Contract analysis

I. Executive Summary This memorandum surveys the state-by-state premium finance company licensing requirements across all 50 states and the District of Columbia, confirms the licensing status of Quorum Premium Finance LLC ("QPF"), and analyzes securitization-related issues arising in connection with the proposed $500,000,000 asset-backed securitization by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"). In parti

1. QPF holds active premium finance company licenses or equivalent authorizations in all 50 states and the District of Columbia. No pending regulatory actions, investigations, consent orders, or license suspensions have been identified in any jurisdiction.

2. QPF's pricing practices, including its weighted average APR of 7.85% and its individual loan APR range of approximately 5.50% to 11.00%, comply with all applicable state rate caps and usury limitations for commercial premium finance agreements.

3. The securitization structure does not require QRH or QRF 2022-1 to obtain premium finance company licenses in any jurisdiction. The majority of states expressly permit assignment of premium finance agreements without requiring the assignee to hold a license, provided the original agreement was lawfully originated by a licensed premium finance company. A small number of states (approximately three to five) have sta

4. The eligible receivables criteria in the proposed transaction documents must incorporate compliance with applicable usury and licensing laws as a condition of eligibility. The current draft criterion (vii) captures this requirement in general terms, but we recommend that it be made more explicit, as further described in Section XI of this memorandum.

5. Subject to the specific recommendations set forth in Section XI below regarding enhanced representations, covenants, and disclosure, no licensing-related impediment to the proposed $500,000,000 securitization has been identified.

II. Background on the Transaction Structure The proposed securitization utilizes a two-tier special purpose vehicle ("SPV") structure, which is standard in asset-backed securitizations of this type and is designed to achieve a "true sale" of the receivables for bankruptcy-remoteness purposes. Originator/Seller. QPF, in its capacity as originator and initial seller, originates premium finance agreements with commercia

III. Overview of State Premium Finance Regulation A. General Regulatory Framework Insurance premium finance is regulated exclusively at the state level. There is no federal statute or regulatory framework governing the licensing or operation of premium finance companies. Most states have adopted some version of the National Association of Insurance Commissioners ("NAIC") Model Premium Finance Company Act (the "Model

IV. QPF Licensing Status — State-by-State Survey A. Methodology In connection with the preparation of this memorandum, Calderwood & Harkness conducted a comprehensive review of QPF's licensing status in all 50 states and the District of Columbia. Our review included the following:

1. Statutory Review. We reviewed the applicable insurance codes and premium finance statutes for each of the 50 states and the District of Columbia, with particular attention to: (a) the definition of "premium finance company" and the scope of activities requiring licensure; (b) licensing requirements, including application procedures, minimum capital or net worth requirements, and surety bond requirements; (c) maxim

2. Internal Records Review. We reviewed QPF's internal licensing database, which is maintained by QPF's compliance department under the supervision of Nolan Whitford, General Counsel of QIH. We also reviewed copies of QPF's active licenses and certificates of authority in each jurisdiction, as provided to us by Mr. Whitford on July 18, 2022.

3. Online Verification. We independently verified QPF's licensing status through the online regulatory databases and license verification portals maintained by the state insurance departments or equivalent regulatory agencies in each jurisdiction. This verification was conducted during the period of July 18 through August 5, 2022.

4. Examination Reports. We reviewed QPF's most recent state examination reports, where available, to identify any compliance deficiencies, findings, or recommendations noted by state examiners. We note that QPF has been subject to regulatory examinations in several states during the past three years, including comprehensive examinations by the Connecticut Insurance Department (2020), the Texas Department of Insurance

5. Compliance Filings. We confirmed that QPF's annual reports and renewal filings are current in all jurisdictions as of the date of this memorandum. Our review was conducted as of July 2022. All license expiration and renewal dates were confirmed as current through at least December 31, 2022, in all jurisdictions, providing a reasonable margin for the anticipated closing of the securitization in September or October

V. Assignee Licensing Requirements — Securitization Analysis A. The Core Question A fundamental question in any securitization of premium finance receivables is whether the purchasers or assignees of the receivables — here, QRH and QRF 2022-1 — must themselves hold premium finance company licenses under applicable state law. This question arises because the state premium finance statutes generally regulate the "busin

1. Minnesota. Statutory Citation. Minn. Stat. §§ 59A.01 to 59A.16. Analysis. The Minnesota premium finance statute defines "premium finance company" broadly as "a person engaged in the business of entering into premium finance agreements or acquiring premium finance agreements from other premium finance companies." The inclusion of the phrase "acquiring premium finance agreements from other premium finance companies"

2. Montana. Statutory Citation. Mont. Code Ann. §§ 33-17-701 to -717. Analysis. Montana's premium finance statute requires a license for any person "engaged in the business of financing insurance premiums in this state." The term "financing insurance premiums" is not defined with specificity, and the statute does not contain an express provision addressing the assignment of premium finance agreements. The absence of

3. Wisconsin. Statutory Citation. Wis. Stat. § 625.01 et seq. Analysis. Wisconsin's premium finance statute requires licensing for any person "who engages in the business of a premium finance company" and defines a premium finance company as a person who "acquires" premium finance agreements. This language, like Minnesota's, could potentially be read to encompass securitization purchasers. However, the statute also c

4. Kansas. Statutory Citation. Kan. Stat. Ann. §§ 40-2101 to -2112. Analysis. Kansas defines "premium finance company" as any person "engaged in the business of entering into or purchasing premium finance agreements." The inclusion of "purchasing" in the statutory definition raises the same concern as in Minnesota and Wisconsin. Kansas does not have a separate provision expressly authorizing assignment without assign

VI. Usury Compliance Analysis A. Framework Each receivable in the proposed securitization pool must comply with the applicable state's maximum permissible finance charge or interest rate for premium finance agreements. Non-compliance with applicable rate limitations could result in significant adverse consequences, including: • Unenforceability. A premium finance agreement originated at a finance charge exceeding the

VII. Interplay with Eligible Receivables Criteria A. Overview of Eligibility Criteria The eligible receivables criteria are set forth in the Receivables Sale Agreement between QPF and QRH and the Receivables Transfer Agreement between QRH and QRF 2022-1. These criteria are substantially identical in both agreements and are also reflected in the Final Term Sheet (v3, dated September 2, 2022) circulated to the rating a

VIII. Cancellation and Unearned Premium Refund Mechanics A. Overview Insurance premium finance agreements are a unique form of secured lending in which the collateral securing the lender's advance is the policyholder's right to receive an unearned premium refund upon cancellation of the financed insurance policy. When a commercial policyholder finances its insurance premiums through a premium finance agreement, the p