CATASTROPHE EXCESS-OF-LOSS REINSURANCE CONTRACT
DRAFT — For Discussion Purposes Only — November 1, 2025
$35,000,000 Per Occurrence Excess of $15,000,000 Per Occurrence
Treaty Period: January 1, 2026 to December 31, 2026
Between
QUORUM SPECIALTY INSURANCE COMPANY (Cedent)
and
REINSURER PANEL (as set forth in the Reinsurer Participation Schedule attached hereto as Schedule A)
Calderwood & Harkness LLP Matter No. 1025-00004
PRIVILEGED & CONFIDENTIAL — DRAFT
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PREAMBLE
This Catastrophe Excess-of-Loss Reinsurance Contract (this "Contract") is made and entered into effective as of January 1, 2026 (the "Effective Date"), by and among:
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 "Company" or the "Cedent"). The Company is a wholly owned subsidiary of Quorum Insurance Holdings Corp., a Delaware corporation (Nasdaq: QIHC);
and each of the following reinsurers (individually, a "Reinsurer" and collectively, the "Reinsurers"):
PINNACLE RE LTD., a Bermuda Class 4 insurer, with its registered office at Cumberland House, 1 Victoria Street, Hamilton HM 11, Bermuda;
GRAYSTONE REINSURANCE AG, a Swiss corporation (Aktiengesellschaft) regulated by the Swiss Financial Market Supervisory Authority (FINMA), with its registered office at Bahnhofstrasse 72, 8001 Zürich, Switzerland; and
TIDEWATER RE S.A., a Luxembourg société anonyme, with its registered office at 14 Boulevard Royal, L-2449 Luxembourg.
The Company and the Reinsurers are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The Company is engaged in the business of underwriting specialty property and casualty insurance in the United States and maintains a diversified property book of business across the Territory (as defined herein);
B. The Company desires to obtain catastrophe excess-of-loss reinsurance protection for its property book of business, net of any quota-share reinsurance cessions (including, without limitation, the Company's 40% property quota-share reinsurance treaty with Pinnacle Re Ltd.), and the Reinsurers are willing to provide such reinsurance, each in the percentages set forth in Schedule A attached hereto (the "Reinsurer Participation Schedule");
C. This Contract has been placed through Blackbridge Advisory Group LLC, a Delaware limited liability company and licensed reinsurance intermediary (NY DFS License No. RI-00483), with its principal office at 55 Water Street, Suite 1410, New York, NY 10041, acting as the intermediary in connection with this placement (the "Intermediary"); and
D. The Parties desire to set forth their respective rights and obligations with respect to the reinsurance provided hereunder as set forth in this Contract.
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 agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Contract, the following terms shall have the meanings set forth below. Capitalized terms used in this Contract and not otherwise defined herein shall have the meanings ascribed to them in the context in which they are used.
"Attachment Point" means Fifteen Million Dollars ($15,000,000) per Occurrence, net of quota-share recoveries and any other inuring reinsurance.
"Business Covered" or "Subject Business" means all property insurance policies underwritten, issued, or renewed by the Company during the Treaty Period, including all policies of the Company in force at the inception of the Treaty Period, net of any inuring reinsurance. For the avoidance of doubt, the Business Covered is net of the Company's 40% property quota-share reinsurance treaty with Pinnacle Re Ltd. (or any successor or replacement thereof) and any other reinsurance that inures to the benefit of this Contract as identified in writing by the Company to the Lead Reinsurer.
"Cat Model" means Tempest Analytics CatView v11.2, or such successor version or replacement model as may be mutually agreed in writing by the Company and the Lead Reinsurer.
"Company" or "Cedent" means Quorum Specialty Insurance Company, a Connecticut-domiciled admitted insurer (NAIC No. 42917).
"Contract" means this Catastrophe Excess-of-Loss Reinsurance Contract, including all Schedules and Exhibits attached hereto, as the same may be amended, modified, or supplemented from time to time in accordance with the terms hereof.
"Deposit Premium" means Seven Hundred Forty-Three Thousand Seven Hundred Fifty Dollars ($743,750) per quarter, as further described in Article V.
"Effective Date" means January 1, 2026.
"Exhaustion Point" means Fifty Million Dollars ($50,000,000) per Occurrence, being the sum of the Attachment Point of Fifteen Million Dollars ($15,000,000) and the Layer Limit of Thirty-Five Million Dollars ($35,000,000).
"Hours Clause" or "Occurrence Period" means a period of one hundred sixty-eight (168) consecutive hours, as further defined in Section 3.3.
"Intermediary" means Blackbridge Advisory Group LLC, a Delaware limited liability company and licensed reinsurance intermediary (NY DFS License No. RI-00483), with its principal office at 55 Water Street, Suite 1410, New York, NY 10041.
"Layer Limit" means Thirty-Five Million Dollars ($35,000,000) per Occurrence, being the maximum amount recoverable by the Company from the Reinsurers in the aggregate with respect to any single Occurrence.
"Layer Premium" or "Annual Premium" means Two Million Nine Hundred Seventy-Five Thousand Dollars ($2,975,000), as calculated and further described in Article V.
"Lead Reinsurer" means Pinnacle Re Ltd.
"Loss" or "Ultimate Net Loss" has the meaning set forth in Section 3.6 and shall be defined to include paid and outstanding losses, loss adjustment expenses (both allocated and unallocated, to the extent provided herein), and shall be net of all salvage, subrogation, and other recoveries.
"Maximum Aggregate Limit" or "Maximum Aggregate Exposure" means Seventy Million Dollars ($70,000,000), being the Layer Limit of Thirty-Five Million Dollars ($35,000,000) plus one (1) reinstatement of Thirty-Five Million Dollars ($35,000,000), as further described in Article VI.
"Minimum Premium" means Two Million Three Hundred Eighty Thousand Dollars ($2,380,000), representing eighty percent (80%) of the Annual Premium, as further described in Section 5.2.
"Net Retention" means Fifteen Million Dollars ($15,000,000) per Occurrence, being the Company's retention for its own account net of quota-share cessions under the Company's 40% property quota-share reinsurance treaty with Pinnacle Re Ltd. and any other inuring reinsurance.
"Occurrence" has the meaning set forth in Section 3.3.
"Percentage Share" means, with respect to each Reinsurer, the percentage of the Layer Limit for which such Reinsurer is liable, as set forth in Schedule A.
"Rate-on-Line" or "ROL" means eight and one-half percent (8.50%).
"Reinstatement" has the meaning set forth in Article VI.
"Reinstatement Premium" means one hundred percent (100%) of the original Annual Premium applicable to the reinstated amount, calculated pro rata as to time for the balance of the Treaty Period remaining at the time of the applicable loss Occurrence, as further described in Section 6.2.
"Reinsurer Participation Schedule" means Schedule A attached hereto, setting forth each Reinsurer's Percentage Share and related financial terms.
"Territory" means the Continental United States (including the District of Columbia), Alaska, Hawaii, Puerto Rico, and the United States Virgin Islands, as further described in Schedule B.
"Treaty Period" or "Term" means the period commencing at 12:01 a.m. Eastern Time on January 1, 2026 and ending at 12:01 a.m. Eastern Time on January 1, 2027 (both days inclusive), as further set forth in Article II.
Section 1.2 — Rules of Construction
In this Contract, unless the context otherwise requires:
(a) Headings and titles of articles, sections, schedules, and exhibits are inserted for convenience of reference only and shall not affect the interpretation or construction of any provision of this Contract.
(b) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(c) References to any statute, regulation, rule, or order shall include any amendment, modification, codification, replacement, or reenactment thereof, and any regulation, rule, or order issued thereunder.
(d) References to articles, sections, schedules, or exhibits are to the articles, sections, schedules, or exhibits of this Contract unless otherwise specified.
(e) All monetary amounts set forth in this Contract are denominated in lawful currency of the United States of America ("United States Dollars" or "USD" or "$") unless otherwise expressly specified.
(f) Words in the singular shall include the plural, and words in the plural shall include the singular, as the context may require.
(g) References to "days" shall mean calendar days unless "business days" is expressly specified; "business days" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in New York, New York are authorized or required by law to close.
(h) The terms "hereof," "herein," "hereby," "hereto," "hereunder," and similar terms refer to this Contract as a whole and not to any particular provision of this Contract.
(i) The Parties acknowledge that each Party and its counsel have reviewed and revised this Contract and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Contract.
ARTICLE II — TERM
Section 2.1 — Treaty Period
This Contract shall be effective from 12:01 a.m. Eastern Time on January 1, 2026 through 12:01 a.m. Eastern Time on January 1, 2027 (the "Treaty Period"). The Treaty Period shall constitute a twelve (12) month term, during which the reinsurance provided hereunder shall be in effect in accordance with the terms and conditions set forth herein. All times referenced in this Contract shall be Eastern Time unless otherwise expressly stated.
Section 2.2 — Policies Covered
This Contract covers all policies of the Company constituting Business Covered that are in force at the inception of the Treaty Period, and all policies constituting Business Covered that are issued or renewed by the Company during the Treaty Period. This Contract is written on a "Losses Occurring During" basis, meaning that this Contract covers Occurrences taking place during the Treaty Period regardless of (a) when the underlying policies giving rise to such Occurrences were written, bound, issued, or renewed, and (b) when the losses arising from such Occurrences are reported, adjusted, settled, or paid by the Company. For the avoidance of doubt, the determinative factor for coverage under this Contract is whether the Occurrence commenced during the Treaty Period, and not the date on which any individual claim or loss is reported or settled.
Section 2.3 — Run-off / Sunset
Upon the expiration or termination of the Treaty Period, this Contract shall continue in effect with respect to all outstanding claims arising from Occurrences that took place during the Treaty Period, until such claims are finally settled, commuted, or otherwise resolved. The Reinsurers' obligations with respect to such Occurrences shall survive the expiration or termination of the Treaty Period, and the following provisions of this Contract shall remain in full force and effect after such expiration or termination: Article VII (Loss Settlement and Claims), Article VIII (Reports and Accounts), Article IX (Collateral and Security), Article XIII (Insolvency), Article XIV (Arbitration), Article XV (Governing Law), Section 19.8 (Confidentiality), and any other provisions that by their nature are intended to survive expiration or termination. The Company shall continue to provide quarterly reports with respect to outstanding claims from the Treaty Period until all such claims are finally settled, and the Reinsurers shall continue to maintain any required collateral in accordance with Article IX until all obligations hereunder have been discharged or commuted. The Company's obligation to remit any final premium adjustments and the Reinsurers' obligation to pay loss amounts due with respect to covered Occurrences shall likewise survive expiration or termination.
ARTICLE III — COVERAGE
Section 3.1 — Indemnity and Layer Structure
Subject to all of the terms and conditions of this Contract, the Company agrees to cede, and each Reinsurer agrees to accept (severally and not jointly, in accordance with each Reinsurer's Percentage Share as set forth in Schedule A), its respective share of the amount by which the Company's Ultimate Net Loss arising from any one Occurrence exceeds the Attachment Point of Fifteen Million Dollars ($15,000,000), up to the Layer Limit of Thirty-Five Million Dollars ($35,000,000).
Accordingly, the maximum recovery by the Company from all Reinsurers combined with respect to any single Occurrence shall be Thirty-Five Million Dollars ($35,000,000), representing the difference between the Exhaustion Point of Fifty Million Dollars ($50,000,000) and the Attachment Point of Fifteen Million Dollars ($15,000,000).
Each Reinsurer's maximum liability with respect to any single Occurrence shall be its Percentage Share multiplied by the Layer Limit, as follows:
(a) Pinnacle Re Ltd.: 50% × $35,000,000 = $17,500,000 per Occurrence;
(b) Graystone Reinsurance AG: 30% × $35,000,000 = $10,500,000 per Occurrence; and
(c) Tidewater Re S.A.: 20% × $35,000,000 = $7,000,000 per Occurrence.
The liability of each Reinsurer under this Contract is several and not joint. No Reinsurer shall be liable for any portion of any other Reinsurer's Percentage Share of any loss or obligation arising under this Contract. The inability or failure of any Reinsurer to perform its obligations hereunder shall not relieve any other Reinsurer of its obligations, nor shall it increase the obligations of any non-defaulting Reinsurer.
The maximum aggregate liability of all Reinsurers combined under this Contract, across all Occurrences during the Treaty Period (including the original Layer Limit and one reinstatement as provided in Article VI), shall not exceed Seventy Million Dollars ($70,000,000).
Section 3.2 — Net Retained Lines
The Company's retention of Fifteen Million Dollars ($15,000,000) per Occurrence represents the Company's net retention after giving effect to the Company's 40% property quota-share reinsurance treaty with Pinnacle Re Ltd. and any other inuring reinsurance that reduces the Company's net loss from any Occurrence before application of this Contract. The Company warrants that it shall retain for its own account not less than Fifteen Million Dollars ($15,000,000) per Occurrence of Ultimate Net Loss before any recovery is made under this Contract.
The Company shall not, during the Treaty Period, purchase, obtain, or otherwise procure any additional reinsurance, indemnity, or other form of risk transfer that would have the effect of reducing its Net Retention below Fifteen Million Dollars ($15,000,000) per Occurrence without the prior written consent of the Lead Reinsurer. Any such additional reinsurance obtained with the consent of the Lead Reinsurer shall be disclosed to all Reinsurers promptly upon placement and shall be reflected in the calculation of Ultimate Net Loss under this Contract.
Section 3.3 — Definition of Occurrence / Hours Clause
For purposes of this Contract, an "Occurrence" means any one loss, disaster, casualty, or catastrophe, or any series of losses, disasters, casualties, or catastrophes arising out of one event or from one common cause or from one catastrophe. All individual losses arising from an Occurrence shall be treated as a single Occurrence for purposes of determining whether the Company's Ultimate Net Loss exceeds the Attachment Point and for calculating recoveries hereunder.
For losses arising out of a catastrophe (including, without limitation, hurricanes, tropical storms, named storms, earthquakes, floods, wildfires, severe convective storms, tornadoes, hailstorms, straight-line winds, derechos, ice storms, winter storms, and volcanic eruptions), all individual losses arising from such catastrophe shall be deemed to constitute a single Occurrence, provided that such losses occur within a continuous period of one hundred sixty-eight (168) consecutive hours (the "Hours Clause"). The Company shall select the date and time at which the 168-hour period commences, and shall provide written notice to the Lead Reinsurer and the Intermediary of the Hours Clause period selected for each Occurrence. The Company may not select more than one 168-hour period with respect to any single event or catastrophe.
For earthquake perils specifically, the Hours Clause shall apply as follows: all earthquake shocks, aftershocks, and related seismic events (including resulting tsunami) that occur within a period of one hundred sixty-eight (168) consecutive hours shall be deemed a single Occurrence. If successive earthquake shocks occur within the selected 168-hour period but can reasonably be attributed to a single seismic event or fault movement, such shocks shall be aggregated and treated as one Occurrence.
In the event that two or more separate and distinct events or catastrophes occur within a single 168-hour period, and each such event independently produces losses that could give rise to a claim under this Contract, the Company shall allocate losses to each event in a reasonable and defensible manner, consistent with the Company's underlying claims-handling practices. Each event so allocated shall constitute a separate Occurrence for purposes of this Contract, and the Attachment Point and Layer Limit shall apply separately to each such Occurrence. However, in no event shall any individual loss be counted in more than one Occurrence.
Section 3.4 — Territory
This Contract applies only to losses originating from risks physically located within the Territory, as defined in Section 1.1 and further described in Schedule B. The Territory encompasses the Continental United States (including all fifty states and the District of Columbia), Hawaii, Puerto Rico, and the United States Virgin Islands.
Losses arising from risks located outside the Territory are excluded from coverage under this Contract. Notwithstanding the foregoing, if a covered Occurrence originates within the Territory and causes loss or damage to insured property that is temporarily located outside the Territory (for example, property in transit), such extraterritorial loss shall be covered under this Contract to the extent such loss is covered under the underlying policy issued by the Company, provided that the Occurrence itself originated from a peril event within the Territory. Losses arising from events originating outside the Territory, even if such events subsequently cause loss or damage within the Territory, shall not be covered unless the predominant cause of the loss event is centered within the Territory.
Section 3.5 — Perils Covered
This Contract provides coverage on an "all natural perils" basis. The natural perils covered hereunder include, without limitation, the following:
(a) Named storm and hurricane (including tropical storms, typhoons, and related storm surge and precipitation);
(b) Earthquake (including seismic activity, aftershock, tsunami, and related ground movement);
(c) Flood (whether or not resulting from named storm, including riverine flooding, flash flooding, and coastal flooding);
(d) Wildfire (including brush fire and forest fire);
(e) Severe convective storm (including tornado, hailstorm, straight-line wind, downburst, microburst, and derecho);
(f) Winter storm and ice storm (including freezing rain, sleet, heavy snowfall, and ice accumulation);
(g) Volcanic eruption (including lava flow, pyroclastic flow, ashfall, and related seismic activity); and
(h) Any other natural peril not specifically enumerated above, provided that such peril constitutes a catastrophe event giving rise to aggregate losses exceeding the Attachment Point and is not otherwise excluded under Article IV.
Man-made perils, including but not limited to terrorism, industrial accidents, explosions caused by human action (other than those resulting from a covered natural peril), civil disorder, and riots, are excluded from coverage under this Contract except as may be expressly provided elsewhere herein or as may be agreed in writing by the Parties.
Section 3.6 — Ultimate Net Loss
"Ultimate Net Loss" means the sum actually paid or payable by the Company in settlement of losses and/or liabilities arising from a covered Occurrence, after deduction of all recoveries (whether collected or not), salvage, subrogation, and all other reductions in loss actually obtained, including, without limitation:
(a) All allocated loss adjustment expenses ("ALAE"), including court costs, legal fees, expert fees, investigation expenses, and all other expenses allocable to the investigation, adjustment, negotiation, defense, and settlement of individual claims arising from the Occurrence;
(b) Unallocated loss adjustment expenses ("ULAE") to the extent of five percent (5%) of paid losses attributable to the Occurrence, provided that such ULAE amount shall not exceed One Hundred Thousand Dollars ($100,000) per Occurrence;
(c) [Extra-Contractual Obligations ("ECO"): The inclusion of extra-contractual obligations — i.e., damages awarded against the Company, not covered by any underlying policy, that arise from the Company's handling of any claim on a policy covered hereunder, including damages for bad faith, failure to settle within policy limits, or other alleged wrongful act or omission — is subject to further negotiation between the Parties and shall be addressed in a subsequent draft of this Contract.]
(d) [Excess of Policy Limits Losses ("XPL"): The inclusion of loss amounts in excess of the applicable policy limits (arising from failure to settle within policy limits or from alleged wrongful refusal to settle) is subject to further negotiation between the Parties and shall be addressed in a subsequent draft of this Contract.]
For the avoidance of doubt, Ultimate Net Loss shall be calculated net of the Company's 40% property quota-share reinsurance treaty with Pinnacle Re Ltd. and any other inuring reinsurance that reduces the Company's net loss before application of this Contract. The Ultimate Net Loss shall not include any amounts recovered or recoverable under any other excess-of-loss reinsurance contract or other reinsurance arrangement that is not inuring to this Contract.
ARTICLE IV — EXCLUSIONS
Section 4.1 — Nuclear Exclusion (NMA 1975a)
This Contract shall not apply to nor cover any loss or liability directly or indirectly arising from, contributed to by, or resulting from nuclear reaction, nuclear radiation, or radioactive contamination, regardless of any other cause or event contributing concurrently or in any other sequence to the loss. The Nuclear Incident Exclusion Clause — Liability — Reinsurance (NMA 1975a) is hereby incorporated by reference and attached hereto in full as Schedule C-1.
This exclusion applies regardless of whether the nuclear event is accidental or intentional, and regardless of whether the nuclear hazard or contamination arises from any apparatus, equipment, or weapon employing nuclear fission or fusion, or from the processing, handling, storage, transportation, or disposal of nuclear material or radioactive waste. The exclusion extends to all consequences of nuclear events, including thermal radiation, blast, electromagnetic pulse, and fallout.
Section 4.2 — Communicable Disease Exclusion (NMA 2962)
This Contract shall not apply to nor cover any loss, damage, cost, or expense directly or indirectly arising out of, contributed to by, or resulting from any communicable disease, or the fear or threat (whether actual or perceived) of a communicable disease. The Communicable Disease Exclusion (NMA 2962) is hereby incorporated by reference and attached hereto in full as Schedule C-2.
For purposes of this exclusion, "communicable disease" means any disease that can be transmitted by means of any substance or agent from any organism to another organism, where: (a) the substance or agent includes, but is not limited to, a virus, bacterium, parasite, or other organism, or any variation thereof, whether deemed living or not; and (b) the method of transmission, whether direct or indirect, includes but is not limited to airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid, or gas, or transmission between organisms. This exclusion applies regardless of whether the communicable disease has been declared a pandemic, epidemic, or outbreak by any governmental or international authority.
Section 4.3 — Terrorism Exclusion (LMA 3030, Modified)
This Contract shall not apply to nor cover any loss, damage, cost, or expense of whatsoever nature directly or indirectly caused by, resulting from, or in connection with any act of terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss. The Terrorism Exclusion (LMA 3030, as modified) is hereby incorporated by reference and attached hereto in full as Schedule C-3.
For purposes of this exclusion, "act of terrorism" means any act, or preparation in respect of action, or threat of action, designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes, to intimidate the public or a section of the public of any nation, by any person or group of persons, whether acting alone or on behalf of or in connection with any organization or government de jure or de facto, and which (a) involves violence against one or more persons, (b) involves damage to property, (c) endangers life other than that of the person committing the action, (d) creates a risk to health or safety of the public or a section of the public, or (e) is designed to interfere with or to disrupt an electronic system.
Without limiting the generality of the foregoing, this exclusion specifically applies to any act that is certified or certifiable as an "act of terrorism" under the Terrorism Risk Insurance Act of 2002 (TRIA), as amended and extended (including, without limitation, the Terrorism Risk Insurance Program Reauthorization Act of 2015 and any successor legislation), by the Secretary of the Treasury of the United States in concurrence with the Secretary of Homeland Security and the Attorney General of the United States.
[Note: The Parties shall discuss whether a limited carve-back for non-certified domestic terrorism events may be appropriate. If agreed, such carve-back language shall be incorporated into the modified LMA 3030 text attached as Schedule C-3. Any such carve-back, if included, shall be subject to a separate sub-limit and reinstatement provisions to be agreed.]
Section 4.4 — Cyber Exclusion (LMA 5400, Modified per Quorum Manuscript)
This Contract shall not apply to nor cover any loss, damage, liability, claim, cost, or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with any cyber act or any cyber incident. The Cyber Act Exclusion (LMA 5400, as modified per the Quorum Manuscript) is hereby incorporated by reference and attached hereto in full as Schedule C-4.
For purposes of this exclusion, a "cyber act" includes, without limitation: (a) any unauthorized, malicious, or criminal act, or the threat or hoax thereof, involving access to, processing of, use of, or operation of any computer system; (b) any error or omission involving access to, processing of, use of, or operation of any computer system; (c) any partial or total unavailability or failure to access, process, use, or operate any computer system; (d) any denial of service attack; (e) any deployment or use of malware, ransomware, spyware, phishing, or other malicious code or software; or (f) any loss of, alteration of, or damage to data, software, or information.
Notwithstanding the foregoing exclusion, and pursuant to the Quorum Manuscript modifications:
[The Parties are negotiating a limited carve-back (or "write-back") for physical damage resulting from a cyber event, where such physical damage constitutes a covered natural peril under the Company's underlying property policies. Specifically, if a cyber act or cyber incident directly causes fire, explosion, or other physical damage to tangible property, and such fire, explosion, or physical damage is of a type that constitutes a covered peril under Article III and the underlying policy, the resulting physical damage (but not the cyber act itself) may be covered under this Contract. The scope, terms, and sub-limits of any such write-back are subject to further negotiation and will be reflected in the final version of Schedule C-4.]
[The Parties shall also confirm whether this cyber exclusion applies at the reinsurance contract level (i.e., operating as an exclusion from the reinsurance coverage regardless of the underlying policy terms) or at the underlying policy level (i.e., only excluding losses to the extent the underlying policy contains a cyber exclusion). The current draft contemplates application at the reinsurance contract level.]
Section 4.5 — Other Exclusions
In addition to the exclusions set forth in Sections 4.1 through 4.4, this Contract shall not apply to nor cover any loss, damage, cost, expense, or liability directly or indirectly arising from, contributed to by, or resulting from any of the following:
(a) War and Civil War. Any war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, or confiscation or nationalization or requisition or destruction of or damage to property by or under the order of any government or public or local authority. This exclusion shall not apply to acts of terrorism, which are addressed separately in Section 4.3.
(b) Asbestos. Any claim, loss, cost, or expense arising from, related to, or in any way connected with asbestos or asbestos-containing materials, including the manufacture, mining, processing, distribution, use, storage, removal, abatement, replacement, encapsulation, or disposal of asbestos or products containing asbestos, except to the extent that such claim constitutes first-party property damage resulting from a covered natural peril Occurrence under Article III.
(c) Environmental Pollution. Any claim, loss, cost, or expense arising from, related to, or in any way connected with the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, escape, or disposal of pollutants, contaminants, or hazardous substances into or upon land, the atmosphere, or any watercourse or body of water, except for sudden and accidental pollution events that are covered under the Company's underlying property policies and that result directly from a covered natural peril Occurrence under Article III.
(d) [Any other exclusions as may be agreed by the Parties prior to execution of this Contract shall be set forth in this Section 4.5.]
ARTICLE V — PREMIUM
Section 5.1 — Annual Layer Premium
The Annual Layer Premium payable by the Company to the Reinsurers for the reinsurance coverage provided under this Contract shall be Two Million Nine Hundred Seventy-Five Thousand Dollars ($2,975,000), calculated as the product of the Layer Limit of Thirty-Five Million Dollars ($35,000,000) multiplied by the Rate-on-Line of eight and one-half percent (8.50%). Each Reinsurer's share of the Annual Layer Premium shall be determined by multiplying the Annual Layer Premium by such Reinsurer's Percentage Share as set forth in Schedule A, as follows:
(a) Pinnacle Re Ltd.: 50% × $2,975,000 = $1,487,500;
(b) Graystone Reinsurance AG: 30% × $2,975,000 = $892,500; and
(c) Tidewater Re S.A.: 20% × $2,975,000 = $595,000.
Section 5.2 — Minimum Premium
The Minimum Premium under this Contract shall be Two Million Three Hundred Eighty Thousand Dollars ($2,380,000), representing eighty percent (80%) of the Annual Layer Premium. The Minimum Premium shall be fully earned as of the Effective Date and shall be non-refundable under any circumstances, including early termination of this Contract (except for termination resulting from a material breach by a Reinsurer or the insolvency of a Reinsurer). Each Reinsurer's share of the Minimum Premium shall be its Percentage Share of Two Million Three Hundred Eighty Thousand Dollars ($2,380,000), as follows:
(a) Pinnacle Re Ltd.: 50% × $2,380,000 = $1,190,000;
(b) Graystone Reinsurance AG: 30% × $2,380,000 = $714,000; and
(c) Tidewater Re S.A.: 20% × $2,380,000 = $476,000.
Section 5.3 — Deposit Premium and Payment Schedule
The Annual Layer Premium shall be paid in four (4) equal quarterly installments of Seven Hundred Forty-Three Thousand Seven Hundred Fifty Dollars ($743,750) each. Each installment shall be payable on the following due dates:
(a) First Installment: January 1, 2026, or within thirty (30) days of the Effective Date (i.e., no later than January 31, 2026);
(b) Second Installment: April 1, 2026;
(c) Third Installment: July 1, 2026; and
(d) Fourth Installment: October 1, 2026.
All premium payments shall be remitted by the Company through the Intermediary (Blackbridge Advisory Group LLC) to each Reinsurer in accordance with the remittance procedures set forth in Article XII. The quarterly premium payment schedule is further detailed in Schedule D attached hereto.
Section 5.4 — Adjustment Premium
[The Parties shall discuss whether the Annual Layer Premium is structured on a flat-rated basis (as currently contemplated in this draft) or whether a variable-rated structure shall apply, under which the final Annual Layer Premium would be subject to adjustment based on changes in the Company's subject premium base during the Treaty Period. If a variable-rated structure is adopted, the Contract will include a provisional premium (with a minimum and maximum), a rate formula, and an adjustment calculation to be performed within ninety (90) days following the expiration of the Treaty Period. Pending resolution of this open point, the Annual Layer Premium is treated as fixed and flat-rated at $2,975,000.]
Section 5.5 — Late Payment / Interest
Any premium installment not received by the applicable Reinsurer (or by the Intermediary on behalf of such Reinsurer) within the applicable payment period shall bear interest at a rate equal to the Prime Rate as published by The Wall Street Journal on the applicable due date, plus two percent (2%) per annum, calculated from the due date to the date of actual receipt. For purposes of this Section, the Company shall be entitled to a grace period of thirty (30) days following the applicable due date before interest begins to accrue. In no event shall the interest rate applicable under this Section exceed the maximum rate permitted by applicable law. The accrual of interest under this Section shall not constitute a waiver of any other right or remedy available to the Reinsurers with respect to overdue premiums.
ARTICLE VI — REINSTATEMENT
Section 6.1 — Number of Reinstatements
The Layer Limit shall be subject to one (1) reinstatement of the full Layer Limit of Thirty-Five Million Dollars ($35,000,000). Accordingly, following the exhaustion or partial exhaustion of the original Layer Limit by reason of a loss Occurrence during the Treaty Period, the Layer Limit shall be automatically reinstated to its original amount (or the portion thereof that has been exhausted), subject to payment of the Reinstatement Premium as provided in Section 6.2.
Section 6.2 — Reinstatement Premium
The reinstatement of the Layer Limit (or any portion thereof) shall be subject to the payment by the Company of a Reinstatement Premium calculated at one hundred percent (100%) of the original Annual Layer Premium applicable to the reinstated amount, pro rata as to time for the balance of the Treaty Period remaining from the date of the loss Occurrence giving rise to the reinstatement. The Reinstatement Premium shall be calculated in accordance with the following formula:
Reinstatement Premium = (Annual Layer Premium) × (Amount Reinstated ÷ Layer Limit) × (Number of Days Remaining in the Treaty Period from the Date of the Loss Occurrence ÷ 365)
By way of illustration, if the full Layer Limit of $35,000,000 is exhausted by a loss Occurrence on July 1, 2026 (with 184 days remaining in the Treaty Period), the Reinstatement Premium would be calculated as follows:
$2,975,000 × ($35,000,000 ÷ $35,000,000) × (184 ÷ 365) = $2,975,000 × 1.0 × 0.5041 = $1,499,698 (approximately)
The reinstatement of the Layer Limit shall be automatic upon the attachment of a loss to the Layer, and shall not require any further agreement, documentation, or confirmation by the Reinsurers. Each Reinsurer's share of the Reinstatement Premium shall be its Percentage Share of the calculated Reinstatement Premium.
Section 6.3 — Maximum Aggregate Exposure
The total aggregate exposure of all Reinsurers under this Contract (being the original Layer Limit plus one reinstatement of the Layer Limit) shall not exceed Seventy Million Dollars ($70,000,000). In no event shall the aggregate of all recoveries by the Company under this Contract, across all Occurrences during the Treaty Period, exceed Seventy Million Dollars ($70,000,000). Each Reinsurer's maximum aggregate liability under this Contract is its Percentage Share of Seventy Million Dollars ($70,000,000), as follows:
(a) Pinnacle Re Ltd.: 50% × $70,000,000 = $35,000,000;
(b) Graystone Reinsurance AG: 30% × $70,000,000 = $21,000,000; and
(c) Tidewater Re S.A.: 20% × $70,000,000 = $14,000,000.
Section 6.4 — Reinstatement Mechanics
The reinstatement of the Layer Limit following the attachment of a loss Occurrence to the Layer is automatic and immediate, requiring no additional documentation, endorsement, or confirmation by any Party. Coverage under the reinstated Layer Limit shall be effective immediately following the Occurrence that exhausted or partially exhausted the original Layer Limit.
The Reinstatement Premium shall be due and payable by the Company (through the Intermediary) within thirty (30) days of the Company's notification to the Reinsurers of the loss Occurrence that triggered the reinstatement. For the avoidance of doubt, the obligation to pay the Reinstatement Premium arises upon the occurrence of a covered event that attaches to the Layer, even if the final amount of Ultimate Net Loss has not been determined at the time the Reinstatement Premium becomes due.
If the Layer Limit is only partially exhausted by a loss Occurrence (i.e., the Ultimate Net Loss exceeds the Attachment Point but does not reach the Exhaustion Point), the reinstatement shall apply on a pro rata basis as to the amount of the Layer Limit that has been exhausted. For example, if the Ultimate Net Loss from an Occurrence is $30,000,000, the Layer is penetrated by $15,000,000 (i.e., $30,000,000 − $15,000,000 Attachment Point), and the reinstatement applies only to the $15,000,000 of the Layer that has been used. The remaining $20,000,000 of the original Layer Limit continues to be available for subsequent Occurrences without requiring reinstatement.
ARTICLE VII — LOSS SETTLEMENT AND CLAIMS
Section 7.1 — Loss Notices
The Company shall provide prompt written notice to the Lead Reinsurer (Pinnacle Re Ltd.) and to the Intermediary (Blackbridge Advisory Group LLC) of any Occurrence that the Company reasonably believes may give rise to a claim or recovery under this Contract. Such preliminary loss notice shall be provided within ten (10) business days of the date on which the Company first determines, based on available information, that the Attachment Point may be breached by the Company's Ultimate Net Loss from such Occurrence.
The preliminary loss notice shall include, at a minimum, the following information to the extent then known or reasonably ascertainable: (a) the date and time of the Occurrence; (b) a brief description of the nature of the event (including the peril and geographic area affected); (c) the Hours Clause period selected by the Company; (d) a preliminary estimate of the Company's gross loss and estimated Ultimate Net Loss; and (e) any other information reasonably available to the Company at the time. The form of preliminary loss notice is attached hereto as Exhibit A.
The Company shall provide a detailed proof of loss within sixty (60) days of final settlement of all claims arising from the Occurrence, or within a reasonable time following the Company's determination of its final Ultimate Net Loss. If the final settlement of claims is expected to take longer than sixty (60) days, the Company shall provide interim loss reports at least quarterly, updating the estimated Ultimate Net Loss and the status of open claims.
Failure by the Company to provide timely notice as required under this Section 7.1 shall not relieve the Reinsurers of liability under this Contract, except to the extent that a Reinsurer demonstrates actual prejudice resulting from such late notice.
Section 7.2 — Loss Adjustment
The Company shall investigate, adjust, defend, and settle all claims and losses arising from covered Occurrences in accordance with the Company's standard claims-handling practices and procedures. The Company shall exercise its professional judgment in the investigation, adjustment, and settlement of claims, and shall act in good faith and in a commercially reasonable manner consistent with sound insurance practices.
The Reinsurers shall follow the fortunes and settlements of the Company with respect to losses falling within the terms and conditions of this Contract. Accordingly, the Reinsurers shall be bound by the loss adjustments and settlements made by the Company, provided that such adjustments and settlements are: (a) made in good faith; (b) within the terms and conditions of the underlying policies; and (c) within the terms and conditions of this Contract. The "follow the fortunes" and "follow the settlements" doctrine, as understood and applied in the customs and practices of the reinsurance industry, shall apply to this Contract.
Notwithstanding the foregoing, the Reinsurers shall not be bound by or liable for any ex gratia payment, compromise settlement, or voluntary payment made by the Company that is not within the terms and conditions of the underlying policy, unless such payment has been agreed in advance in writing by the Lead Reinsurer. Any ex gratia payment made without such prior written consent shall not be recoverable from the Reinsurers under this Contract.
Section 7.3 — Cash Call / Interim Funding
In the event of a catastrophe loss that the Company reasonably expects will result in a claim under this Contract, the Company may make a cash call upon each Reinsurer for its Percentage Share of the estimated Ultimate Net Loss in excess of the Attachment Point. Each cash call shall be accompanied by reasonable supporting documentation, including the preliminary loss notice, the basis for the Company's estimate, and a summary of claims activity.
Each Reinsurer shall remit its proportionate share of the cash call within thirty (30) days of receipt of the cash call demand and supporting documentation. If any Reinsurer reasonably requires additional supporting documentation or information before making payment, such Reinsurer shall notify the Company and the Intermediary within ten (10) business days of receipt of the cash call, and the Company shall provide such additional documentation within a reasonable time. Upon receipt of the requested documentation, the Reinsurer shall remit payment within fifteen (15) business days.
Any cash call payment shall be deemed an interim payment on account of the Reinsurer's ultimate liability under this Contract and shall be subject to adjustment upon final determination of the Ultimate Net Loss for the applicable Occurrence. If the final Ultimate Net Loss is less than the interim amount paid by a Reinsurer, the Company shall promptly refund the excess to such Reinsurer, together with interest at the rate specified in Section 5.5 from the date of the interim payment to the date of refund.
Section 7.4 — Subrogation, Salvage, and Recoveries
All subrogation, salvage, and other recoveries (including recoveries from inuring reinsurance, other third parties, or any other source) attributable to a covered Occurrence shall be applied to reduce the Ultimate Net Loss for such Occurrence. The Reinsurers shall share in all such recoveries in proportion to their respective shares of paid losses under this Contract. Recoveries shall be applied in the reverse order of loss payments, such that the Reinsurers' share of recoveries shall be calculated based on the proportion of the total loss borne by the Reinsurers.
The Company shall exercise reasonable efforts and due diligence to pursue all available subrogation and salvage rights in connection with covered Occurrences. The Company shall not waive or release any subrogation rights without the prior written consent of the Lead Reinsurer, except in the ordinary course of business and consistent with the Company's standard practices. The costs and expenses of pursuing subrogation and salvage shall be allocated between the Company and the Reinsurers in the same proportion as the loss to which such subrogation or salvage relates.
Section 7.5 — Extra-Contractual Obligations and Excess of Policy Limits
[The inclusion, scope, and terms of coverage for Extra-Contractual Obligations (ECO) and Excess of Policy Limits (XPL) losses are subject to negotiation between the Parties. The following open points remain to be resolved:]
[(a) Whether ECO and XPL losses shall be covered under this Contract;]
[(b) If covered, whether ECO and XPL losses shall be included within the Layer Limit (i.e., subject to the $35,000,000 per Occurrence cap) or in addition to the Layer Limit (i.e., subject to a separate sub-limit);]
[(c) Whether ECO/XPL coverage shall be subject to a separate sub-limit and, if so, the amount of such sub-limit;]
[(d) Whether ECO/XPL coverage shall be subject to a "sole cause" or "contributing cause" nexus requirement linking the ECO/XPL loss to the Company's handling of a claim that is otherwise covered under this Contract; and]
[(e) Whether ECO/XPL coverage shall exclude losses resulting from fraud or criminal acts by the Company or its officers or directors.]
[These provisions will be finalized in a subsequent draft.]