REINSURANCE TRUST AGREEMENT
DRAFT — FOR DISCUSSION PURPOSES ONLY
by and among
GRAYSTONE REINSURANCE AG (as Grantor)
QUORUM SPECIALTY INSURANCE COMPANY (as Beneficiary)
and
FIDELITAS TRUST COMPANY OF NEW YORK (as Trustee)
Dated as of [●], 2025
Target Execution: December 15, 2025
In connection with the Catastrophe Excess-of-Loss Reinsurance Contract dated on or about December 1, 2025
Calderwood & Harkness LLP — Matter No. 1025-00004
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REINSURANCE TRUST AGREEMENT
This REINSURANCE TRUST AGREEMENT (this "Agreement") is made and entered into as of [●], 2025 (the "Execution Date"), by and among:
(1) GRAYSTONE REINSURANCE AG, a corporation (Aktiengesellschaft) organized under the laws of Switzerland, with its registered office at Bahnhofstrasse 72, 8001 Zürich, Switzerland (the "Grantor");
(2) QUORUM SPECIALTY INSURANCE COMPANY, a Connecticut-domiciled admitted insurer (NAIC No. 42917), with its principal office at 400 Constitution Plaza, Suite 2200, Hartford, CT 06103 (the "Beneficiary"); and
(3) FIDELITAS TRUST COMPANY OF NEW YORK, a trust company duly chartered under the laws of the State of New York, with its principal office at 60 Wall Street, 12th Floor, New York, NY 10005 (the "Trustee").
Each of the Grantor, the Beneficiary, and the Trustee is referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The Reinsurance Agreement. Quorum Specialty Insurance Company ("QSIC"), a Connecticut-domiciled admitted insurer duly licensed and in good standing with the Connecticut Insurance Department and assigned NAIC No. 42917, has entered into that certain Catastrophe Excess-of-Loss Reinsurance Contract (the "Reinsurance Agreement") with a panel of reinsurers consisting of Pinnacle Re Ltd. (50% participation), Graystone Reinsurance AG (30% participation), and Tidewater Re S.A. (20% participation), dated on or about December 1, 2025 and effective January 1, 2026 through December 31, 2026 (the "Treaty Period"). The Reinsurance Agreement provides catastrophe excess-of-loss coverage with a per-occurrence limit of Thirty-Five Million Dollars ($35,000,000) in excess of a per-occurrence retention of Fifteen Million Dollars ($15,000,000), net of quota-share recoveries, resulting in an exhaustion point of Fifty Million Dollars ($50,000,000). Graystone Reinsurance AG participates in thirty percent (30%) of the foregoing layer, representing a per-occurrence limit of Ten Million Five Hundred Thousand Dollars ($10,500,000) and a premium share of Eight Hundred Ninety-Two Thousand Five Hundred Dollars ($892,500). The Reinsurance Agreement provides for one (1) reinstatement at one hundred percent (100%) additional premium, pro rata as to time.
B. Graystone Reinsurance AG. Graystone Reinsurance AG ("Graystone Re") is a Swiss corporation (Aktiengesellschaft) organized and existing under the laws of Switzerland, regulated by the Swiss Financial Market Supervisory Authority (FINMA), with its registered office located at Bahnhofstrasse 72, 8001 Zürich, Switzerland. Graystone Re currently holds a financial strength rating of A (Excellent), outlook Stable, as rated by Brindoval Rating Services. Graystone Re is not licensed, accredited, or certified as a reinsurer in the State of New York and is not a Certified Reinsurer under Part 125 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York (11 NYCRR 125). Accordingly, Graystone Re is required to post collateral in order for QSIC to receive credit for reinsurance ceded to Graystone Re on QSIC's statutory financial statements.
C. Regulatory Requirement. Section 1308 of the New York Insurance Law and the regulations promulgated thereunder at 11 NYCRR 125 require that an assuming insurer that is not licensed, accredited, or certified in the State of New York must establish and maintain a trust fund for the benefit of its United States ceding insurers in order for such ceding insurers to obtain statutory credit for reinsurance. This Agreement is being established as a multi-beneficiary reinsurance trust to comply with such statutory and regulatory requirements. The Parties acknowledge that Pinnacle Re Ltd., another participant in the Reinsurance Agreement, is a Certified Reinsurer under 11 NYCRR 125 (NYDFS Certified Reinsurer ID CR-2019-0217) with a zero-dollar ($0) collateral requirement and is therefore exempt from the trust requirement applicable to Graystone Re.
D. The Trustee. Fidelitas Trust Company of New York ("Fidelitas Trust") is a trust company duly chartered and authorized under the banking laws of the State of New York, with its principal office located at 60 Wall Street, 12th Floor, New York, NY 10005. Fidelitas Trust has agreed to serve as trustee under this Agreement and to hold, invest, and disburse the trust assets in accordance with the terms and conditions set forth herein and in compliance with all applicable laws and regulations of the State of New York.
E. Purpose. The Parties desire to establish the trust contemplated hereby for the purpose of securing Graystone Re's obligations under the Reinsurance Agreement in favor of QSIC as beneficiary. The Reinsurance Agreement provides for one (1) reinstatement at one hundred percent (100%) additional premium, pro rata as to time, resulting in a maximum aggregate exposure for Graystone Re's thirty percent (30%) share of Twenty-One Million Dollars ($21,000,000) (being $10,500,000 per-occurrence limit multiplied by two (2) occurrence exposures). The required trust funding, calculated at one hundred two percent (102%) of the maximum aggregate exposure in accordance with 11 NYCRR 125, is Twenty-One Million Four Hundred Twenty Thousand Dollars ($21,420,000).
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Reinsurance Trust Agreement, as it may be amended, supplemented, or modified from time to time in accordance with Section 13.4 hereof.
"Beneficiary" means Quorum Specialty Insurance Company, a Connecticut-domiciled admitted insurer, assigned NAIC No. 42917, with its principal office located at 400 Constitution Plaza, Suite 2200, Hartford, CT 06103, and its successors and permitted assigns.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in the City of New York, State of New York, are authorized or required by law or regulation to close.
"Certified Reinsurer" has the meaning ascribed to such term in 11 NYCRR 125, as amended from time to time.
"Brindoval Rating Services" means Brindoval Rating Services, Inc., a nationally recognized statistical rating organization, or any successor thereto.
"Execution Date" has the meaning set forth in the preamble to this Agreement.
"FINMA" means the Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht), or any successor regulatory body.
"Grantor" means Graystone Reinsurance AG, a Swiss corporation (Aktiengesellschaft), with its registered office at Bahnhofstrasse 72, 8001 Zürich, Switzerland, and its successors and permitted assigns.
"Maximum Aggregate Exposure" means Twenty-One Million Dollars ($21,000,000), being Graystone Re's thirty percent (30%) pro-rata share of the maximum aggregate exposure under the Reinsurance Agreement, calculated as the per-occurrence layer limit of Thirty-Five Million Dollars ($35,000,000), multiplied by two (2) (reflecting the original occurrence exposure plus one (1) reinstatement), multiplied by thirty percent (30%) (being Graystone Re's participation share), i.e., $35,000,000 × 2 × 30% = $21,000,000.
"Minimum Trust Balance" means Twenty-One Million Four Hundred Twenty Thousand Dollars ($21,420,000), being one hundred two percent (102%) of the Maximum Aggregate Exposure, as calculated in Schedule B hereto, subject to adjustment pursuant to the terms of this Agreement.
"NAIC" means the National Association of Insurance Commissioners.
"NYDFS" means the New York Department of Financial Services, or any successor regulatory body.
"Permitted Investments" has the meaning set forth in Section 5.2 of this Agreement.
"Reinsurance Agreement" means the Catastrophe Excess-of-Loss Reinsurance Contract, dated on or about December 1, 2025, by and between Quorum Specialty Insurance Company (as cedent) and the reinsurer panel consisting of Pinnacle Re Ltd. (50% participation), Graystone Reinsurance AG (30% participation), and Tidewater Re S.A. (20% participation), effective January 1, 2026 through December 31, 2026, including all endorsements, amendments, and addenda thereto.
"Required Funding Date" means December 15, 2025, being not later than seventeen (17) days prior to the effective date of the Reinsurance Agreement (January 1, 2026).
"Trust Account" means the segregated trust account established and maintained by the Trustee pursuant to Section 2.2 of this Agreement.
"Trust Assets" means all cash, securities, and other assets of any kind deposited in, credited to, or held in the Trust Account from time to time, together with all income, dividends, interest, distributions, proceeds, and accretions thereon or thereof.
"Trustee" means Fidelitas Trust Company of New York, a trust company duly chartered under the laws of the State of New York, with its principal office at 60 Wall Street, 12th Floor, New York, NY 10005, and any successor trustee appointed in accordance with Article VIII of this Agreement.
"Treaty Period" means the period commencing on January 1, 2026 and ending on December 31, 2026, inclusive.
Section 1.2 — Rules of Construction
(a) References herein to any statute, law, regulation, or rule shall be deemed to include all amendments, modifications, re-enactments, and successor provisions thereto, unless otherwise expressly provided.
(b) The headings and captions contained in this Agreement are for reference and convenience purposes only and shall not affect the interpretation or construction of any provision hereof.
(c) Whenever used in this Agreement, the singular number shall include the plural, the plural number shall include the singular, and the use of any gender shall include all genders, as the context may require.
(d) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(e) All references to "dollars" or "$" shall mean lawful money of the United States of America.
(f) References to "Sections," "Articles," "Schedules," and "Exhibits" are to sections, articles, schedules, and exhibits of and to this Agreement, unless otherwise specified.
(g) The laws of the State of New York shall govern the interpretation and construction of all defined terms used herein.
(h) In the event of any inconsistency between the body of this Agreement and any Schedule or Exhibit hereto, the body of this Agreement shall control, except to the extent that a Schedule or Exhibit expressly states that it supplements or modifies a specific provision of the body of this Agreement.
ARTICLE II — ESTABLISHMENT OF THE TRUST
Section 2.1 — Creation of Trust
The Grantor hereby establishes an irrevocable trust (the "Trust") for the sole benefit of the Beneficiary. The Trust is established as a multi-beneficiary reinsurance trust pursuant to Section 1308 of the New York Insurance Law and Part 125 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York (11 NYCRR 125). The Trustee hereby accepts the Trust and agrees to hold, invest, and disburse the Trust Assets in accordance with the terms and conditions of this Agreement. The Trust shall be maintained at the offices of the Trustee in the City of New York, State of New York, at all times during the term of this Agreement.
Section 2.2 — Trust Account
The Trustee shall establish and maintain a segregated trust account titled "Graystone Reinsurance AG — Reinsurance Trust Account FBO Quorum Specialty Insurance Company" (the "Trust Account"). The Trust Account shall be and shall at all times remain separate and distinct from all other accounts, assets, and funds of the Trustee, the Grantor, and any other person or entity. The Trustee shall not commingle Trust Assets with any other assets held by the Trustee in any capacity. The Trustee shall maintain the Trust Account in the name of the Trust at a custodial bank or depository institution located in the State of New York.
Section 2.3 — Irrevocability
The Trust established hereunder is irrevocable during the term of the Reinsurance Agreement and during any run-off or development period following the expiration or termination of the Reinsurance Agreement, until all of the Grantor's obligations thereunder have been fully discharged, commuted, or novated. The Grantor shall not have the right or power to revoke, amend, alter, or terminate the Trust, in whole or in part, without the prior written consent of the Beneficiary and full compliance with all applicable regulatory requirements, including those imposed by NY Insurance Law § 1308 and 11 NYCRR 125. Any purported revocation, amendment, or termination of the Trust in violation of this Section 2.3 shall be void and of no force or effect.
Section 2.4 — Initial Funding
On or before the Required Funding Date (December 15, 2025), the Grantor shall deposit into the Trust Account cash or Permitted Investments (or a combination thereof) having an aggregate fair market value of not less than Twenty-One Million Four Hundred Twenty Thousand Dollars ($21,420,000), being the Minimum Trust Balance. All assets deposited shall be denominated in United States dollars. The Grantor shall provide the Trustee with written instructions specifying the assets to be deposited and shall cause the delivery of such assets to the Trust Account on or before the Required Funding Date. The Trustee shall confirm receipt of such deposits in writing to both the Grantor and the Beneficiary within one (1) Business Day following the date of receipt. If the Grantor fails to fund the Trust Account in an amount equal to or exceeding the Minimum Trust Balance by the Required Funding Date, such failure shall constitute a default under the Reinsurance Agreement, and the Beneficiary shall have all rights and remedies available to it under the Reinsurance Agreement and applicable law, including the right to terminate Graystone Re's participation in the Reinsurance Agreement.
Section 2.5 — Subsequent Deposits
(a) The Grantor shall make such additional deposits of cash or Permitted Investments into the Trust Account as may be necessary to maintain the fair market value of Trust Assets at or above the Minimum Trust Balance at all times during the term of this Agreement.
(b) If, as of any valuation date established pursuant to Section 5.5 of this Agreement, the fair market value of Trust Assets falls below the Minimum Trust Balance, the Trustee shall promptly notify both the Grantor and the Beneficiary of such deficiency in writing. The Grantor shall deposit additional cash or Permitted Investments into the Trust Account in an amount sufficient to restore the fair market value of Trust Assets to at least the Minimum Trust Balance within five (5) Business Days following the date on which the Grantor receives such notice from the Trustee or the Beneficiary, whichever is earlier.
(c) In the event that a reinstatement event occurs under the Reinsurance Agreement resulting in additional exposure to the Grantor, the Grantor shall promptly recalculate the Maximum Aggregate Exposure and the corresponding Minimum Trust Balance, and shall fund any increase in the Minimum Trust Balance by depositing additional cash or Permitted Investments into the Trust Account within ten (10) Business Days following such reinstatement event. The Grantor shall provide the Trustee and the Beneficiary with a written calculation of the revised Minimum Trust Balance contemporaneously with any such additional deposit.
(d) Failure by the Grantor to make any required deposit within the time periods specified in this Section 2.5 shall constitute a default under this Agreement and under the Reinsurance Agreement.
ARTICLE III — WITHDRAWAL OF TRUST ASSETS BY BENEFICIARY
Section 3.1 — Right of Withdrawal
The Beneficiary shall have the right to withdraw Trust Assets from the Trust Account at any time and from time to time, without notice to or the consent of the Grantor, upon delivery to the Trustee of a written withdrawal notice in the form attached hereto as Exhibit A (or in such other form as may be reasonably acceptable to the Trustee). The Beneficiary may make withdrawals for any one or more of the following purposes:
(a) to reimburse the Beneficiary for the Grantor's share of losses and loss adjustment expenses paid by the Beneficiary under policies of insurance reinsured by the Reinsurance Agreement that are recoverable from the Grantor;
(b) to reimburse the Beneficiary for the Grantor's share of unearned premium reserves on business ceded to the Grantor under the Reinsurance Agreement;
(c) to reimburse the Beneficiary for any other amounts due and payable from the Grantor to the Beneficiary under the Reinsurance Agreement, including but not limited to commissions, premium adjustments, and other contractual obligations; and
(d) to fund any claim amount or other obligation that the Beneficiary has been required to pay, or reasonably anticipates being required to pay, on account of the Grantor's failure to perform its obligations under the Reinsurance Agreement in a timely manner.
Section 3.2 — Form of Withdrawal Notice
Each withdrawal notice submitted by the Beneficiary to the Trustee shall be (a) in writing, (b) signed by a duly authorized officer of the Beneficiary, and (c) delivered to the Trustee at its notice address set forth in Section 13.3 of this Agreement by hand delivery, overnight courier service, or electronic mail (with a confirmation copy sent by overnight courier). Each withdrawal notice shall specify in reasonable detail the amount to be withdrawn, the purpose of the withdrawal (with reference to the applicable category set forth in Section 3.1), and wire transfer or other payment instructions for the disbursement of the withdrawn funds or assets.
Section 3.3 — Trustee's Obligation to Honor Withdrawals
Upon receipt of a valid withdrawal notice from the Beneficiary, the Trustee shall disburse the requested funds or assets to the Beneficiary (or as otherwise directed in the withdrawal notice) within two (2) Business Days following the Trustee's receipt of such notice. The Trustee shall not be required or permitted to inquire into the Beneficiary's right, entitlement, or reason to make any withdrawal, and the Trustee shall have no duty or obligation to the Grantor to investigate, verify, or confirm the accuracy, propriety, or legitimacy of any withdrawal request submitted by the Beneficiary. The Trustee shall be fully protected in acting upon any withdrawal notice that the Trustee in good faith believes to be genuine and to have been signed by an authorized officer of the Beneficiary. The Trustee shall provide written notice to the Grantor of any withdrawal made by the Beneficiary within one (1) Business Day following such disbursement, specifying the amount withdrawn and the date of disbursement.
Section 3.4 — Limitation on Withdrawals
Notwithstanding any provision of this Agreement to the contrary, the Beneficiary may not withdraw amounts in excess of the then-current aggregate fair market value of the Trust Assets held in the Trust Account as of the date of such withdrawal. In the event that a withdrawal request exceeds the then-current fair market value of Trust Assets, the Trustee shall disburse Trust Assets having a fair market value equal to the total Trust Assets then on deposit and shall promptly notify both the Beneficiary and the Grantor of the shortfall.
Section 3.5 — Excess Withdrawals and Replenishment
If the Beneficiary withdraws Trust Assets from the Trust Account such that the remaining fair market value of Trust Assets falls below the Minimum Trust Balance, the Grantor shall replenish the Trust Account by depositing additional cash or Permitted Investments in an amount sufficient to restore the fair market value of Trust Assets to at least the Minimum Trust Balance. Such replenishment deposit shall be made within five (5) Business Days following the Grantor's receipt of notice of such withdrawal (which notice shall be provided by the Trustee pursuant to Section 3.3). Failure by the Grantor to replenish the Trust Account within the required timeframe shall constitute a default under this Agreement and under the Reinsurance Agreement.
ARTICLE IV — WITHDRAWAL BY GRANTOR
Section 4.1 — Conditions for Grantor Withdrawal
Except as expressly provided in Section 4.2 of this Agreement, the Grantor may withdraw Trust Assets from the Trust Account only with the prior written consent of the Beneficiary. Any request by the Grantor to withdraw Trust Assets shall be submitted in writing to both the Trustee and the Beneficiary, specifying the amount and nature of the assets to be withdrawn and the purpose of the withdrawal. The Trustee shall not honor any withdrawal request from the Grantor unless the Trustee has received written confirmation from the Beneficiary that it consents to such withdrawal.
Section 4.2 — Permitted Grantor Withdrawals Without Consent
Notwithstanding Section 4.1, the Grantor may, without the Beneficiary's prior written consent, undertake the following actions:
(a) Substitution of Trust Assets. The Grantor may withdraw Trust Assets from the Trust Account and simultaneously substitute therefor other assets of equal or greater fair market value, provided that (i) the substituted assets qualify as Permitted Investments under Section 5.2 of this Agreement, (ii) the fair market value of Trust Assets remaining in the Trust Account immediately following such substitution shall not be less than the Minimum Trust Balance, and (iii) the Grantor delivers to the Trustee and the Beneficiary a substitution notice in the form attached hereto as Exhibit B, together with evidence reasonably satisfactory to the Trustee that the substituted assets qualify as Permitted Investments. The Trustee shall effect such substitution within two (2) Business Days of receipt of a valid substitution notice and the corresponding replacement assets.
(b) Withdrawal of Excess Income. The Grantor may withdraw income earned on Trust Assets, including interest, dividends, and other distributions, to the extent that the fair market value of Trust Assets remaining in the Trust Account immediately following such withdrawal is equal to or greater than the Minimum Trust Balance. The Grantor shall provide the Trustee with written instructions for such withdrawal, and the Trustee shall verify that the Minimum Trust Balance will be maintained after giving effect to such withdrawal before disbursing any income to the Grantor.
Section 4.3 — Return of Trust Assets upon Termination
(a) Upon the final termination, commutation, or novation of all obligations of the Grantor under the Reinsurance Agreement, and upon the full and final discharge of all claims, losses, and liabilities arising thereunder, the Grantor may request the return of all remaining Trust Assets held in the Trust Account by delivering a written request to both the Trustee and the Beneficiary.
(b) Such return of Trust Assets shall be contingent upon (i) written confirmation from the Beneficiary that all of the Grantor's obligations under the Reinsurance Agreement have been fully and finally discharged and that no outstanding or contingent obligations remain, and (ii) such additional certifications or releases as may be required by applicable law or regulation.
(c) The Trustee shall disburse all remaining Trust Assets to the Grantor within ten (10) Business Days following the Trustee's receipt of written instructions signed by both the Beneficiary and the Grantor authorizing such distribution. Upon the complete distribution of all Trust Assets, this Agreement shall terminate in accordance with Article X.
ARTICLE V — INVESTMENT OF TRUST ASSETS
Section 5.1 — Investment Authority
Trust Assets shall be invested and reinvested by the Trustee in accordance with written investment guidelines provided by the Grantor from time to time, subject in all cases to the restrictions and limitations set forth in Section 5.2 and Schedule D of this Agreement. The Grantor shall provide the Trustee with initial written investment guidelines on or before the Required Funding Date and may amend such guidelines from time to time by written notice to the Trustee, provided that all investments shall at all times comply with Section 5.2. The Trustee shall exercise reasonable care and diligence in making, monitoring, and managing investments of Trust Assets, consistent with the standard of care applicable to fiduciaries under New York law. Notwithstanding the foregoing, the Trustee shall not be liable for any losses to Trust Assets resulting from market fluctuations in the value of Permitted Investments, provided the Trustee has complied with the investment guidelines and the requirements of this Agreement.
Section 5.2 — Permitted Investments
Trust Assets shall be invested only in the following categories of assets, as required by NY Insurance Law § 1308 and 11 NYCRR 125 and as further specified in Schedule D hereto:
(a) Cash and cash equivalents denominated in United States dollars, including demand deposits and money market funds invested exclusively in obligations described in clauses (b) and (c) below;
(b) Obligations issued by the United States government or any agency or instrumentality thereof, including but not limited to United States Treasury bills, notes, and bonds;
(c) Obligations of any kind guaranteed as to the timely payment of principal and interest by the full faith and credit of the United States government;
(d) Certificates of deposit issued by banks or trust companies that are domiciled in the United States and that are rated at least A– (or the equivalent) by Brindoval Rating Services or another nationally recognized statistical rating organization;
(e) Investment-grade corporate bonds, debentures, and notes rated at least BBB (or the equivalent) by Brindoval Rating Services or another nationally recognized statistical rating organization, subject to the diversification limits and concentration restrictions set forth in Schedule D; and
(f) Such other investments as may be permitted by applicable New York insurance regulations, including NY Insurance Law § 1308 and 11 NYCRR 125, and as may be approved in writing by the Beneficiary.
All Permitted Investments must be denominated in United States dollars. No investment shall be made in any asset class that is prohibited under NY Insurance Law § 1308 or 11 NYCRR 125 or that is identified as a prohibited asset class in Schedule D. The Trustee shall not invest Trust Assets in any equity securities, real estate, derivatives, structured products, or alternative investments unless expressly permitted by applicable regulation and approved in writing by the Beneficiary.
Section 5.3 — Maturity and Liquidity Restrictions
(a) No single investment held in the Trust Account shall have a remaining term to maturity in excess of three (3) years from the date of acquisition.
(b) At all times, at least fifty percent (50%) of the aggregate fair market value of Trust Assets shall be invested in assets with a remaining term to maturity of one (1) year or less, or in cash or cash equivalents.
(c) The Trustee shall at all times maintain sufficient liquidity in the Trust Account to honor withdrawal requests from the Beneficiary within the timeframes specified in Article III of this Agreement. The Trustee shall manage the maturity profile and liquidity of Trust Assets so as to ensure that the Trustee can liquidate or otherwise realize upon Trust Assets in an orderly manner to satisfy any withdrawal notice within two (2) Business Days of receipt.
Section 5.4 — Income on Trust Assets
All income, interest, dividends, distributions, and other earnings generated by or accruing on Trust Assets shall be credited to the Trust Account and shall constitute part of the Trust Assets for all purposes under this Agreement. Income on Trust Assets that is in excess of the Minimum Trust Balance may be withdrawn by the Grantor in accordance with Section 4.2(b) of this Agreement. No income shall be paid or distributed to the Grantor if, after giving effect to such payment or distribution, the fair market value of Trust Assets would fall below the Minimum Trust Balance.
Section 5.5 — Valuation
(a) Trust Assets shall be valued at fair market value as of each valuation date. For purposes of this Agreement, the "valuation date" shall be the last Business Day of each calendar month.
(b) The Trustee shall determine the fair market value of Trust Assets as of each valuation date using pricing sources and methodologies consistent with standard industry practice and in accordance with any applicable regulatory requirements. For securities that are publicly traded, fair market value shall be determined by reference to the closing price or last available bid price on the applicable valuation date. For securities that are not publicly traded, fair market value shall be determined by reference to such pricing services, broker quotes, or valuation models as the Trustee deems appropriate in its reasonable discretion.
(c) The Trustee shall provide a monthly valuation statement to the Grantor and the Beneficiary within five (5) Business Days following each valuation date, setting forth the fair market value of each category of Trust Assets, the total fair market value of all Trust Assets, and a comparison of the total fair market value to the Minimum Trust Balance.
ARTICLE VI — DUTIES AND RESPONSIBILITIES OF THE TRUSTEE
Section 6.1 — Standard of Care
The Trustee shall hold, invest, administer, and disburse Trust Assets in accordance with the terms and conditions of this Agreement and in compliance with the standard of care required of fiduciaries under the laws of the State of New York. The Trustee shall act in good faith and with the degree of care, skill, and diligence that a prudent professional trustee would exercise under similar circumstances, taking into account the purposes and requirements of this Agreement, the regulatory framework applicable to reinsurance trusts, and the interests of the Beneficiary.
Section 6.2 — Record Keeping
The Trustee shall maintain complete, accurate, and current books and records of all transactions, deposits, withdrawals, investment purchases and sales, income receipts, disbursements, and other activities relating to the Trust Account. Such books and records shall be maintained in a manner consistent with generally accepted accounting principles and applicable regulatory requirements, and shall be available for inspection and audit by the Grantor, the Beneficiary, and the NYDFS (or their respective authorized representatives) upon reasonable notice during normal business hours.
Section 6.3 — Reporting Obligations
The Trustee shall provide the following reports and statements in connection with the administration of the Trust Account:
(a) Monthly Statements. Within five (5) Business Days after the end of each calendar month, the Trustee shall deliver to both the Grantor and the Beneficiary a written statement of Trust Account activity for such month, including a summary of all deposits, withdrawals, investment transactions, income earned, and the fair market value of all Trust Assets (by category) as of the last Business Day of such month.
(b) Annual Compliance Certificate. Within thirty (30) days after the end of each calendar year (or partial calendar year) during the term of this Agreement, the Trustee shall deliver to the Grantor and the Beneficiary, and upon written request to the NYDFS, an annual compliance certificate substantially in the form attached hereto as Exhibit C, certifying: (i) the aggregate fair market value of Trust Assets as of the last Business Day of such calendar year; (ii) that the Trust Assets meet or exceed the Minimum Trust Balance; (iii) that all Trust Assets constitute Permitted Investments in compliance with Section 5.2 and Schedule D; and (iv) that the Trust is being administered in compliance with NY Insurance Law § 1308 and 11 NYCRR 125.
(c) Regulatory Reports. The Trustee shall prepare and deliver such additional reports, certifications, statements, and information as may be required by NY Insurance Law § 1308, 11 NYCRR 125, or any other applicable law or regulation, or as may be reasonably requested by the NYDFS or any other regulatory authority having jurisdiction over the Grantor, the Beneficiary, or the Trust.
Section 6.4 — Tax Reporting
The Trustee shall prepare and file (or cause to be prepared and filed) all applicable federal, state, and local tax returns, information reports, and other tax filings relating to the Trust Account, including Internal Revenue Service Forms 1099 and such other forms as may be required. All income, gains, losses, and deductions attributable to the Trust Assets shall be treated as income, gains, losses, and deductions of the Grantor for federal and state income tax purposes. The Trustee shall provide the Grantor with such tax information as the Grantor may reasonably request to enable the Grantor to comply with its tax reporting and payment obligations.
Section 6.5 — Compliance with Law
The Trustee shall at all times administer the Trust and the Trust Account in compliance with NY Insurance Law § 1308, 11 NYCRR 125, and all other applicable laws, regulations, rules, and orders of any governmental or regulatory authority having jurisdiction over the Trust, the Trustee, or the Trust Assets. The Trustee shall promptly notify the Grantor and the Beneficiary of any regulatory inquiry, examination, or action relating to the Trust or the Trust Account.
Section 6.6 — No Offset or Lien
The Trustee shall not subject Trust Assets, or any portion thereof, to any charge, lien, encumbrance, offset, security interest, claim, or right of setoff of the Trustee, any creditor of the Trustee, the Grantor, or any other person or entity. Trust Assets are held exclusively for the benefit of the Beneficiary as required by NY Insurance Law § 1308 and 11 NYCRR 125, and no party other than the Beneficiary (and the Grantor, to the extent expressly permitted by Article IV) shall have any right, title, or interest in or claim against the Trust Assets.
ARTICLE VII — TRUSTEE FEES AND EXPENSES
Section 7.1 — Fee Schedule
The Grantor shall pay to the Trustee an annual administration fee calculated at the rate of [●] basis points per annum on the average monthly fair market value of Trust Assets, as more fully set forth in the fee schedule attached hereto as Schedule C. The annual minimum fee payable to the Trustee shall be $[●], regardless of the fair market value of Trust Assets. Fees shall be calculated and payable quarterly in arrears, with each quarterly payment due within thirty (30) days following the end of each calendar quarter (or partial quarter) during the term of this Agreement.
Section 7.2 — Expenses
In addition to the fees set forth in Section 7.1, the Grantor shall reimburse the Trustee for all reasonable and documented out-of-pocket expenses incurred by the Trustee in connection with the establishment, administration, and maintenance of the Trust Account, including but not limited to legal fees and expenses, accounting and audit fees, transaction and settlement costs, wire transfer fees, custodial charges, and regulatory filing fees. The Trustee shall provide the Grantor with an itemized statement of such expenses on a quarterly basis together with its invoice for fees.
Section 7.3 — Payment of Fees
Trustee fees and reimbursable expenses shall be paid by the Grantor directly and shall not be deducted from or charged against the Trust Assets without the prior written consent of the Beneficiary. In no event shall the payment of Trustee fees or expenses, whether deducted from Trust Assets or otherwise, reduce the fair market value of Trust Assets held in the Trust Account below the Minimum Trust Balance. If the Grantor fails to pay any fees or expenses when due, the Trustee shall notify the Grantor and the Beneficiary in writing. Such failure shall not relieve the Trustee of any of its obligations under this Agreement or entitle the Trustee to assert any lien or claim against the Trust Assets.
ARTICLE VIII — RESIGNATION AND REMOVAL OF TRUSTEE
Section 8.1 — Resignation of Trustee
The Trustee may resign from its duties and obligations under this Agreement upon not less than ninety (90) days' prior written notice to both the Grantor and the Beneficiary. Such resignation shall not become effective until a successor trustee has been duly appointed in accordance with Section 8.3, has accepted the trusteeship in writing, and has received all Trust Assets and related records from the outgoing Trustee. The resigning Trustee shall continue to serve and to fulfill all of its obligations under this Agreement until the effective date of the successor trustee's appointment.
Section 8.2 — Removal of Trustee
The Trustee may be removed by the Grantor with the prior written consent of the Beneficiary, or by the Beneficiary acting alone in its sole discretion, upon thirty (30) days' prior written notice to the Trustee and the other Party. No removal of the Trustee shall become effective until a successor trustee has been appointed, has accepted the trusteeship, and has received all Trust Assets and related records. The Beneficiary's right to remove the Trustee shall be absolute and shall not require the showing of cause or the consent of the Grantor or the Trustee.
Section 8.3 — Appointment of Successor Trustee
(a) Upon the resignation or removal of the Trustee, the Grantor shall, with the written consent of the Beneficiary (which consent shall not be unreasonably withheld, conditioned, or delayed), appoint a successor trustee. The successor trustee must be a trust company duly chartered under the laws of the State of New York, or a national bank with trust powers authorized to do business in the State of New York, in each case in compliance with the requirements of 11 NYCRR 125.
(b) If no successor trustee has been appointed and has accepted the trusteeship within sixty (60) days following the effective date of the Trustee's notice of resignation or the notice of removal, as applicable, the Beneficiary shall have the right to appoint a successor trustee meeting the qualifications set forth in subsection (a) above, and the Grantor shall accept such appointment.
(c) The successor trustee shall execute and deliver to the Grantor and the Beneficiary a written instrument accepting the trusteeship and agreeing to be bound by all of the terms and conditions of this Agreement. Upon such acceptance, the successor trustee shall become the "Trustee" for all purposes under this Agreement.
Section 8.4 — Transfer of Trust Assets
(a) The outgoing Trustee shall transfer and deliver all Trust Assets to the successor trustee within ten (10) Business Days following the successor trustee's written acceptance of the trusteeship, or such shorter period as the Beneficiary may reasonably require.
(b) Together with the transfer of Trust Assets, the outgoing Trustee shall deliver to the successor trustee all books, records, documents, correspondence, reports, and other materials relating to the Trust Account and the administration of the Trust. The outgoing Trustee shall cooperate with the successor trustee and shall take all actions reasonably necessary to effect an orderly transition of the trusteeship.
(c) The outgoing Trustee shall be discharged from all further obligations and liabilities under this Agreement upon the completion of the transfer of Trust Assets and records to the successor trustee, except with respect to any obligations or liabilities arising prior to the effective date of such transfer.
ARTICLE IX — INDEMNIFICATION AND LIABILITY
Section 9.1 — Indemnification of Trustee
The Grantor shall indemnify, defend, and hold harmless the Trustee and its officers, directors, employees, agents, and affiliates from and against any and all losses, liabilities, claims, damages, costs, and expenses (including reasonable attorneys' fees and expenses) arising out of or relating to the Trustee's acceptance of the trusteeship, the performance or non-performance of its duties under this Agreement, or any action taken or omitted by the Trustee in connection with the administration of the Trust Account, except to the extent that such losses, liabilities, claims, damages, costs, or expenses are directly caused by the Trustee's willful misconduct, gross negligence, or material breach of this Agreement. This indemnification obligation shall survive the termination of this Agreement and the resignation or removal of the Trustee.
Section 9.2 — Limitation of Trustee Liability
(a) The Trustee shall not be liable to the Grantor, the Beneficiary, or any other person for any loss, diminution in value, or damage to Trust Assets resulting from:
(i) market fluctuations, changes in interest rates, or other changes in the fair market value of Permitted Investments held in the Trust Account, provided the Trustee has complied with the investment guidelines and the requirements of this Agreement;
(ii) compliance with withdrawal instructions from the Beneficiary submitted in accordance with Article III of this Agreement;
(iii) any action taken or omission made by the Trustee in good faith reliance upon written instructions, notices, documents, or instruments believed by the Trustee to be genuine and to have been signed or delivered by an authorized representative of the Grantor or the Beneficiary; or
(iv) any delay or failure caused by circumstances beyond the Trustee's reasonable control, including acts of God, war, terrorism, civil unrest, epidemics, governmental actions, failures of communication systems, or disruptions in financial markets.
(b) In no event shall the Trustee's aggregate liability to the Grantor, the Beneficiary, or any other person under or in connection with this Agreement exceed the total amount of fees actually paid to the Trustee under this Agreement during the twelve (12) month period immediately preceding the event or occurrence giving rise to such liability.
(c) In no event shall the Trustee be liable for any indirect, consequential, incidental, special, or punitive damages, regardless of the form of action or theory of liability.
Section 9.3 — No Liability for Reinsurance Obligations
The Trustee assumes no responsibility for, and shall have no liability whatsoever with respect to, the Reinsurance Agreement or any obligations, duties, or liabilities of the Grantor or the Beneficiary arising under or in connection with the Reinsurance Agreement. The Trustee's sole obligations are those expressly set forth in this Agreement, and the Trustee shall not be required to interpret or enforce any provision of the Reinsurance Agreement or to determine whether any claim made by the Beneficiary against the Trust Assets is valid or proper as between the Grantor and the Beneficiary under the Reinsurance Agreement.
ARTICLE X — TERM AND TERMINATION
Section 10.1 — Effective Date
This Agreement shall become effective upon the later of (a) execution and delivery of this Agreement by all three Parties and (b) funding of the Trust Account with Trust Assets having an aggregate fair market value of not less than the Minimum Trust Balance.
Section 10.2 — Term
This Agreement shall remain in full force and effect for the duration of the Treaty Period (January 1, 2026 through December 31, 2026) and shall continue thereafter until all of the Grantor's obligations under the Reinsurance Agreement have been fully and finally discharged, commuted, novated, or otherwise terminated, and the Beneficiary has provided written confirmation of such discharge and release in form and substance reasonably satisfactory to the Trustee. No expiration or termination of the Treaty Period shall, in and of itself, terminate this Agreement.
Section 10.3 — Run-Off Period
Following the expiration of the Treaty Period on December 31, 2026, the Trust shall continue in full force and effect during any development or run-off period, until all incurred but not reported (IBNR) claims, outstanding loss reserves, loss adjustment expenses, and any other obligations of the Grantor arising under or in connection with the Reinsurance Agreement have been settled, paid, commuted, or otherwise finally resolved. During the run-off period:
(a) The Minimum Trust Balance shall be recalculated and adjusted from time to time based on the Grantor's outstanding and estimated obligations under the Reinsurance Agreement, as determined by the Beneficiary in consultation with the Grantor acting reasonably and in good faith.
(b) Notwithstanding any recalculation, the Minimum Trust Balance during the run-off period shall not be reduced below the amount required by NY Insurance Law § 1308 and 11 NYCRR 125 for the Beneficiary to obtain credit for reinsurance on its statutory financial statements.
(c) All provisions of this Agreement, including the Beneficiary's withdrawal rights under Article III and the Grantor's replenishment obligations under Section 2.5, shall remain in full force and effect during the run-off period.
Section 10.4 — Final Distribution
Upon written confirmation from the Beneficiary that all of the Grantor's obligations under the Reinsurance Agreement have been fully and finally discharged, and that no outstanding, contingent, or IBNR obligations remain, the Trustee shall distribute all remaining Trust Assets to the Grantor within ten (10) Business Days following the Trustee's receipt of written instructions signed by both the Beneficiary and the Grantor authorizing such distribution. Upon the complete distribution of all Trust Assets, this Agreement shall terminate, and the Trustee shall be discharged from all further obligations hereunder, except as otherwise expressly provided herein.
ARTICLE XI — REPRESENTATIONS AND WARRANTIES
Section 11.1 — Representations of Grantor
The Grantor hereby represents and warrants to the Beneficiary and the Trustee, as of the Execution Date and as of the Required Funding Date, as follows:
(a) Organization and Good Standing. The Grantor is a corporation (Aktiengesellschaft) duly organized, validly existing, and in good standing under the laws of Switzerland, and is regulated by FINMA. The Grantor has all necessary corporate authorizations and licenses to conduct its reinsurance business as presently conducted.
(b) Power and Authority. The Grantor has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(c) Due Authorization. The execution, delivery, and performance of this Agreement by the Grantor have been duly authorized by all necessary corporate action on the part of the Grantor, including any requisite approvals of its board of directors or other governing body, and no further corporate action is required.
(d) Enforceability. This Agreement constitutes a legal, valid, and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors' rights generally and to general principles of equity.
(e) Regulatory Status. The Grantor is not a Certified Reinsurer under 11 NYCRR 125, is not licensed or accredited as a reinsurer in the State of New York, and acknowledges that it is required to post collateral in connection with the Reinsurance Agreement in order for the Beneficiary to obtain credit for reinsurance on its statutory financial statements.
(f) Rating. The Grantor currently holds a financial strength rating of A (Excellent), outlook Stable, as rated by Brindoval Rating Services. The Grantor shall promptly notify the Beneficiary and the Trustee, in writing, of any downgrade, withdrawal, suspension, or material change in such rating, including any change in outlook.
Section 11.2 — Representations of Beneficiary
The Beneficiary hereby represents and warrants to the Grantor and the Trustee, as of the Execution Date, as follows:
(a) Organization and Good Standing. The Beneficiary is a Connecticut-domiciled admitted insurer, assigned NAIC No. 42917, duly organized, validly existing, and in good standing under the laws of the State of Connecticut. The Beneficiary is duly licensed to transact insurance business in each jurisdiction where such license is required.
(b) Power and Authority. The Beneficiary has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(c) Enforceability. This Agreement constitutes a legal, valid, and binding obligation of the Beneficiary, enforceable against the Beneficiary in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors' rights generally and to general principles of equity.
Section 11.3 — Representations of Trustee
The Trustee hereby represents and warrants to the Grantor and the Beneficiary, as of the Execution Date, as follows:
(a) Organization and Authorization. The Trustee is a trust company duly chartered and authorized under the banking laws of the State of New York, and is authorized to act as trustee and to exercise fiduciary powers in the State of New York.
(b) Power and Authority. The Trustee has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement and to establish, maintain, and administer the Trust Account in accordance with the terms hereof.
(c) Insurance. The Trustee maintains errors and omissions insurance, fidelity bond coverage, and such other insurance as is customary for trust companies of similar size and type, in amounts adequate to cover its obligations and potential liabilities arising under or in connection with this Agreement.
ARTICLE XII — COVENANTS