Suzanne,
I hope your week is wrapping up well. I wanted to send along an end-of-week status update covering both the property quota-share renewal with Pinnacle Re Ltd. and the new catastrophe excess-of-loss placement so that we're all aligned heading into a busy few weeks. For reference, this falls under Matter No. 1025-00004.
**A. Quota-Share Treaty Renewal — Draft Status**
As planned, on November 1 we distributed the draft amended and restated property quota-share reinsurance treaty to Nathan Kessler and Miriam Soto-Flores at Harmon, Kessler & Fitch LLP, counsel to Pinnacle Re. The draft reflects the proposed terms we discussed with your team, including:
- 40% cession percentage (unchanged since the original inception on January 1, 2022); - Proposed increase in provisional ceding commission from 32.0% (expiring) to 33.5%; - Sliding-scale commission range of 30.0% to 36.0%, with a slide factor of 1 point of commission per 2.5 points of loss ratio movement; - Retention of the loss corridor under which Quorum retains 100% of losses in the 75%–80% loss ratio band; - Funds withheld percentage of 25% of ceded premium, invested at 3-month SOFR + 75 bps; - Per-risk retention of $2,500,000 (net of quota-share) and a maximum per-occurrence limit of $25,000,000 to the treaty; and - Cash loss ratio trigger for commutation at 85% inception-to-date.
HKF has acknowledged receipt and indicated they expect to circulate a marked draft with Pinnacle Re's comments within the next 7–10 days — so roughly mid-November. As expected, we anticipate the ceding commission increase and sliding-scale parameters will be the most contested provisions. Angela and I are prepared to schedule a negotiation call as soon as we have HKF's markup in hand.
On the premium side, we have included the projected 2026 ceded premium of approximately $135,200,000 (based on $338,000,000 projected gross written premium × 40%) in the draft's recitals and schedules. Please let us know if that GWP projection has been updated at all since we last spoke.
The intermediary clause naming Blackbridge Advisory Group LLC, with brokerage at 1.25% of ceded premium, is included in the current draft.
**B. Catastrophe Excess-of-Loss Treaty — Draft and Placement Status**
The draft cat XOL reinsurance contract was also distributed to HKF on November 1. Key terms in the draft are as follows:
- **Layer structure:** $35,000,000 per-occurrence layer in excess of a $15,000,000 retention (net of quota-share recoveries), with an exhaustion point of $50,000,000. - **Panel allocation:** - Pinnacle Re Ltd. — 50% ($17,500,000 limit / $1,487,500 premium share) - Graystone Reinsurance AG — 30% ($10,500,000 limit / $892,500 premium share) - Tidewater Re S.A. — 20% ($7,000,000 limit / $595,000 premium share) - **Reinstatement:** One reinstatement at 100% additional premium, pro rata as to time, resulting in maximum aggregate exposure of $70,000,000. - **Pricing:** Rate-on-line of 8.50%; annual layer premium of $2,975,000; minimum premium of $2,380,000 (80% of annual); quarterly deposit premium installments of $743,750. - **Hours clause:** 168-hour catastrophe occurrence definition. - **Territory:** Continental United States, Alaska, Hawaii, Puerto Rico, and U.S. Virgin Islands. - **Perils:** All natural perils, including named storm/hurricane, earthquake, flood, wildfire, and severe convective storm. - **Exclusions:** NMA 1975a (Nuclear), NMA 2962 (Communicable Disease), LMA 3030 (Terrorism, modified — TRIA-certified acts excluded), and LMA 5400 (Cyber, modified per Quorum's manuscript language). Carlos has completed a detailed exclusion clause analysis memo on these provisions. We would recommend discussing the cyber carve-back language with you before the next round with HKF — more on that below in the action items. - **Dispute resolution:** ARIAS-U.S. arbitration seated in New York, NY; New York governing law. - **Intermediary clause:** Blackbridge Advisory Group LLC, brokerage at 5% of layer premium ($148,750).
On the placement side, Owen Halstead at Blackbridge circulated the initial broker market submission on October 17 and has been coordinating with the following underwriting contacts:
- Derek Kimball (Head of Treaty, North America) at Pinnacle Re — 50% lead share - Jan-Erik Lindgren (Head of Property Treaty, Americas) at Graystone Re — 30% share - François-Xavier Delacroix (CUO) at Tidewater Re — 20% share
Owen expects to receive formal indicative pricing responses from all three panel members by the **November 15 deadline**. Informally, he has indicated that Pinnacle Re and Graystone Re appear comfortable with the 8.50% rate-on-line, but Tidewater Re may push for a slightly higher rate. Blackbridge is working to hold the line.
One item to flag: the panel allocations (50/30/20) are not yet formally confirmed via signed participation slips. Owen expects to finalize those concurrent with or shortly after the pricing responses.
**C. Trust Agreement Negotiations — Graystone Re and Tidewater Re**
With respect to collateral and trust arrangements required under NY Insurance Law § 1308 and 11 NYCRR 125:
- **Pinnacle Re** is exempt from collateral requirements as a certified reinsurer under the NY DFS framework (Certified Reinsurer ID CR-2019-0217), with a $0 collateral posting requirement given its A.M. Best "A (Excellent)" rating from Brindoval Rating Services. - **Graystone Re** (Swiss AG, regulated by FINMA) and **Tidewater Re** (Luxembourg S.A.) are each required to fund multi-beneficiary reinsurance trusts at Fidelitas Trust Company of New York: - Graystone Re trust funding: **$21,420,000** (102% of its pro-rata share of maximum aggregate exposure: $10,500,000 × 2 × 1.02) - Tidewater Re trust funding: **$14,280,000** (102% of its pro-rata share: $7,000,000 × 2 × 1.02)
We have circulated draft trust agreements to Fidelitas Trust and to counsel for both Graystone Re and Tidewater Re. Fidelitas has provided initial comments on the trustee provisions — fees, investment guidelines, and reporting obligations. We are reviewing those and expect to turn a revised draft early next week.
The target date for execution of the trust agreements is **December 15, 2025**, with funding to be completed prior to the January 1, 2026 treaty inception. Given the year-end holidays, holding to this timeline will be important, and we'll stay on top of it.
**D. Outstanding Actuarial Deliverables — Meridian Actuarial Partners**
We are awaiting the final loss development and catastrophe model review report from Dr. Anita K. Rourke (FCAS) at Meridian Actuarial Partners LLC. The report, based on the Tempest Analytics CatView v11.2 model output, is expected to include:
- Updated loss development triangles supporting the sliding-scale commission economics on the quota-share treaty; - Validation of Quorum's 250-year modeled PML (net of quota-share) of $52,000,000, which underpins the $15M xs $15M cat XOL layer structure (covering through approximately the 1-in-50-year return period); and - Commentary on the 2024 net combined ratio of 94.7% and projected loss experience.
Meridian has indicated the final report will be delivered by approximately November 12–14. Could you confirm whether Quorum's internal actuarial team has any additional data requests pending with Meridian? We want to make sure nothing is holding up their timeline.
As a related note, the Meridian deliverable will also be important for Quorum's discussions with Whitfield & Strand LLP (Gregory Tate) regarding reinsurance asset recognition for statutory and GAAP reporting purposes.
**E. Key Upcoming Deadlines**
For ease of reference:
| Date
**F. Action Items / Requests of Quorum**
A few items we could use your help on:
1. **GWP Projection** — Please confirm that the projected 2026 gross written premium figure of $338,000,000 for the property book remains current. 2. **Funds Withheld Mechanics** — Could you coordinate internally with Priya Chandrasekaran (CFO) regarding the funds withheld investment mechanics and whether Quorum has any preferences or concerns regarding the SOFR + 75 bps rate? 3. **Cyber Exclusion Carve-Back** — Please review the LMA 5400 modification / cyber exclusion carve-back language and let us know Quorum's position before the next round of negotiations with HKF. Carlos's exclusion clause analysis memo (previously circulated) provides detailed background on this point and our recommendations. 4. **Board Authorization** — Lionel (cc'd) — could you confirm whether Quorum's board has scheduled the authorization/resolution needed for execution of the new cat XOL contract and the trust agreements? 5. **Meridian Data Requests** — Please confirm the status of any outstanding data requests from Meridian so we can ensure the report stays on track for the November 12–14 delivery window.
We are maintaining a closing checklist across both transactions and will circulate an updated version early next week.
Angela is available to discuss any of the above at your convenience. It might be worthwhile to schedule a call early next week to align on negotiating strategy ahead of receiving HKF's markups — please let us know what works on your end. If it would also be helpful for your internal reporting to Desmond Hargrove or the board, we're happy to prepare a more detailed written status memo.
Have a good weekend, Suzanne, and please don't hesitate to reach out with any questions in the meantime.
Best regards,
**Yuki Nakamura** Associate Calderwood & Harkness LLP 125 Broad Street, 38th Floor New York, NY 10004 Tel: (212) 555-0194 Email: ynakamura@calderwoodharkness.com
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