**WARRANTY OF UNDERLYING INSURANCE WITH LIMITED DROP-DOWN ENDORSEMENT**

1. The Named Insured represents and warrants that the Policy in each layer applies excess of underlying insurance in respect thereof as set forth in Exhibit 1 hereto.

2. With respect to the layer(s) of coverage listed below, if and only if underlying aggregate limits have been eroded or exhausted by actual payment of loss, the per occurrence retention amount set forth in Item 2(a) of the Declarations for such layer(s) shall be amended to be the greater of the underlying aggregate limits as so reduced or the Minimum Per Occurrence Retention Amount set forth below.

3. Other than where the aggregate limits of the underlying insurance have been eroded or exhausted by actual payment of loss, the Policy in respect of the layer(s) listed below shall not drop down below the level of the respective per occurrence retention amount(s) previously listed in Item 2(a) of the Declarations for such layer(s) (i.e., without giving effect to the operation of paragraph 2 above) for any reason, including, without limitation, absence of coverage for an occurrence under any of the underlying policies (i.e., this Endorsement does not provide difference-in-conditions coverage), insolvency of the underlying insurer, unwillingness to pay by the underlying insurer, cancellation or expiration of the underlying insurance, failure by the insured to satisfy any condition of any underlying policy, etc.

4. The Named Insured represents and warrants that as of the effective date hereof there has been no erosion of the aggregate limits of the insurance set forth in Exhibit 1 hereto and there are no known occurrences or claims which it is reasonably anticipated will cause such erosion, except as set forth in the attached Exhibit 2.

5. With respect to any loss which is covered by the underlying policies listed on Exhibit 1 hereto but would not be covered under the Policy even if the amount thereof exceeded the per occurrence retention amount, the Insured, as a condition precedent to the application of this Endorsement, shall give notice pursuant to Article V(d) of the Policy in all respects as if such loss were in respect of an occurrence covered under the Policy.