# ACE Risk Management

If the Claims Adjusting Service deteriorates or could deteriorate rapidly, then the Company shall select the new Claims Adjusting Service. Once the new Claims Adjusting Service is selected, this Agreement will be deemed automatically amended to reflect the new Claims Adjusting Service, and the Company will inform the Insured of the revised or additional Claims Administration Expenses. The Insured shall pay such amounts by the Required Payment Date.

In the event of the termination of such contractual arrangement, the Company shall administer, calculate and collect the Paid Loss Deposit Fund itself, or shall assign such responsibility to the replacement Claims Adjusting Service.

Claims Administration Expense will be adjusted with loss information valued at 6 months after Policy expiration and annually thereafter. Adjustments will be calculated in accordance with the fees listed in C) Claims Administration and Expense.

Claims Administration Expense will be charged for each individual type of claim listed in C) Claims Administration and Expense resulting from an accident, incident or occurrence.

Client will maintain a Claim Fund and will continue to remit additional funds, upon ESIS's written request, sufficient to maintain a minimum balance (the "Required Level") in the Claim Fund in an amount equal to the greater of: a) $425,943; or b) the sum of all claim payments and allocated loss expenses paid by ESIS during the previous 4.5 months (excluding payments funded as Special Billed Amounts).

## 5. Reimbursable and Retrospectively Rated Losses

### A. Paid Loss Reimbursement

Reimbursable Losses are losses subject to reimbursement through the application of a deductible endorsement on the Policies or are Losses Subject to a Loss Limitation. The Company or the Claims Adjusting Service will bill the Insured for reimbursement of paid losses and ALAE on a semiannual basis, subject to the Single Payment of Paid Loss and/or Allocated Loss Adjustment Expense amount as provided for in E) Collateral & Paid Loss Deposit Fund and the Collateral Agreement executed by you and us.

### B. Losses Subject to a Loss Limitation

When a workers compensation policy is subject to a Loss Limitation, as defined herein, the Loss Limitation applies as follows: (i) in the case of bodily injury as the result of disease, the Loss Limitation applies separately to each employee who sustains such bodily injury; and separately, (ii) in the case of bodily injury as the result of an accident, the Loss Limitation applies to the aggregate of all employees who sustain such bodily injury in a single accident or occurrence.

As shown in D) Reimbursable Losses above, you are responsible for reimbursement of loss on policies subject to a loss limit as follows:

- **100% borne by the Insured:** You will reimburse the Company for each loss up to the amount of the Loss Limit plus all Allocated Loss Adjustment Expense.

Losses subject to a Loss Limitation are considered premium. The Expected Reimbursable Amount shown in D) Reimbursable Losses above is an estimate. This portion of your premium, along with any premium charge dependent upon the value of loss subject to a Loss Limitation will be adjusted using loss information valued 6 months after the Rating Period ends and annually thereafter until we make a final premium calculation. In calculating a premium adjustment we will apply loss development factors to the incurred losses limited to the Loss Limitation.

The Rating Period means the period of time beginning on the earliest Policy effective date and ending on the latest Policy expiration date. If the Rating Period is greater than 12 months, we may make an interim adjustment to premium with loss information valued at 6 months after expiration of the Policy being adjusted. We may make an adjustment to premium with loss information valid as of any date that you are declared bankrupt or insolvent, make an assignment for the benefit of creditors, or are the subject of reorganization, receivership, or liquidation.

## 6. Collateral & Paid Loss Deposit Fund

Subject to all of the terms and conditions of the Collateral Agreement or other security agreement between you and the Company, you are required to provide collateral or other security, in addition to any collateral or security that you may

INTERNAT_05212016
05/16/2016
Notice of Election Page 8 of 17