MULTI-BENEFICIARY REINSURANCE TRUST AGREEMENT
Draft — Subject to Review and Negotiation
by and among
TIDEWATER RE S.A. a Luxembourg société anonyme (the "Grantor")
and
QUORUM SPECIALTY INSURANCE COMPANY a Connecticut-domiciled admitted insurer, NAIC No. 42917 (the "Beneficiary")
and
FIDELITAS TRUST COMPANY OF NEW YORK a New York-chartered trust company (the "Trustee")
Dated as of [●], 2025
Target Execution Date: December 15, 2025
Established pursuant to NY Insurance Law § 1308 and 11 NYCRR 125
Calderwood & Harkness LLP — Matter No. 1025-00004
CONFIDENTIAL — This document is a draft prepared for purposes of discussion and negotiation only. It does not constitute a binding agreement and is subject to review, comment, and revision by all parties and their respective counsel. This document and its contents are protected by the attorney-client privilege and/or the work product doctrine. Unauthorized reproduction or distribution is prohibited.
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RECITALS
WHEREAS:
A. Tidewater Re S.A. (the "Grantor") is a société anonyme duly organized and validly existing under the laws of the Grand Duchy of Luxembourg, with its registered office located at 14 Boulevard Royal, L-2449 Luxembourg, Grand Duchy of Luxembourg. The Grantor's Chief Underwriting Officer is François-Xavier Delacroix. The Grantor holds an A.M. Best rating of A– (Excellent), outlook Positive, as assigned by Brindoval Rating Services. The Grantor is not a certified reinsurer under Title 11, Section 125 of the New York Codes, Rules and Regulations ("11 NYCRR 125") and is therefore required to provide collateral to secure its reinsurance obligations in order for a U.S. ceding insurer to receive financial statement credit for reinsurance ceded to the Grantor.
B. Quorum Specialty Insurance Company ("QSIC" or the "Beneficiary") is a Connecticut-domiciled admitted property and casualty insurer, NAIC Company Code No. 42917, duly organized and in good standing under the laws of the State of Connecticut. The Beneficiary is a wholly owned operating subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a corporation organized under the laws of the State of Delaware and publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC." QIH maintains its corporate headquarters at 400 Constitution Plaza, Suite 2200, Hartford, Connecticut 06103. As of December 31, 2024, QSIC reported policyholder surplus of Four Hundred Seventy-Eight Million Dollars ($478,000,000) on a statutory accounting basis.
C. The Grantor and the Beneficiary are parties to, or will contemporaneously become parties to, a Catastrophe Excess-of-Loss Reinsurance Contract (the "Reinsurance Agreement") for the treaty period commencing January 1, 2026 and expiring December 31, 2026 (the "Treaty Period"). The Reinsurance Agreement provides a Thirty-Five Million Dollar ($35,000,000) per-occurrence catastrophe excess-of-loss layer attaching in excess of a Fifteen Million Dollar ($15,000,000) per-occurrence retention (net of quota-share recoveries), with an exhaustion point of Fifty Million Dollars ($50,000,000). The Grantor's participation in the layer is twenty percent (20%), corresponding to a Seven Million Dollar ($7,000,000) limit per occurrence. The Reinsurance Agreement provides for one (1) reinstatement at one hundred percent (100%) additional premium, calculated on a pro rata as to time basis, yielding a maximum aggregate exposure per reinsurer share of Fourteen Million Dollars ($14,000,000), calculated as Seven Million Dollars ($7,000,000) multiplied by two (2). The total annual layer premium is Two Million Nine Hundred Seventy-Five Thousand Dollars ($2,975,000), of which the Grantor's twenty percent (20%) share is Five Hundred Ninety-Five Thousand Dollars ($595,000). The reinsurer panel under the Reinsurance Agreement consists of: Pinnacle Re Ltd. (fifty percent (50%) lead), Graystone Reinsurance AG (thirty percent (30%)), and Tidewater Re S.A. (twenty percent (20%)). The Reinsurance Agreement was placed through Blackbridge Advisory Group LLC, acting as intermediary.
D. New York Insurance Law Section 1308 ("NY Insurance Law § 1308") and 11 NYCRR 125 require that an unauthorized or non-certified reinsurer maintain a trust to secure its reinsurance obligations in order for the ceding insurer to take financial statement credit for reinsurance ceded to such reinsurer. Pinnacle Re Ltd. is exempt from collateral requirements as a certified reinsurer holding New York Department of Financial Services ("NYDFS") Certified Reinsurer Identification Number CR-2019-0217, with a zero-dollar ($0) collateral requirement applicable to its rating classification. The Grantor, as a non-certified, non-United States domiciled reinsurer, is required to fund a multi-beneficiary reinsurance trust in an amount equal to not less than one hundred two percent (102%) of the Grantor's pro-rata share of the maximum aggregate exposure under the Reinsurance Agreement. The required trust funding is Fourteen Million Two Hundred Eighty Thousand Dollars ($14,280,000), calculated as follows: Seven Million Dollars ($7,000,000) per occurrence multiplied by two (2) occurrences (original limit plus one reinstatement), equaling Fourteen Million Dollars ($14,000,000), multiplied by one hundred two percent (102%), equaling Fourteen Million Two Hundred Eighty Thousand Dollars ($14,280,000).
E. This Trust is established for the purpose of securing the Grantor's obligations under the Reinsurance Agreement and enabling the Beneficiary to take full credit for reinsurance ceded to the Grantor on the Beneficiary's statutory financial statements filed with the Connecticut Department of Insurance and any other applicable insurance regulatory authorities. This Trust is intended to qualify as a multi-beneficiary trust under NY Insurance Law § 1308, and the parties intend that this Agreement and the Trust established hereunder shall at all times comply with, and be interpreted in a manner consistent with, the requirements of NY Insurance Law § 1308 and 11 NYCRR 125.
F. Fidelitas Trust Company of New York (the "Trustee"), a trust company duly organized and existing under the laws of the State of New York, with its principal office located at 60 Wall Street, 12th Floor, New York, New York 10005, has agreed to serve as Trustee of the multi-beneficiary reinsurance trust established pursuant to this Agreement, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto 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:
"Applicable Law" means New York Insurance Law Section 1308, Title 11, Section 125 of the New York Codes, Rules and Regulations (11 NYCRR 125), and any successor statutes, regulations, rules, bulletins, guidelines, or orders promulgated thereunder or in replacement thereof, in each case as amended from time to time.
"ARIAS-U.S." means the AIDA Reinsurance and Insurance Arbitration Society – U.S., or any successor organization.
"Beneficiary" means Quorum Specialty Insurance Company, a Connecticut-domiciled admitted property and casualty insurer, NAIC Company Code No. 42917, and its successors and permitted assigns.
"Funding Percentage" means one hundred two percent (102%) of the Maximum Aggregate Exposure, or such higher percentage as may be required under Applicable Law.
"Grantor" means Tidewater Re S.A., a société anonyme organized under the laws of the Grand Duchy of Luxembourg, and its successors and permitted assigns.
"Grantor's Share of Layer Limit" means Seven Million Dollars ($7,000,000), representing the Grantor's Participation Percentage of the Layer Limit.
"Layer Limit" means Thirty-Five Million Dollars ($35,000,000) per occurrence, as specified in the Reinsurance Agreement.
"Maximum Aggregate Exposure" means Fourteen Million Dollars ($14,000,000), representing the Grantor's twenty percent (20%) participation share of the total layer aggregate of Seventy Million Dollars ($70,000,000), calculated as the Grantor's Share of Layer Limit multiplied by two (2) (reflecting the original limit plus one (1) reinstatement). The Maximum Aggregate Exposure shall be subject to adjustment as provided in Section 3.3 in the event of amendment to the Reinsurance Agreement.
"Participation Percentage" means twenty percent (20%), representing the Grantor's proportionate share of the reinsurance layer under the Reinsurance Agreement.
"Permitted Investments" has the meaning set forth in Section 4.2.
"Reinsurance Agreement" means the Catastrophe Excess-of-Loss Reinsurance Contract dated [●], 2025 by and between the Beneficiary, as cedent, and the reinsurer panel consisting of Pinnacle Re Ltd., Graystone Reinsurance AG, and the Grantor, as reinsurers, for the Treaty Period, as such contract may be amended, modified, supplemented, or restated from time to time.
"Required Trust Amount" means Fourteen Million Two Hundred Eighty Thousand Dollars ($14,280,000), calculated as the Funding Percentage multiplied by the Maximum Aggregate Exposure, subject to adjustment as provided in Section 3.3.
"Treaty Period" means the period commencing on January 1, 2026 and expiring on December 31, 2026, inclusive of both dates.
"Trust Account" means the multi-beneficiary reinsurance trust account established and maintained by the Trustee pursuant to this Agreement.
"Trust Assets" means all assets deposited in, or earned on assets held in, the Trust Account, including but not limited to cash, Permitted Investments, interest, dividends, and any other income or proceeds derived from assets held in the Trust Account.
"Trustee" means Fidelitas Trust Company of New York, a trust company organized and existing under the laws of the State of New York, or any successor trustee appointed in accordance with Section 7.6 or Section 7.7 of this Agreement.
"Withdrawal Notice" has the meaning set forth in Section 5.2.
Section 1.2 — Rules of Interpretation
The following rules of construction and interpretation shall apply to this Agreement:
(a) References to any statute, regulation, rule, or other enactment shall be deemed to include any amendments, modifications, successor enactments, or re-enactments thereof, unless the context requires otherwise.
(b) The headings and captions of Articles, Sections, Schedules, and Exhibits in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.
(c) Unless the context otherwise requires, words importing the singular include the plural and vice versa, and words importing gender include all genders.
(d) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(e) References to "days" shall mean calendar days unless "business days" is expressly specified, in which case "business days" shall mean any day other than a Saturday, Sunday, or day on which commercial banks in New York City are authorized or required by law to close.
(f) All dollar amounts referenced in this Agreement are in United States Dollars unless expressly stated otherwise.
(g) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, as further set forth in Article X. In the event of any ambiguity or conflict in the interpretation of this Agreement, the provisions shall be construed in a manner that ensures compliance with Applicable Law and preserves the Beneficiary's right to take credit for reinsurance on its statutory financial statements.
(h) References to "Sections," "Articles," "Schedules," and "Exhibits" are references to Sections and Articles of, and Schedules and Exhibits to, this Agreement, unless otherwise specified.
ARTICLE II — ESTABLISHMENT OF TRUST
Section 2.1 — Creation of Trust Account
The Grantor hereby establishes a multi-beneficiary reinsurance trust account with the Trustee, and the Trustee hereby accepts appointment as trustee of such trust account, upon the terms and subject to the conditions set forth in this Agreement. The Trust Account shall be denominated in United States Dollars and shall be titled as follows:
"Tidewater Re S.A. Multi-Beneficiary Reinsurance Trust Account f/b/o Quorum Specialty Insurance Company"
The Trust Account shall be maintained at the offices of Fidelitas Trust Company of New York, located at 60 Wall Street, 12th Floor, New York, New York 10005, or at such other location within the United States as the Trustee may designate from time to time with the prior written consent of the Beneficiary, provided that any such location complies with the requirements of Applicable Law. The Trustee shall provide the Grantor and the Beneficiary with the Trust Account number and any other identifying information promptly upon establishment of the Trust Account.
Section 2.2 — Multi-Beneficiary Trust Status
The Trust established hereunder is structured as a multi-beneficiary trust under NY Insurance Law § 1308 and 11 NYCRR 125. The Trust may be designated by the Grantor to secure the Grantor's reinsurance obligations to additional United States ceding insurers, subject to the following conditions:
(a) The addition of any additional beneficiary shall be subject to the provisions of Section 3.4 regarding the maintenance of the Required Trust Amount and the deposit of additional Trust Assets to cover the Grantor's obligations to all beneficiaries at the Funding Percentage.
(b) The Grantor shall provide the Beneficiary with not less than thirty (30) days' prior written notice of the proposed addition of any additional beneficiary, together with such information regarding the identity of the proposed additional beneficiary, the nature and amount of the Grantor's reinsurance obligations to such beneficiary, and the proposed increase to the Required Trust Amount as the Beneficiary may reasonably request.
(c) Quorum Specialty Insurance Company is the initial and, as of the date hereof, sole beneficiary of the Trust.
Section 2.3 — Irrevocability
The Trust is irrevocable during the term of the Reinsurance Agreement and any period during which obligations of the Grantor under the Reinsurance Agreement remain outstanding, including any run-off period following the expiration or termination of the Reinsurance Agreement. The Grantor may not revoke, amend, modify, or terminate the Trust except in accordance with the provisions of Article VIII and Article IX of this Agreement. Any attempted revocation, amendment, modification, or termination in contravention of this Section 2.3 shall be null and void and of no force or effect.
Section 2.4 — Situs
The Trust established hereunder is sitused in the State of New York. All Trust Assets shall be held within the United States at all times by the Trustee or its authorized agents and custodians, in compliance with the situs requirements of 11 NYCRR 125 and any other requirements of Applicable Law. The Trustee shall not transfer, deposit, or maintain any Trust Assets outside the United States without the prior written consent of the Beneficiary, and no such consent shall be given if such transfer, deposit, or maintenance would cause the Trust to fail to comply with Applicable Law.
ARTICLE III — FUNDING OF TRUST
Section 3.1 — Initial Funding
The Grantor shall deposit into the Trust Account assets with a fair market value of not less than Fourteen Million Two Hundred Eighty Thousand Dollars ($14,280,000) (the "Required Trust Amount"). The initial funding of the Trust Account must be completed no later than the earlier of: (a) December 15, 2025, or (b) the date immediately preceding the inception of the Treaty Period (i.e., December 31, 2025). The Grantor acknowledges that the timely funding of the Trust Account is a condition precedent to the Beneficiary's ability to take financial statement credit for reinsurance ceded to the Grantor under the Reinsurance Agreement, and the Grantor agrees to use its best efforts to complete the initial funding as promptly as practicable following the execution of this Agreement.
Section 3.2 — Form of Initial Deposit
The initial deposit into the Trust Account may consist of any combination of the following:
(a) Cash, denominated in United States Dollars;
(b) Permitted Investments, as defined in Section 4.2, valued at fair market value as of the date of deposit; or
(c) Clean, irrevocable letters of credit meeting the requirements of 11 NYCRR 125 and issued by a qualified United States financial institution, as defined therein.
All non-cash assets deposited into the Trust Account shall be valued at fair market value as of the date of deposit. The Trustee shall confirm the fair market value of all non-cash assets within two (2) business days of receipt and shall promptly notify the Grantor and the Beneficiary if the aggregate fair market value of assets deposited is less than the Required Trust Amount.
Section 3.3 — Maintenance and Adjustment of Trust Funding
(a) Maintenance Obligation. The Grantor shall ensure that the aggregate fair market value of Trust Assets is maintained at not less than one hundred two percent (102%) of the Grantor's pro-rata share of the maximum aggregate exposure under the Reinsurance Agreement at all times during the term of this Agreement. The Grantor acknowledges that this maintenance obligation is a continuing obligation and is not limited to the quarterly valuation dates specified in subsection (d) below.
(b) Adjustment for Amendments to Reinsurance Agreement. If the Reinsurance Agreement is amended, modified, or supplemented to increase the Layer Limit, the number of reinstatements, the Grantor's Participation Percentage, or the Grantor's maximum aggregate exposure thereunder, the Required Trust Amount shall be recalculated to reflect such increase, and the Grantor shall deposit additional assets into the Trust Account in an amount sufficient to bring the aggregate fair market value of Trust Assets to the recalculated Required Trust Amount within thirty (30) calendar days following the effective date of such amendment, modification, or supplement.
(c) Replenishment for Market Fluctuations. If the aggregate fair market value of Trust Assets declines below the Required Trust Amount due to market fluctuations, depreciation of Permitted Investments, or any other cause, the Grantor shall replenish the Trust Account by depositing additional assets sufficient to restore the aggregate fair market value of Trust Assets to the Required Trust Amount within thirty (30) business days following the earlier of: (i) the date on which the Grantor becomes aware or reasonably should have become aware of such deficiency, or (ii) the date on which the Grantor receives written notice of such deficiency from the Trustee or the Beneficiary. The Trustee shall promptly notify the Grantor and the Beneficiary of any deficiency of which it becomes aware.
(d) Quarterly Valuation. The Trustee shall determine the aggregate fair market value of Trust Assets as of March 31, June 30, September 30, and December 31 of each calendar year during the term of this Agreement (each, a "Valuation Date"). The Trustee shall deliver a written valuation report to the Grantor and the Beneficiary within fifteen (15) business days following each Valuation Date, setting forth the aggregate fair market value of Trust Assets as of such Valuation Date and specifying whether the aggregate fair market value equals or exceeds the Required Trust Amount.
Section 3.4 — Additional Beneficiaries
If additional ceding insurers are designated as beneficiaries of the Trust pursuant to Section 2.2, the Grantor shall increase the aggregate fair market value of Trust Assets proportionally to cover the Grantor's reinsurance obligations to all beneficiaries at the Funding Percentage. Specifically, the Required Trust Amount shall be increased by an amount equal to one hundred two percent (102%) of the Grantor's maximum aggregate exposure to each additional beneficiary under the applicable reinsurance agreements. The Beneficiary's withdrawal rights under Article V shall not be subordinated to, conditioned upon, or otherwise impaired by the withdrawal rights of any subsequently added beneficiary. The rights of each beneficiary in the Trust shall be several and not joint, and each beneficiary shall have the right to withdraw Trust Assets to the extent of the Grantor's obligations to such beneficiary, independent of the claims of any other beneficiary.
Section 3.5 — No Commingling
Trust Assets shall not be commingled with the general assets of the Trustee, the Grantor, or any other person or entity. The Trustee shall maintain the Trust Account as a separate and distinct account, and shall hold all Trust Assets in a segregated manner in compliance with Applicable Law and the Trustee's fiduciary obligations.
ARTICLE IV — TRUST INVESTMENTS
Section 4.1 — Investment Authority
Subject to the Permitted Investment guidelines set forth in Section 4.2 and the Trustee's standard investment policies, the Grantor shall have the right to direct the investment of Trust Assets by providing written investment instructions to the Trustee. The Trustee shall execute investment instructions received from the Grantor promptly and in good faith, provided that such instructions comply with this Article IV and Applicable Law. If the Trustee determines that any investment instruction from the Grantor would result in the acquisition of an asset that does not qualify as a Permitted Investment or would otherwise cause the Trust to fail to comply with Applicable Law, the Trustee shall decline to execute such instruction and shall promptly notify the Grantor and the Beneficiary in writing of the reason for such refusal. In the absence of investment instructions from the Grantor, the Trustee shall invest Trust Assets in short-term United States Treasury obligations or in such other cash equivalents as are consistent with the Permitted Investments.
Section 4.2 — Permitted Investments
Trust Assets shall be invested only in assets qualifying under 11 NYCRR 125 and NY Insurance Law § 1308, including the following:
(a) Direct obligations of the United States of America, including United States Treasury bills, notes, and bonds;
(b) Obligations of agencies or instrumentalities of the United States government, including but not limited to obligations issued or guaranteed by the Thackeray Holdings (Fannie Mae), the Harborview Partners LLC (Freddie Mac), the Government National Mortgage Association (Ginnie Mae), and the Federal Home Loan Banks;
(c) Cash and cash equivalents denominated in United States Dollars, including demand deposits, money market funds invested exclusively in United States government obligations, and overnight repurchase agreements fully collateralized by United States government obligations;
(d) Certificates of deposit issued by commercial banks organized under the laws of the United States or any state thereof, provided that such banks maintain a long-term deposit or issuer credit rating of at least A– as assigned by Brindoval Rating Services, or an equivalent rating from a nationally recognized statistical rating organization ("NRSRO");
(e) Such other investments as may be expressly permitted under 11 NYCRR 125 and approved by the Beneficiary in writing prior to acquisition.
Notwithstanding the foregoing, Trust Assets shall not be invested in equity securities, derivative instruments (including but not limited to options, futures, swaps, and forward contracts), non-United States Dollar-denominated assets, structured securities or products that do not meet the credit quality requirements of 11 NYCRR 125, or any other asset that does not qualify as a Permitted Investment under Applicable Law. The detailed list of qualifying asset classes, rating requirements, and any applicable concentration limits are set forth in Schedule D attached hereto.
Section 4.3 — Investment Income
All interest, dividends, coupon payments, and other income earned on Trust Assets shall be credited to the Trust Account and shall form part of the Trust Assets for all purposes under this Agreement, including for purposes of calculating whether the aggregate fair market value of Trust Assets equals or exceeds the Required Trust Amount. Investment income may be withdrawn by the Grantor only in accordance with Section 6.1, and only to the extent that the aggregate fair market value of Trust Assets exceeds the Required Trust Amount after giving effect to such withdrawal. Under no circumstances shall investment income be withdrawn from the Trust Account if such withdrawal would cause the aggregate fair market value of Trust Assets to fall below the Required Trust Amount.
Section 4.4 — Valuation
Trust Assets shall be valued at fair market value, determined in accordance with generally accepted valuation methodologies applicable to the type of asset in question. The Trustee shall provide monthly valuation statements to the Grantor and the Beneficiary, setting forth the composition and aggregate fair market value of Trust Assets as of the last business day of each calendar month. Such monthly valuation statements shall be delivered within ten (10) business days following the end of each calendar month.
In the event of a dispute between the Grantor and the Beneficiary regarding the fair market value of any Trust Asset, the parties shall use commercially reasonable efforts to resolve such dispute within ten (10) business days. If the parties are unable to resolve the dispute within such period, an independent third-party valuation agent mutually acceptable to the Grantor and the Beneficiary shall be engaged to determine the fair market value of the disputed asset. The fees and expenses of such independent valuation agent shall be borne by the Grantor. The determination of the independent valuation agent shall be final and binding upon the parties.
ARTICLE V — BENEFICIARY WITHDRAWAL RIGHTS
Section 5.1 — Right to Withdraw
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 or approval of, the Grantor, to the extent necessary to accomplish any of the following purposes:
(a) To pay or reimburse the Beneficiary for the Grantor's share of losses, allocated loss adjustment expenses, unallocated loss adjustment expenses, and any other amounts due and payable by the Grantor to the Beneficiary under the Reinsurance Agreement that are not otherwise paid by the Grantor within the time periods specified in the Reinsurance Agreement or, if no such time periods are specified, within thirty (30) days following the Beneficiary's submission of a claim or billing to the Grantor;
(b) To pay or reimburse the Beneficiary for unearned premium amounts due to the Beneficiary as a result of policy cancellations, mid-term premium adjustments, or other premium return obligations arising under the Reinsurance Agreement;
(c) To make payment to the Beneficiary if the Reinsurance Agreement is terminated, commuted, or rescinded, or if the Grantor's obligations under the Reinsurance Agreement are accelerated for any reason, including but not limited to a downgrade of the Grantor's financial strength rating below B++ (Good) by Brindoval Rating Services or equivalent, an insolvency or receivership proceeding involving the Grantor, or a material breach of the Reinsurance Agreement by the Grantor;
(d) To refund to the Beneficiary any amounts held in the Trust Account that are in excess of the actual amounts owed by the Grantor to the Beneficiary under the Reinsurance Agreement but that are not otherwise recoverable by the Grantor under the terms of this Agreement or the Reinsurance Agreement.
The Beneficiary's withdrawal rights under this Section 5.1 are absolute and unconditional, and shall not be subject to any limitation, qualification, or condition other than as expressly set forth in this Section 5.1, consistent with the requirements of NY Insurance Law § 1308 and 11 NYCRR 125. The Trustee shall honor any Withdrawal Notice submitted by the Beneficiary in accordance with Section 5.2 without inquiry into the merits or basis of the withdrawal, and without regard to any instruction, objection, or claim by the Grantor.
Section 5.2 — Withdrawal Procedures
To effect a withdrawal from the Trust Account, the Beneficiary shall deliver a written notice (a "Withdrawal Notice") to the Trustee, substantially in the form of Exhibit A attached hereto, specifying the following:
(a) The date of the Withdrawal Notice;
(b) The aggregate amount of the withdrawal, stated in United States Dollars;
(c) The purpose or basis for the withdrawal, in reasonable detail (e.g., loss payment, unearned premium return, termination or commutation, or other);
(d) Wire transfer instructions for the delivery of the withdrawal proceeds, if the withdrawal is to be made in cash; and
(e) The name and title of the authorized signatory of the Beneficiary executing the Withdrawal Notice.
The Trustee shall honor the Withdrawal Notice within two (2) business days of receipt thereof. No approval, consent, instruction, or direction from the Grantor shall be required for the Trustee to process, honor, or execute a Withdrawal Notice. The Trustee shall not be required to verify the accuracy of the stated purpose of the withdrawal, the existence or amount of any underlying claim, or any other matter set forth in the Withdrawal Notice. The Trustee shall notify the Grantor of any withdrawal within one (1) business day after honoring the Withdrawal Notice, by delivering to the Grantor a copy of the Withdrawal Notice together with a statement of the aggregate fair market value of Trust Assets remaining in the Trust Account after giving effect to the withdrawal.
Section 5.3 — Form of Withdrawal
Withdrawals from the Trust Account may be made in cash or, at the Beneficiary's sole election, in kind (i.e., by delivery of specific Trust Assets to the Beneficiary). If the Beneficiary elects to receive a withdrawal in kind, the Beneficiary shall specify in the Withdrawal Notice the particular Trust Assets to be delivered, and the Trustee shall deliver such Trust Assets to the Beneficiary or its designee within two (2) business days. Cash withdrawals shall be made by wire transfer in immediately available funds to the account designated by the Beneficiary in the Withdrawal Notice. The Beneficiary may change its designated account for receipt of cash withdrawals by providing written notice to the Trustee at any time.
Section 5.4 — Restoration Following Withdrawal
Following any withdrawal by the Beneficiary from the Trust Account, the Grantor shall, within thirty (30) calendar days following receipt of notice of such withdrawal from the Trustee, deposit additional assets into the Trust Account in an amount sufficient to restore the aggregate fair market value of Trust Assets to the Required Trust Amount, unless the withdrawal was made in connection with the termination, commutation, or final settlement of the Reinsurance Agreement and all of the Grantor's obligations thereunder have been fully discharged. The Grantor's failure to restore the Trust Account within such thirty (30) day period shall constitute a material breach of this Agreement and shall entitle the Beneficiary to exercise any and all remedies available under this Agreement, the Reinsurance Agreement, and Applicable Law.
ARTICLE VI — GRANTOR'S LIMITED RIGHTS
Section 6.1 — Withdrawal of Excess Assets
The Grantor may withdraw Trust Assets from the Trust Account only to the extent that the aggregate fair market value of Trust Assets exceeds the Required Trust Amount as of the most recent quarterly valuation performed by the Trustee pursuant to Section 3.3(d). The amount available for withdrawal by the Grantor shall be equal to the excess, if any, of the aggregate fair market value of Trust Assets over the Required Trust Amount as of such most recent quarterly Valuation Date.
Any withdrawal by the Grantor pursuant to this Section 6.1 shall be subject to the following conditions:
(a) The Grantor shall provide prior written notice to the Beneficiary of its intent to withdraw excess Trust Assets not less than ten (10) business days prior to the date of the proposed withdrawal. Such notice shall be substantially in the form of Exhibit B attached hereto and shall specify the amount of the proposed withdrawal, include a certification that the aggregate fair market value of Trust Assets will remain at or above the Required Trust Amount after giving effect to the withdrawal, and attach evidence of the most recent quarterly valuation.
(b) The Beneficiary may object to a Grantor withdrawal within such ten (10) business day period if the Beneficiary reasonably determines that the proposed withdrawal would cause the aggregate fair market value of Trust Assets to fall below the Required Trust Amount, taking into account any pending or anticipated claims under the Reinsurance Agreement, including claims that have been reported but not yet paid, claims that have been incurred but not yet reported, and any other contingent or unliquidated obligations of the Grantor under the Reinsurance Agreement.
(c) If the Beneficiary delivers a written objection to the Grantor and the Trustee within such ten (10) business day period, the Trustee shall not process the Grantor's withdrawal request until the dispute between the Grantor and the Beneficiary has been resolved by mutual agreement or by arbitration in accordance with Section 10.2.
(d) If the Beneficiary does not deliver a written objection within such ten (10) business day period, the Trustee shall process the Grantor's withdrawal request in accordance with its terms.
Section 6.2 — Substitution of Assets
The Grantor may substitute Trust Assets held in the Trust Account, provided that all of the following conditions are satisfied:
(a) The replacement assets are Permitted Investments and have an aggregate fair market value that is equal to or greater than the aggregate fair market value of the Trust Assets being substituted;
(b) The Trustee receives simultaneous delivery of the replacement assets (i.e., the delivery of the replacement assets and the release of the substituted assets shall occur on a delivery-versus-delivery basis, and at no point shall the aggregate fair market value of Trust Assets fall below the Required Trust Amount during the substitution process); and
(c) The Beneficiary is notified of the substitution in writing within two (2) business days following the completion of the substitution, such notice to include a description of the assets substituted and the replacement assets, together with the fair market values of each.
Section 6.3 — No Other Rights
Except as expressly set forth in Sections 6.1 and 6.2, the Grantor has no right, title, interest, or claim in or to Trust Assets while the Trust is in effect. Without limiting the generality of the foregoing, the Grantor may not pledge, hypothecate, encumber, assign, or transfer any interest in Trust Assets, and any such attempted pledge, hypothecation, encumbrance, assignment, or transfer shall be null and void and of no force or effect.
ARTICLE VII — TRUSTEE DUTIES, POWERS, AND COMPENSATION
Section 7.1 — Standard of Care
The Trustee shall administer the Trust in accordance with the terms of this Agreement, Applicable Law, and the standard of care applicable to professional corporate fiduciaries under the laws of the State of New York. The Trustee shall act with the care, skill, prudence, and diligence that a prudent professional fiduciary would exercise in like circumstances. The Trustee shall not be liable for losses on Permitted Investments resulting from market fluctuations, changes in interest rates, or other forces beyond the Trustee's reasonable control, except in cases of gross negligence, willful misconduct, fraud, or breach of the Trustee's fiduciary duty. Nothing in this Section 7.1 shall be construed to relieve the Trustee of its obligation to comply with the investment and custody requirements of this Agreement and Applicable Law.
Section 7.2 — Record Keeping and Reporting
The Trustee shall maintain complete, accurate, and current books and records of all Trust Account transactions, including but not limited to deposits, withdrawals, investment purchases and sales, maturities, interest and dividend receipts, and all other credits and debits to the Trust Account. The Trustee's record-keeping and reporting obligations shall include the following:
(a) Monthly Statements. The Trustee shall deliver monthly statements to both the Grantor and the Beneficiary within ten (10) business days following the end of each calendar month. Each monthly statement shall reflect all deposits, withdrawals, investment activity, income, and Trust Account balances (at fair market value) for the period covered by the statement.
(b) Quarterly Valuation Reports. The Trustee shall deliver quarterly valuation reports as provided in Section 3.3(d).
(c) Annual Audit Report. The Trustee shall cause an annual audit report of the Trust Account to be prepared by an independent certified public accounting firm and shall furnish such report to the Grantor and the Beneficiary within ninety (90) days after December 31 of each year during the term of this Agreement.
(d) Inspection Rights. All books, records, and documents relating to the Trust Account shall be available for inspection and copying by the Beneficiary, the Grantor, or their respective authorized representatives and regulators, including the Connecticut Department of Insurance and the New York Department of Financial Services, upon reasonable notice during normal business hours.
Section 7.3 — Compliance with Applicable Law
The Trustee shall comply with all requirements of NY Insurance Law § 1308, 11 NYCRR 125, and any other Applicable Law governing the establishment, maintenance, administration, and operation of multi-beneficiary reinsurance trusts. Without limiting the generality of the foregoing, the Trustee shall cooperate fully with examinations, audits, inquiries, and information requests from the Connecticut Department of Insurance, the New York Department of Financial Services, and any other insurance regulatory authority having jurisdiction over the Beneficiary, the Grantor, or the Trust. The Trustee shall promptly notify the Grantor and the Beneficiary of any communication received from any regulatory authority relating to the Trust or the Trust Account.
Section 7.4 — Trustee Compensation and Expenses
The Grantor shall pay the Trustee's fees and reimburse the Trustee for all reasonable out-of-pocket expenses incurred in connection with the administration of the Trust, in accordance with the fee schedule set forth in Schedule B attached hereto. Trustee fees and expenses shall not be paid from Trust Assets unless the Grantor fails to pay such fees and expenses within sixty (60) calendar days following the date of the Trustee's invoice, in which case the Trustee may deduct its reasonable fees and expenses from Trust Assets, subject to the following conditions:
(a) The Trustee shall provide the Beneficiary with not less than ten (10) business days' prior written notice of its intent to deduct fees and expenses from Trust Assets, specifying the amount to be deducted and the basis therefor;
(b) Following any such deduction, the aggregate fair market value of Trust Assets must remain at or above the Required Trust Amount. If the deduction of fees and expenses would cause Trust Assets to fall below the Required Trust Amount, the Trustee shall not make such deduction and shall instead pursue collection of unpaid fees and expenses from the Grantor through other available legal remedies; and
(c) The Trustee shall promptly notify the Grantor in writing of any deduction made pursuant to this Section 7.4 and shall include the amount deducted in the next monthly statement delivered to the Grantor and the Beneficiary.
Section 7.5 — Indemnification of Trustee
The Grantor shall indemnify, defend, and hold harmless the Trustee and its directors, officers, employees, and agents from and against all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and expenses and costs of investigation) arising out of or in connection with the Trustee's acceptance of appointment, administration, and performance of its duties under this Agreement, except to the extent that such losses, claims, damages, liabilities, costs, or expenses are caused by the Trustee's own gross negligence, willful misconduct, fraud, or breach of fiduciary duty. The indemnification obligations of the Grantor under this Section 7.5 shall survive the termination of this Agreement and the resignation or removal of the Trustee.
Section 7.6 — Resignation and Removal of Trustee
(a) Resignation. The Trustee may resign as trustee hereunder upon ninety (90) calendar days' written notice delivered to the Grantor and the Beneficiary. Such resignation shall not become effective until a successor trustee has been appointed and has accepted appointment in accordance with Section 7.7, and all Trust Assets, records, and documents have been transferred to the successor trustee.
(b) Removal. The Beneficiary may remove the Trustee, with or without cause, upon sixty (60) calendar days' written notice delivered to the Trustee and the Grantor. The Grantor may request the removal of the Trustee, but such removal shall not be effective unless consented to in writing by the Beneficiary.
(c) Appointment of Successor. Upon any resignation or removal of the Trustee, a successor trustee shall be appointed by the Grantor, subject to the approval of the Beneficiary. The successor trustee must be a bank or trust company organized and existing under the laws of the State of New York, or a national banking association with its principal office located in the State of New York, that meets the requirements of Applicable Law to serve as trustee of a multi-beneficiary reinsurance trust. The Beneficiary shall have approval rights over any proposed successor trustee, which approval shall not be unreasonably withheld, conditioned, or delayed.
(d) Transfer of Trust Assets. The transfer of all Trust Assets, books, records, and documents to the successor trustee shall be completed within thirty (30) calendar days of the effective date of the resignation or removal. During the transition period, the outgoing Trustee shall continue to perform its duties and obligations hereunder in all material respects.
Section 7.7 — Successor Trustee
Any successor trustee appointed in accordance with Section 7.6 shall have all the rights, powers, duties, and obligations of the original Trustee under this Agreement. The predecessor trustee shall deliver all Trust Assets, records, documents, and instruments to the successor trustee, together with a final accounting of the Trust Account as of the date of transfer. Upon completion of such transfer and delivery, the predecessor trustee shall be released and discharged from all further duties and obligations under this Agreement, except with respect to any liability arising from acts or omissions occurring prior to the effective date of such transfer.
ARTICLE VIII — TERM AND TERMINATION
Section 8.1 — Term
This Agreement shall become effective upon execution and delivery by all three parties hereto (target execution date: December 15, 2025) and shall remain in full force and effect until the later of:
(a) The date on which all of the Grantor's obligations under the Reinsurance Agreement have been fully and finally discharged, commuted, or otherwise satisfied, as evidenced by a written confirmation from the Beneficiary; or
(b) Two (2) years following the expiration of the Treaty Period, i.e., December 31, 2028, unless the Beneficiary consents in writing to an earlier termination of this Agreement.
In no event shall this Agreement terminate while any obligation of the Grantor under the Reinsurance Agreement remains outstanding, unliquidated, or subject to dispute, unless the Beneficiary consents in writing to such termination.
Section 8.2 — Conditions to Termination
The Trust may be terminated only upon the satisfaction of all of the following conditions:
(a) All obligations of the Grantor under the Reinsurance Agreement have been fully and finally discharged, commuted, or otherwise satisfied, including but not limited to the payment of all losses, loss adjustment expenses, unearned premium, and any other amounts owed by the Grantor to the Beneficiary;
(b) The Beneficiary has delivered a written release to the Trustee, in form and substance satisfactory to the Trustee, confirming that no further claims exist under the Reinsurance Agreement, that no further claims are reasonably anticipated, and that the Beneficiary consents to the termination of the Trust and the release of all remaining Trust Assets to the Grantor; and
(c) Any regulatory approvals, consents, or non-objections required under Applicable Law, including from the Connecticut Department of Insurance and the New York Department of Financial Services, have been obtained.
Section 8.3 — Distribution upon Termination
Upon termination of this Agreement in accordance with Sections 8.1 and 8.2, any remaining Trust Assets shall be released and distributed to the Grantor, or as the Grantor may otherwise direct in writing. The Trustee shall deliver a final accounting of the Trust Account, reflecting all transactions from the date of the most recent prior statement through the date of distribution, to the Grantor and the Beneficiary within thirty (30) calendar days following the date of termination.
Section 8.4 — Survival
Notwithstanding the termination of this Agreement, the following provisions shall survive such termination and shall continue in full force and effect: (a) the indemnification obligations set forth in Section 7.5; (b) the record-keeping and reporting obligations set forth in Section 7.2, to the extent necessary to deliver the final accounting and to respond to regulatory inquiries; and (c) the governing law and dispute resolution provisions set forth in Article X. The survival of such provisions shall not be limited in duration unless otherwise specified herein.
ARTICLE IX — AMENDMENTS
Section 9.1 — Amendment
This Agreement may be amended, modified, or supplemented only by a written instrument duly executed by all three parties hereto (the Grantor, the Beneficiary, and the Trustee). No oral agreement, understanding, representation, or course of dealing shall constitute or be deemed to constitute an amendment to this Agreement. No amendment shall be effective if it would cause the Trust to fail to comply with NY Insurance Law § 1308, 11 NYCRR 125, or any other Applicable Law, or if it would impair the Beneficiary's withdrawal rights under Article V.
Section 9.2 — Regulatory Amendments
If Applicable Law is amended, modified, or supplemented such that additional or different requirements are imposed on the Trust, the Trust Account, the Trust Assets, or the parties hereto, the parties shall promptly and in good faith negotiate and execute such amendments to this Agreement as are necessary or appropriate to conform the terms of this Agreement to such additional or different requirements. Each party shall bear its own costs and expenses in connection with any such amendment, except as otherwise agreed by the parties.
ARTICLE X — GOVERNING LAW AND DISPUTE RESOLUTION
Section 10.1 — Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts-of-law principles thereof that would result in the application of the laws of any other jurisdiction. The parties acknowledge and agree that the State of New York has a substantial relationship to the Trust, the Trust Account, and the transactions contemplated hereby, and that the application of New York law is appropriate and consistent with Applicable Law.
Section 10.2 — Dispute Resolution — Grantor and Beneficiary
Any dispute, controversy, or claim between the Grantor and the Beneficiary arising out of, relating to, or in connection with this Agreement, including but not limited to disputes regarding the Beneficiary's withdrawal rights under Article V, the Grantor's funding obligations under Article III, or the Grantor's rights under Article VI, shall be resolved by arbitration before a panel of three (3) arbitrators, seated in New York, New York, conducted in accordance with the rules and procedures of ARIAS-U.S. then in effect, consistent with the dispute resolution provisions of the Reinsurance Agreement. Each party shall appoint one (1) arbitrator, and the two (2) party-appointed arbitrators shall select a third arbitrator who shall serve as the umpire. The arbitration panel shall have the authority to award compensatory damages, specific performance, and other equitable relief, but shall not have the authority to award punitive, exemplary, or consequential damages. The decision of the arbitration panel shall be final and binding upon the parties, and judgment upon any award rendered may be entered in any court of competent jurisdiction. Each party shall bear its own costs and expenses incurred in connection with the arbitration, and the costs of the arbitration (including the fees and expenses of the arbitrators) shall be borne equally by the parties, unless the arbitration panel determines otherwise.
Section 10.3 — Dispute Resolution — Trustee
Any dispute, controversy, or claim involving the Trustee, whether arising between the Trustee and the Grantor, between the Trustee and the Beneficiary, or among all three parties, shall be submitted to the exclusive jurisdiction of the state courts of the State of New York located in the County of New York, or the United States District Court for the Southern District of New York, and each party hereby irrevocably consents to the personal jurisdiction of such courts and waives any objection to venue therein. The Trustee shall not be required to submit to arbitration under Section 10.2 unless it voluntarily agrees to do so in writing.
Section 10.4 — Waiver of Jury Trial
EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
ARTICLE XI — REPRESENTATIONS AND WARRANTIES
Section 11.1 — Representations and Warranties of the Grantor
The Grantor hereby represents and warrants to the Beneficiary and the Trustee as follows, as of the date of this Agreement:
(a) Organization and Existence. The Grantor is a société anonyme duly organized, validly existing, and in good standing under the laws of the Grand Duchy of Luxembourg.
(b) Power and Authority. The Grantor has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate action on the part of the Grantor.
(c) No Violations. The execution, delivery, and performance of this Agreement by the Grantor do not and will not (i) violate any law, regulation, order, judgment, or decree applicable to the Grantor, (ii) contravene or conflict with the Grantor's articles of association (statuts), or (iii) result in a breach of, or constitute a default under, any material agreement to which the Grantor is a party.
(d) Non-Certified Status. The Grantor is not a certified reinsurer under 11 NYCRR 125 and acknowledges and agrees that the establishment and funding of the Trust as provided herein is a condition to the Beneficiary's ability to take credit for reinsurance ceded to the Grantor on the Beneficiary's statutory financial statements.
(e) Financial Strength Rating. As of the date of this Agreement, the Grantor holds a financial strength rating of A– (Excellent), outlook Positive, as assigned by Brindoval Rating Services. The Grantor shall promptly notify the Beneficiary and the Trustee in writing of any change in or withdrawal of such rating.
Section 11.2 — Representations and Warranties of the Beneficiary
The Beneficiary hereby represents and warrants to the Grantor and the Trustee as follows, as of the date of this Agreement: