PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: Jeffrey Park, Senior Associate, Calderwood & Harkness LLP
TO: Douglas Carmichael, Responsible Partner, Calderwood & Harkness LLP
DATE: March 15, 2026
RE: Expert Retention Strategy — Pinnacle Atlantic Reinsurance Recoverable Dispute (Matter No. 1025-00005)
CLIENT: Quorum Insurance Holdings Corp. ("QIH") / Quorum Casualty & Surety Company ("QC&S")
PRIVILEGE NOTICE: This memorandum is protected by the attorney-client privilege and the work product doctrine. It was prepared by counsel in anticipation of litigation and/or arbitration arising from the pre-suit demand served by Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), through its counsel Hargrove, Fitch & Calloway LLP, dated February 14, 2026. This memorandum contains the mental impressions, conclusions, opinions, and legal theories of counsel at Calderwood & Harkness LLP and is not to be disclosed to any person or entity outside of the attorney-client relationship without the prior written consent of Calderwood & Harkness LLP and the client. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. Executive Summary
This memorandum outlines the categories of expert witnesses that Quorum Casualty & Surety Company ("QC&S") should retain in connection with the pending reinsurance recoverable dispute with Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") arising under Aggregate Excess-of-Loss Reinsurance Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"). The dispute centers on Pinnacle Atlantic's refusal to honor cessions totaling $78,400,000 across Treaty Years 2022 and 2023, and its countervailing demand — delivered via pre-suit demand letter from Hargrove, Fitch & Calloway LLP ("HFC") dated February 14, 2026 — totaling $91,000,000 (comprising $78,400,000 in disputed reinsurance recoverables and $12,600,000 in claimed interest). The stakes of this dispute are considerable: at issue is not only the validity of QC&S's reported cessions but also the integrity of QC&S's statutory surplus position and QIH's consolidated GAAP financial statements.
Based on our review of the dispute, the relevant treaty provisions, and the underlying factual record, we have identified three primary categories of expert witnesses whose testimony will be essential to the prosecution of QC&S's position and the defense against Pinnacle Atlantic's claims:
1. Independent Actuarial Expert — to provide an independent opinion on the propriety of the IBNR allocation methodology employed by Velthorn Actuarial Advisors LLC ("Velthorn") and to evaluate the reasonableness of QC&S's aggregate net incurred loss figures for Treaty Years 2022 and 2023;
2. Reinsurance Industry Practices Expert — to testify regarding customs and practices in the reinsurance industry relevant to the late notice defense, follow-the-fortunes doctrine, IBNR allocation, and premium reporting; and
3. Damages / Financial Expert — to quantify QC&S's damages arising from Pinnacle Atlantic's refusal to honor valid cessions, to model the financial impact of various dispute outcomes, and to evaluate and rebut Pinnacle Atlantic's interest and premium calculations.
These experts would serve in either arbitration proceedings — specifically, an ARIAS-U.S. arbitration before a three-member panel seated in New York, as contemplated by Treaty Article 22 — or in litigation before the Supreme Court of the State of New York, New York County, Commercial Division, depending on the resolution of the pending forum dispute. We have identified candidates for each category who are credible and qualified in both settings.
The need for independent expert testimony is driven in large part by the requirement to supplement and independently corroborate the work performed by Velthorn Actuarial Advisors LLC (Dr. Stephen Tanaka, FCAS, MAAA), QC&S's consulting actuaries, whose actuarial methodology underlies the disputed cessions. While Dr. Tanaka's work product is well-supported and defensible, the most persuasive presentation to any tribunal — whether an arbitration panel of experienced reinsurance professionals or a Commercial Division judge — will pair Dr. Tanaka's fact testimony regarding the analyses he actually performed with an independent expert's opinion that the methodology and conclusions are sound under applicable actuarial standards and industry practice.
We recommend that the firm begin expert vetting and retention immediately. The complexity of the underlying actuarial and financial issues will require substantial lead time for expert analysis, and we anticipate that Pinnacle Atlantic's counsel at HFC — led by Nathaniel R. Calloway III, a partner well known in the reinsurance dispute community — will move quickly to retain competing experts. Early retention secures the best candidates and avoids disqualifying conflicts that may arise if opposing counsel retains experts from the same firms or with overlapping professional networks. Furthermore, if early mediation is pursued (a possibility that Douglas Carmichael and Francesca Morano have discussed with QIH General Counsel), our experts' preliminary advisory input will be valuable in preparing the client for settlement discussions and assessing the strength of QC&S's positions.
II. Background on the Dispute and Expert-Related Issues
A. Overview of the Four Grounds of Dispute
Pinnacle Atlantic's February 14, 2026 pre-suit demand letter, transmitted by HFC on behalf of Pinnacle Atlantic, raises four distinct grounds upon which Pinnacle Atlantic claims entitlement to refuse payment of ceded losses and, in certain respects, to recover amounts already paid. Each ground implicates issues that will require expert analysis and testimony. The four grounds are summarized below.
1. Late Notice (Article 7). Pinnacle Atlantic alleges that QC&S failed to provide timely notice of the Meridian Docks mass tort claim cluster — comprising thirty-one (31) separate commercial general liability bodily injury claims arising under Policy No. CGL-2020-09844 — in violation of Article 7 of the Treaty. The factual predicate for this allegation is the gap of approximately fourteen months and seven days between the date QC&S first established reserves for the Meridian Docks claims (March 15, 2021, when QC&S's claims department posted initial case reserves totaling approximately $4.2 million across the thirty-one claims) and the date on which notice was transmitted to Pinnacle Atlantic via Broadreach Intermediaries Inc. (May 22, 2022). Pinnacle Atlantic contends that Article 7's notice provisions required prompt notification of claims or occurrences that could reasonably be expected to result in cessions under the Treaty, and that QC&S's delay prejudiced Pinnacle Atlantic's ability to monitor claim development, participate in the claims process, and assess its own reserves. QC&S's position — which the reinsurance industry practices expert will be asked to address — is that notice was not required under the Treaty's terms until individual claims crossed the $1,000,000 per-claim reporting threshold specified in Article 7.3, and that the fourteen-month period falls within the range of acceptable industry practice for aggregate excess-of-loss treaties where underlying claims are developing below reporting thresholds.
2. IBNR Misallocation (Article 5). Pinnacle Atlantic alleges that $22,300,000 in incurred-but-not-reported ("IBNR") reserve strengthening was improperly allocated to Treaty Year 2022 when it should have been attributed to Treaty Year 2021 exposures. This allocation is critical because QC&S's aggregate net incurred loss for TY 2022 was reported at $189,700,000 against a retention of $120,000,000, generating a ceded loss of $69,700,000. If the $22.3 million in IBNR is reallocated from TY 2022 to TY 2021 as Pinnacle Atlantic contends it should be, the TY 2022 aggregate net incurred loss would fall to $167,400,000, and the ceded loss would drop from $69,700,000 to $47,400,000 — a reduction of $22,300,000 in Pinnacle Atlantic's liability. The IBNR allocation methodology was developed by Velthorn Actuarial Advisors LLC (Dr. Stephen Tanaka) and is documented in the actuarial certificates that accompanied QC&S's cession billings. This ground of dispute is fundamentally actuarial in nature and is the single largest component of the overall dispute by dollar value.
3. Follow-the-Fortunes / Settlements (Article 11). Pinnacle Atlantic challenges the reasonableness and good faith of QC&S's settlement of the Veridian Financial Services Inc. errors-and-omissions claim cluster, which was resolved on September 8, 2023, for a total settlement payment of $34,500,000 (comprising Claim A at $14,200,000, Claim B at $12,800,000, and Claim C at $7,500,000). Pinnacle Atlantic contends that the settlement was not made in the exercise of good faith and businesslike judgment as required by the follow-the-fortunes provision set forth in Treaty Article 11.2, and that QC&S overpaid the Veridian claims to the detriment of its reinsurers. QC&S's position is that the settlement was the product of extensive arms'-length negotiations, informed by a thorough coverage and exposure analysis, and reflects the exercise of prudent claims management judgment. Expert testimony on industry standards for cedent settlement authority and the application of the follow-the-fortunes doctrine will be essential to defending the settlement.
4. Premium Reporting (Article 3). Pinnacle Atlantic alleges that QC&S underreported ceded earned premium by $6,800,000 — specifically, that QC&S reported $38,400,000 in ceded earned premium for the relevant treaty periods when Pinnacle Atlantic's own calculation yields $45,200,000. At the Treaty's 42% provisional ceding commission rate, this premium differential results in an alleged treaty premium underpayment of $2,856,000. The dispute centers on the treatment of certain run-off portfolio transfer premiums and whether those premiums are properly included in or excluded from the ceded earned premium base under Article 3.4 of the Treaty. While the premium dispute is the smallest component of Pinnacle Atlantic's overall demand by dollar value, it raises issues of both industry practice (how such premiums are customarily treated in aggregate excess-of-loss structures) and financial analysis (the correct computation under the Treaty's sliding-scale premium adjustment mechanism).
B. Specific Expert-Dependent Issues
Beyond the summary of each ground of dispute, several specific issues merit discussion because they are uniquely dependent on expert testimony for their resolution.
First, the IBNR allocation dispute is, at its core, an actuarial question. The determination of whether $22.3 million in IBNR development is properly attributed to accident-year 2022 claims (as Velthorn and QC&S contend, based on loss development factor analysis and actuarial certificates prepared in accordance with applicable Actuarial Standards of Practice) or to accident-year 2021 exposures (as Pinnacle Atlantic contends, based on its assertion that the underlying loss emergence relates to claims with accident dates in 2021) will require independent expert testimony on loss development factors, accident-year attribution methodology, and the propriety of Velthorn's approach under accepted actuarial standards. No lay witness — regardless of how experienced — can credibly render the opinions necessary to resolve this dispute. The arbitration panel or court will look to qualified actuarial experts to assess the reasonableness and standard-compliance of each party's methodology.
Second, the late notice and follow-the-fortunes disputes implicate reinsurance industry custom and practice in ways that require expert illumination. Treaty Article 7 does not define "timely" notice with the specificity needed to resolve the dispute on the contract language alone; industry custom will fill the gap. Similarly, Article 11's follow-the-fortunes provision invokes standards of "good faith and businesslike conduct" — terms of art in the reinsurance industry whose meaning is shaped by custom and practice as much as by contract language. Expert testimony on what constitutes reasonable notice practices, the role of intermediary brokers such as Broadreach Intermediaries Inc. in the notice chain, and the standards by which cedent settlement decisions are evaluated in the context of aggregate excess-of-loss treaties will be critical to the resolution of these issues.
Third, damages quantification presents its own set of complexities that may require dedicated financial expert testimony. Beyond the straightforward computation of ceded losses, the dispute involves Pinnacle Atlantic's interest calculation of $12,600,000 (claimed at approximately 8% per annum on the $78,400,000 disputed recoverable over an average period of approximately 24 months), alternative treaty-year allocation scenarios, and the financial impact of the dispute on QC&S's statutory surplus and QIH's consolidated GAAP financial statements. A dedicated damages or financial expert will be needed to model these scenarios credibly and to evaluate and rebut Pinnacle Atlantic's calculations.
Finally, it bears noting that Pinnacle Atlantic's IBNR reallocation argument creates an important wrinkle that may favor QC&S. If $22,300,000 in IBNR development is reallocated from TY 2022 to TY 2021 as Pinnacle Atlantic advocates, QC&S's aggregate net incurred loss for TY 2021 would increase from the reported figure of $104,600,000 (which was below the $120,000,000 retention, generating no cession for TY 2021) to $126,900,000 — a figure that breaches the TY 2021 retention by $6,900,000. Although Pinnacle Atlantic's demand letter did not address TY 2021 and did not dispute the reported figures for that year, the arithmetic of Pinnacle Atlantic's own reallocation theory would generate a new TY 2021 cession of $6,900,000 that QC&S could potentially assert. The actuarial and financial experts should be asked to analyze this scenario and its implications for both the quantum of the dispute and the net exposure calculation.
III. Category 1: Independent Actuarial Expert
A. Purpose and Scope of Retention
The independent actuarial expert will serve as QC&S's testifying actuarial expert and will be retained to provide an independent actuarial opinion addressing the central actuarial issues in the dispute. The principal objectives of this expert's engagement are as follows:
(a) IBNR Allocation Methodology. The expert will provide an independent opinion on the propriety of the IBNR allocation methodology employed by Velthorn Actuarial Advisors LLC (Dr. Stephen Tanaka, FCAS, MAAA) in connection with the actuarial certificates underlying the TY 2022 and TY 2023 cessions. Specifically, the expert will evaluate whether the $22,300,000 in IBNR reserve development was correctly attributed to accident-year 2022 claims — as Velthorn and QC&S contend — or whether there is a basis for Pinnacle Atlantic's contention that this development should be attributed to accident-year 2021 exposures. The expert will be expected to evaluate the competing methodologies and, if warranted, opine that Velthorn's approach is the more actuarially sound of the two.
(b) Definition of "Losses Incurred" Under the Treaty. The expert will opine on the definition of "losses incurred" as that term is used in Article 5.2 of the Treaty, as applied to IBNR development in the context of aggregate excess-of-loss reinsurance. This issue is fundamental to the allocation dispute: if "losses incurred" is defined to include IBNR development recognized during a given treaty year regardless of the underlying accident year to which the development relates, then Velthorn's TY 2022 attribution is correct. If, as Pinnacle Atlantic argues, "losses incurred" must be traced back to the accident year of origin, then the reallocation may have merit. The actuarial expert will address how this definitional issue is understood and applied within the actuarial profession.
(c) Review of Velthorn's Work Product. The expert will conduct a thorough review of Velthorn's loss development analysis and actuarial certificates underlying the TY 2022 and TY 2023 cessions. This review will encompass the loss development triangles, selection of development factors, methodology for IBNR estimation, and the actuarial assumptions applied in the allocation of IBNR between accident years. The goal is not to supplant Velthorn's work but to provide an independent assessment that the work was performed in accordance with applicable Actuarial Standards of Practice (ASOPs), particularly ASOP No. 43 (Unpaid Claim Estimates) and ASOP No. 36 (Statements of Actuarial Opinion Regarding Property/Casualty Loss and Loss Adjustment Expense Reserves).
(d) Reasonableness of Aggregate Net Incurred Loss Figures. The expert will assess the overall reasonableness of QC&S's reported aggregate net incurred loss figures: $189,700,000 for TY 2022 and $128,700,000 for TY 2023. This assessment will address whether the components of these figures — paid losses, case reserves, and IBNR — are individually and collectively reasonable in light of the underlying claim data and actuarial analysis.
(e) Alternative Loss Development Analysis. If necessary to rebut Pinnacle Atlantic's actuarial expert's opinions, the independent expert will prepare alternative loss development triangles that demonstrate the reasonableness of Velthorn's methodology and illustrate the sensitivity of the allocation to different methodological choices. The expert should be prepared to show that, under a range of reasonable actuarial approaches, the $22.3 million IBNR development is properly attributed to TY 2022.
(f) Reallocation Scenario Modeling. The expert will model the financial impact of the reallocation scenarios advanced by each party. Specifically, the expert will calculate the impact on TY 2022 ceded losses (reduction from $69,700,000 to $47,400,000) and the potential creation of a TY 2021 cession of $6,900,000 if the reallocation is applied. This modeling will be coordinated with the damages/financial expert to ensure consistency across the expert reports.
B. Qualifications Sought
The ideal candidate for the independent actuarial expert role should possess the following qualifications:
• Fellow of the Casualty Actuarial Society (FCAS) and Member of the American Academy of Actuaries (MAAA), demonstrating the highest level of professional credentialing in casualty actuarial practice.
• Significant, demonstrable experience with reinsurance reserving, specifically in the context of aggregate excess-of-loss treaty structures. The candidate should have worked extensively with IBNR estimation and allocation in multi-year reinsurance treaty contexts, either as a consulting actuary, a reserving actuary at a reinsurer or cedent, or both.
• Prior testimony or arbitration panel experience in reinsurance disputes. Given the likelihood that this matter will proceed to either arbitration or trial, the selected expert must be comfortable and effective as a witness. Prior experience with ARIAS-U.S. arbitration proceedings is strongly preferred.
• Familiarity with IBNR allocation methodologies in multi-year treaty contexts, including the various approaches used to attribute IBNR development to specific accident years and treaty years. The expert should be conversant with the actuarial literature on this subject and able to articulate the strengths and weaknesses of competing methodologies.
• No prior engagements with Pinnacle Atlantic Reinsurance Ltd., Pinnacle Atlantic Group Holdings Ltd., or Hargrove, Fitch & Calloway LLP that would create an actual or perceived conflict of interest. We will conduct a full conflicts check on each candidate.
• Independence from Velthorn Actuarial Advisors LLC. The candidate should have no current or recent professional relationship with Dr. Stephen Tanaka or Velthorn that would undermine the independence of the expert's opinion. The value of the independent expert is precisely that the opinion is rendered independently of the consulting actuary who performed the underlying work.
C. Candidate Experts
We have identified three candidates for the independent actuarial expert role. Each is described below, together with a preliminary assessment of their suitability.
Candidate 1: Dr. Margaret Lindquist, FCAS, MAAA
Dr. Lindquist is a partner at Whitmore Actuarial Partners LLC, based in Chicago, Illinois. She has more than twenty-five years of experience in casualty reinsurance reserving, with a particular focus on excess-of-loss and aggregate treaty structures. Dr. Lindquist has testified as an expert witness in over fifteen reinsurance arbitrations conducted under ARIAS-U.S. Rules and in several litigated proceedings in state and federal court. She has authored multiple peer-reviewed publications on IBNR allocation methodologies in excess-of-loss treaties, including articles in the Casualty Actuarial Society Forum and Variance: Advancing the Science of Risk. Her academic background includes a Ph.D. in actuarial science from the University of Wisconsin-Madison. Based on our preliminary inquiries, Dr. Lindquist has no known conflicts with Pinnacle Atlantic, HFC, or Velthorn. She is our top-ranked candidate in this category.
Candidate 2: Robert Carruthers, FCAS, MAAA
Mr. Carruthers is the principal of Carruthers & Dean Consulting LLC, based in New York, New York. He brings approximately thirty years of actuarial experience, including fifteen years as the chief actuary of a major Bermuda-domiciled reinsurer where he was responsible for casualty treaty reserving. Since founding his consulting practice, Mr. Carruthers has focused on expert witness engagements in reinsurance disputes. He has extensive experience with aggregate treaty loss development and is well known in the ARIAS-U.S. arbitration community, having served as both a testifying expert and a party-appointed arbitrator in prior proceedings. Mr. Carruthers's credentials and industry reputation are strong. However, given his prior role at a Bermuda reinsurer, a conflict check against Pinnacle Atlantic and Pinnacle Atlantic Group Holdings Ltd. is essential before we can proceed further. His hourly rates may be at the higher end of the estimated range given his New York base and senior reputation.
Candidate 3: Dr. Anita Redmond, FCAS, MAAA, Ph.D.
Dr. Redmond is a senior consultant at Edgemont Risk Analytics LLC, based in Boston, Massachusetts. She holds a Ph.D. in statistics from Columbia University in addition to her FCAS and MAAA designations, giving her unusually strong academic credentials alongside practical reinsurance consulting experience. Dr. Redmond has published extensively on actuarial standards applicable to reinsurance accounting and has consulted for both cedents and reinsurers on reserving disputes. Her primary limitation relative to the other candidates is less extensive arbitration testimony experience — she has served as a testifying expert in four prior matters, compared with Dr. Lindquist's fifteen-plus engagements. However, her analytical credentials are exceptional, and her academic publications would lend credibility to her testimony on methodology. She would be a strong choice if Dr. Lindquist is unavailable or conflicted.
D. Relationship to Velthorn's Work
It is important to delineate clearly the respective roles of the independent actuarial expert and Velthorn Actuarial Advisors LLC (Dr. Stephen Tanaka). The independent actuarial expert will review, analyze, and opine upon the work of Velthorn but will not replace or supplant that work. This distinction serves several purposes.
Dr. Tanaka prepared the actuarial certificates and loss development analyses that accompanied QC&S's cession billings to Pinnacle Atlantic. He has firsthand knowledge of the data, methodologies, and professional judgments that informed those certificates. As such, Dr. Tanaka will likely serve as a fact witness — testifying to what he did, how he did it, and why — rather than as an expert witness offering opinions on the standard of care or the correctness of methodology in the abstract. His testimony will be grounded in the specific analyses he performed and the specific data he reviewed.
The independent actuarial expert, by contrast, will provide the opinion testimony that the tribunal will rely upon in evaluating the propriety of Velthorn's methodology. The independent expert will bring a fresh perspective, unencumbered by involvement in the underlying work, and will be able to opine that the methodology employed by Velthorn is consistent with accepted actuarial standards of practice, reasonable in the context of the Treaty and the underlying claims data, and preferable to the alternative methodology that Pinnacle Atlantic's expert is likely to advance.
Careful coordination will be required to ensure consistency between Velthorn's factual work and the independent expert's opinions. We will manage this coordination through the engagement team — specifically, through Jeffrey Park as primary coordinator, with support from Yuki Nakamura — to maintain appropriate separation while ensuring that the expert has full access to Velthorn's work product and can incorporate it into the independent analysis.
E. Estimated Retention Costs
Based on our experience with actuarial expert retentions in comparable reinsurance disputes and preliminary inquiries with the candidate experts, we estimate the following retention costs for the independent actuarial expert:
The range of estimated hours for the initial review and report reflects the complexity of the IBNR allocation issue and the volume of underlying data — including loss development triangles, claim-level data, and multiple years of actuarial certificates — that the expert will need to review. The higher end of the range assumes that the expert will need to construct independent loss development analyses and model multiple allocation scenarios. The lower end assumes that the expert can rely more heavily on the existing Velthorn analysis, supplementing with targeted independent verification.
IV. Category 2: Reinsurance Industry Practices Expert
A. Purpose and Scope of Retention
The reinsurance industry practices expert will serve as QC&S's testifying expert on customs and practices in the reinsurance industry. This expert's testimony will be relevant to each of the four grounds of dispute raised by Pinnacle Atlantic, and the scope of the engagement accordingly spans the full breadth of the case. The principal topics for this expert's testimony are as follows:
Notice Practices (Article 7 / Late Notice). The industry practices expert will opine on what constitutes timely notice in the context of aggregate excess-of-loss reinsurance treaties. This testimony is critical because Article 7 of the Treaty, while requiring notice of claims or occurrences that "may reasonably be expected to result in a cession," does not specify a fixed time period for compliance, and the meaning of "timely" notice in this context is informed by industry custom and practice. Specifically, the expert will address:
• Whether industry custom supports QC&S's position that notice to reinsurers under an aggregate excess-of-loss treaty is not required until individual underlying claims have developed to a level at which they could reasonably be expected to contribute to a breach of the aggregate retention — and specifically, whether the $1,000,000 per-claim reporting threshold referenced in Article 7.3 reflects a reasonable and customary notice trigger.
• Whether a fourteen-month gap between the cedent's initial reserving of underlying claims and the provision of notice to reinsurers through an intermediary is within the range of acceptable industry practice when the claims in question are developing below treaty reporting thresholds and the aggregate retention has not yet been breached.
• The standard practices and protocols by which notice is transmitted through reinsurance intermediaries such as Broadreach Intermediaries Inc., including typical processing times, the allocation of responsibility for notice between the cedent and the intermediary, and the extent to which delays attributable to intermediary processing are customarily excused or attributed to the cedent.
Follow-the-Fortunes / Settlement Practices (Article 11). The expert will opine on industry standards for cedent settlement authority under the follow-the-fortunes doctrine as it applies in the aggregate excess-of-loss context. With respect to the Veridian Financial Services Inc. E&O cluster settlement, the expert will address:
• The standards by which a cedent's settlement decisions are evaluated in the reinsurance industry, including the deference customarily afforded to a cedent's assessment of coverage exposure and the settlement value of claims.
• Whether the Veridian settlement — totaling $34,500,000 across three related claims (Claim A: $14,200,000; Claim B: $12,800,000; Claim C: $7,500,000) — reflects the exercise of good faith and businesslike judgment in light of the nature of the underlying E&O/professional liability exposure.
• Industry standards for settlement documentation and exposure analysis, including the extent to which cedents are expected to document their evaluation of claims, obtain reinsurer input prior to settlement, and maintain records supporting the reasonableness of settlement amounts.
IBNR Allocation Practices. The expert will opine on how aggregate excess-of-loss treaties in the marketplace typically handle IBNR development and treaty-year attribution. While the specific actuarial analysis will be addressed by the independent actuarial expert, the industry practices expert can provide a broader market perspective on customary approaches, including whether Velthorn's methodology is consistent with prevailing industry practice and whether there is an established market custom regarding the attribution of IBNR development to the treaty year in which it is recognized versus the accident year from which it originates.
Premium Reporting. The expert will opine on the customary treatment of run-off portfolio transfer premiums in ceded earned premium calculations under aggregate excess-of-loss treaties. The premium reporting dispute centers on whether certain run-off portfolio transfer premiums should be included in or excluded from the ceded earned premium base under Article 3.4. The industry practices expert can testify to whether the exclusions that QC&S applied are consistent with market practice and the expectations of parties in the London and Bermuda reinsurance markets.
More broadly, the expert will testify to the general expectations between cedents and reinsurers regarding billing, documentation, claim handling, and dispute resolution in the London and Bermuda reinsurance markets — the markets in which this Treaty was placed and from which industry norms are drawn.
B. Qualifications Sought
The ideal candidate for the reinsurance industry practices expert role should possess the following qualifications:
• Former senior reinsurance executive with a minimum of twenty years of industry experience, preferably in an underwriting, claims, or treaty management role at a reinsurer, cedent, or both. Seniority of the candidate's former roles is important because the arbitration panel (or court) will assess the credibility of industry practice testimony based in part on the breadth and depth of the witness's direct experience.
• Direct experience with aggregate excess-of-loss casualty treaty structures. This is a non-negotiable qualification. Aggregate excess-of-loss treaties have distinct characteristics that differentiate them from per-occurrence and per-risk excess treaties, and the expert must be able to speak to the specific customs and practices applicable to the aggregate structure.
• Prior expert witness experience in reinsurance arbitrations and/or litigation in New York courts. Candidates with ARIAS-U.S. arbitration experience — either as testifying experts or as certified arbitrators — are preferred, as they will be familiar with the expectations and procedures of the ARIAS arbitration format.
• Understanding of the roles of reinsurance intermediaries (brokers) in the treaty placement and claims process. Given that Broadreach Intermediaries Inc. served as the intermediary broker on this Treaty, and that the notice dispute involves questions about intermediary protocols, the expert should be able to testify credibly about broker-intermediated treaty mechanics.
• No current or recent affiliation with Pinnacle Atlantic Reinsurance Ltd., Pinnacle Atlantic Group Holdings Ltd., or any of their subsidiaries, and no current or recent retention by Hargrove, Fitch & Calloway LLP.
C. Candidate Experts
We have identified three candidates for the reinsurance industry practices expert role. Each is described below.
Candidate 1: Thomas Ainsworth
Mr. Ainsworth is the former Executive Vice President, Treaty Claims, at a major Bermuda-domiciled reinsurer, from which he retired in 2022 after more than thirty years in the reinsurance industry. During his career, Mr. Ainsworth was directly responsible for the management and resolution of treaty claims, including claims arising under aggregate excess-of-loss structures. Since his retirement, he has maintained an active practice as an independent reinsurance consultant and expert witness. He is a certified ARIAS-U.S. arbitrator and has served as a party-appointed arbitrator in multiple reinsurance arbitrations, in addition to his extensive experience testifying as an industry practices expert. He is based in New York and has confirmed initial availability for this engagement. Mr. Ainsworth is our top-ranked candidate in this category based on the breadth and depth of his experience, his established reputation in the ARIAS-U.S. community, and the alignment of his background with the specific issues in this dispute.
Candidate 2: Patricia Dalrymple
Ms. Dalrymple is the former Chief Underwriting Officer of a Sundial Indemnity Co. syndicate, where she led casualty excess-of-loss treaty underwriting for more than twenty-five years. She is now an independent consultant and expert witness based in Stamford, Connecticut. Ms. Dalrymple has particular expertise regarding the follow-the-fortunes doctrine and cedent settlement obligations, having been involved in numerous disputes touching on these issues during her underwriting career. She also has strong credentials regarding notice practices in the London market and has testified in prior arbitrations regarding the customs applicable to intermediary-brokered treaty placements. Her primary limitation for this engagement is that her background is weighted toward the London market, whereas this Treaty involves a Bermuda-domiciled reinsurer; however, the customs and practices at issue are broadly consistent across the London and Bermuda markets.
Candidate 3: James Moorehead
Mr. Moorehead is the former President of a major U.S. reinsurance intermediary brokerage, where he spent over twenty years managing treaty placements, claims notifications, and premium accounting for clients on both the ceding company and reinsurer sides. He is based in New York. Mr. Moorehead's deep knowledge of broker-intermediated treaty mechanics would be particularly valuable for the notice and premium reporting issues, given the centrality of Broadreach Intermediaries Inc. to both disputes. His limitation is that he has more limited testimony experience compared with Mr. Ainsworth and Ms. Dalrymple, having served as an expert witness in only three prior matters. However, his factual knowledge base is exceptionally strong, and his firsthand experience with the intermediary function gives him a unique perspective that the other candidates cannot match.
D. Estimated Retention Costs
Based on our experience with industry practices expert retentions in comparable reinsurance disputes and preliminary inquiries with the candidate experts, we estimate the following retention costs:
The industry practices expert's hourly rates are generally lower than the actuarial expert's rates, reflecting market norms for industry practices testimony. However, the scope of this expert's engagement is broad — spanning all four grounds of dispute — and the total hours may approach or exceed the actuarial expert's hours if the case proceeds to a hearing on all issues.
V. Category 3: Damages / Financial Expert
A. Purpose and Scope of Retention
The damages/financial expert will serve as QC&S's testifying expert on financial and damages issues. This expert's engagement will encompass the quantification of QC&S's affirmative damages, the rebuttal of Pinnacle Atlantic's damages calculations, and the modeling of the financial impact of various dispute outcomes on QC&S and QIH. The principal objectives of this expert's engagement are as follows:
(a) Quantification of QC&S's Damages. If Pinnacle Atlantic's refusal to honor valid cessions constitutes a breach of the Treaty — as we believe it does — the damages expert will quantify QC&S's resulting damages. This calculation will encompass the $78,400,000 in disputed reinsurance recoverables, as well as any applicable pre-judgment interest. The expert will also assess whether QC&S is entitled to consequential damages arising from Pinnacle Atlantic's breach, including the costs of securing replacement reinsurance coverage, the impact on QC&S's credit facility covenant compliance, and any credit-for-reinsurance implications under New York Insurance Law arising from the dispute's effect on QC&S's Schedule F reporting.
(b) Statutory Surplus and GAAP Impact Modeling. The expert will model the financial impact of various dispute outcomes on QC&S's statutory surplus position and QIH's consolidated GAAP financial statements. As of the most recent reporting period, QC&S's statutory surplus stands at approximately $1,420,000,000. The QIH credit facility contains a minimum statutory surplus covenant of $1,100,000,000, leaving current headroom of $320,000,000. A full write-off of the $78,400,000 reinsurance recoverable would reduce QC&S's statutory surplus to approximately $1,341,600,000, maintaining covenant compliance but significantly narrowing the headroom. On a GAAP basis, the after-tax impact of a full write-off to QIH's consolidated financial statements would be approximately $61,936,000 (assuming a 21% effective tax rate). The damages expert will model these impacts and prepare demonstrative exhibits showing the financial consequences under various resolution scenarios.
(c) Interest Calculation Analysis. Pinnacle Atlantic's demand includes $12,600,000 in claimed interest on the $78,400,000 disputed recoverable. This figure appears to be calculated at approximately 8% per annum over an average period of approximately twenty-four months. The damages expert will evaluate Pinnacle Atlantic's interest methodology, including the rate applied, the accrual period, and the basis for computing interest on disputed (as opposed to undisputed and unpaid) reinsurance recoverables. The expert will provide a counter-analysis applying the appropriate interest rate and methodology, which we anticipate will yield a significantly lower figure.
(d) Premium Dispute Reconciliation. The expert will analyze the premium reporting dispute, reconciling QC&S's reported ceded earned premium of $38,400,000 against Pinnacle Atlantic's calculation of $45,200,000. The expert will trace the $6,800,000 differential to specific premium components and opine on the correct calculation under the Treaty's terms — specifically, the treatment of run-off portfolio transfer premiums under Article 3.4 and their inclusion or exclusion from the ceded earned premium base. The expert will calculate the resulting treaty premium differential of $2,856,000 (at the 42% provisional ceding commission rate) and assess whether the differential is in fact owed.
(e) Counterclaim Damages. If QC&S elects to assert a counterclaim for Pinnacle Atlantic's breach of the Treaty — a strategy that the engagement team will evaluate separately — the damages expert will quantify the full spectrum of counterclaim damages, including:
• The unpaid reinsurance recoverables themselves ($78,400,000);
• Pre-judgment interest at the contractual or statutory rate;
• Consequential damages, including the cost of replacement reinsurance coverage (which we anticipate would need to be placed at substantially higher rates than the Treaty's provisional rate given current market conditions);
• Credit facility covenant headroom reduction and any associated financing costs;
• Potential credit-for-reinsurance implications under New York Insurance Law if the disputed recoverable must be written off or reserved against for Schedule F purposes; and
• Any additional direct or consequential damages attributable to Pinnacle Atlantic's breach.
(f) Sliding-Scale Premium Adjustment. The Treaty contains a sliding-scale premium adjustment mechanism with a minimum provisional rate of 35% and a maximum rate of 52%. The damages expert will analyze the effect of this mechanism on the net economics of the Treaty under various loss scenarios, including scenarios in which certain cessions are invalidated or adjusted as Pinnacle Atlantic demands. This analysis will be important for assessing the true financial impact of the dispute on each party and for evaluating settlement alternatives.
B. Qualifications Sought
The ideal candidate for the damages/financial expert role should possess the following qualifications:
• CPA, CFA, or equivalent financial credentials. The candidate should hold recognized professional certifications in accounting, financial analysis, or valuation that establish credibility as a financial expert. Dual credentials (e.g., CPA and CFA, or CPA with an Accredited in Business Valuation designation) are preferred.
• Experience with insurance and reinsurance financial analysis, including familiarity with statutory accounting principles (SAP), GAAP reporting for insurance companies, and the financial mechanics of reinsurance treaties. The candidate should understand the interplay between reinsurance recoverables, statutory surplus, Schedule F reporting, and credit-for-reinsurance requirements.
• Prior testimony experience in insurance or reinsurance financial disputes, whether in arbitration proceedings, court proceedings, or both. The candidate should be able to present complex financial models clearly and persuasively to arbitration panels composed of reinsurance industry professionals or to a Commercial Division judge.
• Ability to present complex financial models clearly. Given the number of financial variables at play — multiple treaty years, alternative allocation scenarios, sliding-scale premium adjustments, interest calculations, and statutory surplus impacts — the expert must be capable of distilling complexity into clear, persuasive demonstrative exhibits and testimony.
• No conflicts with Pinnacle Atlantic Reinsurance Ltd., Pinnacle Atlantic Group Holdings Ltd., Hargrove, Fitch & Calloway LLP, or Meridian Whitcomb & Co. LLP (QIH's independent auditors). The last of these is important because the damages expert's analysis of GAAP impacts will necessarily touch upon areas within the scope of Meridian Whitcomb's audit, and any professional relationship between the damages expert and the auditor could raise concerns about independence or bias.
C. Candidate Experts
We have identified three candidates for the damages/financial expert role. Each is described below.
Candidate 1: Dr. Harrison Bellows, CPA, CFA
Dr. Bellows is a Managing Director at Stonebridge Forensic Advisory LLC, based in New York, New York. He has over twenty years of experience in forensic accounting and financial advisory engagements, with a particular focus on disputes involving insurance and reinsurance companies. Dr. Bellows has served as a testifying expert in both arbitration and trial proceedings on numerous occasions and has previously analyzed reinsurance recoverable disputes, including matters involving statutory surplus impact, credit-for-reinsurance, and interest computation. He holds a Ph.D. in finance from New York University's Stern School of Business in addition to his CPA and CFA credentials. Dr. Bellows is our top-ranked candidate in this category based on the direct relevance of his prior experience and his strong testimony track record.
Candidate 2: Sandra Ng, CFA, ASA
Ms. Ng is a partner at Clearview Economic Consulting LLC, based in Boston, Massachusetts. She holds dual credentials as a Chartered Financial Analyst (CFA) and an Associate of the Society of Actuaries (ASA), giving her an unusual combination of financial analysis and actuarial expertise that would be particularly valuable in a case involving both financial and actuarial issues. Ms. Ng has extensive experience in quantifying damages in complex insurance disputes and has published on topics including statutory surplus analysis and credit-for-reinsurance requirements. Her dual background could reduce the need for coordination between the damages expert and the actuarial expert, as she would be able to bridge the gap between the two disciplines. Her primary limitation is that she has not, to our knowledge, testified in an ARIAS-U.S. arbitration proceeding, though she has testified in several litigated insurance disputes.
Candidate 3: Richard Voss, CPA/ABV
Mr. Voss is a principal at Horizon Valuation & Litigation Services LLP, based in New York, New York. He has extensive experience in insurance-related litigation support, including engagements involving financial statement analysis, damages quantification, and interest calculations for insurance and reinsurance companies. Mr. Voss has testified in proceedings before the New York Supreme Court, Commercial Division, on multiple occasions, giving him particular familiarity with the expectations and procedures of that forum. He holds a CPA license and the Accredited in Business Valuation (ABV) credential from the American Institute of CPAs. His strong credentials in interest calculations and statutory surplus analysis are directly relevant to this engagement. He is less well known in the arbitration community than Dr. Bellows, but his Commercial Division experience would be an asset if the case proceeds in that forum.
D. Estimated Retention Costs
Based on our experience with financial expert retentions in comparable insurance and reinsurance disputes and preliminary inquiries with the candidate experts, we estimate the following retention costs:
The damages/financial expert's engagement is somewhat narrower in scope than the actuarial and industry practices expert engagements, resulting in lower total estimated hours. However, the expert will need to construct financial models of considerable complexity, and the hours could increase if QC&S pursues a counterclaim and the expert is asked to quantify consequential damages in addition to direct contract damages.
VI. Coordination and Timing Considerations
A. Expert Coordination Plan
The effectiveness of QC&S's expert presentation will depend not only on the quality of each individual expert's work but also on the consistency and coherence of the three experts' opinions when presented together. Accordingly, careful coordination among the three expert categories is essential.
All three experts must be coordinated to ensure that their respective opinions are consistent with one another and with the underlying factual record. Inconsistencies between expert reports — even on peripheral issues — will be exploited by opposing counsel and could undermine the credibility of QC&S's overall presentation. To this end, we propose the following coordination protocols:
• The actuarial expert and damages expert will need to share financial models and loss development data to ensure that their respective calculations are based on the same inputs and yield consistent outputs. In particular, the damages expert's modeling of alternative allocation scenarios must be consistent with the actuarial expert's loss development analysis. We recommend that the actuarial expert prepare a standardized set of scenario outputs that the damages expert can incorporate directly into the financial impact models.
• The industry practices expert should be given the opportunity to review the actuarial expert's draft report (or a summary thereof) to confirm that the industry practice testimony regarding IBNR allocation customs is aligned with the specific methodology that the actuarial expert endorses. Similarly, the industry practices expert's testimony regarding notice customs should be reviewed for consistency with the factual narrative that QC&S's fact witnesses (Diana Kessler-Hoff, Jamie Castellano) will present.
• Calderwood & Harkness will manage all expert communications, document productions to experts, and review of draft reports. Jeffrey Park will serve as the primary coordinator for expert matters on the engagement team, with Yuki Nakamura providing support. All substantive communications with experts should be channeled through the engagement team to preserve the work product protection applicable to counsel's communications with testifying experts and to ensure that coordination occurs in a controlled and documented manner.
B. Timeline for Retention
We propose the following timeline for the expert retention process:
March–April 2026: Identify and interview the lead candidates in each expert category. Conduct conflicts checks against Pinnacle Atlantic Reinsurance Ltd., Pinnacle Atlantic Group Holdings Ltd., Hargrove, Fitch & Calloway LLP, Broadreach Intermediaries Inc., Velthorn Actuarial Advisors LLC, and Meridian Whitcomb & Co. LLP. Confirm availability and general terms of engagement. Present retention recommendations to Douglas Carmichael for approval.
April–May 2026: Execute formal engagement letters with each retained expert. Provide experts with initial document sets (described in Appendix C below), including the Treaty (with all endorsements and amendments), Velthorn actuarial certificates and loss development analyses, relevant claims files, billing records, and the Pinnacle Atlantic demand and reservation of rights letters. Conduct introductory briefings with each expert to frame the issues and establish the analytical framework for their respective engagements.
May–August 2026: Expert analysis and preparation of initial reports. The specific timeline for report completion will depend on the resolution of the forum dispute — arbitration under ARIAS-U.S. Rules may have a compressed discovery schedule with expert reports due earlier than in a litigated proceeding before the Commercial Division. We should plan for the possibility of an accelerated timeline and work with the experts to establish interim milestones and progress check-ins throughout this period.
Ongoing: Coordination with potential mediation. If mediation is pursued as a preliminary dispute resolution step — a possibility that has been discussed between Douglas Carmichael, Francesca Morano, and QIH General Counsel — the retained experts may provide informal advisory input before formal reports are prepared. Such advisory input would be protected as attorney work product and would help the engagement team assess the strengths and weaknesses of QC&S's positions in preparation for mediation discussions. However, we should be mindful that extensive pre-mediation expert analysis may not be cost-effective if the mediation results in early settlement.
C. Forum Considerations
The choice of forum — arbitration under Treaty Article 22 or litigation in the New York Supreme Court, Commercial Division — will affect both the selection of experts and the manner in which their testimony is presented.
Arbitration (ARIAS-U.S.). If the matter proceeds to arbitration under the ARIAS-U.S. Rules as contemplated by Treaty Article 22, the proceeding will be heard by a three-member panel consisting of reinsurance-experienced arbitrators seated in New York. In an ARIAS proceeding, expert presentations tend to be more streamlined than in court litigation, and the arbitrators themselves bring substantial industry knowledge to the evaluation of expert testimony. This means that the panel will scrutinize expert credentials carefully and will expect experts to engage substantively with the industry-specific issues rather than presenting elementary background. ARIAS panels are also known for asking direct questions of witnesses, including experts, which places a premium on selecting experts who are articulate, responsive, and comfortable in an interactive format.
Litigation (NY Supreme Court, Commercial Division). If the matter proceeds in the Commercial Division, the full Frye reliability standards applicable in New York state court will apply to expert testimony. Under Frye, expert testimony is admissible only if it is based on principles and methodologies that are generally accepted in the relevant scientific or professional community. While actuarial methodology and financial analysis are well-established disciplines unlikely to trigger a successful Frye challenge, candidates must nonetheless be vetted for admissibility, and their methodologies must be documented with sufficient rigor to withstand a pre-testimony admissibility challenge by HFC. The Commercial Division also tends to impose stricter scheduling orders and page limits on expert reports than an ARIAS arbitration, which may affect the scope and format of the experts' written work product.
Our recommendation is to select experts who are credible and effective in both forums. This avoids the need for substitution if the forum is resolved differently than we currently anticipate, and ensures that QC&S's expert presentation is adaptable to either setting. All three of the top-ranked candidates identified in this memorandum — Dr. Lindquist, Mr. Ainsworth, and Dr. Bellows — have experience in both arbitration and court proceedings.
D. Relationship to Fact Witnesses
The expert testimony strategy must be developed in coordination with the fact witness strategy. The following key fact witnesses are anticipated, and their testimony will intersect with the experts' opinions as described below:
Dr. Stephen Tanaka, FCAS, MAAA (Velthorn Actuarial Advisors LLC) — Dr. Tanaka will serve as a fact witness regarding the actuarial analyses he performed in connection with the QC&S cession billings. He will testify to the data he reviewed, the methodologies he selected, and the professional judgments he exercised in preparing the actuarial certificates and loss development analyses. The independent actuarial expert will complement Dr. Tanaka's testimony by providing an independent opinion that the methodology and conclusions reflected in his work are consistent with accepted actuarial standards of practice.
Diana Kessler-Hoff, Vice President, Claims & Reinsurance Recoveries, QC&S — Ms. Kessler-Hoff will serve as a fact witness on QC&S's claims handling and notice practices with respect to the Meridian Docks and Veridian Financial Services claim clusters. She will testify to the processes QC&S followed in reserving claims, transmitting notice to reinsurers through Broadreach Intermediaries, and evaluating and settling the Veridian claims. The reinsurance industry practices expert will complement her testimony by opining that the practices she describes meet or exceed the standards customarily observed in the reinsurance industry.
Tobias Engström, Senior Vice President, Reinsurance & Capital Markets, QIH — Mr. Engström will serve as a fact witness on treaty negotiation, premium reporting, and the financial and strategic significance of the Treaty to QC&S and QIH. His testimony will address the negotiation of the Treaty's terms (including the premium provisions and notice requirements), the parties' course of dealing, and the impact of the dispute on QIH's financial position. The experts — particularly the damages expert and the industry practices expert — will corroborate his testimony with independent analysis and industry context.
Jamie Castellano, Broadreach Intermediaries Inc. — Mr. Castellano, as the intermediary broker, is a key fact witness on the transmission of notice, the processing of cession billings, and the communication of information between QC&S and Pinnacle Atlantic. His testimony will be important to the late notice dispute (regarding the timing and content of notices transmitted through Broadreach) and the premium reporting dispute (regarding the billing transmittals and premium calculations processed through the intermediary). The industry practices expert can testify to the role of the broker in the reinsurance process and the standard protocols that intermediaries are expected to follow, providing context for Mr. Castellano's factual testimony.
VII. Budget Summary
A. Aggregate Expert Costs (Estimated Ranges)
The following table summarizes the estimated expert retention costs across all three categories:
These estimates encompass the full lifecycle of each expert engagement, from initial review through hearing or trial testimony, including the preparation of rebuttal reports where necessary. The estimates are based on the hourly rates and hour ranges described in the individual expert sections above and reflect the scope of work contemplated for each expert category.
B. Contextual Budget Notes
Several contextual observations are relevant to the evaluation of these expert cost estimates:
• Relationship to Legal Fees. Expert costs are in addition to the Calderwood & Harkness legal fees previously estimated for this engagement. As set forth in the engagement budget presented to QIH, the Phase 1 legal fee estimate (through initial pleadings, discovery planning, and early mediation) is $450,000 to $625,000, and the total legal fee estimate through trial or hearing is $3,200,000 to $4,800,000. When combined with the estimated expert costs, the total engagement cost through hearing or trial is projected at approximately $3,483,750 to $5,415,000.
• Expert Costs as a Percentage of Total Engagement Cost. At the estimated ranges, expert costs represent approximately 8% to 13% of total estimated engagement cost through hearing or trial. This is within the normal range for a complex reinsurance dispute of this magnitude and is proportionate to the dispute amount of $91,000,000 (or $78,400,000 excluding interest).
• Early Resolution Scenario. If the case resolves through early mediation or settlement — a scenario that remains possible given the parties' ongoing dialogue and the potential for mediation to be pursued before formal proceedings commence — expert costs may be limited to initial review and informal advisory work. In that scenario, we estimate total expert costs of $100,000 to $200,000, representing the cost of preliminary document review, issue framing, and advisory input to the engagement team in preparation for mediation.
• Billing Arrangements. All expert costs will be billed through to QIH on monthly invoicing, net-30, consistent with the terms of the Calderwood & Harkness engagement letter dated March 1, 2026. Expert invoices will be reviewed by the engagement team for reasonableness prior to passthrough to the client.
VIII. Recommendations
Based on the foregoing analysis, we make the following recommendations for the engagement team's consideration and Douglas Carmichael's approval:
1. Initiate Immediate Outreach to Top-Ranked Candidates. We recommend immediate outreach to the top-ranked candidate in each expert category: Dr. Margaret Lindquist (