# GENERAL CONDITIONS

1. **REINSURER'S LIABILITY:** The Reinsurer's liability under this Casualty Re-accutative Reinsurance Certificate, ("Certificate") shall follow the ceding Company's ("Company") liability in accordance with the terms and conditions of the policy reinsured hereunder except with respect to those terms and/or conditions as may be inconsistent with the terms of this Certificate. It shall be the duty of the Company to notify the Reinsurer, promptly, of any changes in the policy reinsured hereunder. Notwithstanding the foregoing, the Reinsurer and the Company hereby agree that the reinsurance hereunder is subject to the (a) Standard War Exclusion Clause or Clauses; (b) Nuclear Exclusion Clause-Physical Damage-Reinsurance; and (c) Nuclear Exclusion Clause-Liability Reinsurance.

2. **RETENTION:** The Company warrants that it shall retain for its own account, subject to treaty reinsurance only, if any, the amount specified on the face of this Certificate.

3. **CLAIMS:** (a) The Company agrees that it will promptly investigate and will settle or defend all claims under the policy reinsured hereunder and that it will notify the Reinsurer promptly of any event or development which the Company reasonably believes might result in a claim against the Reinsurer. The Company further agrees to forward to the Reinsurer copies of such pleadings and reports of investigations as are pertinent to the claim and/or as may be requested by the Reinsurer.

(b) The Reinsurer shall have the right at its own expense to be associated with the Company in the defense or control of any claim, suit or proceeding involving a loss covered by the reinsurance provided under this Certificate and the Company and the Reinsurer agree to cooperate in every respect in the defense and control of each such claim, suit or proceeding.

(c) Upon receipt by the Reinsurer of satisfactory evidence of payment of a loss for which reinsurers provided hereunder, the Reinsurer shall promptly reimburse the Company for its share of the loss and loss expenses, subject to paragraph 5 of these General Conditions.

(d) The term "loss" shall mean only such amounts as are actually paid by the Company in settlement of claims or in satisfaction of awards or judgments. The term "loss expenses" shall include all reasonable and necessary expenses incurred in connection with the investigation, adjustment, or litigation of claims, awards of judgments, including the salaries of the Company's staff adjusters but excluding the office expenses of the Company and the salaries and expenses of all other employees of the Company.

(e) The Reinsurer's liability for its proportion of a "loss" incurred by the Company shall be determined as follows: (i) If the reinsurance provided hereunder is on an excess of loss basis the Reinsurer shall be liable for its excess proportion of a "loss," after application of the Company's retention and any reinsurance, excess or pro rata, inuring to the benefit of the Reinsurer; (ii) If the reinsurance provided hereunder is on a pro rata basis, the Reinsurer shall be liable for its proportion of a "loss," after application of any reinsurance, excess or pro rata, inuring to the benefit of the Reinsurer.

(f) The Company shall pay or credit the Reinsurer with its proportion of salvages (i.e., recoveries or reimbursements made or obtained by the Company), after deducting the cost of obtaining such salvages. The cost of obtaining salvage shall include salaries and expenses of the Company's staff adjusters and the costs of legal counsel and other expenses of the Company. If the reinsurance provided hereunder is on an excess of loss basis, salvage shall be applied in the inverse order in which liability attaches; otherwise, salvage shall be applied proportionally.

4. **INSPECTION:** The Company shall place at the disposal of the Reinsurer and the Reinsurer shall have the right to inspect through its authorized representatives, at all reasonable times during the currency of this Certificate and thereafter, the books, records and papers of the Company pertaining to the reinsurance provided hereunder and all claims made in connection therewith.

5. **INSOLVENCY:** The reinsurance provided by this Certificate shall be payable by the Reinsurer directly to the Company or to its liquidator, receiver or statutory successor on the basis of the liability of the Company under the policy reinsured without diminution because of the insolvency of the Company. In the event of the insolvency of the Company the liquidator, receiver or statutory successor of the Company shall give written notice of the pendency of each claim against the Company within sixty days following the filing of such claim in the insolvency proceeding; and during the pendency of such claim the Reinsurer may investigate such claim and purpose at its own expense the defense where such claim is not covered by any defense or defenses which it may deem available to the Company, its liquidator, receiver or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent company as part of the expense of liquidation to the extent of such proportion of the benefit which may accrue to the Company solely as the result of the defense undertaken by the Reinsurer. The reinsurance shall be payable as hereinafter provided pursuant to the liquidator's, receiver's or statutory successor's rights and powers of such reinsurance in the event of the insolvency of the Company and (b) where the Reinsurer with the consent of the direct insured has assumed such power of obligation of the Company as direct obligations of the Reinsurer to the payee under such policy and in substitution for the obligations of the Company to such payee.

6. **OFFSET:** Each party hereto shall have and may exercise at any time and from time to time, the right to offset any balance or balances whether on account of premiums or on account of losses or otherwise, due from such party to the other (or, if more than one, any other) party hereto under this Certificate or under any other reinsurance certificate or agreement hereafter or hereafter entered into by and between them, and may offset the same against any balance or balances due from the other party to the former party or parties later under this Certificate or any other reinsurance certificate or agreement between them, and the party asserting the right of offset shall have and may exercise the right whether the balance due to be offset is due to such party from the other on account of premiums or on account of losses or otherwise and regardless of the capacity, whether as assuming insurer or as ceding insurer, in which each party acted under the certificate or agreement or, if more than one, the different certificates and agreements involved, provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of Section 538 of the Insurance Law of the State of New York.

7. **ARBITRATION:** Should any irreconcilable difference of opinion arise as to the interpretation of the Contract, it is hereby mutually agreed that, as a condition precedent to any right of action hereunder, such difference shall be submitted to arbitration, one arbiter to be chosen by the Company, one by the Reinsurer, and an umpire to be chosen by the two arbiters before they enter upon arbitration. In the event that either party should fail to choose an arbiter within sixty days following a written request by the other party to enter upon arbitration, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. Each party shall present its case to the arbiters and the decision of the majority shall be final and binding upon both parties. Each party shall bear its own expenses of the arbitration, but failing to agree they shall call in the umpire and the decision of the majority shall be final and binding upon both parties. The costs of the umpire shall be limited to expenses arising upon both parties, but failing to agree they shall call in the umpire and the decision of the majority shall be final and binding upon both parties. The expense of the umpire and of the arbitration shall be equally divided between the two parties. In the event that the two arbiters are chosen by one party, as above provided, the expense of the arbiters, the umpire, and the arbitration shall be equally divided between the two parties. Any such arbitration shall take place at New York, N.Y., unless some other location is mutually agreed upon by the two parties in interest.

8. **CANCELLATION:** If the Company cancels the policy or policies reinsured hereunder, said cancellation shall automatically cancel this reinsurance effective the same date and on the same basis as the policy or policies of the Company. This certificate may be canceled by either party's giving not less than thirty days' notice to the other party. If canceled by the Company without simultaneous cancellation of the Company's policy, adjustment of premium shall be on a short rate basis.

9. **MISCELLANEOUS:** The terms of this Certificate shall not be waived, amended or in any way modified unless such waiver, amendment or modification is contained in an endorsement to this Certificate, executed by a duly authorized representative of the Reinsurer. Assignment of this Certificate shall not be valid except with the written consent of the Reinsurer.

10. **TAXES:** The Company will be liable for all taxes on premiums ceded to the Reinsurer under this Certificate.

11. **PRIOR ACCEPTANCE:** If this Reinsurance attaches prior to the date of acceptance, the Company warrants that there are no known or reported losses which might be recoverable under this Certificate as of the date this reinsurance is accepted.

IN WITNESS WHEREOF THE REINSURER has caused this Certificate, and any endorsements thereto, to be signed by its President and Secretary, but same shall not be binding upon the Reinsurer unless countersigned by an authorized representative or chief agent of the Reinsurer.