1025-00004 · Quorum Insurance Holdings · Correspondence

letter-to-hkf-marked-drafts.docx DOCUMENT M&A / Corporate

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CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

125 Broad Street, 38th Floor New York, NY 10004 Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com

November 1, 2025

Nathan R. Kessler, Esq., Partner Harmon, Kessler & Fitch LLP 780 Third Avenue, 30th Floor New York, NY 10017

Re: Quorum Specialty Insurance Company — (a) Amended and Restated Property Quota-Share Reinsurance Treaty with Pinnacle Re Ltd. (January 1, 2026 Renewal) and (b) Catastrophe Excess-of-Loss Reinsurance Contract with Pinnacle Re Ltd., Graystone Reinsurance AG, and Tidewater Re S.A.

Calderwood & Harkness Matter No. 1025-00004

Dear Nathan and Miriam:

1. Introduction and Purpose

As you know, Calderwood & Harkness LLP represents Quorum Insurance Holdings Corp. and its operating subsidiary, Quorum Specialty Insurance Company (NAIC No. 42917), a Connecticut-domiciled admitted carrier (collectively, "Quorum" or the "Cedent"), in connection with the above-referenced reinsurance transactions. We understand that Harmon, Kessler & Fitch LLP represents Pinnacle Re Ltd. ("Pinnacle Re" or, as applicable, the "Lead Reinsurer") in the ongoing treaty negotiations for both the property quota-share renewal and the new catastrophe excess-of-loss placement.

These transactions are being placed through Blackbridge Advisory Group LLC ("Blackbridge"), acting as reinsurance intermediary, under the direction of Owen F. Halstead, Managing Director. Mr. Halstead and his team have been instrumental in facilitating the commercial discussions to date, and we anticipate that Blackbridge will continue to serve as a point of coordination between the parties as we move toward execution.

The purpose of this letter is twofold. First, we are transmitting to you, on behalf of Quorum, the first marked drafts of two treaty wordings — namely, the amended and restated property quota-share reinsurance treaty and the catastrophe excess-of-loss reinsurance contract — each of which is enclosed herewith in both clean and redline versions. Second, we are identifying and summarizing all open commercial and legal terms that remain subject to negotiation and require counterparty positions from Pinnacle Re and, where applicable, from the following reinsurers.

These drafts are being circulated in accordance with the mutually agreed target date of November 1, 2025 for distribution of first draft treaty wordings, as confirmed during the October 10, 2025 call among counsel and the intermediary. We have endeavored to present the drafts in a format that clearly identifies all bracketed and open provisions so as to facilitate an efficient exchange of marked comments. We respectfully request that Pinnacle Re and your firm provide marked-up comments and counterparty positions on all bracketed provisions by no later than November 15, 2025, consistent with the timeline discussed more fully in Section 10 below.

2. Enclosed Documents

Enclosed with this letter, please find the following draft documents:

1. Amended and Restated Property Quota-Share Reinsurance Treaty between Quorum Specialty Insurance Company (as Cedent) and Pinnacle Re Ltd. (as Reinsurer) — marked draft with bracketed provisions, transmitted in both clean and redline versions. The redline version reflects changes from the expiring January 1, 2025 treaty form.

2. Catastrophe Excess-of-Loss Reinsurance Contract between Quorum Specialty Insurance Company (as Cedent) and Pinnacle Re Ltd. (as Lead Reinsurer), Graystone Reinsurance AG (as Following Reinsurer), and Tidewater Re S.A. (as Following Reinsurer) — marked draft with bracketed provisions, transmitted in both clean and redline versions. As this is a new placement (not a renewal), the redline version reflects changes from Calderwood & Harkness's standard catastrophe excess-of-loss form, which was used as the base document.

Both treaty wordings are governed by the laws of the State of New York and include arbitration provisions providing for three-arbitrator panel arbitration administered under the rules of ARIAS-U.S., with the seat of arbitration in New York, New York. We address the governing law and dispute resolution provisions in greater detail in Section 7 below.

We note for completeness that the enclosed drafts are being transmitted simultaneously to Blackbridge for its records and to Quorum's internal legal and reinsurance teams for ongoing review. The drafts remain subject to all reservations set forth in Section 11 of this letter.

3. Summary of Key Terms — Property Quota-Share Treaty (Renewal)

3.1 Background. The property quota-share reinsurance treaty between Quorum Specialty Insurance Company and Pinnacle Re Ltd. originally incepted on January 1, 2022, and has been renewed annually since that date. The enclosed draft reflects an amended and restated form of the treaty for the renewal treaty period commencing January 1, 2026 and ending December 31, 2026, inclusive (the "2026 Treaty Year"). The amended and restated format has been used in order to incorporate all changes negotiated for the 2026 Treaty Year into a single, comprehensive document, rather than relying on a series of endorsements and addenda to the original 2022 form.

Under the renewal draft, Pinnacle Re Ltd. continues as the sole reinsurer on the quota-share program, with a cession percentage of forty percent (40%) of Quorum Specialty's net retained property premium, unchanged from the expiring 2025 treaty year. The continuity of this cession percentage reflects the longstanding and productive relationship between the parties, as well as Quorum's satisfaction with Pinnacle Re's claims-handling performance and financial security.

For context, Quorum Specialty's 2024 gross written premium on its property book of business was approximately $312,000,000. Based on current growth projections and the planned expansion of Quorum Specialty's commercial property portfolio into additional southeastern U.S. markets, projected 2026 gross written premium is approximately $338,000,000. Applying the 40% cession percentage, the projected 2026 ceded premium under the quota-share treaty is approximately $135,200,000 (i.e., 40% of $338,000,000). These projections are, of course, estimates and are subject to revision as Quorum Specialty's underwriting plans for the 2026 treaty year are finalized.

3.2 Ceding Commission — Open / Bracketed Terms

The ceding commission is the principal commercial term on which Quorum seeks an improved position for the 2026 Treaty Year. Under the expiring 2025 treaty, the provisional ceding commission rate is thirty-two percent (32.0%) of ceded premium. For the 2026 renewal, Quorum proposes an increase to a provisional ceding commission of thirty-three and one-half percent (33.5%) of ceded premium. This proposed rate is reflected in brackets in the enclosed draft at Article V, Section 5.01(a), and requires Pinnacle Re's agreement before the brackets can be removed.

Quorum's request for an increase of 1.5 percentage points in the provisional ceding commission is supported by the favorable underwriting performance of the ceded portfolio over the prior treaty years. Specifically, Quorum's independent actuarial consultants, Meridian Actuarial Partners LLC, under the direction of Dr. Anita K. Rourke, FCAS, have confirmed that Quorum Specialty's 2024 net combined ratio on its property book was 94.7%, reflecting a loss ratio of 58.2% and an expense ratio of 36.5%. This represents a meaningful improvement from the 2023 net combined ratio of 97.1% and continues a trend of favorable loss development across all treaty years since inception. In Quorum's view, this sustained favorable performance — and the value delivered to Pinnacle Re's treaty portfolio as a result — justifies a modest upward adjustment in the ceding commission to better reflect the quality of the ceded business.

We respectfully request that Pinnacle Re provide its position on the proposed 33.5% provisional ceding commission rate. Should Pinnacle Re wish to propose an alternative rate, we would welcome a counterproposal so that the parties may work toward agreement on this term in advance of the target signing date.

3.3 Sliding-Scale Commission Parameters — Open / Bracketed Terms

The enclosed draft includes a sliding-scale commission mechanism at Article V, Section 5.01(b), pursuant to which the provisional ceding commission is subject to retrospective adjustment based on the actual loss experience of the ceded portfolio during the treaty year. The draft proposes the following sliding-scale parameters:

• Minimum ceding commission: 30.0% of ceded premium

• Maximum ceding commission: 36.0% of ceded premium

• Slide factor: 1 point of commission adjustment per 2.5 points of loss ratio movement from the anticipated loss ratio of 60.0%

These parameters are bracketed in the draft and are open for negotiation. The proposed range represents a widening of the sliding-scale band relative to the expiring treaty (which provided for a minimum of 30.5% and a maximum of 34.5%), which Quorum believes is appropriate in light of the higher proposed provisional rate and the increased premium volume projected for 2026.

We request that Pinnacle Re review the proposed sliding-scale parameters and provide any counterproposal with respect to the minimum and maximum commission rates, the slide factor, and the anticipated loss ratio. If Pinnacle Re has a preferred sliding-scale structure or methodology, we are open to considering alternative approaches, provided they achieve a commercially balanced result.

3.4 Loss Corridor

The enclosed draft carries forward from the expiring treaty a loss corridor provision at Article VI, Section 6.03, under which Quorum Specialty retains one hundred percent (100%) of losses falling within the 75% to 80% loss ratio band (the "Loss Corridor"). The Loss Corridor operates as a risk-retention feature that limits Pinnacle Re's exposure to an adverse swing in the loss ratio within this specified band, with Quorum resuming its normal quota-share cession for losses above the 80% loss ratio threshold.

This provision has been included in the quota-share treaty since its inception and has not been triggered during any prior treaty year. We have carried it forward in the draft without brackets, but we flag it here as a term that Pinnacle Re may wish to revisit in the context of the overall renewal negotiation. We request confirmation that Pinnacle Re finds the loss corridor retention band of 75% to 80% acceptable for the 2026 Treaty Year, or alternatively, that Pinnacle Re advise whether it proposes any modification to this provision.

3.5 Funds Withheld

The enclosed draft provides for a funds withheld arrangement at Article VII, Section 7.01, under which Quorum Specialty retains twenty-five percent (25%) of ceded premium in a funds withheld account. The investment crediting rate applied to the funds withheld balance is the three-month Secured Overnight Financing Rate ("SOFR") plus seventy-five (75) basis points, calculated and credited quarterly.

These terms are unchanged from the expiring treaty and are not bracketed in the enclosed draft. We include them here for completeness and request that Pinnacle Re confirm that the funds withheld percentage and investment crediting rate remain acceptable.

3.6 Per-Risk Retention and Per-Occurrence Limit

The draft maintains the following per-risk and per-occurrence parameters at Article III, Section 3.02:

• Per-risk retention (net of quota-share): $2,500,000 any one risk

• Maximum per-occurrence limit to the treaty: $25,000,000 (of which Pinnacle Re's 40% share equals $10,000,000)

These terms are unchanged from the expiring treaty and are not bracketed. We note them here for reference and request confirmation.

3.7 Commutation Trigger

The enclosed draft retains the commutation provision at Article XII, Section 12.01, which provides for an optional commutation of the treaty by either party upon the occurrence of a commutation trigger, defined as a cash loss ratio of eighty-five percent (85%) or greater on an inception-to-date basis. This provision has been carried forward from the expiring treaty without modification.

We request confirmation that the 85% cash loss ratio commutation trigger remains acceptable to Pinnacle Re for the 2026 Treaty Year, or that Pinnacle Re advise of any proposed changes to the commutation mechanics.

3.8 Bordereau and Reporting

The enclosed draft provides for quarterly bordereau reporting at Article IX, Section 9.01. Quorum Specialty will deliver to Pinnacle Re (with copies to the intermediary) a detailed quarterly bordereau of all ceded premiums, losses, and loss adjustment expenses, together with supporting schedules. The first quarterly bordereau for the 2026 Treaty Year is due on or before March 31, 2026, covering the period from January 1, 2026 through March 31, 2026.

The bordereau format and content requirements remain substantively unchanged from the expiring treaty.

3.9 Intermediary / Brokerage

As noted above, Blackbridge Advisory Group LLC (New York Department of Financial Services Reinsurance Intermediary License No. RI-00483) serves as the intermediary for the quota-share treaty. The brokerage commission payable to Blackbridge is one and one-quarter percent (1.25%) of ceded premium on the quota-share treaty, consistent with the terms of the intermediary engagement and reflected at Article XIV, Section 14.01 of the enclosed draft.

The draft includes a standard intermediary clause providing for the payment of balances through the intermediary and the application of the intermediary's errors and omissions coverage. This provision is not bracketed and is not proposed for modification.

4. Summary of Key Terms — Catastrophe Excess-of-Loss Reinsurance Contract (New Layer)

4.1 Layer Structure

The catastrophe excess-of-loss reinsurance contract (the "Cat XOL Contract") is a new placement for the January 1, 2026 treaty period. The layer structure is as follows:

• Layer limit: $35,000,000 per occurrence

• Attachment point: $15,000,000 per occurrence, net after quota-share recoveries under the property quota-share treaty described in Section 3 above

• Exhaustion point: $50,000,000 (i.e., $15,000,000 attachment plus $35,000,000 limit)

• Treaty period: January 1, 2026 through December 31, 2026, inclusive

The attachment point of $15,000,000 has been calibrated by reference to Quorum Specialty's catastrophe retention appetite and the output of the catastrophe modeling analysis described in Section 8 below. Quorum's position is that this layer structure provides meaningful coverage for medium-to-large catastrophe events while preserving a manageable net retention.

4.2 Reinsurer Panel and Participation Schedule

The Cat XOL Contract is structured as a multi-party treaty with a three-reinsurer panel. Pinnacle Re Ltd. serves as Lead Reinsurer, and Graystone Reinsurance AG and Tidewater Re S.A. serve as Following Reinsurers. The participation schedule, as reflected at Article II, Section 2.01 of the enclosed draft, is as follows:

The participation percentages and premium shares set forth above are based on the indicated rate-on-line discussed in Section 4.3 and are subject to adjustment if the final agreed rate-on-line differs from the indicated rate.

4.3 Pricing Terms — Open / Subject to Indicative Pricing Response

The enclosed draft reflects the following pricing terms, all of which are bracketed pending confirmation from the reinsurer panel:

• Rate-on-line: 8.50% (indicated/proposed)

• Annual layer premium: $2,975,000 (calculated as $35,000,000 × 8.50%)

• Minimum premium: $2,380,000 (80% of the indicated annual layer premium)

• Quarterly deposit premium: $743,750 (calculated as $2,975,000 ÷ 4), with the first quarterly deposit due on or before March 31, 2026

The 8.50% rate-on-line represents Quorum's view of fair value for the layer, informed by the catastrophe modeling analysis described in Section 8 and by market intelligence gathered by Blackbridge during the preliminary marketing process. However, we recognize that the rate-on-line and related pricing terms are subject to confirmation from the reinsurer panel. The November 15, 2025 indicative pricing response deadline has been communicated to all panel members through Blackbridge, and we request that Pinnacle Re, as Lead Reinsurer, provide its indicative pricing response on or before that date. We further request that Pinnacle Re coordinate with Graystone Re and Tidewater Re to facilitate a consolidated pricing response from the full panel to the extent practicable.

4.4 Reinstatement. The enclosed draft provides for one (1) reinstatement at one hundred percent (100%) additional premium, calculated pro rata as to time for the remainder of the treaty period following the date of the loss occurrence giving rise to the reinstatement. The reinstatement provision is set forth at Article IV, Section 4.02 of the draft.

Accordingly, the maximum aggregate exposure under the Cat XOL layer, inclusive of the original limit and one full reinstatement, is $70,000,000 (i.e., $35,000,000 × 2). This aggregate cap is an important feature of the contract from Quorum's perspective, as it establishes the outer boundary of the panel's exposure in a multi-event scenario.

4.5 Hours Clause — Open / Bracketed

The enclosed draft proposes a 168 consecutive hours clause at Article I, Section 1.09, for the definition of a covered catastrophe occurrence. Under this provision, all individual losses arising from a single catastrophe event that occur within a period of one hundred sixty-eight (168) consecutive hours shall be aggregated and treated as a single occurrence for purposes of the attachment point, layer limit, and reinstatement provisions.

This term is bracketed in the draft and is open for negotiation. Quorum's position is that 168 hours (i.e., seven consecutive days) is consistent with the prevailing market standard for North American property catastrophe excess-of-loss reinsurance programs and is the hours period most commonly used in the programs of Quorum's peer carriers, as surveyed by Blackbridge in its October 2025 market study. We respectfully request that Pinnacle Re and the following reinsurers provide their respective positions on the proposed 168-hour period. If any panel member proposes an alternative hours clause duration (e.g., 96 hours, 120 hours, or 336 hours for earthquake), we ask that such proposal be accompanied by a rationale so that the parties may discuss the issue on an informed basis.

4.6 Territory. The territorial scope of the Cat XOL Contract is the continental United States, Alaska, Hawaii, the Commonwealth of Puerto Rico, and the United States Virgin Islands, as set forth at Article I, Section 1.05 of the enclosed draft.

4.7 Perils Covered

The Cat XOL Contract covers all natural perils, including but not limited to named storm and hurricane, earthquake, flood (including storm surge), wildfire, and severe convective storm (including tornado, hail, and straight-line wind). The perils are defined at Article I, Section 1.06 of the enclosed draft. Exclusions applicable to the contract are discussed separately in Section 5 below.

4.8 Intermediary / Brokerage

Blackbridge Advisory Group LLC serves as the intermediary for the Cat XOL Contract, consistent with its role on the quota-share treaty. The brokerage commission payable to Blackbridge on the Cat XOL Contract is five percent (5%) of layer premium, which, based on the indicated annual layer premium of $2,975,000, yields a brokerage commission of $148,750. The intermediary clause and brokerage terms are set forth at Article XIV of the enclosed draft and are not bracketed.

5. Exclusion Clauses — Open Issues and Proposed Modifications

The enclosed drafts of both the quota-share treaty and the Cat XOL Contract include a suite of market-standard exclusion clauses. While many of these exclusions are carried forward in their standard form and are not expected to require significant negotiation, we wish to draw your attention to several exclusions that are either modified from their standard form or that we believe warrant express confirmation from the reinsurer panel.

5.1 Nuclear Exclusion

Both treaty drafts include the NMA 1975a (Nuclear Exclusion Clause — Reinsurance) in its standard form, as set forth at the applicable exclusion schedule in each draft. This is a widely accepted market-standard exclusion, and Quorum has not proposed any modifications. The provision is not bracketed.

We request confirmation from Pinnacle Re that the NMA 1975a is acceptable in its standard form as included in the drafts.

5.2 Communicable Disease Exclusion

Both treaty drafts include the NMA 2962 (Communicable Disease Exclusion) in its standard form. This exclusion was first introduced into Quorum's reinsurance program during the 2021 renewal cycle and has been included in each subsequent treaty year without modification. The provision is not bracketed.

We request confirmation from Pinnacle Re that the NMA 2962 is acceptable in its standard form as included in the drafts.

5.3 Terrorism Exclusion — Modified / Open

Both treaty drafts include a terrorism exclusion based on LMA 3030 (Terrorism Exclusion), as modified by Quorum to exclude losses arising from acts certified under the Terrorism Risk Insurance Act of 2002, as amended and reauthorized ("TRIA"). The modified language is set forth at the exclusion schedule in each draft and is bracketed, indicating that this provision is open for negotiation.

Quorum's position on the scope of the terrorism exclusion is as follows: Quorum Specialty has elected to participate in the federal TRIA program for the 2026 calendar year, and its applicable policyholders have been offered and, in many cases, have purchased TRIA coverage as required under the statute. In Quorum's view, it is both commercially appropriate and consistent with standard cedent practice to exclude from the reinsurance treaty losses arising from TRIA-certified acts of terrorism, on the basis that such losses are subject to the federal backstop and the related mandatory and insurer deductible provisions of the TRIA program. Including TRIA-certified terrorism losses within the scope of the reinsurance treaty would create a potential for double recovery and would complicate the allocation of recoveries between the federal program and the reinsurance program.

We request that Pinnacle Re provide its position on the scope of the terrorism exclusion and, in particular, on the proposed exclusion of TRIA-certified acts. If Pinnacle Re or any following reinsurer proposes alternative terrorism exclusion language, we ask that such alternative language be provided in the form of a marked draft so that the parties may efficiently compare the proposed approaches.

5.4 Cyber Exclusion — Modified / Open

The Cat XOL Contract draft includes a cyber exclusion based on LMA 5400 (Cyber War and Cyber Operation Exclusion), as modified per Quorum's manuscript language. The modified version of LMA 5400 is set forth at Exclusion Schedule D to the Cat XOL Contract and is bracketed, indicating that this provision is expected to be one of the most closely negotiated terms in the contract.

The key modification proposed by Quorum is the inclusion of carve-backs for physical-damage cyber incidents — that is, scenarios in which a cyber event (such as a malicious code intrusion, ransomware attack, or state-sponsored cyber operation) results in tangible physical damage to insured property. By way of example, Quorum's proposed carve-back would preserve coverage under the Cat XOL Contract for a loss arising from a fire or explosion at an insured facility where the fire or explosion was proximately caused by the introduction of malicious code into the facility's industrial control systems. In Quorum's view, such losses are fundamentally property losses and should be treated as such under a property catastrophe reinsurance treaty, notwithstanding the involvement of a cyber element in the chain of causation.

Quorum recognizes that the scope of the cyber exclusion and the availability and breadth of physical-damage carve-backs are subjects of active discussion across the property reinsurance market and that reinsurer positions on these issues continue to evolve. Quorum's position is that a property catastrophe reinsurance treaty should not exclude losses arising from physical perils merely because the proximate cause includes a cyber element, and that a well-drafted physical-damage carve-back appropriately balances the cedent's need for certainty of coverage with the reinsurer's legitimate interest in excluding affirmative, non-physical cyber risks.

We respectfully request that Pinnacle Re and the following reinsurers provide their marked comments on the proposed modifications to LMA 5400, including any alternative language or narrowing of the carve-back that the reinsurers may wish to propose. We anticipate that this provision will benefit from a focused discussion among counsel and the respective underwriting teams, and we are prepared to arrange such a discussion at a mutually convenient time following receipt of the reinsurers' comments.

6. Collateral and Trust Requirements — Graystone Re and Tidewater Re

6.1 Regulatory Framework

The Cat XOL Contract includes two following reinsurers — Graystone Reinsurance AG and Tidewater Re S.A. — that are non-U.S. domiciled reinsurers not certified by the New York Department of Financial Services ("NYDFS") as certified reinsurers under 11 NYCRR 125. Graystone Reinsurance AG is a Swiss Aktiengesellschaft regulated by the Swiss Financial Market Supervisory Authority ("FINMA"). Tidewater Re S.A. is a Luxembourg société anonyme. As neither Graystone Re nor Tidewater Re holds certified reinsurer status in New York, Quorum Specialty is required under Section 1308 of the New York Insurance Law and Regulation 125 (11 NYCRR 125) to obtain collateral security from each such reinsurer in order to take full balance sheet credit for the reinsurance recoverable.

By contrast, Pinnacle Re Ltd. is a certified reinsurer under 11 NYCRR 125, holding NYDFS Certified Reinsurer ID CR-2019-0217, with a $0 collateral requirement. Accordingly, no collateral is required from Pinnacle Re in connection with either the quota-share treaty or the Cat XOL Contract.

6.2 Multi-Beneficiary Reinsurance Trust Agreements

In order to satisfy the collateral requirements described above, separate multi-beneficiary reinsurance trust agreements are being prepared for execution by each of Graystone Re and Tidewater Re (collectively, the "Trust Agreements"). The Trust Agreements will be governed by New York law and will conform to the requirements of NY Insurance Law § 1308 and 11 NYCRR 125.

The trustee for each Trust Agreement will be Fidelitas Trust Company of New York, located at 60 Wall Street, 12th Floor, New York, NY 10005. Fidelitas Trust Company has served as trustee for Quorum Specialty's reinsurance trust arrangements since 2019 and is familiar with the regulatory requirements applicable to reinsurance trusts under New York law.

The beneficiary of each Trust Agreement will be Quorum Specialty Insurance Company.

6.3 Trust Funding Requirements — Open / Bracketed

The trust funding requirements for each following reinsurer have been calculated based on the regulatory collateral factor and each reinsurer's pro-rata share of the maximum aggregate exposure under the Cat XOL layer (i.e., the original limit plus one reinstatement). The proposed trust funding amounts are as follows:

Graystone Reinsurance AG:

• Pro-rata share of maximum aggregate exposure: $10,500,000 limit × 2 (original plus one reinstatement) = $21,000,000

• Collateral factor: 102%

• Required trust funding: $21,000,000 × 1.02 = $21,420,000

Tidewater Re S.A.:

• Pro-rata share of maximum aggregate exposure: $7,000,000 limit × 2 (original plus one reinstatement) = $14,000,000

• Collateral factor: 102%

• Required trust funding: $14,000,000 × 1.02 = $14,280,000

The Trust Agreements are expected to be executed by December 15, 2025, and the trusts must be funded in full prior to the January 1, 2026 treaty inception date in order for Quorum Specialty to take credit for the reinsurance as of the inception date on its year-end 2025 statutory financial statements.

We note that the trust funding amounts and the 102% collateral factor set forth above are bracketed in the Cat XOL Contract draft pending confirmation from Graystone Re (we understand the responsible contact to be Jan-Erik Lindgren) and Tidewater Re (we understand the responsible contact to be François-Xavier Delacroix). We request that Pinnacle Re, in its capacity as Lead Reinsurer, coordinate with the following reinsurers to confirm that the proposed trust funding amounts and collateral factor are acceptable, or to advise Quorum if any following reinsurer proposes a different collateral structure or factor.

Alternatively, if Graystone Re and/or Tidewater Re have engaged separate outside counsel to negotiate the Trust Agreements, we would appreciate it if Harmon, Kessler & Fitch LLP would advise us of the identity of such counsel so that Calderwood & Harkness may coordinate directly on trust-related matters. In the absence of separate counsel for the following reinsurers, we will plan to transmit the draft Trust Agreements to your firm for distribution to the following reinsurers through the Lead Reinsurer.

7. Dispute Resolution

Both the quota-share treaty draft and the Cat XOL Contract draft include dispute resolution provisions providing for binding arbitration before a three-arbitrator panel, administered under the rules of ARIAS-U.S. (the AIDA Reinsurance and Insurance Arbitration Society — U.S.), with the seat of arbitration in New York, New York. Each party is entitled to appoint one arbitrator, and the two party-appointed arbitrators shall select the third arbitrator, who shall serve as the umpire. All arbitrators and the umpire must be current or former officers of insurance or reinsurance companies, as required by the ARIAS-U.S. rules.

The governing law for both treaties is the law of the State of New York, without regard to its conflict-of-laws principles.

These provisions are not bracketed in either draft and are proposed to remain as presented. We request Pinnacle Re's confirmation that the ARIAS-U.S. arbitration provisions and New York governing law are acceptable.

8. Actuarial and Modeling Support

In connection with the renewal of the quota-share treaty and the new Cat XOL placement, Quorum has engaged Meridian Actuarial Partners LLC, under the direction of Dr. Anita K. Rourke, FCAS, MAAA, to perform loss development analysis and catastrophe model review in support of the transactions. The actuarial analysis encompasses both the historical loss experience underlying the quota-share treaty and the probabilistic catastrophe exposure analysis underlying the Cat XOL layer placement.

The catastrophe model used for the Cat XOL analysis is Tempest Analytics CatView version 11.2, which incorporates updated event catalogs, vulnerability functions, and financial models for all covered perils and territories. The key output of the modeling exercise is summarized as follows:

• 250-year modeled probable maximum loss ("PML") (net of quota-share recoveries): $52,000,000

• The $35,000,000 excess of $15,000,000 Cat XOL layer covers through approximately the 1-in-50-year return period on Quorum Specialty's modeled loss exceedance curve

• The Cat XOL layer premium of $2,975,000, expressed as a percentage of Quorum Specialty's 2024 year-end policyholder surplus of $478,000,000, is approximately 7.3% of surplus

These metrics support Quorum's view that the proposed Cat XOL layer structure and pricing represent a reasonable allocation of catastrophe risk and a prudent use of reinsurance capacity relative to Quorum Specialty's capital position and risk appetite.

We note that detailed actuarial exhibits and catastrophe model output summaries — including modeled loss exceedance curves, event loss tables, and gross-to-net reconciliation schedules — can be made available to Pinnacle Re and the following reinsurers upon request, subject to execution of an appropriate confidentiality agreement or acknowledgment. If Pinnacle Re or any following reinsurer would like to receive these materials, please advise us and we will coordinate their delivery through Blackbridge or directly, as appropriate.

9. Summary of Bracketed and Open Provisions

For convenience, we set forth below a consolidated summary of all bracketed and open terms in the enclosed drafts requiring counterparty positions from Pinnacle Re and, where applicable, from the following reinsurers:

1. Quota-Share Provisional Ceding Commission: 33.5% of ceded premium proposed (vs. 32.0% under the expiring treaty) — Article V, Section 5.01(a) of the Quota-Share Treaty

2. Quota-Share Sliding-Scale Commission Range: Minimum 30.0%, maximum 36.0%, with a slide factor of 1 point of commission adjustment per 2.5 points of loss ratio movement — Article V, Section 5.01(b) of the Quota-Share Treaty

3. Quota-Share Loss Corridor: Quorum retains 100% of losses in the 75%–80% loss ratio band; flagged for confirmation — Article VI, Section 6.03 of the Quota-Share Treaty

4. Cat XOL Rate-on-Line: 8.50% indicated, yielding $2,975,000 annual layer premium — Article III, Section 3.01 of the Cat XOL Contract

5. Cat XOL Hours Clause: 168 consecutive hours for catastrophe occurrence definition — Article I, Section 1.09 of the Cat XOL Contract

6. Cat XOL Cyber Exclusion: LMA 5400 modified per Quorum manuscript with physical-damage carve-backs — Exclusion Schedule D to the Cat XOL Contract

7. Cat XOL Terrorism Exclusion: LMA 3030 modified to exclude TRIA-certified acts of terrorism — Exclusion Schedule C to the Cat XOL Contract (also applicable to Quota-Share Treaty)

8. Trust Funding Amounts and Collateral Factor: Graystone Re trust funding of $21,420,000 and Tidewater Re trust funding of $14,280,000, based on a 102% collateral factor applied to each following reinsurer's pro-rata share of maximum aggregate exposure — Article XI, Section 11.02 of the Cat XOL Contract; Trust Agreements (drafts to follow)

We request that Pinnacle Re and your firm provide marked comments and counterparty positions on each of the above items by the November 15, 2025 deadline discussed below.

10. Requested Timeline and Next Steps

In light of the January 1, 2026 inception date for both transactions, we respectfully request that the parties adhere to the following timeline:

We recognize that this timeline is ambitious, and we are committed to working cooperatively and efficiently with your firm and with Blackbridge to resolve the open issues within the available timeframe. To that end, we suggest scheduling a call or in-person meeting among counsel and the principals to discuss the open issues promptly following receipt of Pinnacle Re's comments. We are happy to coordinate such a meeting through Blackbridge (Owen F. Halstead) or to arrange it directly with your firm, as you prefer. Please let us know your availability for the week of November 17, 2025.

11. Confidentiality and Privilege Reservation

Calderwood & Harkness LLP reserves all rights with respect to the attorney-client privilege and the work product doctrine in connection with this letter and all enclosed materials. Nothing in this letter or the enclosed draft treaty wordings shall be construed as a waiver of any applicable privilege.

The enclosed draft treaty wordings and all related materials are confidential and have been prepared solely for purposes of negotiation among the parties and their respective counsel and advisors in connection with the above-referenced reinsurance transactions. The drafts do not constitute binding commitments, obligations, or agreements of any party, and no party shall be bound by any term set forth in the drafts unless and until formal execution of the definitive treaty documents by all parties thereto.

We request that Harmon, Kessler & Fitch LLP treat the enclosed materials, and all information contained therein, as confidential and limit distribution to those individuals within the Pinnacle Re organization and, to the extent applicable, within the Graystone Re and Tidewater Re organizations, who have a need to know in connection with the negotiation and execution of the transactions. If any enclosed material is to be shared with third parties beyond the reinsurer panel and their respective counsel, we ask that you advise us in advance so that appropriate confidentiality protections may be put in place.

We trust that the enclosed drafts and this summary will provide a useful foundation for the next phase of the treaty negotiations. We are available to discuss any questions, comments, or concerns that you or your clients may have at any time. Given the importance of adhering to the timeline set forth above in order to achieve a January 1, 2026 inception, we would appreciate the prompt attention of Pinnacle Re and your firm to the open issues identified herein.

We look forward to working with you and with the broader placement team to bring these transactions to a successful conclusion. To the extent that Graystone Re and Tidewater Re have engaged separate counsel for purposes of the Trust Agreements or the Cat XOL Contract generally, we are happy to coordinate with such counsel directly on the relevant matters.

Please do not hesitate to reach out if you would like to discuss any aspect of the enclosed materials in advance of providing formal comments.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Angela Fontaine, Partner

By: ________

Yuki Nakamura, Associate

Calderwood & Harkness LLP 125 Broad Street, 38th Floor New York, NY 10004 Telephone: (212) 506-7000 afontaine@calderwoodharkness.com ynakamura@calderwoodharkness.com

cc: (via email)

Lionel T. Okafor, General Counsel, Quorum Insurance Holdings Corp.

Suzanne M. Driscoll, Vice President, Reinsurance & Capital Management, Quorum Insurance Holdings Corp.

Owen F. Halstead, Managing Director, Blackbridge Advisory Group LLC

Carlos Espinoza, Associate, Calderwood & Harkness LLP

Enclosures:

Enclosure 1: Amended and Restated Property Quota-Share Reinsurance Treaty (Quorum Specialty Insurance Company / Pinnacle Re Ltd.) — Clean and Redline Drafts

Enclosure 2: Catastrophe Excess-of-Loss Reinsurance Contract (Quorum Specialty Insurance Company / Pinnacle Re Ltd., Graystone Reinsurance AG, Tidewater Re S.A.) — Clean and Redline Drafts

Reinsurer	Role	Share	Limit	Annual Premium Share
Pinnacle Re Ltd.	Lead Reinsurer	50%	$17,500,000	$1,487,500
Graystone Reinsurance AG	Following Reinsurer	30%	$10,500,000	$892,500
Tidewater Re S.A.	Following Reinsurer	20%	$7,000,000	$595,000
Total Panel	100%	$35,000,000	$2,975,000
Milestone	Target Date
Distribution of first draft treaty wordings (this letter)	November 1, 2025
Pinnacle Re / Harmon, Kessler & Fitch LLP marked comments and counterparty positions on all bracketed provisions	November 15, 2025
Indicative pricing response deadline (Cat XOL panel)	November 15, 2025
Resolution of open commercial terms and finalization of treaty wordings	November 15 – November 30, 2025
Target signing date for both treaties	December 1, 2025
Execution and funding of Trust Agreements (Graystone Re and Tidewater Re)	December 15, 2025
Treaty inception / effective date	January 1, 2026

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
125 Broad Street, 38th Floor New York, NY 10004 Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com
November 1, 2025
Nathan R. Kessler, Esq., Partner Harmon, Kessler & Fitch LLP 780 Third Avenue, 30th Floor New York, NY 10017
Re: Quorum Specialty Insurance Company — (a) Amended and Restated Property Quota-Share Reinsurance Treaty with Pinnacle Re Ltd. (January 1, 2026 Renewal) and (b) Catastrophe Excess-of-Loss Reinsurance Contract with Pinnacle Re Ltd., Graystone Reinsurance AG, and Tidewater Re S.A.
Calderwood & Harkness Matter No. 1025-00004
Dear Nathan and Miriam:
1. Introduction and Purpose
As you know, Calderwood & Harkness LLP represents Quorum Insurance Holdings Corp. and its operating subsidiary, Quorum Specialty Insurance Company (NAIC No. 42917), a Connecticut-domiciled admitted carrier (collectively, "Quorum" or the "Cedent"), in connection with the above-referenced reinsurance transactions. We understand that Harmon, Kessler & Fitch LLP represents Pinnacle Re Ltd. ("Pinnacle Re" or, as applicable, the "Lead Reinsurer") in the ongoing treaty negotiations for both the property quota-share renewal and the new catastrophe excess-of-loss placement.
These transactions are being placed through Blackbridge Advisory Group LLC ("Blackbridge"), acting as reinsurance intermediary, under the direction of Owen F. Halstead, Managing Director. Mr. Halstead and his team have been instrumental in facilitating the commercial discussions to date, and we anticipate that Blackbridge will continue to serve as a point of coordination between the parties as we move toward execution.
The purpose of this letter is twofold. First, we are transmitting to you, on behalf of Quorum, the first marked drafts of two treaty wordings — namely, the amended and restated property quota-share reinsurance treaty and the catastrophe excess-of-loss reinsurance contract — each of which is enclosed herewith in both clean and redline versions. Second, we are identifying and summarizing all open commercial and legal terms that remain subject to negotiation and require counterparty positions from Pinnacle Re and, where applicable, from the following reinsurers.
These drafts are being circulated in accordance with the mutually agreed target date of November 1, 2025 for distribution of first draft treaty wordings, as confirmed during the October 10, 2025 call among counsel and the intermediary. We have endeavored to present the drafts in a format that clearly identifies all bracketed and open provisions so as to facilitate an efficient exchange of marked comments. We respectfully request that Pinnacle Re and your firm provide marked-up comments and counterparty positions on all bracketed provisions by no later than November 15, 2025, consistent with the timeline discussed more fully in Section 10 below.
2. Enclosed Documents
Enclosed with this letter, please find the following draft documents:
1. Amended and Restated Property Quota-Share Reinsurance Treaty between Quorum Specialty Insurance Company (as Cedent) and Pinnacle Re Ltd. (as Reinsurer) — marked draft with bracketed provisions, transmitted in both clean and redline versions. The redline version reflects changes from the expiring January 1, 2025 treaty form.
2. Catastrophe Excess-of-Loss Reinsurance Contract between Quorum Specialty Insurance Company (as Cedent) and Pinnacle Re Ltd. (as Lead Reinsurer), Graystone Reinsurance AG (as Following Reinsurer), and Tidewater Re S.A. (as Following Reinsurer) — marked draft with bracketed provisions, transmitted in both clean and redline versions. As this is a new placement (not a renewal), the redline version reflects changes from Calderwood & Harkness's standard catastrophe excess-of-loss form, which was used as the base document.
Both treaty wordings are governed by the laws of the State of New York and include arbitration provisions providing for three-arbitrator panel arbitration administered under the rules of ARIAS-U.S., with the seat of arbitration in New York, New York. We address the governing law and dispute resolution provisions in greater detail in Section 7 below.
We note for completeness that the enclosed drafts are being transmitted simultaneously to Blackbridge for its records and to Quorum's internal legal and reinsurance teams for ongoing review. The drafts remain subject to all reservations set forth in Section 11 of this letter.
3. Summary of Key Terms — Property Quota-Share Treaty (Renewal)
3.1 Background. The property quota-share reinsurance treaty between Quorum Specialty Insurance Company and Pinnacle Re Ltd. originally incepted on January 1, 2022, and has been renewed annually since that date. The enclosed draft reflects an amended and restated form of the treaty for the renewal treaty period commencing January 1, 2026 and ending December 31, 2026, inclusive (the "2026 Treaty Year"). The amended and restated format has been used in order to incorporate all changes negotiated for the 2026 Treaty Year into a single, comprehensive document, rather than relying on a series of endorsements and addenda to the original 2022 form.
Under the renewal draft, Pinnacle Re Ltd. continues as the sole reinsurer on the quota-share program, with a cession percentage of forty percent (40%) of Quorum Specialty's net retained property premium, unchanged from the expiring 2025 treaty year. The continuity of this cession percentage reflects the longstanding and productive relationship between the parties, as well as Quorum's satisfaction with Pinnacle Re's claims-handling performance and financial security.
For context, Quorum Specialty's 2024 gross written premium on its property book of business was approximately $312,000,000. Based on current growth projections and the planned expansion of Quorum Specialty's commercial property portfolio into additional southeastern U.S. markets, projected 2026 gross written premium is approximately $338,000,000. Applying the 40% cession percentage, the projected 2026 ceded premium under the quota-share treaty is approximately $135,200,000 (i.e., 40% of $338,000,000). These projections are, of course, estimates and are subject to revision as Quorum Specialty's underwriting plans for the 2026 treaty year are finalized.
3.2 Ceding Commission — Open / Bracketed Terms
The ceding commission is the principal commercial term on which Quorum seeks an improved position for the 2026 Treaty Year. Under the expiring 2025 treaty, the provisional ceding commission rate is thirty-two percent (32.0%) of ceded premium. For the 2026 renewal, Quorum proposes an increase to a provisional ceding commission of thirty-three and one-half percent (33.5%) of ceded premium. This proposed rate is reflected in brackets in the enclosed draft at Article V, Section 5.01(a), and requires Pinnacle Re's agreement before the brackets can be removed.
Quorum's request for an increase of 1.5 percentage points in the provisional ceding commission is supported by the favorable underwriting performance of the ceded portfolio over the prior treaty years. Specifically, Quorum's independent actuarial consultants, Meridian Actuarial Partners LLC, under the direction of Dr. Anita K. Rourke, FCAS, have confirmed that Quorum Specialty's 2024 net combined ratio on its property book was 94.7%, reflecting a loss ratio of 58.2% and an expense ratio of 36.5%. This represents a meaningful improvement from the 2023 net combined ratio of 97.1% and continues a trend of favorable loss development across all treaty years since inception. In Quorum's view, this sustained favorable performance — and the value delivered to Pinnacle Re's treaty portfolio as a result — justifies a modest upward adjustment in the ceding commission to better reflect the quality of the ceded business.
We respectfully request that Pinnacle Re provide its position on the proposed 33.5% provisional ceding commission rate. Should Pinnacle Re wish to propose an alternative rate, we would welcome a counterproposal so that the parties may work toward agreement on this term in advance of the target signing date.
3.3 Sliding-Scale Commission Parameters — Open / Bracketed Terms
The enclosed draft includes a sliding-scale commission mechanism at Article V, Section 5.01(b), pursuant to which the provisional ceding commission is subject to retrospective adjustment based on the actual loss experience of the ceded portfolio during the treaty year. The draft proposes the following sliding-scale parameters:
• Minimum ceding commission: 30.0% of ceded premium
• Maximum ceding commission: 36.0% of ceded premium
• Slide factor: 1 point of commission adjustment per 2.5 points of loss ratio movement from the anticipated loss ratio of 60.0%
These parameters are bracketed in the draft and are open for negotiation. The proposed range represents a widening of the sliding-scale band relative to the expiring treaty (which provided for a minimum of 30.5% and a maximum of 34.5%), which Quorum believes is appropriate in light of the higher proposed provisional rate and the increased premium volume projected for 2026.
We request that Pinnacle Re review the proposed sliding-scale parameters and provide any counterproposal with respect to the minimum and maximum commission rates, the slide factor, and the anticipated loss ratio. If Pinnacle Re has a preferred sliding-scale structure or methodology, we are open to considering alternative approaches, provided they achieve a commercially balanced result.
3.4 Loss Corridor
The enclosed draft carries forward from the expiring treaty a loss corridor provision at Article VI, Section 6.03, under which Quorum Specialty retains one hundred percent (100%) of losses falling within the 75% to 80% loss ratio band (the "Loss Corridor"). The Loss Corridor operates as a risk-retention feature that limits Pinnacle Re's exposure to an adverse swing in the loss ratio within this specified band, with Quorum resuming its normal quota-share cession for losses above the 80% loss ratio threshold.
This provision has been included in the quota-share treaty since its inception and has not been triggered during any prior treaty year. We have carried it forward in the draft without brackets, but we flag it here as a term that Pinnacle Re may wish to revisit in the context of the overall renewal negotiation. We request confirmation that Pinnacle Re finds the loss corridor retention band of 75% to 80% acceptable for the 2026 Treaty Year, or alternatively, that Pinnacle Re advise whether it proposes any modification to this provision.
3.5 Funds Withheld
The enclosed draft provides for a funds withheld arrangement at Article VII, Section 7.01, under which Quorum Specialty retains twenty-five percent (25%) of ceded premium in a funds withheld account. The investment crediting rate applied to the funds withheld balance is the three-month Secured Overnight Financing Rate ("SOFR") plus seventy-five (75) basis points, calculated and credited quarterly.
These terms are unchanged from the expiring treaty and are not bracketed in the enclosed draft. We include them here for completeness and request that Pinnacle Re confirm that the funds withheld percentage and investment crediting rate remain acceptable.
3.6 Per-Risk Retention and Per-Occurrence Limit
The draft maintains the following per-risk and per-occurrence parameters at Article III, Section 3.02:
• Per-risk retention (net of quota-share): $2,500,000 any one risk
• Maximum per-occurrence limit to the treaty: $25,000,000 (of which Pinnacle Re's 40% share equals $10,000,000)
These terms are unchanged from the expiring treaty and are not bracketed. We note them here for reference and request confirmation.
3.7 Commutation Trigger
The enclosed draft retains the commutation provision at Article XII, Section 12.01, which provides for an optional commutation of the treaty by either party upon the occurrence of a commutation trigger, defined as a cash loss ratio of eighty-five percent (85%) or greater on an inception-to-date basis. This provision has been carried forward from the expiring treaty without modification.
We request confirmation that the 85% cash loss ratio commutation trigger remains acceptable to Pinnacle Re for the 2026 Treaty Year, or that Pinnacle Re advise of any proposed changes to the commutation mechanics.
3.8 Bordereau and Reporting
The enclosed draft provides for quarterly bordereau reporting at Article IX, Section 9.01. Quorum Specialty will deliver to Pinnacle Re (with copies to the intermediary) a detailed quarterly bordereau of all ceded premiums, losses, and loss adjustment expenses, together with supporting schedules. The first quarterly bordereau for the 2026 Treaty Year is due on or before March 31, 2026, covering the period from January 1, 2026 through March 31, 2026.
The bordereau format and content requirements remain substantively unchanged from the expiring treaty.
3.9 Intermediary / Brokerage
As noted above, Blackbridge Advisory Group LLC (New York Department of Financial Services Reinsurance Intermediary License No. RI-00483) serves as the intermediary for the quota-share treaty. The brokerage commission payable to Blackbridge is one and one-quarter percent (1.25%) of ceded premium on the quota-share treaty, consistent with the terms of the intermediary engagement and reflected at Article XIV, Section 14.01 of the enclosed draft.
The draft includes a standard intermediary clause providing for the payment of balances through the intermediary and the application of the intermediary's errors and omissions coverage. This provision is not bracketed and is not proposed for modification.
4. Summary of Key Terms — Catastrophe Excess-of-Loss Reinsurance Contract (New Layer)
4.1 Layer Structure
The catastrophe excess-of-loss reinsurance contract (the "Cat XOL Contract") is a new placement for the January 1, 2026 treaty period. The layer structure is as follows:
• Layer limit: $35,000,000 per occurrence
• Attachment point: $15,000,000 per occurrence, net after quota-share recoveries under the property quota-share treaty described in Section 3 above
• Exhaustion point: $50,000,000 (i.e., $15,000,000 attachment plus $35,000,000 limit)
• Treaty period: January 1, 2026 through December 31, 2026, inclusive
The attachment point of $15,000,000 has been calibrated by reference to Quorum Specialty's catastrophe retention appetite and the output of the catastrophe modeling analysis described in Section 8 below. Quorum's position is that this layer structure provides meaningful coverage for medium-to-large catastrophe events while preserving a manageable net retention.
4.2 Reinsurer Panel and Participation Schedule
The Cat XOL Contract is structured as a multi-party treaty with a three-reinsurer panel. Pinnacle Re Ltd. serves as Lead Reinsurer, and Graystone Reinsurance AG and Tidewater Re S.A. serve as Following Reinsurers. The participation schedule, as reflected at Article II, Section 2.01 of the enclosed draft, is as follows:
The participation percentages and premium shares set forth above are based on the indicated rate-on-line discussed in Section 4.3 and are subject to adjustment if the final agreed rate-on-line differs from the indicated rate.
4.3 Pricing Terms — Open / Subject to Indicative Pricing Response
The enclosed draft reflects the following pricing terms, all of which are bracketed pending confirmation from the reinsurer panel:
• Rate-on-line: 8.50% (indicated/proposed)
• Annual layer premium: $2,975,000 (calculated as $35,000,000 × 8.50%)
• Minimum premium: $2,380,000 (80% of the indicated annual layer premium)
• Quarterly deposit premium: $743,750 (calculated as $2,975,000 ÷ 4), with the first quarterly deposit due on or before March 31, 2026
The 8.50% rate-on-line represents Quorum's view of fair value for the layer, informed by the catastrophe modeling analysis described in Section 8 and by market intelligence gathered by Blackbridge during the preliminary marketing process. However, we recognize that the rate-on-line and related pricing terms are subject to confirmation from the reinsurer panel. The November 15, 2025 indicative pricing response deadline has been communicated to all panel members through Blackbridge, and we request that Pinnacle Re, as Lead Reinsurer, provide its indicative pricing response on or before that date. We further request that Pinnacle Re coordinate with Graystone Re and Tidewater Re to facilitate a consolidated pricing response from the full panel to the extent practicable.
4.4 Reinstatement. The enclosed draft provides for one (1) reinstatement at one hundred percent (100%) additional premium, calculated pro rata as to time for the remainder of the treaty period following the date of the loss occurrence giving rise to the reinstatement. The reinstatement provision is set forth at Article IV, Section 4.02 of the draft.
Accordingly, the maximum aggregate exposure under the Cat XOL layer, inclusive of the original limit and one full reinstatement, is $70,000,000 (i.e., $35,000,000 × 2). This aggregate cap is an important feature of the contract from Quorum's perspective, as it establishes the outer boundary of the panel's exposure in a multi-event scenario.
4.5 Hours Clause — Open / Bracketed
The enclosed draft proposes a 168 consecutive hours clause at Article I, Section 1.09, for the definition of a covered catastrophe occurrence. Under this provision, all individual losses arising from a single catastrophe event that occur within a period of one hundred sixty-eight (168) consecutive hours shall be aggregated and treated as a single occurrence for purposes of the attachment point, layer limit, and reinstatement provisions.
This term is bracketed in the draft and is open for negotiation. Quorum's position is that 168 hours (i.e., seven consecutive days) is consistent with the prevailing market standard for North American property catastrophe excess-of-loss reinsurance programs and is the hours period most commonly used in the programs of Quorum's peer carriers, as surveyed by Blackbridge in its October 2025 market study. We respectfully request that Pinnacle Re and the following reinsurers provide their respective positions on the proposed 168-hour period. If any panel member proposes an alternative hours clause duration (e.g., 96 hours, 120 hours, or 336 hours for earthquake), we ask that such proposal be accompanied by a rationale so that the parties may discuss the issue on an informed basis.
4.6 Territory. The territorial scope of the Cat XOL Contract is the continental United States, Alaska, Hawaii, the Commonwealth of Puerto Rico, and the United States Virgin Islands, as set forth at Article I, Section 1.05 of the enclosed draft.
4.7 Perils Covered
The Cat XOL Contract covers all natural perils, including but not limited to named storm and hurricane, earthquake, flood (including storm surge), wildfire, and severe convective storm (including tornado, hail, and straight-line wind). The perils are defined at Article I, Section 1.06 of the enclosed draft. Exclusions applicable to the contract are discussed separately in Section 5 below.
4.8 Intermediary / Brokerage
Blackbridge Advisory Group LLC serves as the intermediary for the Cat XOL Contract, consistent with its role on the quota-share treaty. The brokerage commission payable to Blackbridge on the Cat XOL Contract is five percent (5%) of layer premium, which, based on the indicated annual layer premium of $2,975,000, yields a brokerage commission of $148,750. The intermediary clause and brokerage terms are set forth at Article XIV of the enclosed draft and are not bracketed.
5. Exclusion Clauses — Open Issues and Proposed Modifications
The enclosed drafts of both the quota-share treaty and the Cat XOL Contract include a suite of market-standard exclusion clauses. While many of these exclusions are carried forward in their standard form and are not expected to require significant negotiation, we wish to draw your attention to several exclusions that are either modified from their standard form or that we believe warrant express confirmation from the reinsurer panel.
5.1 Nuclear Exclusion
Both treaty drafts include the NMA 1975a (Nuclear Exclusion Clause — Reinsurance) in its standard form, as set forth at the applicable exclusion schedule in each draft. This is a widely accepted market-standard exclusion, and Quorum has not proposed any modifications. The provision is not bracketed.
We request confirmation from Pinnacle Re that the NMA 1975a is acceptable in its standard form as included in the drafts.
5.2 Communicable Disease Exclusion
Both treaty drafts include the NMA 2962 (Communicable Disease Exclusion) in its standard form. This exclusion was first introduced into Quorum's reinsurance program during the 2021 renewal cycle and has been included in each subsequent treaty year without modification. The provision is not bracketed.
We request confirmation from Pinnacle Re that the NMA 2962 is acceptable in its standard form as included in the drafts.
5.3 Terrorism Exclusion — Modified / Open
Both treaty drafts include a terrorism exclusion based on LMA 3030 (Terrorism Exclusion), as modified by Quorum to exclude losses arising from acts certified under the Terrorism Risk Insurance Act of 2002, as amended and reauthorized ("TRIA"). The modified language is set forth at the exclusion schedule in each draft and is bracketed, indicating that this provision is open for negotiation.
Quorum's position on the scope of the terrorism exclusion is as follows: Quorum Specialty has elected to participate in the federal TRIA program for the 2026 calendar year, and its applicable policyholders have been offered and, in many cases, have purchased TRIA coverage as required under the statute. In Quorum's view, it is both commercially appropriate and consistent with standard cedent practice to exclude from the reinsurance treaty losses arising from TRIA-certified acts of terrorism, on the basis that such losses are subject to the federal backstop and the related mandatory and insurer deductible provisions of the TRIA program. Including TRIA-certified terrorism losses within the scope of the reinsurance treaty would create a potential for double recovery and would complicate the allocation of recoveries between the federal program and the reinsurance program.
We request that Pinnacle Re provide its position on the scope of the terrorism exclusion and, in particular, on the proposed exclusion of TRIA-certified acts. If Pinnacle Re or any following reinsurer proposes alternative terrorism exclusion language, we ask that such alternative language be provided in the form of a marked draft so that the parties may efficiently compare the proposed approaches.
5.4 Cyber Exclusion — Modified / Open
The Cat XOL Contract draft includes a cyber exclusion based on LMA 5400 (Cyber War and Cyber Operation Exclusion), as modified per Quorum's manuscript language. The modified version of LMA 5400 is set forth at Exclusion Schedule D to the Cat XOL Contract and is bracketed, indicating that this provision is expected to be one of the most closely negotiated terms in the contract.
The key modification proposed by Quorum is the inclusion of carve-backs for physical-damage cyber incidents — that is, scenarios in which a cyber event (such as a malicious code intrusion, ransomware attack, or state-sponsored cyber operation) results in tangible physical damage to insured property. By way of example, Quorum's proposed carve-back would preserve coverage under the Cat XOL Contract for a loss arising from a fire or explosion at an insured facility where the fire or explosion was proximately caused by the introduction of malicious code into the facility's industrial control systems. In Quorum's view, such losses are fundamentally property losses and should be treated as such under a property catastrophe reinsurance treaty, notwithstanding the involvement of a cyber element in the chain of causation.
Quorum recognizes that the scope of the cyber exclusion and the availability and breadth of physical-damage carve-backs are subjects of active discussion across the property reinsurance market and that reinsurer positions on these issues continue to evolve. Quorum's position is that a property catastrophe reinsurance treaty should not exclude losses arising from physical perils merely because the proximate cause includes a cyber element, and that a well-drafted physical-damage carve-back appropriately balances the cedent's need for certainty of coverage with the reinsurer's legitimate interest in excluding affirmative, non-physical cyber risks.
We respectfully request that Pinnacle Re and the following reinsurers provide their marked comments on the proposed modifications to LMA 5400, including any alternative language or narrowing of the carve-back that the reinsurers may wish to propose. We anticipate that this provision will benefit from a focused discussion among counsel and the respective underwriting teams, and we are prepared to arrange such a discussion at a mutually convenient time following receipt of the reinsurers' comments.
6. Collateral and Trust Requirements — Graystone Re and Tidewater Re
6.1 Regulatory Framework
The Cat XOL Contract includes two following reinsurers — Graystone Reinsurance AG and Tidewater Re S.A. — that are non-U.S. domiciled reinsurers not certified by the New York Department of Financial Services ("NYDFS") as certified reinsurers under 11 NYCRR 125. Graystone Reinsurance AG is a Swiss Aktiengesellschaft regulated by the Swiss Financial Market Supervisory Authority ("FINMA"). Tidewater Re S.A. is a Luxembourg société anonyme. As neither Graystone Re nor Tidewater Re holds certified reinsurer status in New York, Quorum Specialty is required under Section 1308 of the New York Insurance Law and Regulation 125 (11 NYCRR 125) to obtain collateral security from each such reinsurer in order to take full balance sheet credit for the reinsurance recoverable.
By contrast, Pinnacle Re Ltd. is a certified reinsurer under 11 NYCRR 125, holding NYDFS Certified Reinsurer ID CR-2019-0217, with a $0 collateral requirement. Accordingly, no collateral is required from Pinnacle Re in connection with either the quota-share treaty or the Cat XOL Contract.
6.2 Multi-Beneficiary Reinsurance Trust Agreements
In order to satisfy the collateral requirements described above, separate multi-beneficiary reinsurance trust agreements are being prepared for execution by each of Graystone Re and Tidewater Re (collectively, the "Trust Agreements"). The Trust Agreements will be governed by New York law and will conform to the requirements of NY Insurance Law § 1308 and 11 NYCRR 125.
The trustee for each Trust Agreement will be Fidelitas Trust Company of New York, located at 60 Wall Street, 12th Floor, New York, NY 10005. Fidelitas Trust Company has served as trustee for Quorum Specialty's reinsurance trust arrangements since 2019 and is familiar with the regulatory requirements applicable to reinsurance trusts under New York law.
The beneficiary of each Trust Agreement will be Quorum Specialty Insurance Company.
6.3 Trust Funding Requirements — Open / Bracketed
The trust funding requirements for each following reinsurer have been calculated based on the regulatory collateral factor and each reinsurer's pro-rata share of the maximum aggregate exposure under the Cat XOL layer (i.e., the original limit plus one reinstatement). The proposed trust funding amounts are as follows:
Graystone Reinsurance AG:
• Pro-rata share of maximum aggregate exposure: $10,500,000 limit × 2 (original plus one reinstatement) = $21,000,000
• Collateral factor: 102%
• Required trust funding: $21,000,000 × 1.02 = $21,420,000
Tidewater Re S.A.:
• Pro-rata share of maximum aggregate exposure: $7,000,000 limit × 2 (original plus one reinstatement) = $14,000,000
• Collateral factor: 102%
• Required trust funding: $14,000,000 × 1.02 = $14,280,000
The Trust Agreements are expected to be executed by December 15, 2025, and the trusts must be funded in full prior to the January 1, 2026 treaty inception date in order for Quorum Specialty to take credit for the reinsurance as of the inception date on its year-end 2025 statutory financial statements.
We note that the trust funding amounts and the 102% collateral factor set forth above are bracketed in the Cat XOL Contract draft pending confirmation from Graystone Re (we understand the responsible contact to be Jan-Erik Lindgren) and Tidewater Re (we understand the responsible contact to be François-Xavier Delacroix). We request that Pinnacle Re, in its capacity as Lead Reinsurer, coordinate with the following reinsurers to confirm that the proposed trust funding amounts and collateral factor are acceptable, or to advise Quorum if any following reinsurer proposes a different collateral structure or factor.
Alternatively, if Graystone Re and/or Tidewater Re have engaged separate outside counsel to negotiate the Trust Agreements, we would appreciate it if Harmon, Kessler & Fitch LLP would advise us of the identity of such counsel so that Calderwood & Harkness may coordinate directly on trust-related matters. In the absence of separate counsel for the following reinsurers, we will plan to transmit the draft Trust Agreements to your firm for distribution to the following reinsurers through the Lead Reinsurer.
7. Dispute Resolution
Both the quota-share treaty draft and the Cat XOL Contract draft include dispute resolution provisions providing for binding arbitration before a three-arbitrator panel, administered under the rules of ARIAS-U.S. (the AIDA Reinsurance and Insurance Arbitration Society — U.S.), with the seat of arbitration in New York, New York. Each party is entitled to appoint one arbitrator, and the two party-appointed arbitrators shall select the third arbitrator, who shall serve as the umpire. All arbitrators and the umpire must be current or former officers of insurance or reinsurance companies, as required by the ARIAS-U.S. rules.
The governing law for both treaties is the law of the State of New York, without regard to its conflict-of-laws principles.
These provisions are not bracketed in either draft and are proposed to remain as presented. We request Pinnacle Re's confirmation that the ARIAS-U.S. arbitration provisions and New York governing law are acceptable.
8. Actuarial and Modeling Support
In connection with the renewal of the quota-share treaty and the new Cat XOL placement, Quorum has engaged Meridian Actuarial Partners LLC, under the direction of Dr. Anita K. Rourke, FCAS, MAAA, to perform loss development analysis and catastrophe model review in support of the transactions. The actuarial analysis encompasses both the historical loss experience underlying the quota-share treaty and the probabilistic catastrophe exposure analysis underlying the Cat XOL layer placement.
The catastrophe model used for the Cat XOL analysis is Tempest Analytics CatView version 11.2, which incorporates updated event catalogs, vulnerability functions, and financial models for all covered perils and territories. The key output of the modeling exercise is summarized as follows:
• 250-year modeled probable maximum loss ("PML") (net of quota-share recoveries): $52,000,000
• The $35,000,000 excess of $15,000,000 Cat XOL layer covers through approximately the 1-in-50-year return period on Quorum Specialty's modeled loss exceedance curve
• The Cat XOL layer premium of $2,975,000, expressed as a percentage of Quorum Specialty's 2024 year-end policyholder surplus of $478,000,000, is approximately 7.3% of surplus
These metrics support Quorum's view that the proposed Cat XOL layer structure and pricing represent a reasonable allocation of catastrophe risk and a prudent use of reinsurance capacity relative to Quorum Specialty's capital position and risk appetite.
We note that detailed actuarial exhibits and catastrophe model output summaries — including modeled loss exceedance curves, event loss tables, and gross-to-net reconciliation schedules — can be made available to Pinnacle Re and the following reinsurers upon request, subject to execution of an appropriate confidentiality agreement or acknowledgment. If Pinnacle Re or any following reinsurer would like to receive these materials, please advise us and we will coordinate their delivery through Blackbridge or directly, as appropriate.
9. Summary of Bracketed and Open Provisions
For convenience, we set forth below a consolidated summary of all bracketed and open terms in the enclosed drafts requiring counterparty positions from Pinnacle Re and, where applicable, from the following reinsurers:
1. Quota-Share Provisional Ceding Commission: 33.5% of ceded premium proposed (vs. 32.0% under the expiring treaty) — Article V, Section 5.01(a) of the Quota-Share Treaty
2. Quota-Share Sliding-Scale Commission Range: Minimum 30.0%, maximum 36.0%, with a slide factor of 1 point of commission adjustment per 2.5 points of loss ratio movement — Article V, Section 5.01(b) of the Quota-Share Treaty
3. Quota-Share Loss Corridor: Quorum retains 100% of losses in the 75%–80% loss ratio band; flagged for confirmation — Article VI, Section 6.03 of the Quota-Share Treaty
4. Cat XOL Rate-on-Line: 8.50% indicated, yielding $2,975,000 annual layer premium — Article III, Section 3.01 of the Cat XOL Contract
5. Cat XOL Hours Clause: 168 consecutive hours for catastrophe occurrence definition — Article I, Section 1.09 of the Cat XOL Contract
6. Cat XOL Cyber Exclusion: LMA 5400 modified per Quorum manuscript with physical-damage carve-backs — Exclusion Schedule D to the Cat XOL Contract
7. Cat XOL Terrorism Exclusion: LMA 3030 modified to exclude TRIA-certified acts of terrorism — Exclusion Schedule C to the Cat XOL Contract (also applicable to Quota-Share Treaty)
8. Trust Funding Amounts and Collateral Factor: Graystone Re trust funding of $21,420,000 and Tidewater Re trust funding of $14,280,000, based on a 102% collateral factor applied to each following reinsurer's pro-rata share of maximum aggregate exposure — Article XI, Section 11.02 of the Cat XOL Contract; Trust Agreements (drafts to follow)
We request that Pinnacle Re and your firm provide marked comments and counterparty positions on each of the above items by the November 15, 2025 deadline discussed below.
10. Requested Timeline and Next Steps
In light of the January 1, 2026 inception date for both transactions, we respectfully request that the parties adhere to the following timeline:
We recognize that this timeline is ambitious, and we are committed to working cooperatively and efficiently with your firm and with Blackbridge to resolve the open issues within the available timeframe. To that end, we suggest scheduling a call or in-person meeting among counsel and the principals to discuss the open issues promptly following receipt of Pinnacle Re's comments. We are happy to coordinate such a meeting through Blackbridge (Owen F. Halstead) or to arrange it directly with your firm, as you prefer. Please let us know your availability for the week of November 17, 2025.
11. Confidentiality and Privilege Reservation
Calderwood & Harkness LLP reserves all rights with respect to the attorney-client privilege and the work product doctrine in connection with this letter and all enclosed materials. Nothing in this letter or the enclosed draft treaty wordings shall be construed as a waiver of any applicable privilege.
The enclosed draft treaty wordings and all related materials are confidential and have been prepared solely for purposes of negotiation among the parties and their respective counsel and advisors in connection with the above-referenced reinsurance transactions. The drafts do not constitute binding commitments, obligations, or agreements of any party, and no party shall be bound by any term set forth in the drafts unless and until formal execution of the definitive treaty documents by all parties thereto.
We request that Harmon, Kessler & Fitch LLP treat the enclosed materials, and all information contained therein, as confidential and limit distribution to those individuals within the Pinnacle Re organization and, to the extent applicable, within the Graystone Re and Tidewater Re organizations, who have a need to know in connection with the negotiation and execution of the transactions. If any enclosed material is to be shared with third parties beyond the reinsurer panel and their respective counsel, we ask that you advise us in advance so that appropriate confidentiality protections may be put in place.
We trust that the enclosed drafts and this summary will provide a useful foundation for the next phase of the treaty negotiations. We are available to discuss any questions, comments, or concerns that you or your clients may have at any time. Given the importance of adhering to the timeline set forth above in order to achieve a January 1, 2026 inception, we would appreciate the prompt attention of Pinnacle Re and your firm to the open issues identified herein.
We look forward to working with you and with the broader placement team to bring these transactions to a successful conclusion. To the extent that Graystone Re and Tidewater Re have engaged separate counsel for purposes of the Trust Agreements or the Cat XOL Contract generally, we are happy to coordinate with such counsel directly on the relevant matters.
Please do not hesitate to reach out if you would like to discuss any aspect of the enclosed materials in advance of providing formal comments.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Angela Fontaine, Partner
By: ________
Yuki Nakamura, Associate
Calderwood & Harkness LLP 125 Broad Street, 38th Floor New York, NY 10004 Telephone: (212) 506-7000 afontaine@calderwoodharkness.com ynakamura@calderwoodharkness.com
cc: (via email)
Lionel T. Okafor, General Counsel, Quorum Insurance Holdings Corp.
Suzanne M. Driscoll, Vice President, Reinsurance & Capital Management, Quorum Insurance Holdings Corp.
Owen F. Halstead, Managing Director, Blackbridge Advisory Group LLC
Carlos Espinoza, Associate, Calderwood & Harkness LLP
Enclosures:
Enclosure 1: Amended and Restated Property Quota-Share Reinsurance Treaty (Quorum Specialty Insurance Company / Pinnacle Re Ltd.) — Clean and Redline Drafts
Enclosure 2: Catastrophe Excess-of-Loss Reinsurance Contract (Quorum Specialty Insurance Company / Pinnacle Re Ltd., Graystone Reinsurance AG, Tidewater Re S.A.) — Clean and Redline Drafts
Reinsurer | Role | Share | Limit | Annual Premium Share
Pinnacle Re Ltd. | Lead Reinsurer | 50% | $17,500,000 | $1,487,500
Graystone Reinsurance AG | Following Reinsurer | 30% | $10,500,000 | $892,500
Tidewater Re S.A. | Following Reinsurer | 20% | $7,000,000 | $595,000
Total Panel | 100% | $35,000,000 | $2,975,000
Milestone | Target Date
Distribution of first draft treaty wordings (this letter) | November 1, 2025
Pinnacle Re / Harmon, Kessler & Fitch LLP marked comments and counterparty positions on all bracketed provisions | November 15, 2025
Indicative pricing response deadline (Cat XOL panel) | November 15, 2025
Resolution of open commercial terms and finalization of treaty wordings | November 15 – November 30, 2025
Target signing date for both treaties | December 1, 2025
Execution and funding of Trust Agreements (Graystone Re and Tidewater Re) | December 15, 2025
Treaty inception / effective date | January 1, 2026

CONFIDENTIAL

CALDERWOOD & HARKNESS LLP

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