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EXHIBIT 10(a)
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QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement made by and between Employers Mutual Casualty Company
("Employers") and EMC Reinsurance Company ("EMC Re").
ARTICLE I
EMC Re is an affiliate of Employers and was formed by Employers for the
sole purpose of engaging in the business of reinsurance.
It is the intention of the parties hereto that EMC Re will solicit,
underwrite, and assume reinsurance risks in a mode of operation similar to
that heretofore conducted by Employers, and that consistent therewith, EMC Re
will gradually assume by means of this Quota Share Agreement, the major
portion of the reinsurance assumed business of Employers as is in force or as
may be placed in force by Employers.
ARTICLE II
Excluded from this Quota Share Agreement at its inception are: (1) all
direct insurance business written by Employers and its affiliated companies;
(2) all involuntary insurance or reinsurance business written by Employers and
classed by Employers as "facilities business"; (3) facultative reinsurance
assumed contracts; (4) intercompany reinsurance contracts between Employers
and its affiliated companies; (5) reinsurance assumed contracts that have been
terminated or are in the process of termination.
ARTICLE III
Pursuant to and subject to the foregoing, Employers hereby cedes and
transfers to EMC Re, and EMC Re hereby accepts, a quota share portion of the
reinsurance contracts on which Employers is subject to liability which were
outstanding and in force as of 12:01 a.m. January 1, 1981, or which were
issued thereafter, or as shall be issued hereafter, in accordance with the
Assumption Addendum attached hereto. Such liability shall include reserves
for unearned premiums, outstanding loss and loss expenses (including
unreported losses) and all other underwriting and administrative expenses, but
shall not include liabilities incurred in connection with investment
transactions. Employers hereby assigns and transfers to EMC Re amounts equal
to the aggregate of the liabilities quota shared as above, less a commission
for the prepaid expenses of Employers.
ARTICLE IV
Employers shall not be prejudiced in any way by any error or omission
through accident or oversight resulting in a failure to accurately or fully
cede, report, or recover with respect to this Quota Share Agreement, but any
such error or omission shall be corrected immediately upon discovery.
ARTICLE V
This agreement is a continuing one and is unlimited as to duration, but
may be terminated as of the end of any calendar year upon ninety days prior
written notice; or may be otherwise terminated by agreement of the parties.
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ARTICLE VI
Each of the parties hereto agrees that the reinsurance business quota
shared hereunder shall be payable by EMC Re on the basis of the liability of
Employers under the contracts reinsured without diminution because of the
insolvency of Employers; provided that such reinsurance shall be payable
directly to Employers or its liquidator, receiver or such other statutory
successor, except as provided by Section 315 of new York Insurance Law, or
except (a) where the contract specifically provides another payee for such
reinsurance in the event of the insolvency of the ceding insurer and (b) where
EMC Re, with the consent of the direct reinsured company, has assumed such
contract obligations of Employers as direct obligations of EMC Re to the
payees under wich reinsurance contracts and in substitution for the
obligations of Employers to such payees; and further provided that the
liquidator, receiver or statutory successor of Employers shall give written
notice of the pendency of any claim against Employers on such contracts with
any reasonable time after such claim; and EMC Re may investigate such claim
and interpose, at its own expense, in the proceeding where such claim is to be
ajudicated in the defense or defenses which it may deem available to Employers
or its liquidator, receiver or statutory successor, the expense thus incurred
by EMC Re to be chargable, subject to court approval, against Employers as
part of the expense of liquidation to the extent of a proportionate share of
the benefit which may accrue to Employers solely as a result of the defense
undertaken by EMC Re.
Executed by the parties hereto the day and year as reflected in the
Assumption Addendum attached hereto.
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ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement shall incept as 12:01 a.m. on the date executed by the
parties hereto. The parties to this agreement mutually agree that as of its
inception, the quota share portion of the net liabilities of Employers as
12:01 a.m. January 1, 1981 ceded to and assumed by EMC Re shall be five
percent.
Executed by the parties hereto this 10th day of June, 1981.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
-------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By: /s/ Richard E. Haskins
-------------------------
Richard E. Haskins, President
41
AMENDMENT #1
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota share portion
of the net liabilities of Employers at 12:01 a.m. January 1, 1982 ceded to and
assumed by EMC Re shall be twenty-five percent.
Executed by the parties hereto this 3rd day of January, 1982.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
-------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By: /s/ Richard E. Haskins
-------------------------
Richard E. Haskins, President
42
AMENDMENT #2
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota share portion
of the net liabilities of Employers at 12:01 a.m. January 1, 1983 ceded to and
assumed by EMC Re shall be fifty percent.
Executed by the parties hereto this 18th day of March, 1983.
Employers Mutual Casualty Company
By: /s/ George W. Kochheiser
-------------------------------
George W. Kochheiser, President
EMC Reinsurance Company
By: /s/ Richard E. Haskins
-------------------------------
Richard E. Haskins, President
43
AMENDMENT #3
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota share portion
of the net liabilities of Employers at 12:01 a.m. January 1, 1984 ceded to and
assumed by EMC Re shall be seventy five percent.
Executed by the parties hereto this 3rd day of January, 1984.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By: /s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
44
AMENDMENT #4
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota share portion
of the net liabilities of Employers at 12:01 a.m. January 1, 1988 ceded to and
assumed by EMC Re shall be ninety-five percent.
Executed by the parties hereto this 9th day of March, 1988.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By: /s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
45
ENDORSEMENT #1
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
1. Certain business subject to this agreement and ceded hereunder was
protected by pro-rata and excess of loss reinsurances; such
reinsurances to enure to the benefit of the parties as their
interests appear herein.
2. Such reinsurances were represented to be collectable; there was no
intent to transfer to the reinsurer the credit risk of
non-collectable reinsurances other than as would be deemed
incidental; and there was no consideration contemplated nor given
for the assumption of such credit risk.
3. At various times during the pendency of this agreement the parties
have come to perceive that recoverables from on such reinsurer,
Transit Casualty Company, were becoming of doubtful
collectability, and the parties began a scheduled "write down" of
receivables from that source as their interests appeared in order
to recognize the degree of doubt perceived.
4. The parties have now determined that no part of such receivables
from Transit Casualty Company are collectable, and that the entire
account should be written off as a bad debt.
5. The parties further recognize that the combination of a) increases
in the percentages of business ceded hereunder, and b) the more
than 200 percent growth in the loss amounts now recognized as
non-recoverable from Transit, have exacerbated the adverse affects
upon EMC Re hereunder to the point of severely reducing EMC Re's
surplus, and to the frustration of the purpose of this contract
and to the goals of the parties when it was drafted.
Now therefore, in consideration of the foregoing, the parties agree as
follows:
1. EMC Re will pay Employers in full the outstanding portion of its
95% pro-rata part of the Transit Casualty Company scheduled write
off as booked through September 30, 1988, in the amount of 95% of
$2,650,000.
2. Employers Mutual Casualty Company will retain (in addition to its
5% quota share portion), and hereby releases EMC Re from liability
therefore, any additional non-recoverable sums now due or in the
future recognized as necessary to be written off, applicable not
only to Transit but to any other non-collectable reinsurance
protections on business subject to this quota share agreement,
from its inception.
Executed by the parties hereto this 6th day of December, 1988.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By: /s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
46
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual Casualty
Company (the "Company") and EMC Reinsurance Company (the "Reinsurer") and
shall be effective as of September 30, 1989 (the "commutation date").
WHEREAS, the parties have entered into a certain quota share reinsurance
contract effective from January 1, 1981, and remaining in full force and
effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust and
determine the liabilities of the Reinsurer thereunder for losses
occurring during all years prior to 12:01 A.M., January 1, 1981, and
WHEREAS, by reason of which settlement agreement there is due and owing
to the Company from the Reinsurer the sum of $2,982,882.00,
NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $2,982,882.00, the Company has released and discharged, and
by these presents does for itself, its successors and assigns, release
and discharge the Reinsurer with respect to any contractual obligations
under the aforesaid quota share reinsurance contract as respects, and
only as respects, losses occurring during any and all years prior to
12:01 A.M., January 1, 1981.
IN WITNESS WHEREOF, the parties have caused these presents to be executed
in duplicate this 5th day of December, 1989.
EMPLOYERS MUTUAL CASUALTY COMPANY
By: /s/ George W. Kochheiser
--------------------------
George W. Kochheiser
President
EMC REINSURANCE COMPANY
By: /s/ Richard E. Haskins
--------------------------
Richard E. Haskins
President
47
ENDORSEMENT #2
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
Effective January 1, 1993 Article III of the Quota Share is amended by
adding the following additional paragraph:
Notwithstanding the foregoing terms, it is agreed that the maximum
liability transferred to EMC Re for loss resulting from any one occurrence,
including reinstatement premium costs resulting from such occurrence, is
limited to $1,000,000. As consideration to Employers for this per occurrence
limitation, it is agreed that EMC Re shall allow Employers an additional
ceding commission of 5.25%
Executed by the parties this 2nd day of December, 1992.
Employers Mutual Casualty Company
By: /s/ Bruce G. Kelley
-------------------
EMC Reinsurance Company
By: /s/ Dean P. McClaflin
---------------------
48
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual Casualty
Company (the "Company") and EMC Reinsurance Company (the "Reinsurer") and
shall be effective as of June 30, 1993 (the "commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and remaining in
full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust and
determine final liabilities of the Reinsurer thereunder for losses
originating from the business written by Russell Reinsurance Services,
Inc., and
WHEREAS, by reason of such settlement agreement there is due and owing
to the Company from the Reinsurer the sum $17,806,179.
NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $17,806,179, the Company has released and discharged, and
by these presents does for itself, its successors and assigns, release
and discharge the Reinsurer with respect to any contractual
obligations under the aforesaid quota share reinsurance contract as
respects, all business originating through Russell Reinsurance
Services, Inc.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 29th day of July, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By: /s/ Bruce G. Kelley
---------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By: /s/ Dean P. McClaflin
---------------------
Dean P. McClaflin
President
49
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual Casualty
Company (the "Company") and EMC Reinsurance Company (the "Reinsurer") and
shall be effective as of October 31, 1993 (the "commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and remaining in
full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust and
determine final liabilities of the Reinsurer thereunder for losses
originating from the business written by Improved Risk Mutual, and
WHEREAS, by reason of such settlement agreement there is due and owing
to the Company from the Reinsurer the sum of $2,619,776.
NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $2,619,776, the Company has released and discharged, and
by these presents does for itself, its successors and assigns, release
and discharge the Reinsurer with respect to any contractual
obligations under the aforesaid quota share reinsurance contract as
respects, all business originating through Improved Risk Mutual.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 1st day of December, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By: /s/ Bruce G. Kelley
----------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By: /s/ Dean P. McClaflin
----------------------
Dean P. McClaflin
President
50
ENDORSEMENT #3
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
Effective January 1, 1997, the last paragraph of Article III of the
Quota Share found in Endorsement #2 is changed to read as follows:
Notwithstanding the foregoing terms, it is agreed that the maximum
liability transferred to EMC Re for loss resulting from any one
occurrence, including reinstatement premium costs resulting from such
occurrence, is limited to $1,500,000. As consideration to Employers
for this per occurrence limitation, it is agreed that EMC Re shall
allow Employers an override commission of 5.00% plus .25% (fronting
fee) equaling 5.25%.
Executed by the parties this 7th day of January, 1997.
Employers Mutual Casualty Company
By: /s/Bruce G. Kelley
------------------------
EMC Reinsurance Company
By: /s/Ronnie D. Hallenbeck
------------------------
51
AMENDMENT #5
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota share portion
of the net liabilities of Employers at 12:01 a.m. January 1, 1997 ceded to and
assumed by EMC Re shall be one hundred percent.
Executed by the parties hereto this 7th day of January, 1997.
Employers Mutual Casualty Company
By: /s/Bruce G. Kelley
-----------------------
EMC Reinsurance Company
By: /s/Ronnie D. Hallenbeck
-----------------------
52
ENDORSEMENT #4
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
Effective January 1, 2000, the last paragraph of Article III of the
Quota Share found in Endorsement #3 is changed to read as follows:
Notwithstanding the foregoing terms, it is agreed that the maximum
liability transferred to EMC Re for loss resulting from any one
occurrence, including reinstatement premium costs resulting from
such occurrence, is limited to $1,500,000. As consideration to
Employers for this per occurrence limitation, it is agreed that
EMC Re shall allow Employers an override commission of 4.25% plus
.25% (fronting fee) equaling 4.5%.
Executed by the parties this 7th day of July, 2000.
Employers Mutual Casualty Company
BY: /s/ Bruce G. Kelley
--------------------------------
Bruce G. Kelley, President & CEO
EMC Reinsurance Company
BY: /s/ Ronnie D. Hallenbeck
-------------------------------
Ronnie D. Hallenbeck, President
53