Available For Sale	$	2,495,045	200 bp decrease	$	2,716,811		8.9	%		9.8	%
			100 bp decrease	$	2,615,041		4.8	%		5.3	%
			50 bp decrease	$	2,556,403		2.5	%		2.7	%
			50 bp increase	$	2,432,864		(2.5	)%		(2.8	)%
			100 bp increase	$	2,371,115		(5.0	)%		(5.5	)%
			200 bp increase	$	2,251,758		(9.7	)%		(10.8	)%
September 30, 2006:
Investments
Total Fixed Maturities Available For Sale	$	2,045,960	200 bp decrease	$	2,203,927		7.7	%		9.6	%
			100 bp decrease	$	2,125,622		3.9	%		4.8	%
			50 bp decrease	$	2,086,185		2.0	%		2.4	%
			50 bp increase	$	2,005,102		(2.0	)%		(2.5	)%
			100 bp increase	$	1,963,708		(4.0	)%		(5.0	)%
			200 bp increase	$	1,880,367		(8.1	)%		(10.0	)%

37

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.

38

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

There were no material changes to the risk factors disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

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

The Company’s purchases of its common stock during the third quarter of 2007 are shown in the following table:

				(c) Total	(d)
				Number of	Approximate
				Shares	Dollar Value of
				Purchased as	Shares That
				Part of	May Yet Be
				Publicly	Purchased
	(a) Total Number	(b) Average		Announced	Under the
	of Shares	Price Paid per		Plans or	Plans or
Period	Purchased	Share		Programs	Programs
July 1 – July 31	2,149(1)	$	35.38	—	—
					$45,000,000 (2)
August 1 – August 31	1,225(1)	$	31.07	—	—
					$45,000,000 (2)
September 1 – September 30	3,491 (1)	$	32.18	—	—
					$45,000,000 (2)

(1)	Such shares were issued under the Company’s Employee Stock Purchase Plan and Amended and Restated Employees’ Stock Incentive and Performance Based Compensation 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

Not applicable.

Item 5. Other Information

Not applicable.

39

Item 6. Exhibits

Exhibits:

Exhibit No.	Description
10.1*	Casualty (Clash) Excess of Loss Reinsurance Agreement with Swiss Reinsurance America Corporation effective January 1, 2007
10.2*	Property Per Risk Excess of Loss Agreement of Reinsurance No. 9034 — 07 with General Reinsurance Corporation effective January 1, 2007 and Termination of Endorsement No. 6 to the Property Per Risk Excess of Loss Reinsurance Agreement No. 9034
10.3*	Interest and Liabilities Agreement to the Property Fourth Per Risk Excess of Loss Reinsurance Agreement with Swiss Reinsurance America Corporation effective January 1, 2007
10.4*	Terrorism Catastrophe Excess of Loss Reinsurance Contract – 80% Share with Underwriters At Lloyd’s effective March 1, 2007
10.5*	Terrorism Catastrophe Excess of Loss Reinsurance Contract – 20% Share with Validus Reinsurance, LTD. effective March 1, 2007
10.6*	Excess Catastrophe Reinsurance Contract with Subscribing Reinsurers effective June 1, 2007
10.7*	Reinstatement Premium Protection Reinsurance Contract with Subscribing Reinsurers effective June 1, 2007
10.8*	Florida Only Excess Catastrophe Reinsurance Contract with Subscribing Reinsurers effective June 1, 2007 — Liberty American and Liberty American Select Insurance Companies
10.9*	First and Second Excess Reinstatement Premium Protection Reinsurance Contract with Subscribing Reinsurers effective June 1, 2007 – Liberty American and Liberty American Select Insurance Companies
10.10*	Third Excess Reinstatement Premium Protection Reinsurance Contract with Subscribing Reinsurers effective June 1, 2007 – Liberty American and Liberty American Select Insurance Companies
10.11*	Florida Hurricane Catastrophe Fund Reimbursement Contract and Addendums No. 1 through No. 4 effective June 1, 2007 – Liberty American Select Insurance Company
10.12*	Florida Hurricane Catastrophe Fund Reimbursement Contract and Addendums No. 1 through No. 4 effective June 1, 2007 – Liberty American Insurance Company
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.

40

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 November 6, 2007	James J. Maguire, Jr.
	James J. Maguire, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)
Date November 6, 2007	Craig P. Keller
	Craig P. Keller
	Executive Vice President, Secretary,
	Treasurer and Chief Financial Officer
	(Principal Financial and Accounting Officer)

41

EX-10.1

Exhibit 10.1

CASUALTY EXCESS OF LOSS REINSURANCE
AGREEMENT

EFFECTIVE: January 1, 2007

the following member companies of the
PHILADELPHIA CONSOLIDATED HOLDING CORPORATION:
PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania

CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
January 1, 2007

ARTICLE	CONTENTS	PAGE
	PREAMBLE		1
I	BUSINESS COVERED		1
II	EFFECTIVE DATE AND TERMINATION		3
III	TERRITORY		3
IV	LIMIT AND RETENTION		3
V	WARRANTY		4
VI	REINSTATEMENT		5
VII	ULTIMATE NET LOSS		5
VIII	LOSS IN EXCESS OF POLICY LIMITS		6
IX	EXTRA CONTRACTUAL OBLIGATIONS		7
X	EXCLUSIONS		8
XI	SPECIAL ACCEPTANCE		14
XII	LOSS OCCURRENCE		14
XIII	REINSURANCE PREMIUM		15
XIV	REPORTS AND REMITTANCES		16
XV	CLAIMS		17
XVI	SALVAGE AND SUBROGATION		18
XVII	TERRORISM EXCESS RECOVERY		18
XVIII	ACCESS TO RECORDS		20
XIX	TAXES		20
XX	CURRENCY		20
XXI	OFFSET		20
XXII	ERRORS OR OMISSIONS		21
XXIII	DISPUTE RESOLUTION		21
XXIV	INSOLVENCY		23
XXV	SPECIAL TERMINATION		23
XXVI	AMENDMENTS		25
	SIGNATURES		25

ATTACHMENTS:

POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE
INSOLVENCY FUNDS EXCLUSION CLAUSE
NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA
NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4
PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
(hereinafter referred to as the “Agreement”)

between

the following member companies of the
PHILADELPHIA CONSOLIDATED HOLDING CORPORATION:
PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania
(hereinafter referred to as “Company”)

and

SWISS REINSURANCE AMERICA CORPORATION
Armonk, New York
(hereinafter referred to as the “Reinsurer”)

Effective: January 1, 2007

ARTICLE I — BUSINESS COVERED

A.	The Reinsurer shall indemnify the Company on an excess of loss basis in respect of the Company’s Ultimate Net Loss paid by the Company as a result of losses occurring during the term of this Agreement, for Policies in force as of January 1, 2007, and new and renewal Policies becoming effective on or after said date, subject to the terms and conditions contained herein.
B.	This Agreement is solely between the Company and the Reinsurer, and nothing contained in this Agreement shall create any obligations or establish any rights against the Reinsurer in favor of any person or entity not a party hereto.
C.	The performance of obligations by both parties under this Agreement shall be in accordance with a fiduciary standard of good faith and fair dealing.
D.	The term “Policies” shall mean each of the Company’s binders, policies and contracts of insurance on the business covered hereunder.

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E.	Under this Agreement, the indemnity for reinsured loss applies only to the following Classes of Insurance, except as excluded under Article X — Exclusions of this Agreement.
	The Classes of Insurance covered under this Article include business written by the Company’s Commercial and Specialty Lines Divisions and classified by the Company as Casualty and Liability, which is defined in the NAIC Annual Statement as:

1.	Commercial Multiple Peril — Liability coverages only
2.	Commercial and Private Passenger Automobile Liability:
	Bodily Injury Liability, Property Damage Liability, Medical Payments, Uninsured Motorists, Underinsured Motorists and No-Fault Coverage.
3.	Other Liability — occurrence and claims made:
	Bodily Injury Liability, Property Damage Liability, Personal and Advertising Injury Liability, and Medical Payments Coverage when written as part of a Commercial or Personal Package Policy or on a monoline basis. However, Advertising Injury Liability shall only apply to this Agreement when written as part of a Commercial Package Policy or a Commercial General Liability Coverage Form.
	Commercial Umbrella Liability.
	Professional Liability:
	Director’s and Officers Liability For Profit and Not for Profit risks, Miscellaneous Errors and Omissions Liability, Lawyers Professional Liability, Accountants Professional Liability, Dentists professional Liability, Insurance Agents professional liability, Miscellaneous Professional Liability, Employment Practices Liability.

Furthermore, it is agreed that the Company may add other Casualty and Liability product lines of business to the scope of this Contract with prior written approval of the Reinsurer, pursuant to the Special Acceptance article.

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ARTICLE II — EFFECTIVE DATE AND TERMINATION

A.	This Agreement shall apply to losses occurring within the period commencing 12:01 a.m., Eastern Standard Time, January 1, 2007, and ending 12:01 a.m., Eastern Standard Time, January 1, 2008.
B.	During the running of such notice as stipulated in Paragraph A. above, the Reinsurer shall participate in business coming within the terms of this Agreement until the date of termination of this Agreement.
C.	In the event of termination of this Agreement, the Reinsurer shall be liable for losses occurring prior to the date of termination; however, the Reinsurer shall have no liability for losses occurring subsequent to the termination of this Agreement.

ARTICLE III — TERRITORY

This Agreement applies to Policies issued by the Company within the United States of America, its territories and possessions, and Canada and shall apply to losses covered hereunder wherever occurring.

ARTICLE IV — LIMIT AND RETENTION

A.	The limits and retentions provided under this Agreement are set forth in the following Parts I, II and III:
	Part I — First Excess of Loss (Accounting Code No. POR376426)

The Company shall retain the first $2,000,000 of Ultimate Net Loss as respects any one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the Company’s Ultimate Net Loss exceeds the Company’s retention of $2,000,000, but the liability of the Reinsurer shall never exceed $3,000,000 with respect to any one Loss Occurrence. However, in no event shall the liability of the Reinsurer arising out of Act(s) of Terrorism exceed $3,000,000 during the term of this Agreement.

Part II — Second Excess of Loss (Accounting Code No.POR376428)

The Company shall retain the first $5,000,000 of Ultimate Net Loss as respects any one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the Company’s Ultimate Net Loss exceeds the Company’s retention of $5,000,000, but the liability of the Reinsurer shall never exceed $5,000,000 with respect to any one Loss Occurrence. However, in no event

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shall the liability of the Reinsurer arising out of Act(s) of Terrorism exceed $5,000,000 during the term of this Agreement.

Part III — Third Excess of Loss (Accounting Code No. POR376430)

The Company shall retain the first $10,000,000 of Ultimate Net Loss as respects any one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the Company’s Ultimate Net Loss exceeds the Company’s retention of $10,000,000, but the liability of the Reinsurer shall never exceed $10,000,000 with respect to any one Loss Occurrence. However, in no event shall the liability of the Reinsurer arising out of Act(s) of Terrorism exceed $10,000,000 during the term of this Agreement.

B.	The Company’s retention and the Reinsurer’s limit of liability for each Loss Occurrence, set forth in Parts I, II and III above, shall apply irrespective of the number of Policies affected or number of hazards in one Policy and regardless of the number of Classes of Insurance involved.
C.	Reinsurance of the Company’s retention, set forth above, shall not be deducted in arriving at the Company’s Ultimate Net Loss herein.
D.	An “Act of Terrorism” for purposes of this Agreement shall mean:

1.

Any actual or threatened violent act or act harmful to human life, tangible or intangible property or infrastructure directed towards or having the effect of (a) influencing or protesting against any de jure or de facto government or policy thereof, (b) intimidating, coercing or putting in fear a civilian population or section thereof religious or political system of thought, perpetrated by a specific individual or group directly or indirectly through agents acting on behalf of said individual or group or (c) retaliating against any country for direct or vicarious support by that country of any other government or political system.

2.

Any act declared pursuant to the Terrorism Risk Insurance Act of 2002, as amended, shall also be considered an “Act of Terrorism” for purposes of this Agreement.

ARTICLE V — WARRANTY

A. It is warranted, or so deemed, that casualty reinsurance is in effect for all policies issued by or on behalf of the Company with limits greater than $1,000,000 per occurrence or claim made. It is also warranted, or so deemed, that the Company has in effect an Insurance Company Errors and Omissions policy with a limit of

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$10,000,000 and a retention/deductible of $1,000,000. This insurance, or reinsurance, whether collectible or not, and retention/deductible, shall be maintained until all losses reinsured under this Agreement are fully discharged and shall inure to the benefit of the reinsurer.

B.	It is further warranted that policies subject to this Agreement with inuring coverage as deemed above, shall not exceed a combined limit for both the Primary Policy and Umbrella Policy of $11,000,000 per occurrence, or so deemed.
C.	The maximum policy period on business covered by this Agreement is one year plus odd time, not to exceed 120 days.

ARTICLE VI — REINSTATEMENT

A.	Each claim hereunder reduces the amount of indemnity from the time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby reinstated from the time the Loss Occurrence commences hereon.
B.	For each amount so reinstated the Company agrees to pay an additional premium calculated at pro rata of the annual premium hereon, being pro rata only as to the fraction of the limit of liability of this Agreement (i.e., the fraction of $3,000,000 as respects Part I and $5,000,000 as respects Part II and $10,000,000 as respects Part III) so reinstated and 100% as to the term.
C.	Nevertheless, the Reinsurer’s liability hereunder shall never exceed $3,000,000 as respects Part I and $5,000,000 as respects Part II and $10,000,000 as respects Part III in respect of any one Loss Occurrence and shall be further limited in all during the term of this Agreement $6,000,000 as respects Part I and $10,000,000 as respects Part II and $20,000,000.

ARTICLE VII — ULTIMATE NET LOSS

A. The term “Ultimate Net Loss” shall mean the actual sum paid by the Company in settlement of losses or liability including interest accrued prior to judgment after making deductions for all recoveries, including subrogation, salvages, and claims upon other reinsurances, whether collectible or not, which inure to the benefit of the Reinsurer under this Agreement, and shall include Loss Adjustment Expenses incurred by the Company; provided, however, that in the event of the insolvency of the Company, Ultimate Net Loss shall mean the amount of loss and Loss Adjustment Expenses for which the Company is liable, and payment by the Reinsurer shall be made to the liquidator, receiver, conservator or statutory

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successor of the Company in accordance with the provisions of Article XXIV— Insolvency of this Agreement.

B.	The term “Ultimate Net Loss” shall include 90% of Loss In Excess of Policy Limits and 90% of Extra Contractual Obligations, as defined herein, but only as respects business covered under this Agreement.
C.	The term “Loss Adjustment Expenses” shall mean all expenses incurred by the Company in connection with the investigation, settlement, defense or litigation, including court costs and post-judgment interest, of any claim or loss covered by the Policies reinsured under this Agreement, and shall include Declaratory Judgment Expenses. However, the term “Loss Adjustment Expenses” shall not include the salaries and expenses of Company employees, office expenses and other overhead expenses.
D.	The term “Declaratory Judgment Expenses” 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 Agreement. In addition, the Company shall promptly notify the Reinsurer of any Declaratory Judgment Expenses subject to this Agreement.
E.	All recoveries, salvages or payments recovered or received subsequent to a loss settlement under this Agreement shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments to the loss settlement shall be made by the parties hereto.
F.	Nothing in this Article shall be construed to mean that losses are not recoverable hereunder until the Ultimate Net Loss of the Company has been ascertained.

ARTICLE VIII — LOSS IN EXCESS OF POLICY LIMITS

A.

“Loss in Excess of Policy Limits” is defined as loss in excess of the limit of the original Policy, such loss in excess of the limit having been incurred because of failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.

B.

However, this Article shall not apply where the loss has been incurred due to fraud by a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or

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

C.	For the purposes of this Article, the word “loss” shall mean any amounts which the Company would have been contractually liable to pay had it not been for the limit of the original Policy.
D.	With respect to coverage provided under this Article, recoveries from any insurance or reinsurance other than this Agreement shall be deducted to arrive at the amount of the Company’s Ultimate Net Loss.

ARTICLE IX — EXTRA CONTRACTUAL OBLIGATIONS

A.	“Extra Contractual Obligations” are defined as those liabilities not covered under any other provision of this Agreement and which arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.
B.	The date on which an Extra Contractual Obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original accident, casualty, disaster or loss occurrence.
C.	However, coverage hereunder as respects Extra Contractual Obligations shall not apply where the loss has been incurred due to the fraud of a member of the Board of Directors or a corporate officer 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.
D.	Recoveries, collectibles or retention from any other form of insurance or reinsurance including deductibles or self-insured retention which protect the Company against Extra Contractual Obligations shall inure to the benefit of the Reinsurer and shall be deducted from the total amount of Extra Contractual Obligations for purposes of determining the loss hereunder.
E.	If any provision of this Article shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other

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provision of this Article or the enforceability of such provision in any other jurisdiction.

ARTICLE X — EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

A. THE FOLLOWING GENERAL CATEGORIES:

1.	Ex-gratia payments.
2.	Risks subject to a deductible or a self-insured retention excess of $250,000.
3.	Loss or damage caused directly or indirectly by: (a) enemy attack by armed forces including action taken by military, naval or air forces in resisting an actual or an immediately impending enemy attack; (b) invasion; (c) insurrection; (d) rebellion; (e) revolution; (f) intervention; (g) civil war; and (h) usurped power.
4.	Reinsurance assumed by the Company.
5.	Business derived from any Pool, Association, including Joint Underwriting Association, Syndicate, Exchange, Plan, Fund or other facility directly as a member, subscriber or participant, or indirectly by way of reinsurance or assessments; provided this exclusion shall not apply to Automobile or Workers Compensation assigned risks which may be currently or subsequently covered hereunder.
6.	Pollution Liability as per the attached Pollution Liability Exclusion Clause — Reinsurance.
7.	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.
8.	Nuclear Incident Exclusion Clauses which are attached and made part of this Agreement:

a.	Nuclear Incident Exclusion Clause — Liability — Reinsurance — U.S.A.
b.	Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada.
c.	Nuclear Incident Exclusion Clause — Reinsurance — No. 4.

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9.	Any actual or alleged liability whatsoever for any claim or claims in respect of loss or losses, directly or indirectly arising out of, resulting from, or in consequence of asbestos, in whatever form or quantity.
10.	Any liability, loss, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with the use or release, or threat thereof, of any nuclear weapon or device or chemical or biological agent, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
11.	Policies covering the liability of any original insured whose annual gross revenue, sales or receipts exceed $5,000,000,000.

B. THE FOLLOWING INSURANCE COVERAGES:

1.	Fiduciary Liability except as respects Non Profits and private For Profit entities other than financial institutions.
2.	Fidelity and Surety except as respects Non Profits and private For Profit entities other than financial institutions.
3.	Credit and Financial Guarantee.
4.	Securities and Exchange Liability.
5.	Retroactive coverage.
6.	Personal Excess or Umbrella Liability.
7.	Medical malpractice for Doctors, Physicians, Surgeons, Nurses, Hospitals and Clinics. This does not apply to medical professionals when written within the Company’s package policy program business or for other non profit entities when the professionals are not directly employed by the entity and who maintain an underlying medical professional liability policy with limits of $1,000,000/$3,000,000 which is primary to the Company’s insured policy, or so deemed.
8.	Advertisers’, Broadcasters’ and Telecasters’ Liability as respects Personal Injury Liability except as provided under Commercial Package Policies or Commercial General Liability Coverage Forms.
9.	Liquor Law Liability, except Host Liquor Law Liability, when written as such.

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10.	Kidnap, Extortion and Ransom Liability.
11.	Boiler and Machinery Insurance.
12.	Protection and Indemnity (Ocean Marine) when written as such.
13.	Workers Compensation.
14.	Business classified by the Company as Primary Rental Liability, Supplemental Liability, Residual Value or GAAP Liability.
15.	New and Renewal business classified by the Company as Nursing Home or Assisted Living General Liability or Professional Liability. However, this exclusion shall not apply if the Company is required by the applicable regulatory authority(ies) to renew any insured(s) policy.
16.	Products recall, Products integrity or Products impairment.

C. THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY:

1.	Vehicles used in or while in practice or preparation for, a prearranged racing, speed, exhibition or demolition contest.
2.	All vehicles classified as “Public Automobiles” except church buses, social service agency automobiles, van pools and vehicles used for the transportation of employees.
3.	Fire, police, emergency or municipal vehicles except when written as part of the Company’s Municipality or Volunteer Fire programs.
4.	Motorcycles except when written as part of the Company’s Motorcycle School program and Municipality program, but not when operated on public roads.
5.	The rental or leasing of vehicles to others.
6.	Logging trucks.
7.	Vehicles regularly used to haul property of others and operating beyond a 200 mile radius.
8.	Newspaper delivery trucks.

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9. Vehicles engaged in the transportation or distribution of fireworks, fuses, explosives, ammunitions, natural or artificial fuel, gas, or liquefied petroleum gases or gasoline.

D. THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE:

1. Risks involving known exposure to the following substances:

a.	dioxin.
b.	polychlorinated biphenols.
c.	lead.
d.	silica.

2. Liability as respects Products and Completed Operations:

a. The manufacture, labeling or re-labeling, importation or wholesale distribution of:

(i)	Drugs or pharmaceuticals.
(ii)	Cosmetics.
(iii)	Herbicides, insecticides or pesticides.
(iv)	Petrochemical or electrical equipment used for heating, lighting or cooking.
(v)	Industrial or toxic chemicals.
(vi)	Valves, gaskets or seals of a hydraulic, petrochemical or high pressure nature.
(vii)	Medical supplies.
(viii)	Heavy machinery and equipment.
(ix)	Power tools.
(x)	Medical equipment used for diagnostic or life sustaining purposes.

b.	The manufacture or importing of motorized or self-propelled vehicles and equipment.
c.	The manufacturing, importing, packing, canning, bottling or processing of foodstuffs.
d.	The blending, mixing, processing or importing of animal feed.
e.	The manufacture, sale, distribution, handling, servicing or maintenance of aircraft, aero spacecraft, missiles, satellites or any component or components thereof.
f.	Exterior installation finishing systems (EIFS) or synthetic stucco manufacturing, importation, installation.

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g. Any insured contractors’ or developers’ operations which are involved in the new construction of apartments, condominiums, cooperatives, town houses or single family dwellings in Arizona, California, Colorado, Hawaii, Nevada, South Carolina, Utah or Washington.

3.	Ownership, operation or use of vessels exceeding 58 feet in length.
4.	All railway operations except sidetrack agreements.
5.	Amusement parks, carnivals or circuses, except incidental exposures when written in conjunction with Human Services, Religious Organizations, Volunteer Fire Companies or similar package business.
6.	Public assembly exposure in excess of 10,000 seating capacity or admissions per event, per building or stadium; however, this exclusion does not apply to walk-a-thons, bicycle races or similar events.
7.	Public gas, electric and water utility companies.
8.	Subaqueous operations.
9.	Mining.
10.	Blasting operations.
11.	Demolition of buildings or structures in excess of two stories.
12.	Shoring, underpinning or moving of buildings or structures.
13.	Manufacture, sale, rental, lease, erection or repair of scaffolds.
14.	Construction of bridges, tunnels or dams.
15.	a. Manufacturers or importers of fireworks, fuses, or any substance, as defined and noted below, intended for use as an explosive.

b.	Loading of fireworks, fuses, or any explosive substance defined below into containers for use as explosive objects, propellant charges or detonation devices and the storage thereof.
c.	Manufacturers or importers of any product in which fireworks, fuses, or any explosive substance defined below is an ingredient.
d.	Handling, storage, transportation or use of fireworks, fuses, or any explosive substance defined below.

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	NOTE: An explosive substance is defined as any substance manufactured for the express purpose of exploding as differentiated from commodities used industrially and which are only incidentally explosive.
16.	Manufacture, production, refining, storage, wholesale distribution or transportation of natural or artificial fuel, gas, butane, propane or liquefied petroleum gases or gasoline.
17.	Onshore and offshore gas and oil drilling operations.
18.	Ownership, maintenance or use of any airport or aircraft, including fueling, or any device or machine intended for and/or aiding in the achievement of atmospheric flight, projection or orbit.
19.	Municipalities with populations over 75,000.
20.	Liability as respects companies identified in the attached Pharmaceutical / Medical Company Exclusion Listing, including all affiliates and subsidiaries thereof.

E.

Those exclusions set forth under Items 5. and 16. of Section D. shall not apply if the exposure is incidental to the regular operations of the insured covered hereunder. An exposure shall be considered incidental if it comprises 15% or less of the insured’s exposure base.

F.

In the event the Company is inadvertently bound on any risk which is excluded under this Agreement and identified below, the reinsurance provided under this Agreement shall apply to such risk until discovery by the Company within its Home Office of the existence of such risk and for 30 days thereafter, and shall then cease unless within the 30 day period, the Company has received from the Reinsurer written notice of its approval of such risk:

1.	As respects Automobile Liability:
	Items 2. through 9. of Section C.
2.	As respects Liability Other Than Automobile:
	Items 2. through 19. of Section D.

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ARTICLE XI — SPECIAL ACCEPTANCE

Policies which are beyond the terms, conditions or limitations of this Agreement may be submitted to the Reinsurer for special acceptance hereunder; and such Policies, if accepted in writing by the Reinsurer, shall be subject to all of the terms, conditions and limitations of this Agreement, except as modified by the special acceptance. Premiums and losses derived from any special acceptance shall be included with other data for rating purposes under this Agreement.

ARTICLE XII — LOSS OCCURRENCE

The provisions under this Article are set forth in the following Parts I, II and III.

Part I — As respects Policies written on an occurrence basis:

The term “Loss Occurrence” shall mean any accident or occurrence or series of accidents or occurrences arising out of any one event and happening within the term and scope of this Agreement. Without limiting the generality of the foregoing, the term “Loss Occurrence” shall be held to include:

A.	As respects Products Bodily Injury and Products Property Damage Liability, injuries to all persons and all damage to property of others occurring during a Policy Period and proceeding from or traceable to the same causative agency shall be deemed to arise out of one Loss Occurrence, and the date of such Loss Occurrence shall be deemed to be the commencing date of the Policy Period. For the purpose of this provision, each annual period of a Policy which continues in force for more than one year shall be deemed to be a separate Policy Period.
B.	As respects Bodily Injury Liability (other than Automobile and Products), said term shall also be understood to mean, as regards each original assured, injuries to one or more than one person resulting from infection, contagion, poisoning, or contamination proceeding from or traceable to the same causative agency.
C.	As respects Property Damage Liability (other than Automobile and Products), said term shall also, subject to Provisions 1. and 2. below, be understood to mean loss or losses caused by a series of operations, events, or occurrences arising out of operations at one specific site and which cannot be attributed to any single one of such operations, events or occurrences, but rather to the cumulative effect of the same. In assessing each and every Loss Occurrence within the foregoing definition, it is understood and agreed that:

1. the series of operations, events or occurrences shall not extend over a period longer than 12 consecutive months; and

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2. the Company may elect the date on which the period of not exceeding 12 consecutive months shall be deemed to have commenced.

In the event that the series of operations, events or occurrences extend over a period longer than 12 consecutive months, then each consecutive period of 12 months, the first of which commences on the date elected under 2. above, shall form the basis of claim under this Agreement.

Part II — As respects Policies written on a claims-made basis:

A.

The term “Loss Occurrence” shall mean each claim or series of claims made to the Company or the insured, during the term of this Agreement arising out of one casualty or event.

B.

As respects a Loss Occurrence involving one or more Policies written on a claims made basis, the date of Loss Occurrence for purposes of reinsurance, shall be considered the earliest date when notice of claims is first received and recorded by the Company or the insured, and any related claims reported subsequent to such date shall be included in such loss. However, if notice of claims is first received and recorded by the Company or the insured, during an Extended Reporting Period, the date of occurrence shall be deemed to be the last day of the Policy Period.

Part III — As respects loss occurrence and claims-made Policies involved in the same Loss Occurrence:

As respects a Loss Occurrence involving one or more Policies written on an occurrence basis and one or more Policies written on a claims-made basis, it is understood that the earliest date on which bodily injury or property damage occurs, and any related claims reported subsequent to such date shall be included in such loss whether they are covered under occurrence or claims-made Policies.

ARTICLE XIII — REINSURANCE PREMIUM

A.	The Company shall pay to the Reinsurer a premium for the reinsurance provided under the First, Second, and Third Excess of Loss Layers at a rates set forth in Paragraph B below. Such rates shall be applied to the Company’s Subject Earned Premium for term of this Agreement.
B.	A deposit premium for each layer set forth below, shall be payable by the Company to the Reinsurer in four equal installments each due January 1, April 1, July 1 and October 1. Within 60 days after the termination of this Agreement, the

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Company shall render a statement to the Reinsurer showing the actual reinsurance premiums due hereunder. If such premium calculations differ from the deposit previously paid, the debtor party shall pay the outstanding balance within 60 days after the termination of this Agreement. However, in no event shall the adjusted premium be less than the minimum premium for each layer, set forth below.

	Rate			Deposit Premium		Minimum Premium		Quarterly Deposit
First Excess Layer		.06	%	$	572,765	$	458,212	$	143,191
Second Excess Layer		.07	%	$	668,226	$	534,581	$	167,056
Third Excess Layer		.13	%	$	1,240,990	$	992,792	$	310,248

C.

The term “Subject Earned Premium” as used herein is equal to the sum of the Net Premiums Written on the business covered hereunder during the period under consideration, plus the unearned premium reserve as respects premiums in force at the beginning of such period, less the unearned premium reserve as respects premiums in force at the end of the period, said unearned premium is to be calculated on an actual daily basis or in accordance with the Company’s methodology, as agreed.

D.

The term “Net Premiums Written” shall mean gross premiums written less returns, allowances and reinsurances which inure to the benefit of the Reinsurer.

ARTICLE XIV — REPORTS AND REMITTANCES

A.	The Company shall furnish the Reinsurer with all necessary data respecting premiums and losses for as long as one of the parties hereto has a claim against the other arising from this Agreement.
B.	All checks and supporting documentation shall be sent to the Reinsurer through one of the options set forth below:

a. WIRE TRANSFER

(i) All wires should be sent to:
The Bank of New York
1 Wall Street
New York, NY 10286
Account Name: Swiss Reinsurance America Corporation
Account Number: 8900489197
ABA Number: 021000018
SWIFT: IRVTUS3N

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(ii) All supporting documentation should be sent to:
Swiss Reinsurance America Corporation
Accounting Department
175 King Street
Armonk, NY 10504

b.	LOCK BOX Both checks and supporting documentation shall be sent to:
	Swiss Reinsurance America Corporation P.O. Box 7247-7281 Philadelphia, PA 19170-7281

C. Payment by the Reinsurer of its portion of loss and Loss Adjustment Expenses paid by the Company shall be made by the Reinsurer to the Company within 15 days after proof of payment is received by the Reinsurer.

ARTICLE XV — CLAIMS

A.

The Company shall promptly notify the Reinsurer of each claim which may involve the reinsurance provided hereunder and of all subsequent developments relating thereto, stating the amount claimed and estimate of the Company’s Ultimate Net Loss and Loss Adjustment Expenses. Notwithstanding the provisions set forth in any other Article herein, prompt notification of loss shall be considered a condition precedent to liability under this Agreement.

B.

The Company shall advise the Reinsurer of all claims which:

1.	Are reserved by the Company for an amount in excess of 50% of its retention;
2.	Originate from fatal injuries;
3.	Originate from the following kinds of bodily injury:

a.	Brain injuries resulting in impairment of physical function;
b.	Spinal injuries resulting in a partial or total paralysis of upper or lower extremities;
c.	Amputation or permanent loss of use of upper or lower extremities;
d.	Severe burn injuries;
e.	Loss of sight in one or both eyes;
f.	All other injuries likely to result in a permanent disability rate of 50% or more.

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4.	Any action alleging Extra Contractual Obligations against the Company.
5.	Any Declaratory Judgment action brought by or against the Company.
6.	Any judgment against an insured for an amount in excess of the Company’s policy limit.

C. The Company shall have the responsibility to investigate, defend or negotiate settlements of all claims and lawsuits related to Policies written by the Company and reinsured under this Agreement. The Reinsurer, at its own expense, may associate with the Company in the defense or control of any claim, suit or other proceeding which involves or is likely to involve the reinsurance provided under this Agreement, and the Company shall cooperate in every respect in the defense of any such claim, suit or proceeding.

ARTICLE XVI — SALVAGE AND SUBROGATION

A.

In the event of the payment of any indemnity by the Reinsurer under this Agreement, the Reinsurer shall be subrogated, to the extent of such payment, to all of the rights of the Company against any person or entity legally responsible for damages of the loss. The Company agrees to enforce such rights; but, in case the Company refuses or neglects to do so, the Reinsurer is hereby authorized and empowered to bring any appropriate action in the name of the Company or their policyholders or otherwise to enforce such rights.

B.

From any amount recovered by subrogation, salvage or other means, there shall first be deducted the expenses incurred in effecting the recovery. The balance shall then be used to reimburse the excess carriers in the inverse order to that in which their respective liabilities attached, before being used to reimburse the Company for its primary loss.

ARTICLE XVII — TERRORISM EXCESS RECOVERY

A. For purposes of this Article:

1.	“Act” shall mean the Terrorism Risk Insurance Act of 2002, any amendments thereto and any regulations promulgated thereunder.
2.	“Affiliate,” “Insured Losses,” and “Program year” shall have the meanings provided in the Act.
3.	“Company” shall include the Company and all affiliates.

B. This reinsurance shall not apply to any fines, civil penalties or surcharges assessed pursuant to the Act.

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C.	To the extent that the Company allocates Insured Losses and/or federal assistance under the Act among affiliates, claims, contracts or otherwise in any manner which impacts the reinsurance provided hereunder, the Company shall apply a reasonable allocation method acceptable to the Reinsurer.
D.	To the extent that an Insured Loss is otherwise payable hereunder, the reinsurance provided by this Agreement shall apply only to the portion of liability, loss, cost and/or expense retained by the company net of any federal assistance pursuant to the Act. For each Program Year, the liability of the Reinsurer for Insured Losses under this Agreement shall be reduced by the ratio that the financial assistance under the Act allocated to Policies subject to this Agreement bears to the Company’s total Insured Losses subject to this Agreement. If the Company does not make such allocation, the liability the Reinsurer for the Insured Losses in any Program Year under this Agreement shall be reduced by the ratio that the financial assistance available to the Company under the Act for that program Year bears to the Company’s total Insured Losses for the same Program Year.
E.	The parties recognize that, for any Program Year, the Reinsurer may without waiver of the foregoing paragraphs make payments for Insured Losses which, together with available financial assistance under the Act and the Company retentions and/or deductibles hereunder, exceed the Company’s Insured Losses. In such event, the Reinsurer’s proportional share of all such excess recovery (hereafter “Reinsurer’s Excess Share”) shall inure to the benefit of the Reinsurer. All excess recovery described in this paragraph shall be allocated to the Reinsurer and the Company in proportion to the respective liability of each for Insured Losses, net of federal assistance under the Act, salvage, subrogation and other similar recoveries, as applicable.
F.	In the event of a Reinsurer’s Excess Share, the Company shall:

1.

Promptly pay the Reinsurer’s Excess Share to the Reinsurer; or

2.

Upon request of the Reinsurer at any time and at the Reinsurer’s sole discretion, instead assign to the Reinsurer its rights to recover directly from the federal government any portion of Reinsurer’s Excess Share not already paid to the Reinsurer., at its own expense, to the extent reasonably necessary for the Reinsurer to exercise those rights. If the Reinsurer is unable, for any reason, to exercise any right assigned to it by the Company pursuant to this Article, the Company shall pay the Reinsurer’s Excess Share to the Reinsurer as if no assignment had taken place to the extent that the Company has not been deemed to have forfeited the right to financial assistance under the Act by virtue of the attempted assignment.

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G. In the event of an Insured Loss, the Company shall provide the Reinsurer with a monthly report detailing claim settlement activities and financial assistance under the Act. Calculations for each Program Year shall continue to be made until the settlement of all Insured losses covered hereunder.

ARTICLE XVIII — ACCESS TO RECORDS

The Reinsurer or its duly authorized representatives shall have the right to examine, at the offices of the Company at a reasonable time, during the currency of this Agreement or anytime thereafter, all books and records of the Company relating to business which is the subject of this Agreement.

ARTICLE XIX — TAXES

The Company shall be liable for all taxes on premiums paid to the Reinsurer under this Agreement, except income or profit taxes of the Reinsurer, and shall indemnify and hold the Reinsurer harmless for any such taxes which the Reinsurer may become obligated to pay to any local, state or federal taxing authority.

ARTICLE XX — CURRENCY

Wherever the word “dollars” or the “$” symbol is used in this Agreement, it shall mean dollars of the United States of America, excepting in those cases where the Policy is issued by the Company in Canadian dollars, in which case it shall mean dollars of Canada. In the event the Company is involved in a loss requiring payment in United States and Canadian currency, the Company’s retention and the limit of liability of the Reinsurer shall be apportioned between the two currencies in the same proportion as the amount of net loss in each currency bears to the total amount of net loss paid by the Company. For the purposes of this Agreement, where the Company receives premiums or pays losses in currencies other than United States or Canadian currency, such premiums and losses shall be converted into United States dollars at the actual rates of exchange at which the premiums and losses are entered in the Company’s books.

ARTICLE XXI — OFFSET

Each party to this Agreement together with their successors or assigns shall have and may exercise, at any time, the right to offset any balance or balances due the other (or, if more than one, any other). Such offset may include balances due under this Agreement and any other agreements heretofore or hereafter entered into between the parties regardless of

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whether such balances arise from premiums, losses or otherwise, and regardless of capacity of any party, whether as assuming insurer and/or ceding insurer, under the various agreements involved, provided however, that in the event of insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of Section 7427 of the Insurance Law of the State of New York to the extent such statute or any other applicable law, statute or regulation governing such offset shall apply.

ARTICLE XXII — ERRORS OR OMISSIONS

Errors or omissions of an administrative nature on the part of the Company shall not invalidate the reinsurance under this Agreement, provided such errors or omissions are corrected promptly after discovery thereof; but the liability of the Reinsurer under this Agreement or any exhibits, addenda, or endorsements attached hereto shall in no event exceed the limits specified herein nor be extended to cover any risks, perils, lines of business or classes of insurance generally or specifically excluded herein.

ARTICLE XXIII — DISPUTE RESOLUTION

Part I — Choice Of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of Pennsylvania, and the laws of the State of Pennsylvania shall govern the interpretation and application of this Agreement.

Part II — Mediation

If a dispute between the Company and the Reinsurer, arising out of the provisions of this Agreement or concerning its interpretation or validity and whether arising before or after termination of this Agreement has not been settled through negotiation, both parties agree to try in good faith to settle such dispute by nonbinding mediation, before resorting to arbitration.

Part III — Arbitration

A.	Resolution of Disputes — As a condition precedent to any right of action arising hereunder, any dispute not resolved by mediation between the Company and the Reinsurer arising out of the provisions of this Agreement or concerning its interpretation or validity, whether arising before or after termination of this Agreement, shall be submitted to arbitration in the manner hereinafter set forth.
B.	Composition of Panel — Unless the parties agree upon a single arbitrator within 15 days after the receipt of a notice of intention to arbitrate, all disputes shall be

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submitted to an arbitration panel composed of two arbitrators and an umpire chosen in accordance with Paragraph C. hereof.

C.	Appointment of Arbitrators — The members of the arbitration panel shall be chosen from persons knowledgeable in the insurance and reinsurance business. Unless a single arbitrator is agreed upon, the party requesting arbitration (hereinafter referred to as the “claimant”) shall appoint an arbitrator and give written notice thereof by certified mail, to the other party (hereinafter referred to as the “respondent”) together with its notice of intention to arbitrate. Within 30 days after receiving such notice, the respondent shall also appoint an arbitrator and notify the claimant thereof by certified mail. Before instituting a hearing, the two arbitrators so appointed shall choose an umpire. If, within 20 days after the appointment of the arbitrator chosen by the respondent, the two arbitrators fail to agree upon the appointment of an umpire, each of them shall nominate three individuals to serve as umpire, of whom the other shall decline two and the umpire shall be chosen from the remaining two by drawing lots. The name of the individual first drawn shall be the umpire.
D.	Failure of Party to Appoint an Arbitrator — If the respondent fails to appoint an arbitrator within 30 days after receiving a notice of intention to arbitrate, the claimant’s arbitrator shall appoint an arbitrator on behalf of the respondent, such arbitrator shall then, together with the claimant’s arbitrator, choose an umpire as provided in Paragraph C. of Part III of this Article.
E.	Submission of Dispute to Panel — Unless otherwise extended by the arbitration panel or agreed to by the parties, each party shall submit its case to the panel within 30 days after the selection of the umpire.
F.	Procedure Governing Arbitration — All proceedings before the panel shall be informal and the panel shall not be bound by the formal rules of evidence. The panel shall have the power to fix all procedural rules relating to the arbitration proceeding. In reaching any decision, the panel shall give due consideration to the customs and usages of the insurance and reinsurance business.
G.	Arbitration Award — The arbitration panel shall render its decision within 60 days after termination of the proceeding, which decision shall be in writing, stating the reasons therefor. The decision of the majority of the panel shall be final and binding on the parties to the proceeding.
H.	Cost of Arbitration — Unless otherwise allocated by the panel, each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other parties the expense of the umpire and the arbitration.

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ARTICLE XXIV — INSOLVENCY

A.	In the event of insolvency of the Company, the reinsurance provided by this Agreement shall be payable by the Reinsurer on the basis of the liability of the Company as respects Policies covered hereunder, without diminution because of such insolvency, directly to the Company or its liquidator, receiver, conservator or statutory successor except as provided in Sections 4118(a)(1)(A) and 1114(c) of the New York Insurance Law.
B.	The Reinsurer shall be given written notice of the pendency of each claim or loss which may involve the reinsurance provided by this Agreement within a reasonable time after such claim or loss is filed in the insolvency proceedings. The Reinsurer shall have the right to investigate each such claim or loss and interpose, at its own expense, in the proceedings where the claim or loss is to be adjudicated, any defense which it may deem available to the Company, its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C.	In addition to the offset provisions set forth in Article — Offset, any debts or credits, liquidated or unliquidated, in favor of or against either party on the date of the receivership or liquidation order (except where the obligation was purchased by or transferred to be used as an offset) are deemed mutual debts or credits and shall be set off with the balance only to be allowed or paid. Although such claim on the part of either party against the other may be unliquidated or undetermined in amount on the date of the entry of the receivership or liquidation order, such claim will be regarded as being in existence as of such date and any claims then in existence and held by the other party may be offset against it.
D.	Nothing contained in this Article is intended to change the relationship or status of the parties to this Agreement or to enlarge upon the rights or obligations of either party hereunder except as provided herein.

ARTICLE XXV — SPECIAL TERMINATION

A. Notwithstanding the termination provisions set forth in Article — Effective Date and Termination, this Agreement shall be:

1. Terminated automatically and simultaneously upon the happening of any of the following events:

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a.	Entry of an order of liquidation, rehabilitation, receivership or conservatorship with respect to the Company or the Reinsurer by any court or regulatory authority;
b.	Assignment of this Agreement by either party;
c.	General reinsurance of any portion of the Company’s business it retains net for its own account, as determined under the provisions of this Agreement without prior consent of the Reinsurer.

2.	Terminated by either party giving not less than 30 days prior written notice to the other party upon the happening of the following event:
	Any transfer of control of either party by change in ownership or otherwise.
3.	Terminated by the Reinsurer by giving not less than 30 days prior written notice to the Company upon the happening of the following event:
	Failure of the Company to remit premiums in accordance with the provisions set forth in this Agreement.
4.	Terminated in accordance with the provisions set forth in this Paragraph, upon the discovery of the following event:
	A reduction of 50% or more of the Company’s policyholders’ surplus during any calendar year. Such reduction shall be determined by calculating the difference between the Company’s prior year annual statement and each subsequent quarterly statutory statement within such current calendar year.
	As respects the event set forth in this Paragraph A.4., the Company shall be obligated to notify the Reinsurer in writing within 30 days after the filing of its quarterly statement. Upon receipt of such notification the Reinsurer shall have the right to terminate this Agreement, by giving not less than 30 days notice of its intention to do so.

B.	Any notice of termination pursuant to the provisions set forth in Paragraphs A.2., A.3. and A.4. above shall be sent by certified mail, return receipt requested. Such notice period shall commence upon the other party’s receipt of the notice of termination.
C.	In the event of termination, as provided under the provisions of this Article, the Reinsurer shall not be liable for losses occurring subsequent to the date of termination.

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ARTICLE XXVI — AMENDMENTS

This Agreement may be amended by mutual consent of the parties expressed in an addendum; and such addendum, when executed by both parties, shall be deemed to be an integral part of this Agreement and binding on the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate, by their duly authorized representatives as of the following dates:

In Bala Cynwyd, Pennsylvania, this 25th day of September, 2007.

ATTEST:

/s/ William McKenna	/s/ Christopher J. Maguire
William McKenna	Christopher J. Maguire
Name	Name
Assistant Vice President — Reinsurance	CUO & Executive Vice President
Title	Title

And in Overland Park, Kansas, this 24^th day of September, 2007.

ATTEST:	SWISS REINSURANCE AMERICA CORPORATION
/s/ Holly Lowe	/s/ Paul Johnson	.
Holly Lowe	Paul Johnson	.
Name	Name
Vice President	Vice President and Attorney in Fact
Title	Title

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SUPPLEMENT TO THE ATTACHMENTS

DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS

A.	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever other term is used to designate the reinsured company or companies within the various attachments to the reinsurance agreement, the term shall be understood to mean Company or Reinsured or Reassured or whatever other term is used in the attached reinsurance agreement to designate the reinsured company or companies.
B.	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other term is used to designate the attached reinsurance agreement within the various attachments to the reinsurance agreement, the term shall be understood to mean Agreement or Contract or Policy or whatever other term is used to designate the attached reinsurance agreement.
C.	Wherever the term “Reinsurer” or “Reinsurers” or “Underwriters” or whatever other term is used to designate the reinsurer or reinsurers in the various attachments to the reinsurance agreement, the term shall be understood to mean Reinsurer or Reinsurers or Underwriters or whatever other term is used to designate the reinsuring company or companies.

POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE

This Reinsurance excludes:

(1) Any loss occurrence arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:

a)	At or from premises owned, rented or occupied by an original assured; or
b)	At or from any site or location used for the handling, storage, disposal, processing or treatment of waste; or
c)	Which are at any time transported, handled, stored, treated, disposed of, or processed as waste; or
d)	At or from any site or location on which any original assured is performing operations:

(i)	If the pollutants are brought on or to the site or location in connection with such operations; or
(ii)	If the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize the pollutants.

(2) Any liability, loss, cost or expense arising out of any governmental direction or request to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

“Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

Subparagraphs a) and d)(i) of paragraph (1) of this exclusion do not apply to loss occurrences caused by heat, smoke or fumes from a hostile fire. As used herein, “hostile fire” means one which becomes uncontrollable or breaks out from where it was intended to be.

“Original assured” as used herein means all insureds as defined in the policy issued by the Company.

INSOLVENCY FUNDS EXCLUSION CLAUSE

This Agreement excludes 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 or from reimbursement of any person for any such liability. “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 any person 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.

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A.

N.M.A. 1590

1.	This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.
2.	Without in any way restricting the operation of paragraph 1. of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II. in this paragraph 2. from the time specified in Clause III. in this paragraph 2. shall be deemed to include the following provision (specified as the Limited Exclusion Provision):
	LIMITED EXCLUSION PROVISION*

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

-1-

(a)

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

(b)

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

3.	Except for those classes of policies specified in Clause II. of paragraph 2. and without in any way restricting the operation of paragraph 1. of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages:
	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)shall be deemed to include with respect to such coverages, from the time specified in Clause V. of this paragraph 3., the following provision (specified as the Broad Exclusion Provision):
	BROAD EXCLUSION PROVISION*
	It is agreed that the policy does not apply:

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

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

-2-

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

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

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

IV. As used in this endorsement:

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“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct material; “source material,” “special nuclear material,” and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material other than the tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed for its source material content and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

(a)	any nuclear reactor,
(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste,
(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235,
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste

and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material; with respect to injury to or destruction of property, the word “injury” or “destruction” includes all forms of radioactive contamination of property; “property damage” includes all forms of radioactive contamination of property.

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

(i) Garage and Automobile Policies issued by the Reassured on New York risks, or

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(ii) Statutory liability insurance required under Chapter 90, General Laws of Massachusetts,

until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

4.

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

*

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

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     NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA

     N.M.A. 1979a

1.	This Agreement does not cover any loss or liability accruing to the Company as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association.
2.	Without in any way restricting the operation of Paragraph 1. of this Clause, it is agreed that for all purposes of this Agreement all the original liability contracts of the Company, whether new, renewal or replacement, of the following classes, namely,

Personal Liability
Farmers’ Liability
Storekeepers’ Liability

which become effective on or after 31st December 1992, shall be deemed to include, from their inception dates and thereafter, the following provision:

Limited Exclusion Provision -

This Policy does not apply to bodily injury or property damage with respect to which the Insured is also insured under a contract of nuclear energy liability insurance (whether the Insured is unnamed in such contract and whether or not it is legally enforceable by the Insured) issued by the Nuclear Insurance Association of Canada or any other group or pool of insurers or would be an Insured under any such policy but for its termination upon exhaustion of its limits of liability.

With respect to property, loss of use of such property shall be deemed to be property damage.

3. Without in any way restricting the operation of Paragraph 1. of this Clause, it is agreed that for all purposes of this Agreement all the original liability contracts of the Company, whether new, renewal or replacement, of any class whatsoever (other than Personal Liability, Farmers’ Liability, Storekeepers’ Liability or Automobile Liability contracts), which become effective on or after 31st December 1992, shall be deemed to include, from their inception dates and thereafter, the following provision:

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Broad Exclusion Provision —

It is agreed that this Policy does not apply:

(a)	to liability imposed by or arising from any nuclear liability act, law or statute or any law amendatory thereof; nor
(b)	to bodily injury or property damage with respect to which an Insured under this Policy is also insured under a contract of nuclear energy liability insurance (whether the Insured is unnamed in such contract and whether or not it is legally enforceable by the Insured) issued by the Nuclear Insurance Association of Canada or any other insurer or group or pool of insurers or would be an Insured under any such policy but for its termination upon exhaustion of its limit of liability; nor
(c)	to bodily injury or property damage resulting directly or indirectly from the nuclear energy hazard arising from:

(i)	the ownership, maintenance, operation or use of a nuclear facility by or on behalf of an Insured;
(ii)	the furnishing by an Insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility; and
(iii)	the possession, consumption, use, handling, disposal or transportation of fissionable substances, or of other radioactive material (except radioactive isotopes, away from a nuclear facility, which have reached the final stage of fabrication so as to be usable for any scientific, medical, agricultural, commercial or industrial purpose) used, distributed, handled or sold by an Insured.

As used in this Policy:

(1)

The term “nuclear energy hazard” means the radioactive, toxic, explosive, or other hazardous properties of radioactive material;

(2)

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 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;

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(3) The term “nuclear facility” means:

(a)	any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of plutonium, thorium and uranium or any one or more of them;
(b)	any equipment or device designed or used for (i) separating the isotopes of plutonium, thorium and uranium or any one or more of them, (ii) processing or utilizing spent fuel, or (iii) handling, processing or packaging waste;
(c)	any equipment or device used for the processing, fabricating or alloying of plutonium, thorium or uranium enriched in the isotope uranium 233 or in the isotope uranium 235, or any one or more of them if at any time the total amount of such material in the custody of the Insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235;
(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste radioactive material;

and includes the site on which any of the foregoing is located, together with all operations conducted thereon and all premises used for such operations.

(4)	The term “fissionable substance” means any prescribed substance that is, or from which can be obtained, a substance capable of releasing atomic energy by nuclear fission.
(5)	With respect to property, loss of use of such property shall be deemed to be property damage.

April 1, 1996

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NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4

1.

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

2.

Without in any way restricting the operations of Nuclear Incident Exclusion Clauses, — Liability, — Physical Damage, — Boiler and Machinery and paragraph 1. of this Clause, it is understood and agreed that for all purposes of the reinsurance assumed by the Reinsurer from the Reinsured, all original insurance policies or contracts of the Reinsured (new, renewal and replacement) shall be deemed to include the applicable existing Nuclear Clause and/or Nuclear Exclusion Clause(s) in effect at the time and any subsequent revisions thereto as agreed upon and approved by the Insurance Industry and/or a qualified Advisory or Rating Bureau.

PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

ABBOTT LABORATORIES	NOVARTIS
AKZO NOBEL	NOVO NORDISK
ALLERGAN	OTSUKA PHARMACEUTICAL
ALPHARMA	PFIZER
ALTANA AG	PLIVA
AMGEN	PROCTER & GAMBLE
ASTELLAS	PURDUE FREDERICK / PRA HOLDING
ASTRAZENECA	ROCHE
BARR LABORATORIES	SANKYO
BAXTER INTERNATIONAL	SANOFI-AVENTIS
BAYER	SCHERING AG
BEAUFOUR IPSEN	SCHERING-PLOUGH
BIOGEN	SCHWARZ PHARMA
BIOMET	SERONO
BOEHRINGER INGELHEIM	SHIONOGI
BOSTON SCIENTIFIC CORPORATION	SHIRE PHARMACEUTICALS
BRISTOL-MYERS SQUIBB	SMITH & NEPHEW
CHIRON	SOLVAY
CSL	ST. JUDE MEDICAL
DAIICHI PHARMACEUTICAL	STRYKER
DAINIPPON PHARMACEUTICAL	SUMITOMO PHARMACEUTICALS
EDWARDS LIFESCIENCES	SYNTHES-STRATEC
EISAI	TAKEDA
ELAN	TANABE
FOREST LABORATORIES	TAP PHARMACEUTICAL PRODUCTS
GENENTECH	TEVA PHARMACEUTICAL
GENERAL ELECTRIC HEALTHCARE	TYCO HEALTHCARE
GENZYME	UCB
GLAXOSMITHKLINE	WATSON PHARMACEUTICAL
GUIDANT	WYETH
HOSPIRA	ZIMMER
IVAX
JOHNSON & JOHNSON
KING PHARMACEUTICALS
KYOWA HAKKO KOGYO
LABORATOIRE SERVIER
LILLY (ELI)
LUNDBECK
MEDIMMUNE
MEDTRONIC
MERCK & CO
MERCK KGAA
MINNESOTA MINING & MANUFACTURING
MYLAN LABORATORIES

GROUP PRODUCT AND LIMITS COMMITTEE/2006 APRIL 10

EX-10.2

Exhibit 10.2

TABLE OF CONTENTS

to
AGREEMENT OF REINSURANCE
NO. 9034-07
between
PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
and
GENERAL REINSURANCE CORPORATION

		Page
GENERAL ARTICLES
Article I	SCOPE OF AGREEMENT	1
Article II	PARTIES TO THE AGREEMENT	1
Article III	MANAGEMENT OF CLAIMS AND LOSSES	2
Article IV	RECOVERIES	2
Article V	TRIA INUREMENT	2
Article VI	PREMIUM REPORTS AND REMITTANCES	3
Article VII	ERRORS AND OMISSIONS	3
Article VIII	SPECIAL ACCEPTANCES	3
Article IX	RESERVES AND TAXES	4
Article X	OFFSET	4
Article XI	INSPECTION OF RECORDS	4
Article XII	ARBITRATION	4
Article XIII	INSOLVENCY OF THE COMPANY	5
Article XIV	ENTIRE AGREEMENT	5
EXHIBIT A — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business
Section 1	BUSINESS SUBJECT TO THIS EXHIBIT	A-1
Section 2	COMMENCEMENT	A-1
Section 3	LIABILITY OF THE REINSURER	A-1
Section 4	DEFINITIONS	A-2
Section 5	EXCLUSIONS	A-5
Section 6	OTHER REINSURANCE	A-8
Section 7	REINSURANCE PREMIUM	A-9
Section 8	REPORTS AND REMITTANCES	A-9
Section 9	AUTOMATIC REINSTATEMENT	A-10
Section 10	TERMINATION	A-11
Section 11	MORTGAGEE REINSURANCE ENDORSEMENT	A-11
EXHIBIT B — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business (Coverage for Terrorism Only)
Section 1	BUSINESS SUBJECT TO THIS EXHIBIT	B-1
Section 2	TERM	B-1
Section 3	LIABILITY OF THE REINSURER	B-1
Section 4	DEFINITIONS	B-2
Section 5	EXCLUSIONS	B-3
Section 6	REINSURANCE PREMIUM	B-3
Section 7	REPORTS AND REMITTANCES	B-3

GENERAL REINSURANCE CORPORATION
A Berkshire Hathaway Company

AGREEMENT OF REINSURANCE
NO. 9034-07

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
(herein collectively referred to as the “Company”)

and

GENERAL REINSURANCE CORPORATION
a Delaware corporation
having its principal offices at
Financial Centre
695 East Main Street P.O. Box 10350
Stamford, Connecticut 06904-2350
(herein referred to as the “Reinsurer”)

In consideration of the promises set forth in this Agreement, the parties agree as follows:

Article I — SCOPE OF AGREEMENT

As a condition precedent to the Reinsurer’s obligations under this Agreement, the Company shall cede to the Reinsurer the business described in this Agreement, and the Reinsurer shall accept such business as reinsurance from the Company.

This Agreement is comprised of General Articles I through XIV and the Exhibit(s) listed below and each Exhibit which may be made a part of this Agreement. The terms of the General Articles and of the Exhibit(s) shall determine the rights and obligations of the parties. The terms of the General Articles shall apply to each Exhibit unless specifically amended therein. In the event of termination of all the Exhibits made a part of this Agreement, the General Articles shall automatically terminate when the liability of the Reinsurer under said Exhibits ceases.

     EXHIBIT A — EXCESS OF LOSS REINSURANCE

of

Property Business

     EXHIBIT B — EXCESS OF LOSS REINSURANCE

of

Property Business (Coverage for Terrorism Only)

Article II — PARTIES TO THE AGREEMENT

This Agreement is solely between the Company and the Reinsurer. When more than one Company is named as a party to this Agreement, the first Company named shall be the

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GENERAL REINSURANCE CORPORATION

agent of the other companies as to all matters pertaining to this Agreement. Performance of the obligations of each party under this Agreement shall be rendered solely to the other party. However, if the Company becomes insolvent, the liability of the Reinsurer shall be modified to the extent set forth in the article entitled INSOLVENCY OF THE COMPANY. In no instance shall any insured of the Company or any claimant against an insured of the Company have any rights under this Agreement.

Article III — MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. When requested by the Reinsurer, the Company shall permit the Reinsurer, at the expense of the Reinsurer, to be associated with the Company in the defense or control of any claim, loss, or legal proceeding which involves or is likely to involve the Reinsurer. All payments of claims or losses by the Company within the terms and limits of its policies which are within the limits set forth in the applicable Exhibit shall be binding on the Reinsurer, subject to the terms of this Agreement.

Article IV — RECOVERIES

The Company shall pay to or credit the Reinsurer with the Reinsurer’s portion of any recovery obtained from salvage, subrogation, or other insurance. Adjustment Expense for recoveries shall be deducted from the amount recovered. However, if the Adjustment Expense incurred in obtaining recoveries exceeds the amount recovered, if any, the excess Adjustment Expense shall be apportioned between the parties in proportion to the liability of each party for the loss before the recovery was obtained.

The Reinsurer shall be subrogated to the rights of the Company to the extent of its loss payments to the Company. The Company agrees to enforce its rights of salvage, subrogation, and its rights against insurers or to assign these rights to the Reinsurer.

If the reinsurance under an Exhibit is on a share basis, the recoveries shall be apportioned between the parties in the same ratio as the amounts of their liabilities bear to the loss. If the reinsurance under an Exhibit is on an excess basis, recoveries shall be distributed to the parties in an order inverse to that in which their liabilities accrued.

Article V — TRIA INUREMENT

As respects any “insured loss”, as defined in the Terrorism Risk Insurance Act of 2002 (“the Act”), for which the Reinsurer makes a payment to the Company under this Agreement, the following provisions shall apply.

If the sum of:

(a)	Financial assistance provided under the Act to the Company and its affiliates, if any, (as “affiliate” is defined in the Act) with respect to all “insured loss” that applies to each “program year”, as defined in the Act; and
(b)	Amounts due from all reinsurance which the Company and its affiliates, if any, purchase, including but not limited to this reinsurance, all other treaty reinsurance and all facultative reinsurance, and whether

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GENERAL REINSURANCE CORPORATION

collectible or not, under which there is a recoverable for any such “insured loss”,

exceeds the amount of the Company’s and its affiliates’, if any, gross “insured loss”, the excess amount shall be allocated to the Reinsurer in the ratio that the Reinsurer’s liability for the “insured loss” under this Agreement bears to the total collectible reinsurance recoverables for the “insured loss” under (b) above.

Upon receipt of payment under the Act by the Company and its affiliates, if any, the Company shall pay to or credit the Reinsurer under this Agreement with the Reinsurer’s share of such excess amount determined in accordance with the preceding paragraph.

Article VI — PREMIUM REPORTS AND REMITTANCES

All reinsurance premium reports required by the Exhibit(s) attached hereto may be sent to:

     Client Accounting Unit
     General Reinsurance Corporation
     Financial Centre
     P.O. Box 10353
     Stamford, CT 06904-2353

All reinsurance premiums and any other amounts due the Reinsurer may be remitted to the following lockbox address:

     General Reinsurance Corporation
     75 Remittance Drive
     Suite 2555
     Chicago, IL 60675-2555

Article VII — ERRORS AND OMISSIONS

The Reinsurer shall not be relieved of liability because of an error or accidental omission of the Company in reporting any claim or loss or any business reinsured under this Agreement, provided that the error or omission is rectified promptly after discovery. The Reinsurer shall be obligated only for the return of the premium paid for business reported but not reinsured under this Agreement.

Article VIII — SPECIAL ACCEPTANCES

Business not within the terms of this Agreement may be submitted to the Reinsurer for special acceptance and, if accepted by the Reinsurer, shall be subject to all of the terms of this Agreement except as modified by the special acceptance.

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GENERAL REINSURANCE CORPORATION

Article IX — RESERVES AND TAXES

The Reinsurer shall maintain the required reserves as to the Reinsurer’s portion of unearned premium, if any, claims, losses, and Adjustment Expense.

The Company shall be liable for all premium taxes on premium ceded to the Reinsurer under this Agreement. If the Reinsurer is obligated to pay any premium taxes on this premium, the Company shall reimburse the Reinsurer; however, the Company shall not be required to pay taxes twice on the same premium.

Article X — OFFSET

The Company or the Reinsurer may offset any balance, whether on account of premium, commission, claims or losses, Adjustment Expense, salvage, or otherwise, due from one party to the other under this Agreement or under any other agreement heretofore or hereafter entered into between the Company and the Reinsurer.

Article XI — INSPECTION OF RECORDS

The Company shall allow the Reinsurer to inspect, at reasonable times, the records of the Company relevant to the business reinsured under this Agreement, including the Company’s files concerning claims, losses, or legal proceedings which involve or are likely to involve the Reinsurer. The Reinsurer’s right of inspection shall continue after the termination of this Agreement.

Article XII — ARBITRATION

All unresolved differences of opinion between the Company and the Reinsurer relating to this Agreement, including its formation and validity, shall be submitted to arbitration consisting of one arbitrator chosen by the Company, one arbitrator chosen by the Reinsurer, and a third arbitrator chosen by the first two arbitrators.

The party demanding arbitration shall communicate its demand for arbitration to the other party by registered or certified mail, identifying the nature of the dispute and the name of its arbitrator, and the other party shall then be bound to name its arbitrator within 30 days after receipt of the demand.

Failure or refusal of the other party to so name its arbitrator shall empower the demanding party to name the second arbitrator. If the first two arbitrators are unable to agree upon a third arbitrator after the second arbitrator is named, each arbitrator shall name three candidates, two of whom shall be declined by the other arbitrator, and the choice shall be made between the two remaining candidates by drawing lots. The arbitrators shall be disinterested and shall be active or retired officers of property or casualty insurance or reinsurance companies.

The arbitrators shall adopt their own rules and procedures and are relieved from judicial formalities. In addition to considering the rules of law and the customs and practices of the insurance and reinsurance business, the arbitrators shall make their award with a view to effecting the intent of this Agreement.

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GENERAL REINSURANCE CORPORATION

The decision of the majority of the arbitrators shall be in writing and shall be final and binding upon the parties.

Each party shall bear the cost of its own arbitrator and shall jointly and equally bear with the other party the expense of the third arbitrator and other costs of the arbitration. In the event both arbitrators are chosen by one party, the fees of all arbitrators shall be equally divided between the parties.

The arbitration shall be held at the times and places agreed upon by the arbitrators.

Article XIII — INSOLVENCY OF THE COMPANY

In the event of the insolvency of the Company, the reinsurance proceeds will be paid to the Company or the liquidator, with reasonable provision for verification, on the basis of the claim allowed in the insolvency proceeding without diminution by reason of the inability of the Company to pay all or part of the claim, except as otherwise specified in the statutes of any state having jurisdiction of the insolvency proceedings or except where the Agreement, or other written agreement, specifically provides another payee of such reinsurance in the event of insolvency.

The Reinsurer shall be given written notice of the pendency of each claim against the Company on the policy(ies) reinsured hereunder within a reasonable time after such claim is filed in the insolvency proceedings. The Reinsurer shall have the right to investigate each such claim and to interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defenses which it may deem available to the Company or its liquidator. The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

Article XIV — ENTIRE AGREEMENT

This Agreement constitutes the entire Agreement between the parties with respect to the business reinsured hereunder. Any change or modification to this Agreement shall be made by written amendment to this Agreement and signed by the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in

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GENERAL REINSURANCE CORPORATION

duplicate,

this 14th day of August , 2007,

		PHILADELPHIA INDEMNITY INSURANCE COMPANY
		PHILADELPHIA INSURANCE COMPANY
		Christopher J. Maguire
		EVP & CUO
Attest: William A. McKenna
and this 13th day of August, 2007.
		GENERAL REINSURANCE CORPORATION
		Joan LaFrance
		Senior Vice President
	Attest: Karen Morello

GENERAL REINSURANCE CORPORATION
A Berkshire Hathaway Company

EXHIBIT A

Attached to and made a part of
Agreement of Reinsurance No. 9034-07

EXCESS OF LOSS REINSURANCE
(Per Risk)
of
Property Business

      Section 1 — BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Property Business written by the Company, which is defined as insurance which is classified in the NAIC form of annual statement as fire, allied lines, inland marine, commercial multiple peril (property coverages), associations homeowners multiple peril (property coverages), or automobile physical damage (comprehensive and collision) when written on a garage open lot basis or in the Company’s Antique/Collector Car Program, and as insurance that is classified by the Company as crime and fidelity when written as part of a package policy, except those lines specifically excluded in the section entitled EXCLUSIONS, on Risks wherever located in the United States of America, its territories and possessions. On policies which provide inland marine coverage beyond these territorial limits, the territorial limits of this Exhibit shall be identical with those of the Company’s policies.

Section 2 — COMMENCEMENT

This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after 12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1, 2007, with respect to claims and losses resulting from Occurrences taking place at and after the aforesaid time and date, and shall continue in force until terminated in accordance with the provisions of the section entitled TERMINATION.

Section 3 — LIABILITY OF THE REINSURER

The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of Liability of the Reinsurer as set forth in the Schedule of Reinsurance.

SCHEDULE OF REINSURANCE

Class of Business	Company Retention		Limits of Liability of the Reinsurer
Property Business	$	2,000,000	First Excess Cover: The next
			$3,000,000 in excess of the first
			$2,000,000

A-8
GENERAL REINSURANCE CORPORATION

SCHEDULE OF REINSURANCE (Continued)

Class of Business	Company Retention	Limits of Liability of the Reinsurer
		Second Excess Cover: The next
		$5,000,000 in excess of the first
		$5,000,000
		Third Excess Cover: The next
		$5,000,000 in excess of the first
		$10,000,000

The liability of the Reinsurer shall not exceed:

(a)

$6,000,000 under the First Excess Cover nor $10,000,000 under the Second Excess Cover nor $10,000,000 under the Third Excess Cover with respect to all Net Loss on all Risks involved in one Occurrence.

(b)

$15,000,000 under the Second Excess Cover nor $15,000,000 under the Third Excess Cover with respect to all Net Loss on all Risks involved in all Occurrences (including Extra Contractual Obligations) taking place during each Agreement Year. For purposes of this provision, upon a run off termination of this Exhibit the last completed Agreement Year shall be combined with the remaining period that reinsurance is afforded under this Exhibit to constitute a single Agreement Year.

All insurance written under one or more policies of the Company against the same peril on the same Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer shall be determined on the basis of the sum of all insurance against the same peril and on the same Risk which is in force at the time of a claim or loss.

Section 4 — DEFINITIONS

(a)	Company Retention
	This term shall mean the amount the Company and its underlying facultative reinsurers shall retain for its own account; however, this requirement shall be satisfied if this amount is retained by the Company or its affiliated companies under common management or common ownership.
(b)	Net Loss
	This term shall mean all payments by the Company within the terms and limits of its policies in settlement of claims or losses, after deduction of salvage and other recoveries and after deduction of amounts due from all other reinsurance, except underlying facultative reinsur-

A-9
GENERAL REINSURANCE CORPORATION

	ance and catastrophe reinsurance, whether collectible or not. This term shall include Adjustment Expense. If the Company becomes insolvent, this definition shall be modified to the extent set forth in the article entitled INSOLVENCY OF THE COMPANY.
	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS AND LOSSES, this term shall also include 95% of Extra Contractual Obligations, provided that the Reinsurer is given written notice of circumstances which may result in an Extra Contractual Obligation within 36 months of the later of the termination date of this Exhibit or the termination of reinsurance on the policy under which the Extra Contractual Obligation arose.
	Nothing in this definition shall imply that losses are not recoverable hereunder until the Company’s Net Loss has been finally ascertained.
(c)	Adjustment Expense
	This term shall mean expenditures by the Company within the terms of its policies in the direct defense of claims and in connection with Extra Contractual Obligations and as allocated to an individual claim or loss (other than for office expenses and for the salaries and expenses of employees of the Company or of any subsidiary or related or wholly owned company of the Company) made in connection with the disposition of a claim, loss, or legal proceeding including investigation, negotiation, and legal expenses; court costs; prejudgment interest; and postjudgment interest.
	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS AND LOSSES, this term shall also be deemed to include any expenses incurred by the Company in bringing or in defending a declaratory judgment action brought to determine the Company’s obligations to its insured with respect to a specific claim under a policy (or coverage part thereof) reinsured hereunder. However, the amount of any declaratory judgment expense that may be included in computation of Adjustment Expense shall not exceed the lesser of the amount of insurance under the policy or the Reinsurer’s Limit of Liability for each Risk under this Exhibit.
	The date on which a declaratory judgment expense is incurred by the Company shall be deemed, in all circumstances, to be the date of the original Occurrence.
(d)	Extra Contractual Obligations
	This term shall mean a loss which is not covered under any other provision of this Exhibit resulting from an action taken by the insured or assignee arising from the Company’s handling of any claim otherwise covered under this Exhibit on the Risks reinsured hereunder which have total amounts of insurance greater than the Company Retention.

A-10
GENERAL REINSURANCE CORPORATION

	The date on which an Extra Contractual Obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original Occurrence.
	There shall be no coverage hereunder where the Extra Contractual Obligation has been incurred due to the fraud or criminal conduct of a member of the Board of Directors, a corporate officer of the Company, or any other employee of the Company, acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the investigation, defense or settlement of any claim covered hereunder.
	Any insurance which indemnifies or protects the Company against claims which are the subject matter of this definition shall inure to the benefit of the Reinsurer and shall be deducted to arrive at the amount of the Company’s Net Loss.
(e)	Risk
	The Company shall establish what constitutes one Risk and shall make such determination based on the peril of fire at the time of acceptance, provided:
(1)	A Building and its contents, regardless of the number of insureds or policies involved, including time element coverages, shall never be considered more than one Risk.
	When two or more Buildings and their contents, including time element coverages, are situated at the same General Location, the Company shall identify on its records at the time of acceptance by the Company those individual Buildings and their contents, including time element coverages, that are to be considered to constitute each Risk; if such identification is not made, all of the Buildings and their contents situated at the same General Location shall be considered one Risk.
	When there are known and named extensions of coverage involving other risk locations (including but not limited to suppliers extensions, customer extensions and interdependencies and whether triggered by physical loss at the risk location or another location) that are included and formally recorded on the Company’s records at the time of acceptance of the Risk, all such known and named extensions of coverage shall be included in calculation of the one Risk.
(2)	Unknown, unnamed or unidentified extensions of coverage shall be considered separate Risks. The maximum amount which may be included in Net Loss with respect to each such Risk shall be $250,000. Further, the Limit of Liability of the Reinsurer shall not exceed $500,000 of Net Loss with respect to all such Risks involved in one Occurrence. Such Occurrence limit is part of, and not in addition to the Occurrence limit stipulated in the section entitled LIABILITY OF THE REINSURER.

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GENERAL REINSURANCE CORPORATION

(3)	As respects the Company’s Antique/Collector Car Program, each collection will be considered a Risk.
(f)	Building
	This term shall mean each structure enclosed within exterior walls. Exterior walls are defined as walls constructed on the perimeter foundation, regardless of the number of additional structures or roofs placed upon this perimeter foundation.
(g)	Occurrence
	This term shall mean a loss or series of losses arising out of one event.
(h)	General Location
	This term shall mean a contiguous and unbroken tract of land surrounded by public roads, railroads, rivers or other natural barriers.
(i)	Agreement Year
	This term shall mean each twelve month period commencing on January 1st.
(j)	Company’s Subject Earned Premium
	This term shall mean the premium earned by the Company on the business reinsured hereunder, after deduction from such premium earned of the portion paid for share reinsurance which inures to the benefit of the Reinsurer.

Section 5 — EXCLUSIONS

This Exhibit shall not apply to:

(a)	Reinsurance assumed by the Company other than reinsurance of primary business assumed from affiliated companies;
(b)	Nuclear incident per the Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance attached hereto;
(c)	Any loss or liability accruing to the Company directly or indirectly from any insurance written by or through any pool or association including pools or associations in which membership by the Company is required under any statutes or regulations;
(d)	Any liability of the Company arising from its participation or membership in any insolvency fund;
(e)	Any loss or damage directly or indirectly arising out of, caused by, or resulting from war, as described in paragraph (1) below, or any act of terrorism, as described in paragraphs (2), (3), (4) and (5) below. Such

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GENERAL REINSURANCE CORPORATION

	loss or damage is excluded regardless of (i) any other cause or event contributing to such loss or damage in any way or at any time, or (ii) whether such loss or damage is accidental or intentional.
(1)	War, including undeclared or civil war; warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these. War includes any activity that would be included as an “act of terrorism” in paragraphs (2), (3), (4) and (5) below, but for the fact that such activity was perpetrated by an official, employee or agent of a foreign state acting for or on behalf of such state.
(2)	Any “act of terrorism”, as described in paragraphs (3), (4) and (5) below, but only with respect to loss or damage that is not excluded by paragraph (1) above.
(3)	Any act defined as an “act of terrorism” in the Terrorism Risk Insurance Act of 2002.
(4)	Any act authorized by a governmental authority for the purpose of preventing, terminating, countering or responding to any act or threat of terrorism or for the purpose of preventing or minimizing the consequences of any act or threat of terrorism.

(5) Any activity (other than an act described in (3) above), including the threat of an activity or any preparation for an activity, that (a) causes either (i) damage to property, or (ii) injury to persons; and (b) appears to be intended to: (i) intimidate or coerce a civilian population, or (ii) disrupt any segment of an economy, or (iii) influence the policy of a government by intimidation or coercion, or (iv) affect the conduct of a government by destruction, assassination, kidnapping or hostage-taking, or (v) advance a political, religious or ideological cause; provided, however, that an “act of terrorism” for purposes of this exclusion shall not include any act or threat as described above perpetrated by an official, employee or agent of a foreign state acting for or on behalf of such state.

(f)	Risks written on a layered basis, whether primary or excess of loss, or policies written with a deductible or franchise of more than $500,000; however, this exclusion shall not apply to policies which provide a percentage deductible or franchise in connection with windstorm, earthquake or flood;
(g)	Pollution to the extent excluded in the Company’s policies. Nevertheless, if the insured elects to purchase any “buy back” or additional coverage options, such options shall not be covered hereunder;

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GENERAL REINSURANCE CORPORATION

(h)	Insurance against earthquake, except when written in conjunction with fire and otherwise eligible perils;
(i)	Insurance on growing crops;
(j)	Insurance against flood, surface water, waves, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not, except when written in conjunction with fire and otherwise eligible perils;
(k)	Business classified as fidelity; however, this exclusion shall not apply to crime and fidelity with limits no greater than $2,000,000 when written as part of a package policy;
(l)	Credit insurance;
(m)	Business classified as boiler and machinery;
(n)	Mortgage impairment insurance and similar kinds of insurance, howsoever styled, providing coverage to an insured with respect to its mortgagee interest in property or its owner interest in foreclosed property;
(o)	Difference in conditions insurance and similar kinds of insurance, howsoever styled, but not to include the Condominium Association Difference in Conditions Coverage Form (PI-DIC-1, 11/03);
(p)	Risks which have a total insurable value of more than $250,000,000; however, this exclusion shall not apply if the Company writes 100% of the Risk;
(q)	Losses with respect to overhead transmission and distribution lines and their supporting structures, other than those on or within 1,000 feet of the insured premises. However, public utilities extension and/or suppliers extension and/or contingent business interruption coverage are not subject to this exclusion, provided these are not part of a transmitters’ or distributors’ policy;
(r)	Inland marine business with respect to the following:

(1)	Cargo insurance when written as such with respect to ocean vessels;
(2)	Faulty film, tape, processing and editing insurance and cast insurance;
(3)	Furriers’ customers policies;
(4)	Insurance on livestock under so-called “mortality policies”;
(5)	Mining equipment while underground;
(6)	Registered mail and armored car insurance;

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GENERAL REINSURANCE CORPORATION

(s)	Loss of, damage to, or failure of, or consequential loss resulting therewith (including but not limited to earnings and extra expense) of satellites, spacecraft, and launch vehicles, including cargo and freight carried therein, in all phases of operation (including but not limited to manufacturing, transit, pre-launch, launch, and in-orbit);
(t)	Losses arising, directly or indirectly, out of loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a computer system, hardware, program, software, data, information repository, microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the policyholder of the Company or not, unless such loss arises out of physical damage occurring at the insured’s premises as a result of the following perils to the extent that these perils are covered under this Exhibit: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, sprinkler leakage, sinkhole collapse, volcanic action, falling objects, weight of snow, ice or sleet, water damage, flood and/or earth movement. Nothing in this exclusion shall be construed to extend coverage under this Exhibit to any liability which would not have been covered in the absence of this exclusion;
(u)	Mobile homes unless written as part of a commercial multiple peril policy;
(v)	Watercraft, other than watercraft insured under a standard homeowners policy or when written as part of contents coverage under a commercial multiple peril policy.

If the Company is bound, without knowledge of or contrary to the instructions of the Company’s supervisory underwriting personnel, on any business falling within the scope of one or more of the exclusions set forth in this section, these exclusions, except (a) through (e), (g), (i), (k), (l) and (n) shall be suspended with respect to such business until 60 days after an underwriting supervisor of the Company acquires knowledge of such business.

Section 6 — OTHER REINSURANCE

The obligations of the Company to reinsure business falling within the scope of this Exhibit and of the Reinsurer to accept such reinsurance are mandatory and no other reinsurance (either facultative or treaty) is permitted, except as provided for below.

When the amount of insurance written by the Company on an individual Risk exceeds $15,000,000, the Company may purchase facultative excess of loss or share reinsurance for the excess amount on such Risk. The Company may also purchase facultative excess of loss reinsurance or facultative share reinsurance within the liability of the Reinsurer, if, in the underwriting judgment of the Company, the Reinsurer will be benefited thereby.

The Company may also purchase facultative excess of loss reinsurance within the Company Retention. In no event, however, shall the amount required with respect to the net Company Retention after such reinsurance be reduced to less than $500,000.

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GENERAL REINSURANCE CORPORATION

Recoveries from catastrophe reinsurance shall be deemed not to reduce the amount required with respect to the Company Retention.

Section 7 — REINSURANCE PREMIUM

The Company shall pay to the Reinsurer:

(a)	For the First Excess Cover, 1.90% of the Company’s Subject Earned Premium;
(b)	For the Second Excess Cover, 0.88% of the Company’s Subject Earned Premium;
(c)	For the Third Excess Cover, 0.29% of the Company’s Subject Earned Premium.

     Section 8 — REPORTS AND REMITTANCES

(a)	Reinsurance Premium
	Within 25 days after the close of each calendar quarter, the Company shall render to the Reinsurer a report of the reinsurance premium for the quarter with respect to the Company’s Subject Earned Premium during the quarter, summarizing the reinsurance premium by line of insurance. The amount due the Reinsurer, shall be remitted within 25 days after the close of the quarter.
(b)	Claims and Losses
	The Company shall report promptly to the Reinsurer each claim or loss which in the Company’s opinion may involve the reinsurance afforded by this Exhibit. The Company shall also report promptly to the Reinsurer any action alleging Extra Contractual Obligations against the Company or any declaratory judgment action brought by or against the Company on the business reinsured hereunder. The Company shall advise the Reinsurer of the estimated amount of Net Loss in connection with each such claim or loss and of any subsequent changes in such estimates.
	Promptly upon receipt of a definitive statement of Net Loss from the Company, but within no more than 25 days after receipt of such statement, the Reinsurer shall pay to the Company the Reinsurer’s portion of Net Loss. The Company shall report to the Reinsurer any subsequent changes in the amount of Net Loss, and the amount due either party shall be remitted promptly, but within no more than 25 days after receipt of such report.
(c)	P.C.S. Catastrophe Bulletins

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GENERAL REINSURANCE CORPORATION

The Company shall furnish to the Reinsurer, upon request, the following information with respect to each catastrophe set forth in the Catastrophe Bulletins published by the Property Claim Services:

(1)	The preliminary estimates of the amount recoverable from the Reinsurer;
(2)	The Reinsurer’s portion of claims, losses, and Adjustment Expenses paid less salvage recovered during each calendar quarter;
(3)	The Reinsurer’s portion of reserves for claims, losses, and Adjustment Expenses at the end of each calendar quarter.

(d)	General
	In addition to the reports required by (a), (b), and (c) above, the Company shall furnish such other information as may be required by the Reinsurer for the completion of the Reinsurer’s quarterly and annual statements and internal records.
	All reports shall be rendered on forms or in format acceptable to the Company and the Reinsurer.

Section 9 — AUTOMATIC REINSTATEMENT

The Limit of Liability of the Reinsurer with respect to each Risk shall be reduced by an amount equal to the amount of liability paid by the Reinsurer, but that part of the liability of the Reinsurer that is so reduced shall be automatically reinstated from the date of the Occurrence for which payment is made; however, the Limits of Liability of the Reinsurer under the Second and Third Excess Covers with respect to all Occurrences taking place during each Agreement Year shall not exceed the amounts set forth in the section entitled LIABILITY OF THE REINSURER. In consideration of this automatic reinstatement:

(a)	For each amount so reinstated in the First Excess Cover, there shall be no additional reinsurance premium;
(b)	For first $5,000,000 so reinstated in the Second and Third Excess Covers, there shall be no additional reinsurance premium;
(c)	For the next $5,000,000, so reinstated in the Second Excess Cover, the Company shall pay to the Reinsurer an additional reinsurance premium that shall be the product of 100% of the reinsurance premium set forth in sub-paragraph (b) of the section entitled REINSURANCE PREMIUM for the Agreement Year multiplied by the amount of the reinstated Limit of Liability of the Reinsurer divided by $5,000,000;
(d)	For the next $5,000,000, so reinstated in the Third Excess Cover, the Company shall pay to the Reinsurer an additional reinsurance premium that shall be the product of 100% of the reinsurance premium set forth in sub-paragraph (c) of the section entitled REINSURANCE PREMIUM

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GENERAL REINSURANCE CORPORATION

for the Agreement Year multiplied by the amount of the reinstated Limit of Liability of the Reinsurer divided by $5,000,000.

The reinsurance premium so developed for each amount reinstated shall be in addition to the reinsurance premium set forth in the section entitled REINSURANCE PREMIUM.

Section 10 — TERMINATION

Either party may terminate this Exhibit at any time by sending to the other, by registered mail to its principal office, notice stating the time and date when, not less than 90 days after the date of mailing of such notice, termination shall be effective. Upon termination of this Exhibit, at the Company’s option:

(a)

The Reinsurer shall continue to be liable, with respect to policies in force at the time and date of termination, for claims and losses resulting from Occurrences taking place until the expiration, cancellation, or next anniversary date, not to exceed one year, of each such policy of the Company, which ever occurs first. The reinsurance premium for policies in force a the time and date of termination shall be calculated by applying the provisions of the section entitled REINSURANCE PREMIUM to the monthly earned premiums that derive from the unearned premium applicable to policies in force at the time and date of termination.

(b)

The Reinsurer shall not be liable for claims and losses resulting from Occurrences taking place at and after the effective time and date of termination.

Section 11 — MORTGAGEE REINSURANCE ENDORSEMENTS

To induce a mortgagee named in a policy of the Company to accept such policy, the Company and the Reinsurer may agree to name such mortgagee as a third party beneficiary in a Mortgagee Reinsurance Endorsement made a part of this Exhibit. For each such Mortgagee Reinsurance Endorsement so issued, the Company shall indemnify the Reinsurer for any and all liability, loss, cost, or expense the Reinsurer may sustain or incur in excess of its obligations under this Exhibit by reason of the issuance of such Mortgagee Reinsurance Endorsement.

If the Reinsurer becomes liable to a mortgagee under any Mortgagee Reinsurance Endorsement, the Reinsurer shall, to the extent of its liability:

(a)	Benefit pro-rata in reductions of the Company’s loss by salvage, subrogation, compromise, or otherwise.
(b)	Be automatically subrogated to all of the mortgagee’s rights against the Company under the policy.

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GENERAL REINSURANCE CORPORATION

(c) Be completely discharged from its obligation to make any payment to the Company under this Exhibit and be entitled to set off against any amount due from the Reinsurer to the Company under this or any other agreement for any amounts for which the Reinsurer would not be liable except for the existence of such Mortgagee Reinsurance Endorsement.

The Reinsurer shall have the right to cancel any Mortgagee Reinsurance Endorsement by notice to the mortgagee.

Prior to the termination date, the Company shall advise the Reinsurer as to which of the above options shall apply.

GENERAL REINSURANCE CORPORATION
A Berkshire Hathaway Company

EXHIBIT B

Attached to and made a part of
Agreement of Reinsurance No. 9034-07

EXCESS OF LOSS REINSURANCE
(Per Risk)
of
Property Business
(Coverage for Terrorism Only)

      Section 1 — BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Property Business written by the Company, as defined in Exhibit A to this Agreement, but only as respects loss or damage directly or indirectly arising out of, caused by, or resulting from Terrorism Occurrences taking place during the term of this Exhibit, regardless of any other cause or event contributing to such loss or damage in any way or at any time, or whether such loss or damage is accidental or intentional.

Section 2 — TERM

This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after 12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1, 2007, with respect to claims and losses resulting from Terrorism Occurrences taking place at and after the aforesaid time and date, and prior to 12:01 A.M., January 1, 2008.

However, if Exhibit A to this Agreement is terminated within the term stipulated above, this Exhibit will automatically terminate on the same date. In such instance, the Reinsurer shall not be liable for Terrorism Occurrences taking place at and after the time and date of termination and shall return to the Company the reinsurance premium unearned, calculated on the monthly pro rata basis, as of such time and date.

Section 3 — LIABILITY OF THE REINSURER

The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of Liability of the Reinsurer as set forth in the Schedule of Reinsurance.

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GENERAL REINSURANCE CORPORATION

SCHEDULE OF REINSURANCE

Class of Business	Company Retention		Limits of Liability of the Reinsurer
			First		Second
			Excess Cover		Excess Cover
Property Business	$	2,000,000	$	8,000,000	$	5,000,000

The liability of the Reinsurer shall not exceed $8,000,000 under the First Excess Cover nor $5,000,000 under the Second Excess Cover with respect to all Net Loss arising out of all loss or damage directly or indirectly arising out of, caused by, or resulting from all Terrorism Occurrences taking place during the term of this Exhibit, regardless of any other cause or event contributing to such loss or damage in any way or at any time, or whether such loss or damage is accidental or intentional.

All insurance written under one or more policies of the Company against the same peril on the same Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer shall be determined on the basis of the sum of all insurance against the same peril and on the same Risk which is in force at the time of a claim or loss.

Section 4 — DEFINITIONS

The terms “Company Retention”, “Net Loss”, “Adjustment Expense”, “Extra Contractual Obligations”, “Risk”, “Building” and “General Location” shall have the same meaning as in Exhibit A to this Agreement.

The term “Terrorism Occurrence” shall mean an Occurrence arising out of any Act of Terrorism, as described in paragraphs (1) and (2) below.

(1)

An Act of Terrorism means an activity, including the threat of an activity or any preparation for an activity, that (a) causes either (i) damage to property, or (ii) injury to persons; and (b) appears to be intended to: (i) intimidate or coerce a civilian population, or (ii) disrupt any segment of an economy, or (iii) influence the policy of a government by intimidation or coercion, or (iv) affect the conduct of a government by destruction, assassination, kidnapping or hostage-taking, or (v) advance a political, religious or ideological cause; provided, however, that an Act of Terrorism for purposes of this definition shall not include any act or threat as described above perpetrated by an official, employee or agent of a foreign state acting for or on behalf of such state.

(2)

An Act of Terrorism is also deemed to include any act authorized by a governmental authority for the purpose of preventing, terminating, countering or responding to any act or threat of terrorism or for the pur-

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GENERAL REINSURANCE CORPORATION

pose of preventing or minimizing the consequences of any act or threat of terrorism.

Section 5 — EXCLUSIONS

This Exhibit shall be subject to the exclusions set forth in the section entitled EXCLUSIONS of Exhibit A to this Agreement, except that for purposes of this Exhibit, exclusion (e) of said Section is amended to read as follows:

(e) Any loss or damage directly or indirectly arising out of, caused by, or resulting from war, including undeclared or civil war; warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these. War includes any activity that would be included as an Act of Terrorism, but for the fact that such activity was perpetrated by an official, employee or agent of a foreign state acting for or on behalf of such state. Such loss or damage is excluded regardless of (i) any other cause or event contributing to such loss or damage in any way or at any time, or (ii) whether such loss or damage is accidental or intentional.

Section 6 — REINSURANCE PREMIUM

The Company shall pay to the Reinsurer:

(a)	For the First Excess Cover, a flat reinsurance premium of $640,000 for the term of this Exhibit;
(b)	For the Second Excess Cover, a flat reinsurance premium of $400,000 for the term of this Exhibit.

     Section 7 — REPORTS AND REMITTANCES

(a)	Reinsurance Premium
	Within 25 days after the close of each calendar quarter, the Company shall pay to the Reinsurer one quarter of the flat reinsurance premium stipulated in the section entitled REINSURANCE PREMIUM.
(b)	Claims and Losses
	The Company shall report promptly to the Reinsurer each claim or loss which in the Company’s opinion may involve the reinsurance afforded by this Exhibit. The Company shall also report promptly to the Reinsurer any action alleging Extra Contractual Obligations against the Company or any declaratory judgment action brought by or against the Company on the business reinsured hereunder. The Company

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GENERAL REINSURANCE CORPORATION

shalladvise the Reinsurer of the estimated amount of Net Loss and Adjustment Expense in connection with each such claim or loss and of any subsequent changes in such estimates.

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GENERAL REINSURANCE CORPORATION

	Promptly upon receipt of a definitive statement of Net Loss and Adjustment Expense from the Company, but within no more than 25 days after receipt of such statement, the Reinsurer shall pay to the Company the Reinsurer’s portion of Net Loss and the Reinsurer’s portion of Adjustment Expense, if any. The Company shall report to the Reinsurer any subsequent changes in the amount of Net Loss and/or Adjustment Expense, and the amount due either party shall be remitted promptly, but within no more than 25 days after receipt of such report.
(c)	General
	In addition to the reports required by (a), (b), and (c) above, the Company shall furnish such other information as may be required by the Reinsurer for the completion of the Reinsurer’s quarterly and annual statements and internal records.
	All reports shall be rendered on forms or in format acceptable to the Company and the Reinsurer.

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GENERAL REINSURANCE CORPORATION

ENDORSEMENT NO. 6 REVISED

Attached to and made a part of
AGREEMENT OF REINSURANCE
NO. 9034
between
PHILADELPHIA INDEMNITY COMPANY
PHILADELPHIA INSURANCE COMPANY
(herein collectively referred to as the “Company”)
and
GENERAL REINSURANCE CORPORATION
(herein referred to as the “Reinsurer”)

IT IS MUTUALLY AGREED that, effective 12:01 A.M., January 1, 2007, this Agreement and Exhibit A attached thereto are hereby terminated, having been replaced concurrently by Agreement No. 9034-07 between the Company and the Reinsurer. The Reinsurer shall not be liable for claims and losses resulting from Occurrences taking place at and after such time and date.

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed in duplicate,

this 14th day of August, 2007,

	PHILADELPHIA INDEMNITY COMPANY
	PHILADELPHIA INSURANCE COMPANY
	Christopher J. Maguire
	EVP & CUO
Attest: William A. McKenna
and this 25th day of July, 2007.
	GENERAL REINSURANCE CORPORATION
	Joan LaFrance
	Senior Vice President
Attest: Diane Hyland

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GENERAL REINSURANCE CORPORATION

EX-10.3

Exhibit 10.3

Swiss Re

INTERESTS AND LIABILITIES AGREEMENT
(hereinafter referred to as the “Agreement”)

to the

PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT

between

PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania

(hereinafter collectively referred to as the “Company”)

and

SWISS REINSURANCE AMERICA CORPORATION
Armonk, New York
(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby agreed that the Subscribing Reinsurer shall have a 75% share in the interests and liabilities of all reinsurers participating in the attached Property Fourth Per Risk Excess of Loss Reinsurance Agreement effective from 12:01 a.m., Eastern Standard Time, January 1, 2007.

The share of the Subscribing Reinsurer in the interests and liabilities of all reinsurers participating in said Contract shall be separate and apart from the shares of such other reinsurers to the said Contract. The interests and liabilities of the Subscribing Reinsurer shall not be joint with those of the other reinsurers and in no event shall the Subscribing Reinsurer participate in the interests and liabilities of the other reinsurers participating in said Contract.

It is further agreed that the following shall apply to the Subscribing Reinsurer’s share in the interests and liabilities of all the reinsurers participating in the Property Fourth Per Risk Excess of Loss Reinsurance Agreement:

1.

Swiss Re

1. The Preamble is revised to read:

PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT
(the “Contract”)

between

PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania
(the “Company”)

and

THE SUBSCRIBING REINSURER(S) EXECUTING THE
INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED HERETO
(the “Reinsurer”)

2. Paragraph E. is added to Article III — Special Termination:

E. This Article shall not apply to those Reinsurers with an A.M. Best’s rating of “A+” or better at the inception of this Contract.

3. Paragraph C.1. of Article IV — Definitions is revised to read:

1. Extra Contractual Obligations

“Extra Contractual Obligations” are defined as those liabilities not covered under any other provision of this Agreement and which arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.

The date on which an Extra Contractual Obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original accident, casualty, disaster or loss occurrence.

4. Paragraph C.3. and Paragraph C.4. of Article IV — Definitions are revised to read:

2.

Swiss Re

3.

This paragraph C. shall not apply where an Extra Contractual Obligation and/or Loss in Excess of policy limits has been incurred due to the fraud of a member of the Board of Directors or a corporate officer 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.

4.

Recoveries, collectibles or retention from any other form of insurance or reinsurance including deductibles or self-insured retention which protect the Company against claims which are the subject matter of this paragraph C., whether collectible or not, shall inure to the benefit of the Reinsurer and shall be deducted from the total amount of such claims for purposes of determining the loss hereunder.

5. Paragraph D. of Article IV — Definitions is revised to read:

D. “Loss Adjustment Expense” as used herein shall mean all costs and expenses allocable to a specific claim that are incurred by the Company in the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim, including court costs and costs of supersedeas and appeal bonds, and including 1) pre-judgment interest, unless included as part of the award or judgment; 2) post-judgment interest; 3) legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including Declaratory Judgment Expense; and 4) a pro rata share of salaries and expenses of Company field employees, and expenses of other company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract. Loss Adjustment Expense does not include the salaries and expenses of Company employees, other than (4) above, office expenses and other overhead expenses.

6. Paragraph F. of Article IV — Definitions is revised to read:

F. Net Earned Premium

“Net Earned Premium” as used herein is defined as gross earned premium of the Company during the term of the Contract for the classes of business reinsured hereunder, less the earned portion of premiums ceded by the Company for reinsurance which inures to the benefit of the Reinsurer.

3.

Swiss Re

7. Paragraph J. of Article IV — Definitions is revised to read:

J. Ultimate Net Loss

The term “Ultimate Net Loss” shall mean the actual loss, including any pre-judgment interest which is included as part of the award or judgment, Loss Adjustment Expense, 100% of Loss in Excess of Policy Limits, and 100% of Extra Contractual Obligations, paid by the Company on its net retained liability after making deductions for all recoveries, salvages, subrogations and all claims on inuring reinsurance, whether collectible or not; provided, however, that in the event of the insolvency of the Company, payment by the Reinsurer shall be made in accordance with the provisions of the INSOLVENCY ARTICLE. 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.

8. Exclusion Q. of Article VI — Exclusions are revised to read:

Q. i. Loss, damage or expense of whatsoever nature caused directly or indirectly by any of the following, regardless of any other cause or event contributing concurrently or in any other sequence to the loss: nuclear reaction or radiation, or radioactive contamination, however caused.

ii.	However, if nuclear reaction or radiation, or radioactive contamination results in fire it is specifically agreed herewith that this Agreement will pay for such fire loss or damage subject to all of the terms, conditions and limitations of this Agreement.
iii.	This exclusion shall not apply to loss, damage or expense originating from and occurring at risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Company to be the primary hazard.

9. The following Paragraph is added to Article IX- Reinsurance Premium:

In respect of Paragraph B. above:

1. All statements shall be sent to the Reinsurer at:

a.	E-Mail/XML or EDI Formats: reaccount_armonk@swissre.com, or
b.	Standard Mail:

Swiss Reinsurance America Corporation
Accounting Department
175 King Street
Armonk, NY 10504
Telephone: 914-828-8000
Facsimile: 914-828-5919

4.

Swiss Re

2. All checks and supporting documentation shall be sent to the Reinsurer through one of the options set forth below:

a. WIRE TRANSFER

(i) As respects payments in United States dollars, all wires should be sent to:

The Bank of New York
1 Wall Street
New York, NY 10286
Account Name: Swiss Reinsurance America Corporation
Account Number: 8900489197
ABA Number: 021000018
SWIFT: IRVTUS3N

(ii) All supporting documentation should be sent to:

Swiss Reinsurance America Corporation
Accounting Department
175 King Street
Armonk, NY 10504

b. LOCK BOX

As respects payments in United States dollars, both checks and supporting documentation shall be sent to:

Swiss Reinsurance America Corporation
P.O. Box 7247-7281
Philadelphia, PA 19170-7281

10. Article XI — Agency Agreement is revised to read:

ARTICLE XI

       AGENCY AGREEMENT

For purposes of sending and receiving notices and payments required by this Agreement, the reinsured company that is set forth first in the Preamble to this Agreement shall be deemed the agent of all other reinsured companies referenced in the Preamble. In no event, however, shall any reinsured company be deemed the agent of another with respect to the terms of Article XXVII — Insolvency.

5.

Swiss Re

11. Article XII — Salvage and Subrogations is revised to read:

A.

In the event of the payment of any indemnity by the Reinsurer under this Agreement, the Reinsurer shall be subrogated, to the extent of such payment, to all of the rights of the Company against any person or entity legally responsible for damages of the loss. The Company agrees to enforce such rights; but, in case the Company refuses or neglects to do so, the Reinsurer is hereby authorized and empowered to bring any appropriate action in the name of the Company or their policyholders or otherwise to enforce such rights.

B.

The Reinsurer shall be credited with salvage or subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company, less Loss Adjustment Expense incurred in obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage and subrogation recoveries 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.

12.	Article XXII — Mortgagee Reinsurance Endorsements shall be deleted in its entirety.
13.	Article XXIII — Third Party Rights (BRMA 52C Modified) is revised to read:

ARTICLE XXIII

       THIRD PARTY RIGHTS (BRMA 52C MODIFIED)

This Contract is solely between the Company and the Reinsurer, and in no instance shall any other party have any rights under this Contract except as expressly provided otherwise in the Insolvency Article.

14. Article XXVI — Access to Records (BRMA 1E) is revised to read:

ARTICLE XXVI

       ACCESS TO RECORDS (BRMA 1E)

The Reinsurer or its duly authorized representatives shall have the right to examine, at the offices of the Company at a reasonable time, during the currency of this Agreement or anytime thereafter, all books and records of the Company relating to business which is the subject of this Agreement.

15. Paragraph F. of Article XXVIII — Arbitration shall be deleted in its entirety and the remaining paragraph shall be realphabetized. Furthermore, the previous paragraph G. is revised as paragraph F., as shall read as follows:

6.

Swiss Re

F. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel.

16. Article XXXI — Intermediary (WINT8) shall be deleted in its entirety.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate, by their duly authorized representatives as of the following dates:

In Bala Cynwyd, PA, this 12th day of September, 2007.

ATTEST:	PHILADELPHIA INSURANCE COMPANY PHILADELPHIA INDEMNITY INSURANCE COMPANY
/s/ William A. McKenna	/s/ Christopher J. Maguire
William A. McKenna	Christopher J. Maguire
Name	Name
AVP — Reinsurance	CUO & EVP
Title	Title

And in Armonk, New York, this 10th day of September, 2007.

ATTEST:	SWISS REINSURANCE AMERICA CORPORATION
/s/ Edward Lyons	/s/ Timothy M. Lamothe
Edward Lyons	Timothy M. Lamothe
Name	Name
Vice President	Senior Vice President
Member of Management	Member of Senior Management
Title	Title

Philadelphia 4^th per risk 1-07

7.

EX-10.4

Exhibit 10.4

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE MARCH 1, 2007

between

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY

BALA CYNWYD, PENNSYLVANIA, USA

(hereinafter called the “Reinsured”)

by

THE UNDERWRITERS AT LLOYD’S
who are signatories hereto, each for the
proportion underwritten and not one for another

(hereinafter called the “Reinsurers”)

Under the terms of this Contract the above Reinsurers agree to assume

an 80.00% share

of the liability described in the attached Contract and, as consideration, the above Reinsurers shall receive an 80.00% share of the premium named therein.

Signed in London, England, this 31st day of May, 2007.

The share attaching to this Contract is subscribed by the Underwriters, Members of the Syndicates the definitive numbers of which and the proportions reinsured are contained in the schedule attached.

Towers Perrin No. G26004.07
FINAL

SIGNING SCHEDULE

Attaching to and forming part of Towers Perrin No. G26004.07

Now Know Ye 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.

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.

R.C. TOWNSEND
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

BUREAU REFERENCE 61797 31/05/07		BROKER NUMBER 0868
PROPORTION	SYNDICATE	UNDERWRITER’S
%		REFERENCE
50.00	2003	NP8000137736
20.00	2791	J1107GG03193
10.00	2987	FC881QO7A000
TOTAL LINE	No. OF SYNDICATES
80.00	3
	THE LIST OF UNDERWRITING MEMBERS
	OF LLOYD’S IS IN RESPECT OF 2007
	YEAR OF ACCOUNT

Towers Perrin No. G26004.07
FINAL

and signed in Bala Cynwyd, Pennsylvania, this 24^th day of August, 2007.

PHILADELPHIA INSURANCE COMPANY And PHILADELPHIA INDEMNITY INSURANCE COMPANY
BY:	/s/ CHRISTOPHER MAGUIRE
		TITLE: EXECUTIVE VICE PRESIDENT AND           CHIEF UNDERWRITING OFFICER

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE MARCH 1, 2007

between

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY

BALA CYNWYD, PENNSYLVANIA, USA

Towers Perrin No. G26004.07
FINAL

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania, USA

TERRORISM CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT

INDEX

Article I	BUSINESS COVERED	PAGE 1
Article II	COMMENCEMENT AND TERMINATION	PAGE 2
Article III	REINSURANCE COVERAGE	PAGE 2
Article IV	EXCLUSIONS	PAGE 4
Article V	REINSURANCE PREMIUM	PAGE 6
Article VI	DEFINITION OF LOSS OCCURRENCE	PAGE 7
Article VII	NET RETAINED LINES	PAGE 7
Article VIII	REVIEW	PAGE 8
Article IX	REPORTS, LOSS AND LOSS SETTLEMENTS	PAGE 10
Article X	LOSS EXCESS OF POLICY LIMITS	PAGE 11
Article XI	ORIGINAL CONDITIONS	PAGE 12
Article XII	ERRORS AND OMISSIONS	PAGE 12
Article XIII	CURRENCY	PAGE 13
Article XIV	FEDERAL EXCISE TAX AND OTHER TAXES	PAGE 13
Article XV	ACCESS TO RECORDS	PAGE 13
Article XVI	RESERVES	PAGE 14
Article XVII	SERVICE OF SUIT	PAGE 17
Article XVIII	ARBITRATION	PAGE 18
Article XIX	INSOLVENCY	PAGE 22
Article XX	CLAIMS COOPERATION	PAGE 22
Article XXI	CONFIDENTIALITY	PAGE 23
Article XXII	LATE PAYMENTS	PAGE 23
Article XXIII	OFFSET	PAGE 25
Article XXIV	SPECIAL TERMINATION	PAGE 25
Article XXV	TERRORISM RECOVERY — TERRORISM RISK INSURANCE ACT OF 2002	PAGE 27
Article XXVI	VARIOUS OTHER TERMS	PAGE 28
Article XXVII	INTERMEDIARY	PAGE 30

     ATTACHMENT

     SCHEDULE A — TARGET AREA ZIP CODES

Towers Perrin No. G26004.07
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1.

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania, USA
(hereinafter referred to as the “Reinsured”)

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(hereinafter referred to as the “Contract”)

ARTICLE I — BUSINESS COVERED

     A. This Contract applies to losses occurring during its term on all Covered Policies, except as hereinafter excluded, classified by the Reinsured as Property or Casualty, that are in force at the inception of, or written with a Policy period (new or renewal) that is effective during the term of this Contract.

     B. The term “Covered Policies”, whenever used herein, shall mean all binders, policies, contracts, certificates and other obligations, whether oral or written, of insurance or reinsurance written and classified for the annual statement lines as indicated:

Check	Line of Business	Check	Line of Business	Check
	Inland Marine		Other Casualty
	Commercial Property	x	Professional Liability	x
	Personal Lines; however, Personal Automobile shall be excluded		Wet Marine
	Liability	x	Other lines of business		Line of Business (to be filled in as applicable)
	Umbrella Liability	x

Covered Policies hereunder shall be written on standard industry policy forms of the line(s) of business indicated and which include cover for Acts of Terrorism. Forms substantially similar to ISO forms shall be deemed approved. Policy forms broader than the forms customarily used for the lines of business written by the Reinsured will be submitted for the Reinsurers’ prior review and approval. Any material changes made to such forms shall be subject to prior notice as set forth in the Article entitled “Review”.

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ARTICLE II — COMMENCEMENT AND TERMINATION

     This Contract shall incept at 12:01 a.m., Eastern Standard Time, March 1, 2007 and shall remain in force until 12:01 a.m., Eastern Standard Time, March 1, 2009 (“Contract Term”). The first twelve (12) month period of March 1, 2007 through February 29, 2008, both days included, shall be deemed a “Contract Period”. Each subsequent twelve (12) month period during the Contract Term shall be deemed a separate Contract Period. Should this Contract terminate while a Loss Occurrence is in progress, the entire loss arising out of the Loss Occurrence shall be subject to this Contract.

ARTICLE III — REINSURANCE COVERAGE

Part One — Acts of Terrorism

Section I (applicable to Loss Occurrence covered in conjunction with TRIA/ TRIEA)

     A. With respect to losses occurring during the Contract Term on Covered Policies that are Business Covered (including, for the avoidance of doubt, lines of business that are Covered Policies hereunder, but not covered lines under TRIA/TRIEA), the Reinsurers shall be liable to, indemnify and reinsure the Reinsured for each and every Loss Occurrence that is a Certified Act of Terrorism, as defined and certified in accordance with TRIA and as amended by TRIEA, for 100% of the excess Net Loss above an initial Net Loss to the Reinsured of USD10,000,000 each and every Loss Occurrence; but the Reinsurers shall not be liable for more than USD50,000,000 of Net Loss for each and every such Loss Occurrence.

     B. “Certified Act(s) of Terrorism” means any act that is certified by the Secretary of the Treasury in concurrence with the Secretary of State and the Attorney General of the United States pursuant to the Federal Terrorism Risk Insurance Act (“TRIA”) as amended by the Terrorism Risk Insurance Extension Act (“TRIEA”):

Section II (applicable to Loss Occurrence not covered in conjunction with TRIA/ TRIEA)

     A. With respect to losses occurring during the Contract Term on Covered Policies that are Business Covered, the Reinsurers shall be liable to, indemnify and reinsure the Reinsured for each and every Loss Occurrence that results from an Act of Terrorism that is not a Certified Act of Terrorism (“Non-Certified Act of Terrorism”), for 100% of the excess Net Loss above an initial Net Loss to the Reinsured of USD10,000,000 each and every Loss Occurrence; but the Reinsurers shall not be liable for more than USD50,000,000 of Net Loss for each and every such Loss Occurrence.

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3.

     B. For the purposes of this Section, an “Act of Terrorism” shall be any act or preparation in respect of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of any political, religious, ideological, or similar purpose 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:

(i)	involves violence against one or more persons; or
(ii)	involves damage to property; or
(iii)	endangers life other than that of the person committing the action; or
(iv)	creates a risk to health or safety of the public or a section of the public; or
(v)	involves physical loss, damage, cost, or expense caused by, contributed to by, resulting from, or arising out of or in connection with any action in directly responding to any act of terrorism; or
(vi)	are defined as such in any of the Reinsured’s policy forms that have been the subject of the Reinsurers’ express written prior review and approval.

     C. Loss or damage occasioned by riot, strikes, civil commotion, vandalism or malicious mischief as those terms have been interpreted by United States Courts to apply to insurance policies shall not be construed to be an “Act of Terrorism”.

Applicable to both Section I and Section II

     A. The Reinsurers’ liability in respect of excess Net Loss hereunder for losses occurring during each Contract Period within the Contract Term shall be limited to USD100,000,000 in the aggregate as respects all Net Loss on Covered Policies that are Business Covered hereunder as a result of all Loss Occurrences taking place during each such Contract Period during the Contract Term in respect of both Section I and Section II combined.

     B. In the event that the Terrorism Insurance Program, (“TIP”) as established by TRIA and TRIEA terminates, the parties will endeavor to continue to employ the definitions of “Act of Terrorism” as set forth in Section 1 above, but for the certification by the Secretary of the Treasury. In the event that the parties cannot agree on whether such Loss Occurrence is subject to coverage under Section I or Section II, the decision shall be subject to the Article entitled “Arbitration” in this Contract and the payment due date shall be determined by the date of the Panel’s reasoned decision.

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4.

Part Two — Reinsurance Loss

     A. “Net Loss” shall mean the actual loss incurred by the Reinsured under Business Covered hereunder including (i) sums paid in settlement of claims and suits and in satisfaction of judgments, (ii) prejudgment interest when added to a judgment, (iii) all expenses incurred in connection with adjustment, defense, settlement and litigation of claims and suits, satisfaction of judgments, resistance to or negotiations concerning a loss (excluding the normal office expenses of the Reinsured and salaries of the Reinsured) (iv) any associated Loss Excess of Policy Limits, and (v) any interest on judgments other than prejudgment interest when added to a judgment.

     B. All salvages, recoveries, payments and reversals or reductions of verdicts or judgments (net of the cost of obtaining such salvage, recovery, payment or reversal or reduction of a verdict or judgment) whether recovered, received or obtained prior or subsequent to loss settlement under this Contract, including amounts recoverable under other reinsurance, whether collected or not, shall be applied as if recovered, received or obtained prior to the aforesaid settlement and shall be deducted from the actual losses sustained to arrive at the amount of the Net Loss. Nothing in this Article shall be construed to mean losses are not recoverable until the final Net Loss to the Reinsured finally has been ascertained.

     C. The Reinsurers shall be subrogated, as respects any loss for which the Reinsurers shall actually pay or become liable, but only to the extent of the amount of payment by or the amount of liability to the Reinsurers, to all the rights of the Reinsured against any person or other entity who may be legally responsible for damages as a result of said loss. Should the Reinsured elect not to enforce such rights, the Reinsurers are hereby authorized and empowered to bring any appropriate action in the name of the Reinsured or its policyholders, or otherwise to enforce such rights. The Reinsurers shall promptly remit to the Reinsured the amount of any judgment awarded in such an action in excess of the amount of payment by, or the amount of liability to, the Reinsurers hereunder.

ARTICLE IV — EXCLUSIONS

     A. This Contract shall not cover any Net Loss arising from Certified Acts of Terrorism or Non-Certified Acts of Terrorism that results from:

1.	An act committed as part of the course of a war declared by the Congress of the United States of America as set forth in Section 102(1)(B)(i) of TRIA as amended by TRIEA; or
2.	Seizure or illegal occupation; or

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5.

3.	Confiscation, requisition, detention, legal or illegal occupation, embargo, quarantine, or an order of public or government authority which deprives the insured of the use or value of the property, or arising from acts of contraband or illegal transportation or illegal trade; or
4.	Contingent Business Interruption, written as such, unless specially accepted by the Reinsurers hereon; or
5.	Workers Compensation and Employers Liability, written as such; or
6.	Pollutants or contaminants whether directly or indirectly arising from or as consequence of the discharge of pollutants or contaminants, which pollutants and contaminants shall include but not be limited to any solid, liquid, gaseous or thermal irritant, contaminant or toxic or hazardous substance or any substance the presence, existence or release of which endangers or threatens to endanger the health, safety or welfare of persons or the environment; or
7.	Electronic attack, including computer hacking or the introduction of any form of computer virus. Notwithstanding the foregoing, this Contract will respond to a Loss Occurrence arising from attacks involving the use of a mobile telephone, remote control, or radio controlled device or any other electronic device or system or such like in the launch and/or guidance system and/or firing mechanism and/or detonation of any explosive bomb, weapon or missile subject always to the other terms and conditions of this Contract; or
8.	Increased cost occasioned by any Public or Civil Authority’s enforcement of any ordinance or law regulating the reconstruction, repair or demolition of any property; or
9	Cessation, fluctuation or variation in, or insufficiency of, water, gas or electricity supplies and telecommunications of any type or service; or
10.	Threat or hoax, in the absence of physical damage due to an act or series of Acts of Terrorism; or
11.	Burglary, house — breaking, theft or larceny or caused by any person taking part therein; or

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6.

12. Extra Contractual Obligation. “Extra Contractual Obligation” means liabilities, other than a Loss Excess of Policy Limits, that are not covered under any other provision of this Contract and which arise from the handling of any claim on Business Covered hereunder by reason of alleged or actual negligence, gross negligence, fraud, or bad faith on the part of the Company.

     B. This Contract shall not cover any Net Loss arising from any part of Non-Certified Acts of Terrorism that results from a loss occasioned directly or indirectly by war or invasion (whether war be declared or not), hostile acts of sovereign or government entities, civil war, rebellion, revolution, insurrection, civil commotion assuming the proportions of or amounting to an uprising, military or usurped power or martial law or confiscation by order of any Government or public authority.

ARTICLE V— REINSURANCE PREMIUM

Part One — Basic Annual Premium

     A. As premium for the reinsurance provided hereunder, the Reinsured shall pay the Reinsurers a flat premium of USD3,625,000 for each full year Contract Period.

     B. The Reinsured shall pay the Reinsurers a premium of USD7,250,000 in four (4) equal installments of USD1,812,500 on March 1, 2007, September 1, 2007, March 1, 2008, and September 1, 2008.

Part Two — Reinstatement Premium

     A. Each claim hereunder shall reduce the amount of the Reinsurers’ liability from the time of the Loss Occurrence by the sum paid, but the sum so reduced shall be reinstated immediately from the time of the Loss Occurrence, provided that only one such full reinstatement for both sections combined shall be available in each Contract Period.

     B. For each amount so reinstated, the Reinsured agrees to pay an additional premium calculated by multiplying 100% of the annual reinsurance premium earned hereon by the percentage that the amount reinstated bears to the limit (i.e., USD50,000,000) of this Contract. Nevertheless, the liability of the Reinsurers shall never be more than USD50,000,000 Net Loss in respect of any one (1) Loss Occurrence, nor more than USD100,000,000 Net Loss in all in respect of all Loss Occurrences over both sections combined during a Contract Period, nor more than USD200,000,000 Net Loss in all in respect of all Loss Occurrences over both sections combined during the Contract Term.

Towers Perrin No. G26004.07
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7.

     C. A statement of reinstatement premium due the Reinsurers shall be prepared by the Reinsured and submitted to the Reinsurers with each loss payment request hereunder. The reinstatement premium shall be based upon 100% of the annual reinsurance premium earned by the Reinsurer hereunder. The amount of reinstatement premium due Reinsurers shall be offset against the loss payment due the Reinsured with only the net amount due to be remitted by the debtor party.

Part Three — No Claims Bonus

     A. In the event that no claims arise under this Contract then the Reinsurers will allow to the Reinsured a return premium of USD500,000 payable at the end of the Contract Term.

     B. The return premium payment by the Reinsurers to the Reinsured shall constitute the commutation of this Contract and such payment once effected shall be regarded as a full and final release of the Reinsurers from all liability hereunder.

ARTICLE VI — DEFINITION OF LOSS OCCURRENCE

     A. The term “Loss Occurrence” shall mean any one loss and/or series of losses arising out of and directly caused by one Act or series of Acts of Terrorism for the same apparent purpose or cause. The duration and extent of any one Loss Occurrence shall be limited to all losses sustained by the Reinsured during any period of seventy-two (72) consecutive hours arising out of the same apparent purpose or cause. However, no such period of seventy-two (72) consecutive hours may extend beyond the expiration of this Contract unless direct physical damage by an Act of Terrorism occurs prior to the expiration and within said period of seventy-two (72) consecutive hours, nor shall any period of seventy-two (72) consecutive hours commence prior to the attachment of this reinsurance.

     B. As respects coverage provided in Section I of the Article entitled “Reinsurance Coverage”, Loss Occurrence shall be consistent with the determination of the Secretary of the Treasury of a Certified Act of Terrorism. As respects coverage provided in Section II of the Article entitled “Reinsurance Coverage”, all losses flowing from an apparently coordinated plan of attack shall be deemed a single Loss Occurrence even though they may be separate in time or space subject always to the above seventy-two (72) hour period.

ARTICLE VII — NET RETAINED LINES

     A. This Contract applies only to that portion of the exposure to loss from Acts of Terrorism on any Policy which the Reinsured 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

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8.

loss or losses in respect of that portion of the exposure to loss from Acts of Terrorism on any Policy which the Reinsured retains net for its own account shall be included. Recoveries under TRIA and TRIEA referenced in the Article entitled “Terrorism Recovery — Terrorism Risk Insurance Act of 2002” shall be disregarded in calculating the Net Loss to which this reinsurance applies.

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

     C. Where the Reinsured comprises more than one insurance company, reinsurance among the companies collectively called the “Reinsured” hereunder or between any of them and any of their affiliates under common control with the Reinsured shall be entirely disregarded for all purposes of this Contract.

     D Permission is hereby granted to the Reinsured to carry underlying Terrorism reinsurance below the attachment of this Contract and recoveries made thereunder shall be disregarded for all purposes of this Contract and shall inure to the sole benefit of the Reinsured.

ARTICLE VIII — REVIEW

     A. The Reinsured has provided the Reinsurers, prior to the commencement of this Contract, with information concerning its Policy forms and Underwriting Practices and Covered Policies in respect to coverage for Acts of Terrorism. The Reinsured shall report to the Reinsurers as soon as practically possible upon the happening of any of the following:

1.	Change in control of the Reinsured via a closing upon a definitive agreement to sell or merge approved by the applicable regulatory authorities including but not limited to (a) become merged with, acquired or controlled by any company, corporation or individual(s) not controlling the party’s operations previously (though excluding transactions among entities under common control); or
2.	a transfer by portfolio transfer of the Business Covered; or
3.	Material Change in the Reinsured’s Underwriting Practices that materially increases the Reinsured’s underwriting exposure to a Loss Occurrence arising from an Act of Terrorism. For the purpose of this condition, a material change shall mean the following: (i) from inception, an increase of 20% or USD20,000,000, whichever is greater, or

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more in the Total Insured Values covered in those zip codes set forth in Schedule A, Target Area zip codes (“Target Area TIV Increase”) or (ii) any material change to the Reinsured’s coverage forms concerning terrorism (“Material Change”), or (iii) the commencement of the Reinsured offering terrorism coverage on a stand-alone basis (“Offering of Stand-Alone Terrorism”).

As used herein, the reference to a “zip code” or a “Target Area zip code” shall mean that entire area encompassed by all zip codes within an area described by reference only to the first three digits of a zip code.

For example, an area made up of zip codes 89712, 89713, and 89714 will be considered for the purposes of this Contract the “zip code” or “Target Area zip code” of “897”

     B. In the event of a failure to timely report to the Reinsurers in sub-paragraphs A1. or A2. above, the Reinsurer shall have a right to cancel the Contract with fifteen (15) days advance notice.

     C. In the event of A3. above,

1.	The Reinsurer shall have the right to review the impact of any Material Change in the Reinsured’s Underwriting Practices and either accept the change or propose a modification to the terms of this Contract;
2.	In the event that: (i) the Material Change in the Reinsured’s Underwriting Practices is not reported to the Reinsurer in a timely fashion or (ii) the Reinsured does not accept the Reinsurer’s proposal to modify the terms of this Contract per sub-paragraph C1. above, then the following conditions shall apply:

a.	In respect of a Material Change or Offering of Stand-Alone Terrorism, no coverage shall be afforded hereunder for that portion of Net Loss from a Loss Occurrence that occurs after the date of the Material Change/Offering of Stand-Alone Terrorism that directly results from such Material Change and/or Offering of Stand-Alone Terrorism.
b.	In respect of a Target Area TIV Increase, the Reinsurer shall have the option to reduce the contribution to Net Loss in a Loss Occurrence from a Target Area

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according to the following fraction:

(Total Insured Value in applicable Target Area at the inception of this Contract * 1.20)^* divided by actual Total Insured Value in applicable Target Area at the date of the Loss Occurrence.

^*In the event that USD20,000,000 is greater than 1.2 times the Total Insured Value in the applicable Target Area at the inception of this Contract, such amount shall be utilized rather than 1.2 times the Total Insured Value in the applicable Target Area at the inception of this Contract.

     D. In the event that there is a Certified Act of Terrorism during the Contract Term and there is a change in the Reinsured’s Exposure by 50% or more during the end of the second Contract Period in relation to the end of the first Contract Period, the reinsurance premium set forth in this Contract shall be adjusted in the manner set forth below. The change in the Reinsured’s Exposure shall be measured by comparing the Reinsured’s Exposure for the second Contract Period to that for the first Contract Period of this Contract. The reinsurance premium under this Contract for the second Contract Period (and any subsequent short period) shall be adjusted by increasing the reinsurance premium set forth in this Contract by the percentage increase of the Reinsured’s Exposure that exceeds 50% for the second Contract Period over the first Contract Period. The adjustment shall be reported and any premium due to the Reinsurers shall be paid as soon as practicable after the end of the applicable Contract Period.

ARTICLE IX — REPORTS, LOSS AND LOSS SETTLEMENTS

Part One — Reinsured Exposures

     A. The Reinsured has provided the Reinsurers a statement of Reinsured Exposure prior to the Contract Term, (“Statement”), reflecting the Reinsured’s Total Insured Values for terrorism coverage at the date of that report (“Gross TIV”) plus the Total Insured Values for Terrorism coverage in the Target Area zip codes at the same date. The Reinsured shall provide the Reinsurers an updated Statement each calendar quarter thereafter during the Contract Term, reflecting the Gross TIV and the subtotal for the Total Insured Values for Terrorism coverage in the Target Area zip codes at the same date. Such report shall be due within ninety (90) days following the end of each calendar quarter.

     B. The term “Reinsured Exposure” shall mean the difference between the Gross TIV and the Total Insured Values for Terrorism coverage in the Target Area zip codes on the date of the report.

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Part Two — Claim Reporting

     A. The Reinsured shall advise the Reinsurers promptly of all losses which, in the opinion of the Reinsured, are likely to result in a claim hereunder or are incurred in the Reinsured’s books at 50% of the retention hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurers. Inadvertent omission or oversight in giving such notice shall in no way affect the liability of the Reinsurers. However, the Reinsurers shall be informed of such omission or oversight promptly upon its discovery.

     B. The Reinsured shall have the right to settle all claims under its Policies. All loss settlements made by the Reinsured, within the terms and conditions of this Contract, and provided that such settlement is not an Ex-Gratia settlement made without the prior approval of the Reinsurers, shall be binding upon the Reinsurers, and the Reinsurers agree to pay or allow, as the case may be, their share of each such settlement in accordance with this Contract all amounts for which it is obligated immediately upon being furnished by the Reinsured with Reasonable Evidence of the Amount Due. Reasonable Evidence of the Amount Due shall consist of a notarized certification by an Officer of the Reinsured that the amount requested to be paid and submitted by the certification is due and payable to the Reinsured by the Reinsurers under the terms and conditions of this Contract.

     C. “Ex-gratia settlements”, as used in this Contract, will mean all settlements of losses not covered under the express terms of the policies that are primarily motivated by the customer business relationship. “Ex-gratia settlements” will not include Loss Excess of Policy Limits as defined in the Article entitled “Loss Excess of Policy Limits” nor settlements of losses which (1) arise from court decisions or other judicial acts or orders, (2) arise from the good faith position of the Reinsured of probable coverage under the Policies, nor (3) settlements made to avoid costs that could be incurred in connection with potential or actual litigation relating to coverage issues arising under the Policies subject to this Contract.

     D. In addition, the Reinsured shall furnish the Reinsurers a periodic statement showing the unearned premium, the total reserves for outstanding Net Losses including loss adjustment expense, and such other information as may be required by the Reinsurers for completion of their NAIC annual statements.

ARTICLE X — LOSS EXCESS OF POLICY LIMITS

     A. “Loss Excess of Policy Limits” means 80% of any amount of loss, together with any legal costs and expenses incurred in connection therewith, paid as damages or in settlement by the Reinsured in excess of its Policy Limits, but otherwise within the coverage terms of the Policy, arising from an allegation or claim of its insured, its insured’s assignee, or other third party, which alleges negligence, gross negligence, bad faith or other tortuous conduct on the part of the

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Reinsured in the handling of a claim under a Policy subject to this Contract, in rejecting a settlement within the Policy Limits, in discharging a duty to defend or prepare the defense in the trial of an action against its insured, or in discharging its duty to prepare or prosecute an appeal consequent upon such an action. For the avoidance of doubt, the decision by the Reinsured to settle a claim for an amount within the coverage of the Policy but not within the Policy limit when the Reinsured has reasonable basis to believe that it may have liability to its insured or assignee or other third party on the claim will be deemed a Loss Excess of Policy Limits.

     B. A Loss Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Reinsured’s original Policy and shall be considered part of the original loss (subject to other terms of this Contract.)

     C. A Loss Excess of Policy Limits shall not include a loss incurred by the Reinsured as the result of any fraudulent or criminal act directed against the Reinsured by any officer or director of the Reinsured acting individually or collectively or in collusion with any other organization or party involved in the presentation, defense, or settlement of any claim under this Contract.

     D. Recoveries, whether collectible or not, including any retentions and/or deductibles, from any other form of insurance or reinsurance which protect the Reinsured against any loss or liability covered under this Article shall inure to the benefit of the Reinsurers and shall be deducted from the total amount of Loss Excess of Policy Limits in determining the amount of Loss Excess of Policy Limits that shall be indemnified under this Article.

     E. The Reinsured shall be indemnified in accordance with this Article to the extent permitted by applicable law.

ARTICLE XI — ORIGINAL CONDITIONS

          The Reinsurer’s liability to the Reinsured shall be subject in all respects to the same risks, terms, clauses, conditions, interpretations, alterations, modifications cancellations and waivers as the respective insurances of the Reinsured’s Policies and the Reinsurer shall pay losses as may be paid thereon, the true intent of this Contract being that in each and every case to which this Contract applies, the Reinsurer shall follow the settlements of the Reinsured, subject always to the limits, terms and conditions of this Contract .

ARTICLE XII — ERRORS AND OMISSIONS

          Inadvertent delays, errors or omissions made by the Reinsured in connection with this Contract (including the reporting of claims) shall not relieve the Reinsurer from any liability which would have attached had such delay, error or omission not occurred, provided always that such delay, error or omission shall be

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rectified as soon as possible after discovery by the Reinsured’s Home Office. Nothing in this Article shall, however, be held to override the provisions of the Article entitled “Review”.

ARTICLE XIII — CURRENCY

          Whenever the word “Dollars”, “USD” 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. Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE XIV — FEDERAL EXCISE TAX AND OTHER TAXES

     A. To the extent that any portion of the reinsurance premium for this Contract is subject to the Federal Excise Tax (as imposed under Section 4371 of the Internal Revenue Code) and the Reinsurer is not exempt therefrom, the Reinsurer shall allow for the purpose of paying the Federal Excise Tax, a deduction by the Reinsured of the applicable percentage of the premium payable hereon. In the event of any return of premium becoming due hereunder, the Reinsurer shall deduct the applicable same percentage from the return premium payable hereon and the Reinsured or its agent shall take steps to recover the tax from the United States Government. In the event of any uncertainty, upon the written request of the Reinsured, the Reinsurer will immediately file a certificate of a senior corporate officer of the Reinsurer certifying to its entitlement to the exemption from the Federal Excise Tax with respect to one or more transactions.

     B. In consideration of the terms under which this Contract is issued, the Reinsured undertakes not to claim any deduction of the premium hereon when making Canadian Tax returns or when making tax returns, other than Income or Profits Tax returns, to any State or Territory of the United States of America or to the District of Columbia.

ARTICLE XV — ACCESS TO RECORDS

          The Reinsured shall place at the disposal of the Reinsurer at all reasonable times, and the Reinsurer shall have the right to inspect through its designated representatives, during the term of this Contract and thereafter, all non-privileged books, records and papers of the Reinsured directly related to any reinsurance hereunder, or the subject matter hereof, provided that if the Reinsurer has ceased active market operations, this right of access shall be subject to that Reinsurer being current in all payments owed the Reinsured.

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ARTICLE XVI — RESERVES

(Unless otherwise required by law to obtain full credit for this Contract, in recognition of the security in place under the Lloyd’s Credit for Reinsurance Trust, the provisions of this Article shall not apply to participating Lloyd’s syndicates.)

     A. If any Reinsurer is unauthorized or otherwise unqualified in any state or other United States jurisdiction, and if, without such security, a financial penalty to the Reinsured would result on any statutory statement or report it is required to make or file with insurance regulatory authorities or a court of law in the event of insolvency, for reasons of the Reinsured’s financial security and condition, that Reinsurer will timely secure the Reinsurer’s share of Obligations under this Contract in a manner, form, and amount acceptable to the Reinsured and to all applicable insurance regulatory authorities in accordance with this Article.

     B. The Reinsurer shall secure such Obligations, within thirty (30) days after the receipt of the Reinsured’s written request regarding the Reinsurer’s share of Obligations under this Contract (but not later than December 31) of each year by either:

1.	Clean, irrevocable, and unconditional evergreen letter(s) of credit issued and confirmed, if confirmation is required by the applicable insurance regulatory authorities, by a qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state and acceptable to the Reinsured and to insurance regulatory authorities;
2.	A trust account meeting at least the standards of New York’s Insurance Regulation 114 and the Insurance Law of the Reinsured’s domiciliary state; or
3.	Cash advances or funds withheld or a combination of both, which will be under the exclusive control of the Reinsured (“Funds Deposit”).

     C. The “Obligations” referred to herein means the then current (as of the end of each calendar quarter) sum of:

1.	The amount of the ceded unearned premium reserve for which the Reinsurer is responsible to the Reinsured;
2.	The amount of Net Loss and other amounts paid by the Reinsured for which the Reinsurer is responsible to the Reinsured but has not yet paid;

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3.	The amount of ceded reserves for Net Loss for which the Reinsurer is responsible to the Reinsured;
4.	The amount of return and refund premiums paid by the Reinsured for which the Reinsurer is responsible to the Reinsured but has not yet paid.

     D. The Reinsured, or its successors in interest, may draw, at any time and from time to time, upon the:

1.	Established letter of credit (or subsequent cash deposit);
2.	Established trust account (or subsequent cash deposit); or
3.	Funds Deposit;

without diminution or restriction because of the insolvency of either the Reinsured or the Reinsurer for one or more of the following purposes set forth below:

     E. Draws shall be made only for the following purposes:

1.	To make payment to and reimburse the Reinsured for the Reinsurer’s share of Net Loss and other amounts paid by the Reinsured under its Policies and for which the Reinsurer is responsible under this Contract that is due to the Reinsured but unpaid by the Reinsurer including but not limited to the Reinsurer’s share of premium refunds and returns; and
2.	To obtain a cash advance of the entire amount of the remaining balance under any letter of credit in the event that the Reinsured:

a.	has received notice of non-renewal or expiration of the letter of credit or trust account;
b.	has not received assurances satisfactory to the Reinsured of any required increase in the amount of the letter of credit or trust account, or its replacement or other continuation of the letter of credit or trust account at least thirty (30) days before its stated expiration date;
c.	has been made aware that others may attempt to attach or otherwise place in jeopardy the security represented by the letter of credit or trust account; or

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d. has concluded that the trustee or issuing (or confirming) bank’s financial condition is such that the security represented by the letter of credit or trust account may be in jeopardy;

and under any of those circumstances where the Reinsurer’s entire Obligations, or part thereof, under this Contract remain un-liquidated and un-discharged at least thirty (30) days prior to the stated expiration date or at the time the Reinsured learns of the possible jeopardy to the security represented by the letter of credit or trust account.

     F. If the Reinsured draws on the letter of credit or trust account to obtain a cash advance, the Reinsured will hold the amount of the cash advance so obtained in the name of the Reinsured in any qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state in trust solely to secure the Obligations referred to above and for the use and purposes enumerated above and to return any balance thereof to the Reinsurer:

1.	Upon the complete and final liquidation and discharge of all of the Reinsurer’s Obligations to the Reinsured under this Contract; or
2.	In the event the Reinsurer subsequently provides alternate or replacement security consistent with the terms hereof and acceptable to the Reinsured.

     G. The Reinsured will prepare and forward at annual intervals or more frequently as determined by the Reinsured, but not more frequently than quarterly to the Reinsurer a statement for the purposes of this Article, showing the Reinsurer’s share of Obligations as set forth above. If the Reinsurer’s share thereof exceeds the then existing balance of the security provided, the Reinsurer will, within fifteen (15) days of receipt of the Reinsured’s statement, but never later than December 31 of any year, increase the amount of the letter of credit, (or subsequent cash deposit), trust account or Funds Deposit to the required amount of the Reinsurer’s share of Obligations set forth in the Reinsured’s statement, but never later than December 31 of any year. If the Reinsurer’s share thereof is less than the then existing balance of the cash advance, the Reinsured will release the excess thereof to the Reinsurer upon the Reinsurer’s written request. The Reinsurer will not attempt to prevent the Reinsured from holding the cash advance or Funds Deposit so long as the Reinsured is acting in accordance with this Article.

     H. Any assets deposited to a trust account will be valued according to their current fair market value and will consist only of cash (U.S. legal tender), certificates of deposit issued by a qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state and payable

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in cash, and investments of the types no less conservative than those specified in Section 1404 (a)(1)(2)(3) (8) and (10) of the New York Insurance Law and which are admitted assets under the Insurance Law of the Reinsured’s domiciliary state. Investments issued by the parent, subsidiary, or affiliate of either the Reinsured or the Reinsurer will not be eligible investments. All assets so deposited will be accompanied by all necessary assignments, endorsements in blank, or transfer of legal title to the trustee in order that the Reinsured may negotiate any such assets without the requirement of consent or signature from the Reinsurer or any other entity.

     I. All settlements of account between the Reinsured and the Reinsurer will be made in cash or its equivalent. All income earned and received by the amount held in an established trust account will be added to the principal.

     J. The Reinsured’s “successors in interest” will include those by operation of law, including without limitation, any liquidator, rehabilitator, receiver, or conservator.

     K. The Reinsurer will take any other reasonable steps that may be required for the Reinsured to take full credit on its statutory financial statements for the reinsurance provided by this Contract.

ARTICLE XVII — SERVICE OF SUIT

     A. This Article only applies to Reinsurers domiciled outside of the United States and/or unauthorized in any state, territory or district of the United States having jurisdiction over the Reinsured. Furthermore, this Article will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Article entitled “Arbitration”. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Article entitled “Arbitration” for resolving disputes arising out of this Contract.

     B. In the event of any dispute, the Reinsurer, at the request of the Reinsured, shall 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 any obligation to arbitrate disputes arising from this Contract or 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.

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     C. Service of process in any such suit against the Reinsurer may be made upon Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or the entity identified on the Reinsurer’s signature page to this Contract, (whichever applicable shall be hereinafter referred to as the “Firm”) and in any suit instituted, the Reinsurer shall abide by the final decision of such court or of any Appellate Court in the event of an appeal.

     D. The Firm is authorized and directed to accept service of process on behalf of the Reinsurer in any such suit and/or upon the request of the Reinsured to give a written undertaking to the Reinsured that they shall enter a general appearance upon the Reinsurer’ behalf in the event such a suit shall be instituted.

     E. Further, as required by and pursuant to any statute of any state, territory or district of the United States which makes provision therefore, the Reinsurer hereby designates 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 their 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 Reinsured or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE XVIII — ARBITRATION

     A. Any and all disputes between the Reinsured and the Reinsurer arising out of, relating to, or concerning this Contract, whether sounding in contract or tort and whether arising during or after termination of this Contract, shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire (“Board”) meeting at a site in the city in which the principal headquarters of the Reinsured are located. The arbitration shall be conducted under the Federal Arbitration Act and shall proceed as set forth below.

     B. A notice requesting arbitration, or any other notice made in connection therewith, shall be in writing and be sent certified or registered mail, return receipt requested to the affected parties. The notice requesting arbitration shall state in particulars all issues to be resolved in the view of the claimant, shall appoint the arbitrator selected by the claimant and shall set a tentative date for the hearing, which date shall be no sooner than ninety (90) days and no later than one hundred fifty (150) days from the date that the notice requesting arbitration is mailed. Within thirty (30) days of receipt of claimant’s notice, the respondent shall notify claimant of any additional issues to be resolved in the arbitration and of the name of its appointed arbitrator.

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     C. Unless otherwise mutually agreed, the members of the Board shall be impartial and disinterested and shall be current or former senior officers of property-casualty insurance companies, reinsurance companies, or Lloyds Underwriters or active or inactive lawyers with at least twenty (20) years of experience in insurance and reinsurance not currently representing any party participating in the arbitration. The Reinsured and the Reinsurer as aforesaid shall each appoint an arbitrator and the two (2) arbitrators shall choose a third arbitrator before instituting the hearing. As time is of the essence, if the respondent fails to appoint its arbitrator within thirty (30) days after having received claimant’s written request for arbitration, the claimant is authorized to and shall appoint the second arbitrator. If the two (2) arbitrators fail to agree upon the appointment of an umpire within thirty (30) days after notification of the appointment of the second arbitrator, within ten (10) days thereof, the two (2) arbitrators shall request ARIAS U. S. (“ARIAS”) to apply its procedures to appoint a third arbitrator for the arbitration with the qualifications set forth above in this Article. If the use of ARIAS procedures fails to name an umpire, either party may apply to the court named below to appoint an umpire with the above required qualifications. The third arbitrator shall promptly notify in writing all parties to the arbitration of his selection and of the scheduled date for the hearing. Upon resignation or death of any member of the Board, a replacement shall be appointed in the same fashion as the resigning or deceased member was appointed.

     D. The claimant and respondent shall each submit initial briefs to the Board outlining the facts, the issues in dispute and the basis, authority, and reasons for their respective positions within thirty (30) days of the date of notice of appointment of the umpire. The claimant and the respondent may submit a reply brief to the Board within ten (10) days after filing of the initial brief(s). Initial and reply briefs may be amended by the submitting party at any time, but not later than ten (10) days prior to the date of commencement of the arbitration hearing. Reasonable responses shall be allowed at the arbitration hearing to new material contained in any amendments filed to the briefs but not previously responded to.

     E. The Board shall consider this Contract as an honorable engagement and shall make a decision and award with regard to the terms expressed in this Contract, the original intentions of the parties to the extent reasonably ascertainable, and the custom and usage of the property and casualty insurance and reinsurance business.

     F. The Board shall be relieved of all judicial formalities and the decision and award shall be based upon a hearing in which evidence shall be allowed though the formal rules of evidence shall not strictly apply. Cross examination and rebuttal shall be allowed. At its own election or at the request of the Board, either party may submit a post-hearing brief for consideration of the Board within twenty (20) days of the close of the hearing.

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     G. The Board shall render its decision and award in writing within thirty (30) days following the close of the hearing or the submission of post-hearing briefs, whichever is later, unless the parties consent to an extension. Every decision by the Board shall be by a majority of the members of the Board and each decision and award by the majority of the members of the Board shall be final and binding upon all parties to the proceeding.

     H. The Board may award (i) interest at a rate of up to four hundred (400) basis points above the prime rate as published in the Wall Street Journal (eastern edition), but not less than five percent (5%) per annum, on the date of the award calculated from the date the Board determines that any amounts due the prevailing party should have been paid to the prevailing party, (ii) attorney fees and punitive, exemplary, or treble damages if the actions of either party in prosecuting, defending or causing the arbitration are made in bad faith and constitute outrageous behavior in the opinion of the Board.

     I. Either party may apply to a court of competent jurisdiction for an order confirming any decision and the award; a judgment of that Court shall thereupon be entered on any decision or award. If such an order is issued, the attorneys’ fees of the party so applying and court costs will be paid by the party against whom confirmation is sought.

     J. Except in the event of a consolidated arbitration, each party shall bear the expense of the one arbitrator appointed by it and shall jointly and equally bear with the other party the expense of any stenographer requested, and of the umpire. The remaining costs of the arbitration proceedings shall be finally allocated by the Board.

     K. Subject to customary and recognized legal rules of privilege, each party participating in the arbitration shall have the obligation to produce those documents and as witnesses at the arbitration those of its employees, those of its affiliates as any other participating party reasonably requests which are relevant providing always that the same witnesses and documents be obtainable and relevant to the issues before the arbitration and not be unduly burdensome or excessive.

     L. The parties may mutually agree as to pre-hearing discovery prior to the arbitration hearing and in the absence of agreement, upon the request of any party, pre-hearing discovery may be conducted as the Board shall determine in its sole discretion to be in the interest of fairness, full disclosure, and a prompt hearing, decision and award by the Board.

     M. The Board shall be the final judge of the procedures of the Board, the conduct of the arbitration, of the rules of evidence, the rules of privilege and production and of excessiveness and relevancy of any witnesses and documents upon the petition of any participating party. To the extent permitted by law, the

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Board shall have the authority to issue subpoenas and other orders to enforce their decisions. The Board shall also have the authority to issue interim decisions or awards in the interest of fairness, full disclosure, and a prompt and orderly hearing and decision and award by the Board.

     N. Upon request of the Reinsured made to the affected Reinsurers and to the Board not later than ten (10) days after the third arbitrator’s appointment, the Board may order a consolidated hearing between the Reinsured and all affected Reinsurers participating in this Contract if the Board is satisfied in its discretion that the issues in dispute affect more than one Reinsurer and a consolidated hearing would be in the interest of fairness, and a prompt and cost effective resolution of the issues in dispute.

     O. If the parties mutually agree to or the Board orders a consolidated hearing, all other affected participating Reinsurers shall join and participate in the arbitration under time frames established by the Board and will be bound by the Board’s decision and award unless excused by the Board in its discretion.

     P. Any Reinsurer may decline to actively participate in a consolidated arbitration if in advance of the hearing, that Reinsurer shall file with the Board a written agreement in form satisfactory to the Board to be bound by the decision and award of the Board in the same fashion and to the same degree as if it actively participated in the arbitration.

     Q. In the event of an order of consolidation by the Board, the arbitrator appointed by the original Reinsurer shall be subject to being and may be replaced within thirty (30) days of the decision to have a consolidated arbitration by an arbitrator named collectively by the Reinsurers or in the absence of agreement, by the Lead Reinsurer, or if there is no Lead Reinsurer, the Reinsurer with the largest participation in this Contract affected by the dispute. In the event two (2) or more Reinsurers affected by the dispute each have the same largest participation, they shall agree among themselves as to the replacement arbitrator, if any, to be appointed. The third arbitrator shall be the final determiner in the event of any dispute over replacement of that arbitrator. All other aspects of the arbitration shall be conducted as provided for in this Article provided that (1) each party actively participating in the consolidated arbitration will have the right to its own attorney, position, and related claims and defenses; (2) each party will not, in presenting its position, be prevented from presenting its position by the position set forth by any other party; and (3) the cost and expense of the arbitration, exclusive of attorney’s fees (which will be borne exclusively by the respective retaining party) but including the expense of any stenographer by each party actively participating in the consolidated arbitration or as the Board shall determine to be fair and appropriate under the circumstances.

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ARTICLE XIX — INSOLVENCY

     A. In the event of insolvency and the appointment of a conservator, liquidator, or statutory successor of the Reinsured, the portion of any risk or obligation assumed by the Reinsurer shall be payable to the conservator, liquidator, or statutory successor on the basis of claims allowed against the insolvent Reinsured by any court of competent jurisdiction or by any conservator, liquidator, or statutory successor of the Reinsured having authority to allow such claims, without diminution because of that insolvency, or because the conservator, liquidator, or statutory successor has failed to pay all or a portion of any claims.

     B. Payments by the Reinsurer as above set forth shall be made directly to the Reinsured or to its conservator, liquidator, or statutory successor, except where this contract of reinsurance specifically provides another payee of such reinsurance or except as provided by applicable law and regulation (such as subsection (a) of section 4118 of the New York Insurance laws) in the event of the insolvency of the Reinsured.

     C. In the event of the insolvency of the Reinsured, the liquidator, receiver, conservator or statutory successor of the Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Reinsured on the Policy or Policies reinsured within a reasonable time after such claim is filed in the insolvency proceeding and during the pendency of such claim any 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 which it may deem available to the Reinsured or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Reinsured as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Reinsured solely as a result of the defense undertaken by the Reinsurer.

     D. Where two (2) or more Reinsurers are involved in the same claim and a majority in interest elects 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 Reinsured.

ARTICLE XX — CLAIMS COOPERATION

          When so requested in writing, the Reinsured shall afford the Reinsurer or its representatives an opportunity to be associated with the Reinsured, at the expense of the Reinsurer, in the defense of any claim, suit or proceeding involving this Contract, and the Reinsured and the Reinsurer shall cooperate in every respect in the defense of such claim, suit or proceeding, provided the Reinsured shall have the right to make any decision in the event of disagreement over any matter of defense or settlement subject always to the conditions of the Article entitled “Original Conditions”.

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ARTICLE XXI — CONFIDENTIALITY

     A. The information, data, statements, representations and other materials provided by the Reinsured or the Reinsurer to the other arising from consideration and participation in this Contract whether contained in the reinsurance submission, this Contract, or in materials or discussions arising from or related to this Contract, may contain confidential or proprietary information as expressly indicated by the disclosing party in writing from time to time to the other party of the respective parties (“Confidential Information”). This Confidential Information is intended for the sole use of the parties to this Contract (and their retrocessionaires, respective auditors and legal counsel) as may be necessary in analyzing and/or accepting a participation in and/or executing their respective responsibilities under or related to this Contract. Disclosing or using Confidential Information disclosed under this Contract for any purpose beyond (i) the scope of this Contract, (ii) the reasonable extent necessary to perform rights and responsibilities expressly provided for under this Contract, (iii) the reasonable extent necessary to administer, report to and effect recoveries from retrocessional Reinsurers, or (iv) persons with a need to know the information and who are obligated to maintain the confidentiality of the Confidential Information or who have agreed in writing to maintain the confidentiality of the Confidential Information is expressly forbidden without the prior written consent of the disclosing party. Copying, duplicating, disclosing, or using Confidential Information for any purpose beyond this expressed purpose is forbidden without the prior written consent of the disclosing party.

     B. Should a party (“Receiving Party”) receive a third party demand pursuant to subpoena, summons, or court or governmental order, to disclose Confidential Information that has been provided by another party to this Contract (“Disclosing Party”), the Receiving Party shall, to the extent permitted by law, make commercially reasonable efforts to notify the Disclosing Party promptly upon receipt of the demand and prior to disclosure of the Confidential Information and provide the Disclosing Party a reasonable opportunity to object to the disclosure. If such notice is provided, the Receiving Party may after the passage of five (5) business days after providing notice, proceed to disclose the Confidential Information as necessary to satisfy such a demand without violating this Contract. If the Disclosing Party timely objects to the release of the Confidential Information, the Receiving Party will comply with the reasonable requests of the Disclosing Party in connection with the Disclosing Party’s efforts to resist release of the Confidential Information. The Disclosing Party shall bear the cost of resisting the release of the Confidential Information.

ARTICLE XXII — LATE PAYMENTS

     A. Payments from the Reinsurer to the Reinsured shall have as a due date the date on which the Reinsured Reasonable Evidence of Amount Due is received by the Reinsurer, and shall be overdue sixty (60) days thereafter.

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Payments due from the Reinsurer to the Reinsured will not be considered overdue if the Reinsurer requests, in writing, that such payment be made by drawing on a letter of credit or other similar method of funding that has been established for this Contract, provided that there is an adequate balance in place, and further provided that such advice to draw is received by the Reinsured within the sixty (60) day deadline set forth above. Payments from the Reinsured to the Reinsurer will have a due date as the date specified in this Contract and will be overdue sixty (60) days thereafter. Premium adjustments will be overdue sixty (60) days from the Contract due date or one hundred (120) days after the expiration or renewal date, whichever is greater.

     B. The Reinsured will provide the Reinsurer with reasonable evidence of amount due, supplemented by copies of any proof of loss and a copy of the claim adjuster’s report(s) or any other reasonable evidence of indemnification. If subsequent to receipt of this evidence, the information contained therein is unreasonably insufficient or not in substantial accordance with the contractual conditions of this Contract, then the payment due date as specified above will be deemed to be the date upon which the Reinsurer received the additional information necessary to approve payment of the claim and the claim is presented in a reasonably acceptable manner. This paragraph is only for the purpose of establishing when a claim payment is overdue, and will not alter the provisions of the Article entitled “Reports, Loss and Loss Settlements” or other pertinent contractual stipulations of this Contract.

     C. If payment is made of overdue amounts within thirty (30) days of the due date, overdue amounts will bear simple interest from the overdue date at a rate determined by the one-month London Interbank Offered Rate for the first business day of the calendar month in which the amount becomes overdue, as published in The Wall Street Journal, plus four hundred (400) basis points to be calculated weekly. If payment is made of overdue amounts more than thirty (30) days after the due date, overdue amounts will bear simple interest from the overdue date at a rate determined by the one-month London Interbank Offered Rate for the first business day of the calendar month in which the amount becomes overdue, as published in The Wall Street Journal, plus four hundred basis (400) points to be calculated weekly but in no event less than five percent (5%) simple interest. If the sum of the compensating additional amount computed in respect of any overdue payment is less than 0.25% of the amount overdue, or $1,000, whichever is greater, and/or the overdue period is one week or less, then the interest amount shall be waived. The basis point standards referred to above shall be doubled if the late payment is due from a Reinsurer who is no longer an active reinsurance market.

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ARTICLE XXIII — OFFSET

          The Reinsured and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise and immediately inform the Intermediary accordingly. In the event of the insolvency of any party, offset shall be as permitted by applicable law.

ARTICLE XXIV — SPECIAL TERMINATION

     A. The Reinsured may terminate or commute this Contract upon the happening of any one (1) of the following circumstances at any time by the giving of fifteen (15) days prior written notice to the Reinsurer:

1.	The Reinsurer ceases active underwriting operations or a State Insurance Department or other legal authority orders the Reinsurer to cease writing business in all jurisdictions; or
2.	The Reinsurer has: a) become insolvent, b) been placed under supervision (voluntarily or involuntarily), c) been placed into liquidation or receivership, or d) had instituted against it proceedings for the appointment of a supervisor, 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
3.	The Reinsurer’s (a) policyholders’ surplus (“PHS”) has been reduced by whichever is greater, (i) twenty percent (20%) of the amount of PHS at the inception of this Contract or (ii) twenty percent (20%) of the amount of PHS stated in its last filed quarterly or annual statutory statement with its state of domicile; or (b) AM Best’s insurer financial strength rating becomes less than “A-” (N.B. as respects alien Reinsurers, a Standard & Poor’s Insurance Rating of less than “BBB” will apply; as respects Lloyd’s Syndicates where an AM Best insurer financial strength rating is not available, a reduction of the Reinsurer’s S&P Lloyd’s Syndicate Assessment (LSA) ranking from the LSA ranking that was in effect at either the inception of this Contract or the beginning of the most current annual term of this Contract will apply); or
4.	The Reinsurer has entered into a definitive agreement to (a) become merged with, acquired or controlled by any company, corporation or individual(s) not affiliated with or controlling the party’s operations previously; or (b) directly or indirectly

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assign all or essentially all of its entire liability for Obligations (as defined in the Article entitled “Reserves”) under this Contract to another party without the Reinsured’s prior written consent; or

5. There is either (a) a severance or obstruction of free and unfettered communication and/or normal commercial or financial intercourse between the United States of America and the country in which the Reinsurer is incorporated or has its principal office as a result of war, currency regulations or any circumstances arising out of political, financial or economic uncertainty; or (b) a severance (of any kind) of any two or more of the following executives of the Reinsurer from active employment of the Reinsurer during the most recent sixty (60) day period: President, Chief Underwriting Officer, Chief Actuary, Chief Claims Officer or Chief Financial Officer.

     B. In the event that notice of termination is given by reason of an event described in A3 above (the “Termination Notice”) and prior to the effective date of the termination (the “Termination Date”), the Chief Financial Officer of the Reinsurer represents and certifies in writing to the Reinsured that (i) the deterioration of the Reinsurer’s financial condition is the direct and sole result of a recent major property catastrophe(s) or the result of an Act(s) of Terrorism (either the “Event”) and (ii) that it is actively seeking and has a high probability of successfully obtaining additional capital to substantially replace the capital loss because of the Event (the “Extension Notice”), the Termination Date shall be extended an additional thirty (30) days from the Termination Date (the “Extended Termination Date”). If prior to the Extended Termination Date, the Chief Financial Officer of the Reinsurer represents and certifies in writing to the Reinsured that (a) it has raised sufficient capital so as to return its PHS to within five percent (5%) of the Reinsurer’s PHS last filed with its domiciliary regulatory authorities prior to the Event, (b) obtained reinstatement of its rating agency grade(s) to the level as existed immediately prior to the Event, the Termination Notice shall be null and void. Otherwise, this Contract shall terminate on the Extended Termination Date in the manner described in the Termination Notice.

     C. In the event the Reinsured elects termination, the Reinsured shall with the notice of termination specify that termination will be on a cut-off basis and thus relieve the Reinsurer for losses occurring subsequent to the Reinsurer’s specified termination date. The Reinsurer shall within fifteen (15) days of the termination date return the liability for the unearned portion of any ceded premium paid hereunder, calculated as of the termination date, and cash in that amount and the minimum premium provisions, if any, shall be waived.

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     D. In the event the Reinsured elects to commute, the Reinsurer shall return the sum total of the net present value (“capitalized”) of the ceded (1) Reserves for Net Loss outstanding, (2) Reserves for Net Loss incurred but not reported, and (3) unearned premium reserves. In the event the parties are unable to agree on the capitalized value of the reserves to be returned to the Reinsured, the Reinsured and the Reinsurer shall jointly appoint an independent and neutral actuary experienced in such matters and the mutually agreed actuary shall render a decision. In the event that the Reinsured and the Reinsurer are unable to agree upon a single actuary within thirty (30) days, the parties shall ask the then current President of the Casualty Actuarial Society to appoint an actuary with those qualifications within another thirty (30) days. The decision of the actuary will be final and binding on both parties. The Reinsured and the Reinsurer shall share equally the fees and expenses of the actuary. Upon payment of the amount so agreed or determined by the actuary to the Reinsured, the Reinsurer and the Reinsured shall each be completely released from all liability to each other under this Contract.

     E. If the Reinsurer is not otherwise obligated under the Article entitled “Reserves” of this Contract, to provide the Reinsured security in order for the Reinsured to obtain credit for the reinsurance provided by this Contract and the Reinsurer has not cured the conditions described above, other than as expressed in conditions 5 and 6 above, the Reinsured shall also have the option, if it does not elect the commutation option described above, to require the Reinsurer to provide the Reinsured with collateral funding as if the Reinsurer were otherwise obligated to provided security for the Reinsurer’s obligations under this Contract in an amount and manner and as provided for under the Article entitled “Reserves” of this Contract. The Reinsured shall have the option to require the Reinsurer to provide collateral funding but, provided it is reasonably acceptable to the Reinsured and any insurance regulatory authorities involved, the Reinsurer shall have the sole option of determining the method of funding referred to above. In recognition of security a participating Reinsurer or Lloyd’s Syndicate may place under the terms of a master trust agreement, such as the US Lloyd’s Credit for Reinsurance Trust, the provisions of this Paragraph shall not apply to that participating Reinsurer or Lloyd’s Syndicate that has fully funded 100% of the Obligations to the Reinsured, as the term Obligations is defined in the Article entitled “Reserves”, pursuant to the terms of that trust agreement and the applicable funding requirements and procedures.

ARTICLE XXV — TERRORISM RECOVERY — TERRORISM RISK INSURANCE ACT OF 2002

     A. As respects the Insured Losses of the Reinsured for each Program Year, to the extent the Reinsured’s total reinsurance recoverables for Insured Losses, whether collected or not, when combined with the financial assistance available to the Reinsured under the Act exceeds the aggregate amount of Insured Losses paid by the Reinsured, less any other recoveries or reimbursements, (the

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“Excess Recovery”), a share of the Excess Recovery shall be allocated to the Reinsured and the Reinsurer. The Reinsured’s share of the Excess Recovery shall be deemed to be an amount equal to the proportion that the Reinsured’s Insured Losses bear to the Insurer’s total Insured Losses for each Program Year. The Reinsurer’s share of the Excess Recovery shall be deemed to be an amount equal to the proportion that the Reinsurer’s payment of Insured Losses under this Contract bears to the Reinsured’s total collected reinsurance recoverables for Insured Losses. The Reinsured shall provide the Reinsurer with all necessary data respecting the transactions covered under this Article.

     B. The method set forth herein for determining an Excess Recovery is intended to be consistent with the United States Treasury Department’s construction and application of Section 103 (g)(2) of the Act. To the extent it is inconsistent, it shall be amended to conform with such construction and application, nevertheless the Reinsured shall be the sole judge as to the allocation of TRIA Recoveries to this or to other reinsurance Contracts.

     C. “Act” as used herein shall mean the Terrorism Risk Insurance Act of 2002 and any subsequent amendment thereof or any regulations promulgated thereunder. “Reinsured” shall have the same meaning as “Insurer” under the Act and “Insured Losses”, and “Program Year” shall follow the definitions as provided in the Act.

ARTICLE XXVI — VARIOUS OTHER TERMS

     A. This Contract shall be binding upon and inure to the benefit of the Reinsured and Reinsurer and their respective successors and assigns provided, however, that this Contract may not be assigned by either party without the prior written consent of the other which consent may be withheld by either party in its sole unfettered discretion. This provision shall not be construed to preclude the assignment by the Reinsured of reinsurance recoverables to another party for collection.

     B. The territorial limits of this Contract shall be identical with those of the Reinsured’s Policies.

     C. This Contract shall constitute the entire agreement between the parties with respect to the Business Covered hereunder. There are no understandings between the parties other than as expressed in this Contract or any amendment thereto. Any change or modification of this Contract shall be null and void unless made by amendment to the Contract and signed by both parties or otherwise clearly and unequivocally amended by exchange of letters or electronic mail. Nothing in this Article shall act to preclude the introduction of submission-related documents in any dispute between the parties.

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     D. Except as may be provided in the Article entitled “Arbitration”, this Contract shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania, exclusive of that state’s rules with respect to conflicts of law.

     E. The headings preceding the text of the Articles and paragraphs of this Contract are intended and inserted solely for the convenience of reference and shall not affect the meaning, interpretation, construction or effect of this Contract.

     F. This Contract is solely between the Reinsured and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract.

     G. If any provisions 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.

     H. The failure of the Reinsured or Reinsurer to insist on strict compliance with this Contract or to exercise any right or remedy shall not constitute a waiver of any rights contained in this Contract nor estop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising any remedy.

     I. Each party shall be excused for any reasonable failure or delay in performing any of its respective obligations under this Contract, if such failure or delay is caused by Force Majeure. “Force Majeure” shall mean any act of God, strike, lockout, act of public enemy, any accident, explosion, fire, storm, earthquake, flood, drought, peril of sea, riot, embargo, war or foreign, federal, state or municipal order or directive issued by a court or other authorized official, seizure, requisition or allocation, any failure or delay of transportation, shortage of or inability to obtain supplies, equipment, fuel or labor or any other circumstance or event beyond the reasonable control of the party relying upon such circumstance or event; provided, however, that no such Force Majeure circumstance or Event shall excuse any failure or delay beyond a period exceeding ten (10) days from the date such performance would have been due but for such circumstance or Event.

     J. The Obligations of each Reinsurer with respect to this Contract are several and not joint and in the event of any failure or default by any Reinsurer to perform any of its Obligations hereunder, no other Reinsurer shall have any obligation with respect to such failure or default.

     K. This Contract may be executed by the parties hereto in any number of counterparts, and by each of the parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

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ARTICLE XXVII — INTERMEDIARY

     A. Towers Perrin Forster & Crosby, 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 Reinsured or the Reinsurer through Towers Perrin, 1500 Market Street, Centre Square East, Philadelphia, PA 19102-4790. Payments by the Reinsured 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 Reinsured only to the extent that such payments are actually received by the Reinsured.

     B. Whenever notice is required within this Contract, such notice may be given by certified mail, registered mail, or overnight express mail. Notice shall be deemed to be given on the date received by the receiving party.

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SCHEDULE A

TARGET AREA ZIP CODES

ZIP CODE	US STATE	US COUNTY
10022	NEW YORK	NEW YORK
89109	NEVADA	CLARK
10017	NEW YORK	NEW YORK
10036	NEW YORK	NEW YORK
10019	NEW YORK	NEW YORK
10020	NEW YORK	NEW YORK
60606	ILLINOIS	COOK
10001	NEW YORK	NEW YORK
10038	NEW YORK	NEW YORK
22102	VIRGINIA	FAIRFAX
10004	NEW YORK	NEW YORK
10021	NEW YORK	NEW YORK
60603	ILLINOIS	COOK
55402	MINNESOTA	HENNEPIN
92618	CALIFORNIA	ORANGE
23607	VIRGINIA	NEWPORT NEWS CITY
90245	CALIFORNIA	LOS ANGELES (REST OF)
60611	ILLINOIS	COOK
94104	CALIFORNIA	SAN FRANCISCO
90278	CALIFORNIA	LOS ANGELES (REST OF)
92101	CALIFORNIA	SAN DIEGO

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EX-10.5

Exhibit 10.5

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE MARCH 1, 2007

between

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY

BALA CYNWYD, PENNSYLVANIA, USA

(hereinafter called the “Reinsured”)

by

VALIDUS REINSURANCE, LTD.

HAMILTON, BERMUDA

(hereinafter called the “Reinsurers”)

Under the terms of this Contract, the above
Reinsurers agree to assume severally and not jointly
with other participants

a 20.00% share

of the liability described in the attached Contract and, as
consideration, the above Reinsurers shall receive a 20.00% share
of the premium named therein.

Signed in Hamilton, Bermuda, this 18th day of September, 2007,

VALIDUS REINSURANCE, LTD.
BY:	/s/ JEFF A. CLEMENTS
	TITLE: EXECUTIVE VICE PRESIDENT

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and signed in Bala Cynwyd, Pennsylvania, this 24th day of August, 2007.

PHILADELPHIA INSURANCE COMPANY And PHILADELPHIA INDEMNITY INSURANCE COMPANY
BY:	/s/ CHRISTOPHER MAGUIRE
	TITLE: EXECUTIVE VICE PRESIDENT AND CHIEF UNDERWRITING OFFICER

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE MARCH 1, 2007

between

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY

BALA CYNWYD, PENNSYLVANIA, USA

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PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania, USA

TERRORISM CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT

INDEX

Article I	BUSINESS COVERED	PAGE 1
Article II	COMMENCEMENT AND TERMINATION	PAGE 2
Article III	REINSURANCE COVERAGE	PAGE 2
Article IV	EXCLUSIONS	PAGE 5
Article V	REINSURANCE PREMIUM	PAGE 7
Article VI	DEFINITION OF LOSS OCCURRENCE	PAGE 8
Article VII	NET RETAINED LINES	PAGE 8
Article VIII	REVIEW	PAGE 9
Article IX	REPORTS, LOSS AND LOSS SETTLEMENTS	PAGE 11
Article X	ORIGINAL CONDITIONS	PAGE 12
Article XI	ERRORS AND OMISSIONS	PAGE 12
Article XII	CURRENCY	PAGE 13
Article XIII	FEDERAL EXCISE TAX AND OTHER TAXES	PAGE 13
Article XlV	ACCESS TO RECORDS	PAGE 13
Article XV	RESERVES	PAGE 14
Article XVI	SERVICE OF SUIT	PAGE 17
Article XVIl	ARBITRATION	PAGE 18
Article XVIll	INSOLVENCY	PAGE 22
Article XlX	CLAIMS COOPERATION	PAGE 23
Article XX	CONFIDENTIALITY	PAGE 23
Article XXI	LATE PAYMENTS	PAGE 24
Article XXIl	OFFSET	PAGE 25
Article XXIll	SPECIAL TERMINATION	PAGE 25
Article XXlV	TERRORISM RECOVERY — TERRORISM RISK INSURANCE ACT OF 2002	PAGE 28
Article XXV	VARIOUS OTHER TERMS	PAGE 28
Article XXVI	INTERMEDIARY	PAGE 30

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1.

PHILADELPHIA INSURANCE COMPANY
And
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania, USA
(hereinafter referred to as the “Reinsured”)

TERRORISM CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(hereinafter referred to as the “Contract”)

ARTICLE I — BUSINESS COVERED

A. This Contract applies to losses occurring during its term on all Covered Policies, except as hereinafter excluded, classified by the Reinsured as Property or Casualty, that are in force at the inception of, or written with a Policy period (new or renewal) that is effective during the term of this Contract.

B. The term “Covered Policies”, whenever used herein, shall mean all binders, policies, contracts, certificates and other obligations, whether oral or written, of insurance or reinsurance written and classified for the annual statement lines as indicated:

Check	Line of Business	Check	Line of Business	Check
	Inland Marine		Other Casualty
	Commercial Property	x	Professional Liability	x
	Personal Lines;		Wet Marine
	however, Personal
	Automobile shall be
	excluded
	Liability	x	Other lines of		Line of Business
			business		(to be filled in as
					applicable)
	Umbrella Liability	x

Covered Policies hereunder shall be written on standard industry policy forms of the line(s) of business indicated and which include cover for Acts of Terrorism. Forms substantially similar to ISO forms shall be deemed approved. Policy forms broader than the forms customarily used for the lines of business written by the Reinsured will be submitted for the Reinsurers’ prior review and approval. Any material changes made to such forms shall be subject to prior notice as set forth in the Article entitled “Review”.

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ARTICLE II — COMMENCEMENT AND TERMINATION

     A. This Contract shall incept at 12:01 a.m., Eastern Standard Time, March 1, 2007 and shall remain in force until 12:01 a.m., Eastern Standard Time, March 1, 2008 (“Contract Term”). Should this Contract terminate while a Loss Occurrence is in progress, the entire loss arising out of the Loss Occurrence shall be subject to this Contract.

     B. If the Reinsurer has a genuine interest in renewing this Contract for one additional 12 month contract period at the Contract’s then current prevailing terms, it shall give the Reinsured, at least 180 days prior to the expiration date of this Contract, written notice of that intention and request and the parties shall execute an endorsement to that effect no later than 150 days prior to the scheduled expiration date of this Contract (the “deadline”). If no endorsement is executed by the deadline, the Reinsurer shall have no right to any such renewal.

ARTICLE III — REINSURANCE COVERAGE

Part One — Acts of Terrorism

Section I (applicable to Loss Occurrence covered in conjunction with TRIA/ TRIEA)

     A. With respect to losses occurring during the Contract Term on Covered Policies that are Business Covered (including, for the avoidance of doubt, lines of business that are Covered Policies hereunder, but not covered lines under TRIA/TRIEA), the Reinsurers shall be liable to, indemnify and reinsure the Reinsured for each and every Loss Occurrence that is a Certified Act of Terrorism, as defined and certified in accordance with TRIA, and as amended by TRIEA, for 100% of the excess Net Loss above an initial Net Loss to the Reinsured of USD10,000,000 each and every Loss Occurrence; but the Reinsurers shall not be liable for more than USD50,000,000 of Net Loss for each and every such Loss Occurrence.

     B. “Certified Act(s) of Terrorism” means any act that is certified by the Secretary of the Treasury in concurrence with the Secretary of State and the Attorney General of the United States pursuant to the Federal Terrorism Risk Insurance Act (“TRIA”) as amended by the Terrorism Risk Insurance Extension Act (“TRIEA”):

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Section II (applicable to Loss Occurrence not covered in conjunction with TRIA/ TRIEA)

     A. With respect to losses occurring during the Contract Term on Covered Policies that are Business Covered, the Reinsurers shall be liable to indemnify and reinsure the Reinsured for each and every Loss Occurrence that results from an Act of Terrorism that is not a Certified Act of Terrorism (“Non-Certified Act of Terrorism”), for 100% of the excess Net Loss above an initial Net Loss to the Reinsured of USD10,000,000 each and every Loss Occurrence; but the Reinsurers shall not be liable for more than USD50,000,000 of Net Loss for each and every such Loss Occurrence.

     B. For the purposes of this Section, an “Act of Terrorism” shall be any act or preparation in respect of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of any political, religious, ideological, or similar purpose 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:

(i)	involves violence against one or more persons; or
(ii)	involves damage to property; or
(iii)	endangers life other than that of the person committing the action; or
(iv)	creates a risk to health or safety of the public or a section of the public; or
(v)	involves physical loss, damage, cost, or expense caused by, contributed to by, resulting from, or arising out of or in connection with any action in directly responding to any Act of Terrorism; or
(vi)	are defined as such in any of the Reinsured’s policy forms that have been the subject of the Reinsurers’ express written prior review and approval.

     C. Loss or damage occasioned by riot, strikes, civil commotion, vandalism or malicious mischief as those terms have been interpreted by United States Courts to apply to insurance policies shall not be construed to be an “Act of Terrorism”.

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Section III (Applicable to both Section I and Section II)

     A. The Reinsurers’ liability in respect of excess Net Loss hereunder for losses occurring during the Contract Term shall be limited to USD100,000,000 in the aggregate as respects all Net Loss on Covered Policies that are Business Covered hereunder as a result of all Loss Occurrences taking place during the Contract Term in respect of both Section I and Section II combined.

     B. In the event that the Terrorism Insurance Program, (“TIP”) as established by TRIA and TRIEA terminates, the parties will endeavor to continue to employ the definitions of “Act of Terrorism” as set forth in Section 1 above, but for the certification by the Secretary of the Treasury. In the event that the parties cannot agree on whether such Loss Occurrence is subject to coverage under Section I or Section II, the decision shall be subject to the Article entitled “Arbitration” in this Contract and the payment due date shall be determined by the date of the Panel’s reasoned decision.

Part Two — Reinsurance Loss

     A. “Net Loss” shall mean the actual loss incurred by the Reinsured under Business Covered hereunder including (i) sums paid in settlement of claims and suits and in satisfaction of judgments, (ii) prejudgment interest when added to a judgment, (iii) all expenses incurred in connection with adjustment, defense, settlement and litigation of claims and suits, satisfaction of judgments, resistance to or negotiations concerning a loss (excluding the normal office expenses of the Reinsured and salaries of the Reinsured) and (iv) any interest on judgments other than prejudgment interest when added to a judgment.

     B. All salvages, recoveries, payments and reversals or reductions of verdicts or judgments (net of the cost of obtaining such salvage, recovery, payment or reversal or reduction of a verdict or judgment) whether recovered, received or obtained prior or subsequent to loss settlement under this Contract, including amounts recoverable under other reinsurance, whether collected or not, shall be applied as if recovered, received or obtained prior to the aforesaid settlement and shall be deducted from the actual losses sustained to arrive at the amount of the Net Loss. Nothing in this Article shall be construed to mean losses are not recoverable until the final Net Loss to the Reinsured finally has been ascertained.

     C. The Reinsurers shall be subrogated, as respects any loss for which the Reinsurers shall actually pay or become liable, but only to the extent of the amount of payment by or the amount of liability to the Reinsurers, to all the rights of the Reinsured against any person or other entity who may be legally responsible for damages as a result of said loss. Should the Reinsured elect not to enforce such rights, the Reinsurers are hereby authorized and empowered to bring any appropriate action in the name of the Reinsured or its policyholders, or otherwise to enforce such rights. The Reinsurers shall promptly remit to the Reinsured the amount of any judgment awarded in such an action in excess of the amount of payment by, or the amount of liability to, the Reinsurers hereunder.

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ARTICLE IV — EXCLUSIONS

     A. This Contract shall not cover any Net Loss arising from Certified Acts of Terrorism or Non-Certified Acts of Terrorism that results from:

1.	An act committed as part of the course of a war declared by the Congress of the United States of America as set forth in Section 102(1)(B)(i) of TRIA as amended by TREIA; or
2.	Seizure or illegal occupation; or
3.	Confiscation, requisition, detention, legal or illegal occupation, embargo, quarantine, or an order of public or governmental authority which deprives the insured of the use or value of the property, or arising from acts of contraband or illegal transportation or illegal trade; or
4.	Contingent Business Interruption, written as such, unless specially accepted by the Reinsurers hereon; or
5.	Workers Compensation and Employers Liability, written as such; or
6.	Pollutants or contaminants whether directly or indirectly arising from or as consequence of the discharge of pollutants or contaminants, which pollutants and contaminants shall include but not be limited to any solid, liquid, gaseous or thermal irritant, contaminant or toxic or hazardous substance or any substance the presence, existence or release of which endangers or threatens to endanger the health, safety or welfare of persons or the environment; or
7.	Electronic attack, including computer hacking or the introduction of any form of computer virus. Notwithstanding the foregoing, this Contract will respond to a Loss Occurrence arising from attacks involving the use of a mobile telephone, remote control, or radio controlled device or any other electronic device or system or such like in the launch and/or guidance system and/or firing mechanism and/or detonation of any explosive bomb, weapon or missile subject always to the other terms and conditions of this Contract; or
8.	Increased cost occasioned by any Public or Civil Authority’s enforcement of any ordinance or law regulating the reconstruction, repair or demolition of any property; or

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9	Cessation, fluctuation or variation in, or insufficiency of, water, gas or electricity supplies and telecommunications of any type or service; or
10.	Threat or hoax, in the absence of physical damage due to an act or series of Acts of Terrorism; or
11.	Burglary, house — breaking, theft or larceny or caused by any person taking part therein; or
12.	Extra Contractual Obligation. “Extra Contractual Obligation” means liabilities, including Loss Excess of Policy Limits, that are not covered under any other provision of this Contract and which arise from the handling of any claim on Business Covered hereunder by reason of alleged or actual negligence, gross negligence, fraud, or bad faith on the part of the Company. As used herein, “Loss Excess of Policy Limits” means any amount of loss, together with any legal costs and expenses incurred in connection therewith, paid as damages or in settlement by the Reinsured in excess of its Policy Limits, but otherwise within the coverage terms of the Policy, arising from an allegation or claim of its insured, its insured’s assignee, or other third party, which alleges negligence, gross negligence, bad faith or other tortuous conduct on the part of the Reinsured in the handling of a claim under a Policy subject to this Contract, in rejecting a settlement within the Policy Limits, in discharging a duty to defend or prepare the defense in the trial of an action against its insured, or in discharging its duty to prepare or prosecute an appeal consequent upon such an action. For the avoidance of doubt, the decision by the Reinsured to settle a claim for an amount within the coverage of the Policy but not within the Policy limit when the Reinsured has reasonable basis to believe that it may have liability to its insured or assignee or other third party on the claim will be deemed a Loss Excess of Policy Limits.

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     B. This Contract shall not cover any Net Loss arising from any part of Non-Certified Acts of Terrorism that results from a loss occasioned directly or indirectly by war or invasion (whether war be declared or not), hostile acts of sovereign or government entities, civil war, rebellion, revolution, insurrection, civil commotion assuming the proportions of or amounting to an uprising, military or usurped power or martial law or confiscation by order of any government or public authority.

ARTICLE V — REINSURANCE PREMIUM

Part One — Premium

     A. As premium for the reinsurance provided hereunder, the Reinsured shall pay the Reinsurers a flat premium of USD3,625,000 in two equal installments of USD1,812,500 on March 1, 2007 and September 1, 2007.

Part Two — Reinstatement Premium

     A. Each claim hereunder shall reduce the amount of the Reinsurers’ liability from the time of the Loss Occurrence by the sum paid, but the sum so reduced shall be reinstated immediately from the time of the Loss Occurrence.

     B. For each amount so reinstated, the Reinsured agrees to pay an additional premium calculated by multiplying 100% of the annual reinsurance premium earned hereon by the percentage that the amount reinstated bears to the limit (i.e., USD50,000,000) of this Contract. Nevertheless, the liability of the Reinsurers shall never be more than USD50,000,000 Net Loss in respect of any one Loss Occurrence, nor more than USD100,000,000 of Net Loss in all in respect of all Loss Occurrences during the Contract Term.

     C. A statement of reinstatement premium due the Reinsurers shall be prepared by the Reinsured and submitted to the Reinsurers with each loss payment request hereunder. The reinstatement premium shall be based upon 100% of the annual reinsurance premium earned by the Reinsurer hereunder. The amount of reinstatement premium due Reinsurers shall be offset against the loss payment due the Reinsured with only the net amount due to be remitted by the debtor party.

Part Three — No Claims Bonus

     A. In the event that no claims arise under this Contract then the Reinsurers will allow to the Reinsured a return premium equal to their participation in this Contract multiplied by USD250,000 payable effective March 1, 2008.

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     B. The return premium payment by the Reinsurers to the Reinsured shall constitute the commutation of this Contract and such payment once effected shall be regarded as a full and final release of the Reinsurers from all liability hereunder.

ARTICLE VI — DEFINITION OF LOSS OCCURRENCE

     A. The term “Loss Occurrence” shall mean any one loss and/or series of losses arising out of and directly caused by one Act or series of Acts of Terrorism for the same apparent purpose or cause. The duration and extent of any one Loss Occurrence shall be limited to all losses sustained by the Reinsured during any period of seventy-two (72) consecutive hours arising out of the same apparent purpose or cause. However, no such period of seventy-two (72) consecutive hours may extend beyond the expiration of this Contract unless direct physical damage by an Act of Terrorism occurs prior to the expiration and within said period of seventy-two (72) consecutive hours, nor shall any period of seventy-two (72) consecutive hours commence prior to the attachment of this reinsurance.

     B. As respects coverage provided in Section I of the Article entitled “Reinsurance Coverage”, Loss Occurrence shall be consistent with the determination of the Secretary of the Treasury of a Certified Act of Terrorism. As respects coverage provided in Section II of the Article entitled “Reinsurance Coverage”, all losses flowing from an apparently coordinated plan of attack shall be deemed a single Loss Occurrence even though they may be separate in time or space subject always to the above seventy-two (72) hour period.

ARTICLE VII — NET RETAINED LINES

     A. This Contract applies only to that portion of the exposure to loss from Acts of Terrorism on any Policy which the Reinsured 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 the exposure to loss from Acts of Terrorism on any Policy which the Reinsured retains net for its own account shall be included. Recoveries under TRIA and TRIEA referenced in Article entitle “Terrorism Recovery” shall be disregarded in calculating the Net Loss to which this reinsurance applies.

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

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     C. Where the Reinsured comprises more than one insurance company, reinsurance among the companies collectively called the “Reinsured” hereunder or between any of them and any of their affiliates under common control with the Reinsured shall be entirely disregarded for all purposes of this Contract.

     D. Permission is hereby granted to the Reinsured to carry underlying Terrorism reinsurance below the attachment of this Contract and recoveries made thereunder shall be disregarded for all purposes of this Contract and shall inure to the sole benefit of the Reinsured.

ARTICLE VIII — REVIEW

     A. The Reinsured has provided the Reinsurers, prior to the commencement of this Contract, with information concerning its Policy forms and Underwriting Practices and Covered Policies in respect to coverage for Acts of Terrorism. The Reinsured shall report to the Reinsurers as soon as practically possible upon the happening of any of the following:

1.	Change in control of the Reinsured via a closing upon a definitive agreement to sell or merge approved by the applicable regulatory authorities including but not limited to (a) become merged with, acquired or controlled by any company, corporation or individual(s) not controlling the party’s operations previously (though excluding transactions among entities under common control); or
2.	a transfer by portfolio transfer of the Business Covered; or
3.	Material Change in the Reinsured’s Underwriting Practices that materially increases the Reinsured’s underwriting exposure to a Loss Occurrence arising from an Act of Terrorism. For the purpose of this condition, a material change shall mean the following: (i) from inception, an increase of 20% or USD20,000,000, whichever is greater, or more in the Total Insured Values covered in those zip codes set forth in Schedule A, Target Area zip codes (“Target Area TIV Increase”) or (ii) any material change to the Reinsured’s coverage forms concerning terrorism (“Material Change”), or (iii) the commencement of the Reinsured offering terrorism coverage on a stand-alone basis (“Offering of Stand-Alone Terrorism”).

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As used herein, the reference to a “zip code” or a “Target Area zip code” shall mean that entire area encompassed by all zip codes within an area described by reference only to the first three digits of a zip code.

For example, an area made up of zip codes 89712, 89713, and 89714 will be considered for the purposes of this Contract the “zip code” or “Target Area zip code” of “897”

     B. In the event of a failure to timely report to the Reinsurers in sub-paragraphs A1. or A2. above, the Reinsurer shall have a right to cancel the Contract with 15 days advance notice.

     C. In the event of A3. above,

1.	The Reinsurer shall have the right to review the impact of any Material Change in the Reinsured’s Underwriting Practices and either accept the change or propose a modification to the terms of this Contract;
2.	In the event that: (i) the Material Change in the Reinsured’s Underwriting Practices is not reported to the Reinsurer in a timely fashion or (ii) the Reinsured does not accept the Reinsurer’s proposal to modify the terms of this Contract per sub-paragraph C1. above, then the following conditions shall apply:

a.	In respect of a Material Change or Offering of Stand-Alone Terrorism, no coverage shall be afforded hereunder for that portion of Net Loss from a Loss Occurrence that occurs after the date of the Material Change/Offering of Stand-Alone Terrorism that directly results from such Material Change and/or Offering of Stand-Alone Terrorism.
b.	In respect of a Target Area TIV Increase, the Reinsurer shall have the option to reduce the contribution to Net Loss in a Loss Occurrence from a Target Area according to the following fraction:

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(Total Insured Value in applicable Target Area at the inception of this Contract * 1.20)^* divided by actual Total Insured Value in applicable Target Area at the date of the Loss Occurrence.

^* In the event that USD20,000,000 is greater than 1.2 times the Total Insured Value in the applicable Target Area at the inception of this Contract, such amount shall be utilized rather than 1.2 times the Total Insured Value in the applicable Target Area at the inception of this Contract.

ARTICLE IX — REPORTS, LOSS AND LOSS SETTLEMENTS

Part One — Reinsured Exposures

     A. The Reinsured has provided the Reinsurers a statement of Reinsured Exposure prior to the Contract Term, (“Statement”), reflecting the Reinsured’s Total Insured Values for terrorism coverage at the date of that report (“Gross TIV”) plus the Total Insured Values for Terrorism coverage in the Target Area zip codes at the same date. The Reinsured shall provide the Reinsurers an updated Statement each calendar quarter thereafter during the Contract Term, reflecting the Gross TIV and the subtotal for the Total Insured Values for Terrorism coverage in the Target Area zip codes at the same date. Such report shall be due within ninety (90) days following the end of each calendar quarter.

     B. The term “Reinsured Exposure” shall mean the difference between the Gross TIV and the Total Insured Values for Terrorism coverage in the Target Area zip codes on the date of the report.

Part Two — Claim Reporting

     A. The Reinsured shall advise the Reinsurers promptly of all losses which, in the opinion of the Reinsured, are likely to result in a claim hereunder or are incurred in the Reinsured’s books at 50% of the retention hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurers. Inadvertent omission or oversight in giving such notice shall in no way affect the liability of the Reinsurers. However, the Reinsurers shall be informed of such omission or oversight promptly upon its discovery.

     B. The Reinsured shall have the right to settle all claims under its Policies. All loss settlements made by the Reinsured, within the terms and conditions of this Contract, and provided that such settlement is not an ex-gratia settlement made without the prior approval of the Reinsurers, shall be binding upon the Reinsurers, and the Reinsurers agree to pay or allow, as the case may be, their share of each such settlement in accordance with this Contract all amounts for which it is obligated immediately upon being furnished by the Reinsured with

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Reasonable Evidence of the Amount Due. Reasonable Evidence of the Amount Due shall consist of a notarized certification by an Officer of the Reinsured that the amount requested to be paid and submitted by the certification is due and payable to the Reinsured by the Reinsurers under the terms and conditions of this Contract.

     C. “Ex-gratia settlements”, as used in this Contract, will mean all settlements of losses not covered under the express terms of the policies that are primarily motivated by the customer business relationship. “Ex-gratia settlements” will not include settlements of losses which (1) arise from court decisions or other judicial acts or orders, (2) arise from the good faith position of the Reinsured of probable coverage under the Policies, nor (3) settlements made to avoid costs that could be incurred in connection with potential or actual litigation relating to coverage issues arising under the Policies subject to this Contract.

     D. In addition, the Reinsured shall furnish the Reinsurers a periodic statement showing the unearned premium, the total reserves for outstanding Net Losses including loss adjustment expense, and such other information as may be required by the Reinsurers for completion of their NAIC annual statements.

ARTICLE X — ORIGINAL CONDITIONS

          The Reinsurer’s liability to the Reinsured shall be subject in all respects to the same risks, terms, clauses, conditions, interpretations, alterations, modifications cancellations and waivers as the respective insurances of the Reinsured’s Policies and the Reinsurer shall pay losses as may be paid thereon, the true intent of this Contract being that in each and every case to which this Contract applies, the Reinsurer shall follow the settlements of the Reinsured, subject always to the limits, terms and conditions of this Contract.

ARTICLE XI — ERRORS AND OMISSIONS

          Inadvertent delays, errors or omissions made by the Reinsured in connection with this Contract (including the reporting of claims) shall not relieve the Reinsurer from any liability which would have attached had such delay, error or omission not occurred, provided always that such delay, error or omission shall be rectified as soon as possible after discovery by the Reinsured’s Home Office. Nothing in this Article shall, however, be held to override the provisions of the Article entitled “Review”.

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ARTICLE XII — CURRENCY

          Whenever the word “Dollars”, “USD” 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. Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE XIII — FEDERAL EXCISE TAX AND OTHER TAXES

     A. To the extent that any portion of the reinsurance premium for this Contract is subject to the Federal Excise Tax (as imposed under Section 4371 of the Internal Revenue Code) and the Reinsurer is not exempt therefrom, the Reinsurer shall allow for the purpose of paying the Federal Excise Tax, a deduction by the Reinsured of the applicable percentage of the premium payable hereon. In the event of any return of premium becoming due hereunder, the Reinsurer shall deduct the applicable same percentage from the return premium payable hereon and the Reinsured or its agent shall take steps to recover the tax from the United States Government. In the event of any uncertainty, upon the written request of the Reinsured, the Reinsurer will immediately file a certificate of a senior corporate officer of the Reinsurer certifying to its entitlement to the exemption from the Federal Excise Tax with respect to one or more transactions.

     B. In consideration of the terms under which this Contract is issued, the Reinsured undertakes not to claim any deduction of the premium hereon when making Canadian Tax returns or when making tax returns, other than Income or Profits Tax returns, to any State or Territory of the United States of America or to the District of Columbia.

ARTICLE XIV — ACCESS TO RECORDS

          The Reinsured shall place at the disposal of the Reinsurer at all reasonable times, and the Reinsurer shall have the right to inspect through its designated representatives, during the term of this Contract and thereafter, all non-privileged books, records and papers of the Reinsured directly related to any reinsurance hereunder, or the subject matter hereof, provided that if the Reinsurer has ceased active market operations, this right of access shall be subject to that Reinsurer being current in all payments owed the Reinsured.

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ARTICLE XV — RESERVES

(Unless otherwise required by law to obtain full credit for this Contract, in recognition of the security in place under the Lloyd’s Credit for Reinsurance Trust, the provisions of this Article shall not apply to participating Lloyd’s syndicates.)

     A. If any Reinsurer is unauthorized or otherwise unqualified in any state or other United States jurisdiction, and if, without such security, a financial penalty to the Reinsured would result on any statutory statement or report it is required to make or file with insurance regulatory authorities or a court of law in the event of insolvency, for reasons of the Reinsured’s financial security and condition, that Reinsurer will timely secure the Reinsurer’s share of Obligations under this Contract in a manner, form, and amount acceptable to the Reinsured and to all applicable insurance regulatory authorities in accordance with this Article.

     B. The Reinsurer shall secure such Obligations, within thirty (30) days after the receipt of the Reinsured’s written request regarding the Reinsurer’s share of Obligations under this Contract (but not later than December 31) of each year by either:

1.	Clean, irrevocable, and unconditional evergreen letter(s) of credit issued and confirmed, if confirmation is required by the applicable insurance regulatory authorities, by a qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state and acceptable to the Reinsured and to insurance regulatory authorities;
2.	A trust account meeting at least the standards of New York’s Insurance Regulation 114 and the Insurance Law of the Reinsured’s domiciliary state; or
3.	Cash advances or funds withheld or a combination of both, which will be under the exclusive control of the Reinsured (“Funds Deposit”).

     C. The “Obligations” referred to herein means the then current (as of the end of each calendar quarter) sum of:

1. The amount of the ceded unearned premium reserve for which the Reinsurer is responsible to the Reinsured;

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2.	The amount of Net Loss and other amounts paid by the Reinsured for which the Reinsurer is responsible to the Reinsured but has not yet paid;
3.	The amount of ceded reserves for Net Loss for which the Reinsurer is responsible to the Reinsured;
4.	The amount of return and refund premiums paid by the Reinsured for which the Reinsurer is responsible to the Reinsured but has not yet paid.

     D. The Reinsured, or its successors in interest, may draw, at any time and from time to time, upon the:

1.	Established letter of credit (or subsequent cash deposit);
2.	Established trust account (or subsequent cash deposit); or
3.	Funds Deposit;

without diminution or restriction because of the insolvency of either the Reinsured or the Reinsurer for one or more of the following purposes set forth below:

     E. Draws shall be made only for the following purposes:

1.	To make payment to and reimburse the Reinsured for the Reinsurer’s share of Net Loss and other amounts paid by the Reinsured under its Policies and for which the Reinsurer is responsible under this Contract that is due to the Reinsured but unpaid by the Reinsurer including but not limited to the Reinsurer’s share of premium refunds and returns; and
2.	To obtain a cash advance of the entire amount of the remaining balance under any letter of credit in the event that the Reinsured:

a)	has received notice of non-renewal or expiration of the letter of credit or trust account;
b)	has not received assurances satisfactory to the Reinsured of any required increase in the amount of the letter of credit or trust account, or its replacement or other continuation of the letter of credit or trust account at least thirty (30) days before its stated expiration date;

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c)	has been made aware that others may attempt to attach or otherwise place in jeopardy the security represented by the letter of credit or trust account; or
d)	has concluded that the trustee or issuing (or confirming) bank’s financial condition is such that the security represented by the letter of credit or trust account may be in jeopardy;

and under any of those circumstances where the Reinsurer’s entire Obligations, or part thereof, under this Contract remain un-liquidated and un-discharged at least thirty (30) days prior to the stated expiration date or at the time the Reinsured learns of the possible jeopardy to the security represented by the letter of credit or trust account.

     F. If the Reinsured draws on the letter of credit or trust account to obtain a cash advance, the Reinsured will hold the amount of the cash advance so obtained in the name of the Reinsured in any qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state in trust solely to secure the Obligations referred to above and for the use and purposes enumerated above and to return any balance thereof to the Reinsurer:

1.	Upon the complete and final liquidation and discharge of all of the Reinsurer’s Obligations to the Reinsured under this Contract; or
2.	In the event the Reinsurer subsequently provides alternate or replacement security consistent with the terms hereof and acceptable to the Reinsured.

     G. The Reinsured will prepare and forward at annual intervals or more frequently as determined by the Reinsured, but not more frequently than quarterly to the Reinsurer a statement for the purposes of this Article, showing the Reinsurer’s share of Obligations as set forth above. If the Reinsurer’s share thereof exceeds the then existing balance of the security provided, the Reinsurer will, within fifteen (15) days of receipt of the Reinsured’s statement, but never later than December 31 of any year, increase the amount of the letter of credit, (or subsequent cash deposit), trust account or Funds Deposit to the required amount of the Reinsurer’s share of Obligations set forth in the Reinsured’s statement, but never later than December 31 of any year. If the Reinsurer’s share thereof is less

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than the then existing balance of the cash advance, the Reinsured will release the excess thereof to the Reinsurer upon the Reinsurer’s written request. The Reinsurer will not attempt to prevent the Reinsured from holding the cash advance or Funds Deposit so long as the Reinsured is acting in accordance with this Article.

     H. Any assets deposited to a trust account will be valued according to their current fair market value and will consist only of cash (U.S. legal tender), certificates of deposit issued by a qualified United States financial institution as defined under the Insurance Law of the Reinsured’s domiciliary state and payable in cash, and investments of the types no less conservative than those specified in Section 1404 (a)(1)(2)(3) (8) and (10) of the New York Insurance Law and which are admitted assets under the Insurance Law of the Reinsured’s domiciliary state. Investments issued by the parent, subsidiary, or affiliate of either the Reinsured or the Reinsurer will not be eligible investments. All assets so deposited will be accompanied by all necessary assignments, endorsements in blank, or transfer of legal title to the trustee in order that the Reinsured may negotiate any such assets without the requirement of consent or signature from the Reinsurer or any other entity.

     I. All settlements of account between the Reinsured and the Reinsurer will be made in cash or its equivalent. All income earned and received by the amount held in an established trust account will be added to the principal.

     J. The Reinsured’s “successors in interest” will include those by operation of law, including without limitation, any liquidator, rehabilitator, receiver, or conservator.

     K. The Reinsurer will take any other reasonable steps that may be required for the Reinsured to take full credit on its statutory financial statements for the reinsurance provided by this Contract.

ARTICLE XVI — SERVICE OF SUIT

     A. This Article only applies to Reinsurers domiciled outside of the United States and/or unauthorized in any state, territory or district of the United States having jurisdiction over the Reinsured. Furthermore, this Article will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Article entitled “Arbitration”. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Article entitled “Arbitration” for resolving disputes arising out of this Contract.

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     B. In the event of any dispute, the Reinsurer, at the request of the Reinsured, shall 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 any obligation to arbitrate disputes arising from this Contract or 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.

     C. Service of process in any such suit against the Reinsurer may be made upon Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or the entity identified on the Reinsurer’s signature page to this Contract, (whichever applicable shall be hereinafter referred to as the “Firm”) and in any suit instituted, the Reinsurer shall abide by the final decision of such court or of any Appellate Court in the event of an appeal.

     D. The Firm is authorized and directed to accept service of process on behalf of the Reinsurer in any such suit and/or upon the request of the Reinsured to give a written undertaking to the Reinsured that they shall enter a general appearance upon the Reinsurer’ behalf in the event such a suit shall be instituted.

     E. Further, as required by and pursuant to any statute of any state, territory or district of the United States which makes provision therefore, the Reinsurer hereby designates 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 their 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 Reinsured or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE XVII — ARBITRATION

     A. Any and all disputes between the Reinsured and the Reinsurer arising out of, relating to, or concerning this Contract, whether sounding in contract or tort and whether arising during or after termination of this Contract, shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire (“Board”) meeting at a site in the city in which the principal headquarters of the Reinsured are located. The arbitration shall be conducted under the Federal Arbitration Act and shall proceed as set forth below.

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     B. A notice requesting arbitration, or any other notice made in connection therewith, shall be in writing and be sent certified or registered mail, return receipt requested to the affected parties. The notice requesting arbitration shall state in particulars all issues to be resolved in the view of the claimant, shall appoint the arbitrator selected by the claimant and shall set a tentative date for the hearing, which date shall be no sooner than ninety (90) days and no later than one hundred fifty (150) days from the date that the notice requesting arbitration is mailed. Within thirty (30) days of receipt of claimant’s notice, the respondent shall notify claimant of any additional issues to be resolved in the arbitration and of the name of its appointed arbitrator.

     C. Unless otherwise mutually agreed, the members of the Board shall be impartial and disinterested and shall be current or former senior officers of property-casualty insurance companies, reinsurance companies, or Lloyds Underwriters or active or inactive lawyers with at least twenty (20) years of experience in insurance and reinsurance not currently representing any party participating in the arbitration. The Reinsured and the Reinsurer as aforesaid shall each appoint an arbitrator and the two (2) arbitrators shall choose a third arbitrator before instituting the hearing. As time is of the essence, if the respondent fails to appoint its arbitrator within thirty (30) days after having received claimant’s written request for arbitration, the claimant is authorized to and shall appoint the second arbitrator. If the two (2) arbitrators fail to agree upon the appointment of an umpire within thirty (30) days after notification of the appointment of the second arbitrator, within ten (10) days thereof, the two (2) arbitrators shall request ARIAS U. S. (“ARIAS”) to apply its procedures to appoint a third arbitrator for the arbitration with the qualifications set forth above in this Article. If the use of ARIAS procedures fails to name an umpire, either party may apply to the court named below to appoint an umpire with the above required qualifications. The third arbitrator shall promptly notify in writing all parties to the arbitration of his selection and of the scheduled date for the hearing. Upon resignation or death of any member of the Board, a replacement shall be appointed in the same fashion as the resigning or deceased member was appointed.

     D. The claimant and respondent shall each submit initial briefs to the Board outlining the facts, the issues in dispute and the basis, authority, and reasons for their respective positions within thirty (30) days of the date of notice of appointment of the umpire. The claimant and the respondent may submit a reply brief to the Board within ten (10) days after filing of the initial brief(s). Initial and reply briefs may be amended by the submitting party at any time, but not later than ten (10) days prior to the date of commencement of the arbitration hearing. Reasonable responses shall be allowed at the arbitration hearing to new material contained in any amendments filed to the briefs but not previously responded to.

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     E. The Board shall consider this Contract as an honorable engagement and shall make a decision and award with regard to the terms expressed in this Contract, the original intentions of the parties to the extent reasonably ascertainable, and the custom and usage of the property and casualty insurance and reinsurance business.

     F. The Board shall be relieved of all judicial formalities and the decision and award shall be based upon a hearing in which evidence shall be allowed though the formal rules of evidence shall not strictly apply. Cross examination and rebuttal shall be allowed. At its own election or at the request of the Board, either party may submit a post-hearing brief for consideration of the Board within twenty (20) days of the close of the hearing.

     G. The Board shall render its decision and award in writing within thirty (30) days following the close of the hearing or the submission of post-hearing briefs, whichever is later, unless the parties consent to an extension. Every decision by the Board shall be by a majority of the members of the Board and each decision and award by the majority of the members of the Board shall be final and binding upon all parties to the proceeding.

     H. The Board may award (i) interest at a rate of up to four hundred (400) basis points above the prime rate as published in the Wall Street Journal (eastern edition), but not less than five percent (5%) per annum, on the date of the award calculated from the date the Board determines that any amounts due the prevailing party should have been paid to the prevailing party, (ii) attorney fees and punitive, exemplary, or treble damages if the actions of either party in prosecuting, defending or causing the arbitration are made in bad faith and constitute outrageous behavior in the opinion of the Board.

     I. Either party may apply to a court of competent jurisdiction for an order confirming any decision and the award; a judgment of that Court shall thereupon be entered on any decision or award. If such an order is issued, the attorneys’ fees of the party so applying and court costs will be paid by the party against whom confirmation is sought.

     J. Except in the event of a consolidated arbitration, each party shall bear the expense of the one arbitrator appointed by it and shall jointly and equally bear with the other party the expense of any stenographer requested, and of the umpire. The remaining costs of the arbitration proceedings shall be finally allocated by the Board.

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     K. Subject to customary and recognized legal rules of privilege, each party participating in the arbitration shall have the obligation to produce those documents and as witnesses at the arbitration those of its employees, those of its affiliates as any other participating party reasonably requests which are relevant providing always that the same witnesses and documents be obtainable and relevant to the issues before the arbitration and not be unduly burdensome or excessive.

     L. The parties may mutually agree as to pre-hearing discovery prior to the arbitration hearing and in the absence of agreement, upon the request of any party, pre-hearing discovery may be conducted as the Board shall determine in its sole discretion to be in the interest of fairness, full disclosure, and a prompt hearing, decision and award by the Board.

     M. The Board shall be the final judge of the procedures of the Board, the conduct of the arbitration, of the rules of evidence, the rules of privilege and production and of excessiveness and relevancy of any witnesses and documents upon the petition of any participating party. To the extent permitted by law, the Board shall have the authority to issue subpoenas and other orders to enforce their decisions. The Board shall also have the authority to issue interim decisions or awards in the interest of fairness, full disclosure, and a prompt and orderly hearing and decision and award by the Board.

     N. Upon request of the Reinsured made to the affected Reinsurers and to the Board not later than ten (10) days after the third arbitrator’s appointment, the Board may order a consolidated hearing between the Reinsured and all affected Reinsurers participating in this Contract if the Board is satisfied in its discretion that the issues in dispute affect more than one Reinsurer and a consolidated hearing would be in the interest of fairness, and a prompt and cost effective resolution of the issues in dispute.

     O. If the parties mutually agree to or the Board orders a consolidated hearing, all other affected participating Reinsurers shall join and participate in the arbitration under time frames established by the Board and will be bound by the Board’s decision and award unless excused by the Board in its discretion.

     P. Any Reinsurer may decline to actively participate in a consolidated arbitration if in advance of the hearing, that Reinsurer shall file with the Board a written agreement in form satisfactory to the Board to be bound by the decision and award of the Board in the same fashion and to the same degree as if it actively participated in the arbitration.

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     Q. In the event of an order of consolidation by the Board, the arbitrator appointed by the original Reinsurer shall be subject to being and may be replaced within thirty (30) days of the decision to have a consolidated arbitration by an arbitrator named collectively by the Reinsurers or in the absence of agreement, by the Lead Reinsurer, or if there is no Lead Reinsurer, the Reinsurer with the largest participation in this Contract affected by the dispute. In the event two or more Reinsurers affected by the dispute each have the same largest participation, they shall agree among themselves as to the replacement arbitrator, if any, to be appointed. The third arbitrator shall be the final determiner in the event of any dispute over replacement of that arbitrator. All other aspects of the arbitration shall be conducted as provided for in this Article provided that (1) each party actively participating in the consolidated arbitration will have the right to its own attorney, position, and related claims and defenses; (2) each party will not, in presenting its position, be prevented from presenting its position by the position set forth by any other party; and (3) the cost and expense of the arbitration, exclusive of attorney’s fees (which will be borne exclusively by the respective retaining party) but including the expense of any stenographer by each party actively participating in the consolidated arbitration or as the Board shall determine to be fair and appropriate under the circumstances.

ARTICLE XVIII — INSOLVENCY

     A. In the event of insolvency and the appointment of a conservator, liquidator, or statutory successor of the Reinsured, the portion of any risk or obligation assumed by the Reinsurer shall be payable to the conservator, liquidator, or statutory successor on the basis of claims allowed against the insolvent Reinsured by any court of competent jurisdiction or by any conservator, liquidator, or statutory successor of the Reinsured having authority to allow such claims, without diminution because of that insolvency, or because the conservator, liquidator, or statutory successor has failed to pay all or a portion of any claims.

     B. Payments by the Reinsurer as above set forth shall be made directly to the Reinsured or to its conservator, liquidator, or statutory successor, except where this contract of reinsurance specifically provides another payee of such reinsurance or except as provided by applicable law and regulation (such as subsection (a) of section 4118 of the New York Insurance laws) in the event of the insolvency of the Reinsured.

     C. In the event of the insolvency of the Reinsured, the liquidator, receiver, conservator or statutory successor of the Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Reinsured on the Policy or Policies reinsured within a reasonable time after such claim is filed in the insolvency proceeding and during the pendency of such claim any 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 which it may deem available to the Reinsured or its liquidator, receiver, conservator or statutory

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successor. The expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Reinsured as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Reinsured solely as a result of the defense undertaken by the Reinsurer.

     D. Where two or more Reinsurers are involved in the same claim and a majority in interest elects 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 Reinsured.

ARTICLE XIX — CLAIMS COOPERATION

     When so requested in writing, the Reinsured shall afford the Reinsurer or its representatives an opportunity to be associated with the Reinsured, at the expense of the Reinsurer, in the defense of any claim, suit or proceeding involving this Contract, and the Reinsured and the Reinsurer shall cooperate in every respect in the defense of such claim, suit or proceeding, provided the Reinsured shall have the right to make any decision in the event of disagreement over any matter of defense or settlement subject always to the conditions of the Article entitled “Original Conditions”.

ARTICLE XX — CONFIDENTIALITY

     A. The information, data, statements, representations and other materials provided by the Reinsured or the Reinsurer to the other arising from consideration and participation in this Contract whether contained in the reinsurance submission, this Contract, or in materials or discussions arising from or related to this Contract, may contain confidential or proprietary information as expressly indicated by the disclosing party in writing from time to time to the other party of the respective parties (“Confidential Information”). This Confidential Information is intended for the sole use of the parties to this Contract (and their retrocessionaires, respective auditors and legal counsel) as may be necessary in analyzing and/or accepting a participation in and/or executing their respective responsibilities under or related to this Contract. Disclosing or using Confidential Information disclosed under this Contract for any purpose beyond (i) the scope of this Contract, (ii) the reasonable extent necessary to perform rights and responsibilities expressly provided for under this Contract, (iii) the reasonable extent necessary to administer, report to and effect recoveries from retrocessional Reinsurers, or (iv) persons with a need to know the information and who are obligated to maintain the confidentiality of the Confidential Information or who have agreed in writing to maintain the confidentiality of the Confidential Information is expressly forbidden without the prior written consent of the disclosing party. Copying, duplicating, disclosing, or using Confidential Information for any purpose beyond this expressed purpose is forbidden without the prior written consent of the disclosing party.

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     B. Should a party (“Receiving Party”) receive a third party demand pursuant to subpoena, summons, or court or governmental order, to disclose Confidential Information that has been provided by another party to this Contract (“Disclosing Party”), the Receiving Party shall, to the extent permitted by law, make commercially reasonable efforts to notify the Disclosing Party promptly upon receipt of the demand and prior to disclosure of the Confidential Information and provide the Disclosing Party a reasonable opportunity to object to the disclosure. If such notice is provided, the Receiving Party may after the passage of five (5) business days after providing notice, proceed to disclose the Confidential Information as necessary to satisfy such a demand without violating this Contract. If the Disclosing Party timely objects to the release of the Confidential Information, the Receiving Party will comply with the reasonable requests of the Disclosing Party in connection with the Disclosing Party’s efforts to resist release of the Confidential Information. The Disclosing Party shall bear the cost of resisting the release of the Confidential Information.

ARTICLE XXI — LATE PAYMENTS

     A. Payments from the Reinsurer to the Reinsured shall have as a due date the date on which the Reinsured Reasonable Evidence of Amount Due is received by the Reinsurer, and shall be overdue sixty (60) days thereafter. Payments due from the Reinsurer to the Reinsured will not be considered overdue if the Reinsurer requests, in writing, that such payment be made by drawing on a letter of credit or other similar method of funding that has been established for this Contract, provided that there is an adequate balance in place, and further provided that such advice to draw is received by the Reinsured within the sixty (60) day deadline set forth above. Payments from the Reinsured to the Reinsurer will have a due date as the date specified in this Contract and will be overdue sixty (60) days thereafter. Premium adjustments will be overdue sixty (60) days from the Contract due date or one hundred (120) days after the expiration or renewal date, whichever is greater.

     B. The Reinsured will provide the Reinsurer with reasonable evidence of amount Due, supplemented by copies of any proof of loss and a copy of the claim adjuster’s report(s) or any other reasonable evidence of indemnification. If subsequent to receipt of this evidence, the information contained therein is unreasonably insufficient or not in substantial accordance with the contractual conditions of this Contract, then the payment due date as specified above will be deemed to be the date upon which the Reinsurer received the additional information necessary to approve payment of the claim and the claim is presented in a reasonably acceptable manner. This paragraph is only for the purpose of establishing when a claim payment is overdue, and will not alter the provisions of the Article entitled “Reports, Loss and Loss Settlements” or other pertinent contractual stipulations of this Contract.

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     C. If payment is made of overdue amounts within thirty (30) days of the due date, overdue amounts will bear simple interest from the overdue date at a rate determined by the one-month London Interbank Offered Rate for the first business day of the calendar month in which the amount becomes overdue, as published in The Wall Street Journal, plus four hundred (400) basis points to be calculated weekly. If payment is made of overdue amounts more than thirty (30) days after the due date, overdue amounts will bear simple interest from the overdue date at a rate determined by the one-month London Interbank Offered Rate for the first business day of the calendar month in which the amount becomes overdue, as published in The Wall Street Journal, plus four hundred basis (400) points to be calculated weekly but in no event less than five percent (5%) simple interest. If the sum of the compensating additional amount computed in respect of any overdue payment is less than 0.25% of the amount overdue, or $1,000, whichever is greater, and/or the overdue period is one week or less, then the interest amount shall be waived. The basis point standards referred to above shall be doubled if the late payment is due from a Reinsurer who is no longer an active reinsurance market.

ARTICLE XXII — OFFSET

     The Reinsured and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise and immediately inform the Intermediary accordingly. In the event of the insolvency of any party, offset shall be as permitted by applicable law.

ARTICLE XXIII — SPECIAL TERMINATION

     A. The Reinsured may terminate or commute this Contract upon the happening of any one of the following circumstances at any time by the giving of fifteen (15) days prior written notice to the Reinsurer:

1.	The Reinsurer ceases active underwriting operations or a State Insurance Department or other legal authority orders the Reinsurer to cease writing business in all jurisdictions; or
2.	The Reinsurer has: a) become insolvent, b) been placed under supervision (voluntarily or involuntarily), c) been placed into liquidation or receivership, or d) had instituted against it proceedings for the appointment of a supervisor, 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
3.	The Reinsurer’s (a) policyholders’ surplus (“PHS”) has been

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	reduced by whichever is greater, (i) twenty percent (20%) of the amount of PHS at the inception of this Contract or (ii) twenty percent (20%) of the amount of PHS stated in its last filed quarterly or annual statutory statement with its state of domicile; or (b) AM Best’s insurer financial strength rating becomes less than A- (N.B. as respects alien Reinsurers, a Standard & Poor’s Insurance Rating of less than “BBB” will apply; as respects Lloyd’s Syndicates where an AM Best insurer financial strength rating is not available, a reduction of the Reinsurer’s S&P Lloyd’s Syndicate Assessment (LSA) ranking from the LSA ranking that was in effect at the inception of this Contract); or
4.	The Reinsurer has entered into a definitive agreement to (a) become merged with, acquired or controlled by any company, corporation or individual(s) not affiliated with or controlling the party’s operations previously; or (b) directly or indirectly assign all or essentially all of its entire liability for Obligations (as defined in the Article entitled “Reserves”) under this Contract to another party without the Reinsured’s prior written consent; or
5.	There is either (a) a severance or obstruction of free and unfettered communication and/or normal commercial or financial intercourse between the United States of America and the country in which the Reinsurer is incorporated or has its principal office as a result of war, currency regulations or any circumstances arising out of political, financial or economic uncertainty; or (b) a severance (of any kind) of any two or more of the following executives of the Reinsurer from active employment of the Reinsurer during the most recent sixty (60) day period: President, Chief Underwriting Officer, Chief Actuary, Chief Claims Officer or Chief Financial Officer.

     B. In the event that notice of termination is given by reason of an event described in A3 above (the “Termination Notice”) and prior to the effective date of the termination (the “Termination Date”), the Chief Financial Officer of the Reinsurer represents and certifies in writing to the Reinsured that (i) the deterioration of the Reinsurer’s financial condition is the direct and sole result of a recent major property catastrophe(s) or the result of an Act(s) of Terrorism (either the “Event”) and (ii) that it is actively seeking and has a high probability of successfully obtaining additional capital to substantially replace the capital loss because of the Event (the “Extension Notice”), the Termination Date shall be extended an additional thirty (30) days from the Termination Date (the “Extended Termination Date”). If prior to the Extended Termination Date, the Chief Financial

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Officer of the Reinsurer represents and certifies in writing to the Reinsured that (a) it has raised sufficient capital so as to return its PHS to within five percent (5%) of the Reinsurer’s PHS last filed with its domiciliary regulatory authorities prior to the Event, (b) obtained reinstatement of its rating agency grade(s) to the level as existed immediately prior to the Event, the Termination Notice shall be null and void. Otherwise, this Contract shall terminate on the Extended Termination Date in the manner described in the Termination Notice.

     C. In the event the Reinsured elects termination, the Reinsured shall with the notice of termination specify that termination will be on a cut-off basis and thus relieve the Reinsurer for losses occurring subsequent to the Reinsurer’s specified termination date. The Reinsurer shall within fifteen (15) days of the termination date return the liability for the unearned portion of any ceded premium paid hereunder, calculated as of the termination date, and cash in that amount and the minimum premium provisions, if any, shall be waived.

     D. In the event the Reinsured elects to commute, the Reinsurer shall return the sum total of the net present value (“capitalized”) of the ceded (1) Reserves for Net Loss outstanding, (2) Reserves for Net Loss incurred but not reported, and (3) unearned premium reserves. In the event the parties are unable to agree on the capitalized value of the reserves to be returned to the Reinsured, the Reinsured and the Reinsurer shall jointly appoint an independent and neutral actuary experienced in such matters and the mutually agreed actuary shall render a decision. In the event that the Reinsured and the Reinsurer are unable to agree upon a single actuary within thirty (30) days, the parties shall ask the then current President of the Casualty Actuarial Society to appoint an actuary with those qualifications within another thirty (30) days. The decision of the actuary will be final and binding on both parties. The Reinsured and the Reinsurer shall share equally the fees and expenses of the actuary. Upon payment of the amount so agreed or determined by the actuary to the Reinsured, the Reinsurer and the Reinsured shall each be completely released from all liability to each other under this Contract.

     E. If the Reinsurer is not otherwise obligated under the Article entitled “Reserves” of this Contract, to provide the Reinsured security in order for the Reinsured to obtain credit for the reinsurance provided by this Contract and the Reinsurer has not cured the conditions described above, other than as expressed in conditions 4 and 5 above, the Reinsured shall also have the option, if it does not elect the commutation option described above, to require the Reinsurer to provide the Reinsured with collateral funding as if the Reinsurer were otherwise obligated to provided security for the Reinsurer’s obligations under this Contract in an amount and manner and as provided for under the Reserves Article of this Contract. The Reinsured shall have the option to require the Reinsurer to provide collateral funding but, provided it is reasonably acceptable to the Reinsured and any insurance regulatory authorities involved, the Reinsurer shall have the sole option of determining the method of funding referred to above. In recognition of

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security a participating Reinsurer or Lloyd’s Syndicate may place under the terms of a master trust agreement, such as the US Lloyd’s Credit for Reinsurance Trust, the provisions of this Paragraph shall not apply to that participating Reinsurer or Lloyd’s Syndicate that has fully funded 100% of the Obligations to the Reinsured, as the term Obligations is defined in the Article entitled “Reserves”, pursuant to the terms of that trust agreement and the applicable funding requirements and procedures.

ARTICLE XXIV — TERRORISM RECOVERY — TERRORISM RISK INSURANCE ACT OF 2002

     A. As respects the Insured Losses of the Reinsured, to the extent the Reinsured’s total reinsurance recoverables for Insured Losses, whether collected or not, when combined with the financial assistance available to the Reinsured under the Act exceeds the aggregate amount of Insured Losses paid by the Reinsured, less any other recoveries or reimbursements, (the “Excess Recovery”), a share of the Excess Recovery shall be allocated to the Reinsured and the Reinsurer. The Reinsured’s share of the Excess Recovery shall be deemed to be an amount equal to the proportion that the Reinsured’s Insured Losses bear to the Insurer’s total Insured Losses. The Reinsurer’s share of the Excess Recovery shall be deemed to be an amount equal to the proportion that the Reinsurer’s payment of Insured Losses under this Contract bears to the Reinsured’s total collected reinsurance recoverables for Insured Losses. The Reinsured shall provide the Reinsurer with all necessary data respecting the transactions covered under this Article.

     B. The method set forth herein for determining an Excess Recovery is intended to be consistent with the United States Treasury Department’s construction and application of Section 103 (g)(2) of the Act. To the extent it is inconsistent, it shall be amended to conform with such construction and application, nevertheless the Reinsured shall be the sole judge as to the allocation of TRIA Recoveries to this or to other reinsurance Contracts.

     C. “Act” as used herein shall mean the Terrorism Risk Insurance Act of 2002 and any subsequent amendment thereof or any regulations promulgated thereunder. “Reinsured” shall have the same meaning as “Insurer” under the Act and “Insured Losses”, and “Program Year” shall follow the definitions as provided in the Act.

ARTICLE XXV — VARIOUS OTHER TERMS

     A. This Contract shall be binding upon and inure to the benefit of the Reinsured and Reinsurer and their respective successors and assigns provided, however, that this Contract may not be assigned by either party without the prior written consent of the other which consent may be withheld by either party in its sole unfettered discretion. This provision shall not be construed to preclude the

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assignment by the Reinsured of reinsurance recoverables to another party for collection.

     B. The territorial limits of this Contract shall be identical with those of the Reinsured’s Policies.

     C. This Contract shall constitute the entire agreement between the parties with respect to the Business Covered hereunder. There are no understandings between the parties other than as expressed in this Contract or any amendment thereto. Any change or modification of this Contract shall be null and void unless made by amendment to the Contract and signed by both parties or otherwise clearly and unequivocally amended by exchange of letters or electronic mail. Nothing in this Article shall act to preclude the introduction of submission-related documents in any dispute between the parties.

     D. Except as may be provided in the Article entitled “Arbitration”, this Contract shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania, exclusive of that state’s rules with respect to conflicts of law.

     E. The headings preceding the text of the Articles and paragraphs of this Contract are intended and inserted solely for the convenience of reference and shall not affect the meaning, interpretation, construction or effect of this Contract.

     F. This Contract is solely between the Reinsured and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract.

     G. If any provisions 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.

     H. The failure of the Reinsured or Reinsurer to insist on strict compliance with this Contract or to exercise any right or remedy shall not constitute a waiver of any rights contained in this Contract nor estop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising any remedy.

     I. Each party shall be excused for any reasonable failure or delay in performing any of its respective obligations under this Contract, if such failure or delay is caused by Force Majeure. “Force Majeure” shall mean any act of God, strike, lockout, act of public enemy, any accident, explosion, fire, storm, earthquake, flood, drought, peril of sea, riot, embargo, war or foreign, federal, state or municipal order or directive issued by a court or other authorized official, seizure, requisition or allocation, any failure or delay of transportation, shortage of or

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inability to obtain supplies, equipment, fuel or labor or any other circumstance or event beyond the reasonable control of the party relying upon such circumstance or event; provided, however, that no such Force Majeure circumstance or event shall excuse any failure or delay beyond a period exceeding ten (10) days from the date such performance would have been due but for such circumstance or event.

     J. The obligations of each Reinsurer with respect to this Contract are several and not joint and in the event of any failure or default by any Reinsurer to perform any of its obligations hereunder, no other Reinsurer shall have any obligation with respect to such failure or default.

     K. This Contract may be executed by the parties hereto in any number of counterparts, and by each of the parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

ARTICLE XXVI — INTERMEDIARY

     A. Towers Perrin Forster & Crosby, 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 Reinsured or the Reinsurer through Towers Perrin, 1500 Market Street, Centre Square East, Philadelphia, PA 19102-4790. Payments by the Reinsured 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 Reinsured only to the extent that such payments are actually received by the Reinsured.

     B. Whenever notice is required within this Contract, such notice may be given by certified mail, registered mail, or overnight express mail. Notice shall be deemed to be given on the date received by the receiving party.

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SCHEDULE A

TARGET AREA ZIP CODES

ZIP CODE	US STATE	US COUNTY
10022	NEW YORK	NEW YORK
89109	NEVADA	CLARK
10017	NEW YORK	NEW YORK
10036	NEW YORK	NEW YORK
10019	NEW YORK	NEW YORK
10020	NEW YORK	NEW YORK
60606	ILLINOIS	COOK
10001	NEW YORK	NEW YORK
10038	NEW YORK	NEW YORK
22102	VIRGINIA	FAIRFAX
10004	NEW YORK	NEW YORK
10021	NEW YORK	NEW YORK
60603	ILLINOIS	COOK
55402	MINNESOTA	HENNEPIN
92618	CALIFORNIA	ORANGE
23607	VIRGINIA	NEWPORT NEWS CITY
90245	CALIFORNIA	LOS ANGELES (REST OF)
60611	ILLINOIS	COOK
94104	CALIFORNIA	SAN FRANCISCO
90278	CALIFORNIA	LOS ANGELES (REST OF)
92101	CALIFORNIA	SAN DIEGO

Doc#: 212081 10/17/2007

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EX-10.6

Exhibit 10.6

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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

07\P2Z1059

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Commencement and Termination		1
III	Special Commutation		3
IV	Territory (BRMA 51A)		5
V	Exclusions		5
VI	Retention and Limit		8
VII	Reinstatement		8
VIII	Premium		8
IX	Definitions		10
X	Other Reinsurance		11
XI	Loss Occurrence		11
XII	Loss Notices and Settlements		13
XIII	Salvage and Subrogation		13
XIV	Offset (BRMA 36D)		13
XV	Access to Records (BRMA 1D)		13
XVI	Liability of the Reinsurer		14
XVII	Net Retained Lines (BRMA 32B)		14
XVIII	Errors and Omissions (BRMA 14F)		14
XIX	Currency (BRMA 12A)		14
XX	Taxes (BRMA 50B)		14
XXI	Federal Excise Tax		15
XXII	Funding Requirements		15
XXIII	Insolvency		16
XXIV	Arbitration		17
XXV	Service of Suit		18
XXVI	Agency Agreement		19
XXVII	Governing Law		19
XXVIII	Confidentiality		19
XXIX	Severability		19
XXX	Intermediary (BRMA 23A)		19
	Schedule A

07\P2Z1059

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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 “Reinsurer7#148;)

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 (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 Fire, Allied Lines, Inland Marine and Commercial Multi Peril (including Fire, Allied Lines and Inland Marine lines only) business, subject to the terms, conditions and limitations set forth herein and in Schedule A attached to and forming part of this Contract.

Article II — Commencement and Termination

A.	This Contract shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, with respect to losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008.
B.	Notwithstanding the provisions of paragraph A above, if any of the following events occur on or after the date lines are bound and, with the timing exceptions as qualified by subparagraphs 1 and 2 below, before the termination of the Contract, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract:

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1.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto after the date lines are bound for this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 12 months prior to that date; or
2.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto at any time between the date lines are bound and the date of termination of this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 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+; or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or unaffiliated individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent (except for inter-company pooling arrangements); or
8.	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business.

The Company has 30 days from the date of public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. To terminate a Subscribing Reinsurer’s percentage share in this Contract, the Company must provide the Subscribing Reinsurer with formal notice. Such notice, which shall be postmarked no later than the last day of the aforementioned 30-day period, shall include the effective date of termination. The effective date of termination shall be as selected by the Company and shall be one of the following:

a.	The last day of the month prior to the date of any public announcement or discovery; or
b.	The date of any public announcement or discovery; or
c.	The last day of any month after the date of any public announcement or discovery; or

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d.	The date of the Company’s written notice to the Subscribing Reinsurer advising of the termination; or
e.	The date of notice provided by the Subscribing Reinsurer (should the Subscribing Reinsurer elect to provide one).

C. If this Contract is terminated or 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 termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Special Commutation

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

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

Notwithstanding the foregoing, the provisions of this Article shall not apply to Subscribing Reinsurers that (at the inception hereof) are rated A+ or higher by A.M. Best and have a policyholders’ surplus (or the foreign equivalent thereto) of $2,000,000,000 or more.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss, including, but not limited to, paid losses, paid loss adjustment expenses, outstanding losses, outstanding loss adjustment expenses, incurred but not reported loss reserves established by the Company’s internal division or the appropriate actuarial firm under external contract to the Company, salvage and subrogation, and unearned reinsurance deposits, if any, and shall set forth or attach the information relied upon by the Company and the methodology, including, but not limited to, the present value calculation employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

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C.	If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 30 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 30 calendar days of receipt of the notification. Within 45 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss, including, but not limited to, paid losses, paid loss adjustment expenses, outstanding losses, outstanding loss adjustment expenses, incurred but not reported loss reserves established by the Subscribing Reinsurer’s internal division or the appropriate actuarial firm under external contract to the Subscribing Reinsurer, salvage and subrogation, and unearned reinsurance deposits, if any, and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology, including, but not limited to, the present value calculation employed to calculate the excess loss.
D.	In the event the Subscribing Reinsurer’s Statement of Valuation of the outstanding claim or claims is viewed as unacceptable to the Company, the Company may either abandon the commutation effort, or may seek to settle any difference by using an independent actuary agreed to by the parties.
E.	If the parties cannot agree on an acceptable independent actuary within 30 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as party arbitrators for the limited and sole purpose of selecting an independent actuary. If the actuaries cannot agree on an acceptable independent actuary within 30 calendar days of the date of the Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the Subscribing Reinsurer with a list of at least three proposed independent actuaries, and the Subscribing Reinsurer shall select the independent actuary from that list.
F.	Upon selection of the independent actuary, both parties shall present their respective written submissions to the independent actuary. The independent actuary may, at his or her discretion, request additional information. The independent actuary shall issue his or her decision within 45 calendar days after the written submissions have been filed and any additional information has been provided.
G.	The decision of the independent actuary shall be final and binding. The expense of the independent actuary shall be equally divided between the two parties. For the purposes of this Article, unless mutually agreed otherwise, an “independent actuary” shall be an actuary who satisfies each of the following criteria:

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

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

Article IV — Territory (BRMA 51A)

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

Article V — Exclusions

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

1.	Workers’ Compensation, Directors and Officers Liability, and Employers Liability business.
2.	Product integrity and/or product tampering losses.
3.	Space and space related risks such as satellites, spacecraft, launch vehicles and major components thereof from the beginning of transit to launch site.
4.	Offshore risks.
5.	Financial guarantee and insolvency.
6.	Assumed reinsurance.
7.	Mortgage Impairment insurances and similar kinds of insurances, however styled.
8.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance” attached to and forming part of this Contract.
9.	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.
10.	Loss or liability excluded under the provisions of the “Pools, Associations and Syndicates Exclusion Clause” attached to and forming part of this Contract.

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11.	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.
12.	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.
13.	Accident and Health, Casualty, Fidelity and/or Surety business.
14.	Loss, damage, cost or expense 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 25.0% of the Company’s property loss under the applicable original policy.
15.	Notwithstanding any other provision to the contrary within this Contract or any amendment 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
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.

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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.

16. 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,” including:

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 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.

17.	Loss or liability excluded under the provisions of the “Electronic Data Endorsement B (NMA 2915)” attached to and forming part of this Contract.
18.	Assessments made against the Company by the Florida Hurricane Catastrophe Fund (FHCF).
19.	Assessments made against the Company by the Citizens Property Insurance Corporation (CPIC).
20.	Business written under the United States National Flood Insurance Program.

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Article VI — Retention and Limit

A.

As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as “Company’s Retention” for that excess layer in Schedule A attached hereto, arising out of each 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 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 VII — Reinstatement

A.	In the event all or any portion of the reinsurance under any excess layer of reinsurance coverage provided by this Contract is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the loss occurrence commences hereon. For each amount so reinstated, the Company agrees to pay additional premium in accordance with the provisions of the Premium Article.
B.	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 VIII — 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 if there has been no loss hereunder; or
2.	The percentage, shown as “Premium Rate” for that excess layer in Schedule A attached hereto, of the Company’s gross earned premium 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

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excess layer in Schedule A attached hereto, on June 1, September 1 and December 1 of 2007 and March 1, 2008.

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 above, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted promptly.

D. For each amount of limit reinstated for each excess layer in accordance with the Reinstatement Article, the Company agrees to pay additional premium equal to the product of the following:

1.	The percentage of the occurrence limit for the excess layer reinstated (based on the loss paid by the Reinsurer under that excess layer); times
2.	The final adjusted reinsurance premium, as calculated in accordance with paragraph A above, for the excess layer reinstated for the term of this Contract (exclusive of reinstatement premium).

E. 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.

F. In the event a Subscribing Reinsurer’s participation in this Contract is terminated under the provisions of paragraph B of the Commencement and Termination Article, no deposit premium shall be due after the effective date of termination, the minimum premium shall be waived, and the reinsurance premium and reinstatement premium, if applicable, will be calculated in accordance with the following formulas:

1.	Reinsurance premium shall be the number of days the Subscribing Reinsurer participates on this Contract divided by the number of days of the original term of this Contract and the quotient thereof shall be multiplied by the Subscribing Reinsurer’s percentage share of the final adjusted premium reported in accordance with paragraph C above.
2.	Reinstatement premium shall be the product of the percentage determined in accordance with the provisions of subparagraph 1 of paragraph D above and the amount determined in accordance with the provisions of subparagraph 1 of paragraph F above.

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3. In the event the incurred loss for any excess layer is greater than the sum of the amounts from subparagraphs 1 and 2 of this paragraph F that are applicable to the same excess layer, in lieu of the provisions of subparagraphs 1 and 2 of this paragraph F, the Subscribing Reinsurer will receive premium equal to the lesser of:

a.	An amount equal to the Subscribing Reinsurer’s percentage share of the full reinsurance premium calculated in accordance with paragraph A (without regard to the termination of the Subscribing Reinsurer’s share in accordance with the provisions of paragraph B of the Commencement and Termination Article) plus any reinstatement premium calculated in accordance with paragraph D; or
b.	The Subscribing Reinsurer’s percentage share of the incurred loss for the same excess layer.

G. “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.

H. “Incurred loss” as used herein shall mean the Company’s ceded ultimate net loss plus the Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) established by the Company’s internal division or the appropriate actuarial firm under external contract to the Company.

Article IX — 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 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

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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 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.

Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.

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 X — Other Reinsurance

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

B. Any loss reimbursement paid or payable to the Company under coverage provided by the Florida Hurricane Catastrophe Fund shall inure to the benefit of this Contract.

Article XI — 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

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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 A) 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 50-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 commences earlier than

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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 XII — 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 and the terms of the Company’s policies (except as respects loss in excess of policy limits and extra contractual obligations) 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 within 14 days) by the Company.

Article XIII — Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) 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 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 — 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.

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 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or

07\P2Z1059
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profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XXI — Federal Excise Tax

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

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

Article XXII — Funding Requirements

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, subject to receipt of satisfactory information from the Company, its share of the unearned portion of any deposit premium (determined as of the date that this paragraph A first applies to the Reinsurer according to the provisions of subparagraph (a) and/or (b) below) and 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:

a.	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; or
b.	Has an A.M. Best’s rating below A- (inclusive of “Not Rated” ratings) and/or a Standard & Poor’s rating below BBB+. However, this funding requirement will not apply to authorized reinsurers who at inception are rated A or higher by A.M. Best and have a policyholders’ surplus of $2,000,000,000 or more.

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.

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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 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 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.

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.

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

07\P2Z1059
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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 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

07\P2Z1059
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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.

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 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 a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.

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Article 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 unaffiliated 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

07\P2Z1059
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constitute payment to the Company only to the extent that such payments are actually received by the Company.

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

Bala Cynwyd, Pennsylvania, this 17th day of July in the year 2007.

Philadelphia Insurance Companies (for and on behalf of the “Company”) 

/s/ Christopher J. Maguire 

CHRISTOPHER J. MAGUIRE, EVP & CUO  

(Print name and title) 

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Schedule A

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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			Fifth			Sixth
	Excess			Excess			Excess			Excess			Excess			Excess
Company’s Retention	$	10,000,000		$	20,000,000		$	50,000,000		$	100,000,000		$	150,000,000		$	205,000,000
Reinsurer’s Per Occurrence Limit	$	10,000,000		$	30,000,000		$	50,000,000		$	50,000,000		$	55,000,000		$	50,000,000
Reinsurer’s Term Limit	$	20,000,000		$	60,000,000		$	100,000,000		$	100,000,000		$	110,000,000		$	100,000,000
Minimum Premium	$	3,200,000		$	6,480,000		$	5,600,000		$	4,000,000		$	3,190,000		$	2,500,000
Premium Rate		0.8764856	%		1.7748834	%		1.5338499	%		1.0956071	%		0.8737466	%		0.6847544	%
Deposit Premium	$	4,000,000		$	8,100,000		$	7,000,000		$	5,000,000		$	3,987,500		$	3,125,000
Quarterly Deposit Premium	$	1,000,000		$	2,025,000		$	1,750,000		$	1,250,000		$	996,875		$	781,250

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.

07\P2Z1059
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

07\P2Z1059

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 Citizens Property Insurance Corporation
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

07\P2Z1059
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AND

(3) 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:

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.

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.

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\

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.

NMA 2915 (25.1.01)

07IL\P2Z1059

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
Ariel Reinsurance Company Limited		10.00	%
Everest Reinsurance Company		56.00
Flagstone Reinsurance Limited		14.00
Swiss Reinsurance America Corporation		7.00
Validus Reinsurance, Ltd.		10.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		3.00
Total		100.00	%

07IL\P2Z1059
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Second Excess Catastrophe Reinsurance

Reinsurers	Participations
ACE Tempest Reinsurance Ltd.		5.00	%
Ariel Reinsurance Company Limited		10.00
Aspen Insurance Limited		10.00
AXIS Specialty Limited		2.00
Everest Reinsurance Company		20.00
Flagstone Reinsurance Limited		10.00
General Reinsurance Corporation		7.50
GMAC Re Corporation (for Motors Insurance Corporation)		3.50
Hannover Re (Bermuda), Ltd.		2.50
Swiss Reinsurance America Corporation		7.00
Transatlantic Reinsurance Company		7.50
Validus Reinsurance, Ltd.		10.00
Through Benfield Limited (Placement Only)
AXA RE		2.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		3.00
Total		100.00	%

07IL\P2Z1059
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Third Excess Catastrophe Reinsurance

Reinsurers	Participations
Allied World Assurance Company Limited		6.00	%
American Agricultural Insurance Company		1.00
Ariel Reinsurance Company Limited		10.00
Aspen Insurance Limited		5.00
AXIS Specialty Limited		2.00
Flagstone Reinsurance Limited		14.00
General Reinsurance Corporation		10.00
Hannover Re (Bermuda), Ltd.		2.50
Swiss Re Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)		5.00
Swiss Reinsurance America Corporation		10.00
Transatlantic Reinsurance Company		14.00
Validus Reinsurance, Ltd.		10.00
XL Re Ltd		5.00
Through Benfield Limited (Placement Only)
AXA RE		4.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		1.50
Total		100.00	%

07IL\P2Z1059
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Fourth Excess Catastrophe Reinsurance

Reinsurers	Participations
American Agricultural Insurance Company		1.50	%
Ariel Reinsurance Company Limited		10.00
AXIS Specialty Limited		2.00
Flagstone Reinsurance Limited		10.00
General Reinsurance Corporation		10.00
GMAC Re Corporation (for Motors Insurance Corporation)		6.00
Hannover Re (Bermuda), Ltd.		2.50
Montpelier Reinsurance Limited		7.50
Partner Reinsurance Company Ltd.		6.50
Swiss Re Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)		5.00
Swiss Reinsurance America Corporation		10.00
Transatlantic Reinsurance Company		20.00
XL Re Ltd		5.00
Through Benfield Limited (Placement Only)
AXA RE		4.00
Total		100.00	%

07IL\P2Z1059
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Fifth Excess Catastrophe Reinsurance

Reinsurers	Participations
Allied World Assurance Company Limited		7.50	%
American Agricultural Insurance Company		2.00
Ariel Reinsurance Company Limited		10.00
AXIS Specialty Limited		2.00
General Reinsurance Corporation		10.00
Hannover Re (Bermuda), Ltd.		2.50
Montpelier Reinsurance Limited		10.75
Partner Reinsurance Company Ltd.		6.50
Swiss Re Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)		10.00
Swiss Reinsurance America Corporation		10.00
Transatlantic Reinsurance Company		20.00
XL Re Ltd		5.00
Through Benfield Limited (Placement Only)
AXA RE		1.00
Through Benfield Limited
Lloyd’s Underwriters and Companies Per Signing Schedule(s)		2.75
Total		100.00	%

07IL\P2Z1059
Page 5 of 6

Sixth Excess Catastrophe Reinsurance

Reinsurers	Participations
Allied World Assurance Company Limited		7.00	%
American Agricultural Insurance Company		1.00
Ariel Reinsurance Company Limited		12.00
AXIS Specialty Limited		7.50
Flagstone Reinsurance Limited		7.00
Hannover Re (Bermuda), Ltd.		5.00
Montpelier Reinsurance Limited		3.00
Partner Reinsurance Company Ltd.		8.00
QBE Reinsurance Corporation		2.00
Swiss Re Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)		10.00
Transatlantic Reinsurance Company		20.00
Validus Reinsurance, Ltd.		3.00
XL Re Ltd		4.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		10.50
Total		100.00	%

07IL\P2Z1059
Page 6 of 6

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, 2007

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
5.00%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 23rd day of July in the year 2007.

ACE Tempest Reinsurance Ltd.

/s/ Paula Lewin

Paula Lewin, CUO Specialty Desk

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

Allied World Assurance Company Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
6.00%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance
7.50%	of the Fifth Excess Catastrophe Reinsurance
7.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 25th day of July in the year 2007.

Allied World Assurance Company Limited

/s/ Stephen T Michel

Stephen T Michel, AVP

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

American Agricultural Insurance Company
Indianapolis, Indiana
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
1.00%	of the Third Excess Catastrophe Reinsurance
1.50%	of the Fourth Excess Catastrophe Reinsurance
2.00%	of the Fifth Excess Catastrophe Reinsurance
1.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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:

Columbus, Ohio, this 23rd day of July in the year 2007.

American Agricultural Insurance Company

/s/ Kevin W. Scarlett

Kevin W. Scarlett, Underwriting Manager

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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:

10.00%	of the First Excess Catastrophe Reinsurance
10.00%	of the Second Excess Catastrophe Reinsurance
10.00%	of the Third Excess Catastrophe Reinsurance
10.00%	of the Fourth Excess Catastrophe Reinsurance
10.00%	of the Fifth Excess Catastrophe Reinsurance
12.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 26th day of July in the year 2007.

Ariel Reinsurance Company Ltd.

/s/ Stephen Velotti

Stephen Velotti, SVP

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

Aspen Insurance Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
10.00%	of the Second Excess Catastrophe Reinsurance
5.00%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 19th day of July in the year 2007.

Aspen Insurance Limited

/s/ R P Vacher

R P Vacher, U/W.

(Print name and title)

07IL\P2Z1059
Page 2 of 2

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, 2007

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
2.00%	of the Second Excess Catastrophe Reinsurance
2.00%	of the Third Excess Catastrophe Reinsurance
2.00%	of the Fourth Excess Catastrophe Reinsurance
2.00%	of the Fifth Excess Catastrophe Reinsurance
7.50%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 11th day of September in the year 2007.

AXIS Specialty Limited

/s/ Christian Dunleavy

Christian Dunleavy, SVP

(Print name and title)

07IL\P2Z1059
Page 2 of 2

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, 2007

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:

56.00%	of the First Excess Catastrophe Reinsurance
20.00%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
0%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 13th day of August in the year 2007.

Everest Reinsurance Company 

/s/ Charles Volker  

Charles Volker, VP
(Print name and title)
 

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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:

14.00%	of the First Excess Catastrophe Reinsurance
10.00%	of the Second Excess Catastrophe Reinsurance
14.00%	of the Third Excess Catastrophe Reinsurance
10.00%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
7.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 20th day of July in the year 2007.

Flagstone Reinsurance Limited 

/s/ Kevin M. Madigan  

Kevin M. Madigan, Deputy Underwriting Officer NA
(Print name and title)
 

07IL\P2Z1059
Page 2 of 2

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, 2007

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:

0%	of the First Excess Catastrophe Reinsurance
7.50%	of the Second Excess Catastrophe Reinsurance
10.00%	of the Third Excess Catastrophe Reinsurance
10.00%	of the Fourth Excess Catastrophe Reinsurance
10.00%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

It Is Further Agreed that this Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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.

07IL\P2Z1059
Page 1 of 2

It Is Also Agreed that the following Article shall apply to the Subscribing Reinsurer’s participation share in the attached Contract, in lieu of the provisions of Article XXX — Intermediary (BRMA 23A) — of the Contract:

“Article XXX — Intermediary

Benfield Inc. is hereby recognized as the Intermediary for purposes of premium payment, including reinstatements and all adjustments hereunder. Loss billings will be handled through the Intermediary; however, loss payments, including any portion related to loss adjustment expense shall be paid directly by the Reinsurer to the Company.”

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 17th day of July in the year 2007.

Philadelphia Insurance Companies (for and on behalf of the "Company") 

/s/ Christopher J. Maguire  

Christopher J. Maguire, EVP & CUO
(Print name and title)
 

Stamford, Connecticut, this 1st day of August in the year 2007.

General Reinsurance Corporation 

/s/ Joan LaFrance  

Joan LaFrance, SVP
(Print name and title)
 

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

Motors Insurance Corporation
Detroit, Michigan
by
GMAC Re Corporation
Mt. Laurel, New Jersey
(hereinafter referred to as the “Subscribing Reinsurer")

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
3.50%	of the Second Excess Catastrophe Reinsurance
0%	of the Third Excess Catastrophe Reinsurance
6.00%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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:

Mt. Laurel, New Jersey, this 23rd day of July in the year 2007.

GMAC Re Corporation 
(for and on behalf of Motors Insurance Corporation)
 

/s/ Stacy C. Armstrong 

Stacy C. Armstrong, Senior Vice President

 (Print name and title) 

07IL\P2Z1059
Page 2 of 2

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, 2007

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
2.50%	of the Second Excess Catastrophe Reinsurance
2.50%	of the Third Excess Catastrophe Reinsurance
2.50%	of the Fourth Excess Catastrophe Reinsurance
2.50%	of the Fifth Excess Catastrophe Reinsurance
5.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

07IL\P2Z1059
Page 1 of 2

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 20th day of August in the year 2007.

Hannover Re (Bermuda), Ltd.
 

/s/ Schlie

Schlie (VP)

(Print name and title)

/s/ Duesterhaus

Duesterhaus (AVP)

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
7.50%	of the Fourth Excess Catastrophe Reinsurance
10.75%	of the Fifth Excess Catastrophe Reinsurance
3.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 25th day of July in the year 2007.

Montpelier Reinsurance ltd. 
 

/s/ Paul Hopwood  

Paul Hopwood, SVP & N.A. Treaty Underwriter 

 (Print name and title) 

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
6.50%	of the Fourth Excess Catastrophe Reinsurance
6.50%	of the Fifth Excess Catastrophe Reinsurance
8.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 8^th day of August in the year 2007.

Partner Reinsurance Company Ltd.
 

/s/ Jesse Decouto

Jesse Decouto, VP

(Print name and title)

/s/ Catherine Sousa Lombardi

Catherine Sousa Lombardi, Asst Underwriter

(Print name and title)

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

QBE Reinsurance Corporation
Philadelphia, Pennsylvania
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
0%	of the Fourth Excess Catastrophe Reinsurance
0%	of the Fifth Excess Catastrophe Reinsurance
2.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 30^th day of July in the year 2007.

QBE Reinsurance Corporation

/s/ Gregory R. Cuilwik

Gregory R. Cuilwik, Vice President

(Print name and title)

07IL\P2Z1059
Page 2 of 2

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, 2007

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
5.00%	of the Third Excess Catastrophe Reinsurance
5.00%	of the Fourth Excess Catastrophe Reinsurance
10.00%	of the Fifth Excess Catastrophe Reinsurance
10.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
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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 24^th day of July in the year 2007.

Swiss Re Underwriters Agency, Inc.
(for Swiss Reinsurance America Corporation)
 

/s/ Daniel S. McElvany

Daniel S. McElvany, SVP

(Print name and title)

07IL\P2Z1059
Page 2 of 2

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, 2007

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 shall have the following percentage shares in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above:

7.00%	of the First Excess Catastrophe Reinsurance
7.00%	of the Second Excess Catastrophe Reinsurance
10.00%	of the Third Excess Catastrophe Reinsurance
10.00%	of the Fourth Excess Catastrophe Reinsurance
10.00%	of the Fifth Excess Catastrophe Reinsurance
0%	of the Sixth Excess Catastrophe Reinsurance

It Is Further Agreed that this Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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.

07IL\P2Z1059
Page 1 of 2

It Is Also Agreed that the following Article shall apply to the Subscribing Reinsurer’s participation share in the attached Contract, in lieu of the provisions of Article XXX - Intermediary (BRMA 23A) — of the Contract:

     “Article XXX — Servicing

Benfield Inc. is the Servicing Agent providing services for the Company in connection with this Contract. There is no Intermediary of record for this Contract. These services shall include but not be limited to notices, statements, premium, return premium, taxes, losses, loss adjustment expense, salvages and loss settlements. However, such services shall in no way be construed as providing Benfield Inc. with the authority to negotiate or otherwise act on behalf of the Reinsurer.”

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 17^th day of July in the year 2007.

Philadelphia Insurance Companies (for and on behalf of the “Company”)

Christopher J. Maguire, EVP & CUO

(Print name and title)

Armonk, New York, this 23^rd day of October in the year 2007.

Swiss Reinsurance America Corporation

M. JosephCook, VP William J. O’Donnell, Managing Director

(Print name and title)

07IL\P2Z1059
Page 2 of 2

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, 2007

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
7.50%	of the Second Excess Catastrophe Reinsurance
14.00%	of the Third Excess Catastrophe Reinsurance
20.00%	of the Fourth Excess Catastrophe Reinsurance
20.00%	of the Fifth Excess Catastrophe Reinsurance
20.00%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 30^th day of August in the year 2007.

Transatlantic Reinsurance Company 
 

/s/ William Orendorf 

William Orendorf, Senior Underwriter

 (Print name and title) 

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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:

10.00	%	of the First Excess Catastrophe Reinsurance
10.00	%	of the Second Excess Catastrophe Reinsurance
10.00	%	of the Third Excess Catastrophe Reinsurance
0	%	of the Fourth Excess Catastrophe Reinsurance
0	%	of the Fifth Excess Catastrophe Reinsurance
3.00	%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 10_th day of August in the year 2007.

Validus Reinsurance, Ltd. 

/s/ C. Silvester  

C. Silvester - Vice President  

(Print name and title) 

07IL\P2Z1059
Page 2 of 2

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, 2007

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
5.00	%	of the Third Excess Catastrophe Reinsurance
5.00	%	of the Fourth Excess Catastrophe Reinsurance
5.00	%	of the Fifth Excess Catastrophe Reinsurance
4.00	%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

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 28_th day of September in the year 2007.

XL Re Ltd 

/s/ Gino Z. Smith  

Gino Z. Smith, AVP  

(Print name and title) 

07IL\P2Z1059
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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
2.00	%	of the Second Excess Catastrophe Reinsurance
4.00	%	of the Third Excess Catastrophe Reinsurance
4.00	%	of the Fourth Excess Catastrophe Reinsurance
1.00	%	of the Fifth Excess Catastrophe Reinsurance
0	%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1059
Page 1 of 2

it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

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

Paris, France, this 17_th day of October in the year 2007.

AXA RE 

/s/ Antoine Gomot  

Antoine Gomot, Treaty Underwriter  

(Print name and title) 

07IL\P2Z1059
Page 2 of 2

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

Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

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:

3.00	%	of the First Excess Catastrophe Reinsurance
3.00	%	of the Second Excess Catastrophe Reinsurance
1.50	%	of the Third Excess Catastrophe Reinsurance
0	%	of the Fourth Excess Catastrophe Reinsurance
2.75	%	of the Fifth Excess Catastrophe Reinsurance
10.50	%	of the Sixth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

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

Signed by Manager at Lloyds of London

07IL\P2Z1059

EX-10.7

Exhibit 10.7

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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

07\P2Z1061

Table of Contents

Article		Page
I	Coverage		1
II	Commencement and Termination		1
III	Concurrency of Conditions		3
IV	Reinsurance Premium		3
V	Loss Notices and Settlements		4
VI	Late Payments		4
VII	Offset (BRMA 36D)		5
VIII	Access to Records (BRMA 1D)		5
IX	Errors and Omissions (BRMA 14F)		6
X	Currency (BRMA 12A)		6
XI	Taxes (BRMA 50B)		6
XII	Federal Excise Tax		6
XIII	Funding Requirements		6
XIV	Insolvency		8
XV	Arbitration		9
XVI	Service of Suit		10
XVII	Agency Agreement		10
XVIII	Governing Law		10
XIX	Confidentiality		10
XX	Severability		11
XXI	Intermediary (BRMA 23A)		11
	Schedule A
	Schedule B

07\P2Z1061

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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 — Coverage

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 Excess Catastrophe Reinsurance Contract, effective June 1, 2007 (hereinafter referred to as the “Underlying Contract” and described in Schedule B attached hereto), subject to the terms, conditions and limitations hereinafter set forth and in Schedules A and B attached to and forming part of this Contract.

Article II — Commencement and Termination

A. This Contract shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, with respect to reinstatement premium payable by the Company under the provisions of the Underlying Contract as a result of losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008.

B. Notwithstanding the provisions of paragraph A above, if any of the following events occur on or after the date lines are bound and, with the timing exceptions as qualified by

07\P2Z1061
Page 1

subparagraphs 1 and 2 below, before the termination of the Contract, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract:

1. The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto after the date lines are bound for this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 12 months prior to that date; or

2. The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto at any time between the date lines are bound and the date of termination of this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 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+; or

4. The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or unaffiliated individual(s) not controlling the Subscribing Reinsurer’s operations previously; or

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

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

7. The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent (except for inter-company pooling arrangements); or

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

The Company has 30 days from the date of public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. To terminate a Subscribing Reinsurer’s percentage share in this Contract, the Company must provide the Subscribing Reinsurer with formal notice. Such notice, which shall be postmarked no later than the last day of the aforementioned 30-day period, shall include the effective date of termination. The effective date of termination shall be as selected by the Company and shall be one of the following:

a.	The last day of the month prior to the date of any public announcement or discovery; or
b.	The date of any public announcement or discovery; or

07\P2Z1061
Page 2

c.	The last day of any month after the date of any public announcement or discovery; or
d.	The date of the Company’s written notice to the Subscribing Reinsurer advising of the termination; or
e.	The date of notice provided by the Subscribing Reinsurer (should the Subscribing Reinsurer elect to provide one).

C. If this Contract is terminated or 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 termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Concurrency of Conditions

A. 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.

B. 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.

Article IV — Reinsurance Premium

A. As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the percentage, shown as “Reinstatement Premium Rate” for that excess layer in Schedule A attached hereto, of the Company’s gross earned premium as defined in paragraph G of the Premium Article of the Underlying 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, which is payable in four equal installments of the amount, shown as “Deposit Premium Installment” for that excess layer in Schedule A attached hereto, on June 1, September 1 and December 1 of 2007 and March 1 of 2008.

C. Within 45 days after the expiration of this Contract, the Company shall provide a report to the Reinsurer setting forth the premium for excess layer due hereunder, computed in accordance with paragraph A above, and any additional premium due the Reinsurer or return premium due the Company for that excess layer shall be remitted promptly.

D. In the event a Subscribing Reinsurer’s participation in this Contract is terminated under the provisions of paragraph B of the Commencement and Termination Article, no deposit premium installment shall be due after the effective date of termination and the adjusted premium shall be calculated by dividing the number of days the Subscribing Reinsurer participated on this Contract by the number of days of the original term of this Contract, and multiplying the quotient thereof by the Subscribing Reinsurer’s percentage share of the final

07\P2Z1061
Page 3

reinsurance premium calculated in accordance with paragraph A above. Any premium paid to the Subscribing Reinsurer in excess of the adjusted premium shall be returned to the Company as promptly as possible after the effective date of termination.

Article V — Loss Notices and Settlements

A. 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 Company will advise the Reinsurer of all subsequent developments relating to such claims that, in the opinion of the Company, may materially affect the position of the Reinsurer.

B. 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 within 14 days) by the Company.

Article VI — Late Payments

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

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

1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser, times
2.	1/365ths of the 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

07\P2Z1061
Page 4

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 this paragraph C, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 business days following transmittal of written notification that the provisions of this Article have been invoked.

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

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

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

Article VII — 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 VIII — 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.

07\P2Z1061
Page 5

Article IX — 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 X — 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 XI — Taxes (BRMA 50B)

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

Article XII — Federal Excise Tax

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

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

Article XIII — Funding Requirements

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, subject to receipt of satisfactory information from the Company, its share of the Company’s ceded unearned premium and outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the Underlying Contract but not yet recovered from the Reinsurer, plus the Company’s reserves for reinstatement premiums due under the Underlying Contract, if any, determined as of the date that this paragraph A first applies to the Reinsurer according to the provisions of subparagraph (a) and/or (b) below) by:

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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:

a.	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; or
b.	Has an A.M. Best’s rating below A- (inclusive of “Not Rated” ratings) and/or a Standard & Poor’s rating below BBB+. However, this funding requirement will not apply to authorized reinsurers who at inception are rated A or higher by A.M. Best and have a policyholders’ surplus of $2,000,000,000 or more.

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 60 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 reinstatement premiums paid by the Company under the terms of the Underlying Contract, 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 share of any ceded unearned premium and/or outstanding loss reserves funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;

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4.	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 reserves, if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

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.

Article XIV — Insolvency

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

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

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

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Article XV — 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.

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Article XVI — 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.

Article XVII — 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 XVIII — 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.

Article XIX — 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

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Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XX — 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 XXI — 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 17^th day of July in the year 2007.

Philadelphia Insurance Companies (for and on behalf of the “Company”) 

/s/ Christopher J. Maguire  

Christopher J. Maguire, EVP & CUO  

(Print name and title) 

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Schedule A

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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
	Excess			Excess
Reinstatement Premium Rate		0.4352	%		0.5857	%
Deposit Premium	$	1,986,000		$	2,673,000
Deposit Premium Installment	$	496,500		$	668,250

The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer expressed in its Interests and Liabilities Agreement attached hereto.

07IL\P2Z1061
Schedule A

Schedule B

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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			Underlying
	Contract			Contract
	First			Second
	Excess			Excess
Company’s Retention	$	10,000,000		$	20,000,000
Reinsurer’s Per Occurrence Limit	$	10,000,000		$	30,000,000
Reinsurer’s Term Limit	$	20,000,000		$	60,000,000
Minimum Premium	$	3,200,000		$	6,480,000
Premium Rate		0.8764856	%		1.7748834	%
Deposit Premium	$	4,000,000		$	8,100,000
Quarterly Deposit Premium	$	1,000,000		$	2,025,000

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.

07IL\P2Z1061
Schedule B

Interests and Liabilities Agreement

of

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

with respect to the

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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:

40.0%	of the First Excess Reinstatement Premium Protection
10.0%	of the Second Excess Reinstatement Premium Protection

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1061
Page 1 of 2

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 26th day of July in the year 2007.

Ariel Reinsurance Company Ltd. 

/s/ Stephen Velotti  

Stephen Velotti, SVP
(Print name and title) 

07IL\P2Z1061
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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 Reinstatement Premium Protection
40.0%	of the Second Excess Reinstatement Premium Protection

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1061
Page 1 of 2

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 11^th day of September in the year 2007.

AXIS Specialty Limited 

/s/ Christian Dunleavy  

Christian Dunleavy, SVP
(Print name and title) 

07IL\P2Z1061
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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:

60.0%	of the First Excess Reinstatement Premium Protection
50.0%	of the Second Excess Reinstatement Premium Protection

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

The Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers,

07IL\P2Z1061
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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 10^th day of AUGUST in the year 2007.

Validus Reinsurance, Ltd. 

/s/ C. Silvester  

C. Silvester — Vice President
(Print name and title) 

07IL\P2Z1061
Page 2 of 2

Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

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 Reinstatement Premium Protection

Reinsurers	Participations
Ariel Reinsurance Company Ltd.		40.0	%
Validus Reinsurance, Ltd.		60.0
Total		100.0	%

Second Excess Reinstatement Premium Protection

Reinsurers	Participations
Ariel Reinsurance Company Ltd.		10.0	%
AXIS Specialty Limited		40.0
Validus Reinsurance, Ltd.		50.0
Total		100.0	%

07IL\P2Z1061

EX-10.8

Exhibit 10.8

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

07\M2U1138

Table of Contents

Article		Page
I	Classes of Business Reinsured		1
II	Commencement and Termination		1
III	Special Commutation		3
IV	Territory (BRMA 51A)		5
V	Exclusions		5
VI	Retention and Limit		7
VII	Reinstatement		8
VIII	Premium		8
IX	Definitions		10
X	Loss Occurrence		11
XI	Loss Notices and Settlements		12
XII	Salvage and Subrogation		12
XIII	Florida Hurricane Catastrophe Fund		13
XIV	Late Payments		14
XV	Offset (BRMA 36D)		15
XVI	Access to Records (BRMA 1D)		15
XVII	Liability of the Reinsurer		15
XVIII	Net Retained Lines (BRMA 32B)		15
XIX	Errors and Omissions (BRMA 14F)		16
XX	Currency (BRMA 12A)		16
XXI	Taxes (BRMA 50B)		16
XXII	Federal Excise Tax		16
XXIII	Funding Requirements		16
XXIV	Insolvency		18
XXV	Arbitration		19
XXVI	Service of Suit		20
XXVII	Agency Agreement		20
XXVIII	Governing Law		20
XXIX	Confidentiality		20
XXX	Severability		21
XXXI	Intermediary (BRMA 23A)		21
	Schedule A

07\M2U1138

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 — Commencement and Termination

A.	This Contract shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, with respect to losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008.
B.	Notwithstanding the provisions of paragraph A above, if any of the following events occur on or after the date lines are bound and, with the timing exceptions as qualified by subparagraphs 1 and 2 below, before the termination of the Contract, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract:

1. The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto after the date lines are bound for this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 12 months prior to that date; or

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Page 1

2.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto at any time between the date lines are bound and the date of termination of this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 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+; or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or unaffiliated individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent (except for inter-company pooling arrangements); or
8.	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business.

The Company has 30 days from the date of public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. To terminate a Subscribing Reinsurer’s percentage share in this Contract, the Company must provide the Subscribing Reinsurer with formal notice. Such notice, which shall be postmarked no later than the last day of the aforementioned 30-day period, shall include the effective date of termination. The effective date of termination shall be as selected by the Company and shall be one of the following:

a.	The last day of the month prior to the date of any public announcement or discovery; or
b.	The date of any public announcement or discovery; or
c.	The last day of any month after the date of any public announcement or discovery; or
d.	The date of the Company’s written notice to the Subscribing Reinsurer advising of the termination; or
e.	The date of notice provided by the Subscribing Reinsurer (should the Subscribing Reinsurer elect to provide one).

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Page 2

C. If this Contract is terminated or 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 termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Special Commutation

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

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

Notwithstanding the foregoing, the provisions of this Article shall not apply to Subscribing Reinsurers that (at the inception hereof) are rated A+ or higher by A.M. Best and have a policyholders’ surplus (or the foreign equivalent thereto) of $2,000,000,000 or more.

“Outstanding claim or claims” shall be defined as known or unknown claims, including any billed yet unpaid claims.

B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss, including, but not limited to, paid losses, paid loss adjustment expenses, outstanding losses, outstanding loss adjustment expenses, incurred but not reported loss reserves established by the Company’s internal division or the appropriate actuarial firm under external contract to the Company, salvage and subrogation, and unearned reinsurance deposits, if any, and shall set forth or attach the information relied upon by the Company and the methodology, including, but not limited to, the present value calculation employed to calculate the excess loss. The Subscribing Reinsurer shall then pay the amount requested within 30 calendar days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests such amount.

C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company’s Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 calendar days of receipt of the Company’s Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 calendar days of receipt of the notification. Within 30 calendar days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement

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of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the excess loss, including, but not limited to, paid losses, paid loss adjustment expenses, outstanding losses, outstanding loss adjustment expenses, incurred but not reported loss reserves established by the Subscribing Reinsurer’s internal division or the appropriate actuarial firm under external contract to the Subscribing Reinsurer, salvage and subrogation, and unearned reinsurance deposits, if any, and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology, including, but not limited to, the present value calculation employed to calculate the excess loss.

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

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

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

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

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

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

I. Payment by the Subscribing Reinsurer of the amount requested in accordance with paragraph B, C or F above, shall release the Subscribing Reinsurer from all further liability for any outstanding claim or claims, known or unknown, under this Contract and shall

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release the Company from all further liability for payments of salvage or subrogation amounts, known or unknown, to the Subscribing Reinsurer under this Contract.

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

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

Article IV — Territory (BRMA 51A)

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

Article V — Exclusions

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

1.	Assumed reinsurance. However, this exclusion shall not apply to the Company’s 25.0% quota share assumed from USIC of Florida, Inc. as respects Florida Homeowners business produced by the Company, it being understood that recoveries, if any, from the purchased common account catastrophe program and/or the Florida Hurricane Catastrophe Fund (FHCF) will inure to the benefit of said quota share reinsurance, whether collectible or not, and will be deemed not to be reduced by any reduction or exhaustion of the FHCF’s claims paying capacity.
2.	Financial guarantee and insolvency.
3.	Mortgage Impairment insurances and similar kinds of insurances, however styled.
4.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance” attached to and forming part of this Contract.
5.	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.
6.	Loss or liability from any Pool, Association or Syndicate and any assessment or similar demand for payment related to the FHCF or Citizens Property Insurance Corporation.
7.	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.

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8.	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.
9.	Accident and Health, Casualty, Fidelity and/or Surety business.
10.	Loss, damage, cost or expense 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 25.0% of the Company’s property loss under the applicable original policy.
11.	Notwithstanding any other provision to the contrary within this Contract or any amendment 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
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.

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12. 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.

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

Article VI — Retention and Limit

A. As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as “Company’s Retention” for that excess layer in Schedule A attached hereto, arising out of each 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.

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Article VII — Reinstatement

A. In the event all or any portion of the reinsurance under any excess layer of reinsurance coverage provided by this Contract is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the loss occurrence commences hereon. For each amount so reinstated, the Company agrees to pay additional premium in accordance with the provisions of the Premium Article.

B. 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 VIII — 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 sum of the Company’s aggregate total insured value and 25.0% of USIC of Florida, Inc.’s aggregate total insured value for policies that include wind coverage in force on September 30, 2007, multiplied by the percentage shown as “Adjustment Rate” for that excess layer in Schedule A attached hereto.

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 2007 and March 1, 2008.

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 above, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted promptly.

D. For each amount of limit reinstated for each excess layer in accordance with the Reinstatement Article, 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 paragraph A above, for the excess layer reinstated for the term of this Contract (exclusive of reinstatement premium).

E. 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 (if any) 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.

F. In the event a Subscribing Reinsurer’s participation in this Contract is terminated under the provisions of paragraph B of the Commencement and Termination Article, no deposit premium shall be due after the effective date of termination, the minimum premium shall be waived, and the reinsurance premium and reinstatement premium, if applicable, will be calculated in accordance with the following formulas:

1.	Reinsurance premium shall be the number of days the Subscribing Reinsurer participates on this Contract divided by the number of days of the original term of this Contract and the quotient thereof shall be multiplied by the Subscribing Reinsurer’s percentage share of the final adjusted premium reported in accordance with paragraph C above.
2.	Reinstatement premium shall be the product of the percentage determined in accordance with the provisions of subparagraph 1 of paragraph D above and the amount determined in accordance with the provisions of subparagraph 1 of this paragraph F.
3.	In the event the incurred loss for any excess layer is greater than the sum of the amounts from subparagraphs 1 and 2 of this paragraph F that are applicable to the same excess layer, in lieu of the provisions of subparagraphs 1 and 2 of this paragraph F, the Subscribing Reinsurer will receive premium equal to the lesser of:

a.

An amount equal to the Subscribing Reinsurer’s percentage share of the full reinsurance premium calculated in accordance with paragraph A (without regard to the termination of the Subscribing Reinsurer’s share in accordance with the provisions of paragraph B of the Commencement and Termination Article) plus any reinstatement premium calculated in accordance with subparagraph 2 of this paragraph F; or

b.

The Subscribing Reinsurer’s percentage share of the incurred loss for the same excess layer.

G. “Incurred loss” as used herein shall mean the Company’s ceded ultimate net loss plus the Company’s ceded outstanding loss and loss adjustment expense reserves (including

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incurred but not reported loss reserves for known loss occurrences established by the Company).

Article IX — 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.

Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not

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permitted under New York law.

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 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 and states 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 states 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 A) 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

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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.

B. All loss settlements made by the Company, provided they are within the terms of this Contract and the terms of the Company’s policies (except as respects loss in excess of policy limits and extra contractual obligations), 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 within 14 days) 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.

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Article XIII — Florida Hurricane Catastrophe Fund

A. The Company shall provisionally purchase from the Florida Hurricane Catastrophe Fund (FHCF) the following limit and retention:

1.	As respects Liberty American Insurance Company, 90.0% of $5,521,302 excess of $1,086,017; and
2.	As respects Liberty American Select Insurance Company, 90.0% of $75,752,188 excess of $14,900,133.

The provisional limits and retentions detailed above may increase or decrease depending on the Company’s actual written premium subject to the FHCF reimbursement coverage during the term of this Contract. The Company and the Reinsurer agree to accept and be bound by the final determination of the FHCF.

B. Any loss reimbursement paid or payable to the Company under the coverage layers provided by the 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.

C. Prior to the determination of the Company’s FHCF retention and payout, if any, under the coverage layer provided by 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 the FHCF’s final determination of the payout under the coverage layer provided by 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.

D. 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 such 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:

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 such FHCF reimbursement to which the Company would be entitled for that loss occurrence alone, or (b) the remaining such 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.

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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 the Intermediary Article (BRMA 23A) (hereinafter referred to as the “Intermediary”) by the payment due date, the party to which 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 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 respect of that portion of any policy which the Company retains net for its own account shall be included.

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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 50B)

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

Article XXII — Federal Excise Tax

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

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

Article XXIII — Funding Requirements

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, subject to receipt of satisfactory information from the Company, its share of the unearned portion of any deposit premium (determined as of the date that this paragraph A first applies to the

07\M2U1138
Page 16

Reinsurer according to the provisions of subparagraph (a) and/or (b) below) and 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:

a.	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; or
b.	Has an A.M. Best’s rating below A- (inclusive of “Not Rated” ratings) and/or a Standard & Poor’s rating below BBB+. However, this funding requirement will not apply to authorized reinsurers who at inception are rated A or higher by A.M. Best and have a policyholders’ surplus of $2,000,000,000 or more.

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 60 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 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;

07\M2U1138
Page 17

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.

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.

Article XXIV — Insolvency

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

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

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

07\M2U1138
Page 18

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 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.

07\M2U1138
Page 19

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 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 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.

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 unaffiliated 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

07\M2U1138
Page 20

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 July in the year 2007.

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

/s/ T. Bruce Meyer

T. Bruce Meyer, Pres. & CEO (Print name and title)
 

07\M2U1138
Page 21

Schedule A

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

	First			Second			Third			Fourth
	Excess			Excess			Excess			Excess
Company’s Retention	$	3,500,000		$	7,700,000		$	16,000,000		$	24,000,000
Reinsurer’s Per Occurrence Limit	$	4,200,000		$	8,300,000		$	8,000,000		$	30,000,000
Reinsurer’s Term Limit	$	8,400,000		$	16,600,000		$	16,000,000		$	60,000,000
Minimum Premium	$	1,599,360		$	2,390,400		$	1,280,000		$	2,640,000
Adjustment Rate		0.031565	%		0.047178	%		0.025262	%		0.052104	%
Deposit Premium	$	1,999,200		$	2,988,000		$	1,600,000		$	3,300,000
Quarterly Deposit Premium	$	499,800		$	747,000		$	400,000		$	825,000

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.

07\M2U1138
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

07\M2U1138

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.

NMA 2915 (25.1.01)

07IL\M2U1138
Page 1 of 2

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

First Excess Catastrophe Reinsurance

Reinsurers	Participations
Ariel Reinsurance Company Limited		10.00	%
DaVinci Reinsurance Ltd.		17.50
Everest Reinsurance Company		5.00
Flagstone Reinsurance Limited		30.00
New Castle Reinsurance Company Ltd.		8.00
Renaissance Reinsurance, Ltd.		17.50
Transatlantic Reinsurance Company		5.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		7.00
Total		100.00	%

Second Excess Catastrophe Reinsurance

Reinsurers	Participations
Ariel Reinsurance Company Limited		10.00	%
Catlin Insurance Company Ltd.		5.50
DaVinci Reinsurance Ltd.		10.00
Flagstone Reinsurance Limited		30.00
Harbor Point Re Limited		9.00
New Castle Reinsurance Company Ltd.		8.00
Renaissance Reinsurance, Ltd.		10.00
Swiss Reinsurance America Corporation		7.50
Transatlantic Reinsurance Company		5.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		5.00
Total		100.00	%

07IL\M2U1138
Page 2 of 2

Third Excess Catastrophe Reinsurance

Reinsurers	Participations
Ariel Reinsurance Company Limited		10.00	%
Aspen Insurance Limited		10.00
Catlin Insurance Company Ltd.		5.50
Flagstone Reinsurance Limited		25.00
Hannover Re (Bermuda), Ltd.		8.00
Harbor Point Re Limited		2.50
Montpelier Reinsurance Limited		7.50
New Castle Reinsurance Company Ltd.		4.00
Swiss Reinsurance America Corporation		7.50
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		20.00
Total		100.00	%

Fourth Excess Catastrophe Reinsurance

Reinsurers	Participations
Ariel Reinsurance Company Limited		7.00	%
Catlin Insurance Company Ltd.		4.50
DaVinci Reinsurance Ltd.		12.50
Flagstone Reinsurance Limited		7.50
Hannover Re (Bermuda), Ltd.		6.35
Harbor Point Re Limited		6.50
Montpelier Reinsurance Limited		7.50
New Castle Reinsurance Company Ltd.		2.00
Renaissance Reinsurance, Ltd.		12.50
Swiss Reinsurance America Corporation		7.50
Transatlantic Reinsurance Company		10.00
XL Re Ltd		5.00
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		11.15
Total		100.00	%

07IL\M2U1138
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

10.00% of the First Excess Catastrophe Reinsurance
10.00% of the Second Excess Catastrophe Reinsurance
10.00% of the Third Excess Catastrophe Reinsurance
  7.00% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 17th day of July in the year 2007.

Ariel Reinsurance Company Ltd.
By	/s/ Stephen Velotti
	Stephen Velotti, SVP

07IL\M2U1138

Interests and Liabilities Agreement

of

Aspen Insurance Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
      0% of the Second Excess Catastrophe Reinsurance
10.00% of the Third Excess Catastrophe Reinsurance
      0% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 17th day of July in the year 2007.

Aspen Insurance Limited
By	/s/ RP Vacher
	RP Vacher, U/W

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
5.50% of the Second Excess Catastrophe Reinsurance
5.50% of the Third Excess Catastrophe Reinsurance
4.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 23^rd day of July in the year 2007.

Catlin Insurance Company Ltd.
By	/s/ Tom Sperryn-Jones
	Tom Sperryn-Jones, Underwriter

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

17.50% of the First Excess Catastrophe Reinsurance
10.00% of the Second Excess Catastrophe Reinsurance
      0% of the Third Excess Catastrophe Reinsurance
12.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 9th day of August in the year 2007.

DaVinci Reinsurance Ltd.
By	/s/ Rebecca Roberts
	Rebecca Roberts, AVP

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

5.00% of the First Excess Catastrophe Reinsurance
     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 at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Liberty Corner, New Jersey, this 8th day of August in the year 2007.

Everest Reinsurance Company
By	/s/ Charles Volker
	Charles Volker — VP

07IL\M2U1138

Interests and Liabilities Agreement

of

Flagstone Reinsurance Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

30.00% of the First Excess Catastrophe Reinsurance
30.00% of the Second Excess Catastrophe Reinsurance
25.00% of the Third Excess Catastrophe Reinsurance
  7.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 18th day of July in the year 2007.

Flagstone Reinsurance Limited
By	/s/ Kevin M. Madigan
	Kevin M. Madigan, Deputy Underwriting Officer NA

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
    0% of the Second Excess Catastrophe Reinsurance
8.00% of the Third Excess Catastrophe Reinsurance
6.35% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

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

Hamilton, Bermuda, this 20th day of August in the year 2007.

Hannover Re (Bermuda), Ltd.
By	/s/ Schlie
	Schlie (VP)
By	/s/ Duesterhaus
	Duesterhaus (AVP)

07IL\M2U1138

Interests and Liabilities Agreement

of

Harbor Point Re Limited
Hamilton, Bermuda
(hereinafter referred to as the “Subscribing Reinsurer”)

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
9.00% of the Second Excess Catastrophe Reinsurance
2.50% of the Third Excess Catastrophe Reinsurance
6.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 17th day of July in the year 2007.

Harbor Point Re Limited
By	/s/ William Maclachlan
	William Maclachlan, Managing Director

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
     0% of the Second Excess Catastrophe Reinsurance
7.50% of the Third Excess Catastrophe Reinsurance
7.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 25th day of July in the year 2007.

Montpelier Reinsurance Limited
By	/s/ Paul Hopwood
	Paul Hopwood, SVP & NA Treaty Underwriter

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

8.00% of the First Excess Catastrophe Reinsurance
8.00% of the Second Excess Catastrophe Reinsurance
4.00% of the Third Excess Catastrophe Reinsurance
2.00% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 18th day of July in the year 2007.

New Castle Reinsurance Company Ltd.
By	/s/ Chris McKeown
	Chris McKeown, CEO

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

17.50% of the First Excess Catastrophe Reinsurance
10.00% of the Second Excess Catastrophe Reinsurance
       0% of the Third Excess Catastrophe Reinsurance
12.50% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 24th day of July in the year 2007.

Renaissance Reinsurance, Ltd.
By	/s/ Justin O'Keefe
	Justin O'Keefe, VP

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 as collectively as the “Company")

It Is Hereby Agreed that the Subscribing Reinsurer shall have 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
7.50% of the Second Excess Catastrophe Reinsurance
7.50% of the Third Excess Catastrophe Reinsurance
7.50% of the Fourth Excess Catastrophe Reinsurance

It Is Further Agreed that this Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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.

07IL\M2U1138
Page 1 of 2

It Is Also Agreed that the following Article shall apply to the Subscribing Reinsurer’s participation share in the attached Contract, in lieu of the provisions of Article XXXI - Intermediary (BRMA 23A) — of the Contract:

“Article XXXI — Servicing

Benfield Inc. is the Servicing Agent providing services for the Company in connection with this Contract. There is no Intermediary of record for this Contract. These services shall include but not be limited to notices, statements, premium, return premium, taxes, losses, loss adjustment expense, salvages and loss settlements. However, such services shall in no way be construed as providing Benfield Inc. with the authority to negotiate or otherwise act on behalf of the Reinsurer.”

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

Pinellas Park, Florida, this 16th day of July in the year 2007.
	Liberty American Insurance Group, Inc. (for and on behalf of the “Company”)
	T. Bruce Meyer, Pres. & CEO
	(Print name and title)
Armonk, New York,	this 23rd day of October in the year 2007.
	M. Joseph Cook, V.P. William J. O’Donnell, Managing Director
	Swiss Reinsurance America Corporation

07IL\M2U1138
Page 2 of 2

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

  5.00% of the First Excess Catastrophe Reinsurance
  5.00% of the Second Excess Catastrophe Reinsurance
        0% of the Third Excess Catastrophe Reinsurance
 10.00% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

New York, New York, this 30th day of August in the year 2007.

Transatlantic Reinsurance Company
By	/s/ William Orendorf
	William Orendorf, Senior Underwriter

07IL\M2U1138

Interests and Liabilities Agreement

of

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

with respect to the

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 First Excess Catastrophe Reinsurance
    0% of the Second Excess Catastrophe Reinsurance
    0% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 27th day of July in the year 2007.

XL Re Ltd
By	/s/ Gino Z. Smith
	Gino Z. Smith, AVP

07IL\M2U1138

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

Florida Only Excess Catastrophe Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

  7.00% of the First Excess Catastrophe Reinsurance
  5.00% of the Second Excess Catastrophe Reinsurance
20.00% of the Third Excess Catastrophe Reinsurance
11.15% of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

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

Signed by Manager of Lloyds of London

07IL\M2U1138

EX-10.9

Exhibit 10.9

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

07\M2U1140

Table of Contents

Article		Page
I	Coverage		1
II	Commencement and Termination		1
III	Concurrency of Conditions		3
IV	Reinsurance Premium		3
V	Loss Notices and Settlements		4
VI	Late Payments		4
VII	Offset (BRMA 36D)		6
VIII	Access to Records (BRMA 1D)		6
IX	Errors and Omissions (BRMA 14F)		6
X	Currency (BRMA 12A)		6
XI	Taxes (BRMA 50B)		6
XII	Federal Excise Tax		7
XIII	Funding Requirements		7
XIV	Insolvency		8
XV	Arbitration		9
XVI	Service of Suit		10
XVII	Agency Agreement		11
XVIII	Governing Law		11
XIX	Confidentiality		11
XX	Severability		11
XXI	Intermediary (BRMA 23A)		11
	Schedule A
	Schedule B

07\M2U1140

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 — Coverage

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 First and Second Excess layers of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2007 (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 and in Schedule B attached to and forming part of this Contract.

Article II — Commencement and Termination

A. This Contract shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, with respect to reinstatement premium payable by the Company under the provisions of the Underlying Contract as a result of losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008.

B. Notwithstanding the provisions of paragraph A above, if any of the following events occur on or after the date lines are bound and, with the timing exceptions as qualified by

07\M2U1140
Page 1

subparagraphs 1 and 2 below, before the termination of the Contract, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract:

1.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto after the date lines are bound for this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 12 months prior to that date; or
2.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto at any time between the date lines are bound and the date of termination of this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 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+; or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or unaffiliated individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent (except for inter-company pooling arrangements); or
8.	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business.

The Company has 30 days from the date of public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. To terminate a Subscribing Reinsurer’s percentage share in this Contract, the Company must provide the Subscribing Reinsurer with formal notice. Such notice, which shall be postmarked no later than the last day of the aforementioned 30-day period, shall include the effective date of termination. The effective date of termination shall be as selected by the Company and shall be one of the following:

a. The last day of the month prior to the date of any public announcement or discovery; or

07\M2U1140
Page 2

b.	The date of any public announcement or discovery; or
c.	The last day of any month after the date of any public announcement or discovery; or
d.	The date of the Company’s written notice to the Subscribing Reinsurer advising of the termination; or
e.	The date of notice provided by the Subscribing Reinsurer (should the Subscribing Reinsurer elect to provide one).

C. If this Contract is terminated or 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 termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Concurrency of Conditions

A. 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.

B. 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.

Article IV — Reinsurance Premium

A. As premium for the reinsurance provided hereunder for each excess layer for the term of this Contract, the Company shall pay the Reinsurer the product of the following:

1.	The factor, shown as “Reinstatement Factor” for that excess layer in Schedule B attached hereto; times
2.	The final adjusted Rate on Line for the corresponding excess layer under the Underlying Contract; times
3.	The final adjusted premium paid by the Company for the corresponding excess layer under the Underlying Contract.

“Final adjusted Rate on Line” as used herein shall mean the final adjusted premium paid by the Company for the corresponding excess layer under the Underlying Contract divided by the amount shown as “Underlying Contract Reinsurer’s Per Occurrence Limit” for that excess layer in Schedule B attached hereto.

07\M2U1140
Page 3

B. The Company shall pay the Reinsurer an annual deposit premium for each excess layer of the amount shown as “Deposit Premium” for that excess layer in Schedule B attached hereto, in four equal installments of the amount shown as “Quarterly Deposit Premium” for that excess layer in Schedule B attached hereto, on June 1, September 1 and December 1 of 2007 and March 1 of 2008.

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 above, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted promptly.

D. In the event a Subscribing Reinsurer’s participation in this Contract is terminated under the provisions of paragraph B of the Commencement and Termination Article, no deposit premium installment shall be due after the effective date of termination and the adjusted premium for each excess layer shall be calculated by dividing the number of days the Subscribing Reinsurer participated on this Contract by the number of days of the original term of this Contract, and multiplying the quotient thereof by the Subscribing Reinsurer’s percentage share of the reinsurance premium for such excess layer calculated in accordance with paragraph A above.

Article V — Loss Notices and Settlements

A. 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 Company will advise the Reinsurer of all subsequent developments relating to such claims that, in the opinion of the Company, may materially affect the position of the Reinsurer.

B. 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 within 14 days) by the Company.

Article VI — Late Payments

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

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

07\M2U1140
Page 4

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 this paragraph C, 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

07\M2U1140
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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 VII — 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 VIII — 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 IX — 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 X — 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 XI — Taxes (BRMA 50B)

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

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Article XII — Federal Excise Tax

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

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

Article XIII — Funding Requirements

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, subject to receipt of satisfactory information from the Company, its share of the Company’s ceded unearned premium and outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the Underlying Contract but not yet recovered from the Reinsurer, plus the Company’s reserves for reinstatement premiums due under the Underlying Contract, if any, determined as of the date that this paragraph A first applies to the Reinsurer according to the provisions of subparagraph (a) and/or (b) below) 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:

a.	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; or
b.	Has an A.M. Best’s rating below A- (inclusive of “Not Rated” ratings) and/or a Standard & Poor’s rating below BBB+. However, this funding requirement will not apply to authorized reinsurers who at inception are rated A or higher by A.M. Best and have a policyholders’ surplus of $2,000,000,000 or more.

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.

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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 60 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 reinstatement premiums paid by the Company under the terms of the Underlying Contract, 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 share of any ceded unearned premium and/or outstanding loss reserves funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;
4.	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 reserves, if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

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.

Article XIV — 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

07\M2U1140
Page 8

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 XV — 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

07\M2U1140
Page 9

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 XVI — 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.

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Page 10

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.

Article XVII — 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 XVIII — 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.

Article XIX — 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 XX — 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 XXI — 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

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Page 11

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 July in the year 2007.

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

/s/ T. Bruce Meyer  

T. Bruce Meyer, Pres. & CEO
(Print name and title)
 

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Page 12

Schedule A

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

	First			Second
	Excess			Excess
Company’s Retention	$	3,500,000		$	7,700,000
Reinsurer’s Per Occurrence Limit	$	4,200,000		$	8,300,000
Reinsurer’s Term Limit	$	8,400,000		$	16,600,000
Minimum Premium	$	1,599,360		$	2,390,400
Adjustment Rate		0.031565	%		0.047178	%
Deposit Premium	$	1,999,200		$	2,988,000
Quarterly Deposit Premium	$	499,800		$	747,000

07\M2U1140
Schedule A

Schedule B

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

	First		Second
	Excess		Excess
Reinstatement Factor		1.17647		1.25000
Underlying Contract Reinsurer’s Per Occurrence Limit	$	4,200,000	$	8,300,000
Deposit Premium	$	1,119,552	$	1,344,600
Quarterly Deposit Premium	$	279,888	$	336,150

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.

07\M2U1140
Schedule B

Interests and Liabilities Agreement

of

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

with respect to the

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

     50.0% of the First Excess Reinstatement Premium Protection Reinsurance
     50.0% of the Second Excess Reinstatement Premium Protection Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 24 day of July in the year 2007.

DaVinci Reinsurance Ltd.
By	/s/ Justin O’Keefe
	Justin O’Keefe, VP

07IL\M2U1140

Interests and Liabilities Agreement

of

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

with respect to the

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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:

     50.0% of the First Excess Reinstatement Premium Protection Reinsurance
     50.0% of the Second Excess Reinstatement Premium Protection Reinsurance

This Agreement shall become effective at 12:01 a.m., Local Standard Time, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 24 day of July in the year 2007.

Renaissance Reinsurance, Ltd.
By	/s/ Justin O’Keefe
	Justin O’Keefe, VP

07IL\M2U1140

First and Second Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

First Excess Reinstatement Premium Protection Reinsurance

Reinsurers	Participations
DaVinci Reinsurance Ltd.		50.0	%
Renaissance Reinsurance, Ltd.		50.0
Total		100.0	%

Second Excess Reinstatement Premium Protection Reinsurance

Reinsurers	Participations
DaVinci Reinsurance Ltd.		50.0	%
Renaissance Reinsurance, Ltd.		50.0
Total		100.0	%

07IL\M2U1140

EX-10.10

Exhibit 10.10

Third Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

07\M2U1141

Table of Contents

Article		Page
I	Coverage		1
II	Commencement and Termination		1
III	Concurrency of Conditions		3
IV	Reinsurance Premium		3
V	Loss Notices and Settlements		4
VI	Late Payments		4
VII	Offset (BRMA 36D)		5
VIII	Access to Records (BRMA 1D)		5
IX	Errors and Omissions (BRMA 14F)		6
X	Currency (BRMA 12A)		6
XI	Taxes (BRMA 50B)		6
XII	Federal Excise Tax		6
XIII	Funding Requirements		6
XIV	Insolvency		8
XV	Arbitration		9
XVI	Service of Suit		10
XVII	Agency Agreement		10
XVIII	Governing Law		10
XIX	Confidentiality		10
XX	Severability		11
XXI	Intermediary (BRMA 23A)		11
	Schedule A

07\M2U1141

Third Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 — Coverage

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 Third Excess layer of the Company’s Florida Only Excess Catastrophe Reinsurance Contract, effective June 1, 2007 (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.

Article II — Commencement and Termination

A.

This Contract shall become effective at 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2007, with respect to reinstatement premium payable by the Company under the provisions of the Underlying Contract as a result of losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Local Standard Time at the location where the loss occurrence commences, June 1, 2008.

B.

Notwithstanding the provisions of paragraph A above, if any of the following events occur on or after the date lines are bound and, with the timing exceptions as qualified by

07\M2U1141
Page 1

subparagraphs 1 and 2 below, before the termination of the Contract, the Company may terminate a Subscribing Reinsurer’s percentage share in this Contract:

1.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto after the date lines are bound for this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 12 months prior to that date; or
2.	The Subscribing Reinsurer’s surplus as regards policyholders or the foreign equivalent thereto at any time between the date lines are bound and the date of termination of this Contract has been reduced by more than 25.0% of the amount of surplus or foreign equivalent 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+; or
4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or unaffiliated individual(s) not controlling the Subscribing Reinsurer’s operations previously; or
5.	A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
6.	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
7.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent (except for inter-company pooling arrangements); or
8.	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business.

The Company has 30 days from the date of public announcement or discovery to exercise the option to terminate a Subscribing Reinsurer’s percentage share in this Contract. To terminate a Subscribing Reinsurer’s percentage share in this Contract, the Company must provide the Subscribing Reinsurer with formal notice. Such notice, which shall be postmarked no later than the last day of the aforementioned 30-day period, shall include the effective date of termination. The effective date of termination shall be as selected by the Company and shall be one of the following:

a.	The last day of the month prior to the date of any public announcement or discovery; or
b.	The date of any public announcement or discovery; or

07\M2U1141
Page 2

c.	The last day of any month after the date of any public announcement or discovery; or
d.	The date of the Company’s written notice to the Subscribing Reinsurer advising of the termination; or
e.	The date of notice provided by the Subscribing Reinsurer (should the Subscribing Reinsurer elect to provide one).

C. If this Contract is terminated or 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 termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

Article III — Concurrency of Conditions

A.	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.
B.	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.

Article IV — Reinsurance Premium

A.	As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer 0.00606298% of the sum of the Company’s aggregate total insured value and 25.0% of USIC of Florida, Inc.’s aggregate total insured value for policies that include wind coverage in force on September 30, 2007, subject to a minimum premium of $307,200.
B.	The Company shall pay the Reinsurer an annual deposit premium of $384,000 in four equal installments of $96,000 on June 1, September 1 and December 1 of 2007 and March 1 of 2008.
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, computed in accordance with paragraph A above, and any additional premium due the Reinsurer or return premium due the Company shall be remitted promptly.
D.	In the event a Subscribing Reinsurer’s participation in this Contract is terminated under the provisions of paragraph B of the Commencement and Termination Article, no deposit premium installment shall be due after the effective date of termination and the adjusted premium shall be calculated by dividing the number of days the Subscribing Reinsurer participated on this Contract by the number of days of the original term of this Contract, and multiplying the quotient thereof by the Subscribing Reinsurer’s percentage share of the final reinsurance premium calculated in accordance with paragraph A above. Any premium paid to the Subscribing Reinsurer in excess of the adjusted premium shall be returned to the Company as promptly as possible after the effective date of termination.

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Page 3

Article V — Loss Notices and Settlements

A.

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 Company will advise the Reinsurer of all subsequent developments relating to such claims that, in the opinion of the Company, may materially affect the position of the Reinsurer.

B.

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 within 14 days) by the Company.

Article VI — Late Payments

A.

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

B.

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

1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser, times
2.	1/365ths of the 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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Page 4

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 this paragraph C, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 business days following transmittal of written notification that the provisions of this Article have been invoked.

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

D.

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

E.

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

Article VII — 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 VIII — 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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Page 5

Article IX — 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 X — 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 XI — Taxes (BRMA 50B)

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

Article XII — Federal Excise Tax

A.	The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon as imposed under Section 4371 of the Internal Revenue Code to the extent such premium is subject to the Federal Excise Tax.
B.	In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

Article XIII — Funding Requirements

A. The Reinsurer agrees to fund, within 30 days of the Company’s request, subject to receipt of satisfactory information from the Company, its share of the Company’s ceded unearned premium and outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the Underlying Contract but not yet recovered from the Reinsurer, plus the Company’s reserves for reinstatement premiums due under the Underlying Contract, if any, determined as of the date that this paragraph A first applies to the Reinsurer according to the provisions of subparagraph (a) and/or (b) below) 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

07\M2U1141
Page 6

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:

a.	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; or
b.	Has an A.M. Best’s rating below A- (inclusive of “Not Rated” ratings) and/or a Standard & Poor’s rating below BBB+. However, this funding requirement will not apply to authorized reinsurers who at inception are rated A or higher by A.M. Best and have a policyholders’ surplus of $2,000,000,000 or more.

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 60 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 reinstatement premiums paid by the Company under the terms of the Underlying Contract, 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 share of any ceded unearned premium and/or outstanding loss reserves funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;

07\M2U1141
Page 7

4.	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 reserves, if so requested by the Reinsurer; and
5.	To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

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.

Article XIV — 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.

07\M2U1141
Page 8

Article XV — 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.
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.

07\M2U1141
Page 9

Article XVI — 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.

Article XVII — 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 XVIII — 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.

Article XIX — 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

07\M2U1141
Page 10

Contract or disclosures required upon subpoena or other duly-issued order of a court or other governmental agency or regulatory authority.

Article XX — 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 XXI — 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 July in the year 2007.

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

/s/ T. Bruce Meyer  

T. Bruce Meyer, Pres. & CEO  

(Print name and title) 

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Page 11

Schedule A

Third Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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.

	Third
	Excess
Company’s Retention	$	16,000,000
Reinsurer’s Per Occurrence Limit	$	8,000,000
Reinsurer’s Term Limit	$	16,000,000
Minimum Premium	$	1,280,000
Adjustment Rate		0.025262	%
Deposit Premium	$	1,600,000
Quarterly Deposit Premium	$	400,000

The figures listed above shall apply to each Subscribing Reinsurer in the percentage share as expressed in its Interests and Liabilities Agreement attached hereto.

07\M2U1141
Schedule A

Interests and Liabilities Agreement

of

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

with respect to the

Third Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 33.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

Hamilton, Bermuda, this 25th day of July in the year 2007.

Montpelier Reinsurance Limited
	By	/s/ Paul Hopwood
		Paul Hopwood,
		SVP & NA Treaty Underwriter

07IL\M2U1141

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 Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to and duly executed by

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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 67.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract captioned above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time, June 1, 2007, and shall continue in force until 12:01 a.m., Local Standard Time, June 1, 2008, unless earlier terminated in accordance with the provisions of the attached Contract.

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

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

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

Signed by Manager at Lloyds of London

07IL\M2U1141

Third Excess Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2007

issued to

Liberty American Insurance Company
Pinellas Park, Florida
Liberty American Select 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
Montpelier Reinsurance Limited		33.0	%
Through Benfield Limited
Lloyd’s Underwriters Per Signing Schedule		67.0
Total		100.0	%

07IL\M2U1141

EX-10.11

Exhibit 10.11

	Florida Hurricane Catastrophe Fund	CHARLIE CRIST GOVERNOR AS CHAIRMAN
		ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER
		BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY
		COLEMAN STIPANOVICH EXECUTIVE DIRECTOR

August 23, 2007

Mr. Bruce Meyer, CPA, CPCU
President & CEO
Liberty American Select Insurance Company
7785 66th Street North
Pinellas Park, FL 33781

Florida Hurricane Catastrophe Fund
Reimbursement Contract and Addendum(s)
Effective: June 1, 2007

Dear Mr. Meyer:

We are pleased to enclose a fully executed copy of the Reimbursement Contract and Addendum (s) for your company’s participation in the Florida Hurricane Catastrophe Fund for the 2007/2008 contract year. Please retain these documents in a secure location for your permanent reference.

Should you have any questions, please call me at the number below. We appreciate your assistance in completing this documentation.

Cordially,

Holly Bertagnolli
FHCF Contracts Coordinator

Enclosure

J:\fhcf\2007\contract\07 fullyx cvrltr.doc

ADMINISTERED FOR
THE STATE BOARD OF ADMINISTRATION BY
PARAGON STRATEGIC SOLUTIONS INC.
3600 AMERICAN BOULEVARD WEST, SUITE 700,
MINNEAPOLIS, MINNESOTA 55431
PHONE: 800-689-FUND (3863) / FACSIMILE: 800-264-0492

	State Board of Administration	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	of Florida
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

REIMBURSEMENT CONTRACT

Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN SELECT INSURANCE COMPANY
Pinellas Park, FL
(Company)

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, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and three numbered Addenda addressing optional FHCF coverage, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each of the three Addenda unless specifically superseded by one of the Addenda.

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

1	FHCF-2007K
	Rule 19-8.010 F.A.C.

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.

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, 2007, to 12:01 a.m., Eastern Time, June 1, 2008 (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, 2007. Failure to do so may 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, as that term is defined in Article V(21), 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 that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, 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, as adjusted pursuant to Article V(28), 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.
(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.

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(4)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.
(5)	After the end of the 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 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 or earnings thereon are used for debt service in the event of a temporary shortfall in the collection of emergency assessments, then the amount of the Premiums or earnings thereon so used will be reimbursed to the SBA without interest 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.

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(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, as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida.

(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

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methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula.

(17)	Fund Balance or Balance of the Fund as of December 31
	These terms mean the amount of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract 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 single season Claims-Paying Capacity of the FHCF by the total aggregate 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 aggregate 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.
(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.

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(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 under Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF.

(a)

When the Company experiences covered losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.

(b)

When the Company experiences covered losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest covered losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered Events.

1.

All reimbursement of covered losses for each Covered Event shall be based on the Company’s full Retention until January 1 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made as soon as practicable after January 1 of the Contract Year provided the Company reports its losses as specified in this Contract.

2.

Adjustments to the Company’s Retention shall be based upon its paid and outstanding losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events, and the reduction to one-third of the full Retention shall be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made by the SBA only if the quarterly loss reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

(c)	The Company’s full 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.
(d)	Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.

(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 2007/2008 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2006/2007 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, 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.

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(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, as defined under (28) above, 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 level written under the policy 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.

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 rent or rental income, 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; and shelters, camps or retreats.
(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 exposure for barns or barns with apartments.
(13)	Any exposure for builders risk coverage or new residential structures still under construction.
(14)	Any exposure described as a vacant property under a commercial policy.
(15)	Any exposure for recreational vehicles or boats (including boat related equipment) requiring licensing and written on a separate policy or endorsement.
(16)	Any liability of the Company for extra contractual obligations and excess of original policy limits liabilities.

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(17)	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.
(18)	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.
(19)	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.
(20)	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.
(21)	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.
(22)	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.
(23)	Claims for loss assessment coverage under Covered Policies with an effective date after the date of the Covered Event for which the loss assessments are attributed.

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, including amounts payable under previous Contract Years, 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 which have been paid to the Company along with interest thereon. Excess loss reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess loss reimbursements 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

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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 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, FHCF-D1A (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

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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 and payable on August 1, or the date that such State action occurs after August 1 of the Contract Year.
(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,

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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 losses in prior years or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)1., Florida Statutes, Premiums and earnings thereon may be used for payments relating to revenue bonds in the event Emergency Assessments are insufficient. If Premiums or earnings thereon are used for debt service, then the amount of the Premiums or earnings thereon 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 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.

2.

If the Company is in non-compliance with Section 215.555, Florida Statutes for any Contract Year, including deadlines for sending in Contracts, addendums or attachments to Contracts, Data Call submissions or resubmissions, loss reports, or in responding to SBA exam requirements, the SBA reserves the right to withhold reimbursements or advances until such time the Company becomes compliant.

(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, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.

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, adopted for the Contract Year under 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. The Company must also submit a detailed claims listing (as outlined on the Proof of Loss Report) at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request. 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 1 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

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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. Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred, in accordance with the following guidelines:

a.	For quarterly Proof of Loss Reports due by 3/31, an insurer whose losses exceed 50% of its FHCF Retention for a specific Loss Occurrence shall submit.
b.	For quarterly Proof of Loss Reports due by 6/30, an insurer whose losses exceed 75% of its FHCF Retention for a specific Loss Occurrence shall submit.
c.	For quarterly Proof of Loss Reports due by 9/30 and thereafter, an insurer whose losses exceed its FHCF Retention for a specific Loss Occurrence shall submit.

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, those Companies which received their full coverage under the Contract Year in which the Loss Occurrence(s) occurred 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 1 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 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.

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(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. As described in Article V(28), Retention adjustments will be made after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. 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 reimburse each of the Companies, including entities created pursuant to Section 627.351(6), Florida Statutes, 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.
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 shall attempt, by mutual agreement, to 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

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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 paid and reported outstanding losses for Covered Policies (excluding all incurred but not reported [IBNR] losses) 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 subparagraphs (c) and (e) below. All reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon.
(b)	For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. 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). 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.
(c)	If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify outstanding and incurred but not reported losses as reported on the applicable December Proof of Loss Report.
(d)	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 it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:

i. Current assets;

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	Rule 19-8.010 F.A.C.

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 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.

(e) In determining whether or not to grant an advance and the amount of an advance, the SBA:

1.	Shall determine whether its assets available for the payment of obligations 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;
6.	Shall consider whether the Company has substantially exhausted amounts previously advanced; and
7.	Shall consider any other factors deemed relevant.

(f)

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.

(g)

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.

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(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, or loss reports, 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.

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. 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 reimbursement examination 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

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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. A complete list of records to be retained are set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C.

(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 for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year under Rule 19-8.030, 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 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 or update 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.

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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.

4.

If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. The updated Proof of Loss Report(s) will be submitted to the FHCF’s Administrator with a copy of the Proof of Loss Report(s) and a supporting detailed claims listing to be submitted to the offices of the SBA. The report is required to be accompanied by a detailed written description of the specific changes made. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the FHCF’s Administrator will send the Company an invoice for any overpayments and interest due or the additional reimbursement owed the Company, as the case may be. Once the Proof of Loss Report(s) is approved, the exam file is closed.

(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 pursued 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 or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.

(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 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 (FIGA) 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. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and loss examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make loss reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA

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before the examinations are completed and before the response time expires for claims filing by reinsurers and financial institutions, which have a priority interest in those funds pursuant to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by reinsurers or financial institutions having a priority interest in these funds, that the funds will be repaid to the FHCF by FIGA with in a reasonable time.

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.

IMPORTANT NOTE: The FHCF issued revenue bonds in July of 2006 as a result of its liabilities for Covered Events under the Contract Year effective June 1, 2005. As those bonds have not been fully repaid, the Company may not select a Reimbursement Percentage that is less than its selection under the prior Contract Year effective June 1, 2006.

The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2006 was as follows: Liberty American Select Insurance Company — 90%

(a) NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group:

/s/ 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, 2007, to 12:01 a.m., Eastern Time, June 1, 2008, (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 /s/ 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.

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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.

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	/s/ 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.

Additional Living Expense (ALE)Written as Time Element Coverage
If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e. coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the ‘Yes — Time Element ALE’ box below. If your Company does not write time element ALE coverage, initial ‘No — Time Element ALE’ box below.

	OR	/s/ TBM
Yes — Time		No — Time
Element ALE		Element ALE

21	FHCF-2007K
	Rule 19-8.010 F.A.C.

ARTICLE XIX — SIGNATURES

Approved by:

Florida Hurricane Catastrophe Fund
By: State Board of Administration of the State of Florida

By:	/s/ Coleman Stipanovich	7/9/07
	Coleman Stipanovich Executive Director	Date
Approved as to legality:
By:	/s/ Linda Lettera	7/9/07
	Linda Lettera General Counsel FL Bar ID#311911	Date
Liberty American Select Insurance Company
By:	/s/ TBM	5/23/07
	TBM, Pres. & CEO	Date
	Name/Title

22	FHCF-2007K
	Rule 19-8.010 F.A.C.

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES ELIGIBLE FOR COVERAGE UNDER THIS ADDENDUM REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 1

to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN SELECT INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 32760

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
 WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

ADDITIONAL COVERAGE OPTION (up to $10 million) PURSUANT TO SECTION 215.555(4)(b)4., FLORIDA STATUTES.

Pursuant to Section 215.555(4)(b)4., Florida Statutes, certain Companies may select additional FHCF reimbursement coverage of up to $10 million dollars. The additional premium to be charged for this additional reimbursement coverage shall be 50 percent of the additional reimbursement coverage provided, which shall include one prepaid full reinstatement. The additional premium shall be due and payable in three equal installments on August 1, 2007, on October 1, 2007, and on December 1, 2007.

The minimum retention level that must be retained associated with this additional coverage layer is 30 percent of the insurer’s surplus as of December 31, 2006, for each Covered Event. For an insurer which began writing property insurance in 2007 and did not have a surplus as of

1	FHCF-2007K-1
	Rule 19-8.010, F.A.C.

December 31, 2006, surplus shall be deemed to be the surplus reported to the Office of Insurance Regulation at the time the insurer received its Certificate of Authority.

The reimbursement percentage applicable to this additional coverage shall be 100 percent, which includes reimbursement for loss adjustment expense as provided under the Reimbursement Contract.

This additional reimbursement coverage shall be in addition to all other coverage provided by the SBA under the Company’s Reimbursement Contract and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes, but only with respect to those insurers that select the additional coverage option. Coverage provided in this additional coverage option shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

While this additional coverage shall not reduce, overlap, or duplicate coverage otherwise provided for in the Reimbursement Contract or offset any co-payments, the amount of coverage selected herein is irrevocable. Any amount of additional coverage selected herein that would in effect overlap FHCF coverage otherwise provided for in the Reimbursement Contract, or any other Addenda to the Reimbursement Contract, shall be deemed by the FHCF to shift above the highest level of coverage otherwise provided by the FHCF.

The claims-paying capacity with respect to all other participating insurers, including eligible Companies that do not select the additional coverage option, shall be limited to their reimbursement premium’s proportionate share of the actual claims-paying capacity as defined in Section 215.555(4)(c)1., Florida Statutes and as provided for under the terms of the Reimbursement Contract, plus any coverage provided under any other Addenda to the Reimbursement Contract.

The optional coverage provided in this Addendum expires on May 31, 2008 and is not renewable.

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT AND ELIGIBLE FOR THIS ADDITIONAL COVERAGE MUST INDICATE BELOW THE AMOUNT OF ADDITIONAL COVERAGE SELECTED, IF ANY.

If your Company does not wish to purchase the additional coverage under this Addendum, print “No Coverage” on the line below and initial the box.

No Coverage /s/ TBM

If your Company is eligible for the coverage under this Addendum and elects to purchase this coverage, indicate the amount of additional coverage up to $10 million (there is no additional coverage available in excess of $10 million) on the line below:

$____________

2	FHCF-2007K-1
	Rule 19-8.010, F.A.C.

IF THIS ADDENDUM NO. 1 IS RETURNED WITHOUT THE BLANK SPACE IMMEDIATELY ABOVE FILLED IN WITH A DOLLAR AMOUNT, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT THE ADDITIONAL COVERAGE.

Liberty American Select Insurance Company
By:	/s/ T. Bruce Meyer	5/23/07
	T. Bruce Meyer, Pres.& CEO	Date
	Name/Title
Approved by:
Florida Hurricane Catastrophe Fund By: State Board of Administration of the State of Florida
By:	/s/ Linda Lettera / for	7/9/07
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
By:	/s/ Thomas A. Burke / for	7/9/07
	Linda Lettera	Date
	General Counsel
	FL Bar ID#311911

3	FHCF-2007K-1
	Rule 19-8.010, F.A.C.

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 2

to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN SELECT INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 32760

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
 WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO SECTION 215.555(16), FLORIDA STATUTES.

Pursuant to Section 215.555(16), Florida Statutes, the Temporary Emergency Options for Additional Coverage (TEACO) provision allows the Company to select additional FHCF reimbursement coverage below its mandatory FHCF coverage layer under the Reimbursement Contract. The optional coverage provided in this Addendum No. 2 expires on May 31, 2008. Coverage associated with TEACO shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

1	FHCF-2007K-2
	Rule 19-8.010, F.A.C.

I.	TEACO Coverage
	The Company may purchase its mandatory FHCF premium share of coverage underneath its FHCF retention in excess of one of three industry retention levels, which are specified as $3 billion, $4 billion, or $5 billion. The price for the layer of coverage below its mandatory FHCF coverage is 75 cents for each dollar of coverage for the Company’s share of the layer associated with a $5 billion industry retention, 80 cents for each dollar of coverage for the Company’s share of the layer associated with the $4 billion industry retention, or 85 cents for each dollar of coverage for the Company’s share of the layer of coverage associated with the $3 billion industry retention. The Company’s TEACO coverage shall be on an occurrence basis, and the premium for coverage will include one reinstatement. The Company’s TEACO retention shall replace the Company’s mandatory FHCF retention when it selects a TEACO option.
	The SBA shall reimburse the Company for 45 percent, 75 percent, or 90 percent of its losses from each Covered Event in excess of the Company’s TEACO retention, plus 5 percent of the reimbursed losses to cover loss adjustment expense, limited in total to the amount of TEACO coverage purchased by the Company. The reimbursement percentage shall be the same as the coverage level selected by the Company under its Reimbursement Contract. The Company’s maximum reimbursement under its TEACO option shall be its mandatory FHCF premium share of two times the difference between the industry retention calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4 billion, or $5 billion industry TEACO retention based on the Company’s selection of the TEACO option.
	The full limit of the TEACO coverage purchased shall apply only to each of the Company’s two largest Covered Events. The TEACO coverage does not apply to other Covered Events resulting in losses.

II.	TEACO Premium
	The Company’s TEACO premium shall be calculated based on its share of the mandatory FHCF reimbursement premium. Total TEACO premium shall be calculated based on the assumption that all insurers entering into Reimbursement Contracts also accepted the TEACO option:

A.	The industry TEACO premium associated with the $3 billion retention option would be equal to 85% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion industry TEACO retention level.
B.	The industry TEACO premium associated with the $4 billion retention option would be equal to 80% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $4 billion industry TEACO retention level.
C.	The industry TEACO premium associated with the $5 billion retention option would be equal to 75% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $5 billion industry TEACO retention level.

The TEACO premium shall be due and payable in three installments on August 1, 2007, on October 1, 2007, and on December 1, 2007.

2	FHCF-2007K-2
	Rule 19-8.010, F.A.C.

III.	TEACO Retention
	The TEACO retention is the amount of losses below which a TEACO Company is not entitled to reimbursement from the FHCF under the TEACO coverage option.
	The TEACO retention multiple for each TEACO coverage option shall be calculated by dividing $3 billion, $4 billion, or $5 billion by the total estimated mandatory FHCF reimbursement premium assuming all insurers selected the 90% coverage option. The TEACO retention multiple shall be used for determining an insurer’s retention if the insurer has selected a TEACO option. The TEACO retention multiples outlined above shall be adjusted to reflect the coverage level selected by the Company under its Reimbursement Contract. For insurers electing the 90 percent coverage level, the adjusted retention multiple is 100 percent of the amount determined under the preceding paragraph. For insurers electing the 75 percent coverage level, the adjusted retention multiple is 120 percent of the amount determined under the preceding paragraph. For insurers electing the 45 percent coverage level, the adjusted retention multiple is 200 percent of the amount determined under the preceding paragraph.

IV.	Liability of the FHCF
	The liability of the FHCF with respect to all TEACO addenda shall not exceed an amount equal to two times the difference between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4 billion, or $5 billion industry TEACO retention level options actually selected, but in no event may the FHCF’s obligation exceed the actual claims-paying capacity of the FHCF plus the additional TEACO capacity provided for under Section 215.555(16)(g), Florida Statutes.
	The additional capacity shall apply only to the additional coverage provided by the TEACO option and shall not otherwise affect any insurer’s reimbursement from the FHCF.

V.	Coordination of Coverage
	Reimbursement amounts under TEACO shall not be reduced by reinsurance paid or payable to the Company from sources other than the FHCF.
	The TEACO coverage shall be in addition to all other coverage provided by the SBA under the Company’s Reimbursement Contract and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes.
	The TEACO coverage selected is irrevocable and shall not reduce, overlap, or duplicate coverage otherwise provided for in the Reimbursement Contract or offset any co-payments.

VI.	Addendum No. 2 TEACO Coverage Election
	ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE ITS TEACO COVERAGE PROVIDED BELOW THE FHCF RETENTION BY SELECTING ONE OF THREE TEACO RETENTION LEVELS OR REJECT ALL SUCH COVERAGE. IF ADDENDUM NO. 2 IS RETURNED WITHOUT A TEACO

3	FHCF-2007K-2
	Rule 19-8.010, F.A.C.

RETENTION SELECTED, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT TEACO COVERAGE.

If your Company does not want to purchase any TEACO coverage, print “No Coverage” on the line below and initial the box.

No Coverage /s/ TBM

If your company elects to purchase TEACO coverage, select a TEACO retention level option by initialing the applicable box below.

Company selects	OR	Company selects	OR	Company selects
$3 billion		$4 billion		$5 billion
TEACO		TEACO		TEACO
Retention		Retention		Retention
Option		Option		Option

VIII. Signatures

Liberty American Select Insurance Company
By:	/s/ T. Bruce Meyer	5/23/07
	T. Bruce Meyer, Pres.& CEO	Date
	Name/Title
Approved by:
Florida Hurricane Catastrophe Fund By: State Board of Administration of the State of Florida
By:	/s/ Linda Lettera / for	7/9/07
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
By:	/s/ Thomas A. Burke / for	7/9/07
	Linda Lettera	Date
	General Counsel
	FL Bar ID#311911

4	FHCF-2007K-2
	Rule 19-8.010, F.A.C.

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 3
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN SELECT INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 32760

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO SECTION 215.555(17), FLORIDA STATUTES.

Pursuant to Section 215.555(17), Florida Statutes, the Temporary Increase in Coverage Limit (TICL) Options provision allows the Company to select additional FHCF reimbursement coverage above its mandatory FHCF coverage layer under the Reimbursement Contract. The optional coverage selections provided in this Addendum No. 3 expires on May 31, 2008. Coverage provided under TICL shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

1	FHCF-2007K-3
	Rule 19-8.010, F.A.C.

I.	TICL Coverage
	The Company may purchase one of twelve optional coverages above its mandatory FHCF coverage provided for in the FHCF Reimbursement Contract. The TICL options allow the Company to purchase its mandatory FHCF premium share of one of the twelve optional layers of coverage. The optional layers of coverage above the mandatory FHCF coverage are $12 billion, $11 billion, $10 billion, $9 billion, $8 billion, $7 billion, $6 billion, $5 billion, $4 billion, $3 billion, $2 billion, or $1 billion.
	The purchase of a TICL option increases the Company’s coverage under the Reimbursement Contract as calculated pursuant to Section 215.555(4)(d)2., Florida Statutes. The Company’s increased coverage shall be the FHCF reimbursement premium multiplied by the TICL multiple. Each TICL coverage multiple shall be calculated by dividing $12 billion, $11 billion, $10 billion, $9 billion, $8 billion, $7 billion, $6 billion, $5 billion, $4 billion, $3 billion, $2 billion, or $1 billion by the aggregate mandatory FHCF premium under the Reimbursement Contract paid by all companies.
	In order to determine the Company’s total limit of coverage, the Company’s TICL coverage multiple is added to its regular Payout Multiple under the Reimbursement Contract. The total of these two multiples shall represent a number that, when multiplied by an insurer’s mandatory FHCF reimbursement premium under the Reimbursement Contract, defines the Company’s total limit of FHCF reimbursement coverage for the Contract Year under the Reimbursement Contract and Addendum No. 3. The SBA shall reimburse the Company for 45 percent, 75 percent, or 90 percent of its losses from each Covered Event in excess of the Company’s FHCF Retention under the Reimbursement Contract, plus 5 percent of the reimbursed losses to cover loss adjustment expense, not to exceed the Company’s total limit of coverage as defined above. The percentage shall be the same as the coverage level selected by the Company under its Reimbursement Contract.
II.	TICL Premium
	The Company’s TICL premium shall be determined as specified in Section 215.555(5), Florida Statutes, and shall be due and payable in three installments on August 1, 2007, October 1, 2007, and December 1, 2007.
III.	Liability of the FHCF
	Pursuant to Section 215.555(17)(g), Florida Statutes, the liability of the FHCF with respect to all TICL addenda shall not exceed $12 billion and shall depend on the number of insurers that select the TICL optional coverage and the TICL coverage options selected. In no circumstance shall the liability of the FHCF exceed its actual claims-paying capacity as defined in Section 215.555(2)(m), Florida Statutes.
	The additional TICL capacity shall apply only to the additional coverage provided under the TICL options and shall not otherwise affect any insurer’s reimbursement from the FHCF if the insurer chooses not to select a TICL option to increase its limit of FHCF coverage.
IV.	Coordination of Coverage
	Reimbursement amounts under TICL shall not be reduced by reinsurance paid or payable to the Company from sources other than the FHCF.

2	FHCF-2007K-3
	Rule 19-8.010, F.A.C.

	The TICL coverage shall be in addition to all other coverage provided by the FHCF under the Company’s Reimbursement Contract or other Addenda to the Reimbursement Contract, and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes, but only with respect to those insurers that select the TICL coverage.
	The TICL coverage selected is irrevocable and shall not overlap or duplicate coverage otherwise provided for in the Reimbursement Contract, or any Addenda to the Reimbursement Contract, or offset any co-payments or retention amounts.
V.	Addendum No. 3 TICL Coverage Election
	ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE BELOW THE LEVEL OF OPTIONAL TICL COVERAGE SELECTED, IF ANY. IF ADDENDUM NO. 3 IS RETURNED WITHOUT A TICL COVERAGE OPTION SELECTED, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT TICL COVERAGE.
	If your Company does not want to purchase any TICL coverage, print “No Coverage” on the line below and initial the box.

By selecting an option below (initial the applicable box), the Company is selecting its proportionate share based on its mandatory FHCF reimbursement premium to the total mandatory FHCF reimbursement premiums paid by all companies of the layer of optional coverage.

Company	OR	Company	OR	Company	OR	Company
selects		selects		selects		selects
$1 billion		$2 billion		$3 billion		$4 billion
TICL Coverage		TICL Coverage		TICL Coverage		TICL Coverage
Option		Option		Option		Option
Company	OR	Company	OR	Company	OR	Company
selects		selects		selects		selects
$5 billion		$6 billion		$7 billion		$8 billion
TICL Coverage		TICL Coverage		TICL Coverage		TICL Coverage
Option		Option		Option		Option

3	FHCF-2007K-3
	Rule 19-8.010, F.A.C.

						/s/ TBM
Company	OR	Company	OR	Company	OR	Company
selects		selects		selects		selects
$9 billion		$10 billion		$11 billion		$12 billion
TICL Coverage		TICL Coverage		TICL Coverage		TICL Coverage
Option		Option		Option		Option

VI. Signatures

Liberty American Select Insurance Company
By:	/s/ T. Bruce Meyer	5/23/07
	T. Bruce Meyer, Pres.& CEO	Date
	Name/Title
Approved by:
Florida Hurricane Catastrophe Fund
By: State Board of Administration of the State of Florida
By:	/s/ Linda Lettera / for	7/9/07
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
By:	/s/ Thomas A. Burke / for	7/9/07
	Linda Lettera General Counsel FL Bar ID#311911	Date

4	FHCF-2007K-3
	Rule 19-8.010, F.A.C.

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ADDENDUM NO. 4
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN SELECT INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 32760

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

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, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each of the Addenda unless specifically superseded by one of the Addenda.

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. The Company shall not, without the prior approval of the Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration, any sums the FHCF pays under this Contract or the right to receive such sums.

1	FHCF-2007K-4
	(19-8.010, F.A.C. Reimbursement Contract)

Approved by:
Florida Hurricane Catastrophe Fund
By:	State Board of Administration
By:	/s/ Linda Lettera / for	7/9/07
	Coleman Stipanovich	Date
	Executive Director
Approved as to legality:
/s/ Thomas A. Burke / for		7/9/07
Linda Lettera		Date
General Counsel
FL Bar ID#311911
Liberty American Select Insurance Company
By:	/s/ T. Bruce Meyer	5/23/07
	T. Bruce Meyer, Pres.& CEO	Date
	Name/Title

2	FHCF-2007K-4
	(19-8.010, F.A.C. Reimbursement Contract)

EX-10.12

Exhibit 10.12

	Florida Hurricane Catastrophe Fund	CHARLIE CRIST GOVERNOR AS CHAIRMAN
		ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER
		BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY
		COLEMAN STIPANOVICH EXECUTIVE DIRECTOR

August 23, 2007

Mr. Bruce Meyer, CPA, CPCU
President & CEO
Liberty American Insurance Company
7785 66th Street North
Pinellas Park, FL 33780-8080

Florida Hurricane Catastrophe Fund
Reimbursement Contract and Addendum (s)
Effective: June 1, 2007

Dear Mr. Meyer:

We are pleased to enclose a fully executed copy of the Reimbursement Contract and Addendum (s) for your company’s participation in the Florida Hurricane Catastrophe Fund for the 2007/2008 contract year. Please retain these documents in a secure location for your permanent reference.

Should you have any questions, please call me at the number below. We appreciate your assistance in completing this documentation.

Cordially,

Holly Bertagnolli
FHCF Contracts Coordinator

Enclosure

ADMINISTERED FOR
THE STATE BOARD OF ADMINISTRATION BY
PARAGON STRATEGIC SOLUTIONS INC.
3600 AMERICAN BOULEVARD WEST, SUITE 700, MINNEAPOLIS, MINNESOTA 55431
PHONE: 800-689-FUND (3863) / FACSIMILE: 800-264-0492

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

REIMBURSEMENT CONTRACT

Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL
(Company)

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, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and three numbered Addenda addressing optional FHCF coverage, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each of the three Addenda unless specifically superseded by one of the Addenda.

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

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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.

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, 2007, to 12:01 a.m., Eastern Time, June 1, 2008 (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, 2007. Failure to do so may 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, as that term is defined in Article V(21), 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 that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, 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, as adjusted pursuant to Article V(28), 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.
(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.

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(4)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.
(5)	After the end of the 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 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 or earnings thereon are used for debt service in the event of a temporary shortfall in the collection of emergency assessments, then the amount of the Premiums or earnings thereon so used will be reimbursed to the SBA without interest 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.

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(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, as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida.

(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

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	methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula.
(17)	Fund Balance or Balance of the Fund as of December 31
	These terms mean the amount of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract 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 single season Claims-Paying Capacity of the FHCF by the total aggregate 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 aggregate 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.
(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.

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(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 under Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF.

(a)

When the Company experiences covered losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.

(b)

When the Company experiences covered losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest covered losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered Events.

1.

All reimbursement of covered losses for each Covered Event shall be based on the Company’s full Retention until January 1 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made as soon as practicable after January 1 of the Contract Year provided the Company reports its losses as specified in this Contract.

2.

Adjustments to the Company’s Retention shall be based upon its paid and outstanding losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events, and the reduction to one-third of the full Retention shall be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made by the SBA only if the quarterly loss reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

(c)	The Company’s full 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.
(d)	Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.

(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 2007/2008 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2006/2007 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, 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.

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(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, as defined under (28) above, 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 level written under the policy 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.

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 rent or rental income, 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; and shelters, camps or retreats.
(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 exposure for barns or barns with apartments.
(13)	Any exposure for builders risk coverage or new residential structures still under construction.
(14)	Any exposure described as a vacant property under a commercial policy.
(15)	Any exposure for recreational vehicles or boats (including boat related equipment) requiring licensing and written on a separate policy or endorsement.
(16)	Any liability of the Company for extra contractual obligations and excess of original policy limits liabilities.

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(17)	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.
(18)	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.
(19)	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.
(20)	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.
(21)	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.
(22)	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.
(23)	Claims for loss assessment coverage under Covered Policies with an effective date after the date of the Covered Event for which the loss assessments are attributed.

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, including amounts payable under previous Contract Years, 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 which have been paid to the Company along with interest thereon. Excess loss reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess loss reimbursements 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

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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 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, FHCF-D1A (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

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	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 and payable on August 1, or the date that such State action occurs after August 1 of the Contract Year.
(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,

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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 losses in prior years or for debt service on revenue bonds. Pursuant to Section 215.555(6)(a)1., Florida Statutes, Premiums and earnings thereon may be used for payments relating to revenue bonds in the event Emergency Assessments are insufficient. If Premiums or earnings thereon are used for debt service, then the amount of the Premiums or earnings thereon 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 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.

2.

If the Company is in non-compliance with Section 215.555, Florida Statutes for any Contract Year, including deadlines for sending in Contracts, addendums or attachments to Contracts, Data Call submissions or resubmissions, loss reports, or in responding to SBA exam requirements, the SBA reserves the right to withhold reimbursements or advances until such time the Company becomes compliant.

(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, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.

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, adopted for the Contract Year under 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. The Company must also submit a detailed claims listing (as outlined on the Proof of Loss Report) at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request. 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 1 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

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	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.	Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Loss Occurrence(s) occurred, in accordance with the following guidelines:

a.	For quarterly Proof of Loss Reports due by 3/31, an insurer whose losses exceed 50% of its FHCF Retention for a specific Loss Occurrence shall submit.
b.	For quarterly Proof of Loss Reports due by 6/30, an insurer whose losses exceed 75% of its FHCF Retention for a specific Loss Occurrence shall submit.
c.	For quarterly Proof of Loss Reports due by 9/30 and thereafter, an insurer whose losses exceed its FHCF Retention for a specific Loss Occurrence shall submit.

	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, those Companies which received their full coverage under the Contract Year in which the Loss Occurrence(s) occurred 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 1 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 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.

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(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. As described in Article V(28), Retention adjustments will be made after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. 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 reimburse each of the Companies, including entities created pursuant to Section 627.351(6), Florida Statutes, 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.
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 shall attempt, by mutual agreement, to 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

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	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 paid and reported outstanding losses for Covered Policies (excluding all incurred but not reported [IBNR] losses) 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 subparagraphs (c) and (e) below. All reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon.
(b)	For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. 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). 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.
(c)	If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify outstanding and incurred but not reported losses as reported on the applicable December Proof of Loss Report.
(d)	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 it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:

i. Current assets;

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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 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.

(e) In determining whether or not to grant an advance and the amount of an advance, the SBA:

1.	Shall determine whether its assets available for the payment of obligations 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;
6.	Shall consider whether the Company has substantially exhausted amounts previously advanced; and
7.	Shall consider any other factors deemed relevant.

(f)

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.

(g)

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.

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(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, or loss reports, 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.

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. 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 reimbursement examination 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

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	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. A complete list of records to be retained are set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C.
(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 for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year under Rule 19-8.030, 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 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 or update 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.

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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.

4.

If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. The updated Proof of Loss Report(s) will be submitted to the FHCF’s Administrator with a copy of the Proof of Loss Report(s) and a supporting detailed claims listing to be submitted to the offices of the SBA. The report is required to be accompanied by a detailed written description of the specific changes made. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the FHCF’s Administrator will send the Company an invoice for any overpayments and interest due or the additional reimbursement owed the Company, as the case may be. Once the Proof of Loss Report(s) is approved, the exam file is closed.

(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 pursued 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 or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.

(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 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 (FIGA) 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. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and loss examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make loss reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA

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before the examinations are completed and before the response time expires for claims filing by reinsurers and financial institutions, which have a priority interest in those funds pursuant to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by reinsurers or financial institutions having a priority interest in these funds, that the funds will be repaid to the FHCF by FIGA with in a reasonable time.

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.

19	FHCF-2007K
	Rule 19-8.010 F.A.C.

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.

IMPORTANT NOTE: The FHCF issued revenue bonds in July of 2006 as a result of its liabilities for Covered Events under the Contract Year effective June 1, 2005. As those bonds have not been fully repaid, the Company may not select a Reimbursement Percentage that is less than its selection under the prior Contract Year effective June 1, 2006.

The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2006 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:

/s/ 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, 2007, to 12:01 a.m., Eastern Time, June 1, 2008, (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 /s/ 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.

20	FHCF-2007K
	Rule 19-8.010 F.A.C.

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.

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	/s/ 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.

Additional Living Expense (ALE)Written as Time Element Coverage
If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e. coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the ‘Yes — Time Element ALE’ box below. If your Company does not write time element ALE coverage, initial ‘No — Time Element ALE’ box below.

	OR	/s/ TBM
Yes — Time		No — Time
Element ALE		Element ALE

21	FHCF-2007K
	Rule 19-8.010 F.A.C.

ARTICLE XIX — SIGNATURES

Approved by:
Florida Hurricane Catastrophe Fund
By:	State Board of Administration of the State of Florida
By:	/s/ Linda Lettera / for	7/9/07
	Coleman Stipanovich Executive Director	Date
Approved as to legality:
By:	/s/ Thomas A. Burke / for	7/9/07
	Linda Lettera	Date
	General Counsel
	FL Bar ID#311911
/s/ T. Bruce Meyer
Liberty American Insurance Company
By:	T. Bruce Meyer, Pres. & CEO	5/23/07
	Name/Title	Date

22	FHCF-2007K
	Rule 19-8.010 F.A.C.

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES ELIGIBLE FOR COVERAGE UNDER THIS ADDENDUM REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 1
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 10955

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

ADDITIONAL COVERAGE OPTION (up to $10 million) PURSUANT TO SECTION 215.555(4)(b)4., FLORIDA STATUTES.

Pursuant to Section 215.555(4)(b)4., Florida Statutes, certain Companies may select additional FHCF reimbursement coverage of up to $10 million dollars. The additional premium to be charged for this additional reimbursement coverage shall be 50 percent of the additional reimbursement coverage provided, which shall include one prepaid full reinstatement. The additional premium shall be due and payable in three equal installments on August 1, 2007, on October 1, 2007, and on December 1, 2007.

     The minimum retention level that must be retained associated with this additional coverage layer is 30 percent of the insurer’s surplus as of December 31, 2006, for each Covered Event. For an insurer which began writing property insurance in 2007 and did not have a surplus as of

1 FHCF-2007K
Rule 19-8.010 F.A.C

December 31, 2006, surplus shall be deemed to be the surplus reported to the Office of Insurance Regulation at the time the insurer received its Certificate of Authority.

The reimbursement percentage applicable to this additional coverage shall be 100 percent, which includes reimbursement for loss adjustment expense as provided under the Reimbursement Contract.

This additional reimbursement coverage shall be in addition to all other coverage provided by the SBA under the Company’s Reimbursement Contract and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes, but only with respect to those insurers that select the additional coverage option. Coverage provided in this additional coverage option shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

While this additional coverage shall not reduce, overlap, or duplicate coverage otherwise provided for in the Reimbursement Contract or offset any co-payments, the amount of coverage selected herein is irrevocable. Any amount of additional coverage selected herein that would in effect overlap FHCF coverage otherwise provided for in the Reimbursement Contract, or any other Addenda to the Reimbursement Contract, shall be deemed by the FHCF to shift above the highest level of coverage otherwise provided by the FHCF.

The claims-paying capacity with respect to all other participating insurers, including eligible Companies that do not select the additional coverage option, shall be limited to their reimbursement premium’s proportionate share of the actual claims-paying capacity as defined in Section 215.555(4)(c)1., Florida Statutes and as provided for under the terms of the Reimbursement Contract, plus any coverage provided under any other Addenda to the Reimbursement Contract.

The optional coverage provided in this Addendum expires on May 31, 2008 and is not renewable.

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT AND ELIGIBLE FOR THIS ADDITIONAL COVERAGE MUST INDICATE BELOW THE AMOUNT OF ADDITIONAL COVERAGE SELECTED, IF ANY.

If your Company does not wish to purchase the additional coverage under this Addendum, print “No Coverage” on the line below and initial the box.

No Coverage /s/ TBM  

If your Company is eligible for the coverage under this Addendum and elects to purchase this coverage, indicate the amount of additional coverage up to $10 million (there is no additional coverage available in excess of $10 million) on the line below:

$                            

2 FHCF-2007K
Rule 19-8.010 F.A.C

IF THIS ADDENDUM NO. 1 IS RETURNED WITHOUT THE BLANK SPACE IMMEDIATELY ABOVE FILLED IN WITH A DOLLAR AMOUNT, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT THE ADDITIONAL COVERAGE.

Liberty American Insurance Company 

By: /s/ T. Bruce Meyer   T. Bruce Meyer, Pres. & CEO
Name/Title 5-23-07   Date

Approved by:

Florida Hurricane Catastrophe Fund

By: State Board of Administration of the State of Florida

By: /s/ Linda Lettera / for   Coleman Stipanovich
Executive Director 7/9/07   Date

Approved as to legality:

By: /s/ Thomas A. Burke / for   Linda Lettera
General Counsel
FL Bar ID#311911 7/9/07   Date

3 FHCF-2007K
Rule 19-8.010 F.A.C

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 2
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 10955

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO SECTION 215.555(16), FLORIDA STATUTES.

Pursuant to Section 215.555(16), Florida Statutes, the Temporary Emergency Options for Additional Coverage (TEACO) provision allows the Company to select additional FHCF reimbursement coverage below its mandatory FHCF coverage layer under the Reimbursement Contract. The optional coverage provided in this Addendum No. 2 expires on May 31, 2008. Coverage associated with TEACO shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

1 FHCF-2007K
Rule 19-8.010 F.A.C

I. TEACO Coverage

The Company may purchase its mandatory FHCF premium share of coverage underneath its FHCF retention in excess of one of three industry retention levels, which are specified as $3 billion, $4 billion, or $5 billion. The price for the layer of coverage below its mandatory FHCF coverage is 75 cents for each dollar of coverage for the Company’s share of the layer associated with a $5 billion industry retention, 80 cents for each dollar of coverage for the Company’s share of the layer associated with the $4 billion industry retention, or 85 cents for each dollar of coverage for the Company’s share of the layer of coverage associated with the $3 billion industry retention. The Company’s TEACO coverage shall be on an occurrence basis, and the premium for coverage will include one reinstatement. The Company’s TEACO retention shall replace the Company’s mandatory FHCF retention when it selects a TEACO option.

The SBA shall reimburse the Company for 45 percent, 75 percent, or 90 percent of its losses from each Covered Event in excess of the Company’s TEACO retention, plus 5 percent of the reimbursed losses to cover loss adjustment expense, limited in total to the amount of TEACO coverage purchased by the Company. The reimbursement percentage shall be the same as the coverage level selected by the Company under its Reimbursement Contract. The Company’s maximum reimbursement under its TEACO option shall be its mandatory FHCF premium share of two times the difference between the industry retention calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4 billion, or $5 billion industry TEACO retention based on the Company’s selection of the TEACO option.

The full limit of the TEACO coverage purchased shall apply only to each of the Company’s two largest Covered Events. The TEACO coverage does not apply to other Covered Events resulting in losses.

II. TEACO Premium

The Company’s TEACO premium shall be calculated based on its share of the mandatory FHCF reimbursement premium. Total TEACO premium shall be calculated based on the assumption that all insurers entering into Reimbursement Contracts also accepted the TEACO option:

A.	The industry TEACO premium associated with the $3 billion retention option would be equal to 85% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion industry TEACO retention level.
B.	The industry TEACO premium associated with the $4 billion retention option would be equal to 80% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $4 billion industry TEACO retention level.
C.	The industry TEACO premium associated with the $5 billion retention option would be equal to 75% of the difference for the coverage between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $5 billion industry TEACO retention level.

The TEACO premium shall be due and payable in three installments on August 1, 2007, on October 1, 2007, and on December 1, 2007.

2 FHCF-2007K
Rule 19-8.010 F.A.C

III. TEACO Retention

The TEACO retention is the amount of losses below which a TEACO Company is not entitled to reimbursement from the FHCF under the TEACO coverage option.

The TEACO retention multiple for each TEACO coverage option shall be calculated by dividing $3 billion, $4 billion, or $5 billion by the total estimated mandatory FHCF reimbursement premium assuming all insurers selected the 90% coverage option. The TEACO retention multiple shall be used for determining an insurer’s retention if the insurer has selected a TEACO option. The TEACO retention multiples outlined above shall be adjusted to reflect the coverage level selected by the Company under its Reimbursement Contract. For insurers electing the 90 percent coverage level, the adjusted retention multiple is 100 percent of the amount determined under the preceding paragraph. For insurers electing the 75 percent coverage level, the adjusted retention multiple is 120 percent of the amount determined under the preceding paragraph. For insurers electing the 45 percent coverage level, the adjusted retention multiple is 200 percent of the amount determined under the preceding paragraph.

IV. Liability of the FHCF

The liability of the FHCF with respect to all TEACO addenda shall not exceed an amount equal to two times the difference between the industry retention level calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4 billion, or $5 billion industry TEACO retention level options actually selected, but in no event may the FHCF’s obligation exceed the actual claims-paying capacity of the FHCF plus the additional TEACO capacity provided for under Section 215.555(16)(g), Florida Statutes.

The additional capacity shall apply only to the additional coverage provided by the TEACO option and shall not otherwise affect any insurer’s reimbursement from the FHCF.

V. Coordination of Coverage

Reimbursement amounts under TEACO shall not be reduced by reinsurance paid or payable to the Company from sources other than the FHCF.

The TEACO coverage shall be in addition to all other coverage provided by the SBA under the Company’s Reimbursement Contract and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes.

The TEACO coverage selected is irrevocable and shall not reduce, overlap, or duplicate coverage otherwise provided for in the Reimbursement Contract or offset any co-payments.

VI. Addendum No. 2 TEACO Coverage Election

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE ITS TEACO COVERAGE PROVIDED BELOW THE FHCF RETENTION BY SELECTING ONE OF THREE TEACO RETENTION LEVELS OR REJECT ALL SUCH COVERAGE. IF ADDENDUM NO. 2 IS RETURNED WITHOUT A TEACO

3 FHCF-2007K
Rule 19-8.010 F.A.C

RETENTION SELECTED, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT TEACO COVERAGE.

If your Company does not want to purchase any TEACO coverage, print “No Coverage” on the line below and initial the box.

No Coverage   /s/ TBM  

If your company elects to purchase TEACO coverage, select a TEACO retention level option by initialing the applicable box below.

Company selects $3
billion TEACO
Retention Option OR Company selects $4
billion TEACO
Retention Option OR Company selects $5
billion TEACO
Retention Option

VII. Signatures
 

/s/ T. Bruce Meyer  

Liberty American Insurance Company 

By:	T. Bruce Meyer, Pres & CEO	5-23-07
	Name/Title	Date

Approved by:

Florida Hurricane Catastrophe Fund

By: State Board of Administration of the State of Florida

By: /s/ Linda Lettera / for   Coleman Stipanovich
Executive Director 7/9/07   Date

Approved as to legality:

By: /s/ Thomas A. Burke / for   Linda Lettera
General Counsel
FL Bar ID#311911 7/9/07   Date

4 FHCF-2007K
Rule 19-8.010 F.A.C

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ATTENTION: THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL COVERAGE

ADDENDUM NO. 3
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 10955

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO SECTION 215.555(17), FLORIDA STATUTES.

Pursuant to Section 215.555(17), Florida Statutes, the Temporary Increase in Coverage Limit (TICL) Options provision allows the Company to select additional FHCF reimbursement coverage above its mandatory FHCF coverage layer under the Reimbursement Contract. The optional coverage selections provided in this Addendum No. 3 expires on May 31, 2008. Coverage provided under TICL shall otherwise be consistent with terms and conditions as relates to the Reimbursement Contract including, but not limited to, definitions, coverage for Covered Policies as defined, exclusions, loss reporting, and examination procedures.

1 FHCF-2007K
Rule 19-8.010 F.A.C

I. TICL Coverage

The Company may purchase one of twelve optional coverages above its mandatory FHCF coverage provided for in the FHCF Reimbursement Contract. The TICL options allow the Company to purchase its mandatory FHCF premium share of one of the twelve optional layers of coverage. The optional layers of coverage above the mandatory FHCF coverage are $12 billion, $11 billion, $10 billion, $9 billion, $8 billion, $7 billion, $6 billion, $5 billion, $4 billion, $3 billion, $2 billion, or $1 billion.

The purchase of a TICL option increases the Company’s coverage under the Reimbursement Contract as calculated pursuant to Section 215.555(4)(d)2., Florida Statutes. The Company’s increased coverage shall be the FHCF reimbursement premium multiplied by the TICL multiple. Each TICL coverage multiple shall be calculated by dividing $12 billion, $11 billion, $10 billion, $9 billion, $8 billion, $7 billion, $6 billion, $5 billion, $4 billion, $3 billion, $2 billion, or $1 billion by the aggregate mandatory FHCF premium under the Reimbursement Contract paid by all companies.

In order to determine the Company’s total limit of coverage, the Company’s TICL coverage multiple is added to its regular Payout Multiple under the Reimbursement Contract. The total of these two multiples shall represent a number that, when multiplied by an insurer’s mandatory FHCF reimbursement premium under the Reimbursement Contract, defines the Company’s total limit of FHCF reimbursement coverage for the Contract Year under the Reimbursement Contract and Addendum No. 3. The SBA shall reimburse the Company for 45 percent, 75 percent, or 90 percent of its losses from each Covered Event in excess of the Company’s FHCF Retention under the Reimbursement Contract, plus 5 percent of the reimbursed losses to cover loss adjustment expense, not to exceed the Company’s total limit of coverage as defined above. The percentage shall be the same as the coverage level selected by the Company under its Reimbursement Contract.

II. TICL Premium

The Company’s TICL premium shall be determined as specified in Section 215.555(5), Florida Statutes, and shall be due and payable in three installments on August 1, 2007, October 1, 2007, and December 1, 2007.

III. Liability of the FHCF

Pursuant to Section 215.555(17)(g), Florida Statutes, the liability of the FHCF with respect to all TICL addenda shall not exceed $12 billion and shall depend on the number of insurers that select the TICL optional coverage and the TICL coverage options selected. In no circumstance shall the liability of the FHCF exceed its actual claims-paying capacity as defined in Section 215.555(2)(m), Florida Statutes.

The additional TICL capacity shall apply only to the additional coverage provided under the TICL options and shall not otherwise affect any insurer’s reimbursement from the FHCF if the insurer chooses not to select a TICL option to increase its limit of FHCF coverage.

IV. Coordination of Coverage

Reimbursement amounts under TICL shall not be reduced by reinsurance paid or payable to the Company from sources other than the FHCF.

2 FHCF-2007K
Rule 19-8.010 F.A.C

The TICL coverage shall be in addition to all other coverage provided by the FHCF under the Company’s Reimbursement Contract or other Addenda to the Reimbursement Contract, and shall be in addition to the claims-paying capacity of the FHCF as defined in Section 215.555(4)(c)1., Florida Statutes, but only with respect to those insurers that select the TICL coverage.

The TICL coverage selected is irrevocable and shall not overlap or duplicate coverage otherwise provided for in the Reimbursement Contract, or any Addenda to the Reimbursement Contract, or offset any co-payments or retention amounts.

V. Addendum No. 3 TICL Coverage Election

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE BELOW THE LEVEL OF OPTIONAL TICL COVERAGE SELECTED, IF ANY. IF ADDENDUM NO. 3 IS RETURNED WITHOUT A TICL COVERAGE OPTION SELECTED, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT TICL COVERAGE.

If your Company does not want to purchase any TICL coverage, print “No Coverage” on the line below and initial the box.

By selecting an option below (initial the applicable box), the Company is selecting its proportionate share based on its mandatory FHCF reimbursement premium to the total mandatory FHCF reimbursement premiums paid by all companies of the layer of optional coverage.

Company selects $1
billion TICL
Coverage Option OR Company selects $2
billion TICL
Coverage Option OR Company selects $3
billion TICL
Coverage Option OR Company selects $4
billion TICL
Coverage Option

Company selects $5
billion TICL
Coverage Option OR Company selects $6
billion TICL
Coverage Option OR Company selects $7
billion TICL
Coverage Option OR Company selects $8
billion TICL
Coverage Option

3 FHCF-2007K
Rule 19-8.010 F.A.C

						/s/ JBM
Company selects $9 billion TICL Coverage Option	OR	Company selects $10 billion TICL Coverage Option	OR	Company selects $11 billion TICL Coverage Option	OR	Company selects $12 billion TICL Coverage Option

VI. Signatures
 

/s/ T. Bruce Meyer  

Liberty American Insurance Company 

By: T. Bruce Meyer, Pres & CEO   Name/Title 5-23-07   Date

Approved by:

Florida Hurricane Catastrophe Fund

By: State Board of Administration of the State of Florida

By: /s/ Linda Lettera / for   Coleman Stipanovich
Executive Director 7/9/07   Date

Approved as to legality:

By: /s/ Thomas A. Burke / for   Linda Lettera
General Counsel
FL Bar ID#311911 7/9/07   Date

4 FHCF-2007K
Rule 19-8.010 F.A.C

	State Board of Administration of Florida	CHARLIE CRIST GOVERNOR AS CHAIRMAN ALEX SINK CHIEF FINANCIAL OFFICER AS TREASURER BILL McCOLLUM ATTORNEY GENERAL AS SECRETARY COLEMAN STIPANOVICH EXECUTIVE DIRECTOR
	1801 Hermitage Boulevard-Suite 100 Tallahassee, Florida 32308 (850) 488-4406
	Post Office Box 13300 32317-3300

ADDENDUM NO. 4
to
REIMBURSEMENT CONTRACT
Effective: June 1, 2007
(Contract)

between

LIBERTY AMERICAN INSURANCE COMPANY
Pinellas Park, FL
(Company)

NAIC # 10955

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:01 a.m., Eastern Time, June 1, 2007, that this Contract shall be amended as follows:

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, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principle document are equally applicable to each of the Addenda unless specifically superseded by one of the Addenda.

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. The Company shall not, without the prior approval of the Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration, any sums the FHCF pays under this Contract or the right to receive such sums.

1 FHCF-2007K
Rule 19-8.010 F.A.C

Approved by:

Florida Hurricane Catastrophe Fund

By: State Board of Administration

By: /s/ Linda Lettera / for   Coleman Stipanovich
Executive Director 7/9/07   Date

Approved as to legality:

/s/ Thomas A. Burke / for   Linda Lettera
General Counsel
FL Bar ID#311911 7/9/07   Date

/s/ T. Bruce Meyer 

Liberty American Insurance Company 

By: T. Bruce Meyer, Pres. & CEO   Name/Title 5/23/07   Date

2 FHCF-2007K
Rule 19-8.010 F.A.C

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 control 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.
November 6, 2007		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 control 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
November 6, 2007		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 September 30, 2007 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

November 6, 2007

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 September 30, 2007 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

November 6, 2007