# SECURITY REINSURANCE UNDERWRITERS, INC.

127 John Street, New York, New York 10038

## REINSURING AGREEMENTS AND CONDITIONS

In consideration of the payment of the premium and subject to the terms, conditions and limits of liability set forth herein and in the Declarations made a part hereof, Security Insurance Company of Hartford (herein called the Reinsurer) does hereby reinsure the ceding company named in the Declarations (herein called the Company) in respect to the Company's policy(ies) as follows:

A. The Company warrants to retain for its own account, subject to treaty reinsurance if applicable, the amount of liability specified in Item 3 of the Declarations. The Company agrees that the amount of liability of the Reinsurers as specified in the Declarations shall follow that of the Company and shall be subject in all respects to all terms and conditions of the Company's policy(ies). The Company further warrants that it will promptly notify the Reinsurer's certificate period shall be as specified in the Declarations at 12:01 AM on both dates at the place specified in the Company's policy. The Company shall also promptly notify the Reinsurer of any endorsements thereto and shall notify the Reinsurer promptly of all changes which in any manner affect this certificate of reinsurance. The Company shall also promptly notify the Reinsurer of the disposal of the Reinsurer at all reasonable times all records of the Company relating to this certificate of reinsurance or of claims in connection therewith.

B. In no event shall anyone other than the Company or, in the event of the Company's insolvency, its receiver, liquidator, or statutory successor, have any rights under this certificate.

C. The Company shall notify the Reinsurer promptly of any occurrence which in the Company's estimate of value of injuries or damages sought, without regard to liability might result in judgment in an amount sufficient to cause the Company to exceed its retention. The Company shall also notify the Reinsurer promptly of any occurrence in respect of which the Company has created a loss reserve equal to or greater than fifty (50) percent of the amount of the claim. Upon receipt of such notice by the Reinsurer, the Reinsurer shall promptly pay its proportion of such loss as set forth in the Declarations. The Reinsurer shall not be liable for any expenses (other than office expenses and payments to any salaried employee) incurred by the Company in the investigation and settlement of claims or suits, except to the extent that the Reinsurer is required to pay an award in the ratio that the Reinsurer's loss payment bears to the Company's gross payments. If there is no loss payment, the Reinsurer shall pay its proportion of such expenses only if the claim or suit is settled on a contributing excess basis and then only in the percentage stated in Item 4 of the Declarations in the first layer of participation.

D. All loss settlements made by the Company, provided they are within the terms and conditions of the original policy(ies) and within the terms and conditions of this certificate, shall be paid directly to the Reinsurer. Upon receipt of a definitive statement of loss, the Reinsurer shall promptly pay its proportion of such loss as set forth in the Declarations. The Reinsurer shall not be liable for any expenses (other than office expenses and payments to any salaried employee) incurred by the Company in the investigation and settlement of claims or suits, except to the extent that the Reinsurer is required to pay an award in the ratio that the Reinsurer's loss payment bears to the Company's gross payments. If there is no loss payment, the Reinsurer shall pay its proportion of such expenses only if the claim or suit is settled on a contributing excess basis and then only in the percentage stated in Item 4 of the Declarations in the first layer of participation.

E. Definitions

As used in this Certificate the following terms shall have the meaning set opposite each.

Excess of Loss — The limit(s) of liability of the Reinsurer, as stated in Item 3 of the Declarations, applies(ly) only to that portion of loss settlement(s) in excess of the applicable retention of the Company as stated in Item 3 of the Declarations. Contributing Excess — The Company's policy applies an excess of loss to the Reinsurer's assumed liability and retention and the limit of liability of the Reinsurer applies proportionally to those loss settlements in the percentage(s) set forth in Item 4 of the Declarations.

F. The Company warrants that its policy contains the standard Nuclear Incident Exclusion Clause(s) and standard War Exclusion Clause(s) for the coverage provided.

G. The Reinsurer will be paid or credited by the Company with its proportionate share, that is, reimbursement obtained or recovery made by the Company, less all expenses paid by the Company in making such recovery. If the reinsurance afforded by this Certificate is on the excess of loss basis, salvage shall be applied in the inverse order in which liability attaches.

H. The Company will be liable for taxes on premiums ceded to the Reinsurer under this certificate of reinsurance.

I. In the event of the insolvency of the Company, this Reinsurance shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, in the same manner as the liability of the Company without diminution because of the insolvency of the Company. Wherever the liquidator, receiver, conservator or statutory successor of the Company has filed a claim against the Reinsurer, it is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Reinsurer within thirty (30) days after such claim is filed. Such notice would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense which it deems advisable, including the appointment of its liquidator, receiver, conservator, or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable subject to the approval of the Company, and the Reinsurer shall be entitled to a pro rata share of any judgment or liquidation to the extent of a pro rata share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

Where two or more Reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of the Reinsurance as though the Reinsurers were acting as one Company.

The Reinsurance shall be payable by the Reinsurer to the Company or to its liquidator, receiver, conservator, or statutory successor, except as provided by Section 315 of the New York Insurance Law or except (a) where the Reinsurer is the direct insured or the direct insured has assumed policy obligations of the Company, or (b) where the Reinsurer is the payee under such policies and in substitution for the obligations of the Company to such payee.

J. The Reinsurer may offset any balances, whether an account of premium, loss, loss adjustment expense, salvage or any other amount(s) due from one party to the other under this certificate of reinsurance or under any other agreement heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or as ceding company.

K. Should the Company's Policy be cancelled, this Certificate shall terminate automatically at the same time and date. This Certificate may also be cancelled by the Company upon not less than thirty (30) days prior written notice, stating when the Company's Policy reinsured hereby shall terminate. This Certificate may also be cancelled by the Reinsurer upon written notice to the Company, stating when thereafter the reinsurance hereby reinsured shall terminate. The notice shall contain the following:

1. The date written notice is mailed plus the number of days required to cancel the Company's Policy reinsured hereby plus fifteen (15) days.
2. The event of cancellation for non-payment of premium, fifteen (15) days from date of mailing.

Proof of mailing of notice of cancellation and proof of notice and calculation of the earned premium shall follow the wording of the Company's Policy in the use of short rate or pro rata tables.

L. As a condition precedent to a right of action, all controversial and disputes between Reinsurer and Company concerning rights or obligations arising out of this certificate or any transaction hereunder shall be submitted to arbitration pursuant to the following procedure: Either party may invoke arbitration by giving written notice to the other to arbitrate the matter at any time. Within thirty (30) days of the notice, each party shall appoint one arbitrator subject to the conditions as provided herein, and the parties shall agree upon the umpire. If the parties cannot agree to appoint, the other party shall select a second arbitrator within thirty (30) days. Within thirty (30) days after the appointment of the second arbitrator, the parties shall agree upon the umpire. If the umpire cannot be agreed upon with said thirty (30) day period, each shall nominate one person. Not more than one week thereafter, the parties shall agree upon the umpire. If the parties cannot agree upon the umpire, the umpire appointed herein shall comprise the Panel. Unless otherwise agreed by the parties, the Panel shall consist of three arbitrators formed by the American Arbitration Association of Underwriters at Lloyd's, London; none shall be controlled by or affiliated with any insurance company. The Panel shall have full power to take all types of evidence and shall be entitled to admit such evidence, oral and documentary, and to conduct the proceedings in such manner as they deem fit in accordance with the rules of the American Arbitration Association of law as well as the customs and practice of the insurance and reinsurance business and shall make their award with a view to effecting the general reconciliation of the parties. The Panel shall hear and determine the matter in dispute as soon as practicable and conduct such hearing with all due diligence. The hearing shall be conducted in New York, New York unless otherwise agreed by the parties. The award of the Panel, signed by a majority of the Panel, shall be issued within thirty (30) days of the conclusion of the hearing. Said finding and award shall be final and binding upon the parties and shall be conclusive and binding upon the court having jurisdiction. Each party shall bear the expenses incurred by the arbitrator(s) appointed.

M. The terms of this certificate of reinsurance shall not be waived or changed except by endorsement issued to form a part hereof, executed by a duly authorized representative of the Reinsurer.

In Witness Whereof Security Insurance Company of Hartford has caused this certificate of reinsurance to be signed by its President and Secretary, but the same shall not be binding upon the Reinsurer unless countersigned by an authorized representative of the Reinsurer.

**William R. Hechler**  
Secretary  
**President**