Contract analysis

I. Executive Summary This memorandum outlines the categories of expert witnesses that Quorum Casualty & Surety Company ("QC&S") should retain in connection with the pending reinsurance recoverable dispute with Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") arising under Aggregate Excess-of-Loss Reinsurance Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"). The dispute centers on Pinnacle Atlantic's refusal to

1. Independent Actuarial Expert — to provide an independent opinion on the propriety of the IBNR allocation methodology employed by Velthorn Actuarial Advisors LLC ("Velthorn") and to evaluate the reasonableness of QC&S's aggregate net incurred loss figures for Treaty Years 2022 and 2023;

2. Reinsurance Industry Practices Expert — to testify regarding customs and practices in the reinsurance industry relevant to the late notice defense, follow-the-fortunes doctrine, IBNR allocation, and premium reporting; and

3. Damages / Financial Expert — to quantify QC&S's damages arising from Pinnacle Atlantic's refusal to honor valid cessions, to model the financial impact of various dispute outcomes, and to evaluate and rebut Pinnacle Atlantic's interest and premium calculations. These experts would serve in either arbitration proceedings — specifically, an ARIAS-U.S. arbitration before a three-member panel seated in New York, as co

II. Background on the Dispute and Expert-Related Issues A. Overview of the Four Grounds of Dispute Pinnacle Atlantic's February 14, 2026 pre-suit demand letter, transmitted by HFC on behalf of Pinnacle Atlantic, raises four distinct grounds upon which Pinnacle Atlantic claims entitlement to refuse payment of ceded losses and, in certain respects, to recover amounts already paid. Each ground implicates issues that wil

1. Late Notice (Article 7). Pinnacle Atlantic alleges that QC&S failed to provide timely notice of the Meridian Docks mass tort claim cluster — comprising thirty-one (31) separate commercial general liability bodily injury claims arising under Policy No. CGL-2020-09844 — in violation of Article 7 of the Treaty. The factual predicate for this allegation is the gap of approximately fourteen months and seven days betwee

2. IBNR Misallocation (Article 5). Pinnacle Atlantic alleges that $22,300,000 in incurred-but-not-reported ("IBNR") reserve strengthening was improperly allocated to Treaty Year 2022 when it should have been attributed to Treaty Year 2021 exposures. This allocation is critical because QC&S's aggregate net incurred loss for TY 2022 was reported at $189,700,000 against a retention of $120,000,000, generating a ceded lo

3. Follow-the-Fortunes / Settlements (Article 11). Pinnacle Atlantic challenges the reasonableness and good faith of QC&S's settlement of the Veridian Financial Services Inc. errors-and-omissions claim cluster, which was resolved on September 8, 2023, for a total settlement payment of $34,500,000 (comprising Claim A at $14,200,000, Claim B at $12,800,000, and Claim C at $7,500,000). Pinnacle Atlantic contends that th

4. Premium Reporting (Article 3). Pinnacle Atlantic alleges that QC&S underreported ceded earned premium by $6,800,000 — specifically, that QC&S reported $38,400,000 in ceded earned premium for the relevant treaty periods when Pinnacle Atlantic's own calculation yields $45,200,000. At the Treaty's 42% provisional ceding commission rate, this premium differential results in an alleged treaty premium underpayment of $2

III. Category 1: Independent Actuarial Expert A. Purpose and Scope of Retention The independent actuarial expert will serve as QC&S's testifying actuarial expert and will be retained to provide an independent actuarial opinion addressing the central actuarial issues in the dispute. The principal objectives of this expert's engagement are as follows: (a) IBNR Allocation Methodology. The expert will provide an independ

IV. Category 2: Reinsurance Industry Practices Expert A. Purpose and Scope of Retention The reinsurance industry practices expert will serve as QC&S's testifying expert on customs and practices in the reinsurance industry. This expert's testimony will be relevant to each of the four grounds of dispute raised by Pinnacle Atlantic, and the scope of the engagement accordingly spans the full breadth of the case. The prin

V. Category 3: Damages / Financial Expert A. Purpose and Scope of Retention The damages/financial expert will serve as QC&S's testifying expert on financial and damages issues. This expert's engagement will encompass the quantification of QC&S's affirmative damages, the rebuttal of Pinnacle Atlantic's damages calculations, and the modeling of the financial impact of various dispute outcomes on QC&S and QIH. The princ

VI. Coordination and Timing Considerations A. Expert Coordination Plan The effectiveness of QC&S's expert presentation will depend not only on the quality of each individual expert's work but also on the consistency and coherence of the three experts' opinions when presented together. Accordingly, careful coordination among the three expert categories is essential. All three experts must be coordinated to ensure that

VII. Budget Summary A. Aggregate Expert Costs (Estimated Ranges) The following table summarizes the estimated expert retention costs across all three categories: These estimates encompass the full lifecycle of each expert engagement, from initial review through hearing or trial testimony, including the preparation of rebuttal reports where necessary. The estimates are based on the hourly rates and hour ranges describ

VIII. Recommendations Based on the foregoing analysis, we make the following recommendations for the engagement team's consideration and Douglas Carmichael's approval:

1. Initiate Immediate Outreach to Top-Ranked Candidates. We recommend immediate outreach to the top-ranked candidate in each expert category: Dr. Margaret Lindquist (