# HCI Group (HCI) 10-Q SEC filing - Q2 FY2026
- Filed: Aug 7, 2026, 4:16 PM EDT
- Fiscal quarter: Q2 FY2026
- Calendar quarter: Q2 2026
- Accession: 0001193125-26-340280
- OpenCapital page: https://www.opencapital.sh/filings/0001193125-26-340280
- Markdown URL: https://www.opencapital.sh/filings/0001193125-26-340280.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/0001193125-26-340280-index.htm
## Filing documents
- [10-Q (hci-20260630.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-20260630.htm)
- [EX-10.3 (hci-ex10_3.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_3.htm)
- [EX-10.4 (hci-ex10_4.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_4.htm)
- [EX-10.5 (hci-ex10_5.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_5.htm)
- [EX-10.6 (hci-ex10_6.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_6.htm)
- [EX-10.7 (hci-ex10_7.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_7.htm)
- [EX-10.8 (hci-ex10_8.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_8.htm)
- [EX-10.9 (hci-ex10_9.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_9.htm)
- [EX-10.10 (hci-ex10_10.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_10.htm)
- [EX-10.11 (hci-ex10_11.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_11.htm)
- [EX-10.12 (hci-ex10_12.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_12.htm)
- [EX-10.13 (hci-ex10_13.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_13.htm)
- [EX-10.14 (hci-ex10_14.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_14.htm)
- [EX-10.15 (hci-ex10_15.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_15.htm)
- [EX-31.1 (hci-ex31_1.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex31_1.htm)
- [EX-31.2 (hci-ex31_2.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex31_2.htm)
- [EX-32.1 (hci-ex32_1.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex32_1.htm)
- [EX-32.2 (hci-ex32_2.htm)](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex32_2.htm)
---
## 10-Q
SEC source: [hci-20260630.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-20260630.htm)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
### Form 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
### For the quarterly period ended June 30, 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
001-34126
HCI Group, Inc.
(Exact name of registrant as specified in its charter)
Florida 20-5961396
(State of Incorporation) (IRS Employer Identification No.)
3802 Coconut Palm Drive
Tampa, FL 33619
(Address, including zip code, of principal executive offices)
(813) 849-9500
(Registrant’s telephone number, including area code)
### Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Shares, no par value HCI New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate number of shares of the registrant’s common stock, no par value, outstanding as of August 3, 2026 was 12,438,867.
HCI GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| | | Page |
| --- | --- | --- |
| [PART I – FINANCIAL INFORMATION](#part_i_financial_information) | | |
| Item 1 | [Financial Statements](#item_1_financial_statements) | |
| | [Consolidated Balance Sheets:](#consolidated_balance_sheets) | |
| | [June 30, 2026 (unaudited) and December 31, 2025](#consolidated_balance_sheets) | 1-2 |
| | [Consolidated Statements of Income:](#consolidated_statements_income) | |
| | [Three and six months ended June 30, 2026 and 2025 (unaudited)](#consolidated_statements_income) | 3 |
| | [Consolidated Statements of Comprehensive Income:](#consolidated_statements_comprehensive_in) | |
| | [Three and six months ended June 30, 2026 and 2025 (unaudited)](#consolidated_statements_comprehensive_in) | 4 |
| | [Consolidated Statements of Equity:](#consolidated_statement_equity_1) | |
| | [Three and six months ended June 30, 2026 and 2025 (unaudited)](#consolidated_statement_equity_1) | 5-8 |
| | [Consolidated Statements of Cash Flows:](#consolidated_statements_cash_flows) | |
| | [Six months ended June 30, 2026 and 2025 (unaudited)](#consolidated_statements_cash_flows) | 9-11 |
| | [Notes to Consolidated Financial Statements (unaudited)](#notes) | 12-46 |
| Item 2 | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#item_2_mda) | 47-59 |
| Item 3 | [Quantitative and Qualitative Disclosures About Market Risk](#item_3_quantitative_qualitative_disclosu) | 60-61 |
| Item 4 | [Controls and Procedures](#item_4_controls_procedures) | 62 |
| [PART II – OTHER INFORMATION](#part_ii_or_information) | | |
| Item 1 | [Legal Proceedings](#item_1_legal_proceedings) | 63 |
| Item 1A | [Risk Factors](#item_1a_risk_factors) | 63 |
| Item 2 | [Unregistered Sales of Equity Securities and Use of Proceeds](#item_2_unregistered_sales_equity_securit) | 63-64 |
| Item 3 | [Defaults Upon Senior Securities](#item_3_defaults_upon_senior_securities) | 65 |
| Item 4 | [Mine Safety Disclosures](#item_4_mine_safety_disclosures) | 65 |
| Item 5 | [Other Information](#item_5_or_information) | 65 |
| Item 6 | [Exhibits](#item_6_exhibits) | 66-70 |
| [Signatures](#signatures) | | 71 |
PART I – FINANCIAL INFORMATION
## Item 1 – Financial Statements
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Balance Sheets
_(In thousands, except share amounts)_
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| | (Unaudited) | |
| Assets | | |
| Fixed-maturity securities, available-for-sale, at fair value (amortized cost: $1,103,778 and $595,383, respectively, and allowance for credit losses: $0 and $0, respectively) (a) | $1,091,041 | $597,329 |
| Equity securities, at fair value (cost: $55,700 and $61,597, respectively) | 59,038 | 65,890 |
| Limited partnership investments | 16,394 | 17,690 |
| Real estate investments | 102,669 | 103,746 |
| Other investments | 5,000 | 5,000 |
| Total investments | 1,274,142 | 789,655 |
| Cash and cash equivalents (a) | 872,336 | 1,210,126 |
| Restricted cash (a) | 4,378 | 3,748 |
| Income taxes receivable (a) | 1,277 | 1,332 |
| Deferred income tax assets, net (a) | 1,088 | 2,237 |
| Premiums receivable, net (allowance: $5,363 and $4,469, respectively) (a) | 77,607 | 57,494 |
| Prepaid reinsurance premiums (a) | — | 50,127 |
| Reinsurance recoverable, net of allowance for credit losses: | | |
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) (a) | 26,613 | 27,855 |
| Unpaid losses and loss adjustment expenses (allowance: $73 and $97, respectively) (a) | 229,131 | 262,041 |
| Deferred policy acquisition costs (a) | 68,206 | 59,722 |
| Property and equipment, net | 27,503 | 28,939 |
| Intangible assets, net | 1,924 | 2,683 |
| Funds withheld for assumed business | 5,346 | 5,254 |
| Other assets (a) | 58,908 | 27,715 |
| Total assets | $2,648,459 | $2,528,928 |
(a)
See Note 12 for details of balances associated with consolidated variable interest entities.
(continued)
1
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets – (Continued)
(In thousands, except share amounts)
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| | (Unaudited) | |
| Liabilities, Redeemable Noncontrolling Interests and Equity | | |
| Losses and loss adjustment expenses (a) | $558,982 | $576,495 |
| Unearned premiums (a) | 659,335 | 643,328 |
| Advance premiums (a) | 44,440 | 19,302 |
| Ceded reinsurance premiums payable (a) | 34,772 | 27,591 |
| Assumed premiums payable (a) | 4,049 | 1,744 |
| Income taxes payable (a) | 16,467 | 12,782 |
| Deferred income tax liabilities, net (a) | 1,001 | 3,814 |
| Revolving credit facility | 36,000 | 36,000 |
| Long-term debt | 31,465 | 31,877 |
| Accrued expenses and other liabilities (a) | 82,887 | 61,351 |
| Total liabilities | 1,469,398 | 1,414,284 |
| Commitments and contingencies (Note 19) | | |
| Redeemable noncontrolling interests (Note 16) | 5,929 | 3,359 |
| Equity: | | |
| Common stock (no par value, 40,000,000 shares authorized, 12,469,972 and 12,992,147 shares issued and outstanding, respectively) | — | — |
| Additional paid-in capital | 340,854 | 428,109 |
| Retained earnings | 748,437 | 611,509 |
| Accumulated other comprehensive (loss) income | (9,382) | 1,459 |
| Total stockholders’ equity | 1,079,909 | 1,041,077 |
| Noncontrolling interests | 93,223 | 70,208 |
| Total equity | 1,173,132 | 1,111,285 |
| Total liabilities, redeemable noncontrolling interests and equity | $2,648,459 | $2,528,928 |
(a)
See Note 12 for details of balances associated with consolidated variable interest entities.
See accompanying Notes to Consolidated Financial Statements (unaudited).
2
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Statements of Income
_(Unaudited) · (In thousands, except per share amounts)_
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Revenue | | | | |
| Gross premiums earned | $320,824 | $302,628 | $647,030 | $603,011 |
| Premiums ceded | (101,812) | (102,522) | (205,867) | (202,157) |
| Net premiums earned | 219,012 | 200,106 | 441,163 | 400,854 |
| Net investment income | 18,890 | 16,445 | 36,191 | 30,196 |
| Net realized investment gains | 1,222 | 155 | 1,756 | 1,322 |
| Net unrealized investment gains (losses) | 743 | 1,180 | (955) | (726) |
| Policy fee income | 1,651 | 1,467 | 3,227 | 3,696 |
| Other | 5,135 | 2,567 | 8,153 | 3,011 |
| Total revenue | 246,653 | 221,920 | 489,535 | 438,353 |
| Expenses | | | | |
| Losses and loss adjustment expenses | 71,076 | 64,457 | 136,676 | 123,748 |
| Policy acquisition and other underwriting expenses | 32,346 | 30,551 | 64,116 | 57,838 |
| General and administrative personnel expenses | 23,948 | 19,985 | 46,301 | 40,468 |
| Interest expense | 1,084 | 3,744 | 2,007 | 7,128 |
| Other operating expenses | 7,226 | 8,791 | 14,078 | 14,440 |
| Total expenses | 135,680 | 127,528 | 263,178 | 243,622 |
| Income before income taxes | 110,973 | 94,392 | 226,357 | 194,731 |
| Income tax expense | 28,073 | 24,113 | 58,414 | 50,222 |
| Net income | 82,900 | 70,279 | 167,943 | 144,509 |
| Net income attributable to noncontrolling interests | (9,103) | (4,119) | (20,739) | (8,665) |
| Net income after noncontrolling interests | $73,797 | $66,160 | $147,204 | $135,844 |
| Basic earnings per share | $5.78 | $5.57 | $11.39 | $12.00 |
| Diluted earnings per share | $5.60 | $5.18 | $11.05 | $10.57 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
3
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Statements of Comprehensive Income
_(Unaudited) · (In thousands)_
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Net income | $82,900 | $70,279 | $167,943 | $144,509 |
| Other comprehensive (loss) income, net of income taxes: | | | | |
| Available-for-sale fixed-maturity securities | (4,954) | (184) | (11,006) | 1,907 |
| Other comprehensive (loss) income, net of income taxes | (4,954) | (184) | (11,006) | 1,907 |
| Comprehensive income | 77,946 | 70,095 | 156,937 | 146,416 |
| Comprehensive income attributable to noncontrolling interests | (8,993) | (4,119) | (20,574) | (8,665) |
| Comprehensive income after noncontrolling interests | $68,953 | $65,976 | $136,363 | $137,751 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
4
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
For the Three Months Ended June 30, 2026
(Unaudited)
(In thousands, except per share amount)
| Line item | Common Stock / Shares | Common Stock / Amount | Additional Paid-In / Capital | Retained / Earnings | Accumulated Other Comprehensive / Loss | Total Stockholders’ / Equity | Noncontrolling / Interests | Total / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance as of March 31, 2026 | 12,900,905 | — | $413,838 | $679,721 | $(4,538) | $1,089,021 | $84,468 | $1,173,489 |
| Net income | — | — | — | 73,797 | — | 73,797 | 9,103 | 82,900 |
| Other comprehensive loss, net of income taxes | — | — | — | — | (4,844) | (4,844) | (110) | (4,954) |
| Issuance of restricted stock | 3,750 | — | — | — | — | — | — | — |
| Forfeiture of restricted stock | (693) | — | — | — | — | — | — | — |
| Net share settlements on vesting of restricted stock | (70,452) | — | (11,121) | — | — | (11,121) | — | (11,121) |
| Repurchase of common stock | (363,538) | — | (57,720) | — | — | (57,720) | — | (57,720) |
| Repurchase of noncontrolling interests | — | — | (6,580) | — | — | (6,580) | (3,563) | (10,143) |
| Other adjustments to noncontrolling interests | — | — | (147) | — | — | (147) | 147 | — |
| Common stock dividends | — | — | — | (5,081) | — | (5,081) | — | (5,081) |
| Stock-based compensation | — | — | 2,584 | — | — | 2,584 | 755 | 3,339 |
| Reclassification of nonrefundable subscriber surplus contributions | — | — | — | — | — | — | 2,423 | 2,423 |
| Balance as of June 30, 2026 | 12,469,972 | — | $340,854 | $748,437 | $(9,382) | $1,079,909 | $93,223 | $1,173,132 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
5
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity – (Continued)
For the Three Months Ended June 30, 2025
(Unaudited)
(In thousands, except per share amount)
| Line item | Common Stock / Shares | Common Stock / Amount | Additional Paid-In / Capital | Retained / Earnings | Accumulated Other Comprehensive / Income | Total Stockholders’ / Equity | Noncontrolling / Interests | Total / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance as of March 31, 2025 | 10,765,336 | — | $124,170 | $397,171 | $1,342 | $522,683 | $20,149 | $542,832 |
| Net income | — | — | — | 66,160 | — | 66,160 | 4,119 | 70,279 |
| Other comprehensive loss, net of income taxes | — | — | — | — | (184) | (184) | — | (184) |
| Issuance of restricted stock | 9,020 | — | — | — | — | — | — | — |
| Forfeiture of restricted stock | (1,100) | — | — | — | — | — | — | — |
| Net share settlements on vesting of restricted stock | (266) | — | (40) | — | — | (40) | — | (40) |
| Conversion of senior notes to common stock | 2,183,894 | — | 172,582 | — | — | 172,582 | — | 172,582 |
| Common stock dividends | — | — | — | (4,618) | — | (4,618) | — | (4,618) |
| Stock-based compensation | — | — | 1,994 | — | — | 1,994 | 701 | 2,695 |
| Reclassification of nonrefundable subscriber surplus contributions | — | — | — | — | — | — | 1,138 | 1,138 |
| Balance as of June 30, 2025 | 12,956,884 | — | $298,706 | $458,713 | $1,158 | $758,577 | $26,107 | $784,684 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
6
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity – (Continued)
For the Six Months Ended June 30, 2026
(Unaudited)
(In thousands, except per share amount)
| Line item | Common Stock / Shares | Common Stock / Amount | Additional Paid-In / Capital | Retained / Earnings | Accumulated Other Comprehensive / Income (Loss) | Total Stockholders’ / Equity | Noncontrolling / Interests | Total / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance as of December 31, 2025 | 12,992,147 | — | $428,109 | $611,509 | $1,459 | $1,041,077 | $70,208 | $1,111,285 |
| Net income | — | — | — | 147,204 | — | 147,204 | 20,739 | 167,943 |
| Other comprehensive loss, net of income taxes | — | — | — | — | (10,841) | (10,841) | (165) | (11,006) |
| Exercise of stock options | 20,000 | — | 800 | — | — | 800 | — | 800 |
| Issuance of restricted stock | 3,750 | — | — | — | — | — | — | — |
| Forfeiture of restricted stock | (1,386) | — | — | — | — | — | — | — |
| Net share settlements on vesting of restricted stock | (70,930) | — | (11,202) | — | — | (11,202) | — | (11,202) |
| Repurchase of common stock | (473,609) | — | (75,221) | — | — | (75,221) | — | (75,221) |
| Repurchase of noncontrolling interests | — | — | (6,580) | — | — | (6,580) | (3,563) | (10,143) |
| Other adjustments to noncontrolling interests | — | — | (259) | — | — | (259) | 259 | — |
| Common stock dividends | — | — | — | (10,276) | — | (10,276) | — | (10,276) |
| Stock-based compensation | — | — | 5,207 | — | — | 5,207 | 1,491 | 6,698 |
| Reclassification of nonrefundable subscriber surplus contributions | — | — | — | — | — | — | 4,254 | 4,254 |
| Balance as of June 30, 2026 | 12,469,972 | — | $340,854 | $748,437 | $(9,382) | $1,079,909 | $93,223 | $1,173,132 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
7
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Equity – (Continued)
For the Six Months Ended June 30, 2025
(Unaudited)
(In thousands, except per share amount)
| Line item | Common Stock / Shares | Common Stock / Amount | Additional Paid-In / Capital | Retained / Earnings | Accumulated Other Comprehensive / (Loss) Income | Total Stockholders’ / Equity | Noncontrolling / Interests | Total / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance as of December 31, 2024 | 10,767,184 | — | $122,289 | $331,793 | $(749) | $453,333 | $14,017 | $467,350 |
| Net income | — | — | — | 135,844 | — | 135,844 | 8,665 | 144,509 |
| Other comprehensive income, net of income taxes | — | — | — | — | 1,907 | 1,907 | — | 1,907 |
| Issuance of restricted stock | 10,020 | — | — | — | — | — | — | — |
| Forfeiture of restricted stock | (1,850) | — | — | — | — | — | — | — |
| Net share settlements on vesting of restricted stock | (5,533) | — | (679) | — | — | (679) | — | (679) |
| Conversion of senior notes to common stock | 2,187,063 | — | 172,832 | — | — | 172,832 | — | 172,832 |
| Common stock dividends | — | — | — | (8,924) | — | (8,924) | — | (8,924) |
| Stock-based compensation | — | — | 4,264 | — | — | 4,264 | 1,403 | 5,667 |
| Reclassification of nonrefundable subscriber surplus contributions | — | — | — | — | — | — | 2,022 | 2,022 |
| Balance as of June 30, 2025 | 12,956,884 | — | $298,706 | $458,713 | $1,158 | $758,577 | $26,107 | $784,684 |
See accompanying Notes to Consolidated Financial Statements (unaudited).
8
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Statements of Cash Flows
_(Unaudited) · (In thousands)_
| Line item | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Cash flows from operating activities: | | |
| Net income after noncontrolling interests | $147,204 | $135,844 |
| Net income attributable to noncontrolling interests | 20,739 | 8,665 |
| Net income | 167,943 | 144,509 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Stock-based compensation expense | 6,698 | 5,667 |
| Net accretion of discount on investments in available-for-sale fixed-maturity securities | (498) | (1,389) |
| Depreciation and amortization | 4,285 | 6,560 |
| Deferred income tax expense (benefit) | 2,013 | (1,353) |
| Net realized investment gains | (1,756) | (1,322) |
| Net unrealized investment losses | 955 | 726 |
| Credit loss expense - reinsurance recoverable | (24) | (49) |
| Net loss from limited partnership investments | 399 | 658 |
| Debt conversion expense | — | 1,125 |
| Gain on sale of real estate investments | (354) | (440) |
| Foreign currency remeasurement loss | 192 | 47 |
| Other non-cash items | 317 | 71 |
| Changes in operating assets and liabilities: | | |
| Income taxes | 3,740 | 16,176 |
| Premiums receivable, net | (20,113) | (15,244) |
| Prepaid reinsurance premiums | 50,127 | 92,060 |
| Reinsurance recoverable | 34,176 | 120,565 |
| Deferred policy acquisition costs | (8,484) | (10,835) |
| Funds withheld for assumed business | (92) | 3,152 |
| Other assets | (19,842) | (14,587) |
| Losses and loss adjustment expenses | (17,513) | (149,008) |
| Unearned premiums | 16,007 | 42,781 |
| Advance premiums | 25,138 | 24,810 |
| Reinsurance payable on paid losses and loss adjustment expenses | — | (2,369) |
| Ceded reinsurance premiums payable | 7,181 | 19,808 |
| Assumed premiums payable | 2,305 | (1,801) |
| Accrued expenses and other liabilities | 21,127 | 26,687 |
| Net cash provided by operating activities | 273,927 | 307,005 |
(continued)
9
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Statements of Cash Flows – (Continued)
_(Unaudited) · (In thousands)_
| Line item | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Cash flows from investing activities: | | |
| Investments in limited partnerships | — | (270) |
| Return of capital from limited partnership investments | 897 | 644 |
| Purchase of property and equipment | (625) | (2,254) |
| Purchase of real estate investments | (983) | (8,862) |
| Purchase of available-for-sale fixed-maturity securities | (520,005) | (136,582) |
| Purchase of equity securities | (27,760) | (23,293) |
| Proceeds from sales of real estate investments | 760 | 2,013 |
| Proceeds from sales of available-for-sale fixed-maturity securities | 3,643 | 3,359 |
| Proceeds from calls, repayments and maturities of available-for-sale fixed-maturity securities | 8,512 | 263,643 |
| Proceeds from sales of equity securities | 35,173 | 21,621 |
| Net cash (used in) provided by investing activities | (500,388) | 120,019 |
| Cash flows from financing activities: | | |
| Common stock dividends | (10,276) | (8,924) |
| Proceeds from exercise of stock options | 800 | — |
| Payment of other noncontrolling interests issuance costs | (375) | — |
| Repayment under revolving credit facility, net | — | (4,000) |
| Subscriber surplus contributions, net | 6,824 | 2,736 |
| Repayment of long-term debt | (442) | (268) |
| Debt conversion costs paid | — | (1,125) |
| Payment of net share settlements and other | (11,202) | (687) |
| Repurchase of common stock | (74,476) | — |
| Repurchase of noncontrolling interests | (10,043) | — |
| Payment for deposit accounting assets | (11,330) | — |
| Net cash used in financing activities | (110,520) | (12,268) |
| Effect of exchange rate changes on cash | (179) | (45) |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (337,160) | 414,711 |
| Cash and cash equivalents and restricted cash at beginning of period | 1,213,874 | 536,185 |
| Cash and cash equivalents and restricted cash at end of period | $876,714 | $950,896 |
(continued)
10
**HCI GROUP, INC. AND SUBSIDIARIES**
### Consolidated Statements of Cash Flows – (Continued)
_(Unaudited) · (In thousands)_
| Line item | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Supplemental disclosure of cash flow information: | | |
| Income taxes paid, net of refunds | $52,662 | $37,952 |
| Interest paid | 1,864 | 3,697 |
| Non-cash investing and financing activities: | | |
| Unrealized (loss) gain on investments in available-for-sale fixed-maturity securities, net of income taxes | (11,006) | 1,907 |
| Conversion of 4.75% Convertible Senior Notes | — | 172,500 |
| Receivable from sale of equity securities | 121 | — |
| Payable on purchase of equity securities | 115 | 184 |
| Payable on purchase of available-for-sale fixed-maturity securities | — | 127 |
| Payable related to repurchase of common stock | 745 | |
| Payable related to repurchase of noncontrolling interests | 100 | — |
See accompanying Notes to Consolidated Financial Statements (unaudited).
11
HCI GROUP, INC. AND SUBSIDIARIES
### Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 1 -- Nature of Operations
HCI Group, Inc., together with its subsidiaries (“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through two insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TTIC”). The Company provides various homeowners’ property and casualty insurance products for properties located in Florida, which is the Company's primary market, as well as in other states in the northeast and southeast regions of the United States (“U.S.”). A third insurance subsidiary, perRisk Insurance Company (“perRisk”), is domiciled in the State of Arizona and has not yet commenced its surplus lines insurance business. The Company's insurance operations are supported by other insurance-related subsidiaries within the consolidated group.
Exzeo Group, Inc. (“Exzeo”), a publicly traded majority-owned subsidiary, provides turn-key insurance technology and operations solutions based on a proprietary platform of purpose-built software and data analytics applications specifically designed for the property and casualty insurance ecosystem. The Company utilizes Exzeo's internally developed software technologies to identify profitable underwriting opportunities, drive efficiency in claim processing and settlements, and streamline operations across our insurance operations and other insurance-related businesses.
The Company also provides attorney-in-fact (“AIF”) services for Condo Owners Reciprocal Exchange (“CORE”) and Tailrow Insurance Exchange (“Tailrow”), both of which are reciprocal insurance exchanges owned by their policyholders. Although the Company does not have any equity interest in CORE and Tailrow, the Company is required to consolidate them as their primary beneficiary. In addition, the Company's commercial real estate subsidiary is primarily engaged in developing and operating commercial properties for investment purposes or internal use.
HCI Group, Inc. was incorporated in the State of Florida in 2006 and its common stock is currently listed on the New York Stock Exchange (“NYSE”) under the symbol “HCI.” Exzeo completed its initial public offering in November of 2025 and is currently listed on the NYSE under the symbol “XZO.” As of June 30, 2026, HCI Group, Inc. owned approximately 83.1% of Exzeo’s outstanding shares of common stock, inclusive of its unvested restricted stock.
### Note 2 -- Summary of Significant Accounting Policies
#### Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2026 and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2026. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 included in the Company’s Form 10-K, which was filed with the SEC on February 26, 2026 (the “2025 Annual
12
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Report”). Unless otherwise noted, the Company’s accounting policies do not differ from those disclosed in the 2025 Annual Report.
The unaudited consolidated financial statements have been prepared in U.S. dollars and include the accounts of HCI Group, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships or investments for consolidation pursuant to authoritative accounting guidance related to the consolidation of variable interest entities (“VIE”) under the Variable Interest Model prescribed by the Financial Accounting Standards Board (“FASB”). A VIE is consolidated when the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Refer to Note 12 “Variable Interest Entities” for additional information.
Certain prior period amounts have been reclassified to conform with current period presentation.
#### Use of Estimates
The preparation of the interim unaudited consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. The Company's estimates are based on the relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market conditions. The Company's estimates specific to losses and loss adjustment expenses, reinsurance recoverable, income taxes, stock-based compensation expense, and limited partnership investments involve the most significant judgments and estimates related to the consolidated financial statements.
### Note 3 -- Recent Accounting Pronouncements
#### Adopted
Accounting Standards Update No. 2025-05. In July 2025, the FASB issued Accounting Standards Update No. 2025-05 (“ASU 2025-05”) Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This update simplifies the estimation of current expected credit losses on current accounts receivable and current contract assets related to revenue from contracts with customers by allowing all entities to assume that current conditions as of the balance sheet date will not change for the remaining life of the current accounts receivable and current contract assets. ASU 2025-05 is effective for all entities for fiscal years and interim periods beginning after December 15, 2025. The adoption of this update did not have a material impact on the Company’s financial position or results of operation.
#### Pending Adoption
Accounting Standards Update No. 2025-01 and 2024-03. In January 2025, the FASB issued Accounting Standards Update No. 2025-01 (“ASU 2025-01”) Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies the effective date of Accounting Standards Update No. 2024-03 (“ASU 2024-03”) Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which was issued by the FASB in November 2024. For public business entities, ASU 2024-03 enhances disclosures by requiring the disaggregation of certain expense captions presented within the income
13
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
statement, such as employee compensation and intangible asset amortization. In addition, the total relevant expense caption on the income statement must be reconciled to the aggregate of the separately disclosed expense categories with the difference represented by an “other items” amount which is qualitatively described. ASU 2024-03 is effective for all public business entities for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating its impact.
Accounting Standards Update No. 2025-06. In September 2025, the FASB issued Accounting Standards Update No. 2025-06 (“ASU 2025-06”) Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update enhances guidance on the capitalization of software development costs by eliminating project phase based criteria and clarifying the conditions signifying significant development uncertainty used by entities to evaluate when the probable-to-complete recognition threshold is met. ASU 2025-06 is effective for all entities for fiscal years and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating its impact.
### Note 4 -- Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Cash and cash equivalents | $872,336 | $1,210,126 |
| Restricted cash | 4,378 | 3,748 |
| Cash and cash equivalents and restricted cash | $876,714 | $1,213,874 |
The majority of the Company’s cash and cash equivalents are held at major financial institutions. Certain account balances exceed the Federal Deposit Insurance Corporation insurance limits of $250 per account. As a result, there is a concentration of credit risk related to amounts in excess of the insurance limits. The Company regularly monitors the financial stability of these financial institutions and believes there is no exposure to any significant credit risk in cash and cash equivalents.
14
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 5 -- Investments
#### Available-for-Sale Fixed-Maturity Securities
The Company holds investments in fixed-maturity securities classified as available-for-sale. As of June 30, 2026 and December 31, 2025, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale fixed-maturity securities by security type were as follows:
| As of June 30, 2026 | Cost or Amortized / Cost | Allowance for Credit / Loss | Gross Unrealized / Gains | Gross Unrealized / Losses | Estimated Fair / Value |
| --- | --- | --- | --- | --- | --- |
| U.S. Treasury and U.S. government agencies | $835,084 | — | $122 | $(10,902) | $824,304 |
| Corporate | 242,419 | — | 52 | (1,720) | 240,751 |
| Commercial mortgage-backed securities | 26,275 | — | 49 | (338) | 25,986 |
| Available-for-sale fixed-maturity securities | $1,103,778 | — | $223 | $(12,960) | $1,091,041 |
| As of December 31, 2025 | | | | | |
| U.S. Treasury and U.S. government agencies | $332,284 | — | $1,785 | $(717) | $333,352 |
| Corporate | 241,843 | — | 1,463 | (384) | 242,922 |
| Commercial mortgage-backed securities | 21,256 | — | 74 | (275) | 21,055 |
| Available-for-sale fixed-maturity securities | $595,383 | — | $3,322 | $(1,376) | $597,329 |
Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. As of June 30, 2026 and December 31, 2025, the scheduled contractual maturities of available-for-sale fixed-maturity securities, with securities not due at a single maturity date shown separately, were as follows:
| Line item | June 30, 2026 / Cost or / Amortized Cost | June 30, 2026 / Estimated / Fair Value | December 31, 2025 / Cost or / Amortized Cost | December 31, 2025 / Estimated / Fair Value |
| --- | --- | --- | --- | --- |
| Due in one year or less | $44,388 | $44,366 | $10,202 | $10,214 |
| Due after one year through five years | 531,003 | 527,011 | 353,454 | 354,648 |
| Due after five years through ten years | 501,611 | 493,265 | 209,970 | 210,963 |
| Due after ten years | 501 | 413 | 501 | 449 |
| Commercial mortgage-backed securities | 26,275 | 25,986 | 21,256 | 21,055 |
| Available-for-sale fixed-maturity securities | $1,103,778 | $1,091,041 | $595,383 | $597,329 |
15
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Securities on Deposit
As of June 30, 2026 and December 31, 2025, the fair value of available-for-sale fixed-maturity securities on deposit with various regulatory authorities was $1,137 and $1,807, respectively.
Sales of Available-for-Sale Fixed-Maturity Securities
Proceeds received and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities for the three and six months ended June 30, 2026 and 2025 were as follows:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Proceeds | $1,765 | $749 | $3,643 | $3,359 |
| Gross realized gains | $6 | $14 | $55 | $38 |
| Gross realized losses | $(8) | — | $(8) | $(4) |
Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities
As of June 30, 2026 and December 31, 2025, available-for-sale fixed-maturity securities with gross unrealized loss positions by investment category and length of time the individual securities have been in a continuous loss position were as follows:
| As of June 30, 2026 | Less Than Twelve Months / Gross / Unrealized / Losses | Less Than Twelve Months / Estimated / Fair / Value | Twelve Months or Longer / Gross / Unrealized / Losses | Twelve Months or Longer / Estimated / Fair / Value | Total / Gross / Unrealized / Losses | Total / Estimated / Fair / Value |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. Treasury and U.S. government agencies | $(10,736) | $709,989 | $(166) | $2,915 | $(10,902) | $712,904 |
| Corporate | (1,532) | 210,056 | (188) | 1,394 | (1,720) | 211,450 |
| Commercial mortgage-backed securities | (338) | 15,666 | — | — | (338) | 15,666 |
| Total | $(12,606) | $935,711 | $(354) | $4,309 | $(12,960) | $940,020 |
| As of December 31, 2025 | Less Than Twelve Months / Gross / Unrealized / Losses | Less Than Twelve Months / Estimated / Fair / Value | Twelve Months or Longer / Gross / Unrealized / Losses | Twelve Months or Longer / Estimated / Fair / Value | Total / Gross / Unrealized / Losses | Total / Estimated / Fair / Value |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. Treasury and U.S. government agencies | $(553) | $208,273 | $(164) | $2,918 | $(717) | $211,191 |
| Corporate | (289) | 28,303 | (95) | 1,187 | (384) | 29,490 |
| Commercial mortgage-backed securities | (275) | 16,749 | — | — | (275) | 16,749 |
| Total | $(1,117) | $253,325 | $(259) | $4,105 | $(1,376) | $257,430 |
As of June 30, 2026 and December 31, 2025, there were 70 and 47 available-for-sale fixed-maturity securities in an unrealized loss position, respectively.
16
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
#### Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities
The Company regularly reviews its individual available-for-sale fixed-maturity securities for credit impairment. The Company considers various factors in determining whether a credit loss exists for each individual security, including:
- the financial condition and near-term prospects of the issuer, including any specific events affecting its operations or earnings;
- the extent to which the market value of the security has been below its cost or amortized cost;
- general market conditions and industry or sector specific factors and other qualitative factors;
- nonpayment by the issuer of its contractually obligated interest and principal payments; and
- the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.
There was no balance or activity in the allowance for credit losses of available-for-sale fixed-maturity securities during the three and six months ended June 30, 2026 and 2025.
#### Equity Securities
The Company holds investments in equity securities measured at fair values which are readily determinable. As of June 30, 2026 and December 31, 2025, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:
| Line item | Cost | Gross Unrealized / Gains | Gross Unrealized / Losses | Estimated Fair / Value |
| --- | --- | --- | --- | --- |
| June 30, 2026 | $55,700 | $5,693 | $(2,355) | $59,038 |
| December 31, 2025 | $61,597 | $6,204 | $(1,911) | $65,890 |
The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income related to equity securities still held:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Net gains recognized | $1,967 | $1,321 | $754 | $562 |
| Exclude: Net realized gains recognized for securities sold | 1,224 | 141 | 1,709 | 1,288 |
| Net unrealized investment gains (losses) | $743 | $1,180 | $(955) | $(726) |
17
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Sales of Equity Securities
Proceeds received and the gross realized gains and losses from sales of equity securities for the three and six months ended June 30, 2026 and 2025 were as follows:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Proceeds | $20,099 | $12,079 | $35,173 | $21,621 |
| Gross realized gains | $1,619 | $508 | $2,375 | $1,839 |
| Gross realized losses | $(395) | $(367) | $(666) | $(551) |
Limited Partnership Investments
The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity funds managed by general partners who make decisions with regard to financial policies and operations. As such, the Company is not the primary beneficiary and does not consolidate these partnerships.
The following table summarizes limited partnership investments:
| Investment Strategy | June 30, 2026 / Carrying / Value | June 30, 2026 / Unfunded / Balance | December 31, 2025 / Carrying / Value | December 31, 2025 / Unfunded / Balance |
| --- | --- | --- | --- | --- |
| Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e) | $1,668 | — | $1,877 | — |
| Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e) | 573 | — | 587 | — |
| High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g) | 2,854 | — | 2,769 | — |
| Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i) | 1,198 | — | 1,333 | — |
| Value-oriented investments in mature real estate private equity funds and portfolios globally. (b)(j) | 5,531 | 1,706 | 6,182 | 2,042 |
| Risk-adjusted returns on credit and equity investments, primarily in private equity-owned companies. (b)(k) | 4,570 | 2,085 | 4,942 | 1,610 |
| Limited partnership investments | $16,394 | $3,791 | $17,690 | $3,652 |
(a)
Represents the Company’s percentage investment in the fund as of each balance sheet date.
(b)
Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.
18
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
(c)
The term is expected to be two years following the maturity of the fund’s outstanding leverage. Although the capital commitment period has expired, follow-on investments and pending commitments may require additional fundings.
(d)
Effective July 1, 2023, this investment is in the process of winding down. Although the capital commitment period has ended, the general partner could still request an additional funding under certain circumstances.
(e)
At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.
(f)
Expected to have a ten-year term. The capital commitment period has expired but the general partner may request additional funding for follow-on investment.
(g)
With the consent of a supermajority of partners, the term of the fund may be extended for up to three additional one-year periods.
(h)
Expected to have an eight-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.
(i)
The capital commitment period has ended but an additional funding may be requested.
(j)
The term is expected to end November 27, 2027. The term may be extended for up to four additional one-year periods at the general partner’s discretion, and up to two additional one-year periods with the consent of the advisory committee.
(k)
Expected to have an eight-year term after the final admission date. The term may be extended for an additional one-year period at the general partner’s discretion, and up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.
As of June 30, 2026 and December 31, 2025, the Company’s net cumulative contributed capital to the limited partnership investments totaled $17,800 and $18,697, respectively, and the Company’s maximum exposure to loss aggregated $16,394 and $17,690, respectively.
Real Estate Investments
The following table summarizes real estate investments:
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Land | $49,630 | $50,052 |
| Land improvements | 14,401 | 14,760 |
| Buildings and building improvements | 43,792 | 44,019 |
| Tenant and leasehold improvements | 2,149 | 2,265 |
| Construction in progress | 822 | 89 |
| Other | 1,913 | 2,001 |
| Total, at cost | 112,707 | 113,186 |
| Less: accumulated depreciation | (10,038) | (9,440) |
| Real estate investments | $102,669 | $103,746 |
Depreciation expense related to real estate investments was $677 and $473 for the three months ended June 30, 2026 and 2025, respectively, and $1,406 and $812 for the six months ended June 30, 2026 and 2025, respectively.
19
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Net Investment Income
The following table summarizes net investment income:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Available-for-sale fixed-maturity securities | $10,221 | $6,841 | $18,091 | $14,355 |
| Equity securities | 751 | 660 | 1,404 | 1,147 |
| Investment expense | (206) | (154) | (409) | (339) |
| Limited partnership investments | (75) | (32) | (399) | (658) |
| Real estate investments | 73 | 455 | 528 | 773 |
| Cash and cash equivalents | 7,995 | 8,675 | 16,716 | 14,918 |
| Other | 131 | — | 260 | — |
| Net investment income | $18,890 | $16,445 | $36,191 | $30,196 |
### Note 6 -- Fair Value Measurements
The Company records and discloses certain financial assets and liabilities at their estimated fair values. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets.
Level 2 – Other inputs that are observable for the asset, either directly or indirectly such as quoted prices for identical assets that are not observable throughout the full term of the asset.
Level 3 – Inputs that are unobservable.
Valuation Methodology
#### Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash as well as money-market funds and certificates of deposit maturing within three months from the time of purchase. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.
#### Restricted Cash
Restricted cash represents cash held by state authorities and the carrying value approximates fair value.
20
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
#### Available-for-Sale Fixed-Maturity and Equity Securities
Estimated fair values of the Company’s available-for-sale fixed-maturity and equity securities are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally determined using quoted prices in active markets for identical securities or other directly or indirectly observable inputs, including quoted prices for similar securities. In those instances where observable inputs are not available, fair values are determined using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.
The estimated fair values for securities are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 1 or level 2 inputs depending on the asset class. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to other market data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies, and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.
#### Other Investments
The following table summarizes other investments held by the Company and the method used in estimating the fair value:
| Line item | Maturity Date | Valuation Methodology |
| --- | --- | --- |
| 10.50% Surplus Note | 2030 | Discounted cash flow method/Level 3 inputs |
Revolving Credit Facility
The Company has an amount outstanding under a revolving credit facility. The interest rate is variable and is periodically adjusted based on the Secured Overnight Financing Rate (“SOFR”) plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio. As a result, the carrying value approximates fair value.
#### Long-Term Debt
The following table summarizes the Company’s long-term debt and methods used in estimating their fair values:
| Line item | Maturity Date | Valuation Methodology |
| --- | --- | --- |
| 4.55% Promissory Note | 2036 | Discounted cash flow method/Level 3 inputs |
| 5.50% Promissory Note | 2033 | Discounted cash flow method/Level 3 inputs |
| 5.65% Promissory Note | 2035 | Discounted cash flow method/Level 3 inputs |
21
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Assets Measured at Estimated Fair Value on a Recurring Basis
The following tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2026 and December 31, 2025:
| As of June 30, 2026 | Fair Value Measurements Using / (Level 1) | Fair Value Measurements Using / (Level 2) | Fair Value Measurements Using / (Level 3) | Total |
| --- | --- | --- | --- | --- |
| Cash and cash equivalents | $$872,336 | — | — | 872,336 |
| Restricted cash | $$4,378 | — | — | 4,378 |
| Available-for-sale fixed-maturity securities: | | | | |
| U.S. Treasury and U.S. government agencies | $$804,798 | $19,506 | — | 824,304 |
| Corporate | — | 240,751 | — | 240,751 |
| Commercial mortgage-backed securities | — | 25,986 | — | 25,986 |
| Available-for-sale fixed-maturity securities | $$804,798 | $286,243 | — | 1,091,041 |
| Equity securities | $$57,703 | $1,335 | — | 59,038 |
| As of December 31, 2025 | Fair Value Measurements Using / (Level 1) | Fair Value Measurements Using / (Level 2) | Fair Value Measurements Using / (Level 3) | Total |
| --- | --- | --- | --- | --- |
| Cash and cash equivalents | $$1,210,126 | — | — | 1,210,126 |
| Restricted cash | $$3,748 | — | — | 3,748 |
| Available-for-sale fixed-maturity securities: | | | | |
| U.S. Treasury and U.S. government agencies | $$313,420 | $19,932 | — | 333,352 |
| Corporate | — | 242,922 | — | 242,922 |
| Commercial mortgage-backed securities | — | 21,055 | — | 21,055 |
| Available-for-sale fixed-maturity securities | $$313,420 | $283,909 | — | 597,329 |
| Equity securities | $$64,545 | $1,345 | — | 65,890 |
Assets and Liabilities Carried at Other Than Fair Value
The following tables present fair value information for assets and liabilities carried on the consolidated balance sheets at amounts other than fair value as of June 30, 2026 and December 31, 2025:
| As of June 30, 2026 | Carrying / Value | Fair Value Measurements Using / (Level 3) | Estimated / Fair Value |
| --- | --- | --- | --- |
| Other investments | $5,000 | $$$5,201 | $5,201 |
| Revolving credit facility | $36,000 | — | $36,000 |
| Long-term debt: | | | |
| 4.55% Promissory Note | $3,931 | $$$3,682 | $3,682 |
| 5.50% Promissory Note | 11,142 | 10,995 | 10,995 |
| 5.65% Promissory Note | 16,392 | 16,164 | 16,164 |
| Long-term debt | $31,465 | $$$30,841 | $30,841 |
22
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
| As of December 31, 2025 | Carrying / Value | Fair Value Measurements Using / (Level 3) | Estimated / Fair Value |
| --- | --- | --- | --- |
| Other investments | $5,000 | $$$5,223 | $5,223 |
| Revolving credit facility | $36,000 | — | $36,000 |
| Long-term debt: | | | |
| 4.55% Promissory Note | $4,080 | $$$3,863 | $3,863 |
| 5.50% Promissory Note | 11,262 | 11,313 | 11,313 |
| 5.65% Promissory Note | 16,535 | 16,615 | 16,615 |
| Long-term debt | $31,877 | $$$31,791 | $31,791 |
### Note 7 -- Intangible Assets, Net
The following table summarizes intangible assets, net:
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| In-place leases | $2,221 | $2,221 |
| Policy renewal rights - United | 10,100 | 10,100 |
| Non-compete agreements - United (a) | 314 | 314 |
| Total, at cost | 12,635 | 12,635 |
| Less: accumulated amortization | (10,711) | (9,952) |
| Intangible assets, net | $1,924 | $2,683 |
(a)
Fully amortized.
Amortization expense for intangible assets was $310 and $638 for the three months ended June 30, 2026 and 2025, respectively, and $759 and $1,279 for the six months ended June 30, 2026 and 2025, respectively.
### Note 8 -- Revolving Credit Facility
As of June 30, 2026 and December 31, 2025, the Company had an outstanding balance of $36,000 under a senior secured revolving credit facility with Fifth Third Bank (“Revolving Credit Facility”). The Revolving Credit Facility, as amended on November 5, 2025, currently provides borrowing capacity of up to $150,000 and expires on November 5, 2030. Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the one or three month SOFR plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio, with interest payments due in arrears on January 1, April 1, July 1, and October 1. In addition, the Company is subject to an unused commitment fee.
Interest expense for the Revolving Credit Facility was $631 and $644 for the three months ended June 30, 2026 and 2025, respectively, and $1,098 and $1,313 for the six months ended June 30, 2026 and 2025, respectively.
As of June 30, 2026, the Company was in compliance with all required covenants and had an available borrowing capacity of $114,000.
23
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 9 -- Long-Term Debt
The following table summarizes long-term debt:
| Debt Description | Issued | Maturity | Interest / Rate | Payment / Date | June 30, 2026 | December 31, 2025 |
| --- | --- | --- | --- | --- | --- | --- |
| 4.55% Promissory Note | 7/6/2018 | 8/1/2036 | 4.55% | Monthly | $3,973 | $4,125 |
| 5.50% Promissory Note | 6/26/2023 | 7/1/2033 | 5.50% | Monthly | 11,292 | 11,422 |
| 5.65% Promissory Note | 7/24/2025 | 8/1/2035 | 5.65% | Monthly | 16,736 | 16,896 |
| Total principal amount | | | | | 32,001 | 32,443 |
| Less: unamortized issuance costs | | | | | (536) | (566) |
| Long-term debt | | | | | $31,465 | $31,877 |
There were no significant changes in the Company’s long-term debt during the six months ended June 30, 2026. During the six months ended June 30, 2025, the Company converted $172,500 in aggregate principal of its 4.75% convertible senior notes into consideration of 2,187,063 shares of the Company’s common stock and $1,133 in cash. The cash consideration included an inducement payment of $1,125 and $8 paid in lieu of fractional shares. The Company recognized an expense related to the inducement payment of $1,125 in other operating expenses on the consolidated statements of income and as financing cash flows on the consolidated statements of cash flows.
Interest expense for long-term debt was $453 and $3,100 for the three months ended June 30, 2026 and 2025, respectively, and $909 and $5,815 for the six months ended June 30, 2026 and 2025, respectively.
### Note 10 -- Reinsurance
#### Reinsurance obtained from other insurance companies
In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration its overall insurance exposure, modeled probable maximum losses, risk tolerance and retention levels, mandatory reinsurance coverage provided by the Florida Hurricane Catastrophe Fund (a tax-exempt state trust fund), and overall reinsurance market conditions. Amounts recoverable from reinsurers are estimated in a manner consistent with the applicable reinsurance contract or contracts. Premiums ceded to other companies have been reported as a reduction of gross premiums earned to arrive at net premiums earned. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers.
Reinsurance contracts that do not transfer insurance risk are accounted for using the deposit method. Under the deposit method, amounts paid, less any retained fees, are recorded as deposits within other assets in the consolidated balance sheets and within financing activities in the consolidated statements of cash flows.
The Company remains liable for claims payments in the event any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.
24
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The impact of the reinsurance contracts on premiums written and earned is as follows:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Premiums Written: | | | | |
| Direct | $383,351 | $357,336 | $665,355 | $625,792 |
| Assumed | (1,006) | (791) | (2,318) | 19,999 |
| Gross written | 382,345 | 356,545 | 663,037 | 645,791 |
| Ceded | (101,812) | (102,522) | (205,867) | (202,157) |
| Net premiums written | $280,533 | $254,023 | $457,170 | $443,634 |
| Premiums Earned: | | | | |
| Direct | $294,540 | $270,232 | $580,449 | $519,634 |
| Assumed | 26,284 | 32,396 | 66,581 | 83,377 |
| Gross earned | 320,824 | 302,628 | 647,030 | 603,011 |
| Ceded | (101,812) | (102,522) | (205,867) | (202,157) |
| Net premiums earned | $219,012 | $200,106 | $441,163 | $400,854 |
As of June 30, 2026 and December 31, 2025, net amounts recoverable from reinsurers were $255,744 and $289,896, respectively. There were no ceded losses from catastrophic events or significant adjustment to ceded losses from prior periods during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2025, the Company derecognized ceded losses of $61,200 related to a favorable change in estimated losses from Hurricane Milton.
As of June 30, 2026 and December 31, 2025, there were over 40 reinsurers participating in the Company’s reinsurance program. As of June 30, 2026, approximately 75.5% of the reinsurance recoverable balance was receivable from six reinsurers, one of which was the Florida Hurricane Catastrophe Fund. The allowance for credit losses related to reinsurance recoverable was not material to the consolidated balance sheets or consolidated statements of income for the periods presented.
Under contracts in effect prior to June 1, 2025, reinsurance costs could be adjusted by retrospective provisions under reinsurance contracts. There were no adjustments to premiums ceded related to retrospective provisions for the three and six months ended June 30, 2026 and 2025.
#### Reinsurance provided to other insurance companies
#### United Property & Casualty Insurance Company
The Company formerly provided quota share reinsurance to United Property & Casualty Insurance Company (“United”) on its policies in the northeast and southeast regions of the U.S. United was placed into receivership by the State of Florida due to its financial insolvency. As a result, the Company ceased providing quota share reinsurance on United policies, together with other administrative services, in March 2023. The liabilities and obligations under this quota-share reinsurance agreement were not material as of June 30, 2026 and December 31, 2025. Additionally, the balance of funds withheld for assumed business, which represent net amounts owed to
25
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
the Company related to the Company’s quota share reinsurance agreements with United, were not material as of June 30, 2026 and December 31, 2025.
#### Citizens Property Insurance Corporation
The Company may participate in a “take-out program” through which the Company assumes insurance policies held by Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. The take-out program is a legislatively mandated program designed to reduce the state’s risk exposure by encouraging private companies to assume policies from Citizens.
The table below shows the number of policies (in actuals) and annualized gross premiums assumed from Citizens during the periods presented:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Policies Assumed | — | — | — | 13,917 |
| Annualized Gross Premiums | — | — | — | $35,820 |
### Note 11 -- Losses and Loss Adjustment Expenses
The Company accrues for losses and loss adjustment expenses (“LAE”) in the period in which the underlying loss event occurred. LAE are costs associated with the investigation, evaluation, adjustment, and settlement of insurance claims and can be either allocated, costs directly attributable to a specific claim, or unallocated, costs that cannot be directly attributed to a specific claim. Reserves for losses and LAE are determined by establishing liabilities in amounts estimated to cover incurred losses and LAE. Such reserves are determined based on the assessment of claims reported and the development of pending claims. These reserves are based on individual case estimates for reported losses and LAE and estimates of amounts incurred but not reported.
The estimates of unpaid losses and LAE are subject to trends in claim severity and frequency and are continually reviewed. As part of the process, the Company reviews historical data and considers various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation, and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and LAE. Adjustments are reflected in the results of operations in the period in which they are made and the liabilities may deviate substantially from prior estimates. Losses and LAE ceded to or recovered from reinsurers are recorded as a reduction to losses and LAE on the consolidated statements of income. Accordingly, losses and LAE in the consolidated statements of income are net of reinsurance.
26
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Activity in the liability for losses and LAE is summarized as follows:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Net balance, beginning of period (a) | $319,992 | $316,561 | $314,357 | $323,335 |
| Incurred, net of reinsurance, related to: | | | | |
| Current period | 71,076 | 64,457 | 136,676 | 123,748 |
| Prior periods | — | — | — | — |
| Total incurred, net of reinsurance | 71,076 | 64,457 | 136,676 | 123,748 |
| Paid, net of reinsurance, related to: | | | | |
| Current period | (34,880) | (23,057) | (53,308) | (36,152) |
| Prior periods | (26,410) | (36,404) | (67,947) | (89,374) |
| Total paid, net of reinsurance | (61,290) | (59,461) | (121,255) | (125,526) |
| Net balance, end of period | 329,778 | 321,557 | 329,778 | 321,557 |
| Add: reinsurance recoverable before allowance for credit losses | 229,204 | 375,335 | 229,204 | 375,335 |
| Gross balance, end of period | $558,982 | $696,892 | $558,982 | $696,892 |
(a)
Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.
Incurred losses and LAE increased for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 primarily due to a higher volume of policies in force. There were no losses from catastrophic events during the three and six months ended June 30, 2026 and 2025.
### Note 12 -- Variable Interest Entities
The Company includes two consolidated VIEs related to reciprocal insurance exchanges, CORE and Tailrow.
The reciprocal insurance exchanges are owned by their policyholders, referred to as subscribers, who gain ownership by buying an insurance policy and making a surplus contribution. Each subscriber has rights in their respective reciprocal insurance exchange to (i) receive dividends or premium credits if the reciprocal insurance exchange generates a surplus, and (ii) elect members to the subscribers’ advisory committee. The subscribers’ advisory committee oversees the financial affairs of its respective reciprocal insurance exchange and appoints the AIF. Each subscribers’ advisory committee requires at least two-thirds of its members to be subscribers who are independent of the AIF.
27
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
Both CORE and Tailrow each received initial funding through the issuance of a subordinated surplus note to the Company as neither had any subscribers nor sufficient surplus to fund their insurance operations at the time of formation. In addition, CORE and Tailrow each entered into an AIF agreement with Core Risk Managers, LLC (“CRM”) and Tailrow Risk Managers, LLC (“TRM”), respectively. Both CRM and TRM are wholly-owned subsidiaries of HCI Group, Inc. The AIF agreements, which were approved by the Florida Office of Insurance Regulation (“FLOIR”), can be terminated at any time by mutual agreement of both parties or with cause, if the FLOIR or a court of competent jurisdiction determines a material breach of the agreement has occurred. Under the AIF agreements, CRM and TRM have the power of attorney to directly or indirectly conduct the daily operations of CORE and Tailrow, respectively, by underwriting insurance policies, collecting premiums, investing funds, and processing claims. As such, subscribers do not possess the power to directly manage the operations of CORE and Tailrow. The AIF agreements also permit CRM and TRM to contract with service providers, including other HCI Group, Inc. subsidiaries, to perform certain functions.
The AIF agreements, together with the subordinated surplus notes, result in both CORE and Tailrow to be consolidated VIEs. As CORE and Tailrow are owned by their underlying policyholders, their net assets and results of operations are included in noncontrolling interests.
CORE
CORE was formed and issued a $25,000 subordinated surplus note with an annual interest rate of 9% during 2023. CORE commenced business operations during 2024.
As of June 30, 2026 and December 31, 2025, the Company’s maximum exposure to loss relating to CORE was $25,000. CORE’s assets are legally restricted for the purpose of fulfilling obligations specific to CORE and its creditors have no legal right to pursue additional sources of payment from the Company.
Tailrow
Tailrow was formed and issued a $25,000 subordinated surplus note with an annual interest rate of 9% during 2024. Tailrow commenced business operations during 2025.
As of June 30, 2026 and December 31, 2025, the Company’s maximum exposure to loss relating to Tailrow was $25,000. Tailrow’s assets are legally restricted for the purpose of fulfilling obligations specific to Tailrow and its creditors have no legal right to pursue additional sources of payment from the Company.
28
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The following table summarizes the assets and liabilities related to the Company’s variable interests in consolidated VIEs which are included in the accompanying consolidated balance sheets:
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Assets | | |
| Fixed-maturity securities, available-for-sale, at fair value (amortized cost: $33,637 and $0, respectively, and allowance for credit losses: $0 and $0, respectively) | $33,621 | — |
| Total investments | 33,621 | — |
| Cash and cash equivalents | 158,345 | 154,156 |
| Restricted cash | 642 | 636 |
| Income taxes receivable | 1,277 | 1,332 |
| Deferred income tax assets, net | 1,088 | 2,237 |
| Premiums receivable, net (allowance: $1,558 and $1,406, respectively) | 8,414 | 4,549 |
| Prepaid reinsurance premium | — | 2,499 |
| Reinsurance recoverable, net of allowance for credit losses: | | |
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) | 748 | 26 |
| Unpaid losses and loss adjustment expenses (allowance: $0 and $1, respectively) | 852 | 1,573 |
| Deferred policy acquisition costs | 7,493 | 4,464 |
| Other assets | 1,445 | 539 |
| Total assets | $247,546 | $172,011 |
| Liabilities | | |
| Losses and loss adjustment expenses | $30,825 | $24,810 |
| Unearned premiums | 71,998 | 73,086 |
| Advance premiums | 5,613 | 1,817 |
| Ceded reinsurance premiums payable | 5,173 | 933 |
| Assumed premiums payable | 1,841 | 837 |
| Income taxes payable | 1,211 | 2,857 |
| Deferred income tax liabilities, net | — | 127 |
| Accrued expenses and other liabilities | 3,809 | 2,162 |
| Total liabilities | $120,470 | $106,629 |
29
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 13 -- Segment Information
The Company has five reportable segments: Insurance Operations, Exzeo, Reciprocal Exchange Operations, Real Estate, and Corporate and Other. Due to their economic characteristics, the Company’s property and casualty insurance and reinsurance operations, excluding the insurance operations under Reciprocal Exchange Operations, are grouped together into one reportable segment under Insurance Operations. The Exzeo segment represents Exzeo’s operations related to insurance technology and operations solutions for property and casualty insurance carriers. The Reciprocal Exchange Operations segment represents the insurance operations of consolidated reciprocal insurance exchanges owned by their policyholders. The Real Estate segment represents the operations of the Company’s commercial real estate group primarily engaged in developing and operating commercial properties for investment purposes or internal use. The Corporate and Other segment represents the activities of the holding companies and any other operations that do not meet the quantitative and qualitative thresholds for a reportable segment.
The Company’s segments are based on the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (the “CODM”), evaluates performance and makes decisions regarding the allocation of resources. The CODM evaluates performance and allocates resources using various measures primarily through reviews of various operational performance packages, investor presentations, and the Company’s SEC filings, as well as through the approval of the Company’s annual budget and forecast. The Company’s reported segment profit measure is income (loss) before income taxes as this measure is most consistent with the amounts included in the consolidated statements of income. Intersegment transactions are not eliminated from segment results while intrasegment transactions are eliminated from segment results. The accounting policies of the Company’s reportable segments are the same as those of the Company, except as otherwise noted. The determination of segments may change over time due to changes in operational emphasis, revenue, and results of operations.
30
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The following tables present segment information reconciled to the Company’s consolidated statements of income for the periods presented:
| For Three Months Ended June 30, 2026 | Insurance Operations | Exzeo | Reciprocal Exchange Operations | Real Estate (a) | Corporate/Other (b) | Reclassification/ Elimination | Consolidated |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | | | | | | | |
| Gross premiums earned (c) | $287,180 | — | $35,618 | — | — | $(1,974) | $320,824 |
| Premiums ceded | (92,104) | — | (11,682) | — | — | 1,974 | (101,812) |
| Net premiums earned | 195,076 | — | 23,936 | — | — | — | 219,012 |
| Net income from investment portfolio | 15,792 | 2,963 | 1,534 | — | 1,614 | (1,048) | 20,855 |
| Policy fee income | 1,487 | — | — | — | 300 | (136) | 1,651 |
| Other | 4,344 | 57,787 | (110) | 4,567 | 5,630 | (67,083) | 5,135 |
| Total revenue | 216,699 | 60,750 | 25,360 | 4,567 | 7,544 | (68,267) | 246,653 |
| Expenses | | | | | | | |
| Losses and loss adjustment expenses | 84,697 | — | 9,308 | — | — | (22,929) | 71,076 |
| Amortization of deferred policy acquisition costs | 27,780 | — | 2,664 | — | — | — | 30,444 |
| Other policy acquisition expenses | 15,557 | 10,039 | 4,517 | — | 3,228 | (31,439) | 1,902 |
| Stock-based compensation expense | 666 | 760 | — | — | 1,913 | — | 3,339 |
| Interest expense | — | — | 1,122 | 453 | 631 | (1,122) | 1,084 |
| Depreciation and amortization | 283 | 736 | — | 848 | 147 | (708) | 1,306 |
| Personnel and other operating expenses | 12,091 | 17,789 | 232 | 3,177 | 5,308 | (12,068) | 26,529 |
| Total expenses | 141,074 | 29,324 | 17,843 | 4,478 | 11,227 | (68,266) | 135,680 |
| Income (loss) before income taxes (d) | $75,625 | $31,426 | $7,517 | $89 | $(3,683) | $(1) | $110,973 |
| Total revenue from non-affiliates (e) | $211,919 | $6,533 | $27,334 | $3,703 | $1,089 | | |
| Gross premiums written | $338,686 | — | $43,659 | | | | |
(a)
Other revenue under Real Estate primarily consisted of rental income from investment properties.
(b)
Other revenue under Corporate and Other primarily consisted of management fees for AIF services.
(c)
Gross premiums earned under Insurance Operations included $1,974 earned from Reciprocal Exchange Operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The Insurance Operations and the Reciprocal Exchange Operations record service fee expenses based on earned premiums or other appropriate measures, while Exzeo and the AIF operations recognize service fee revenue according to revenue recognition standards. Although both service fee expenses and revenue are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
31
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
| For Three Months Ended June 30, 2025 | Insurance Operations | Exzeo | Reciprocal Exchange Operations | Real Estate (a) | Corporate/Other (b) | Reclassification/Elimination | Consolidated |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | | | | | | | |
| Gross premiums earned (c) | $282,269 | — | $21,639 | — | — | $(1,280) | $302,628 |
| Premiums ceded | (95,017) | — | (8,785) | — | — | 1,280 | (102,522) |
| Net premiums earned | 187,252 | — | 12,854 | — | — | — | 200,106 |
| Net income from investment portfolio | 14,583 | 763 | 974 | — | 2,129 | (669) | 17,780 |
| Policy fee income | 302 | — | — | — | 5 | 1,160 | 1,467 |
| Other | 3,602 | 56,091 | 4 | 3,493 | 2,548 | (63,171) | 2,567 |
| Total revenue | 205,739 | 56,854 | 13,832 | 3,493 | 4,682 | (62,680) | 221,920 |
| Expenses | | | | | | | |
| Losses and loss adjustment expenses | 82,365 | — | 4,842 | — | — | (22,750) | 64,457 |
| Amortization of deferred policy acquisition costs | 27,027 | — | 1,415 | — | — | — | 28,442 |
| Other policy acquisition expenses | 15,268 | 10,074 | 2,836 | — | 1,339 | (27,408) | 2,109 |
| Stock-based compensation expense | 325 | 706 | — | — | 1,664 | — | 2,695 |
| Interest expense | — | — | 1,124 | 215 | 3,529 | (1,124) | 3,744 |
| Depreciation and amortization | 611 | 731 | — | 640 | 194 | (505) | 1,671 |
| Personnel and other operating expenses | 12,071 | 16,454 | 808 | 2,064 | 5,443 | (12,430) | 24,410 |
| Total expenses | 137,667 | 27,965 | 11,025 | 2,919 | 12,169 | (64,217) | 127,528 |
| Income (loss) before income taxes (d) | $68,072 | $28,889 | $2,807 | $574 | $(7,487) | $1,537 | $94,392 |
| Total revenue from non-affiliates (e) | $201,670 | $2,513 | $15,112 | $2,629 | $1,327 | | |
| Gross premiums written | $337,502 | — | $19,043 | | | | |
(a)
Other revenue under Real Estate primarily consisted of rental income from investment properties.
(b)
Other revenue under Corporate and Other primarily consisted of management fees for AIF services.
(c)
Gross premiums earned under Insurance Operations included $1,280 earned from Reciprocal Exchange Operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The Insurance Operations and the Reciprocal Exchange Operations record service fee expenses based on earned premiums or other appropriate measures, while Exzeo and the AIF operations recognize service fee revenue according to revenue recognition standards. Although both service fee expenses and revenue are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
32
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
| For Six Months Ended June 30, 2026 | Insurance Operations | Exzeo Group | Reciprocal Exchange Operations | Real Estate (a) | Corporate/Other (b) | Reclassification/Elimination | Consolidated |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | | | | | | | |
| Gross premiums earned (c) | $578,331 | — | $72,075 | — | — | $(3,376) | $647,030 |
| Premiums ceded | (188,624) | — | (20,619) | — | — | 3,376 | (205,867) |
| Net premiums earned | 389,707 | — | 51,456 | — | — | — | 441,163 |
| Net income from investment portfolio | 27,727 | 5,475 | 2,801 | — | 2,692 | (1,703) | 36,992 |
| Policy fee income | 2,952 | — | — | — | 695 | (420) | 3,227 |
| Other | 8,183 | 113,320 | (378) | 8,763 | 10,814 | (132,549) | 8,153 |
| Total revenue | 428,569 | 118,795 | 53,879 | 8,763 | 14,201 | (134,672) | 489,535 |
| Expenses | | | | | | | |
| Losses and loss adjustment expenses | 158,259 | — | 18,236 | — | — | (39,819) | 136,676 |
| Amortization of deferred policy acquisition costs | 55,619 | — | 4,714 | — | — | — | 60,333 |
| Other policy acquisition expenses | 34,481 | 22,212 | 9,161 | — | 6,074 | (68,145) | 3,783 |
| Stock-based compensation expense | 1,346 | 1,499 | — | — | 3,853 | — | 6,698 |
| Interest expense | — | — | 2,232 | 909 | 1,098 | (2,232) | 2,007 |
| Depreciation and amortization | 704 | 1,466 | — | 1,705 | 310 | (1,430) | 2,755 |
| Personnel and other operating expenses | 22,896 | 34,605 | 544 | 5,692 | 10,248 | (23,059) | 50,926 |
| Total expenses | 273,305 | 59,782 | 34,887 | 8,306 | 21,583 | (134,685) | 263,178 |
| Income (loss) before income taxes (d) | $155,264 | $59,013 | $18,992 | $457 | $(7,382) | $13 | $226,357 |
| Total revenue from non-affiliates (e) | $419,339 | $11,257 | $57,255 | $7,034 | $1,621 | | |
| Gross premiums written | $592,050 | — | $70,987 | | | | |
(a)
Other revenue under Real Estate primarily consisted of rental income from investment properties.
(b)
Other revenue under Corporate and Other primarily consisted of management fees for AIF services.
(c)
Gross premiums earned under Insurance Operations included $3,376 earned from Reciprocal Exchange Operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The Insurance Operations and the Reciprocal Exchange Operations record service fee expenses based on earned premiums or other appropriate measures, while Exzeo and the AIF operations recognize service fee revenue according to revenue recognition standards. Although both service fee expenses and revenue are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
33
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
| For Six Months Ended June 30, 2025 | Insurance Operations | Exzeo Group | Reciprocal Exchange Operations | Real Estate (a) | Corporate/Other (b) | Reclassification/Elimination | Consolidated |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | | | | | | | |
| Gross premiums earned (c) | $564,404 | — | $41,086 | — | — | $(2,479) | $603,011 |
| Premiums ceded | (188,444) | — | (16,192) | — | — | 2,479 | (202,157) |
| Net premiums earned | 375,960 | — | 24,894 | — | — | — | 400,854 |
| Net income from investment portfolio | 25,442 | 1,161 | 1,754 | — | 3,894 | (1,459) | 30,792 |
| Policy fee income | 2,531 | — | — | — | 5 | 1,160 | 3,696 |
| Other | 6,348 | 108,498 | (5) | 6,333 | 6,203 | (124,366) | 3,011 |
| Total revenue | 410,281 | 109,659 | 26,643 | 6,333 | 10,102 | (124,665) | 438,353 |
| Expenses | | | | | | | |
| Losses and loss adjustment expenses | 153,180 | — | 7,614 | — | — | (37,046) | 123,748 |
| Amortization of deferred policy acquisition costs | 52,271 | — | 2,482 | — | — | — | 54,753 |
| Other policy acquisition expenses | 33,601 | 22,741 | 5,357 | — | 3,467 | (62,081) | 3,085 |
| Stock-based compensation expense | 798 | 1,429 | — | — | 3,440 | — | 5,667 |
| Interest expense | — | — | 2,232 | 431 | 6,697 | (2,232) | 7,128 |
| Depreciation and amortization | 1,222 | 1,439 | — | 1,150 | 385 | (879) | 3,317 |
| Personnel and other operating expenses | 23,315 | 30,966 | 1,063 | 3,797 | 9,598 | (22,815) | 45,924 |
| Total expenses | 264,387 | 56,575 | 18,748 | 5,378 | 23,587 | (125,053) | 243,622 |
| Income (loss) before income taxes (d) | $145,894 | $53,084 | $7,895 | $955 | $(13,485) | $388 | $194,731 |
| Total revenue from non-affiliates (e) | $402,720 | $2,911 | $29,122 | $4,604 | $2,165 | | |
| Gross premiums written | $597,031 | — | $48,760 | | | | |
(a)
Other revenue under Real Estate primarily consisted of rental income from investment properties.
(b)
Other revenue under Corporate and Other primarily consisted of management fees for AIF services.
(c)
Gross premiums earned under Insurance Operations included $2,479 earned from Reciprocal Exchange Operations.
(d)
The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions among operating segments. The Insurance Operations and the Reciprocal Exchange Operations record service fee expenses based on earned premiums or other appropriate measures, while Exzeo and the AIF operations recognize service fee revenue according to revenue recognition standards. Although both service fee expenses and revenue are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.
(e)
Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.
34
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The following table presents gross premium earned by geographic location:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Florida | $291,943 | $272,473 | $589,042 | $543,278 |
| Non-Florida | 28,881 | 30,155 | 57,988 | 59,733 |
| Gross premiums earned | $320,824 | $302,628 | $647,030 | $603,011 |
The following table presents segment assets reconciled to the Company’s total assets on the consolidated balance sheets:
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Segments | | |
| Insurance Operations | $2,050,786 | $1,895,081 |
| Exzeo | 385,783 | 347,734 |
| Reciprocal Exchange Operations | 224,134 | 184,453 |
| Real Estate | 137,465 | 130,971 |
| Corporate and Other | 122,020 | 120,686 |
| Consolidation and Elimination | (271,729) | (149,997) |
| Total assets | $2,648,459 | $2,528,928 |
As of June 30, 2026 and December 31, 2025, substantially all of the Company’s assets were located in Florida.
35
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 14 -- Income Taxes
There were no significant changes in the Company’s valuation allowance on deferred income tax assets during the three and six months ended June 30, 2026.
During the three months ended June 30, 2026 and 2025, the Company recorded income tax expense of $28,073 and $24,113, respectively, resulting in effective tax rates of 25.3% and 25.5%, respectively. Each rate represented the federal statutory tax rate of 21.0%, state taxes (net of federal benefits), and unfavorable non-deductible compensation expenses.
During the six months ended June 30, 2026 and 2025, the Company recorded income tax expense of $58,414 and $50,222, respectively, resulting in an effective tax rate of 25.8% for each period. Each rate represented the federal statutory tax rate of 21.0%, state taxes (net of federal benefits), and unfavorable non-deductible compensation expenses.
### Note 15 -- Earnings Per Share
The Company applies the two-class method for computing and presenting earnings per share since the Company’s unvested restricted stock awards represent participating securities due to the right to share in dividends, if declared, equally with common stockholders. The two-class method allocates current period net income to common stock and participating securities based on (i) dividends declared and (ii) participation rights in the remaining undistributed income. For a majority-owned subsidiary, the Company’s proportionate share in that majority-owned subsidiary’s earnings per share is added to the computation of earnings per share on a consolidated basis.
Basic earnings per share is computed by dividing income attributable to common stockholders using the two-class method by the weighted-average number of shares of common stock outstanding during the period.
Diluted earnings per share gives effect to all securities having a dilutive effect on income attributable to common stockholders, weighted-average shares of common stock outstanding, or both. The effect from dilutive securities included, but was not limited to: (i) incremental shares of common stock calculated using the if-converted method for convertible debt instruments; (ii) incremental shares of common stock calculated using the treasury stock method for warrants and share-based compensation awards; (iii) adjustments to a majority-owned subsidiary's earnings per share due to its dilutive securities; and (iv) the corresponding impact to income attributable to common stockholders associated with the preceding considerations. Net losses are not allocated to participating securities as the participating securities do not have a contractual obligation to share in losses.
36
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The computations of basic and diluted earnings per share for the periods presented were as follows:
| Line item | Three Months Ended / June 30, 2026 / Income / (Numerator) | Three Months Ended / June 30, 2026 / Shares (a) / (Denominator) | Three Months Ended / June 30, 2026 / Per Share / Amount | Three Months Ended / June 30, 2025 / Income / (Numerator) | Three Months Ended / June 30, 2025 / Shares (a) / (Denominator) | Three Months Ended / June 30, 2025 / Per Share / Amount |
| --- | --- | --- | --- | --- | --- | --- |
| Net income | $82,900 | | | $70,279 | | |
| Less: Net income attributable to noncontrolling interests | (9,103) | | | (4,119) | | |
| Net income after noncontrolling interests | 73,797 | | | 66,160 | | |
| Less: Income attributable to participating securities | (2,925) | | | (2,616) | | |
| Basic Earnings Per Share: | | | | | | |
| Income attributable to common stockholders | 70,872 | 12,269 | $5.78 | 63,544 | 11,400 | $5.57 |
| Effect of Dilutive Securities: | | | | | | |
| Stock options | — | 382 | | — | 392 | |
| Convertible senior notes | — | — | | 3,170 | 1,084 | |
| Warrants | — | 7 | | — | 7 | |
| Net impact from reallocation of undistributed earnings to participating securities | 65 | — | | — | — | |
| Diluted Earnings Per Share: | | | | | | |
| Income attributable to common stockholders | $70,937 | 12,658 | $5.60 | $66,714 | 12,883 | $5.18 |
(a)
Shares in thousands.
37
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
| Line item | Six Months Ended / June 30, 2026 / Income / (Numerator) | Six Months Ended / June 30, 2026 / Shares (a) / (Denominator) | Six Months Ended / June 30, 2026 / Per Share / Amount | Six Months Ended / June 30, 2025 / Income / (Numerator) | Six Months Ended / June 30, 2025 / Shares (a) / (Denominator) | Six Months Ended / June 30, 2025 / Per Share / Amount |
| --- | --- | --- | --- | --- | --- | --- |
| Net income | $167,943 | | | $144,509 | | |
| Less: Net income attributable to noncontrolling interests | (20,739) | | | (8,665) | | |
| Net income after noncontrolling interests | 147,204 | | | 135,844 | | |
| Less: Income attributable to participating securities | (6,186) | | | (5,691) | | |
| Basic Earnings Per Share: | | | | | | |
| Income attributable to common stockholders | 141,018 | 12,379 | $11.39 | 130,153 | 10,846 | $12.00 |
| Effect of Dilutive Securities: | | | | | | |
| Stock options | — | 390 | | — | 373 | |
| Convertible senior notes | — | — | | 5,500 | 1,611 | |
| Warrants | — | 7 | | — | 7 | |
| Net impact from reallocation of undistributed earnings to participating securities | 143 | — | | — | — | |
| Diluted Earnings Per Share: | | | | | | |
| Income attributable to common stockholders | $141,161 | 12,776 | $11.05 | $135,653 | 12,837 | $10.57 |
(a)
Shares in thousands.
For the periods presented, all dilutive securities for Exzeo were excluded from Exzeo's diluted earnings per share computation because their (i) effect would be anti-dilutive, (ii) exercise prices were out-of-the-money, or (iii) contingent exercise conditions were unsatisfied.
### Note 16 -- Redeemable Noncontrolling Interests
#### Subscriber Surplus Contributions
Subscriber surplus contributions in redeemable noncontrolling interests represent a refundable portion of the surplus contributions received from policyholders of CORE and Tailrow. The surplus contributions are reclassified to noncontrolling interests once they are no longer refundable.
The following table summarizes the activity of subscriber surplus contributions:
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Beginning balance | $4,211 | $1,637 | $3,359 | $1,691 |
| Cash contributions | 4,215 | 1,937 | 6,997 | 2,770 |
| Return of contributions | (74) | (31) | (173) | (34) |
| Reclassification of nonrefundable subscriber surplus contributions | (2,423) | (1,138) | (4,254) | (2,022) |
| Ending balance | $5,929 | $2,405 | $5,929 | $2,405 |
38
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 17 -- Equity
#### Stockholders’ Equity
#### Common Stock
Each share of common stock entitles the stockholder to one vote.
#### Share Repurchase Program
In March 2026, the Company’s Board of Directors authorized a program to repurchase up to $80,000, excluding commissions and other costs, of shares of the Company’s common stock through February 27, 2027 (the “Share Repurchase Program”). The Share Repurchase Program permits the Company to repurchase shares for cash periodically in open market purchases, block transactions, privately negotiated transactions in accordance with applicable federal securities laws, or by other means, including through the use of trading programs intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under that Act. The Share Repurchase Program does not obligate the Company to repurchase a specific number of shares of common stock, and may be canceled or suspended at any time without notice.
During the three and six months ended June 30, 2026, the Company repurchased 363,538 and 473,609 shares of common stock for $56,968 and $74,466, respectively, excluding commissions and other costs, under the Share Repurchase Program. All of the shares repurchased were treated as retirements and reduced the number of shares issued and outstanding. The excess of the purchase price over the par value per share was recorded as a reduction of additional paid-in capital. Commissions and other costs on repurchases of common stock were not material for the three and six months ended June 30, 2026.
As of June 30, 2026, the Company may repurchase up to $5,534, excluding commissions and other costs, of shares of its common stock under the Share Repurchase Program.
#### Dividends
Stockholders are entitled to receive dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for that purpose. Unvested restricted stock awards have the right to share in dividends, if declared, equally with common stockholders on a nonforfeitable basis.
39
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The following table represents the frequency and amount of all cash dividends declared on common stock for the periods presented:
| Declaration Date / Six Months Ended June 30, 2026 | Date of Record | Payment Date | Per Share Amount |
| --- | --- | --- | --- |
| 4/22/2026 | 5/15/2026 | 6/18/2026 | $0.40 |
| 1/14/2026 | 2/20/2026 | 3/20/2026 | $0.40 |
| | | Total | $0.80 |
| Six Months Ended June 30, 2025 | | | |
| 4/23/2025 | 5/16/2025 | 6/20/2025 | $0.40 |
| 1/14/2025 | 2/21/2025 | 3/21/2025 | $0.40 |
| | | Total | $0.80 |
#### Preferred Stock
As of June 30, 2026 and December 31, 2025, the Company had 20,000,000 preferred shares authorized, with no shares issued and outstanding.
#### Warrants
As of June 30, 2026 and December 31, 2025, there were 11,250 warrants outstanding at an exercise price of $54.40 with an expiration date of December 31, 2028.
#### At-The-Market Facility
On January 22, 2024, the Company implemented an “at-the-market” facility (the “ATM Facility”) which gives the Company the ability to raise up to $75,000 through the issuance of new shares of common stock through a sales agent (the “Sales Agent”). The Company has no obligation to sell, and the Sales Agent has no obligation to buy or sell, any shares of common stock under the ATM Facility. As of June 30, 2026 the remaining availability under the ATM Facility was $75,000.
#### Noncontrolling Interests
#### Exzeo
As of June 30, 2026, HCI Group, Inc. owned 75,000,000 of the 90,200,252 shares of Exzeo’s outstanding common stock. Of the shares not owned by HCI Group, Inc., 2,541,953 represent unvested restricted stock awards granted to Exzeo's employees.
Other adjustments to noncontrolling interests in the consolidated statements of equity primarily relates to (i) the net settlement of Exzeo common shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted stock awards issued under Exzeo’s stock-based compensation plan and (ii) the change in ownership of Exzeo as a result of the vesting of restricted stock awards issued under Exzeo’s stock-based compensation plan.
40
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
#### Exzeo Share Repurchase Program
In May 2026, Exzeo’s Board of Directors authorized a program to repurchase up to $12,000, excluding commissions and other costs, of shares of Exzeo’s common stock (the “Exzeo Share Repurchase Program”). The Exzeo Share Repurchase Program permits Exzeo to repurchase shares for cash periodically in open market purchases, block transactions, privately negotiated transactions in accordance with applicable federal securities laws, or by other means, including through the use of trading programs intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under that Act. The Exzeo Share Repurchase Program does not obligate Exzeo to repurchase a specific number of shares of common stock, and may be canceled or suspended at any time without notice.
During the three and six months ended June 30, 2026, Exzeo repurchased 726,828 shares of its common stock for $10,029, excluding commissions and other costs, under the Exzeo Share Repurchase Program. All of the shares repurchased were treated as retirements and reduced the number of shares issued and outstanding of Exzeo. Commissions and other costs on repurchases of noncontrolling interests were not material during the three and six months ended June 30, 2026.
As of June 30, 2026, Exzeo may repurchase up to $1,971, excluding commissions and other costs, of shares of its common stock under the Exzeo Share Repurchase Program.
Subscriber Surplus Contributions
Subscriber surplus contributions in noncontrolling interests represent the nonrefundable portion of the surplus contributions received from policyholders of CORE and Tailrow. The surplus contributions are reclassified from redeemable noncontrolling interest once they are no longer refundable. As CORE and Tailrow are owned by their underlying policyholders, their net assets are included in noncontrolling interests.
#### Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) relates to the unrealized gains or losses on available-for-sale fixed-maturity securities carried at fair value, net of income taxes. Accumulated other comprehensive income (loss) is reclassified to either net investment income or net realized investment gains (losses) in the consolidated statements of income as underlying transactions are recognized in earnings. Other comprehensive income (loss) represents the net change in accumulated other comprehensive income (loss).
41
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
The following table summarizes the activity with respect to accumulated other comprehensive income (loss) during the three and six months ended June 30, 2026 and 2025:
| Line item | Before Tax | Income Tax Effect | Total | Noncontrolling Interests | Accumulated Other Comprehensive (Loss) |
| --- | --- | --- | --- | --- | --- |
| Balance as of March 31, 2026 | $(6,127) | $(1,534) | $(4,593) | $(55) | $(4,538) |
| Net unrealized losses | (6,596) | (1,652) | (4,944) | (110) | (4,834) |
| Reclassification to net investment income | (16) | (4) | (12) | — | (12) |
| Reclassification to net realized investment gains | 2 | — | 2 | — | 2 |
| Balance as of June 30, 2026 | $(12,737) | $(3,190) | $(9,547) | $(165) | $(9,382) |
| Line item | Before Tax | Income Tax Effect | Total | Noncontrolling Interests | Accumulated Other Comprehensive Income |
| --- | --- | --- | --- | --- | --- |
| Balance as of March 31, 2025 | $1,790 | $448 | $1,342 | — | $1,342 |
| Net unrealized losses | (232) | (58) | (174) | — | (174) |
| Reclassification to net realized investment gains | (14) | (4) | (10) | — | (10) |
| Balance as of June 30, 2025 | $1,544 | $386 | $1,158 | — | $1,158 |
| Line item | Before Tax | Income Tax Effect | Total | Noncontrolling Interests | Accumulated Other Comprehensive Income (Loss) |
| --- | --- | --- | --- | --- | --- |
| Balance as of December 31, 2025 | $1,946 | $487 | $1,459 | — | $1,459 |
| Net unrealized losses | (14,794) | (3,705) | (11,089) | (165) | (10,924) |
| Reclassification to net investment income | 158 | 40 | 118 | — | 118 |
| Reclassification to net realized investment gains | (47) | (12) | (35) | — | (35) |
| Balance as of June 30, 2026 | $(12,737) | $(3,190) | $(9,547) | $(165) | $(9,382) |
| Line item | Before Tax | Income Tax Effect | Total | Noncontrolling Interests | Accumulated Other Comprehensive (Loss) Income |
| --- | --- | --- | --- | --- | --- |
| Balance as of December 31, 2024 | $(999) | $(250) | $(749) | — | $(749) |
| Net unrealized gains | 2,577 | 645 | 1,932 | — | 1,932 |
| Reclassification to net realized investment gains | (34) | (9) | (25) | — | (25) |
| Balance as of June 30, 2025 | $1,544 | $386 | $1,158 | — | $1,158 |
42
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 18 -- Stock-Based Compensation
The Company grants stock-based awards to participants under HCI Group, Inc.’s 2012 Omnibus Incentive Plan (“HCI Plan”) and Exzeo Group, Inc.’s 2025 Omnibus Incentive Plan (“Exzeo Plan”). Stock-based compensation expense is included in general and administrative personnel expenses in the consolidated statements of income and consisted of the following for the periods presented:
| Line item | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 |
| --- | --- | --- | --- | --- |
| Restricted stock awards | $2,584 | $1,994 | $5,207 | $4,264 |
| Exzeo stock options | — | 347 | — | 689 |
| Exzeo restricted stock awards | 755 | 354 | 1,491 | 714 |
| Stock-based compensation expense | $3,339 | $2,695 | $6,698 | $5,667 |
Stock-based compensation awards are classified as equity and awards related to the Exzeo Plan are included as a component of noncontrolling interests.
#### HCI Plan
As of June 30, 2026, there were 641,937 shares available for issuance under the HCI Plan.
#### Stock Options
The following table summarizes the activity related to stock options granted under the HCI Plan during the six months ended June 30, 2026:
| Line item | Number of / Options | Weighted / Average / Exercise / Price | Weighted / Average / Remaining / Contractual / Term | Aggregate / Intrinsic / Value |
| --- | --- | --- | --- | --- |
| Outstanding as of December 31, 2025 | 590,000 | $51.54 | 3.9 years | $82,687 |
| Granted | — | — | | |
| Exercised | (20,000) | $40.00 | | |
| Forfeited | — | — | | |
| Outstanding as of June 30, 2026 | 570,000 | $51.95 | 3.5 years | $70,283 |
| Exercisable as of June 30, 2026 | 570,000 | $51.95 | 3.5 years | $70,283 |
As of June 30, 2026, there was no unrecognized compensation expense related to stock options under the HCI Plan.
43
HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
#### Restricted Stock Awards
The following table summarizes the activity related to restricted stock awards granted under the HCI Plan during the six months ended June 30, 2026:
| Line item | Number of / Restricted / Stock / Awards | Weighted / Average / Grant Date / Fair Value |
| --- | --- | --- |
| Unvested as of December 31, 2025 | 494,635 | $73.31 |
| Granted | 3,750 | $162.12 |
| Vested | (202,255) | $34.23 |
| Forfeited | (1,386) | $131.96 |
| Unvested as of June 30, 2026 | 294,744 | $100.99 |
In May 2026, there were 193,500 restricted stock awards that vested as a result of meeting the requisite market condition that the price per share exceeded $140 for a period of 30 consecutive trading days in May 2025.
As of June 30, 2026, there were 200,000 unvested restricted stock awards granted under the HCI Plan with market conditions. These awards have not met the requisite market condition of the Company’s share price reaching $200 per share for 30 consecutive trading days.
As of June 30, 2026, there was $16,089 of unrecognized compensation expense related to unvested restricted stock awards granted under the HCI Plan, which is expected to be recognized over a weighted-average period of 2.0 years.
Exzeo Plan
Exzeo maintained its 2021 Omnibus Plan under which shares of Exzeo common stock were authorized for issuance as stock-based compensation awards. On November 4, 2025, Exzeo terminated its 2021 Omnibus Plan and adopted the Exzeo Plan, which authorizes the issuance of up to 10,000,000 shares of Exzeo’s common stock. Awards outstanding under the Exzeo 2021 Omnibus Plan continue to be governed by the terms of that plan and are incremental to, and do not count against, the authorized share pool of the Exzeo Plan. As of June 30, 2026, there were 9,768,170 shares available for issuance under the Exzeo Plan.
Exzeo Stock Options
As of June 30, 2026, there were 6,350,000 Exzeo stock options outstanding with a weighted-average exercise price of $23.00. All of the Exzeo stock options were fully vested, however, 6,000,000 Exzeo stock options were non-exercisable without approval from HCI Group, Inc.’s Board of Directors.
Exzeo Restricted Stock Awards
As of June 30, 2026, there were 2,541,953 unvested Exzeo restricted stock awards outstanding with a weighted-average grant date fair value of $4.82. There was $10,599 of unrecognized compensation expense related to unvested Exzeo restricted stock awards, which is expected to be recognized over a weighted-average period of 3.8 years.
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HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
### Note 19 -- Commitments and Contingencies
#### Litigation and Other Legal Matters
The Company is party to litigation and other legal matters arising in the ordinary course of business. The Company is also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings.
The Company records accruals for losses that are probable and reasonably estimable. These accruals are based on a variety of factors such as judgment, probability of loss, and opinions of internal and external legal counsel. Legal costs in connection with litigation and other legal matters arising in the ordinary course of business are expensed as incurred.
Although the Company cannot predict with certainty the ultimate resolution of the litigation and other legal matters it is party to, the Company does not believe that any known or potential litigation and other legal matters will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.
#### Rental Income
The Company as a lessor leases its commercial and retail properties, boat slips, and docks to non-affiliates at various terms. There were no significant changes in the Company’s minimum rental payments to be received under operating leases during the three and six months ended June 30, 2026.
#### Capital Commitments
As described in Note 5 “Investments” under Limited Partnership Investments, the Company is contractually committed to capital contributions for limited partnership investments. As of June 30, 2026, there was an aggregate unfunded balance of $3,791.
#### FIGA Assessments
The Company’s insurance subsidiaries, as member insurers, are required to collect and remit the pass-through assessments to Florida Insurance Guaranty Association (“FIGA”) on a quarterly basis. As of June 30, 2026 and December 31, 2025, the FIGA assessments payable by the Company were $3,415 and $2,034, respectively.
### Note 20 -- Related Party Transactions
HCPCI, TTIC, CORE, and Tailrow have reinstatement premium protection reinsurance contracts (“RPP”) with various reinsurers. The purpose of the RPP contracts is to indemnify HCPCI, TTIC, CORE, and Tailrow for the reinstatement premium which HCPCI, TTIC, CORE, and Tailrow pay or become liable to pay under the reinstatement provisions of the respective excess of loss reinsurance contracts. For one of the RPP contracts, Oxbridge Reinsurance Limited (“Oxbridge”) participated as a subscribing reinsurer with HCPCI and Tailrow as collective reinsureds for the 2025 - 2026 treaty year. One of the Company’s non-employee directors, Jay Madhu, serves as Oxbridge’s Chairman of its Board of Directors and Chief Executive Officer and is an investor in that company. For its participation on the RPP contract, Oxbridge’s net annual premium was $930 and was paid by HCPCI and Tailrow over four installments. Management believes the premium rate was competitive with market rates. A trust account has been established with HCPCI and Tailrow as collective beneficiaries and Oxbridge as
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HCI GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(In thousands, except share and per share amounts, unless otherwise stated)
grantor. Each of the four premium installments was deposited into the trust account in order to fully collateralize Oxbridge’s obligations under the RPP contract. Trust assets may be withdrawn by HCPCI and Tailrow to indemnify HCPCI and Tailrow for Oxbridge’s obligations under the provisions of the RPP contract. Total net premiums to Oxbridge were $910 for the 2024-2025 treaty year. During the three and six months ended June 30, 2026, the Company paid Oxbridge $408 in fees for transaction services related to the 2026 - 2027 treaty year. Oxbridge did not participate as a subscribing reinsurer for the 2026 - 2027 treaty year.
### Note 21 -- Subsequent Events
On July 1, 2026, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on September 18, 2026 to stockholders of record on August 21, 2026.
On July 8, 2026, the Company completed the Exzeo Share Repurchase Program with a total 834,250 shares of Exzeo’s common stock repurchased for $12,000, excluding commissions and other costs.
On July 17, 2026, the Company completed the Share Repurchase Program with a total 504,330 shares of common stock repurchased for $80,000, excluding commissions and other costs.
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## ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) on February 26, 2026 (the “2025 Annual Report”). This section is intended to (i) provide material information relevant to the assessment of our results of operations and cash flows; (ii) enhance the understanding of our financial condition, changes in financial condition, and results of operations; and (iii) discuss material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future performance or of future financial condition.
The following discussion and analysis contains forward-looking statements about our business, operations, and financial performance based on current plans and estimates involving risks, uncertainties, and assumptions, which could differ materially from actual results. Factors that could cause such differences are discussed in the sections of this Quarterly Report on Form 10-Q titled Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements, including statements about our plans, objectives, expectations, assumptions or future events, involve risks and uncertainties. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. The important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effects of governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic events; changes in the demand for, pricing of, availability of or collectability of reinsurance; restrictions on our ability to change premium rates; increased rate pressure on premiums; the severity and impact of cybersecurity incidents; and other risks and uncertainties and other factors listed under Item 1A – “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q as well as the 2025 Annual Report. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. Except as required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
### OVERVIEW
HCI Group, Inc., together with its subsidiaries (collectively, “we,” “our,” “us,” the “Company,” or “HCI”), is primarily engaged in the property and casualty insurance business. We provide various homeowners’ property and casualty insurance products for properties located in the Florida, which is our primary market, as well as in other states in the northeast and southeast regions of the U.S. Our insurance operations are supported by other insurance-related subsidiaries within the consolidated group.
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Exzeo Group, Inc. (“Exzeo”), a publicly traded majority-owned subsidiary, provides turn-key insurance technology and operations solutions based on a proprietary platform of purpose-built software and data analytics applications specifically designed for the property and casualty insurance ecosystem. We utilize Exzeo's internally developed software technologies to identify profitable underwriting opportunities, drive efficiency in claim processing and settlements, and streamline operations across our insurance operations and other insurance-related businesses.
We also provide attorney-in-fact (“AIF”) services for reciprocal insurance exchanges owned by their policyholders. Although we do not have any equity interest in the reciprocal insurance exchanges, we are required to consolidate them as their primary beneficiary. In addition, we have a commercial real estate group primarily engaged in developing and operating commercial properties for investment purposes or our own use.
HCI Group, Inc.’s common stock is currently listed on the New York Stock Exchange (“NYSE”) under the symbol “HCI.” Exzeo completed its initial public offering in November of 2025 and is currently listed on the NYSE under the symbol “XZO.” As of June 30, 2026, HCI Group, Inc. owned approximately 83.1% of Exzeo’s outstanding shares of common stock, inclusive of unvested restricted stock.
We identify our segments based on the manner in which our Chief Executive Officer, who is the chief operating decision maker, evaluates performance and makes decisions regarding the allocation of resources. We have five reportable segments: Insurance Operations, Exzeo, Reciprocal Exchange Operations, Real Estate, and Corporate and Other. Due to their economic characteristics, our property and casualty insurance and reinsurance operations, excluding the insurance operations under Reciprocal Exchange Operations, are grouped together into one reportable segment under Insurance Operations. The Exzeo segment represents Exzeo’s operations related to insurance technology and operations solutions for property and casualty insurance carriers. The Reciprocal Exchange Operations segment represents the insurance operations of consolidated reciprocal insurance exchanges owned by their policyholders. The Real Estate segment represents the operations of our commercial real estate group primarily engaged in developing and operating commercial properties for investment purposes or our own use. The Corporate and Other segment represents the activities of the holding companies and any other operations that do not meet the quantitative and qualitative thresholds for a reportable segment. The determination of segments may change over time due to changes in operational emphasis, revenue, and results of operations. Refer to Note 13 “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.
All financial information presented in this section has been prepared in U.S. dollars in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and includes the accounts of HCI Group, Inc. and its subsidiaries and consolidated variable interest entities. All intercompany transactions have been eliminated.
### FACTORS AFFECTING OPERATING RESULTS
Our general operating and growth strategies are to continually optimize our existing book of insurance business, organically expand our insurance business, manage our costs and expenses, diversify our business operations, develop and deploy new technologies to streamline operational processes, and maintain a strong balance sheet so we can quickly pursue accretive opportunities when they arise. Our growth strategies also include policy assumption from third-party insurance companies with the intention of renewing and/or replacing them with our policies.
Our insurance business has grown both organically and through strategic policy assumptions, which have been a key driver of our expansion. We have participated in legislatively mandated take-out programs, designed to reduce the state’s risk exposure by transitioning policies from Citizens Property Insurance Corporation (“Citizens”), a
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Florida state supported insurer, to private insurers. We selectively pursue additional assumption opportunities with Citizens when they align with our risk appetite and growth strategy. We also assume policies from other insurance companies in Florida and/or any other state in which we operate.
The nature of our business is to cover losses that may arise from, among other things, hurricanes and other catastrophic events such as tornadoes, floods and winter storms. The occurrence of any such catastrophes could have a significant adverse effect on our business, results of operations, and financial condition. To mitigate the risk associated with catastrophic events, we purchase reinsurance from other large insurance companies. Even without catastrophic events, we may incur losses and loss adjustment expenses that deviate substantially from our estimates and that may exceed our reserves, in which case our net income and capital would decrease. Our operating and growth strategies may also be impacted by regulation of our business by the State of Florida and other states in which we operate. For example, insurance regulators must approve our policy forms and premium rates as well as monitor our compliance with financial and regulatory requirements.
### Seasonality of Our Business
Our insurance business is seasonal as hurricanes and tropical storms affecting Florida and other southeastern states typically occur during the period from June 1st through November 30th of each year. Winter storms in the northeast usually occur during the period between December 1st and March 31st of each year. Also, our reinsurance treaty year is typically effective on June 1st of each year and any variation in the cost of our reinsurance, whether due to changes in reinsurance rates, coverage levels or changes in the total insured value of our policy base, will occur and be reflected in our financial results beginning on June 1st of each year.
### RECENT EVENTS
In March 2026, Fortex Reinsurance SPC, Ltd. (“Fortex”), our wholly-owned Cayman Islands domiciled captive reinsurance subsidiary, received its license to operate as a Class B insurer in the Cayman Islands. Fortex will allow us additional flexibility to selectively retain risk and reduce the cost of third-party reinsurance. Fortex is regulated by the Cayman Islands Monetary Authority.
### KEY PERFORMANCE INDICATORS
We make strategic decisions, measure our performance, evaluate our business, and identify trends in our business using certain key performance indicators, including the operating metrics gross loss ratio, gross expense ratio, and net combined ratio. Computations of our key performance indicators may not be comparable to other similarly titled measures reported by other companies. Additionally, we compute and disclose other ratios for informational purposes only.
### Gross Loss Ratio
Gross loss ratio is defined as losses and loss adjustment expenses in relation to gross premiums earned. The gross loss ratio represents the percentage of our premiums used to cover our losses. We use the gross loss ratio as a metric to measure and monitor our underwriting and pricing practices.
### Gross Expense Ratio
Gross expense ratio is defined as total expenses excluding losses and loss adjustment expenses and interest expense in relation to gross premiums earned. The gross expense ratio represents the percentage of our gross premiums used on operating expenses. We use the gross expense ratio as a metric to measure and monitor the efficiency of our operating and overhead costs.
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### Net Combined Ratio
Net combined ratio is defined as total expenses excluding interest expense in relation to net premiums earned. The net combined ratio represents the combination of the net loss ratio and net expense ratio. We use the net combined ratio as a metric to measure and monitor our overall profitability.
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RESULTS OF OPERATIONS
The following table summarizes our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands, except per share amounts or as otherwise indicated):
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 | QTD / Change* | YTD / Change* |
| --- | --- | --- | --- | --- | --- | --- |
| Revenue | | | | | | |
| Gross premiums earned | $320,824 | $302,628 | $647,030 | $603,011 | $18,196 | $44,019 |
| Premiums ceded | (101,812) | (102,522) | (205,867) | (202,157) | 710 | (3,710) |
| Net premiums earned | 219,012 | 200,106 | 441,163 | 400,854 | 18,906 | 40,309 |
| Net investment income | 18,890 | 16,445 | 36,191 | 30,196 | 2,445 | 5,995 |
| Net realized investment gains | 1,222 | 155 | 1,756 | 1,322 | 1,067 | 434 |
| Net unrealized investment gains (losses) | 743 | 1,180 | (955) | (726) | (437) | (229) |
| Policy fee income | 1,651 | 1,467 | 3,227 | 3,696 | 184 | (469) |
| Other | 5,135 | 2,567 | 8,153 | 3,011 | 2,568 | 5,142 |
| Total revenue | 246,653 | 221,920 | 489,535 | 438,353 | 24,733 | 51,182 |
| Expenses | | | | | | |
| Losses and loss adjustment expenses | 71,076 | 64,457 | 136,676 | 123,748 | 6,619 | 12,928 |
| Policy acquisition and other underwriting expenses | 32,346 | 30,551 | 64,116 | 57,838 | 1,795 | 6,278 |
| General and administrative personnel expenses | 23,948 | 19,985 | 46,301 | 40,468 | 3,963 | 5,833 |
| Interest expense | 1,084 | 3,744 | 2,007 | 7,128 | (2,660) | (5,121) |
| Other operating expenses | 7,226 | 8,791 | 14,078 | 14,440 | (1,565) | (362) |
| Total expenses | 135,680 | 127,528 | 263,178 | 243,622 | 8,152 | 19,556 |
| Income before income taxes | 110,973 | 94,392 | 226,357 | 194,731 | 16,581 | 31,626 |
| Income tax expense | 28,073 | 24,113 | 58,414 | 50,222 | 3,960 | 8,192 |
| Net income | 82,900 | 70,279 | 167,943 | 144,509 | 12,621 | 23,434 |
| Net income attributable to noncontrolling interests | (9,103) | (4,119) | (20,739) | (8,665) | (4,984) | (12,074) |
| Net income after noncontrolling interests | $73,797 | $66,160 | $147,204 | $135,844 | $7,637 | $11,360 |
| Ratios to Net Premiums Earned: | | | | | | |
| Loss Ratio | 32.5% | 32.2% | 31.0% | 30.9% | 0.3% | 0.1% |
| Expense Ratio | 29.0% | 29.7% | 28.2% | 28.1% | (0.7 | 0.1% |
| Combined Ratio | 61.5% | 61.9% | 59.2% | 59.0% | (0.4 | 0.2% |
| Ratios to Gross Premiums Earned: | | | | | | |
| Loss Ratio | 22.2% | 21.3% | 21.1% | 20.5% | 0.9% | 0.6% |
| Expense Ratio | 19.8% | 19.6% | 19.2% | 18.7% | 0.2% | 0.5% |
| Combined Ratio | 42.0% | 40.9% | 40.3% | 39.2% | 1.1% | 1.1% |
| Earnings Per Share: | | | | | | |
| Basic | $5.78 | $5.57 | $11.39 | $12.00 | $0.21 | $(0.61) |
| Diluted | $5.60 | $5.18 | $11.05 | $10.57 | $0.42 | $0.48 |
| * QTD - Quarter-to-Date; YTD - Year-to-Date | | | | | | |
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Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025
Gross Premiums Earned increased primarily due to a higher volume of policies in force as a result of the addition of policies assumed from Citizens during the first and fourth quarters of 2025 while average premium per policy remained relatively consistent.
For the three months ended June 30, 2026, gross premiums earned were $287.2 million from Insurance Operations and $35.6 million from Reciprocal Exchange Operations. For the three months ended June 30, 2025, gross premiums earned were $282.3 million from Insurance Operations and $21.6 million from Reciprocal Exchange Operations.
Premiums Ceded represented 31.7% and 33.9% of gross premiums earned during the three months ended June 30, 2026 and 2025, respectively.
Our premiums ceded represent costs of reinsurance (i) to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts, (ii) to provide additional loss coverage on a high-value individual risk basis through facultative reinsurance, or (iii) to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Under contracts in effect prior to June 1, 2025, reinsurance costs could be adjusted by retrospective provisions under reinsurance contracts. There were no adjustments to premiums ceded related to retrospective provisions for the three months ended June 30, 2026 and 2025.
Net Premiums Earned represent gross premiums earned less premiums ceded.
The following is a reconciliation of our Net Premiums Written to Net Premiums Earned for the three months ended June 30, 2026 and 2025 (in thousands):
| Line item | Three Months Ended / June 30, 2026 | Three Months Ended / June 30, 2025 |
| --- | --- | --- |
| Net Premiums Written | $280,533 | $254,023 |
| Increase in Unearned Premiums | (61,521) | (53,917) |
| Net Premiums Earned | $219,012 | $200,106 |
Net premiums written represent premiums charged on policies issued during the period less any applicable reinsurance costs and increased primarily due to a higher volume of policies in force while average premium per policy remained relatively consistent. We had approximately 290,100 policies in force as of June 30, 2026 compared to approximately 270,100 policies in force as of June 30, 2025.
Net Investment Income increased primarily as a result of an increase in our invested assets.
Other Revenue increased primarily as a result of the addition of new insurance carrier customers to Exzeo’s insurance technology platform.
Losses and Loss Adjustment Expenses increased primarily due to a higher volume of policies in force. The gross loss ratio for the three months ended June 30, 2026 was 22.2% compared to 21.3% for the three months ended June 30, 2025. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
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Policy Acquisition and Other Underwriting Expenses primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies and premium taxes. The overall increase was primarily due to a higher volume of premiums in force in the comparative periods.
General and Administrative Personnel Expenses include salaries, wages, payroll taxes, stock-based and other incentive compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The quarter-over-quarter increase was driven by additional personnel, annual merit increases, stock-based compensation, and lower reinsurance recoveries related to claims processing for catastrophes.
Interest Expense decreased primarily as a result of the conversion of approximately $172.5 million of 4.75% convertible senior notes, which also resulted in a $1.1 million debt conversion expense included in other operating expenses, during the second quarter of 2025.
Income Tax Expense increased primarily as a result of an increase in income before income taxes. The effective tax rate for the three months ended June 30, 2026 and 2025 was 25.3% and 25.5%, respectively, and each rate represented the federal statutory tax rate of 21.0%, state taxes (net of federal benefits), and unfavorable non-deductible compensation expenses.
Net Income Attributable to Noncontrolling Interests increased primarily as a result of an increase in net income generated by Reciprocal Insurance Exchange Operations as well as the dilution of HCI Group, Inc.’s ownership of Exzeo as a result of Exzeo’s initial public offering in November 2025.
### Ratios
The gross loss ratio, gross expense ratio, and net combined ratio each remained relatively consistent for the three months ended June 30, 2026 and 2025.
Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025
Gross Premiums Earned increased primarily due to a higher volume of policies in force as a result of the addition of policies assumed from Citizens during the first and fourth quarters of 2025 while average premium per policy remained relatively consistent.
For the six months ended June 30, 2026, gross premiums earned were $578.3 million from Insurance Operations and $72.1 million from Reciprocal Exchange Operations. For the six months ended June 30, 2025, gross premiums earned were $564.4 million from Insurance Operations and $41.1 million from Reciprocal Exchange Operations.
Premiums Ceded represented 31.8% and 33.5% of gross premiums earned during the six months ended June 30, 2026 and 2025, respectively.
There were no adjustments to premiums ceded related to retrospective provisions for the six months ended June 30, 2026 and 2025.
Net Premiums Earned represent gross premiums earned less premiums ceded.
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The following is a reconciliation of our Net Premiums Written to Net Premiums Earned for the six months ended June 30, 2026 and 2025 (in thousands):
| Line item | Six Months Ended / June 30, 2026 | Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Net Premiums Written | $457,170 | $443,634 |
| Increase in Unearned Premiums | (16,007) | (42,780) |
| Net Premiums Earned | $441,163 | $400,854 |
Net premiums written increased primarily due to a higher volume of policies in force while average premium per policy remained relatively consistent.
Net Investment Income increased primarily as a result of an increase in our invested assets.
Other Revenue increased primarily as a result of the addition of new insurance carrier customers to Exzeo’s insurance technology platform.
Losses and Loss Adjustment Expenses increased primarily due to a higher volume of policies in force. The gross loss ratio for the six months ended June 30, 2026 was 21.1% compared to 20.5% for the six months ended June 30, 2025. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”
Policy Acquisition and Other Underwriting Expenses increased primarily due to a higher volume of premiums in force in the comparative periods.
General and Administrative Personnel Expenses increased due to additional personnel, annual merit increases, stock-based compensation, and lower reinsurance recoveries related to claims processing for catastrophes.
Interest Expense decreased primarily as a result of the conversion of approximately $172.5 million of 4.75% convertible senior notes, which also resulted in a $1.1 million debt conversion expense included in other operating expenses, during the second quarter of 2025.
Income Tax Expense increased primarily as a result of an increase in income before income taxes. The effective tax rate for the six months ended June 30, 2026 and 2025 was 25.8% for each period and each rate represented the federal statutory tax rate of 21.0%, state taxes (net of federal benefits), and unfavorable non-deductible compensation expenses.
Net Income Attributable to Noncontrolling Interests increased primarily as a result of an increase in net income generated by Reciprocal Insurance Exchange Operations as well as the dilution of HCI Group, Inc.’s ownership of Exzeo as a result of Exzeo’s initial public offering in November 2025.
### Ratios
The gross loss ratio, gross expense ratio, and net combined ratio each remained relatively consistent for the six months ended June 30, 2026 and 2025.
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### LIQUIDITY AND CAPITAL RESOURCES
Throughout our history, our liquidity requirements have been met through issuances of our common and preferred stock, debt offerings, and funds from operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiaries from premiums written and investment income. We may consider raising additional capital through debt and/or equity offerings to support our growth and future investment opportunities.
Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within approximately 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.
As of June 30, 2026, we have $872.3 million of cash and cash equivalents. We believe that we maintain sufficient liquidity to pay claims and expenses, as well as to satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.
In the future, we anticipate our primary use of funds will be to pay claims, reinsurance premiums, interest and principal on our debt, dividends, and to fund operating expenses and real estate acquisitions. From time to time, our use of funds may also include repurchases of shares of our common stock or other strategic initiatives.
### Revolving Credit Facility
As of June 30, 2026, we had an outstanding balance of $36.0 million under a senior secured revolving credit facility with Fifth Third Bank (“Revolving Credit Facility”). The Revolving Credit Facility currently provides borrowing capacity of up to $150.0 million and expires on November 5, 2030. Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the one or three month Secured Overnight Financing Rate plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio, with interest payments due in arrears on January 1, April 1, July 1, and October 1.
As of June 30, 2026, we were in compliance with all required covenants and had an available borrowing capacity of $114.0 million.
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### Long-Term Debt
The following table summarizes the principal and interest payment obligations of our long-term debt as of June 30, 2026 (principal in thousands):
| Debt Description | Issued | Maturity | Interest Rate | Payment Date | June 30, 2026 |
| --- | --- | --- | --- | --- | --- |
| 4.55% Promissory Note | 7/6/2018 | 8/1/2036 | 4.55% | Monthly | $3,973 |
| 5.50% Promissory Note | 6/26/2023 | 7/1/2033 | 5.50% | Monthly | 11,292 |
| 5.65% Promissory Note | 7/24/2025 | 8/1/2035 | 5.65% | Monthly | 16,736 |
| Total principal amount | | | | | $32,001 |
There were no significant changes in long-term debt during the six months ended June 30, 2026.
At-The-Market Facility
On January 22, 2024, we implemented an “at-the-market” facility (the “ATM Facility”) which gives us the ability to raise up to $75.0 million through the issuance of new shares of common stock through a sales agent (the “Sales Agent”). We have no obligation to sell, and the Sales Agent has no obligation to buy or sell, any shares of common stock under the ATM Facility. As of June 30, 2026 the remaining availability under the ATM Facility was $75.0 million.
Share Repurchase Program
In March 2026, our Board of Directors authorized a program to repurchase up to $80.0 million, excluding commissions and other costs, of shares of our common stock through February 27, 2027 (the “Share Repurchase Program”). The Share Repurchase Program permits us to repurchase shares for cash periodically in open market purchases, block transactions, privately negotiated transactions in accordance with applicable federal securities laws, or by other means, including through the use of trading programs intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under that Act. The Share Repurchase Program does not obligate us to repurchase a specific number of shares of common stock, and may be canceled or suspended at any time without notice.
During the three and six months ended June 30, 2026, we repurchased 363,538 and 473,609 shares of common stock for $57.0 million and $74.5 million, respectively, excluding commissions and other costs, under the Share Repurchase Program. As of June 30, 2026, we may repurchase up to $5.5 million, excluding commissions and other costs, of shares of our common stock under the Share Repurchase Program.
On July 17, 2026, we completed the Share Repurchase Program with a total 504,330 shares of common stock repurchased for $80.0 million, excluding commissions and other costs.
Exzeo Share Repurchase Program
In May 2026, Exzeo’s Board of Directors authorized a program to repurchase up to $12.0 million, excluding commissions and other costs, of shares of Exzeo’s common stock (the “Exzeo Share Repurchase Program”). The Exzeo Share Repurchase Program permits Exzeo to repurchase shares for cash periodically in open market purchases, block transactions, privately negotiated transactions in accordance with applicable federal securities laws, or by other means, including through the use of trading programs intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other
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restrictions, including Rule 10b-18 under that Act. The Exzeo Share Repurchase Program does not obligate Exzeo to repurchase a specific number of shares of common stock, and may be canceled or suspended at any time without notice.
During the three and six months ended June 30, 2026, Exzeo repurchased 726,828 shares of its common stock for $10.0 million, excluding commissions and other costs, under the Exzeo Share Repurchase Program. As of June 30, 2026, Exzeo may repurchase up to $2.0 million, excluding commissions and other costs, of shares of its common stock under the Exzeo Share Repurchase Program.
On July 8, 2026, Exzeo completed the Exzeo Share Repurchase Program with a total 834,250 shares of common stock repurchased for $12.0 million, excluding commissions and other costs.
Investments
The main objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial market. Our excess cash is invested primarily in money market accounts, certificates of deposit, and available-for-sale fixed-maturity and equity securities.
As of June 30, 2026, we had $1.2 billion of available-for-sale fixed-maturity and equity investments, which are carried at fair value, and our available-for-sale fixed-maturity securities had a weighted-average duration of 4.6 years. Changes in the general interest rate environment affect the returns available on new available-for-sale fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing available-for-sale fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new available-for-sale fixed-maturity investments but increases the market value of existing available-for-sale fixed-maturity investments, creating the opportunity for realized investment gains on disposition.
In the future, we may alter our investment policy with regard to investments in federal, state and municipal obligations, preferred and common equity securities and real estate mortgages, as permitted by applicable law, including insurance regulations.
### Limited Partnership Investments
As of June 30, 2026, we had $16.4 million of limited partnership investments consisting of six private equity funds managed by their general partners. Withdrawals from limited partnership investments are generally not permitted and distributions occur when the underlying investments of the limited partnership investments are liquidated. Additionally, two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional funds under certain circumstances. As of June 30, 2026, there were unexpired capital commitments of $3.8 million.
### Real Estate Investments
Real estate investments have long been a significant component of our overall investment portfolio. It diversifies our portfolio and helps offset the volatility of other higher-risk assets. Thus, we may consider expanding our real estate investments portfolio should an opportunity arise.
### Dividends
On July 1, 2026, our Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on September 18, 2026 to stockholders of record on August 21, 2026.
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### Sources and Uses of Cash
The following table is a summary of our cash flow activity for the periods presented (in thousands):
| Line item | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change |
| --- | --- | --- | --- |
| Net cash provided by operating activities | $273,927 | $307,005 | $(33,078) |
| Net cash (used in) provided by investing activities | (500,388) | 120,019 | (620,407) |
| Net cash used in financing activities | (110,520) | (12,268) | (98,252) |
| Effect of exchange rate changes on cash | (179) | (45) | (134) |
| Net (decrease) increase in cash and cash equivalents and restricted cash | $(337,160) | $414,711 | $(751,871) |
Cash Flows for the Six Months Ended June 30, 2026
Net cash provided by operating activities consisted primarily of cash received from net premiums written and reinsurance recoveries of approximately $34.2 million, partially offset by cash disbursed for operating expenses, losses and loss adjustment expenses, and interest payments.
Net cash used in investing activities consisted primarily of $547.8 million of purchases of available-for-sale fixed-maturity and equity securities, partially offset by $38.8 million of proceeds from sales of available-for-sale fixed-maturity and equity securities and $8.5 million of proceeds from calls, repayments and maturities of available-for-sale fixed-maturity securities.
Net cash used in financing activities consisted primarily of $74.5 million of repurchases of common stock, $11.3 million of payments for deposit accounting assets, $11.2 million of net share settlements, $10.3 million of common stock dividends, and $10.0 million of repurchases of noncontrolling interests. These cash outflows were partially offset by $6.8 million of net subscriber surplus contributions.
Cash Flows for the Six Months Ended June 30, 2025
Net cash provided by operating activities consisted primarily of cash received from net premiums written and reinsurance recoveries of approximately $59.4 million, partially offset by cash disbursed for operating expenses, losses and loss adjustment expenses, and interest payments.
Net cash provided by investing activities consisted primarily of $263.6 million of proceeds from calls, repayments and maturities of available-for-sale fixed-maturity securities and $25.0 million proceeds from sales of available-for-sale fixed-maturity and equity securities, partially offset by $159.9 million of purchases of available-for-sale fixed-maturity and equity securities and $8.9 million of purchases of real estate investments.
Net cash used in financing activities consisted primarily of $8.9 million of common stock dividends, net repayment of our Revolving Credit Facility of $4.0 million, and an induced debt conversion payment of $1.1 million, partially offset by net subscriber surplus contributions of $2.7 million.
### OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2026, we had unexpired capital commitments for limited partnerships investments of $3.8 million as described above. We do not have any other arrangements giving rise to material obligations not reported in our consolidated balance sheets as described in Item 303 of SEC Regulation S-K.
### CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP, which requires
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us to select accounting policies and make estimates that affect amounts reported in the consolidated financial statements and the accompanying notes. Management’s estimates are based on the relevant information available at the end of each period. Actual results could differ materially from these estimates under different assumptions or market conditions.
We believe our accounting policies and estimates specific to losses and loss adjustment expenses, reinsurance recoverable, income taxes, stock-based compensation expense, and limited partnership investments involve our most significant judgments and estimates material to our consolidated financial statements.
Our accounting policies and estimates and their related risks that we consider to be critical are more fully described in our 2025 Annual Report. During the six months ended June 30, 2026, there have been no material changes with respect to any of our critical accounting policies and estimates.
### Reserves for Losses and Loss Adjustment Expenses
Our liability for losses and loss adjustment expenses (“Reserves”) is specific to property insurance, which is our insurance subsidiaries’ only line of business. The Reserves include both case reserves on reported claims and our reserves for incurred but not reported (“IBNR”) losses. As of each period end date, the balance of our Reserves is based on our best estimate of the ultimate cost of reported claims and the IBNR losses based primarily on our historical experience. Changes in the Reserves are charged or credited to operations as the Reserves are adjusted.
The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. As of June 30, 2026, $506.9 million of the total $559.0 million of Reserves was attributable to our estimate of IBNR. The remaining $52.1 million related to known cases which have been reported but not yet fully settled and represents our best estimate of the cost to settle such claims. As of June 30, 2026, $42.6 million of the $52.1 million in reserves for known cases related to claims incurred during prior years.
Our Reserves decreased from $576.5 million as of December 31, 2025 to $559.0 million as of June 30, 2026. The $17.5 million decrease was comprised of (i) reductions in our non-catastrophe Reserves of $54.4 million for 2025 and prior loss years; (ii) reductions in our catastrophe Reserves of $46.5 million primarily related to Hurricane Ian, Hurricane Helene, and Hurricane Milton; and (iii) partially offset by $83.4 million in reserves established for the 2026 loss year. The Reserves established for 2026 claims were primarily driven by IBNR as of June 30, 2026. The decrease of $100.9 million related to our 2025 and prior loss-years reserves was due to settlement of such claims.
Based on all information known to us, we believe our Reserves as of June 30, 2026 are adequate to cover our claims for losses incurred, including losses not yet reported to us. However, these estimates are continually reviewed by management as they are subject to significant variability and may be impacted by trends in claim severity and frequency or unusual exposures not yet identified. We review historical data and consider various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation, and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the Reserves. Adjustments are reflected in the results of operations in the period in which they are made, and the liabilities may deviate substantially from prior estimates.
### RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 3 “Recent Accounting Pronouncements” to the consolidated financial statements included in this Quarterly Report on Form 10-Q for further information about recent accounting pronouncements and adoptions.
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## ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2026, our investment portfolio included available-for-sale fixed-maturity and equity securities, the purposes of which are not for speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet our obligations while minimizing market risk, which is the potential economic loss from adverse fluctuations in securities prices. We consider many factors including credit ratings, investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment strategies. Our investment securities are managed primarily by an investment committee appointed by our Board of Directors. From time to time, our investment committee may decide to invest in low-risk assets such as U.S. government bonds.
Our investment portfolio is exposed to interest rate risk, credit risk, and equity price risk. Fiscal and economic uncertainties caused by any government action or inaction may exacerbate these risks and potentially have adverse impacts on the value of our investment portfolio.
We classify our fixed-maturity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of accumulated other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact our stockholders’ equity. In addition, we recognize any unrealized gains or losses related to our equity securities in our statement of income. As a result, our results of operations can be materially affected by the volatility in the equity market.
### Interest Rate Risk
Our available-for-sale fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage this risk by analyzing anticipated movement in interest rates and considering our future capital needs.
The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our available-for-sale fixed-maturity securities as of June 30, 2026 (dollar amounts in thousands):
| Hypothetical Change in Interest Rates | Estimated Fair Value | Change in Estimated Fair Value | Percentage Increase(Decrease)in Estimated Fair Value |
| --- | --- | --- | --- |
| 300 basis point increase | $954,004 | $(137,037) | -13% |
| 200 basis point increase | 996,973 | (94,068) | -9% |
| 100 basis point increase | 1,042,652 | (48,389) | -4% |
| 100 basis point decrease | 1,142,140 | 51,099 | 5% |
| 200 basis point decrease | 1,195,949 | 104,908 | 10% |
| 300 basis point decrease | 1,252,469 | 161,428 | 15% |
Credit Risk
Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our available-for-sale fixed-maturity securities. We mitigate this risk by investing primarily in investment grade available-for-sale fixed-maturity securities, diversifying our portfolio to avoid concentrations by issuer or business sector, and continually monitoring individual securities for declines in credit quality. While we emphasize credit quality in our investment selection process, significant downturns in the markets or general economy may impact the credit quality of our portfolio.
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The following table presents the composition of our available-for-sale fixed-maturity securities, by rating, as of June 30, 2026 (dollar amounts in thousands):
| Credit Rating | Cost or / Amortized / Cost | % of Total / Amortized / Cost | Estimated / Fair Value | % of Total / Estimated / Fair Value |
| --- | --- | --- | --- | --- |
| AAA | $2,566 | 0% | $2,571 | 0% |
| AA+, AA, AA- | 839,857 | 76% | 829,061 | 76% |
| A+, A, A- | 68,750 | 6% | 68,162 | 6% |
| BBB+, BBB, BBB- | 179,107 | 17% | 177,969 | 17% |
| BB+, BB, BB- | 1,300 | 0% | 1,248 | 0% |
| B+, B, B- | 2,537 | 0% | 2,379 | 0% |
| Not Rated | 9,661 | 1% | 9,651 | 1% |
| Available-for-sale fixed-maturity securities | $1,103,778 | 100% | $1,091,041 | 100% |
Equity Price Risk
As of June 30, 2026, our equity investment portfolio included common stocks, perpetual preferred stocks, mutual funds, and exchange-traded funds. We may incur potential losses due to adverse changes in equity security prices. We manage this risk primarily through industry and issuer diversification and asset mix.
The following table illustrates the composition of our equity securities as of June 30, 2026 (dollar amounts in thousands):
| Line item | Estimated / Fair Value | % of Total / Estimated / Fair Value |
| --- | --- | --- |
| Stocks by sector: | | |
| Financial | $4,459 | 8% |
| Consumer | 4,458 | 8% |
| Technology | 3,634 | 6% |
| Communications | 2,717 | 5% |
| Other (1) | 3,110 | 5% |
| | 18,378 | 32% |
| Mutual funds and exchange-traded funds by type: | | |
| Debt | 31,123 | 52% |
| Equity | 3,735 | 6% |
| Alternative | 5,802 | 10% |
| | 40,660 | 68% |
| Equity securities | $59,038 | 100% |
(1)
Represents an aggregate of less than 5% sectors.
### Foreign Currency Exchange Risk
As of June 30, 2026, we did not have any material exposure to foreign currency related risk.
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## ITEM 4 – CONTROLS AND PROCEDURES
### Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
### Changes in Internal Control Over Financial Reporting
During the three months ended June 30, 2026, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
## ITEM 1 – LEGAL PROCEEDINGS
Refer to Note 19 “Commitments and Contingencies” to the consolidated financial statements under the heading “Litigation and Other Legal Matters” included in this Quarterly Report on Form 10-Q for legal proceedings and related matters.
## ITEM 1A – RISK FACTORS
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the 2025 Annual Report.
## ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
### Recent Sales of Unregistered Equity Securities
None.
### Use of Proceeds from Registered Equity Securities
None.
### Issuer Purchases of Equity Securities
Under our publicly announced Share Repurchase Program, we are permitted to repurchase shares for cash periodically in open market purchases, block transactions, privately negotiated transactions in accordance with applicable federal securities laws, or by other means, including through the use of trading programs intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under that Act. The timing and total amount of any stock repurchases will be determined at management's discretion and depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices and other considerations. The Share Repurchase Program does not obligate us to repurchase a specific number of shares of common stock, and may be canceled or suspended at any time without notice.
In addition, we generally withhold shares of our common stock to satisfy our employees’ payroll tax liabilities associated with the vesting of restricted stock awards issued under our share-based compensation plan.
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During the three months ended June 30, 2026, we repurchased shares of our common stock as follows (dollar amounts in thousands, except share and per share amounts):
| For the Month Ended | Total Numberof Shares / Purchased | Average Price Paid / Per Share | Total Number of Shares Purchasedas Part of Publicly Announced Plans / or Programs (a) | Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans / or Programs (a) |
| --- | --- | --- | --- | --- |
| April 30, 2026 | 129,364 | $154.60 | 129,364 | $42,502 |
| May 31, 2026 | 199,400 | $155.76 | 129,211 | $22,516 |
| June 30, 2026 | 105,226 | $161.84 | 104,963 | $5,534 |
| | 433,990 | $156.89 | 363,538 | |
(a)
On March 3, 2026, we announced our Board of Directors authorized a program which permits us to repurchase up to $80.0 million, excluding commissions and other costs, of shares of our common stock through February 27, 2027. On July 17, 2026, the Share Repurchase Program was completed with a total 504,330 shares of common stock repurchased for $80.0 million, excluding commissions and other costs.
### Working Capital Restrictions and Other Limitations on the Payment of Dividends
We are not subject to working capital restrictions or other limitations on the payment of dividends. However, our insurance subsidiaries are subject to restrictions on the dividends and other distributions they may pay. Those restrictions could impact our ability to pay dividends in the future.
Under Florida law, a domestic insurer may not pay any dividend or distribute cash or other property to its stockholders except out of that part of its available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains. Additionally, a Florida domestic insurer may not make dividend payments or distributions to its stockholders without prior approval of the Florida Office of Insurance Regulation (“FLOIR”) if the dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains, plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains.
Alternatively, a Florida domestic insurer may pay a dividend or distribution without the prior written approval of the FLOIR if (1) the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards to policyholders derived from realized net operating profits on its business and net realized capital gains or (b) the insurer’s entire net operating profits and realized net capital gains derived during the immediately preceding calendar year, (2) the insurer will have policy holder capital surplus equal to or exceeding 115.0% of the minimum required statutory capital surplus after the dividend or distribution, (3) the insurer files a notice of the dividend or distribution with the FLOIR at least ten business days prior to the dividend payment or distribution and (4) the notice includes a certification by an officer of the insurer attesting that, after the payment of the dividend or distribution, the insurer will have at least 115% of required statutory capital surplus as to policyholders. Except as provided above, a Florida domiciled insurer may only pay a dividend or make a distribution (1) subject to prior approval by the FLOIR or (2) 30 days after the FLOIR has received notice of such dividend or distribution and has not disapproved it within such time.
During the six months ended June 30, 2026, our insurance subsidiaries made cash distributions of $77.5 million to HCI Group, Inc.
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## ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
## ITEM 4 – MINE SAFETY DISCLOSURES
None.
## ITEM 5 – OTHER INFORMATION
During the three months ended June 30, 2026, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).
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## ITEM 6 – EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed, furnished or incorporated by reference as part of this Quarterly Report on form 10-Q.
### Index to Exhibits
The information required by this Item is set forth on the index to exhibits below.
| Exhibit Number | Exhibit Description | Form | Exhibit | Filing Date |
| --- | --- | --- | --- | --- |
| 3.1 | Articles of Incorporation, with amendments. | 10-Q | 3.1 | 8/7/2013 |
| 3.1.1 | Articles of Amendment to Articles of Incorporation designating the rights, preferences and limitations of Series B Junior Participating Preferred Stock. | 8-K | 3.1 | 10/18/2013 |
| 3.1.2 | Articles of Amendment to Articles of Incorporation canceling the rights, preferences and limitations of Series B Junior Participating Preferred Stock. | 8-K | 3.1 | 5/15/2020 |
| 3.2 | Bylaws, with amendments. | 8-K | 3.2 | 9/13/2019 |
| 4.1 | Form of common stock certificate. | 10-Q | 4.1 | 11/7/2013 |
| 4.2 | Common Stock Purchase Warrant, dated February 26, 2021, issued by HCI Group, Inc. to CB Snowbird Holdings, L.P. | 8-K | 4.1 | 3/1/2021 |
| 4.3 | See Exhibits 3.1, 3.1.1, 3.1.2 and 3.2 of this report for provisions of the Articles of Incorporation, as amended, and our Bylaws, as amended, defining certain rights of security holders. | | | |
| 10.1^ | HCI Group, Inc. 2012 Omnibus Incentive Plan as revised April 26, 2022. | 10-Q | 10.5 | 5/6/2022 |
| 10.2^ | Executive Employment Agreement dated November 23, 2016 between Mark Harmsworth and HCI Group, Inc. | 10-Q | 10.7 | 8/3/2017 |
| 10.3* | Reimbursement Contract effective June 1, 2026 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | | | |
| 10.4*# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2026 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.5*# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2026 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.6*# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2026 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.7*# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2026 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.8* | Reimbursement Contract effective June 1, 2026 between TypTap Insurance Company and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | | | |
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| | | | | |
| --- | --- | --- | --- | --- |
| 10.9*# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2026 issued to Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.10*# | Facultative Excess of Loss Reinsurance Contract effective June 1, 2026 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | | | |
| 10.11*# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2026 issued to Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.12*# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2026 issued to Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.13*# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2026 issued to Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | | | |
| 10.14* | Reimbursement Contract effective June 1, 2026 between Condo Owners Reciprocal Exchange and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | | | |
| 10.15* | Reimbursement Contract effective June 1, 2026 between Tailrow Insurance Exchange and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | | | |
| 10.19# | First Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.25 | 8/8/2025 |
| 10.20# | Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to Homeowners Choice Property & Casualty Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.26 | 8/8/2025 |
| 10.21# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.27 | 8/8/2025 |
| 10.22# | Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.28 | 8/8/2025 |
| 10.23# | Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.29 | 8/8/2025 |
| 10.24# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to Homeowners Property & Casualty Insurance Company, Inc. and Tailrow Insurance Exchange by Subscribing Reinsurers. | 10-Q | 10.30 | 8/8/2025 |
| 10.25# | First Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.31 | 8/8/2025 |
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| | | | | |
| --- | --- | --- | --- | --- |
| 10.26# | Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.32 | 8/8/2025 |
| 10.27# | Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.33 | 8/8/2025 |
| 10.28# | Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.34 | 8/8/2025 |
| 10.29# | Sixth Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.35 | 8/8/2025 |
| 10.30# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.36 | 8/8/2025 |
| 10.31# | Reinstatement Premium Protection Reinsurance Contract effective June 1, 2025 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by Subscribing Reinsurers. | 10-Q | 10.37 | 8/8/2025 |
| 10.32# | Reinstatement Premium Protection Contract effective June 1, 2025 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | 10-Q | 10.38 | 8/8/2025 |
| 10.33# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | 10-Q | 10.39 | 8/8/2025 |
| 10.34 | Equity Distribution Agreement between HCI Group, Inc., Truist Securities, Inc. and Citizens JMP Securities, LLC. | S-3 | 1.2 | 1/22/2024 |
| 10.35 | Amended and Restated Common Stock Purchase Warrant between HCI Group, Inc. and CB Snowbird Holdings, L.P. | S-3 | 4.17 | 1/22/2024 |
| 10.36 | Registration Rights Agreement between HCI Group, Inc. and CB Snowbird Holdings, L.P. | S-3 | 4.18 | 1/22/2024 |
| 10.37 | Stock Redemption Agreement between TypTap Insurance Group, Inc. and CB Snowbird Holdings, L.P. | S-3 | 4.19 | 1/22/2024 |
| 10.38 | Assumption Agreement between Homeowners Choice Property & Casualty Insurance Company, Inc. and Citizens Property Insurance Corporation. | 8-K | 99.1 | 10/2/2023 |
| 10.39 | Assumption Agreement between TypTap Insurance Company and Citizens Property Insurance Corporation. | 8-K | 99.1 | 11/6/2023 |
| 10.40# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | 10-Q | 10.46 | 8/8/2025 |
| 10.41# | Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | 10-Q | 10.47 | 8/8/2025 |
| 10.42^ | Exzeo Group, Inc. 2021 Equity Incentive Plan | 8-K | 10.5 | 3/1/2021 |
| 10.43^ | Form of Restricted Stock Award Agreement of TypTap Insurance Group, Inc. | 8-K | 10.6 | 3/1/2021 |
| 10.44^ | Stock Option Agreement between Paresh Patel and TypTap Insurance Group, Inc. dated October 1, 2021. | 8-K | 99.1 | 10/7/2021 |
68
| | | | | |
| --- | --- | --- | --- | --- |
| 10.45^ | Exzeo Group, Inc. 2021 Omnibus Incentive Plan. | 8-K | 99.2 | 10/7/2021 |
| 10.46^ | Form of Stock Option Award under the Exzeo Group, Inc. under the 2021 Omnibus Plan | S-1 | 10.17 | 9/25/2025 |
| 10.47^ | Form of Restricted Stock Award Agreement of Exzeo Group, Inc. under the 2021 Omnibus Plan | S-1 | 10.18 | 9/25/2025 |
| 10.48^ | Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated September 15, 2023. | 10-Q | 10.54 | 11/8/2023 |
| 10.49^ | Form of executive restricted stock award contract. | 10-Q | 10.57 | 5/1/2014 |
| 10.50# | Facultative Excess of Loss Reinsurance Contract effective June 1, 2025 issued to Condo Owners Reciprocal Exchange by Subscribing Reinsurers. | 10-Q | 10.59 | 8/8/2025 |
| 10.51 | Amended and Restated Credit Agreement, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank. | 8-K | 99.1 | 6/8/2023 |
| 10.52 | Security and Pledge Agreement dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank | 8-K | 99.2 | 6/8/2023 |
| 10.53 | Revolving Credit Promissory Note, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank | 8-K | 99.3 | 6/8/20223 |
| 10.54 | Second Amended and Restated Credit Agreement, dated November 3, 2023, between HCI Group, Inc. and Fifth Third Bank | 8-K | 99.1 | 11/9/2023 |
| 10.55 | Second Amended and Restated Security and Pledge Agreement, dated November 3, 2023, between HCI Group, Inc. and Fifth Third Bank. | 8-K | 99.2 | 11/9/2023 |
| 10.56 | Renewed, Amended and Restated Revolving Credit Promissory Note, dated November 3, 2023 between HCI Group, Inc. and Fifth Third Bank | 8-K | 99.3 | 11/9/2023 |
| 10.57^ | Executive Employment Agreement between Paresh Patel and HCI Group, Inc. dated April 17, 2024. | 8-K | 99.1 | 4/23/2024 |
| 10.58^ | Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated April 17, 2024. | 8-K | 99.2 | 4/23/2024 |
| 10.59^ | Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 16, 2020. | 8-K | 99.1 | 1/23/2020 |
| 10.60^ | Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 16, 2020. | 8-K | 99.2 | 1/23/2020 |
| 10.61 | Reimbursement Contract effective June 1, 2025 between Condo Owners Reciprocal Exchange and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | 10-Q | 10.107 | 8/8/2025 |
| 10.62 | Reimbursement Contract effective June 1, 2025 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | 10-Q | 10.108 | 8/8/2025 |
| 10.63 | Reimbursement Contract effective June 1, 2025 between Tailrow Insurance Exchange and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | 10-Q | 10.109 | 8/8/2025 |
| 10.64 | Reimbursement Contract effective June 1, 2025 between TypTap Insurance Company and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. | 10-Q | 10.110 | 8/8/2025 |
69
| | | | | |
| --- | --- | --- | --- | --- |
| 10.65 | Property Quota Share Reinsurance Contract effective December 31, 2020 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. | 10-K | 10.124 | 3/10/2022 |
| 10.66 | Renewal Rights Agreement effective January 18, 2021 by and among United Property and Casualty Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. | 10-K | 10.125 | 3/10/2022 |
| 10.67 | Property Quota Share Reinsurance Contract effective June 1, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company. | 10-K | 10.126 | 3/10/2022 |
| 10.68 | Renewal Rights Agreement effective December 30, 2021 by and among United Property and Casualty Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. | 10-K | 10.127 | 3/10/2022 |
| 10.69 | Property Quota Share Reinsurance Contract effective December 31, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. | 10-K | 10.128 | 3/10/2022 |
| 10.70 | Property Quota Share Reinsurance Contract effective June 1, 2022 issued to United Property and Casualty Insurance Company by TypTap Insurance Company. | 10-Q | 10.129 | 8/9/2022 |
| 10.71^ | Exzeo Group Inc. 2025 Omnibus Incentive Plan. | S-1/A | 10.19 | 10/16/2025 |
| 10.72^ | Form of Stock Option Award under the 2025 Omnibus Plan. | S-1/A | 10.20 | 10/16/2025 |
| 10.73^ | Form of Restricted Stock Award Agreement under the 2025 Omnibus Plan. | S-1/A | 10.21 | 10/16/2025 |
| 10.74^ | Employment Agreement, dated December 9, 2025, by and between Exzeo Group, Inc. and Paresh S. Patel | 8-K | 99.1 | 12/23/2025 |
| 31.1* | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | |
| 31.2* | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | |
| 32.1** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | |
| 32.2** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | |
| 101* | XBRL Instant Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | |
| 104* | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | | | |
| * | Filed herewith. | | | |
| ** | Furnished herewith. | | | |
| ^ | Management contract or compensatory plan. | | | |
| # | Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv) because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets. | | | |
70
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HCI Group, Inc.
Date: August 7, 2026 By: /s/ Paresh Patel
Paresh Patel
Chief Executive Officer
(Principal Executive Officer)
Date: August 7, 2026 By: /s/ James Mark Harmsworth
James Mark Harmsworth
Chief Financial Officer
(Principal Financial and Accounting Officer)
71
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## EX-10.3
SEC source: [hci-ex10_3.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_3.htm)
Docusign Envelope ID: 475BDD38-6D2A-4112-BD47-633F29219D35
STATE BOARD OF ADMINISTRATION OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100 TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300 RON DESANTIS GOVERNOR CHAIR
BLAISE INGOGLIA CHIEF FINANCIAL OFFICER
JAMES UTHMEIER ATTORNEY GENERAL
CHRIS SPENCER EXECUTIVE DIRECTOR
REIMBURSEMENT CONTRACT EXHIBIT 10.3
Coverage Effective: June 1, 2026
(“Contract”)
This Contract is between:
Homeowners Choice Property and Casualty Insurance Company
(“Company”)
NAIC # 12944
and
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)
PREAMBLE
Section 215.555, Florida Statutes, creates the FHCF and directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Appendix A, is subject to Section 215.555, Florida Statutes, and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.
In consideration of the promises set forth in this Contract, the parties agree as follows:
ARTICLE I - SCOPE OF AGREEMENT
As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each
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Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.
ARTICLE II - PARTIES TO THE CONTRACT
This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies
under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any insured of the Company, any claimant against an insured of the Company, or any other third party have any rights under this Contract, except as provided in Article XVI. The SBA will disburse funds only to the Company, except as provided for in Article XVI. The Company shall not, without the prior approval of the Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.
ARTICLE III - TERM; EXECUTION
(1)
Term
This Contract applies to Losses from Covered Events which commence during the period from
12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 midnight, Eastern Time, May 31, 2027 (the “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.
(2)
Mandatory Nature of this Contract
(a)
Statutory Requirement
This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in
fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.
(b)
Duty to Provide a Fully and Timely Executed Copy of this Contract to the Administrator The Company must provide a fully executed copy of this Contract in electronic form to the
Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.
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(3)
Contract Deemed Executed Notwithstanding Execution Errors
Except with respect to New Participants, this Contract is deemed to have been executed by the Company as of the March 1 statutory deadline, notwithstanding the fact that the Coverage Level election in Article XXI(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the Contract on the part of the Company may have lacked the requisite authority. With respect to New Participants, this Contract is deemed to have been executed by the New Participant as of the date on which the New Participant began writing Covered Policies; coverage shall be determined as provided in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or if the executed Contract includes an invalid Coverage Level election under Article XXI, the Company’s Coverage Level shall be deemed as follows:
(a)
For a Company that is a member of a National Association of Insurance Commissioners (NAIC) group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the Administrator, the Coverage Level from the prior Contract Year shall be deemed.
(b)
For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.
(c)
For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.
(d)
For a New Participant that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45 percent, 75 percent, or 90 percent Coverage Levels may be selected if the Administrator receives an executed Contract within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45 percent Coverage Level shall be deemed to have been selected.
ARTICLE IV - LIABILITY OF THE FHCF
(1)
The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company’s Limit.
(2)
Section 215.555(4)(c)1., Florida Statutes, provides that the obligation of the FHCF with respect to all Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of the FHCF up to a specified dollar limit.
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(3)
In order to assure that reimbursements do not exceed the statutory limit of the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
(4)
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to further reimbursements.
ARTICLE V - DEFINITIONS
As used in this Contract, the following words and phrases are defined to mean:
(1)
Actual Claims-Paying Capacity of the FHCF
This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any
reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds under Section 215.555(6), Florida Statutes.
(2)
Actuarially Indicated
This term means an amount determined according to principles of actuarial science to be adequate, but
not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including additional amounts if needed to pay debt service on revenue bonds and to provide required debt service coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined according to principles of actuarial science to reflect each insurer’s relative exposure to hurricane losses.
(3)
Additional Living Expense (ALE)
ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential
Structure or its contents based on how the coverage is provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF.
(4)
Administrator
This term means the entity the SBA contracts with to perform administrative services associated with
the operation of the FHCF.
(5)
Authorized Insurer
This term is defined in Section 624.09(1), Florida Statutes.
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(6)
Balance of the Fund as of December 31 or Fund Balance
This term means the amount of assets available to pay claims resulting from Covered Events which
occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or proceeds from other financing mechanisms.
(7)
Borrowing Capacity
This term means the amount of funds available or which can be raised by the issuance of revenue bonds
or through other financing mechanisms, less bond issuance expenses and reserves.
(8)
Citizens Property Insurance Corporation (Citizens)
This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida
Statutes.
(9)
Commutation
This term means the estimation, payment, and complete discharge of all future obligations for Losses,
regardless of future loss development. The final Commutation shall constitute a complete and final release of all obligations of the SBA with respect to Losses. Commutation may be per Covered Event or by Contract Year as determined by the FHCF.
(10)
Covered Event
This term means any one storm declared to be a hurricane by the National Hurricane Center which
causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.
(11)
Coverage Level
This term means the level of reimbursement (90 percent, 75 percent, or 45 percent), as elected by the
Company under Article XXI or deemed under Article III(3), which is used in determining reimbursement under Article IV.
(12)
Covered Policy
(a)
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean
only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
(b)
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to
1.
the coverage amount for the dwelling in place under the lapsed homeowner’s policy,
2.
the coverage amount that the homeowner has been notified of by the collateral protection insurer, or
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3. the coverage amount that the homeowner requests from the collateral protection insurer,
if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.
(c)
A Company will be deemed to be able to accurately report data if the Company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.
(d)
Covered Policy does not include any policy or exposure excluded under Article VI.
(13)
Deductible Buy-Back Policy
This term means a specific policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a policy issued by another insurer.
(14)
Estimated Claims-Paying Capacity of the FHCF
This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year,
plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.
(15)
Excess Policy
This term means, for the purposes of this Contract, a policy that provides insurance protection for large
commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.
(16)
Insurer Group
For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group
means the group designation assigned by the NAIC for regulatory purposes. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group.
(17)
Limit
This term means the maximum amount that a Company may recover under this Contract, calculated by
multiplying the Company’s Reimbursement Premium by the Payout Multiple.
(18)
Loss
This term means an incurred loss under a Covered Policy from a Covered Event, including Additional
Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does not include allocated or unallocated loss adjustment expenses or any item for which this Contract does not provide reimbursement pursuant to the exclusions in Article VI.
(19)
Loss Adjustment Expense Allowance
(a) The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under
this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
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(b) The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.
(20)
New Participant
This term means a Company that begins writing Covered Policies on or after the beginning of the
Contract Year. A Company that removes Covered Policies from Citizens or an Unsound Insurer pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.
(21)
Payout Multiple
This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes,
which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.
(22)
Premium Formula
This term means the formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and
approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.
(23)
Projected Payout Multiple
The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section
215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.
(24)
Reimbursement Premium or Premium
These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000
of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.
(25)
Residential Structure
In general, this term means a unit or building used exclusively or predominantly for dwelling or
habitational occupancies, including the primary structure and appurtenant structures insured under the same Covered Policy and any other structures covered under endorsements associated with the Covered Policy covering the Residential Structure.
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(a)
With respect to a unit or home insured under a personal lines residential policy form, such unit or home is deemed to have a habitational occupancy and to be a Residential Structure regardless of the term of its occupancy.
(b)
With respect to a condominium structure or complex insured under a commercial lines policy, such structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless of the term of occupancy of individual units.
(c)
A single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and is insured under a commercial lines policy, is considered a Residential Structure if 50 percent or more of the total insured value of the structure is used for habitational occupancies.
(d)
Residential Structures do not include any structures excluded under Article VI. (26) Retention
This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.
(a) When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
(b) When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
1.
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
2.
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made, at a minimum, quarterly by the SBA after all required Proof of Loss Reports are received.
(c) The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
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(27) Retention Multiple
(a)
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2026/2027 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2024/2025 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.
(b)
The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:
1.
If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);
2.
If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or
3.
If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).
(28) Subscription Policy
This term means a Covered Policy where a single policy form is used by multiple Companies to provide vertical layers of primary hurricane coverage on a percentage basis for risks written under the policy. Each subscribing Company must be an Authorized Insurer, and the sum of all subscribers’ participation percentages on a single policy must total 100 percent.
(29) Ultimate Net Loss
(a)
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.
(b)
In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.
(c)
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
(d)
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
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(e) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
(30) Unsound Insurer
This term means an insurer determined by the Office of Insurance Regulation to be in unsound
condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.
ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a
loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
(2) Any policy which excludes wind or hurricane coverage.
(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;
(b)
Any policy providing a layer of windstorm or hurricane coverage for a structure(s) above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a structure(s) using separate policy forms;
(c)
Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or
(d)
The exclusions in this subsection do not apply to primary quota share policies written by Citizens under Section 627.351(6)(c)2., Florida Statutes.
(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).
(7) Any reinsurance assumed by the Company.
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(8)
Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does not apply to any policy identified as covering a residential condominium association or to any policy on which the insured is a residential condominium association, unless it is classified and rated as a hotel, motel, timeshare, shelter, camp, retreat or other similar structure.
(9)
Retail, office, mercantile, or manufacturing facilities, or other similar structures.
(10)
Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.
(11)
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(12)
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
(13)
Policies covering only Additional Living Expense.
(14)
Any exposure for barns or barns with apartments or living quarters.
(15)
Any exposure for builders risk coverage or new Residential Structures under construction.
(16)
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
(17)
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, interest, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
(18)
Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and Additional Living Expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
(19)
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call (unless policy limits have changed effective after June 30 of the Contract Year).
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(20)
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
(21)
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
(22)
Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.
(23)
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Company and Citizens are covered by this Contract.
(24)
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
(25)
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(26)
Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(27)
A policy providing personal property coverage separate from coverage of personal property included in a homeowner’s, mobile homeowner’s, condominium unit owner’s, or tenant’s policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of Covered Policy.
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(28) Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
(a) An endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement
that:
a.
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
b.
Charges a minimum premium of $500; and
c.
Insures scheduled items valued, in the aggregate, at no less than $100,000.
2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
a.
Collection risk assessments;
b.
Fire and security loss prevention;
c.
Warehouse inspections to protect items stored off-site;
d.
Assistance with collection inventory management; or
e.
Collection valuation reviews.
(b) An endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such endorsements are subject to the exclusion provided in this paragraph when the endorsement limit equals or exceeds $500,000. Generally, such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such an endorsement represents an unusually high exposure value and such endorsement is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
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(29) Any losses under liability coverages.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIV relating to inspection of records and examinations.
ARTICLE VIII - REIMBURSEMENT ADJUSTMENTS
Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, Retention adjustments as provided for under Article V(26)(b), incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1)
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
(2)
The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company’s Reimbursement Premium or impact its FHCF coverage. Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall
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exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.
(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures
(a)
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values
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under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)
The requirement that the Data Call is due on a certain date means that the report shall be received
by the SBA no later than 4 p.m. Eastern Time on the due date.
(2) Reimbursement Premium
(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts determined by the SBA. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.
(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as “receivership”):
1.
The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.
2.
Failure by such Company to pay the full annual provisional Reimbursement Premium as
specified in subparagraph 1. by the applicable due date may result in the 45 percent Coverage Level being deemed by the SBA for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a Covered Event occurred or triggered coverage. As such, the annual provisional Reimbursement Premium owed by the Company will be adjusted to reflect the 45 percent Coverage Level for the Contract Year.
(c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before
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February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.
(d)
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
(e)
The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
(f)
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
(3) Losses
(a) In General
Losses resulting from a Covered Event commencing during the Contract Year shall be reported by the Company and reimbursed by the SBA as provided herein and in accordance with Section 215.555, Florida Statutes, this Contract, and any rules adopted pursuant thereto. For a Company participating in a quota share primary insurance agreement(s) with Citizens , Citizens and the Company shall report only their respective portion of Losses under the quota share primary
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insurance agreement(s). The SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the Limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.
(b) Loss Reports
1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from
each Covered Event to allow the SBA to determine any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due at least 14 days from the date of the notice from the SBA that such a report is required.
2. Reimbursements will be issued based on paid Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C.
a.
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
b.
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event.
c.
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received, and shall include a Detailed Claims Listing.
d.
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an “as of” date not more than 60 days prior to the applicable quarter-end date and shall include a Detailed Claims Listing.
3. The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information.
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The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
a.
The SBA shall have the right to consult with relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
b.
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
c.
The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.
4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company’s request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company’s Reimbursement Premium, Retention, and coverage for the Contract Year.
(c) Loss Reimbursement Calculations
In general, the Company’s paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s
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reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
(d) Reserve Established
The SBA will establish a reserve for the outstanding reimbursable Losses for all Contract Years, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
(4) Advances
(a)
The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report and shall include a Loss Adjustment Expense Allowance as calculated by the SBA. Any request for an advance must be accompanied by a Proof of Loss Report and a Detailed Claims Listing, and the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for the specific type of advance requested under paragraph (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus interest due thereon.
(b)
For advances, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the SBA has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the SBA for the overpayment.
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(c)
If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the SBA may require the Company have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.
(d)
The three types of advances enumerated in Section 215.555(4)(e), Florida Statutes, follow.
1. Advances to Companies to prevent insolvency.
a. In order for the Company to demonstrate it is likely to qualify for reimbursement and that
the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, the Company shall provide the following information:
i.
Current assets;
ii.
Current liabilities other than liabilities due to the Covered Event;
iii.
Current surplus as to policyholders;
iv.
Estimate of other expected liabilities not due to the Covered Event; and
v.
Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.
b. The SBA’s final decision shall be based on the totality of the circumstances, including the
SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c. If demonstrated in accordance with subparagraph a., the SBA shall advance the Company
the amount necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.
a.
The SBA may advance the entity up to 90 percent of the lesser of: the SBA’s estimate of the reimbursement due to that entity or the entity’s share of the actual aggregate Reimbursement Premium paid for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c.
The entity must demonstrate the advance is essential to allow the entity to pay claims for a Covered Event.
3. Advances to limited apportionment companies under Section 627.351(2)(b)3, Florida Statutes.
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a.
The SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
(e) In determining whether to grant an advance and the amount of an advance, the SBA shall:
1.
Determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.
Review and consider all the information submitted by such Companies;
3.
Review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.
Consult with relevant regulatory agencies to seek all relevant information;
5.
Review the damage caused by the Covered Event and when that Covered Event occurred;
6.
Consider whether the Company has substantially exhausted amounts previously advanced;
7.
Consider any other factors deemed relevant; and
8.
Require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event.
(5) Inadequate Data Submissions
If exposure data or other information required to be reported by the Company under the terms of this Contract are not received by the SBA in the format specified by the SBA or is inadequate to the extent that the SBA requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.
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(6) Confidential Information/Trade Secret Information
Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the SBA intending to seek trade secret protection, as defined in Section 688.002, Florida Statutes, the Company shall comply with all provisions of Florida law to protect such disclosure.
ARTICLE XI - COMMUTATION
(1) Timeframe for Commutation Process
(a)
The Company and SBA may mutually agree to initiate and complete a Commutation agreement for zero dollars at any time. Such zero-dollar Commutation, once completed, eliminates the mandatory Proof of Loss Report filing requirements for the applicable Covered Event(s) for all reporting periods after the completion of the Commutation.
(b)
The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.
(c)
Provided the Company and SBA do not mutually initiate the Commutation process in subparagraph (a) or (b), the Commutation process will begin upon the later to occur: 60 months after the end of the Contract Year or upon completion of the claims examination for the Company and the resolution of all outstanding examination issues.
(2) Final Proof of Loss Report(s)
(a)
No less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report for each Covered Event during the Contract Year, except for a Company that has entered into a Commutation agreement as described in sub-subparagraph (1)(a). All outstanding Losses and incurred but not reported Losses must be submitted on an undiscounted basis.
(b)
The final Proof of Loss Report must include the following supporting documentation:
1.
All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not settled and which may be reimbursable Losses under this Contract.
2.
Requested supporting documentation (at a minimum, an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary.
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(c) Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or Commutation.
(3) The Loss Valuation Process
Subject to the timeframes outlined in sub-paragraph (1), if the Company has submitted a Proof of Loss Report indicating that it exceeds or expects to exceed its Retention, the Company and the SBA, or their respective representatives, shall attempt to agree upon the present value of all outstanding Losses, both reported and incurred but not reported, resulting from Covered Events during the Contract Year.
(a)
The Loss valuation process may only begin after all other issues arising under this Contract have been resolved, including completion of the claims examination, and shall be suspended pending resolution of any such issues that arise during the Loss valuation process.
(b)
Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA with respect to all Losses, both reported and unreported, under this Contract.
(c)
If agreement on present value cannot be reached within 90 days of the SBA’s receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.
(d)
If the parties fail to agree on the valuation of any Losses, any difference in valuation of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph. Either the SBA or the Company may initiate the process under this subparagraph by providing written notice to the other party stating that the parties are at an impasse with respect to valuation of Losses and specifying the dollar amounts in dispute.
1.
One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days after the initiation of the process, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.
2.
All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.
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3.
None of the actuaries shall be under the control of either party to this Contract.
4.
Each party shall submit a written statement related to its valuation of Losses to the panel of
actuaries and the opposing party no later than 30 days after the appointment of the third actuary. Within 15 days after receiving the other party’s submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.
5.
The written decision of a majority of the panel as to the disagreement over the valuation of Losses identified in the written notice of impasse, when filed with the parties hereto, shall be final and binding on both parties.
(e)
The reasonable and customary expense of the actuaries and of the Commutation (as a result of sub-subparagraph (3)(c) and subparagraph (d)) shall be equally divided between the two parties. Said Commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.
(f)
Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys’ fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.
ARTICLE XII - TAXES
The Company agrees not to make a deduction for the Reimbursement Premium when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company for the Reimbursement Premium, the Company agrees not to make a claim to the SBA for reimbursement of such taxes.
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ARTICLE XIII - ERRORS AND OMISSIONS
Any inadvertent delay, omission, or error on the part of the SBA shall not relieve the Company from any
liability which would attach to it hereunder if such delay, omission, or error had not been made.
ARTICLE XIV - INSPECTION OF RECORDS
The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage amount for the dwelling in place under the lapsed homeowner’s policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.
(1) Purpose of FHCF Examination
The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or in its entirety. The Company should not rely on the SBA to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year, so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any
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changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.
(2)
Examination Requirements for Exposure Verification
The Company shall retain complete and accurate records, in policy level detail, of all exposure data
submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.
(3)
Examination Requirements for Loss Reports
The Company shall retain complete and accurate records of all reported Losses and/or advances
submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.
(4)
Examination Procedures
(a)
The SBA will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the SBA. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
(b)
The reports and data are required to be provided to the SBA as set forth in an examination notice letter, and the SBA will provide the information to the examiner. If the SBA receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All
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costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
(c)
At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the SBA will forward an examination report to the Company.
(d)
Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the SBA. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
(e)
If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
(f)
If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(g)
1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the
Contract Year in question, the SBA will send the Company a letter outlining the process for resubmission and include a deadline to resubmit. Once the resubmission is received, the Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
2. If the recommendation of the examiner is to give the Company the option to either resubmit
the exposure data or to pay the estimated Reimbursement Premium difference, the SBA will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and include a deadline for the resubmission or the payment to be received by the Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.
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(h)
If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the SBA will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and include a deadline to file. Once the Proof of Loss Report(s) is received by the Administrator, the Administrator will calculate a revised reimbursement. The SBA shall review the submitted Proof of Loss Report(s) with respect to the examiner’s findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.
(i)
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than all the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
(5) Costs of the Examinations
The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.
ARTICLE XV - OFFSETS
The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company’s full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.
ARTICLE XVI - INSOLVENCY OF THE COMPANY
For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the SBA has completed and closed its examination of the insolvent Company’s Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion
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of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the SBA determines that it overpaid FIGA on behalf of the Company, the funds will be repaid to the FHCF by FIGA within a reasonable time.
ARTICLE XVII - TERMINATION
The FHCF and the obligations of both parties under this Contract may only be terminated by law.
ARTICLE XVIII - VIOLATIONS
(1) Statutory Provisions
(a)
Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.
(b)
Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.
(2) Noncompliance
(a)
As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).
(b)
If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments or advances due to the Company until the SBA determines that the Company is no longer in a state of noncompliance.
ARTICLE XIX - APPLICABLE LAW
This Contract shall be governed by and construed according to the laws of the State of Florida in respect of
any matter relating to or arising out of this Contract.
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ARTICLE XX - DUE DATES
If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or a legal State of Florida or federal holiday.
ARTICLE XXI - REIMBURSEMENT CONTRACT ELECTIONS
(1) Coverage Level
For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with Section 215.555, Florida Statutes, the Company has the option to elect a 45 percent, 75 percent, or 90 percent Coverage Level under this Contract. If the Company is a member of an NAIC group, all members must elect the same Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same Coverage Level as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90 percent Coverage Level. The Company shall not be permitted to change its Coverage Level once the contract has been executed or after the statutory deadline of March 1, whichever comes first. The Company shall be permitted to change its Coverage Level upon timely execution of the Contract for the next Contract Year but may not reduce its Coverage Level if revenue bonds issued under Section 215.555(6), Florida Statutes, after a Covered Event are outstanding.
The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2025 was as
follows: Homeowners Choice Property and Casualty Insurance Company
90%
(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):
(b) Coverage Level Election: The Company hereby elects the following Coverage Level for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 a.m., Eastern Time, May 31, 2027, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 45%
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ARTICLE XXII - COMPANY COVERAGE OF UNSOUND INSURERS
If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer’s Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.
(1) Providing Coverage for an Unsound Insurer’s Policies Under Company’s Reimbursement Contract
(a)
If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer’s Reimbursement Contract and cannot cover such policies under the Company’s Reimbursement Contract through an assumption of the Unsound Insurer’s Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own Reimbursement Contract for those policies assumed from an Unsound Insurer.
(b)
Responsibilities relating to the assumption of an Unsound Insurer’s Covered Policies by the Company:
1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.
a.
For an assumption of an Unsound Insurer’s Covered Policies that occurs on or before June 30, 2026, the Company shall report the exposure in effect for such policies as of June 30, 2026. This includes assumed policies renewed with the Company on or before June 30, 2026. As outlined in the Data Call, all such policies must be combined with the Company’s Covered policies written as its direct business and reported as a single submission due September 1, 2026.
b.
For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2026, and before December 1, 2026, the Company shall report exposure in effect for such policies as of June 30, 2026, and the SBA shall treat all such policies as if they were in effect as of June 30, 2026, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2026, in a single Data Call file combined with the Company’s Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2026, or a maximum 60 days from the date of the assumption, whichever is
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later. If the Company’s Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.
c.
If the Company is unable to submit the combined Data Call file by September 1, 2026, the Company must initially submit its Data Call file with all of its direct written Covered Policies that were in effect as of June 30, 2026 (prior to the assumption of additional Covered Policies from an Unsound Insurer) by September 1, 2026. The Company will then need to resubmit the combined Data Call file no later than 60 days from the date of the assumption.
d.
If a policy assumed by the Company from the Unsound Insurer is not reported in the Company’s Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.
e.
For an assumption of an Unsound Insurer’s Covered Policies on or after December 1, 2026, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.
f.
Except as noted above, for purposes of reporting Losses to the SBA, the Company shall report all Losses including those associated with Covered Policies assumed from the Unsound Insurer on Forms FHCF-L1A and FHCF-L1B as required under the Contract.
2.
The Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2026, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company’s Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company’s Retention and its share of the FHCF’s capacity.
3.
An administrative fee of $1,000 shall apply to each resubmission of exposure data for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the first examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. Resubmission fees shall be invoiced along with the Reimbursement Premium billing discussed in (b) above.
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4.
The Company shall ensure that the books and records related to the Covered Policies assumed from the Unsound Insurer are preserved and accessible to the SBA for its exposure and claims examinations. The Company shall retain data related to the FHCF examinations as required in Forms FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for the exposure assumed from the Unsound Insurer.
5.
The Company is required to provide the SBA with a complete listing of all assumed policies, including Covered Policies and other policies not covered by the FHCF. As outlined in the Data Call, the listing must include each policy number and the policy’s effective and expiration dates. In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.
(2) Acceptance of an Assignment of an Unsound Insurer’s Reimbursement Contract
(a) Responsibilities relating to assigned Reimbursement Contracts:
1.
The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.
2.
The Company is responsible for the Reimbursement Premiums due under the assigned Reimbursement Contract. Should any Reimbursement Premium be owed at the time paid Losses for Covered Policies under the assigned Reimbursement Contract exceed the Retention under the assigned Reimbursement Contract, all Reimbursement Premiums (as well as any applicable fees and interest) shall be offset before the issuance of any reimbursement payment.
3.
The Company has the responsibility to report all exposure and Loss information for Covered Policies under the assigned Reimbursement Contract separately for each assigned Reimbursement Contract pursuant to the reporting requirements specified in the Reimbursement Contract. If the Unsound Insurer has already submitted the required Data Call, the Company has the responsibility of filing any resubmissions as necessary.
4.
The Company has the responsibility to ensure that the books and records related to the assigned Reimbursement Contract are preserved and accessible to the SBA for its exposure and claims examinations. The Company has the responsibility to retain data related to FHCF examinations as required in FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for each assigned Reimbursement Contract.
(b) The Company will not be reimbursed by the FHCF for any Losses occurring prior to the date it first provides coverage for such transferred policies. Reimbursements for those Losses shall be made to the Unsound Insurer, the court-appointed receiver, or the applicable guaranty association, as provided by statute.
34 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: 475BDD38-6D2A-4112-BD47-633F29219D35
ARTICLE XXIII - SIGNATURES
Approved by:
Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.
By:Date:02/27/2026
Authority to sign on behalf of the Company:
The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with the requisite authority to bind the Company and make the representations on behalf of the Company as set forth in this Contract.
Homeowners Choice Property and Casualty Insurance Company
Karin ColemanPresident [Printed Name and Title]
By: /s/ Karin Coleman
Signature Date 02/26/2026
35 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
---
## EX-10.4
SEC source: [hci-ex10_4.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_4.htm)
EXHIBIT 10.4 PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
issued to
HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 1 of NUMPAGES 5
**PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Preamble | 4 |
| Business Covered | 4 |
| Retention and Limit | 4 |
| Florida Hurricane Catastrophe Fund | 5 |
| Term | 6 |
| Special Termination | 6 |
| Territory | 8 |
| Exclusions | 9 |
| Special Acceptance | 10 |
| Premium | 11 |
| Reinstatement | 12 |
| Definitions | 13 |
| Extra Contractual Obligations/Excess of Policy Limits | 16 |
| Net Retained Liability | 17 |
| Original Conditions | 17 |
| No Third Party Rights | 17 |
| Notice of Loss and Loss Settlements | 17 |
| Late Payments | 18 |
| Offset | 19 |
| Currency | 19 |
| Unauthorized Reinsurance | 20 |
| Taxes | 22 |
| Access to Records | 22 |
| Confidentiality | 23 |
| Indemnification and Errors and Omissions | 25 |
| Insolvency | 25 |
| Run-Off Reinsurer | 26 |
| Arbitration | 28 |
| Expedited Arbitration | 29 |
| Service of Suit | 29 |
| Governing Law | 30 |
| Entire Agreement | 31 |
| Non-Waiver | 31 |
| Sanctions Limitation Clause | 31 |
| Intermediary | 31 |
| Mode of Execution | 32 |
| Company Signing Block | 33 |
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 2 of NUMPAGES 5
**PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Pools, Associations & Syndicates Exclusions Clause | 34 |
| Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A. | 37 |
| Terrorism Exclusion | 39 |
| Limited Communicable Disease Exclusion No. 2(Property Treaty Reinsurance) | 40 |
| Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance) No. 1 | 41 |
| Exhibit A | 42 |
| Trust Agreement Requirements Clause | 44 |
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 3 of NUMPAGES 5
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(the “Contract”)
issued to
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
(collectively, the “Company”)
by
THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT
(the “Reinsurer”)
ARTICLE 1
BUSINESS COVERED
This Contract is to indemnify the Company in respect of its net excess liability as a result of any loss or losses which may occur during the term of this Contract under any Policies in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms and conditions herein contained.
ARTICLE 2
Retention and Limit
A. For each Layer of reinsurance provided hereunder, the Reinsurer shall be liable in respect of each Loss Occurrence for the Ultimate Net Loss over and above the initial Ultimate Net Loss retention as set forth in the schedule below for the Loss Occurrence, subject to a limit of liability to the Reinsurer for each such Loss Occurrence, and subject further to a limit of liability for all Loss Occurrences commencing during the term of this Contract, as set forth below:
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 4 of NUMPAGES 5
**RETENTION AND LIMIT SCHEDULE**
| Layer | Company’s Retention / Ultimate Net Loss in respect of each Loss Occurrence | Reinsurer’s Limit of Liability / Ultimate Net Loss in respect of each Loss Occurrence | Reinsurer’s Limit of Liability / Ultimate Net Loss in respect of all Loss Occurrences during the term of this Contract |
| --- | --- | --- | --- |
| First Layer | $10,000,000 | $80,000,000 | $80,000,000 |
| Second Layer | $90,000,000 | $110,000,000 | $220,000,000 |
| Third Layer | $200,000,000 | $200,000,000 | $400,000,000 |
| Fourth Layer | $400,000,000 | $150,000,000 | $300,000,000 |
| Fifth Layer | $550,000,000 | $250,000,000 | $500,000,000 |
B. As respects the First Layer only, in addition to the retention in paragraph A of this Article, the Company shall retain an aggregate deductible of $80,000,000 otherwise recoverable hereunder for Loss Occurrences commencing during the term of this Contract before making any recovery under the First Layer. The aggregate deductible shall be calculated based on the Ultimate Net Loss that would otherwise be recoverable in the absence of the aggregate deductible. For the avoidance of doubt, “otherwise recoverable” shall mean the Ultimate Net Loss the Reinsurer would have been liable for under the provisions of paragraph A of this Article had the aggregate deductible not applied.
C. No Loss Occurrence shall be covered hereunder unless it involves two or more risks subject to this Contract. The Company shall be the sole judge of what constitutes one risk for purposes of this Contract.
ARTICLE 3
FLORIDA HURRICANE CATASTROPHE FUND
A. As respects Loss Occurrences subject to this Contract, any loss reimbursement recoverable by the Company under the Florida Hurricane Catastrophe Fund (FHCF) shall be deducted in determining Ultimate Net Loss under this Contract, subject to the following:
1. The full reimbursement amount due from the FHCF for coverage under the Mandatory Layer, based on statutory limits of coverage as of June 1, shall be deemed recovered by the Company, whether or not actually received from the FHCF and whether or not reduced because of the FHCF’s inability to pay.
2. For purposes of allocating recoveries from the FHCF with respect to each Loss Occurrence, only amounts recoverable by applying the pay-out and retention multiples for the FHCF prior to any reduction in retention due to multiple Loss Occurrences in the same annual period shall be included in calculating the deduction from Ultimate Net Loss.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 5 of NUMPAGES 5
3. If the Company’s aggregate limit of FHCF reimbursement coverage is exhausted from Loss Occurrences commencing during the term of this Contract, and the FHCF does not designate the portion of said limit allocable to each Loss Occurrence, the total FHCF reimbursement received shall be allocated to each individual Loss Occurrence in the proportion that the Company’s losses in that Loss Occurrence bear to the Company’s total losses arising out of all Loss Occurrences to which the reimbursement applies.
4. For purposes of loss recoveries under this Contract prior to the final determination of the Company’s retention and limit under the FHCF; the FHCF shall be calculated using the Company’s respective “Projected Payout Multiple” under the FHCF. Upon determination of the Company’s retention and limit under the FHCF, losses will be adjusted, recognizing any adjustment to the “Projected Payout Multiple” caused by a change in the Aggregate Mandatory FHCF Premium or any other adjustments as required by statute to determine the final FHCF, but disregarding any change due to a decrease in the statutory limit.
B. Any FHCF reimbursement premiums paid by the Company for FHCF layers that inure to the benefit of this Contract shall be deemed to be premiums paid for inuring reinsurance.
C. The Company has opted for a 45% coverage selection from the FHCF.
ARTICLE 4
Term
This Contract shall take effect at 12:01 a.m., Eastern Time, June 1, 2026, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2027, applying to Loss Occurrences commencing during the term of this Contract.
ARTICLE 5
SPECIAL TERMINATION
A. The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event of any of the following circumstances:
1. The Subscribing Reinsurer ceases underwriting operations.
2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 6 of NUMPAGES 5
3. The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.
4. The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.
6. The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.
7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.
8. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.
9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
10. The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.
11. The Subscribing Reinsurer engages in the process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time.
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated and the country in which the Subscribing Reinsurer is incorporated or has its principal office, as a result of war, currency regulation, or any circumstance arising out of political, financial or economic emergency.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 7 of NUMPAGES 5
13. The Subscribing Reinsurer resides or is incorporated in countries where any regulation, whether by decree or otherwise, be enforced by the government, except for any sanctions regime, which shall restrict or prohibit its performance of any or all of its obligations under this Contract or any contract in consideration of which this Contract has been completed.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(8) and A(9) above.
B. Termination shall be effected on a cut-off basis and the Subscribing Reinsurer shall have no liability for Loss Occurrences commencing after the date of termination. The reinsurance premium due the Subscribing Reinsurer hereunder (including any minimum reinsurance premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess reinsurance premium received. Reinstatement premium, if any, shall be calculated based on the Subscribing Reinsurer’s reinsurance premium earned during the period of the Subscribing Reinsurer’s participation hereon.
C. Additionally, in the event of any of the circumstances listed in paragraph A of this Article, the Company shall have the option to commute the Subscribing Reinsurer’s liability for losses on Policies covered by this Contract. In the event the Company and the Subscribing Reinsurer cannot agree on the commutation amount, they shall appoint an actuary and/or appraiser to assess such amount and shall share equally any expense of the actuary and/or appraiser. If the Company and the Subscribing Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer’s participation under this Contract.
D. The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.
ARTICLE 6
Territory
This Contract shall apply to Policies issued in the State of Florida.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 8 of NUMPAGES 5
ARTICLE 7
Exclusions
A. This Contract shall not apply to and specifically excludes:
1. Flood when written as such.
2. Earthquake for standalone Policies where earthquake is the only named peril.
3. Hail damage to an insured’s growing or standing crops.
4. Reinsurance assumed by the Company under obligatory reinsurance agreements, except intercompany reinsurance between the Company and its affiliates and reinsurance where the Policies involved are to be re-underwritten in accordance with the underwriting standards of the Company and reissued as Policies of the Company in due course.
5. Pools, Associations & Syndicates, per the attached exclusion.
6. Liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, that provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
7. Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority, but not excluding loss or damage that would be covered under a standard form of Policy containing a standard war exclusion clause.
8. Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.
9. Terrorism as defined in the attached Terrorism Exclusion.
10. Mold unless directly resulting from an otherwise covered peril.
11. Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 9 of NUMPAGES 5
damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original Policy.
12. Financial guarantee and insolvency.
13. Loss or damage to overhead transmission and distribution lines, including supporting structures, of electrical companies, telephone companies, and cable companies. This exclusion shall not apply, however, to transmission and distribution lines and their supporting structures located on the property of any original insured or within 1,000 feet thereof.
14. Losses excluded by the attached Limited Communicable Disease Exclusion No.2 (Property Treaty Reinsurance).
15. Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance) No.1.
16. Policies written by TypTap Insurance Company, Condo Owners Reciprocal Exchange, or Tailrow Insurance Exchange.
17. Business located in the counties within the State of Florida as set forth in Exhibit A attached to and forming part of this Contract.
B. With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Company's Policy, any amount of loss for which the Company is liable because of such invalidation will not be excluded hereunder.
C. With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, if the Company inadvertently issues a Policy falling within the scope of one or more of the exclusions, such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the required notice of cancellation within 30 days after a member of the executive or managerial staff at the Company’s home office having underwriting authority in the class of business involved becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel.
ARTICLE 8
SPECIAL ACCEPTANCE
Business that is not within the scope of this Contract may be submitted to the Reinsurer for special acceptance hereunder, and such business, if accepted by the Reinsurer shall be covered hereunder, subject to the terms and conditions of this Contract, except as modified by the special acceptance. The Reinsurer shall be deemed to have accepted a risk, if it has not responded within five business
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 10 of NUMPAGES 5
days after receiving the underwriting information on such risk. Any renewal of a special acceptance agreed to for a predecessor contract to this Contract, shall automatically be covered hereunder.
ARTICLE 9
Premium
A. As respects the First Layer, the Company shall pay the Reinsurer a flat premium of [REDACTED] for the term of this Contract, to be paid in the amount of [REDACTED] on June 1, 2026, September 1, 2026, January 1, 2027 and April 1, 2027.
B. As respects the Second, Third, Fourth and Fifth Layers, the Company shall pay the Reinsurer a Deposit Premium in accordance with the schedule set forth below. The reinsurance premium to be paid to the Reinsurer for the reinsurance provided under each Layer shall be calculated at the Final Adjusted Premium Rates set out below multiplied by the Company’s final Total Insured Value, subject to the applicable Minimum Premium stated below:
PREMIUM SCHEDULE
Layer Final Adjusted Premium Rate Deposit
Premium Minimum
Premium
Second Layer [REDACTED] [REDACTED] [REDACTED]
Third Layer [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED]
C. The Deposit Premiums set forth in paragraph B above shall be payable to the Reinsurer by the Company in installments as follows:
DEPOSIT INSTALLMENT SCHEDULE
Layer June 1, 2026 September 1, 2026 January 1, 2027 April 1, 2027
Second Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Third Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
D. Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. This final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate for each Layer as stated in paragraph B above. Should this amount be greater than or equal to 95% and less than or equal to 105% of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed 105% of the Deposit Premium paid in accordance with paragraph B above, the Company shall immediately pay the Reinsurer the difference in excess of 105% of the Deposit Premium. Should the amount
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 11 of NUMPAGES 5
so calculated be less than 95% of the Deposit Premium paid in accordance with paragraph B of this Article, the Reinsurer shall immediately pay the Company the difference below 95% of the Deposit Premium, subject to the Minimum Premium as set forth above.
E. “Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2026 for business covered hereunder.
F. The estimated Total Insured Value is $51,110,570,281.
G. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.
ARTICLE 10
Reinstatement
A. Loss payments under the Second, Third, Fourth and Fifth Layers of this Contract shall reduce the limit of coverage afforded by the amounts paid, but the limit of coverage shall be reinstated from the time of the occurrence of the loss, and for each amount so reinstated, the Company agrees to pay, simultaneously with the Reinsurer’s loss payment, an additional premium in accordance with the following provisions:
1. As respects the Second Layer, the Company shall pay no additional premium for reinstatements for the term of this Contract.
2. As respects the Third, Fourth and Fifth Layers, the Company agrees to pay an additional premium calculated at pro rata of the Reinsurer’s premium for the applicable layer(s), for the term of this Contract, being pro rata only as to the fraction of the Reinsurer’s limit of liability hereunder (i.e., the fraction of the Reinsurer’s limit of liability for each Loss Occurrence as set forth for the Layer in the Retention and Limit Article) so reinstated.
B. Nevertheless, the Reinsurer’s liability under the applicable layer(s) shall not exceed such limit(s) in respect of any one Loss Occurrence, nor the applicable limit(s) in respect of all Loss Occurrences commencing during the term of this Contract, as set forth in the Retention and Limit Article.
C. If at the time of a loss settlement hereon the reinsurance premium, as calculated in accordance with the Premium Article, is unknown, the above calculation of reinstatement premium shall be based upon the Deposit Premium, subject to adjustment when the reinsurance premium is finally established.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 12 of NUMPAGES 5
ARTICLE 11
Definitions
A. 1. “Ultimate Net Loss” means the actual loss paid by the Company or which the Company becomes liable to pay, such loss to include Loss Adjustment Expense, 100% of any Extra Contractual Obligation and 100% of any Loss in Excess of Policy Limits as defined in the Extra Contractual Obligations/Excess of Policy Limits Article. In no event, however, shall more than 25% of “Ultimate Net Loss” for any one Loss Occurrence be comprised of Extra Contractual Obligations and Loss in Excess of Policy Limits.
2. Salvages and all recoveries (including amounts due from all reinsurances that inure to the benefit of this Contract, whether recovered or not), shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.
3. All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.
4. The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained a release, and/or the Company has accepted a proof of loss, and/or the Company has made a commitment to pay, and/or the Company has scheduled the payment of a loss.
5. Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.
B. “Loss Adjustment Expense” means costs and expenses incurred by the Company in connection with the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim or loss, or alleged loss, including but not limited to:
1. court costs;
2. costs of supersedeas and appeal bonds;
3. monitoring counsel expenses;
4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;
5. post-judgment interest;
6. pre-judgment interest, unless included as part of an award or judgment;
7. a pro rata share of salaries and expenses of Company field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 13 of NUMPAGES 5
Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; and
8. subrogation, salvage and recovery expenses.
“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph B(7) above, and office and other overhead expenses.
C. 1. “Loss Occurrence” means the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event. However, the duration and extent of any one “Loss Occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term “Loss Occurrence” shall be further defined as follows:
a. As regards any “Named Storm,” all individual losses sustained by the Company arising out of and directly occasioned by such “Named Storm,” without regard to the limitations of duration and extent set forth above. “Named Storm” means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a “Named Storm” shall be considered part of that “Named Storm,” once it has merged. A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.
b. As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage other than “Named Storm,” all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event.
c. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours within the area of one municipality or county and
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 14 of NUMPAGES 5
the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses that occur beyond such 96 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period.
d. As regards earthquake and fire following directly occasioned by the earthquake, those earthquake losses and individual fire losses that commence during the period of 168 consecutive hours may be included in the Company’s “Loss Occurrence.”
e. As regards any related weather conditions involving snow, sleet, freezing rain, freeze, ice, winter weather, and wind losses related to such conditions, all individual losses sustained by the Company, that occur during any period of 168 consecutive hours arising out of and directly occasioned by the same event.
f. As regards firestorms, brush fires and other fires or series of fires, irrespective of origin (except for fires covered in subparagraphs C(1)(c) and C(1)(d) above) which spread through trees, grassland or other vegetation, all individual losses sustained by the Company occurring during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company may be included in the Company’s “Loss Occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “Loss Occurrence.”
2. Except as provided in subparagraph C(1)(a) above:
a. The Company may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
b. Only one period of consecutive hours shall apply with respect to one event, except that, as respects those “Loss Occurrences” referred to in subparagraph C(1)(c) above, if the disaster, accident or loss occasioned by the event is of greater duration than 96 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “Loss Occurrences” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
3. Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.” Furthermore, all losses arising from an event involving a combination of losses described in
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subparagraphs C(1)(a) and C(1)(b) may be considered as having arisen from one “Loss Occurrence.” Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils, and, except as respects those “Loss Occurrences” involving a “Named Storm” referred to in subparagraph C(1)(a) above, no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours.
D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.
ARTICLE 12
EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS
A. This Contract shall cover Extra Contractual Obligations, as provided in the definition of Ultimate Net Loss. “Extra Contractual Obligations” shall be defined as those liabilities not covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.
B. This Contract shall cover Loss in Excess of Policy Limits, as provided in the definition of Ultimate Net Loss. “Loss in Excess of Policy Limits” shall be defined as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “loss” shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original Policy
C. An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s Policy, and shall constitute part of the original loss.
D. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.
E. However, this Article shall not apply where the loss has been incurred due to final legal adjudication of fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or
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corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.
F. In no event shall coverage be provided to the extent not permitted under law.
ARTICLE 13
NET RETAINED LIABILITY
A. This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).
B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
ARTICLE 14
Original Conditions
All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
ARTICLE 15
NO THIRD PARTY RIGHTS
This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract except as may be expressly provided otherwise herein.
ARTICLE 16
Notice of Loss and Loss Settlements
A. The Company shall advise the Reinsurer promptly if paid and estimated Ultimate Net Loss is in excess of 75% of the Company’s retention, or if, in the opinion of the Company, such Ultimate Net Loss may result in a claim hereunder. Thereafter, the Company shall advise the Reinsurer, at least monthly, of all subsequent developments thereto that may materially affect the position of the Reinsurer.
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B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.
C. As respects losses subject to this Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, and any Extra Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer. The Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement immediately upon receipt of reasonable evidence of the amount paid by the Company or that the Company estimates it will pay within the next 14 days. Within 30 days after receipt of the Reinsurer’s payment, the Company shall report to the Reinsurer the Reinsurer’s payment, minus the Reinsurer’s share of losses subject to this Contract that the Company has paid, or become liable to pay, as of the date of the report. Any positive difference shall be remitted to the Reinsurer with the Company’s report.
ARTICLE 17
LATE PAYMENTS
A. In the event any payment due either party is not received by the Intermediary by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:
1. the number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times
3. the amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.
B. The due date shall, for purposes of this Article, be determined as follows:
1. Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.
2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement premium, if
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applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such reinstatement premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.
C. If the information contained in the Company’s demand for payment is insufficient or not in accordance with the conditions of this Contract, then within 30 days the Reinsurer shall request from the Company all additional information necessary to validate its claim and the payment due date as defined in paragraph B shall be deemed to be the date upon which the Reinsurer received the requested additional information. This paragraph is only for the purpose of establishing when a payment is overdue, and shall not alter the provisions of the Notice of Loss and Loss Settlements Article or other pertinent contractual stipulations.
D. In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.
E. Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.
ARTICLE 18
OFFSET
Each party hereto shall have, and may exercise at any time and from time to time, the right to offset any and all balances due from a party to the other arising under this Contract. In the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of any applicable law governing offset entitlement.
ARTICLE 19
Currency
A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.
B. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books.
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ARTICLE 20
Unauthorized Reinsurance
A. This Article applies:
1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or
2. to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.
B. The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:
1. unearned premium (if applicable);
2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;
3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;
4. losses incurred but not reported and Loss Adjustment Expense relating thereto;
5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.
C. The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.
D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto. When funding by a LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the
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Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.
E. The Reinsurer and the Company agree that any funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:
1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;
2. to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);
3. to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;
4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.
F. If the amount drawn by the Company is in excess of the actual amount required for subparagraph E(1) or E(3), or in the case of subparagraph E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.
G. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.
H. At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s
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Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:
1. If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC, as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.
2. If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.
ARTICLE 21
TAXES
A. In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.
B. 1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.
2. In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.
ARTICLE 22
ACCESS TO RECORDS
A. The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the
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term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.
B. Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.
C. For purposes of this Article:
1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.
2. “Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in‑house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.
3. “Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.
ARTICLE 23
CONFIDENTIALITY
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:
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1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;
2. have been rightfully received from a third person without obligation of confidentiality;
3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality; or
4. is or has been independently acquired or developed by the Reinsurer without violating any of its obligations under this Article.
B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except:
1. when required by retrocessionaires as respects business ceded to this Contract;
2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition;
3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business;
4. when required by attorneys or arbitrators in connection with an actual or potential dispute hereunder; or
5. when necessary for the performance of services by advisors, affiliates and subsidiaries, contractors, consultants or external service providers engaged by the Reinsurer on the basis that no Confidential Information shall be disclosed by the Reinsurer to any third party in competition with the Company with regard to the lines of business subject to this Contract;
provided that the Reinsurer advises the parties referred to under subparagraphs B(1), B(3), B(4) and B(5) herein of the proprietary and confidential nature of the confidential information and their obligation to maintain its confidentiality. Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract or not related to the underwriting, management or administrative obligations related to this Contract and the Reinsurer’s own internal operations, risk management, retrocession and portfolio arrangements.
C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
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D. The Reinsurer may store Confidential Information in its group-wide IT systems to use for ordinary business purposes such as administration, risk management, governance, claims handling, business analysis, auditing and accounting purposes in support of its business operations. Further, the Reinsurer represents that anyone having legal access to its respective group-wide IT systems is legally bound and has internal controls in place to hold all information that is being made available through these systems in strict confidence.
E. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
ARTICLE 24
Indemnification and Errors and Omissions
A. The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge as to:
1. what shall constitute a claim or loss covered under any Policy;
2. the Company’s liability thereunder; and
3. the amount or amounts that it shall be proper for the Company to pay thereunder.
B. The Reinsurer shall be bound by the judgment of the Company , subject to the terms and conditions of this Contract, as to the obligation(s) and liability(ies) of the Company under any Policy.
C. Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.
D. Nothing in this Article shall be construed to override any of the other terms and conditions of this Contract.
ARTICLE 25
Insolvency
A. If more than one reinsured company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.
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B. 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, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. 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 Company indicating the Policy or bond reinsured, which claim 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C. 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 this reinsurance Contract as though such expense had been incurred by the Company.
D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Reinsurer to the Company or to its liquidator, receiver, conservator or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New York Insurance Law, provided the conditions of 1114(c) of such law have been met, if New York law applies) or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, or (2) where the Reinsurer, with the consent of the direct insured or insureds, has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of assumption on New York risks by the Superintendent of Financial Services of the State of New York, or with the prior approval of such other regulatory authority as may be applicable, is entirely released from its obligation and the Reinsurer shall pay any loss directly to payees under such Policy.
ARTICLE 26
RUN-OFF REINSURER
A. “Run-off Reinsurer” means any Subscribing Reinsurer that:
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1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or
2. has ceased reinsurance underwriting operations; or
3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or
4. engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or
5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(3) and A(5) above.
B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:
1. Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.
2. The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.
3. The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to
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Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.
4. The provisions of the Arbitration Article shall not apply.
C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.
ARTICLE 27
Arbitration
A. Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.
C. If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.
D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.
E. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.
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F. The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.
G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.
ARTICLE 28
Expedited Arbitration
A. Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS).
B. Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.
C. Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.
ARTICLE 29
SERVICE OF SUIT
A. This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.
B. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 29 of NUMPAGES 5
C. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.
D. Service of process in such suit may be made upon:
1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;
2. as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.
The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.
E. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.
ARTICLE 30
GOVERNING LAW
This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply.
Effective: June 1, 2026 DOC: May 26, 2026
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ARTICLE 31
ENTIRE AGREEMENT
This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. However, this Article shall not be construed as limiting the admissibility of evidence regarding the formation, interpretation, purpose or intent of this Contract.
ARTICLE 32
NON-WAIVER
The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.
ARTICLE 33
Sanctions Limitation Clause
No Reinsurer shall be deemed to provide cover and no Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Reinsurer to any sanction, prohibition or restriction under United Nations’ resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
ARTICLE 34
Intermediary
Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expenses, salvages, and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 31 of NUMPAGES 5
ARTICLE 35
MODE OF EXECUTION
A. This Contract may be executed by:
1. an original written ink signature of paper documents;
2. an exchange of facsimile copies showing the original written ink signature of paper documents;
3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 32 of NUMPAGES 5
IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s), who also confirms the Company’s review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as follows:
On this _____ day of __________, in the year of ______.
Homeowners Choice Property & Casualty Insurance Company, INC.
Signature: Title:
Print Name:
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 33 of NUMPAGES 5
POOLS, ASSOCIATIONS & SYNDICATES EXCLUSIONS CLAUSE
Section A:
This Contract excludes:
a. All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
b. Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property, whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.
Section B:
1. This Contract excludes business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in, any Pool, Association or Syndicate, whether by way of insurance or reinsurance, formed for the purpose of writing any of the following:
Oil, Gas or Petro-Chemical Plants
Oil or Gas Drilling Rigs and/or
Aviation Risks
2. The exclusion under paragraph 1 of this Section B does not apply:
a. Where the Total Insured Value over all interests of the risk in question is less than $250,000,000.
b. To interests traditionally underwritten as Inland Marine and/or Stock and/or Contents written on a Blanket basis.
c. To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under subparagraph (a).
Section C:
1. Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in Residual Market Mechanisms, including but not limited to the following, for all perils otherwise protected hereunder shall not be excluded herefrom:
a. So-called “Beach and Windstorm Plans” and so-called “Coastal Pools”;
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 34 of NUMPAGES 5
b. All “FAIR Plan” and “Rural Risk Plan” business;
c. Louisiana Citizens Property Insurance Corporation;
d. California Earthquake Authority (“CEA”) or any similar entity.
Notwithstanding the above, assessments related to the Florida Hurricane Catastrophe Fund, Reinsurance to Assist Policyholders, and Citizens Property Insurance Corporation (Florida) shall be excluded hereunder.
2. However, this reinsurance does not include any increase in such liability resulting from:
a. The inability of any other participant in such Residual Market Mechanisms to meet its liability;
b. Any claim against a Residual Market Mechanism or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Exclusions Article);
c. Any assessment or surcharge levied on the policyholder and therefore not a liability of the Company;
d. The Company’s initial capital contribution to the CEA;
e. Any assessments, other than interim and regular assessments, from a Residual Market Mechanism included in subparagraph 1(c) above;
f. Any expenditure to purchase or retire bonds.
3. The Company may include in Ultimate Net Loss for any Loss Occurrence covered hereunder only the liability attributable to that Loss Occurrence. If the relevant entity does not specify what portion of an assessment is attributable to each Loss Occurrence, the Company may include in Ultimate Net Loss in respect of each Loss Occurrence a percentage of the Company’s assessments from the relevant entity related to the calendar year in which the Loss Occurrence commenced, regardless of when assessed, such percentage to be determined by dividing the relevant entity’s losses arising from the Loss Occurrence by its total losses for the calendar year.
4. The Company will deduct from Ultimate Net Loss amounts received as recoupment of any assessment that has been included in the Ultimate Net Loss, provided the recoupment is directly allocable to the assessment (“itemized recoupment”). The Company shall use commercially reasonable efforts to recoup such assessment. Any amount received as an itemized recoupment of any assessment (whether under this Contract or any predecessor contract), and therefore deductible from Ultimate Net Loss, shall not be included in the subject premium of this Contract.
Effective: June 1, 2026 DOC: May 26, 2026
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However, if a state levies assessments but does not allow itemized recoupment from policyholders, instead allowing the Company to file an overall increased rate, any such premium increased thereby shall not be deemed to be a recoupment that is deductible from Ultimate Net Loss. Any recoupment received as part of a general premium rate increase, not specifically itemized, shall be included as part of the subject premium of this Contract or a successor contract, as applicable.
NOTES: Wherever used herein the terms:
“Company” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Contract” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurer” shall be understood to mean “Reinsurer,” “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.
Effective: June 1, 2026 DOC: May 26, 2026
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.
1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the site, or
II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III. Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material”, and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate
(a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 37 of NUMPAGES 5
5. It is understood and agreed that this clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
12/12/57
NMA 1119
NOTES: Wherever used herein the terms:
“Reassured” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Agreement” shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 38 of NUMPAGES 5
TERRORISM EXCLUSION
A. Notwithstanding any provision to the contrary within this Contract or any endorsement thereto, it is agreed that this Contract excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any Act of Terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
B. An “Act of Terrorism” includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:
a. involves violence against one or more persons; or
b. involves damage to property; or
c. endangers life other than that of the person committing the action; or
d. creates a risk to health or safety of the public or a section of the public; or
e. is designed to interfere with or to disrupt an electronic system.
C. This Contract also excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any Act of Terrorism.
D. Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines, this Contract shall pay actual loss or damage (but not related cost or expense) caused by any Act of Terrorism, provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, radiological or nuclear pollution or contamination.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 39 of NUMPAGES 5
limited Communicable Disease Exclusion No. 2
(Property treaty Reinsurance)
1. Notwithstanding any provision to the contrary within this reinsurance agreement, this reinsurance agreement excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.
Definitions
3. Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:
3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and
3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and
3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.
4. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5503
15 May 2020
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 40 of NUMPAGES 5
CYBER LOSS LIMITED EXCLUSION CLAUSE (PROPERTY TREATY REINSURANCE) No. 1
1. Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:
1.1. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;
1.2. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly occasioned by any of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow.
Definitions
3. Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.
4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.
5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5410
06 March 2020
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 41 of NUMPAGES 5
EXHIBIT A
LIST OF EXCLUDED COUNTIES IN THE STATE OF FLORIDA
for
Homeowners Choice Property & Casualty Insurance Company, Inc.
Alachua,
Baker,
Bay,
Bradford,
Calhoun,
Clay,
Columbia,
Dixie,
Duval,
Escambia,
Flagler,
Franklin,
Gadsden,
Gilchrist,
Gulf,
Hamilton,
Holmes,
Jackson,
Jefferson,
Lafayette,
Leon,
Levy,
Liberty,
Madison,
Nassau,
Okaloosa,
Putnam,
Santa Rosa,
St. Johns,
Suwannee,
Taylor,
Union,
Wakulla,
Walton,
Washington.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 42 of NUMPAGES 5
MAP OF EXCLUDED COUNTIES IN THE STATE OF FLORIDA
for
Homeowners Choice Property & Casualty Insurance Company, Inc.
[REDACTED]
The above map is for illustrative purposes only. Any discrepancy between the list of excluded counties in Exhibit A and the above map shall be resolved in favor of the list of excluded counties.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 43 of NUMPAGES 45
TRUST AGREEMENT REQUIREMENTS CLAUSE
A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;
2. Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;
3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;
4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and
5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.
B. If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.
2. Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.
Effective: June 1, 2026 DOC: May 26, 2026
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3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.
4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.
C. If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean the individual ceding insurer’s domestic regulator.
Effective: June 1, 2026 DOC: May 26, 2026
08GR0DWP – Tower 1 45 of NUMPAGES 45
---
## EX-10.5
SEC source: [hci-ex10_5.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_5.htm)
EXHIBIT 10.5 Reinstatement Premium Protection Reinsurance Contract
issued to
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 1 of NUMPAGES 3
**REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Preamble | 3 |
| Business Covered | 3 |
| Coverage | 3 |
| Term | 4 |
| Special Termination | 4 |
| Territory | 6 |
| Exclusions | 6 |
| Premium | 6 |
| Definitions | 7 |
| Original Conditions | 7 |
| No Third Party Rights | 8 |
| Notice of Loss and Loss Settlements | 8 |
| Late Payments | 8 |
| Offset | 9 |
| Currency | 9 |
| Unauthorized Reinsurance | 10 |
| Taxes | 12 |
| Access to Records | 13 |
| Confidentiality | 14 |
| Errors and Omissions | 15 |
| Insolvency | 15 |
| Run-Off Reinsurer | 16 |
| Arbitration | 17 |
| Expedited Arbitration | 18 |
| Service of Suit | 19 |
| Governing Law | 20 |
| Entire Agreement | 20 |
| Non-Waiver | 20 |
| Sanctions Limitation Clause | 21 |
| Intermediary | 21 |
| Mode of Execution | 21 |
| Company Signing Block | 22 |
| Trust Agreement Requirements Clause | 23 |
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 2 of NUMPAGES 3
Reinstatement Premium Protection Reinsurance Contract
(the “Contract”)
issued to
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
(collectively, the “Company”)
by
THE SUBSCRIBING REINSURER(S) IDENTIFIED
IN THE INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED TO AND FORMING PART OF THIS CONTRACT
(the “Reinsurer”)
article 1
Business Covered
This Contract is to indemnify the Company in respect of the liability that may accrue to the Company as a result of Reinstatement Premium the Company may become liable to pay under the reinstatement provisions of the Property Catastrophe Excess of Loss Reinsurance Contract, effective at 12:01 a.m., Eastern Time, June 1, 2026 and expiring 12:01 a.m., Eastern Time, June 1, 2027, Document Number: 08GR0DWP (the “Original Contract”), subject to the terms and conditions herein contained. The Original Contract covers losses under Policies covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, in force at the inception of this Contract, or issued or renewed during the term of this Contract. A copy of the Original Contract is attached to and forms part of this Contract.
article 2
coverage
The Reinsurer shall be liable to pay the Reinstatement Premium obligations under the Original Contract.
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 3 of NUMPAGES 3
article 3
Term
This Contract shall take effect at 12:01 a.m., Eastern Time, June 1, 2026, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2027, applying to Loss Occurrences commencing during the term of this Contract.
ARTICLE 4
SPECIAL TERMINATION
A. The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event of any of the following circumstances:
1. The Subscribing Reinsurer ceases underwriting operations.
2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.
3. The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.
4. The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.
6. The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.
7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting
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Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.
8. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.
9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
10. The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.
11. The Subscribing Reinsurer engages in the process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time.
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated and the country in which the Subscribing Reinsurer is incorporated or has its principal office, as a result of war, currency regulation, or any circumstance arising out of political, financial or economic emergency.
13. The Subscribing Reinsurer resides or is incorporated in countries where any regulation, whether by decree or otherwise, be enforced by the government, except for any sanctions regime, which shall restrict or prohibit its performance of any or all of its obligations under this Contract or any contract in consideration of which this Contract has been completed.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(8) and A(9) above.
B. The Subscribing Reinsurer shall have no liability for Reinstatement Premium arising from Loss Occurrences commencing after termination. The premium due the Subscribing Reinsurer hereunder (including any minimum premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess premium received.
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article 5
Territory
The territorial limits of this Contract shall be identical with those of the Original Contract.
article 6
exclusions
This Contract shall follow the exclusions set forth in the Original Contract.
ARTICLE 7
Premium
A. The premium for this Contract shall be based on the Layers of the Original Contract. The Company shall pay the Reinsurer a deposit premium in accordance with the schedule set forth below. The adjusted premium to be paid to the Reinsurer for the reinsurance provided under each Layer shall be calculated as the rate on line set out below multiplied by the Final Premium for that Layer:
PREMIUM SCHEDULE
Layer Rate on Line Deposit
Premium
Third Layer [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED]
B. The deposit premiums set forth in paragraph A above shall be payable to the Reinsurer by the Company in installments as follows:
DEPOSIT INSTALLMENT SCHEDULE
Layer June 1, 2026 September 1, 2026 January 1, 2027 April 1, 2027
Third Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
C. Within 45 days following the expiration of this Contract, the Company shall calculate and report the adjusted premium for each Layer in accordance with paragraph A above. If the adjusted premium for a Layer is less than the deposit premium paid under such Layer, the Reinsurer shall remit the difference to the Company. If the adjusted premium for a Layer is
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greater than the deposit premium paid for such Layer, the Company shall immediately remit to the Reinsurer the difference.
D. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.
article 8
definitions
A. “Reinstatement Premium” means premium paid by the Company for each Layer under the provisions of the Reinstatement Article of the Original Contract. Reinstatement Premium shall be calculated at pro rata of the original reinsurance premium, being pro rata only for the amount being reinstated. If, at the time of a loss settlement under the Original Contract, the reinsurance premium thereunder is not yet known, Reinstatement Premium shall be based upon the deposit premium, subject to adjustment when said reinsurance premium is finally established. Nothing in this clause shall be construed to mean that amounts are not recoverable hereunder until the Company’s final Reinstatement Premium has been ascertained. All recoveries received subsequent to reimbursement hereunder shall be applied as if received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.
B. “Loss Occurrence” shall follow the definition set forth in the Original Contract.
C. “Final Premium” means the total reinsurance premium for the Original Contract, except for Reinstatement Premium.
D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.
ARTICLE 9
ORIGINAL CONDITIONS
All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the Original Contract. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
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article 10
No Third Party Rights
This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract except as may be expressly provided otherwise herein.
article 11
NOTICE OF LOSS AND LOSS settlements
A. The Company shall advise the Reinsurer promptly of all losses that, in the opinion of the Company, may result in a claim hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurer.
B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.
C. As respects losses subject to the Original Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of the Reinstatement Premium arising from each such settlement immediately upon receipt of proof of payment.
ARTICLE 12
LATE PAYMENTS
A. In the event any payment due either party is not received by the Intermediary by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:
1. the number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times
3. the amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.
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B. The due date shall, for purposes of this Article, be determined as follows:
1. Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.
2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement Premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such Reinstatement Premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.
C. If the information contained in the Company’s demand for payment is insufficient or not in accordance with the conditions of this Contract, then within 30 days the Reinsurer shall request from the Company all additional information necessary to validate its claim and the payment due date as defined in paragraph B shall be deemed to be the date upon which the Reinsurer received the requested additional information. This paragraph is only for the purpose of establishing when a payment is overdue, and shall not alter the provisions of the Notice of Loss and Loss Settlements Article or other pertinent contractual stipulations.
D. In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.
E. Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.
ARTICLE 13
OFFSET
Each party hereto shall have, and may exercise at any time and from time to time, the right to offset any and all balances due from a party to the other arising under this Contract. In the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of any applicable law governing offset entitlement.
ARTICLE 14
Currency
A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.
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B. For purposes of this Contract, where the Company receives or pays amounts in currencies other than United States Dollars, such amounts shall be converted into United States Dollars at the actual rates of exchange at which these amounts are entered in the Company’s books.
ARTICLE 15
UNAUTHORIZED REINSURANCE
A. This Article applies:
1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or
2. to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.
B. The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:
1. unearned premium (if applicable);
2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;
3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;
4. losses incurred but not reported and Loss Adjustment Expense relating thereto;
5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.
C. The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.
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D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto. When funding by a LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.
E. The Reinsurer and the Company agree that any funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:
1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;
2. to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);
3. to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;
4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.
F. If the amount drawn by the Company is in excess of the actual amount required for subparagraph E(1) or E(3), or in the case of subparagraph E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.
G. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure
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that withdrawals are made only upon the order of properly authorized representatives of the Company.
H. At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:
1. If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC, as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.
2. If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.
ARTICLE 16
Taxes
A. In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.
B. 1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.
2. In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.
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ARTICLE 17
access to records
A. The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.
B. Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.
C. For purposes of this Article:
1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.
2. “Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in‑house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.
3. “Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.
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ARTICLE 18
confidentiality
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:
1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;
2. have been rightfully received from a third person without obligation of confidentiality;
3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality; or
4. is or has been independently acquired or developed by the Reinsurer without violating any of its obligations under this Article.
B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except:
1. when required by retrocessionaires as respects business ceded to this Contract;
2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition;
3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business;
4. when required by attorneys or arbitrators in connection with an actual or potential dispute hereunder; or
5. when necessary for the performance of services by advisors, affiliates and subsidiaries, contractors, consultants or external service providers engaged by the Reinsurer on the basis that no Confidential Information shall be disclosed by the Reinsurer to any third party in competition with the Company with regard to the lines of business subject to this Contract;
provided that the Reinsurer advises the parties referred to under subparagraphs B(1), B(3), B(4) and B(5) herein of the proprietary and confidential nature of the confidential information and their obligation to maintain its confidentiality. Further, the Reinsurer agrees
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not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract or not related to the underwriting, management or administrative obligations related to this Contract and the Reinsurer’s own internal operations, risk management, retrocession and portfolio arrangements.
C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
D. The Reinsurer may store Confidential Information in its group-wide IT systems to use for ordinary business purposes such as administration, risk management, governance, claims handling, business analysis, auditing and accounting purposes in support of its business operations. Further, the Reinsurer represents that anyone having legal access to its respective group-wide IT systems is legally bound and has internal controls in place to hold all information that is being made available through these systems in strict confidence.
E. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
ARTICLE 19
Errors and Omissions
Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.
ARTICLE 20
insolvency
A. If more than one company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.
B. In the event of the insolvency of the Company, this coverage shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution
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because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. 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 Company indicating the Policy or bond reinsured, which claim 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C. 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 this reinsurance Contract as though such expense had been incurred by the Company.
ARTICLE 21
RUN-OFF REINSURER
A. “Run-off Reinsurer” means any Subscribing Reinsurer that:
1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or
2. has ceased reinsurance underwriting operations; or
3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or
4. engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or
5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(3) and A(5) above.
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B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:
1. Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.
2. The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.
3. The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.
4. The provisions of the Arbitration Article shall not apply.
C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.
ARTICLE 22
arbitration
A. Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10
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days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.
C. If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.
D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.
E. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.
F. The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.
G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.
ARTICLE 23
Expedited Arbitration
A. Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS).
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B. Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.
C. Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.
ARTICLE 24
service of suit
A. This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.
B. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
C. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.
D. Service of process in such suit may be made upon:
1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 19 of NUMPAGES 3
2. as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.
The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.
E. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.
ARTICLE 25
GOVERNING LAW
This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply.
ARTICLE 26
Entire Agreement
This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. However, this Article shall not be construed as limiting the admissibility of evidence regarding the formation, interpretation, purpose or intent of this Contract.
ARTICLE 27
NON-WAIVER
The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 20 of NUMPAGES 3
ARTICLE 28
Sanctions Limitation Clause
No Reinsurer shall be deemed to provide cover and no Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Reinsurer to any sanction, prohibition or restriction under United Nations’ resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
ARTICLE 29
Intermediary
Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expenses, salvages, and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
ARTICLE 30
mode of execution
A. This Contract may be executed by:
1. an original written ink signature of paper documents;
2. an exchange of facsimile copies showing the original written ink signature of paper documents;
3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 21 of NUMPAGES 3
IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s), who also confirms the Company’s review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as follows:
On this _____ day of __________, in the year of ______.
Homeowners Choice Property & Casualty Insurance Company, INC.
Signature: Title:
Print Name:
Reinstatement Premium Protection Reinsurance Contract
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 22 of NUMPAGES 3
TRUST AGREEMENT REQUIREMENTS CLAUSE
A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;
2. Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;
3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;
4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and
5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.
B. If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.
2. Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 23 of NUMPAGES 3
3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.
4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.
C. If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean the individual ceding insurer’s domestic regulator.
Effective: June 1, 2026 DOC: May 26, 2026
08GR09PS – Tower 1 24 of NUMPAGES 3
---
## EX-10.6
SEC source: [hci-ex10_6.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_6.htm)
EXHIBIT 10.6 REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT
issued to
TypTap Insurance Company
Ocala, Florida
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 1 of NUMPAGES 25
**REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Preamble | 3 |
| Business Covered | 3 |
| Coverage | 4 |
| Term | 4 |
| Special Termination | 4 |
| Territory | 6 |
| Exclusions | 6 |
| Premium | 6 |
| Definitions | 7 |
| Original Conditions | 7 |
| No Third Party Rights | 8 |
| Notice of Loss and Loss Settlements | 8 |
| Late Payments | 8 |
| Offset | 9 |
| Currency | 9 |
| Unauthorized Reinsurance | 10 |
| Taxes | 12 |
| Access to Records | 13 |
| Confidentiality | 14 |
| Errors and Omissions | 15 |
| Insolvency | 15 |
| Run-Off Reinsurer | 16 |
| Arbitration | 17 |
| Expedited Arbitration | 18 |
| Service of Suit | 19 |
| Governing Law | 20 |
| Entire Agreement | 20 |
| Non-Waiver | 20 |
| Sanctions Limitation Clause | 21 |
| Intermediary | 21 |
| Mode of Execution | 21 |
| Company Signing Block | 22 |
| Trust Agreement Requirements Clause | 24 |
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 2 of NUMPAGES 25
REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT
(the “Contract”)
issued to
Typtap insurance company
Ocala, Florida
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
(collectively, the “Company”)
by
THE SUBSCRIBING REINSURER(S) IDENTIFIED
IN THE INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED TO AND FORMING PART OF THIS CONTRACT
(the “Reinsurer”)
article 1
Business Covered
This Contract is to indemnify the Company in respect of the liability that may accrue to the Company as a result of Reinstatement Premium the Company may become liable to pay under the reinstatement provisions of the Property Catastrophe Excess of Loss Reinsurance Contract, effective at 12:01 a.m., Eastern Time, June 1, 2026, and expiring 12:01 a.m., Eastern Time, June 1, 2027, Document Number: 0BWP0TYV (the “Original Contract”), subject to the terms and conditions herein contained. The Original Contract covers losses under Policies covering direct and assumed business classified by the Company as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, in force at the inception of this Contract, or issued or renewed during the term of this Contract. A copy of the Original Contract is attached to and forms part of this Contract.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 3 of NUMPAGES 25
article 2
coverage
The Reinsurer shall be liable to pay the Reinstatement Premium obligations under the Original Contract.
article 3
Term
This Contract shall take effect at 12:01 a.m., Eastern Time, June 1, 2026, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2027, applying to Loss Occurrences commencing during the term of this Contract.
ARTICLE 4
SPECIAL TERMINATION
A. The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event of any of the following circumstances:
1. The Subscribing Reinsurer ceases underwriting operations.
2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.
3. The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.
4. The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 4 of NUMPAGES 25
6. The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.
7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.
8. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.
9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
10. The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.
11. The Subscribing Reinsurer engages in the process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time.
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated and the country in which the Subscribing Reinsurer is incorporated or has its principal office, as a result of war, currency regulation, or any circumstance arising out of political, financial or economic emergency.
13. The Subscribing Reinsurer resides or is incorporated in countries where any regulation, whether by decree or otherwise, be enforced by the government, except for any sanctions regime, which shall restrict or prohibit its performance of any or all of its obligations under this Contract or any contract in consideration of which this Contract has been completed.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(8) and A(9) above.
B. The Subscribing Reinsurer shall have no liability for Reinstatement Premium arising from Loss Occurrences commencing after termination. The premium due the Subscribing Reinsurer hereunder (including any minimum premium) shall be prorated based on the period
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 5 of NUMPAGES 25
of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess premium received.
article 5
Territory
The territorial limits of this Contract shall be identical with those of the Original Contract.
article 6
exclusions
This Contract shall follow the exclusions set forth in the Original Contract.
ARTICLE 7
Premium
A. The premium for this Contract shall be based on the Layers of the Original Contract. The Company shall pay the Reinsurer a deposit premium in accordance with the schedule set forth below. The adjusted premium to be paid to the Reinsurer for the reinsurance provided under each Layer shall be calculated as the rate on line set out below multiplied by the Final Premium for that Layer:
PREMIUM SCHEDULE
Layer Rate on Line Deposit
Premium
Third Layer [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED]
B. The deposit premiums set forth in paragraph A above shall be payable to the Reinsurer by the Company in installments as follows:
DEPOSIT INSTALLMENT SCHEDULE
Layer June 1, 2026 September 1, 2026 January 1, 2027 April 1, 2027
Third Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
C. Within 45 days following the expiration of this Contract, the Company shall calculate and report the adjusted premium for each Layer in accordance with paragraph A above. If the
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 6 of NUMPAGES 25
adjusted premium for a Layer is less than the deposit premium paid under such Layer, the Reinsurer shall remit the difference to the Company. If the adjusted premium for a Layer is greater than the deposit premium paid for such Layer, the Company shall immediately remit to the Reinsurer the difference.
D. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.
article 8
definitions
A. “Reinstatement Premium” means premium paid by the Company for each Layer under the provisions of the Reinstatement Article of the Original Contract. Reinstatement Premium shall be calculated at pro rata of the original reinsurance premium, being pro rata only for the amount being reinstated. If, at the time of a loss settlement under the Original Contract, the reinsurance premium thereunder is not yet known, Reinstatement Premium shall be based upon the deposit premium, subject to adjustment when said reinsurance premium is finally established. Nothing in this clause shall be construed to mean that amounts are not recoverable hereunder until the Company’s final Reinstatement Premium has been ascertained. All recoveries received subsequent to reimbursement hereunder shall be applied as if received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.
B. “Loss Occurrence” shall follow the definition set forth in the Original Contract.
C. “Final Premium” means the total reinsurance premium for the Original Contract, except for Reinstatement Premium.
D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.
ARTICLE 9
ORIGINAL CONDITIONS
All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the Original Contract. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 7 of NUMPAGES 25
article 10
No Third Party Rights
This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract except as may be expressly provided otherwise herein.
article 11
NOTICE OF LOSS AND LOSS settlements
A. The Company shall advise the Reinsurer promptly of all losses that, in the opinion of the Company, may result in a claim hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurer.
B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.
C. As respects losses subject to the Original Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of the Reinstatement Premium arising from each such settlement immediately upon receipt of proof of payment.
ARTICLE 12
LATE PAYMENTS
A. In the event any payment due either party is not received by the Intermediary by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:
1. the number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times
3. the amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 8 of NUMPAGES 25
B. The due date shall, for purposes of this Article, be determined as follows:
1. Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.
2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement Premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such Reinstatement Premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.
C. If the information contained in the Company’s demand for payment is insufficient or not in accordance with the conditions of this Contract, then within 30 days the Reinsurer shall request from the Company all additional information necessary to validate its claim and the payment due date as defined in paragraph B shall be deemed to be the date upon which the Reinsurer received the requested additional information. This paragraph is only for the purpose of establishing when a payment is overdue, and shall not alter the provisions of the Notice of Loss and Loss Settlements Article or other pertinent contractual stipulations.
D. In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.
E. Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.
ARTICLE 13
OFFSET
Each party hereto shall have, and may exercise at any time and from time to time, the right to offset any and all balances due from a party to the other arising under this Contract. In the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of any applicable law governing offset entitlement.
ARTICLE 14
Currency
A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 9 of NUMPAGES 25
B. For purposes of this Contract, where the Company receives or pays amounts in currencies other than United States Dollars, such amounts shall be converted into United States Dollars at the actual rates of exchange at which these amounts are entered in the Company’s books.
ARTICLE 15
UNAUTHORIZED REINSURANCE
A. This Article applies:
1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or
2. to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.
B. The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:
1. unearned premium (if applicable);
2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;
3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;
4. losses incurred but not reported and Loss Adjustment Expense relating thereto;
5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.
C. The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 10 of NUMPAGES 25
D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto. When funding by a LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.
E. The Reinsurer and the Company agree that any funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:
1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;
2. to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);
3. to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;
4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.
F. If the amount drawn by the Company is in excess of the actual amount required for subparagraph E(1) or E(3), or in the case of subparagraph E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.
G. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0BNL – Tower 2 11 of NUMPAGES 25
that withdrawals are made only upon the order of properly authorized representatives of the Company.
H. At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:
1. If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC, as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.
2. If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.
ARTICLE 16
Taxes
A. In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.
B. 1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.
2. In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.
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ARTICLE 17
access to records
A. The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.
B. Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.
C. For purposes of this Article:
1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.
2. “Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in‑house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.
3. “Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.
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ARTICLE 18
confidentiality
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:
1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;
2. have been rightfully received from a third person without obligation of confidentiality;
3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality; or
4. is or has been independently acquired or developed by the Reinsurer without violating any of its obligations under this Article.
B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except:
1. when required by retrocessionaires as respects business ceded to this Contract;
2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition;
3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business;
4. when required by attorneys or arbitrators in connection with an actual or potential dispute hereunder; or
5. when necessary for the performance of services by advisors, affiliates and subsidiaries, contractors, consultants or external service providers engaged by the Reinsurer on the basis that no Confidential Information shall be disclosed by the Reinsurer to any third party in competition with the Company with regard to the lines of business subject to this Contract;
provided that the Reinsurer advises the parties referred to under subparagraphs B(1), B(3), B(4) and B(5) herein of the proprietary and confidential nature of the confidential information and their obligation to maintain its confidentiality. Further, the Reinsurer agrees
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not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract or not related to the underwriting, management or administrative obligations related to this Contract and the Reinsurer’s own internal operations, risk management, retrocession and portfolio arrangements.
C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
D. The Reinsurer may store Confidential Information in its group-wide IT systems to use for ordinary business purposes such as administration, risk management, governance, claims handling, business analysis, auditing and accounting purposes in support of its business operations. Further, the Reinsurer represents that anyone having legal access to its respective group-wide IT systems is legally bound and has internal controls in place to hold all information that is being made available through these systems in strict confidence.
E. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
ARTICLE 19
Errors and Omissions
Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.
ARTICLE 20
insolvency
A. If more than one company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.
B. In the event of the insolvency of the Company, this coverage shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution
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because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. 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 Company indicating the Policy or bond reinsured, which claim 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C. 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 this reinsurance Contract as though such expense had been incurred by the Company.
ARTICLE 21
RUN-OFF REINSURER
A. “Run-off Reinsurer” means any Subscribing Reinsurer that:
1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or
2. has ceased reinsurance underwriting operations; or
3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or
4. engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or
5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(3) and A(5) above.
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B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:
1. Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.
2. The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.
3. The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.
4. The provisions of the Arbitration Article shall not apply.
C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.
ARTICLE 22
arbitration
A. Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10
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days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.
C. If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.
D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.
E. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.
F. The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.
G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.
ARTICLE 23
Expedited Arbitration
A. Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS).
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B. Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.
C. Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.
ARTICLE 24
service of suit
A. This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.
B. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
C. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.
D. Service of process in such suit may be made upon:
1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;
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2. as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.
The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.
E. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.
ARTICLE 25
GOVERNING LAW
This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply.
ARTICLE 26
Entire Agreement
This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. However, this Article shall not be construed as limiting the admissibility of evidence regarding the formation, interpretation, purpose or intent of this Contract.
ARTICLE 27
NON-WAIVER
The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.
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ARTICLE 28
Sanctions Limitation Clause
No Reinsurer shall be deemed to provide cover and no Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Reinsurer to any sanction, prohibition or restriction under United Nations’ resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
ARTICLE 29
Intermediary
Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expenses, salvages, and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
ARTICLE 30
mode of execution
A. This Contract may be executed by:
1. an original written ink signature of paper documents;
2. an exchange of facsimile copies showing the original written ink signature of paper documents;
3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.
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IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s), who also confirms the Company’s review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract;
On this _____ day of __________, in the year of 20___.
Typtap insurance company
Signature: Title:
Print Name:
Reinstatement Premium Protection Reinsurance Contract
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0BWP0BNL – Tower 2 22 of NUMPAGES 25
And on this _____ day of __________, in the year of 20___.
Homeowners Choice Property & Casualty
Insurance Company, INC.
Signature: Title:
Print Name:
Reinstatement Premium Protection Reinsurance Contract
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TRUST AGREEMENT REQUIREMENTS CLAUSE
A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;
2. Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;
3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;
4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and
5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.
B. If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.
2. Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.
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3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.
4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.
C. If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean the individual ceding insurer’s domestic regulator.
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---
## EX-10.7
SEC source: [hci-ex10_7.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_7.htm)
EXHIBIT 10.7 Property Catastrophe Excess of Loss Reinsurance ContracT
issued to
Typtap insurance company
Ocala, Florida
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0TYV – Tower 2 1 of NUMPAGES 3
**PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Preamble | 4 |
| Business Covered | 4 |
| Retention and Limit | 4 |
| Florida Hurricane Catastrophe Fund | 5 |
| Term | 6 |
| Special Termination | 6 |
| Territory | 8 |
| Exclusions | 8 |
| Special Acceptance | 10 |
| Premium | 10 |
| Reinstatement | 12 |
| Definitions | 12 |
| Extra Contractual Obligations/Excess of Policy Limits | 15 |
| Net Retained Liability | 16 |
| Original Conditions | 17 |
| No Third Party Rights | 17 |
| Notice of Loss and Loss Settlements | 17 |
| Late Payments | 18 |
| Offset | 19 |
| Currency | 19 |
| Unauthorized Reinsurance | 19 |
| Taxes | 22 |
| Access to Records | 22 |
| Confidentiality | 23 |
| Indemnification and Errors and Omissions | 25 |
| Insolvency | 25 |
| Run-Off Reinsurer | 26 |
| Arbitration | 28 |
| Expedited Arbitration | 29 |
| Service of Suit | 29 |
| Governing Law | 30 |
| Entire Agreement | 30 |
| Non-Waiver | 31 |
| Sanctions Limitation Clause | 31 |
| Intermediary | 31 |
| Mode of Execution | 31 |
| Company Signing Block | 33 |
Effective: June 1, 2026 DOC: May 27, 2026
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**PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS**
| Line item | Page |
| --- | --- |
| Pools, Associations & Syndicates Exclusions Clause | 35 |
| Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A. | 38 |
| Terrorism Exclusion | 40 |
| Communicable Disease Exclusion (Property Treaty Reinsurance) | 41 |
| Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance) | 42 |
| Trust Agreement Requirements Clause | 43 |
Effective: June 1, 2026 DOC: May 27, 2026
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PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(the “Contract”)
issued to
Typtap insurance company
Ocala, Florida
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
Tampa, Florida
including any and/or all companies that are or may hereafter become affiliated therewith
(collectively, the “Company”)
by
THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT
(the “Reinsurer”)
ARTICLE 1
BUSINESS COVERED
This Contract is to indemnify the Company in respect of its net excess liability as a result of any
loss or losses which may occur during the term of this Contract under any Policies in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Company as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms and conditions herein contained.
ARTICLE 2
Retention and Limit
A. For each Layer of reinsurance provided hereunder, the Reinsurer shall be liable in respect of each Loss Occurrence for the Ultimate Net Loss over and above the initial Ultimate Net Loss retention as set forth in the schedule below for the Loss Occurrence, subject to a limit of liability to the Reinsurer for each such Loss Occurrence, and subject further to a limit of
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0BWP0TYV – Tower 2 4 of NUMPAGES 3
liability for all Loss Occurrences commencing during the term of this Contract, as set forth below:
**RETENTION AND LIMIT SCHEDULE**
| Layer | Company’s Retention / Ultimate Net Loss in respect of each Loss Occurrence | Reinsurer’s Limit of Liability / Ultimate Net Loss in respect of each Loss Occurrence | Reinsurer’s Limit of Liability / Ultimate Net Loss in respect of all Loss Occurrences during the term of this Contract |
| --- | --- | --- | --- |
| Second Layer | $50,000,000 | $40,000,000 | $80,000,000 |
| Third Layer | $90,000,000 | $180,000,000 | $360,000,000 |
| Fourth Layer | $270,000,000 | $110,000,000 | $220,000,000 |
| Fifth Layer | $380,000,000 | $225,000,000 | $450,000,000 |
B. No Loss Occurrence shall be covered hereunder unless it involves two or more risks subject to this Contract. The Company shall be the sole judge of what constitutes one risk for purposes of this Contract.
ARTICLE 3
FLORIDA HURRICANE CATASTROPHE FUND
A. As respects Loss Occurrences subject to this Contract, any loss reimbursement recoverable by the Company under the Florida Hurricane Catastrophe Fund (FHCF) shall be deducted in determining Ultimate Net Loss under this Contract, subject to the following:
1. The full reimbursement amount due from the FHCF for coverage under the Mandatory Layer, based on statutory limits of coverage as of June 1, shall be deemed recovered by the Company, whether or not actually received from the FHCF and whether or not reduced because of the FHCF’s inability to pay.
2. For purposes of allocating recoveries from the FHCF with respect to each Loss Occurrence, only amounts recoverable by applying the pay-out and retention multiples for the FHCF prior to any reduction in retention due to multiple Loss Occurrences in the same annual period shall be included in calculating the deduction from Ultimate Net Loss.
3. If the Company’s aggregate limit of FHCF reimbursement coverage is exhausted from Loss Occurrences commencing during the term of this Contract, and the FHCF does not designate the portion of said limit allocable to each Loss Occurrence, the total FHCF reimbursement received shall be allocated to each individual Loss Occurrence in the proportion that the Company’s losses in that Loss Occurrence bear to the Company’s total losses arising out of all Loss Occurrences to which the reimbursement applies.
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4. For purposes of loss recoveries under this Contract prior to the final determination of the Company’s retention and limit under the FHCF; the FHCF coverage shall be calculated using the Company’s respective “Projected Payout Multiple” under the FHCF. Upon determination of the Company’s retention and limit under the FHCF, losses will be adjusted, recognizing any adjustment to the “Projected Payout Multiple” caused by a change in the Aggregate Mandatory FHCF Premium or any other adjustments as required by statute to determine the final FHCF layer, but disregarding any change due to a decrease in the statutory limit.
B. Any FHCF reimbursement premiums paid by the Company for FHCF layers that inure to the benefit of this Contract shall be deemed to be premiums paid for inuring reinsurance.
C. The Company has opted for 45% coverage selections from the FHCF.
ARTICLE 4
Term
This Contract shall take effect at 12:01 a.m., Eastern Time, June 1, 2026, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2027, applying to Loss Occurrences commencing during the term of this Contract.
ARTICLE 5
SPECIAL TERMINATION
A. The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event of any of the following circumstances:
1. The Subscribing Reinsurer ceases underwriting operations.
2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.
3. The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.
4. The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of
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the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.
6. The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.
7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.
8. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.
9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
10. The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.
11. The Subscribing Reinsurer engages in the process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time.
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated and the country in which the Subscribing Reinsurer is incorporated or has its principal office, as a result of war, currency regulation, or any circumstance arising out of political, financial or economic emergency.
13. The Subscribing Reinsurer resides or is incorporated in countries where any regulation, whether by decree or otherwise, be enforced by the government, except for any sanctions regime, which shall restrict or prohibit its performance of any or all of its obligations under this Contract or any contract in consideration of which this Contract has been completed.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto
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shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(8) and A(9) above.
B. Termination shall be effected on a cut-off basis and the Subscribing Reinsurer shall have no liability for Loss Occurrences commencing after the date of termination. The reinsurance premium due the Subscribing Reinsurer hereunder (including any minimum reinsurance premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess reinsurance premium received. Reinstatement premium, if any, shall be calculated based on the Subscribing Reinsurer’s reinsurance premium earned during the period of the Subscribing Reinsurer’s participation hereon.
C. Additionally, in the event of any of the circumstances listed in paragraph A of this Article, the Company shall have the option to commute the Subscribing Reinsurer’s liability for losses on Policies covered by this Contract. In the event the Company and the Subscribing Reinsurer cannot agree on the commutation amount, they shall appoint an actuary and/or appraiser to assess such amount and shall share equally any expense of the actuary and/or appraiser. If the Company and the Subscribing Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer’s participation under this Contract.
D. The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.
ARTICLE 6
Territory
The territorial limits of this Contract shall be identical with those of the Company’s Policies.
ARTICLE 7
Exclusions
A. This Contract shall not apply to and specifically excludes:
1. Flood when written as such.
2. Earthquake for standalone Policies where earthquake is the only named peril.
3. Hail damage to an insured’s growing or standing crops.
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4. Reinsurance assumed by the Company under obligatory reinsurance agreements, except intercompany reinsurance between the Company and its affiliates and reinsurance where the Policies involved are to be re-underwritten in accordance with the underwriting standards of the Company and reissued as Policies of the Company in due course.
5. Pools, Associations & Syndicates, per the attached exclusion.
6. Liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, that provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
7. Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority, but not excluding loss or damage that would be covered under a standard form of Policy containing a standard war exclusion clause.
8. Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.
9. Terrorism as defined in the attached Terrorism Exclusion.
10. Mold unless directly resulting from an otherwise covered peril.
11. Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original Policy.
12. Financial guarantee and insolvency.
13. Loss or damage to overhead transmission and distribution lines, including supporting structures, of electrical companies, telephone companies, and cable companies. This exclusion shall not apply, however, to transmission and distribution lines and their supporting structures located on the property of any original insured or within 1,000 feet thereof.
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14. Losses excluded by the attached Communicable Disease Exclusion (Property Treaty Reinsurance).
15. Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance).
16. Policies written by Homeowners Choice Property & Casualty Insurance Company, Inc. covering risks located in the state of Florida, as well as policies written by Tailrow Insurance Exchange and Condo Owners Reciprocal Exchange.
B. With the exception of subparagraphs A(6) through A(9), A(12), A(14) and A(15) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Company's Policy, any amount of loss for which the Company is liable because of such invalidation will not be excluded hereunder.
C. With the exception of subparagraphs A(6) through A(9), A(12), A(14) and A(15) above, if the Company inadvertently issues a Policy falling within the scope of one or more of the exclusions, such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the required notice of cancellation within 30 days after a member of the executive or managerial staff at the Company’s home office having underwriting authority in the class of business involved becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel.
ARTICLE 8
SPECIAL ACCEPTANCE
Business that is not within the scope of this Contract may be submitted to the Reinsurer for special acceptance hereunder, and such business, if accepted by the Reinsurer shall be covered hereunder, subject to the terms and conditions of this Contract, except as modified by the special acceptance. The Reinsurer shall be deemed to have accepted a risk, if it has not responded within five business days after receiving the underwriting information on such risk. Any renewal of a special acceptance agreed to for a predecessor contract to this Contract, shall automatically be covered hereunder.
ARTICLE 9
Premium
A. The Company shall pay the Reinsurer a Deposit Premium in accordance with the schedule set forth below. The reinsurance premium to be paid to the Reinsurer for the reinsurance provided under each Layer shall be calculated at the Final Adjusted Premium Rates set out
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below multiplied by the Company’s final Total Insured Value, subject to the applicable Minimum Premium stated below:
PREMIUM SCHEDULE
Layer Final Adjusted Premium Rate Deposit
Premium Minimum
Premium
Second Layer [REDACTED] [REDACTED] [REDACTED]
Third Layer [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED]
B. The Deposit Premiums set forth in paragraph A above shall be payable to the Reinsurer by the Company in installments as follows:
DEPOSIT INSTALLMENT SCHEDULE
Layer June 1, 2026 September 1, 2026 January 1, 2027 April 1, 2027
Second Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Third Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fourth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Fifth Layer [REDACTED] [REDACTED] [REDACTED] [REDACTED]
C. Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. This final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate for each Layer as stated in paragraph A above. Should this amount be greater than or equal to 95% and less than or equal to 105% of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed 105% of the Deposit Premium paid in accordance with paragraph A above, the Company shall immediately pay the Reinsurer the difference in excess of 105% of the Deposit Premium. Should the amount so calculated be less than 95% of the Deposit Premium paid in accordance with paragraph A of this Article, the Reinsurer shall immediately pay the Company the difference below 95% of the Deposit Premium, subject to the Minimum Premium as set forth above.
D. “Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2026 for business covered hereunder.
E. The estimated Total Insured Value is $68,406,708,728.
F. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.
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ARTICLE 10
Reinstatement
A. Loss payments under any Layer of this Contract shall reduce the limit of coverage afforded by the amounts paid, but the limit of coverage shall be reinstated from the time of the occurrence of the loss, and for each amount so reinstated, the Company agrees to pay, simultaneously with the Reinsurer’s loss payment, an additional premium in accordance with the following provisions:
1. As respects the Second Layer, the Company shall pay no additional premium for reinstatements for the term of this Contract.
2. As respects the Third, Fourth and Fifth Layers, the Company agrees to pay an additional premium calculated at pro rata of the Reinsurer’s premium for the applicable layer(s), for the term of this Contract, being pro rata only as to the fraction of the Reinsurer’s limit of liability hereunder (i.e., the fraction of the Reinsurer’s limit of liability for each Loss Occurrence as set forth for the Layer in the Retention and Limit Article) so reinstated.
B. Nevertheless, the Reinsurer’s liability under the applicable layer(s) shall not exceed such limit(s) in respect of any one Loss Occurrence, nor the applicable limit(s) in respect of all Loss Occurrences commencing during the term of this Contract, as set forth in the Retention and Limit Article.
C. If at the time of a loss settlement hereon the reinsurance premium, as calculated in accordance with the Premium Article, is unknown, the above calculation of reinstatement premium shall be based upon the Deposit Premium, subject to adjustment when the reinsurance premium is finally established.
ARTICLE 11
Definitions
A. 1. “Ultimate Net Loss” means the actual loss paid by the Company or which the Company becomes liable to pay, such loss to include Loss Adjustment Expense, 100% of any Extra Contractual Obligation and 100% of any Loss in Excess of Policy Limits as defined in the Extra Contractual Obligations/Excess of Policy Limits Article. In no event, however, shall more than 25% of “Ultimate Net Loss” for any one Loss Occurrence be comprised of Extra Contractual Obligations and Loss in Excess of Policy Limits.
2. Salvages and all recoveries (including amounts due from all reinsurances that inure to the benefit of this Contract, whether recovered or not), shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.
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3. All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.
4. The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained a release, and/or the Company has accepted a proof of loss, and/or the Company has made a commitment to pay, and/or the Company has scheduled the payment of a loss.
5. Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.
B. “Loss Adjustment Expense” means costs and expenses incurred by the Company in connection with the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim or loss, or alleged loss, including but not limited to:
1. court costs;
2. costs of supersedeas and appeal bonds;
3. monitoring counsel expenses;
4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;
5. post-judgment interest;
6. pre-judgment interest, unless included as part of an award or judgment;
7. a pro rata share of salaries and expenses of Company field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; and
8. subrogation, salvage and recovery expenses.
“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph B(7) above, and office and other overhead expenses.
C. 1. “Loss Occurrence” means the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event. However, the duration and extent of any one “Loss Occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term “Loss Occurrence” shall be further defined as follows:
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a. As regards any “Named Storm,” all individual losses sustained by the Company arising out of and directly occasioned by such “Named Storm,” without regard to the limitations of duration and extent set forth above. “Named Storm” means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a “Named Storm” shall be considered part of that “Named Storm,” once it has merged. A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.
b. As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage other than “Named Storm,” all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event.
c. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses that occur beyond such 96 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period.
d. As regards earthquake and fire following directly occasioned by the earthquake, those earthquake losses and individual fire losses that commence during the period of 168 consecutive hours may be included in the Company’s “Loss Occurrence.”
e. As regards any related weather conditions involving snow, sleet, freezing rain, freeze, ice, winter weather, and wind losses related to such conditions, all individual losses sustained by the Company, that occur during any period of 168 consecutive hours arising out of and directly occasioned by the same event.
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f. As regards firestorms, brush fires and other fires or series of fires, irrespective of origin (except for fires covered in subparagraphs C(1)(c) and C(1)(d) above) which spread through trees, grassland or other vegetation, all individual losses sustained by the Company occurring during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company may be included in the Company’s “Loss Occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “Loss Occurrence.”
2. Except as provided in subparagraph C(1)(a) above:
a. The Company may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
b. Only one period of consecutive hours shall apply with respect to one event, except that, as respects those “Loss Occurrences” referred to in subparagraph C(1)(c) above, if the disaster, accident or loss occasioned by the event is of greater duration than 96 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “Loss Occurrences” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
3. Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.” Furthermore, all losses arising from an event involving a combination of losses described in subparagraphs C(1)(a) and C(1)(b) may be considered as having arisen from one “Loss Occurrence.” Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils, and, except as respects those “Loss Occurrences” involving a “Named Storm” referred to in subparagraph C(1)(a) above, no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours.
D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.
ARTICLE 12
EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS
A. This Contract shall cover Extra Contractual Obligations, as provided in the definition of Ultimate Net Loss. “Extra Contractual Obligations” shall be defined as those liabilities not
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covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.
B. This Contract shall cover Loss in Excess of Policy Limits, as provided in the definition of Ultimate Net Loss. “Loss in Excess of Policy Limits” shall be defined as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action. For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “Loss” shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original Policy.
C. An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s Policy, and shall constitute part of the original loss.
D. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.
E. However, this Article shall not apply where the loss has been incurred due to final legal adjudication of fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.
F. In no event shall coverage be provided to the extent not permitted under law.
ARTICLE 13
NET RETAINED LIABILITY
A. This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).
B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
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ARTICLE 14
Original Conditions
All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
ARTICLE 15
NO THIRD PARTY RIGHTS
This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract except as may be expressly provided otherwise herein.
ARTICLE 16
Notice of Loss and Loss Settlements
A. The Company shall advise the Reinsurer promptly if paid and estimated Ultimate Net Loss is in excess of 75% of the Company’s retention, or if, in the opinion of the Company, such Ultimate Net Loss may result in a claim hereunder. Thereafter, the Company shall advise the Reinsurer, at least monthly, of all subsequent developments thereto that may materially affect the position of the Reinsurer.
B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.
C. As respects losses subject to this Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, and any Extra Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer. The Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement immediately upon receipt of reasonable evidence of the amount paid by the Company or that the Company estimates it will pay within the next 14 days. Within 30 days after receipt of the Reinsurer’s payment, the Company shall report to the Reinsurer the Reinsurer’s payment, minus the Reinsurer’s share of losses subject to this Contract that the Company has paid, or become liable to pay, as of the date of the report. Any positive difference shall be remitted to the Reinsurer with the Company’s report.
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ARTICLE 17
LATE PAYMENTS
A. In the event any payment due either party is not received by the Intermediary by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:
1. the number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times
3. the amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.
B. The due date shall, for purposes of this Article, be determined as follows:
1. Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.
2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such reinstatement premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.
C. If the information contained in the Company’s demand for payment is insufficient or not in accordance with the conditions of this Contract, then within 30 days the Reinsurer shall request from the Company all additional information necessary to validate its claim and the payment due date as defined in paragraph B shall be deemed to be the date upon which the Reinsurer received the requested additional information. This paragraph is only for the purpose of establishing when a payment is overdue, and shall not alter the provisions of the Notice of Loss and Loss Settlements Article or other pertinent contractual stipulations.
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D. In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.
E. Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.
ARTICLE 18
OFFSET
Each party hereto shall have, and may exercise at any time and from time to time, the right to offset any and all balances due from a party to the other arising under this Contract. In the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of any applicable law governing offset entitlement.
ARTICLE 19
Currency
A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.
B. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books.
ARTICLE 20
Unauthorized Reinsurance
A. This Article applies:
1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or
2. to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.
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B. The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:
1. unearned premium (if applicable);
2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;
3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;
4. losses incurred but not reported and Loss Adjustment Expense relating thereto;
5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.
C. The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.
D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto. When funding by an LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.
E. The Reinsurer and the Company agree that any funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:
1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;
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2. to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);
3. to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;
4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.
F. If the amount drawn by the Company is in excess of the actual amount required for E(1) or E(3), or in the case of E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.
G. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.
H. At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:
1. If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.
2. If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another
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method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.
ARTICLE 21
TAXES
A. In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.
B. 1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.
2. In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.
ARTICLE 22
ACCESS TO RECORDS
A. The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.
B. Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without
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causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.
C. For purposes of this Article:
1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.
2. “Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in‑house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.
3. “Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.
ARTICLE 23
CONFIDENTIALITY
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:
1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;
2. have been rightfully received from a third person without obligation of confidentiality;
3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality; or
4. is or has been independently acquired or developed by the Reinsurer without violating any of its obligations under this Article.
B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except:
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1. when required by retrocessionaires as respects business ceded to this Contract;
2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition;
3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business;
4. when required by attorneys or arbitrators in connection with an actual or potential dispute hereunder; or
5. when necessary for the performance of services by advisors, affiliates and subsidiaries, contractors, consultants or external service providers engaged by the Reinsurer on the basis that no Confidential Information shall be disclosed by the Reinsurer to any third party in competition with the Company with regard to the lines of business subject to this Contract;
provided that the Reinsurer advises the parties referred to under subparagraphs B(1), B(3), B(4) and B(5) herein of the proprietary and confidential nature of the confidential information and their obligation to maintain its confidentiality. Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract or not related to the underwriting, management or administrative obligations related to this Contract and the Reinsurer’s own internal operations, risk management, retrocession and portfolio arrangements.
C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
D. The Reinsurer may store Confidential Information in its group-wide IT systems to use for ordinary business purposes such as administration, risk management, governance, claims handling, business analysis, auditing and accounting purposes in support of its business operations. Further, the Reinsurer represents that anyone having legal access to its respective group-wide IT systems is legally bound and has internal controls in place to hold all information that is being made available through these systems in strict confidence.
E. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
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ARTICLE 24
Indemnification and Errors and Omissions
A. The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge as to:
1. what shall constitute a claim or loss covered under any Policy;
2. the Company’s liability thereunder; and
3. the amount or amounts that it shall be proper for the Company to pay thereunder.
B. The Reinsurer shall be bound by the judgment of the Company, subject to the terms and conditions of this Contract, as to the obligation(s) and liability(ies) of the Company under any Policy.
C. Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.
D. Nothing in this Article shall be construed to override any of the other terms and conditions of this Contract.
ARTICLE 25
Insolvency
A. If more than one reinsured company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.
B. 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, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. 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 Company indicating the Policy or bond reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the
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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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C. 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 this reinsurance Contract as though such expense had been incurred by the Company.
D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Reinsurer to the Company or to its liquidator, receiver, conservator or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New York Insurance Law, provided the conditions of 1114(c) of such law have been met, if New York law applies) or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, or (2) where the Reinsurer, with the consent of the direct insured or insureds, has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of assumption on New York risks by the Superintendent of Financial Services of the State of New York, or with the prior approval of such other regulatory authority as may be applicable, is entirely released from its obligation and the Reinsurer shall pay any loss directly to payees under such Policy.
ARTICLE 26
RUN-OFF REINSURER
A. “Run-off Reinsurer” means any Subscribing Reinsurer that:
1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or
2. has ceased reinsurance underwriting operations; or
3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or
4. engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant
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to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or
5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.
Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlement procedures under Lloyd’s Claims Lead Arrangements or any revision or replacement thereto shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs A(3) and A(5) above.
B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:
1. Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.
2. The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.
3. The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.
4. The provisions of the Arbitration Article shall not apply.
C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.
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ARTICLE 27
Arbitration
A. Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.
C. If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.
D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.
E. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.
F. The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.
G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and
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expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.
ARTICLE 28
Expedited Arbitration
A. Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS).
B. Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.
C. Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.
ARTICLE 29
SERVICE OF SUIT
A. This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.
B. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
C. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court
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is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.
D. Service of process in such suit may be made upon:
1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;
2. as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.
The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.
E. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.
ARTICLE 30
GOVERNING LAW
This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply.
ARTICLE 31
ENTIRE AGREEMENT
This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. However, this Article shall not be construed as limiting the admissibility of evidence regarding the formation, interpretation, purpose or intent of this Contract.
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ARTICLE 32
NON-WAIVER
The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.
ARTICLE 33
Sanctions Limitation Clause
No Reinsurer shall be deemed to provide cover and no Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Reinsurer to any sanction, prohibition or restriction under United Nations’ resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
ARTICLE 34
Intermediary
Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expenses, salvages, and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
ARTICLE 35
MODE OF EXECUTION
A. This Contract may be executed by:
1. an original written ink signature of paper documents;
2. an exchange of facsimile copies showing the original written ink signature of paper documents;
3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing,
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is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.
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IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s), who also confirms the Company’s review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract;
On this _____ day of __________, in the year of 20___.
Typtap insurance company
Signature: Title:
Print Name:
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
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And on this _____ day of __________, in the year of 20___.
Homeowners Choice Property & Casualty
Insurance Company, INC.
Signature: Title:
Print Name:
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
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POOLS, ASSOCIATIONS & SYNDICATES EXCLUSIONS CLAUSE
Section A:
This Contract excludes:
a. All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.
b. Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property, whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.
Section B:
1. This Contract excludes business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in, any Pool, Association or Syndicate, whether by way of insurance or reinsurance, formed for the purpose of writing any of the following:
Oil, Gas or Petro-Chemical Plants
Oil or Gas Drilling Rigs and/or
Aviation Risks
2. The exclusion under paragraph 1 of this Section B does not apply:
a. Where the Total Insured Value over all interests of the risk in question is less than $250,000,000.
b. To interests traditionally underwritten as Inland Marine and/or Stock and/or Contents written on a Blanket basis.
c. To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under subparagraph (a).
Section C:
1. Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in Residual Market Mechanisms, including but not limited to the following, for all perils otherwise protected hereunder shall not be excluded herefrom:
a. So-called “Beach and Windstorm Plans” and so-called “Coastal Pools”;
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b. All “FAIR Plan” and “Rural Risk Plan” business;
c. Louisiana Citizens Property Insurance Corporation;
d. California Earthquake Authority (“CEA”) or any similar entity.
Notwithstanding the above, assessments related to the Florida Hurricane Catastrophe Fund, Reinsurance to Assist Policyholders, and Citizens Property Insurance Corporation (Florida) shall be excluded hereunder.
2. However, this reinsurance does not include any increase in such liability resulting from:
a. The inability of any other participant in such Residual Market Mechanisms to meet its liability;
b. Any claim against a Residual Market Mechanism or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Exclusions Article);
c. Any assessment or surcharge levied on the policyholder and therefore not a liability of the Company;
d. The Company’s initial capital contribution to the CEA;
e. Any assessments, other than interim and regular assessments, from a Residual Market Mechanism included in subparagraph 1(c) above;
f. Any expenditure to purchase or retire bonds.
3. The Company may include in Ultimate Net Loss for any Loss Occurrence covered hereunder only the liability attributable to that Loss Occurrence. If the relevant entity does not specify what portion of an assessment is attributable to each Loss Occurrence, the Company may include in Ultimate Net Loss in respect of each Loss Occurrence a percentage of the Company’s assessments from the relevant entity related to the calendar year in which the Loss Occurrence commenced, regardless of when assessed, such percentage to be determined by dividing the relevant entity’s losses arising from the Loss Occurrence by its total losses for the calendar year.
4. The Company will deduct from Ultimate Net Loss amounts received as recoupment of any assessment that has been included in the Ultimate Net Loss, provided the recoupment is directly allocable to the assessment (“itemized recoupment”). The Company shall use commercially reasonable efforts to recoup such assessment. Any amount received as an itemized recoupment of any assessment (whether under this Contract or any predecessor contract), and therefore deductible from Ultimate Net Loss, shall not be included in the subject premium of this Contract.
Effective: June 1, 2026 DOC: May 27, 2026
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However, if a state levies assessments but does not allow itemized recoupment from policyholders, instead allowing the Company to file an overall increased rate, any such premium increased thereby shall not be deemed to be a recoupment that is deductible from Ultimate Net Loss. Any recoupment received as part of a general premium rate increase, not specifically itemized, shall be included as part of the subject premium of this Contract or a successor contract, as applicable.
NOTES: Wherever used herein the terms:
“Company” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Contract” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurer” shall be understood to mean “Reinsurer,” “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.
Effective: June 1, 2026 DOC: May 27, 2026
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.
1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the site, or
II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or
III. Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material”, and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate
(a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
Effective: June 1, 2026 DOC: May 27, 2026
0BWP0TYV – Tower 2 38 of NUMPAGES 3
5. It is understood and agreed that this clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
12/12/57
NMA 1119
NOTES: Wherever used herein the terms:
“Reassured” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.
“Agreement” shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term is used to designate the attached reinsurance document.
“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.
Effective: June 1, 2026 DOC: May 27, 2026
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TERRORISM EXCLUSION
A. Notwithstanding any provision to the contrary within this Contract or any endorsement thereto, it is agreed that this Contract excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any Act of Terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
B. An “Act of Terrorism” includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:
a. involves violence against one or more persons; or
b. involves damage to property; or
c. endangers life other than that of the person committing the action; or
d. creates a risk to health or safety of the public or a section of the public; or
e. is designed to interfere with or to disrupt an electronic system.
C. This Contract also excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any Act of Terrorism.
D. Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines, this Contract shall pay actual loss or damage (but not related cost or expense) caused by any Act of Terrorism, provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, radiological or nuclear pollution or contamination.
Effective: June 1, 2026 DOC: May 27, 2026
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Communicable Disease Exclusion
(PROPERTY TREATY Reinsurance)
1. Notwithstanding any provision to the contrary within this reinsurance agreement, this reinsurance agreement excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.
Definitions
3. Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:
3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and
3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and
3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.
4. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5503
15 May 2020
Effective: June 1, 2026 DOC: May 27, 2026
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CYBER LOSS LIMITED EXCLUSION CLAUSE (PROPERTY TREATY REINSURANCE)
1. Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:
1.2. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;
1.3. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly occasioned by any of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow
Definitions
3. Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.
4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.
5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5410
06 March 2020
Effective: June 1, 2026 DOC: May 27, 2026
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TRUST AGREEMENT REQUIREMENTS CLAUSE
A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;
2. Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;
3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;
4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and
5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.
B. If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:
1. Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.
2. Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.
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3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.
4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.
C. If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean the individual ceding insurer’s domestic regulator.
Effective: June 1, 2026 DOC: May 27, 2026
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---
## EX-10.8
SEC source: [hci-ex10_8.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_8.htm)
STATE BOARD OF ADMINISTRATION OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100 TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300 RON DESANTIS GOVERNOR CHAIR
BLAISE INGOGLIA CHIEF FINANCIAL OFFICER
JAMES UTHMEIER ATTORNEY GENERAL
CHRIS SPENCER EXECUTIVE DIRECTOR
This Contract is between: Typtap Insurance Company (“Company”) EXHIBIT 10.8
NAIC # 15885
and
REIMBURSEMENT CONTRACT
Coverage Effective: June 1, 2026 (“Contract”)
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)
PREAMBLE
Section 215.555, Florida Statutes, creates the FHCF and directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Appendix A, is subject to Section 215.555, Florida Statutes, and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.
In consideration of the promises set forth in this Contract, the parties agree as follows:
ARTICLE I - SCOPE OF AGREEMENT
As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each
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Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.
ARTICLE II - PARTIES TO THE CONTRACT
This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies
under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any insured of the Company, any claimant against an insured of the Company, or any other third party have any rights under this Contract, except as provided in Article XVI. The SBA will disburse funds only to the Company, except as provided for in Article XVI. The Company shall not, without the prior approval of the Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.
ARTICLE III - TERM; EXECUTION
(1)
Term
This Contract applies to Losses from Covered Events which commence during the period from
12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 midnight, Eastern Time, May 31, 2027 (the “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.
(2)
Mandatory Nature of this Contract
(a)
Statutory Requirement
This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in
fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.
(b)
Duty to Provide a Fully and Timely Executed Copy of this Contract to the Administrator The Company must provide a fully executed copy of this Contract in electronic form to the
Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.
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Rule 19-8.010 F.A.C.
Docusign Envelope ID: 23AFA1AA-4735-47A5-BD91-749CDBF5493E
(3)
Contract Deemed Executed Notwithstanding Execution Errors
Except with respect to New Participants, this Contract is deemed to have been executed by the Company as of the March 1 statutory deadline, notwithstanding the fact that the Coverage Level election in Article XXI(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the Contract on the part of the Company may have lacked the requisite authority. With respect to New Participants, this Contract is deemed to have been executed by the New Participant as of the date on which the New Participant began writing Covered Policies; coverage shall be determined as provided in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or if the executed Contract includes an invalid Coverage Level election under Article XXI, the Company’s Coverage Level shall be deemed as follows:
(a)
For a Company that is a member of a National Association of Insurance Commissioners (NAIC) group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the Administrator, the Coverage Level from the prior Contract Year shall be deemed.
(b)
For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.
(c)
For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.
(d)
For a New Participant that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45 percent, 75 percent, or 90 percent Coverage Levels may be selected if the Administrator receives an executed Contract within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45 percent Coverage Level shall be deemed to have been selected.
ARTICLE IV - LIABILITY OF THE FHCF
(1)
The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company’s Limit.
(2)
Section 215.555(4)(c)1., Florida Statutes, provides that the obligation of the FHCF with respect to all Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of the FHCF up to a specified dollar limit.
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(3)
In order to assure that reimbursements do not exceed the statutory limit of the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
(4)
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to further reimbursements.
ARTICLE V - DEFINITIONS
As used in this Contract, the following words and phrases are defined to mean:
(1)
Actual Claims-Paying Capacity of the FHCF
This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any
reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds under Section 215.555(6), Florida Statutes.
(2)
Actuarially Indicated
This term means an amount determined according to principles of actuarial science to be adequate, but
not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including additional amounts if needed to pay debt service on revenue bonds and to provide required debt service coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined according to principles of actuarial science to reflect each insurer’s relative exposure to hurricane losses.
(3)
Additional Living Expense (ALE)
ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential
Structure or its contents based on how the coverage is provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF.
(4)
Administrator
This term means the entity the SBA contracts with to perform administrative services associated with
the operation of the FHCF.
(5)
Authorized Insurer
This term is defined in Section 624.09(1), Florida Statutes.
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(6)
Balance of the Fund as of December 31 or Fund Balance
This term means the amount of assets available to pay claims resulting from Covered Events which
occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or proceeds from other financing mechanisms.
(7)
Borrowing Capacity
This term means the amount of funds available or which can be raised by the issuance of revenue bonds
or through other financing mechanisms, less bond issuance expenses and reserves.
(8)
Citizens Property Insurance Corporation (Citizens)
This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida
Statutes.
(9)
Commutation
This term means the estimation, payment, and complete discharge of all future obligations for Losses,
regardless of future loss development. The final Commutation shall constitute a complete and final release of all obligations of the SBA with respect to Losses. Commutation may be per Covered Event or by Contract Year as determined by the FHCF.
(10)
Covered Event
This term means any one storm declared to be a hurricane by the National Hurricane Center which
causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.
(11)
Coverage Level
This term means the level of reimbursement (90 percent, 75 percent, or 45 percent), as elected by the
Company under Article XXI or deemed under Article III(3), which is used in determining reimbursement under Article IV.
(12)
Covered Policy
(a)
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean
only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
(b)
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to
1.
the coverage amount for the dwelling in place under the lapsed homeowner’s policy,
2.
the coverage amount that the homeowner has been notified of by the collateral protection insurer, or
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3. the coverage amount that the homeowner requests from the collateral protection insurer,
if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.
(c)
A Company will be deemed to be able to accurately report data if the Company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.
(d)
Covered Policy does not include any policy or exposure excluded under Article VI.
(13)
Deductible Buy-Back Policy
This term means a specific policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a policy issued by another insurer.
(14)
Estimated Claims-Paying Capacity of the FHCF
This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year,
plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.
(15)
Excess Policy
This term means, for the purposes of this Contract, a policy that provides insurance protection for large
commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.
(16)
Insurer Group
For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group
means the group designation assigned by the NAIC for regulatory purposes. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group.
(17)
Limit
This term means the maximum amount that a Company may recover under this Contract, calculated by
multiplying the Company’s Reimbursement Premium by the Payout Multiple.
(18)
Loss
This term means an incurred loss under a Covered Policy from a Covered Event, including Additional
Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does not include allocated or unallocated loss adjustment expenses or any item for which this Contract does not provide reimbursement pursuant to the exclusions in Article VI.
(19)
Loss Adjustment Expense Allowance
(a) The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under
this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
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(b) The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.
(20)
New Participant
This term means a Company that begins writing Covered Policies on or after the beginning of the
Contract Year. A Company that removes Covered Policies from Citizens or an Unsound Insurer pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.
(21)
Payout Multiple
This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes,
which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.
(22)
Premium Formula
This term means the formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and
approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.
(23)
Projected Payout Multiple
The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section
215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.
(24)
Reimbursement Premium or Premium
These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000
of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.
(25)
Residential Structure
In general, this term means a unit or building used exclusively or predominantly for dwelling or
habitational occupancies, including the primary structure and appurtenant structures insured under the same Covered Policy and any other structures covered under endorsements associated with the Covered Policy covering the Residential Structure.
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(a)
With respect to a unit or home insured under a personal lines residential policy form, such unit or home is deemed to have a habitational occupancy and to be a Residential Structure regardless of the term of its occupancy.
(b)
With respect to a condominium structure or complex insured under a commercial lines policy, such structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless of the term of occupancy of individual units.
(c)
A single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and is insured under a commercial lines policy, is considered a Residential Structure if 50 percent or more of the total insured value of the structure is used for habitational occupancies.
(d)
Residential Structures do not include any structures excluded under Article VI. (26) Retention
This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.
(a) When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
(b) When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
1.
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
2.
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made, at a minimum, quarterly by the SBA after all required Proof of Loss Reports are received.
(c) The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
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(27) Retention Multiple
(a)
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2026/2027 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2024/2025 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.
(b)
The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:
1.
If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);
2.
If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or
3.
If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).
(28) Subscription Policy
This term means a Covered Policy where a single policy form is used by multiple Companies to provide vertical layers of primary hurricane coverage on a percentage basis for risks written under the policy. Each subscribing Company must be an Authorized Insurer, and the sum of all subscribers’ participation percentages on a single policy must total 100 percent.
(29) Ultimate Net Loss
(a)
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.
(b)
In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.
(c)
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
(d)
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
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(e) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
(30) Unsound Insurer
This term means an insurer determined by the Office of Insurance Regulation to be in unsound
condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.
ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a
loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
(2) Any policy which excludes wind or hurricane coverage.
(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;
(b)
Any policy providing a layer of windstorm or hurricane coverage for a structure(s) above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a structure(s) using separate policy forms;
(c)
Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or
(d)
The exclusions in this subsection do not apply to primary quota share policies written by Citizens under Section 627.351(6)(c)2., Florida Statutes.
(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).
(7) Any reinsurance assumed by the Company.
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(8)
Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does not apply to any policy identified as covering a residential condominium association or to any policy on which the insured is a residential condominium association, unless it is classified and rated as a hotel, motel, timeshare, shelter, camp, retreat or other similar structure.
(9)
Retail, office, mercantile, or manufacturing facilities, or other similar structures.
(10)
Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.
(11)
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(12)
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
(13)
Policies covering only Additional Living Expense.
(14)
Any exposure for barns or barns with apartments or living quarters.
(15)
Any exposure for builders risk coverage or new Residential Structures under construction.
(16)
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
(17)
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, interest, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
(18)
Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and Additional Living Expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
(19)
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call (unless policy limits have changed effective after June 30 of the Contract Year).
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(20)
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
(21)
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
(22)
Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.
(23)
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Company and Citizens are covered by this Contract.
(24)
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
(25)
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(26)
Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(27)
A policy providing personal property coverage separate from coverage of personal property included in a homeowner’s, mobile homeowner’s, condominium unit owner’s, or tenant’s policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of Covered Policy.
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(28) Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
(a) An endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement
that:
a.
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
b.
Charges a minimum premium of $500; and
c.
Insures scheduled items valued, in the aggregate, at no less than $100,000.
2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
a.
Collection risk assessments;
b.
Fire and security loss prevention;
c.
Warehouse inspections to protect items stored off-site;
d.
Assistance with collection inventory management; or
e.
Collection valuation reviews.
(b) An endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such endorsements are subject to the exclusion provided in this paragraph when the endorsement limit equals or exceeds $500,000. Generally, such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such an endorsement represents an unusually high exposure value and such endorsement is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
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(29) Any losses under liability coverages.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIV relating to inspection of records and examinations.
ARTICLE VIII - REIMBURSEMENT ADJUSTMENTS
Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, Retention adjustments as provided for under Article V(26)(b), incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1)
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
(2)
The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company’s Reimbursement Premium or impact its FHCF coverage. Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall
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exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.
(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures
(a)
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values
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under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)
The requirement that the Data Call is due on a certain date means that the report shall be received
by the SBA no later than 4 p.m. Eastern Time on the due date.
(2) Reimbursement Premium
(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts determined by the SBA. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.
(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as “receivership”):
1.
The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.
2.
Failure by such Company to pay the full annual provisional Reimbursement Premium as
specified in subparagraph 1. by the applicable due date may result in the 45 percent Coverage Level being deemed by the SBA for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a Covered Event occurred or triggered coverage. As such, the annual provisional Reimbursement Premium owed by the Company will be adjusted to reflect the 45 percent Coverage Level for the Contract Year.
(c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before
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February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.
(d)
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
(e)
The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
(f)
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
(3) Losses
(a) In General
Losses resulting from a Covered Event commencing during the Contract Year shall be reported by the Company and reimbursed by the SBA as provided herein and in accordance with Section 215.555, Florida Statutes, this Contract, and any rules adopted pursuant thereto. For a Company participating in a quota share primary insurance agreement(s) with Citizens , Citizens and the Company shall report only their respective portion of Losses under the quota share primary
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insurance agreement(s). The SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the Limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.
(b) Loss Reports
1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from
each Covered Event to allow the SBA to determine any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due at least 14 days from the date of the notice from the SBA that such a report is required.
2. Reimbursements will be issued based on paid Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C.
a.
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
b.
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event.
c.
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received, and shall include a Detailed Claims Listing.
d.
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an “as of” date not more than 60 days prior to the applicable quarter-end date and shall include a Detailed Claims Listing.
3. The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information.
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The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
a.
The SBA shall have the right to consult with relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
b.
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
c.
The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.
4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company’s request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company’s Reimbursement Premium, Retention, and coverage for the Contract Year.
(c) Loss Reimbursement Calculations
In general, the Company’s paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s
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reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
(d) Reserve Established
The SBA will establish a reserve for the outstanding reimbursable Losses for all Contract Years, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
(4) Advances
(a)
The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report and shall include a Loss Adjustment Expense Allowance as calculated by the SBA. Any request for an advance must be accompanied by a Proof of Loss Report and a Detailed Claims Listing, and the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for the specific type of advance requested under paragraph (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus interest due thereon.
(b)
For advances, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the SBA has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the SBA for the overpayment.
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(c)
If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the SBA may require the Company have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.
(d)
The three types of advances enumerated in Section 215.555(4)(e), Florida Statutes, follow.
1. Advances to Companies to prevent insolvency.
a. In order for the Company to demonstrate it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, the Company shall provide the following information:
i.
Current assets;
ii.
Current liabilities other than liabilities due to the Covered Event;
iii.
Current surplus as to policyholders;
iv.
Estimate of other expected liabilities not due to the Covered Event; and
v.
Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.
b. The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c. If demonstrated in accordance with subparagraph a., the SBA shall advance the Company the amount necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.
a.
The SBA may advance the entity up to 90 percent of the lesser of: the SBA’s estimate of the reimbursement due to that entity or the entity’s share of the actual aggregate Reimbursement Premium paid for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c.
The entity must demonstrate the advance is essential to allow the entity to pay claims for a Covered Event.
3. Advances to limited apportionment companies under Section 627.351(2)(b)3, Florida Statutes.
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a.
The SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
(e) In determining whether to grant an advance and the amount of an advance, the SBA shall:
1.
Determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.
Review and consider all the information submitted by such Companies;
3.
Review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.
Consult with relevant regulatory agencies to seek all relevant information;
5.
Review the damage caused by the Covered Event and when that Covered Event occurred;
6.
Consider whether the Company has substantially exhausted amounts previously advanced;
7.
Consider any other factors deemed relevant; and
8.
Require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event.
(5) Inadequate Data Submissions
If exposure data or other information required to be reported by the Company under the terms of this Contract are not received by the SBA in the format specified by the SBA or is inadequate to the extent that the SBA requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.
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(6) Confidential Information/Trade Secret Information
Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the SBA intending to seek trade secret protection, as defined in Section 688.002, Florida Statutes, the Company shall comply with all provisions of Florida law to protect such disclosure.
ARTICLE XI - COMMUTATION
(1) Timeframe for Commutation Process
(a)
The Company and SBA may mutually agree to initiate and complete a Commutation agreement for zero dollars at any time. Such zero-dollar Commutation, once completed, eliminates the mandatory Proof of Loss Report filing requirements for the applicable Covered Event(s) for all reporting periods after the completion of the Commutation.
(b)
The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.
(c)
Provided the Company and SBA do not mutually initiate the Commutation process in subparagraph (a) or (b), the Commutation process will begin upon the later to occur: 60 months after the end of the Contract Year or upon completion of the claims examination for the Company and the resolution of all outstanding examination issues.
(2) Final Proof of Loss Report(s)
(a)
No less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report for each Covered Event during the Contract Year, except for a Company that has entered into a Commutation agreement as described in sub-subparagraph (1)(a). All outstanding Losses and incurred but not reported Losses must be submitted on an undiscounted basis.
(b)
The final Proof of Loss Report must include the following supporting documentation:
1.
All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not settled and which may be reimbursable Losses under this Contract.
2.
Requested supporting documentation (at a minimum, an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary.
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(c) Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or Commutation.
(3) The Loss Valuation Process
Subject to the timeframes outlined in sub-paragraph (1), if the Company has submitted a Proof of Loss Report indicating that it exceeds or expects to exceed its Retention, the Company and the SBA, or their respective representatives, shall attempt to agree upon the present value of all outstanding Losses, both reported and incurred but not reported, resulting from Covered Events during the Contract Year.
(a)
The Loss valuation process may only begin after all other issues arising under this Contract have been resolved, including completion of the claims examination, and shall be suspended pending resolution of any such issues that arise during the Loss valuation process.
(b)
Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA with respect to all Losses, both reported and unreported, under this Contract.
(c)
If agreement on present value cannot be reached within 90 days of the SBA’s receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.
(d)
If the parties fail to agree on the valuation of any Losses, any difference in valuation of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph. Either the SBA or the Company may initiate the process under this subparagraph by providing written notice to the other party stating that the parties are at an impasse with respect to valuation of Losses and specifying the dollar amounts in dispute.
1.
One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days after the initiation of the process, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.
2.
All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.
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3.
None of the actuaries shall be under the control of either party to this Contract.
4.
Each party shall submit a written statement related to its valuation of Losses to the panel of
actuaries and the opposing party no later than 30 days after the appointment of the third actuary. Within 15 days after receiving the other party’s submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.
5.
The written decision of a majority of the panel as to the disagreement over the valuation of Losses identified in the written notice of impasse, when filed with the parties hereto, shall be final and binding on both parties.
(e)
The reasonable and customary expense of the actuaries and of the Commutation (as a result of sub-subparagraph (3)(c) and subparagraph (d)) shall be equally divided between the two parties. Said Commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.
(f)
Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys’ fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.
ARTICLE XII - TAXES
The Company agrees not to make a deduction for the Reimbursement Premium when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company for the Reimbursement Premium, the Company agrees not to make a claim to the SBA for reimbursement of such taxes.
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ARTICLE XIII - ERRORS AND OMISSIONS
Any inadvertent delay, omission, or error on the part of the SBA shall not relieve the Company from any
liability which would attach to it hereunder if such delay, omission, or error had not been made.
ARTICLE XIV - INSPECTION OF RECORDS
The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage amount for the dwelling in place under the lapsed homeowner’s policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.
(1) Purpose of FHCF Examination
The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or in its entirety. The Company should not rely on the SBA to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year, so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any
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changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.
(2)
Examination Requirements for Exposure Verification
The Company shall retain complete and accurate records, in policy level detail, of all exposure data
submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.
(3)
Examination Requirements for Loss Reports
The Company shall retain complete and accurate records of all reported Losses and/or advances
submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.
(4)
Examination Procedures
(a)
The SBA will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the SBA. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
(b)
The reports and data are required to be provided to the SBA as set forth in an examination notice letter, and the SBA will provide the information to the examiner. If the SBA receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All
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costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
(c)
At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the SBA will forward an examination report to the Company.
(d)
Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the SBA. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
(e)
If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
(f)
If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(g)
1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the
Contract Year in question, the SBA will send the Company a letter outlining the process for resubmission and include a deadline to resubmit. Once the resubmission is received, the Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
2. If the recommendation of the examiner is to give the Company the option to either resubmit
the exposure data or to pay the estimated Reimbursement Premium difference, the SBA will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and include a deadline for the resubmission or the payment to be received by the Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.
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(h)
If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the SBA will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and include a deadline to file. Once the Proof of Loss Report(s) is received by the Administrator, the Administrator will calculate a revised reimbursement. The SBA shall review the submitted Proof of Loss Report(s) with respect to the examiner’s findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.
(i)
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than all the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
(5) Costs of the Examinations
The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.
ARTICLE XV - OFFSETS
The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company’s full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.
ARTICLE XVI - INSOLVENCY OF THE COMPANY
For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the SBA has completed and closed its examination of the insolvent Company’s Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion
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of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the SBA determines that it overpaid FIGA on behalf of the Company, the funds will be repaid to the FHCF by FIGA within a reasonable time.
ARTICLE XVII - TERMINATION
The FHCF and the obligations of both parties under this Contract may only be terminated by law.
ARTICLE XVIII - VIOLATIONS
(1) Statutory Provisions
(a)
Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.
(b)
Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.
(2) Noncompliance
(a)
As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).
(b)
If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments or advances due to the Company until the SBA determines that the Company is no longer in a state of noncompliance.
ARTICLE XIX - APPLICABLE LAW
This Contract shall be governed by and construed according to the laws of the State of Florida in respect of
any matter relating to or arising out of this Contract.
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ARTICLE XX - DUE DATES
If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or a legal State of Florida or federal holiday.
ARTICLE XXI - REIMBURSEMENT CONTRACT ELECTIONS
(1) Coverage Level
For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with Section 215.555, Florida Statutes, the Company has the option to elect a 45 percent, 75 percent, or 90 percent Coverage Level under this Contract. If the Company is a member of an NAIC group, all members must elect the same Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same Coverage Level as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90 percent Coverage Level. The Company shall not be permitted to change its Coverage Level once the contract has been executed or after the statutory deadline of March 1, whichever comes first. The Company shall be permitted to change its Coverage Level upon timely execution of the Contract for the next Contract Year but may not reduce its Coverage Level if revenue bonds issued under Section 215.555(6), Florida Statutes, after a Covered Event are outstanding.
The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2025 was as
follows: Typtap Insurance Company
90%
(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):
Yes
(b) Coverage Level Election: The Company hereby elects the following Coverage Level for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 a.m., Eastern Time, May 31, 2027, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 45%
| | | |
| --- | --- | --- |
| 45% OR | 75% OR | 90% |
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ARTICLE XXII - COMPANY COVERAGE OF UNSOUND INSURERS
If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer’s Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.
(1) Providing Coverage for an Unsound Insurer’s Policies Under Company’s Reimbursement Contract
(a)
If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer’s Reimbursement Contract and cannot cover such policies under the Company’s Reimbursement Contract through an assumption of the Unsound Insurer’s Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own Reimbursement Contract for those policies assumed from an Unsound Insurer.
(b)
Responsibilities relating to the assumption of an Unsound Insurer’s Covered Policies by the Company:
1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.
a.
For an assumption of an Unsound Insurer’s Covered Policies that occurs on or before June 30, 2026, the Company shall report the exposure in effect for such policies as of June 30, 2026. This includes assumed policies renewed with the Company on or before June 30, 2026. As outlined in the Data Call, all such policies must be combined with the Company’s Covered policies written as its direct business and reported as a single submission due September 1, 2026.
b.
For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2026, and before December 1, 2026, the Company shall report exposure in effect for such policies as of June 30, 2026, and the SBA shall treat all such policies as if they were in effect as of June 30, 2026, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2026, in a single Data Call file combined with the Company’s Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2026, or a maximum 60 days from the date of the assumption, whichever is
32 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: 23AFA1AA-4735-47A5-BD91-749CDBF5493E
later. If the Company’s Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.
c.
If the Company is unable to submit the combined Data Call file by September 1, 2026, the Company must initially submit its Data Call file with all of its direct written Covered Policies that were in effect as of June 30, 2026 (prior to the assumption of additional Covered Policies from an Unsound Insurer) by September 1, 2026. The Company will then need to resubmit the combined Data Call file no later than 60 days from the date of the assumption.
d.
If a policy assumed by the Company from the Unsound Insurer is not reported in the Company’s Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.
e.
For an assumption of an Unsound Insurer’s Covered Policies on or after December 1, 2026, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.
f.
Except as noted above, for purposes of reporting Losses to the SBA, the Company shall report all Losses including those associated with Covered Policies assumed from the Unsound Insurer on Forms FHCF-L1A and FHCF-L1B as required under the Contract.
2.
The Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2026, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company’s Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company’s Retention and its share of the FHCF’s capacity.
3.
An administrative fee of $1,000 shall apply to each resubmission of exposure data for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the first examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. Resubmission fees shall be invoiced along with the Reimbursement Premium billing discussed in (b) above.
33 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: 23AFA1AA-4735-47A5-BD91-749CDBF5493E
4.
The Company shall ensure that the books and records related to the Covered Policies assumed from the Unsound Insurer are preserved and accessible to the SBA for its exposure and claims examinations. The Company shall retain data related to the FHCF examinations as required in Forms FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for the exposure assumed from the Unsound Insurer.
5.
The Company is required to provide the SBA with a complete listing of all assumed policies, including Covered Policies and other policies not covered by the FHCF. As outlined in the Data Call, the listing must include each policy number and the policy’s effective and expiration dates. In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.
(2) Acceptance of an Assignment of an Unsound Insurer’s Reimbursement Contract
(a) Responsibilities relating to assigned Reimbursement Contracts:
1.
The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.
2.
The Company is responsible for the Reimbursement Premiums due under the assigned Reimbursement Contract. Should any Reimbursement Premium be owed at the time paid Losses for Covered Policies under the assigned Reimbursement Contract exceed the Retention under the assigned Reimbursement Contract, all Reimbursement Premiums (as well as any applicable fees and interest) shall be offset before the issuance of any reimbursement payment.
3.
The Company has the responsibility to report all exposure and Loss information for Covered Policies under the assigned Reimbursement Contract separately for each assigned Reimbursement Contract pursuant to the reporting requirements specified in the Reimbursement Contract. If the Unsound Insurer has already submitted the required Data Call, the Company has the responsibility of filing any resubmissions as necessary.
4.
The Company has the responsibility to ensure that the books and records related to the assigned Reimbursement Contract are preserved and accessible to the SBA for its exposure and claims examinations. The Company has the responsibility to retain data related to FHCF examinations as required in FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for each assigned Reimbursement Contract.
(b) The Company will not be reimbursed by the FHCF for any Losses occurring prior to the date it first provides coverage for such transferred policies. Reimbursements for those Losses shall be made to the Unsound Insurer, the court-appointed receiver, or the applicable guaranty association, as provided by statute.
34 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
ARTICLE XXIII - SIGNATURES
Approved by:
Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.
By: Date 2/27/2026
Authority to sign on behalf of the Company:
The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with the requisite authority to bind the Company and make the representations on behalf of the Company as set forth in this Contract.
Typtap Insurance Company
Karin ColemanPresident
Printed Name and Title
By /s/ Karin Coleman Date 2/26/2026
35 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
---
## EX-10.9
SEC source: [hci-ex10_9.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_9.htm)
EXHIBIT 10.9
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
26\C0KT1031
Table of Contents
Article Page
| | | |
| --- | --- | --- |
| 1 | Classes of Business Reinsured | 1 |
| 2 | Term | 1 |
| 3 | Special Termination | 2 |
| 4 | Concurrency of Conditions | 4 |
| 5 | Premium and Rate | 4 |
| 6 | Sanctions (LMA3100) | 4 |
| 7 | Loss Notices and Settlements | 5 |
| 8 | Late Payments | 5 |
| 9 | Offset | 7 |
| 10 | Access to Records | 7 |
| 11 | Confidentiality | 7 |
| 12 | Errors and Omissions (BRMA 14F) | 8 |
| 13 | Currency | 9 |
| 14 | Taxes | 9 |
| 15 | Federal Excise Tax | 9 |
| 16 | Reserves | 9 |
| 17 | Insolvency | 13 |
| 18 | Arbitration | 13 |
| 19 | Service of Suit | 15 |
| 20 | Governing Law (BRMA 71B) | 15 |
| 21 | Non-Waiver | 15 |
| 22 | Severability | 16 |
| 23 | Notices and Contract Execution | 16 |
| 24 | Intermediary | 16 |
| Schedule A | | 18 |
| Schedule B | | 19 |
26\C0KT1031
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
entered into by and between
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
and
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to individually as the "Subscribing Reinsurer"
and collectively as the "Reinsurer")
# Article 1 - Classes of Business Reinsured
A. By this Contract the Reinsurer agrees to indemnify the Company for any reinstatement premium which the Company pays or becomes liable to pay as a result of loss occurrences covered under the First and Second Excess Layers of the Company's Excess Catastrophe Reinsurance Contract, effective June 1, 2026, (reference number 26\C0KT1019, hereinafter referred to as the "Original Contract"), subject to the terms, conditions and limitations set forth herein and in Schedules A and B attached to and forming part of this Contract.
B. The liability of the Reinsurer shall follow that of the Company in every case, including judicial interpretation, policy reformation and regulatory changes, and be subject in all respects to all the general and specific stipulations, clauses, interpretations, waivers, modifications and alterations of the Company's Original Contract, except as may be modified by the terms and conditions of this Contract.
C. Nothing herein shall in any manner create any obligation or establish any right against the Reinsurer in favor of third parties or any persons not parties to this Contract, except as provided in the Insolvency Article.
# Article 2 - Term
A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2026, with respect to reinstatement premium payable by the Company under the First and Second Excess Layers of the Original Contract as a result of losses arising out of loss
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occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2027.
B. If this Contract is terminated or expires while a loss occurrence covered under the Original Contract is in progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.
# Article 3 - Special Termination
A. Notwithstanding the provisions of paragraph A of the Term Article, the Company may terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:
1. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at the effective time and date of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) 12 months prior to that date; or
2. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at any time during the term of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) at the date of the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's most recent financial statement filed with regulatory authorities and available to the public as of the effective time and date of this Contract; or
3. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system) experiences a reduction of 20.0% or more during any 12-month period; or
4. The Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's rating has been assigned or downgraded below A-; or
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or
6. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
7. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer
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for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
8. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
9. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
10. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
11. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity; however, agreement by the Subscribing Reinsurer to follow claim settlement procedures of the Lloyd’s Claims Lead Arrangements (and any successors thereto) shall not constitute a transfer or delegation of its claims-paying authority, for purposes of this subparagraph; or
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated or has its principal office and the country in which the Subscribing Reinsurer (or its group or holding company) is incorporated or has its principal office as a result of war, currency regulations, or any circumstances arising out of political, financial or economic emergency; or
13. The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the Reserves Article.
B. In the event any of the circumstances set forth in paragraph A above occur, it is solely at the Company's option to terminate or allow a Subscribing Reinsurer to continue to participate on this Contract.
C. As respects the terminated share of the Subscribing Reinsurer's original share, if a Subscribing Reinsurer's participation under any excess layer is terminated, no future deposit premium installments shall be due the Subscribing Reinsurer for that excess layer on or after the effective date of termination. The Subscribing Reinsurer shall immediately return the unearned portion of any premium paid for any excess layer, and the minimum premium requirements set forth in the Premium and Rate Article for that excess layer shall be waived.
D. The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the events set forth in paragraph A above. If the Subscribing Reinsurer fails to provide the Company with such notification, the Company may terminate the Subscribing Reinsurer based on a public announcement or discovery of the occurrence of such event.
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# Article 4 - Concurrency of Conditions
A. It is agreed that this Contract shall follow the terms, conditions, exclusions, definitions, warranties and settlements of the Company under the Original Contract, which are not inconsistent with the provisions of this Contract.
B. The Company shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.
# Article 5 - Premium and Rate
A. As premium for each excess layer of reinsurance provided by this Contract, the Company shall pay the Reinsurer the product of the following (or a pro rata portion thereof in the event the term of this Contract is less than 12 months and for purposes of calculating subparagraph 3 below, the term of the Original Contract is a full 12 months):
1. The amount, shown as "Reinstatement Factor" for that excess layer in Schedule B attached hereto; times
2. The Final Adjusted Rate on Line for the corresponding excess layer of the Original Contract; times
3. An amount equal to 100% reinsurance placement percentage under each excess layer of the Original Contract of the final adjusted premium paid by the Company for the corresponding excess layer of the Original Contract.
"Final Adjusted Rate on Line" as used herein shall mean an amount equal to a 100% reinsurance placement percentage under each excess layer of the Original Contract of the final adjusted premium paid by the Company for the corresponding excess layer of the Original Contract divided by the amount, shown as the "Reinsurer's Per Occurrence Limit" for that excess layer under the Original Contract in Schedule A attached hereto.
B. The Company shall pay the Reinsurer an annual deposit premium for each excess layer of the amount, shown as "Deposit Premium" for that excess layer in Schedule B attached hereto, in four equal installments of the amount, shown as "Quarterly Deposit Premium" for that excess layer in Schedule B attached hereto, July 1 and October 1 of 2026, and January 1 and April 1 of 2027.
C. On or before June 1, 2027, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for each excess layer, computed in accordance with paragraph A above, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted within 45 days following the expiration of this Contract.
# Article 6 - Sanctions (LMA3100)
No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition
26\C0KT1031
Page 4
or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
# Article 7 - Loss Notices and Settlements
A. As respects each excess layer hereunder, whenever losses sustained by the Company appear likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.
B. The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.
C. Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer. The Reinsurer shall pay within 10 business days to the Company its share of amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.
# Article 8 - Late Payments
A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. However, any Subscribing Reinsurer that has experienced any of the circumstances set forth in paragraph A of the Special Termination Article shall not be allowed to implement the provisions of this Article against the Company.
B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (hereinafter referred to as the "Intermediary") by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party shall pay, any and all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection or enforcement of any payment obligations of the debtor party, except those costs and expenses the parties are required to share equally pursuant to the Arbitration Article, plus an interest charge on the amount past due calculated for each such payment on the last business day of each month as follows:
1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of 4.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3. The amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest charges have been received by the Intermediary.
Notwithstanding the provisions of subparagraph B(2) above and the immediately preceding sentence, the interest rate for a Runoff Subscribing Reinsurer shall increase by 1.0% for
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every month that payment of the claim is past due, subject to a maximum annual interest rate of 12.0%.
C. If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated in any way.
D. The establishment of the due date shall, for purposes of this Article, be determined as follows:
1. As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract, and such payments shall be deemed overdue 30 days past the provided due date. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment. Such payments shall be deemed overdue 30 days past the provided due date.
2. Any claim or loss payment due the Company hereunder shall be deemed due 30 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 30 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs D(1) and D(2) above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days following transmittal of written notification that the provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.
E. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest charges due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest charge on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.
F. Interest charges arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.
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# Article 9 - Offset
The Company and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise.
In the event that the Reinsurer is liable to pay a total loss under any excess layer of this Contract, prior to any installments of deposit premium being due under any such excess layer, then, in addition to any reinstatement premium due the Reinsurer, the Reinsurer shall also have to the right to offset the amount of unpaid installments of deposit premium against loss payment due the Company with only the net amount being remitted by the debtor party.
# Article 10 - Access to Records
A. By giving the Company 15 days of prior notice, the Reinsurer or its designated representatives shall have access at any reasonable time to underwriting, claims and accounting files of the Company which pertain in any way to this Contract. However, a Subscribing Reinsurer or its designated representatives shall not have any right of access to the records of the Company if it is not current in all undisputed payments due the Company, nor shall any right of access be construed to allow the Reinsurer the right to delay or withhold payment for any undisputed losses which shall fall due hereunder.. "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why the payments are disputed.
B. Prior to the access and review by the Reinsurer of certain books and records, the Company may redact names and any other information the Company, in its sole judgment, considers proprietary and any information the Company is required by law or regulation to redact.
# Article 11 - Confidentiality
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract, including all information obtained through any audits and any claims information between the Company and the Reinsurer, and any submission or other materials relating to any renewal (hereinafter referred to as "confidential information") are proprietary and confidential to the Company.
B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any confidential information to any third parties, including but not limited to the Reinsurer's subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates, underwriting agencies, research organizations, any unaffiliated entity engaged in modeling insurance or reinsurance data, and statistical rating organizations.
C. Confidential information may be used by the Reinsurer only in connection with the performance of its obligations or enforcement of its rights under this Contract and shall only be disclosed when required by (1) retrocessionaires subject to the business ceded to this
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Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial condition, (3) external auditors performing an audit of the Reinsurer's records in the normal course of business, (4) the Reinsurer's legal counsel, or (5) subsidiaries or affiliates of the Reinsurer that assist in underwriting or administrative obligations directly related to this Contract (however, this subparagraph 5 shall not include subsidiaries or affiliates in competition with the Company); provided that the Reinsurer advises such parties of the confidential nature of the confidential information. The Company may require that any third-party representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article or by a separate written confidentiality agreement, containing terms no less stringent than those set forth in this Article. If a third-party representative of the Reinsurer is not bound, in writing, by this Confidentiality Article or by a separate written confidentiality agreement, the Reinsurer shall be responsible for any breach of this provision by such third-party representative of the Reinsurer.
D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the confidential information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure, to the extent legally permissible, and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
E. Any disclosure of personally identifiable information shall comply with all applicable statutes and regulations governing the disclosure of personally identifiable information that apply by law to the parties of this Contract. "Personally identifiable information" shall be defined as this term or a similar term is defined in any applicable state, provincial, territory, federal or international law. Disclosing or using this information for any purpose not authorized by applicable law is expressly forbidden without the prior consent of the Company.
F. The parties agree that any information subject to privilege, including the attorney-client privilege or attorney work product doctrine (collectively "privilege") shall not be disclosed to the Reinsurer until, in the Company's opinion, such privilege is deemed to be waived or otherwise compromised by virtue of its disclosure pursuant to this Contract. Furthermore, the Reinsurer shall not assert that any privilege otherwise applicable to the confidential information has been waived or otherwise compromised by virtue of its disclosure pursuant to this Contract.
G. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
# Article 12 - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.
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# Article 13 - Currency
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to mean United States Dollars, and all transactions under this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.
# Article 14 - Taxes
In consideration of the terms under which this Contract is issued, the Company shall not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.
# Article 15 - Federal Excise Tax
A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
# Article 16 - Reserves
A. The Subscribing Reinsurer agrees to fund 100% of its share of the Company's ceded United States unearned premium, if any, all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer, and/or outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract but not yet recovered from the Reinsurer, plus the Company's reserves for reinstatement premium due under the First and Second Excess Layers of the Original Contract, if any) (hereinafter the "Subscribing Reinsurer's United States obligations") by:
1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2. Trust accounts established solely for the benefit of the Company; and/or
3. Cash advances;
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if the Subscribing Reinsurer:
1. As of the inception of this Contract (irrespective of any certification date that may be backdated) or during the term of the Contract or thereafter, is unauthorized in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
2. Is not domiciled in the United States of America or its territories or possessions, and has become certified, authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
3. Is a Runoff Subscribing Reinsurer; or
4. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
Notwithstanding the provisions above, if the Subscribing Reinsurer became authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves before January 1, 2010, then the Subscribing Reinsurer may provide funding via a multi-beneficiary trust amounting to 100% of the Subscribing Reinsurer's United States obligations, and such funding shall be deemed to satisfy the funding requirements under this Article. Any funding in a multi-beneficiary trust shall include an amount of incurred but not reported loss reserves as calculated by the Company.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's United States obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
B. The Subscribing Reinsurer shall fund 120% of its share of the Company's ceded Canadian unearned premium, if any, all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer, and/or outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract but not yet recovered from the Reinsurer, plus the Company's reserves for reinstatement premium due under the First and Second Excess Layers of the Original Contract, if any) (hereinafter the "Subscribing Reinsurer's Canadian obligations") by:
1. A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2. Cash advances for the remaining balance of the funding required;
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if the Subscribing Reinsurer:
1. Is unauthorized in any province or jurisdiction of Canada and if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved; or
2. Is a Runoff Subscribing Reinsurer; or
3. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
The Subscribing Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the Company and the insurance regulatory authorities involved.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's Canadian obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
C. With regard to funding in whole or in part by letters of credit, each letter of credit shall be in a form acceptable to insurance regulatory authorities involved, shall be issued for a term of at least one year and shall include an "evergreen clause," which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. Notwithstanding anything to the contrary in this Contract, said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Subscribing Reinsurer, but only for one or more of the following purposes:
1. To reimburse the Company for the Subscribing Reinsurer's share of unearned premiums, if any, returned to insureds on account of policy cancellations, unless paid in cash by the Subscribing Reinsurer;
2. To reimburse the Company for the Subscribing Reinsurer's share of reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract, unless paid in cash by the Subscribing Reinsurer;
3. To reimburse the Company for the Subscribing Reinsurer's share of any other amounts claimed to be due hereunder, unless paid in cash by the Subscribing Reinsurer;
4. To fund a cash account in an amount equal to the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Subscribing Reinsurer 10 days prior to its expiration date;
5. To refund to the Subscribing Reinsurer any sum in excess of the actual amount required to fund the Subscribing Reinsurer's United States obligations and/or the
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Subscribing Reinsurer's Canadian obligations, if so requested by the Subscribing Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for C(1), C(2) or C(4) above, or in the case of C(3) above, the actual amount determined to be due, the Company shall promptly return to the Subscribing Reinsurer the excess amount so drawn.
D. At annual intervals, or more frequently as determined by the Company (but never more frequently than quarterly), the Company shall prepare a specific statement, for the sole purpose of amending the respective letters of credit, of the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations. Amendments shall be made to said letters of credit in accordance with the following:
1. If the statement shows that the Subscribing Reinsurer's United States obligations exceed the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of the Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, exceeds the balance of credit applicable thereto as of the statement date, the Subscribing Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment or amendments of the respective letters of credit increasing the amount of credit by the amount of the applicable difference.
2. If, however, the statement shows that the Subscribing Reinsurer's United States obligations are less than the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, is less than the balance of credit applicable thereto as of the statement date, the Company shall, within 30 days after receipt of written request from the Subscribing Reinsurer, release such excess credit by agreeing to secure an amendment or amendments to the respective letters of credit reducing the amount of credit available by the amount of the applicable excess credit.
F. Notwithstanding any other provision of this Article, as respects a Subscribing Reinsurer that is a Reciprocal Jurisdiction Reinsurer, the Subscribing Reinsurer agrees to provide collateral for 100% of the Subscribing Reinsurer’s obligations under this Contract, if the Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration or arbitral award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, if applicable.
Further, with respect to Certain Underwriting Members of Lloyd's, this Contract does not constitute an American Reinsurance Policy as defined under the Lloyd’s US Situs Credit for Reinsurance Trust Deed or the Lloyd’s American Credit for Reinsurance Joint Asset Trust Deed. Therefore, the Company does not have recourse to those trust funds with respect to this Contract.
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# Article 17 - Insolvency
A. This Article shall apply severally to each reinsured company referenced within the definition of "Company" in this Contract. Further, this Article and the laws of the domiciliary jurisdiction shall apply in the event of the insolvency of any company intended to be covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary jurisdiction of any company intended to be covered hereunder, that domiciliary jurisdiction's laws shall prevail.
B. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. However, 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 Company indicating the policy or bond reinsured which claim 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 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation 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.
C. Where two or more Subscribing 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 this Contract as though such expense had been incurred by the Company.
D. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the Company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Company to such payees.
# Article 18 - Arbitration
A. As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion shall be submitted to arbitration. One arbiter shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration, all of whom shall be disinterested active or former officials or experienced individuals who have operated in, or been involved in, business placed in the United States insurance or reinsurance industry for at least 10 years. In the
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event that either party should fail to choose an arbiter within 30 days following a written request by the other party to do so, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. If the two arbiters fail to agree upon the selection of an umpire within 30 days following their appointment, the two arbiters shall request the American Arbitration Association to appoint the umpire. If the American Arbitration Association fails to appoint the umpire within 30 days after it has been requested to do so, either party may request a justice of a Court of general jurisdiction of the state in which the arbitration is to be held to appoint the umpire. Notwithstanding the above, in the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company may, at its option, choose to forgo arbitration and may bring an action in any court of competent jurisdiction. Such court shall award costs and expenses, including reasonable attorneys' fees and other expenses, if the Company prevails in such action.
B. Each party shall present its case to the arbiters within 30 days following the date of appointment of the umpire. The arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the arbiters shall be final and binding on 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. Judgment upon the final decision of the arbiters may be entered in any court of competent jurisdiction. The arbiters may award costs and expenses, including reasonable attorneys' fees and other expenses.
C. If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Subscribing Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers participating under the terms of this Contract from several to joint.
D. Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 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.
E. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.
F. In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in accordance with applicable law as soon as practicable after their decision. The arbiters shall award any necessary and legally permissible punitive damages to the Company.
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# Article 19 - Service of Suit
(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)
A. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
B. In the event the Subscribing Reinsurer fails to perform its obligations hereunder, the Subscribing Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Subscribing Reinsurer, once the appropriate Court is accepted by the Subscribing Reinsurer or is determined by removal, transfer or otherwise, as provided for above, shall comply with all requirements necessary to give said Court jurisdiction and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, shall abide by the final decision of such Court or of any Appellate Court in the event of an appeal.
C. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his or her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.
# Article 20 - Governing Law (BRMA 71B)
This Contract shall be governed by and construed in accordance with the laws of the State of Florida.
# Article 21 - Non-Waiver
The failure of the Company to insist on compliance with this Contract or to exercise any right, remedy or option hereunder shall not: (1) constitute a waiver of any rights contained in this Contract, (2) prevent the Company from thereafter demanding full and complete compliance, (3) prevent the Company from exercising such remedy in the future, nor (4) affect the validity of this Contract or any part thereof.
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# Article 22 - Severability
If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, regulatory body or court, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
# Article 23 - Notices and Contract Execution
A. Whenever a notice, statement, report or any other written communication is required by this Contract, unless otherwise specified, such notice, statement, report or other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first class mail is also acceptable.
B. The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:
1. Paper documents with an original ink signature;
2. Facsimile or electronic copies of paper documents showing an original ink signature; and/or
3. Electronic records with an electronic signature made via an electronic agent. For the purposes of this Contract, the terms "electronic record," "electronic signature" and "electronic agent" shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto.
C. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.
# Article 24 - Intermediary
Aon Re, Inc., or one of its affiliated corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating to this Contract shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
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In Witness Whereof, the Company has caused this Contract to be executed by its duly authorized representatives, who also confirm the Company's review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as of the date specified below:
This ________________ day of ____________________________ in the year ____________.
CORE Risk Managers, LLC as Attorney-In-Fact for Condo Owners Reciprocal Exchange
This ________________ day of ____________________________ in the year ____________.
Tailrow Risk Managers, LLC as Attorney-In-Fact for Tailrow Insurance Exchange
This ________________ day of ____________________________ in the year ____________.
Homeowners Choice Property & Casualty Insurance Company, Inc.
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# Schedule A
Property Catastrophe
Excess Catastrophe
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
| Line item | First Excess | Second Excess |
| --- | --- | --- |
| Company's Retention | $15,000,000 | $100,000,000 |
| Reinsurer's Per Occurrence Limit | $85,000,000 | $100,000,000 |
| Reinsurer's Term Limit | $170,000,000 | $200,000,000 |
| Minimum Premium | [REDACTED] | [REDACTED] |
| Premium Rate | [REDACTED] | [REDACTED] |
| Deposit Premium | [REDACTED] | [REDACTED] |
| Quarterly Deposit Premium | [REDACTED] | [REDACTED] |
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Schedule A
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# Schedule B
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
First
Excess Second
Excess
Reinstatement Factor [REDACTED] [REDACTED]
Annual Deposit Premium [REDACTED] [REDACTED]
Quarterly Deposit Premium [REDACTED] [REDACTED]
The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.
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Schedule B
Page 19
---
## EX-10.10
SEC source: [hci-ex10_10.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_10.htm)
EXHIBIT 10.10
Facultative Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
Tampa, Florida
26\C0KT1003
Table of Contents
Article Page
| | | |
| --- | --- | --- |
| 1 | Business Covered | 1 |
| 2 | Term | 1 |
| 3 | Definitions | 2 |
| 4 | Special Termination | 5 |
| 5 | Territory | 7 |
| 6 | Exclusions | 7 |
| 7 | Special Acceptance | 9 |
| 8 | Retention and Limit | 9 |
| 9 | Other Reinsurance | 9 |
| 10 | Loss Notices and Settlements | 9 |
| 11 | Premium and Rate | 10 |
| 12 | Bordereaux Reports | 10 |
| 13 | Salvage and Subrogation | 11 |
| 14 | Offset | 11 |
| 15 | Late Payments | 11 |
| 16 | Sanction Limitation and Exclusion (LMA3100) | 13 |
| 17 | Liability of the Reinsurer | 13 |
| 18 | Net Retained Lines | 13 |
| 19 | Funding of Reserves | 13 |
| 20 | Access to Records | 16 |
| 21 | Confidentiality | 16 |
| 22 | Errors and Omissions | 17 |
| 23 | Currency | 17 |
| 24 | Taxes | 18 |
| 25 | Federal Excise Tax | 18 |
| 26 | Insolvency | 18 |
| 27 | Arbitration | 19 |
| 28 | Service of Suit | 20 |
| 29 | Run-off Subscribing Reinsurers | 21 |
| 30 | Severability | 22 |
| 31 | Governing Law | 22 |
| 32 | Entire Agreement | 22 |
| 33 | Mode of Execution | 23 |
| 34 | Intermediary | 23 |
26\C0KT1003
Facultative Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
entered into by and between
Condo Owners Reciprocal Exchange
Tampa, Florida
(hereinafter referred to as the "Company")
and
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to individually as the "Subscribing Reinsurer"
and collectively as the "Reinsurer")
# Article 1 - Business Covered
By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the Company under its Policies in force at the effective date hereof or issued or renewed at or after that time and date, covering business classified by the Company as Direct and Assumed Property business, including business assumed by the Company in connection with depopulation of Policies from insurers of last resort, including but not limited to Citizens Property Insurance Corporation and any successor organization of such entity, subject to the terms, conditions and limitations set forth herein.
# Article 2 - Term
A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2026, with respect to Policies in force at the effective date hereof or issued or renewed at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2027, unless earlier terminated in accordance with the provisions of this Contract.
B. At expiration of this Contract, the Reinsurer shall not be liable for any losses occurring at or after the expiration time and date, unless the Company elect’s expiration on a run-off basis, and notifies the Reinsurer as promptly as possible. If the Company chooses to exercise the run-off option, the Reinsurer shall remain liable for all losses under policies in force until their expiration or renewal dates, whichever comes first, but not longer than 12 months plus odd time, not to exceed 18 months in all from the time and date of expiration. During the run-off period, the Company shall cede to the Reinsurer the appropriate premium by multiplying the applicable annual rate per value exposed and pro-rated for time on risk during the run-off period, as stipulated in the Premium Article, multiplied by the Company's TIV (Total Insured Value) during the run-off period.
C. Notwithstanding the provisions of paragraph B above, if the Company is prohibited or precluded by the appropriate regulatory authorities, or by law (in those states where
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applicable and enforced), from arranging mid-term cancellation or non-renewal of any Policies subject to this Contract beyond their natural expiry, the Reinsurer agrees to extend coverage under this Contract until such Policies may be terminated or non-renewed by the Company, but in no event beyond 36 months after the effective date of termination or expiration.
# Article 3 - Definitions
A. "Act of Terrorism" as used in this Contract shall mean any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:
1. Involves violence against one or more persons; or
2. Involves damage to property; or
3. Endangers life other than the person committing the action; or
4. Creates a risk to health or safety of the public or a section of the public; or
5. Is designed to interfere with or to disrupt an electronic system.
B. "Building" as used in this Contract shall be defined solely by the Company.
C. "Loss Adjustment Expense" as used herein shall be defined as all costs and expenses allocable to a specific claim that are incurred by the Company in the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim, regardless of how such costs and expenses are allocated for statutory reporting purposes, including but not limited to court costs and costs of supersedeas and appeal bonds, and including but not limited to (1) pre-judgment interest, unless included as part of the award or judgment; (2) post-judgment interest; (3) legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto; (4) monitoring counsel expenses; and (5) a pro rata share of salaries and expenses of Company field employees and Company desk adjusters and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the adjustment of losses covered by this Contract. Loss Adjustment Expense does not include salaries and expenses of employees, other than (5) above, and office and other overhead expenses.
D. "Loss in Excess of Policy Limits" and "Extra Contractual Obligations" as used in this Contract shall be defined as follows:
1. "Loss in Excess of Policy Limits" shall mean any amount paid or payable by the Company in excess of its Policy limits, but otherwise within the terms of its Policy, such loss in excess of the Company's Policy limits having been incurred because of, but not limited to, failure by the Company to settle within the Policy limits or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of
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settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action.
2. "Extra Contractual Obligations" shall mean any punitive, exemplary, compensatory or consequential damages paid or payable by the Company, not covered by any other provision of this Contract and which arise from the handling of any claim on business subject to this Contract, such liabilities arising because of, but not limited to, failure by the Company to settle within the Policy limits or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action. An Extra Contractual Obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the Policy.
Notwithstanding anything stated herein, this Contract shall not apply to any Loss in Excess of Policy Limits or any Extra Contractual Obligation incurred by the Company as a result of final legal adjudication of a fraudulent and/or criminal act by any Officer or Director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder. As used in the paragraph, an "Officer" or "Director" of the Company shall be limited to officers or directors of the Company in a policy-making role.
Further, it is understood that Loss Adjustment Expense in connection with Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered under this Contract in the same manner as other Loss Adjustment Expense.
Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.
E. "Loss Occurrence" as used herein shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one "Loss Occurrence" shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term "Loss Occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, including ensuing collapse and water damage, snow, sleet, freezing rain, freeze, ice, winter weather, and wind losses related to such conditions, all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. The
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maximum duration of 96 consecutive hours may be extended in respect of individual losses which occur beyond such 96 consecutive hours during the continued occupation of an assured's premises by strikers, provided such occupation commenced during the aforesaid period.
3. As regards "freeze," only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks or freezing and/or melting snow or sleet, including but not limited to ice dams) may be included in the Company's "Loss Occurrence."
The Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
Only one period of consecutive hours shall apply with respect to one event, except that, as respects those "Loss Occurrences" referred to in subparagraph 2 above, if the disaster, accident or loss occasioned by the event is of greater duration than 96 consecutive hours, then the Company may divide that disaster, accident or loss into two or more "Loss Occurrences," provided that no two periods overlap and no individual loss is included in more than one such period, and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
It is understood that losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one "Loss Occurrence." Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils and no single "Loss Occurrence" shall encompass a time period greater than 168 consecutive hours, except as otherwise provided for in this Article.
F. "Policy" as used in this Contract shall mean policies, binders, contracts, endorsements, or agreements of insurance or reinsurance, whether written or oral.
G. "Risk" as used in this Contract shall be defined solely by the Company.
H. "Term of this Contract" as used in this Contract shall be defined as the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, until 12:01 a.m., Eastern Standard Time, June 1, 2027. However, in the event a Subscribing Reinsurer's share is terminated in accordance with the Special Termination Article, "Term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, to the effective time and date of termination or expiration. In the event this Contract is terminated or expires on a "runoff basis, the period from the effective time and date of termination or expiration through the end of the "runoff" period shall be separate from the Term of this Contract and shall be referred to as the "runoff period."
I. "Ultimate Net Loss" as used in this Contract shall mean the sum or sums (including Loss in Excess of Policy Limits, Extra Contractual Obligations and Loss Adjustment Expense, as defined herein) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all claims on inuring reinsurance, whether collectible or not, and all salvage and other recoveries. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until
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the Company's Ultimate Net Loss has been ascertained. In the event a verdict or judgment is reduced by an appeal or a settlement subsequent to the entry of the judgment thereby resulting in an ultimate saving on such verdict or judgment, or a judgment is reversed outright, the Loss Adjustment Expense incurred in securing such final reduction or reversal shall be prorated between the Reinsurer and the Company in the proportion that each benefits from such reduction or reversal. However, for the purposes of this Contract, loss in excess of policy limits and extra contractual obligations arising out of any one loss occurrence shall not exceed 25.0% of ultimate net loss as calculated prior to the consideration of such 25.0% limitation.
# Article 4 - Special Termination
A. Notwithstanding the provisions of paragraph A of the Term Article, the Company may reduce or terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:
1. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at the effective time and date of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) 12 months prior to that date; or
2. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at any time during the Term of this Contract, or the runoff period, if any, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) at the date of the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's most recent financial statement filed with regulatory authorities and available to the public as of the effective time and date of this Contract; or
3. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system) experiences a reduction of 20.0% or more during any 12-month period.
4. The Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been suspended or withdrawn or has been assigned or downgraded below A-, or the Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been downgraded two or more notches during the Term of this Contract, or the runoff period, if any, even if the resulting A.M. Best's and/or Standard & Poor's Financial Strength Rating is A- or better; or
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or
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6. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
7. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
8. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
9. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
10. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
11. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity; or
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated or has its principal office and the country in which the Subscribing Reinsurer (or its group or holding company) is incorporated or has its principal office as a result of war, currency regulations, or any circumstances arising out of political, financial or economic emergency; or
13. The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the Reserves Article.
B. In the event any of the circumstances set forth in paragraph A above occur, it is solely at the Company's option to reduce, terminate or allow a Subscribing Reinsurer to continue to participate on this Contract.
C. As respects the terminated share or the reduced portion of the Subscribing Reinsurer's original share, if a Subscribing Reinsurer's participation is reduced or terminated on a cutoff basis, no future minimum and deposit premium installments shall be due the Subscribing Reinsurer on or after the effective date of reduction or termination. The Subscribing Reinsurer shall immediately return the unearned portion of any premium paid.
D. The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the events set forth in paragraph A above. If the Subscribing Reinsurer fails to provide the Company with such notification, the Company may terminate the Subscribing Reinsurer based on a public announcement or discovery of the occurrence of such event.
E. The provisions of this Article shall survive termination or expiration of the Contract.
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# Article 5 - Territory
This Contract shall only provide coverage for Risks located within the State of Florida and shall apply to Policies issued to insureds domiciled in the State of Florida.
# Article 6 - Exclusions
A. This Contract does not apply to and specifically excludes the following:
1. Liability assumed by the Company under any form of treaty reinsurance; however, group intra-company reinsurance (if applicable), agency reinsurance accepted in the normal course of business, and/or Policies written by another carrier at the Company's request and reinsured 100% by the Company shall not be excluded hereunder.
2. Financial guarantee or insolvency.
3. Loss or liability excluded by the Pools, Associations and Syndicates Exclusion Clause (Non-Catastrophe) attached to and forming part of this Contract.
4. Loss or liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund, or other arrangement, howsoever denominated, established, or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.
5. Nuclear risks as defined in the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.) and the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada) attached to and forming part of this Contract.
6. Loss or damage arising from named storms, meaning any storm or storm system that has been declared by the National Hurricane Center to be a named storm at any time in its lifecycle, which may include, by way of example and not limitation, hurricane, wind, gusts, typhoon, hail, rain, tornados, cyclones, and all events/perils ensuing therefrom, including, by way of example and not limitation, flood, storm surge, water damage, fire following, sprinkler leakage, riots, vandalism, explosion and collapse, in each case, arising out of, caused by, occasioned by or resulting from such storm or storm system, including the merging of one or more separate storm(s) or storm system(s).
7. Loss or damage arising from flood, including storm surge.
8. Loss or damage arising from earthquake, defined as a shaking or trembling of the earth that is tectonic in origin, whether observable or not observable, and whether man-made or caused by natural phenomena, including tsunami, seismic sea waves
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and volcanic eruption. However, loss or damage from fire following, sprinkler leakage and ensuing perils directly occasioned by the peril of earthquake shall not be excluded hereunder.
9. Loss or liability excluded by the provisions of the Property Cyber and Data Endorsement attached to and forming a part of this Contract.
10. Loss or damage directly or indirectly occasioned by, happening through or in consequences of war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, or confiscation or nationalization or requisition or destruction of or damage to property by or under the order of any government or public or local authority.
11. Loss arising from communicable disease in accordance with the "Limited Communicable Disease Exclusion No. 2 (Property Treaty Reinsurance)" attached to and forming part of this Contract.
12. All liability arising out of mold, spores and/or fungus but this exclusion shall not apply to those losses which follow as a direct result of a loss caused by a peril otherwise covered hereunder.
13. Risks with a total insured value greater than $7,000,000. However, this exclusion will not apply to in force risks which will be covered at their renewal for up to 10.0% increase of the total insured value. In force risks where the total insured value increases at a percentage greater than 10.0% of their total insured value at their renewal must be submitted for special acceptance per the Special Acceptance Article herein.
14. Any loss, cost, damage or expense of whatsoever nature directly or indirectly involving biological, chemical, nuclear or radioactive explosion, pollution or contamination.
15. Shared and layered risks not 100% written by the cedent.
B. However, should any arbitration panel or any judicial, regulatory, or legislative entity having legal jurisdiction invalidate any exclusion in the Company's Policy or the underlying policy on which the Company's Policy follows form, any amount of loss for which the Company is liable because of such invalidation shall not be excluded hereunder.
C. The exclusions enumerated above shall not apply when they are merely incidental to the main operations of the insured, provided such main operations are covered by the Company and are not themselves excluded from the scope of this Contract. The Company shall determine what is "incidental."
D. Should the Company, by reason of an inadvertent act, error, or omission, be bound to afford coverage excluded hereunder or should an existing insured extend its operations to include coverage excluded hereunder, the Reinsurer shall waive the exclusion(s). The duration of said waiver shall not extend beyond the time that notice of such coverage has been received by the responsible underwriting authority of the Company plus the minimum time period required thereafter for the Company to terminate such coverage.
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# Article 7 - Special Acceptance
The Company may submit to the Reinsurer for special acceptance business not covered by this Contract. Such business, if accepted by the Reinsurer, shall be covered hereunder, and shall be subject to the terms and conditions of this Contract, except as otherwise modified by such special acceptance. A Subscribing Reinsurer shall be deemed to have accepted a Risk if it has not responded within five business days after receipt of the request for special acceptance. Any business covered by special acceptance under the reinsurance contract being replaced by this Contract will be automatically covered hereunder. Further, in the event a reinsurer becomes a party to this Contract subsequent to the special acceptance of any business not normally covered hereunder, the new reinsurer will automatically accept the same as being a part of this Contract.
# Article 8 - Retention and Limit
The Company shall retain and be liable for the first $1,500,000 of Ultimate Net Loss, arising out of any one Risk, each loss. The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds the Company's Retention, but the liability of the Reinsurer shall not exceed any of the following:
A. $5,500,000 as respects any one Risk, each loss;
B. $5,500,000 as respects all losses arising out of any one Loss Occurrence involving an Act of Terrorism; or
C. $11,000,000 as respects all losses arising out of any one Loss Occurrence not involving an Act of Terrorism.
# Article 9 - Other Reinsurance
The Company shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.
# Article 10 - Loss Notices and Settlements
A. Whenever a loss sustained by the Company appears likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.
B. The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.
C. Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer. The Reinsurer shall pay within 15 business days to the Company its share of amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.
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# Article 11 - Premium and Rate
A. As premium provided by this Contract, the Company shall pay the Reinsurer a deposit premium of [REDACTED] payable in four equal installments of [REDACTED] on July 1 and October 1 of 2026, and January 1 and April 1 of 2027, subject to a minimum premium of [REDACTED]. The deposit premium shall be payable directly to the Reinsurer on the above mentioned dates.
B. Within 45 days after the expiration of this Contract, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder. The Company shall adjust the deposit premium against an amount equal to a flat rate per each million dollars of exposed values for each Risk under this Contract, calculated as follows:
Policy Type CR-M - TIV Band Rate per each million dollars of exposed values
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] and greater [REDACTED]
Policy Type CR-W - TIV Band Rate per each million dollars of exposed values
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] to [REDACTED] [REDACTED]
[REDACTED] and greater [REDACTED]
# Article 12 - Bordereaux Reports
Within 30 days following the close of each calendar quarter, the Company shall furnish the Reinsurer with a bordereaux of Risks in force at the effective date of this Contract and for risks subject to this Contract for the quarter in question, as applicable, providing the following information as respects each Risk:
1. Name(s) of insured(s);
2. Location(s) address(es);
3. Policy number(s);
4. Policy term (effective and expiration dates);
5. Policy Type;
6. Construction;
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7. Occupancy;
8. Private protection (automatic sprinkler/non-sprinklered);
9. Public protection class;
10. Year built;
11. Breakdown of total insured values, including building limit and business personal property.
# Article 13 - Salvage and Subrogation
A. The Reinsurer shall be credited with salvage or subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company) on account of claims and settlements involving reinsurance hereunder. Recoveries therefrom shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage and subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights, provided it is economically reasonable, in the Company's opinion, to do so.
B. The expense incurred by the Company in pursuing any such reimbursement or recovery (excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer) shall be borne by each party in proportion to its benefit (if any) from the recovery. If the recovery expense exceeds the amount recovered, the amount recovered (if any) shall be applied to the reimbursement of recovery expense incurred by the Company, and the remaining expense as well as any originally incurred Loss Adjustment Expense shall be included in the Company's Ultimate Net Loss.
# Article 14 - Offset
The Company and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums or losses or otherwise, due from one party to the other under the terms and conditions of this Contract; provided, however, that in the event of the insolvency of a party hereto, offsets shall be allowed only in accordance with applicable statutes and regulations.
# Article 15 - Late Payments
A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. However, any Subscribing Reinsurer that has its share terminated in accordance with the provisions of paragraph A of the Special Termination Article shall not be allowed to implement the provisions of this Article against the Company until that Subscribing Reinsurer has paid its share of the Ultimate Net Loss in excess of the Company's retention in full.
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B. In the event any premium, loss or other payment due either party is not received by the Intermediary, as defined in the Intermediary Article, by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:
1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the U.S. prime rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made plus 3.0%; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.
C. The establishment of the due date shall, for purposes of this Article, be determined as follows:
1. As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract, and such payments shall be deemed overdue 30 days past the provided due date. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2. Any claim or loss payment due the Company hereunder shall be deemed due 10 business days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 10 business days, interest will accrue on the payment or amount overdue in accordance with paragraph B of this Article, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraph 1 or 2 of this paragraph, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 10 business days following transmittal of written notification that the provisions of this Article have been invoked.
D. For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.
E. Nothing herein shall be construed as limiting or prohibiting the Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest penalty on the amount determined to be due hereunder shall
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be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.
# Article 16 - Sanction Limitation and Exclusion (LMA3100)
No Subscribing Reinsurer shall be deemed to provide cover and no Subscribing Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Subscribing Reinsurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
# Article 17 - Liability of the Reinsurer
A. The liability of the Reinsurer shall follow that of the Company in every case and be subject in all respects to all of the general and specific stipulations, clauses, waivers, interpretations and modifications of the Company's Policies and any endorsements thereto. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.
B. Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third party or any persons not parties to this Contract.
# Article 18 - Net Retained Lines
A. This Contract applies only to that portion of any Policy which the Company retains net for its own account (prior to deduction of any reinsurance which inures solely to the benefit of the Company), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any Policy which the Company retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
# Article 19 - Funding of Reserves
(Applies to each Subscribing Reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company's reserves or at the option of the Company in accordance with the provisions of the Run-off Subscribing Reinsurers Article. Additionally, the Company may require the Subscribing Reinsurer to provide funding in
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accordance with the provisions of this Article in the event any of circumstances outlined in the paragraph A of the Special Termination Article occur).
A. As regards Policies or bonds issued by the Company coming within the scope of this Contract, the Company agrees that when it shall file with the insurance regulatory authority or set up on its books reserves for unearned premium or losses covered hereunder, or any other outstanding balances which it shall be required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund its share of any unearned premium (including, but not limited to, the unearned portion of any minimum and deposit premium installment as determined by the Company), known outstanding losses and Loss Adjustment Expense that have been reported to the Reinsurer, losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer, including all case reserves plus any reasonable amount estimated to be unreported from known Loss Occurrences, all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer, plus any other outstanding balances owed to the Company (hereinafter referred to as "Reinsurer's Obligations") by funds withheld, cash advances, Letter of Credit or a Trust Agreement which meets the requirements of any insurance regulatory authority having jurisdiction over the Company's reserve and is acceptable to the Company. The Reinsurer shall have the option to fund in another manner if the method and form thereof is acceptable to the Company and the insurance regulatory authorities having jurisdiction over the Company's reserves.
As respects a Subscribing Reinsurer who does not qualify for full credit with any insurance regulatory authority having jurisdiction over the Company's reserves, it is understood that any funding required of such Subscribing Reinsurer as set forth above shall not be greater than the amount of funding required by the insurance regulatory authorities having jurisdiction over the Company's reserves.
B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit issued by a bank meeting the NAIC Securities Valuation Office credit standards for issuers of Letters of Credit and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company's reserves in an amount equal to the Reinsurer's Obligations. Such Letter of Credit shall be issued for a period of not less than one year, and shall contain an "evergreen" clause, which automatically extends the term for one year from its date of expiration or any future expiration date, unless 30 days (or 60 days where required by insurance regulatory authorities) prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the Letter of Credit extended for any additional period.
C. The Reinsurer and the Company agree that the Letters of Credit or other funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company for the following purposes, unless otherwise provided for in a separate Trust Agreement:
1. To reimburse the Company for the Reinsurer's Obligations, the payment of which is due under the terms of this Contract and which has not been otherwise paid;
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2. To make refund of any sum which is in excess of the actual amount required to pay the Reinsurer's Obligations (or in excess of 102% of the Reinsurer's Obligations if funding is provided by a Trust Agreement) under this Contract;
3. To fund an account with the Company for the Reinsurer's Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company's other assets, and interest thereon not in excess of the U.S. prime rate shall accrue to the benefit of the Reinsurer;
4. To pay the Reinsurer's share of any other amounts the Company claims are due under this Contract.
All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer. In the event the amount drawn by the Company is in excess of the actual amount required for (1) or (3), or in the case of (4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn.
D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.
E. At annual intervals, or more frequently as agreed but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer's Obligations, for the sole purpose of amending the Letter of Credit or other method of funding, in the following manner:
1. If the statement shows that the Reinsurer's Obligations exceed the balance of the Letter of Credit as of the statement date, the Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall increase such funding by the amount of the difference set forth in the statement within 30 days after receipt of the statement.
2. If, however, the statement shows that the Reinsurer's Obligations are less than the balance of the Letter of Credit (or that 102% of the Reinsurer's Obligations are less than the Trust Account balance if funding is provided by a Trust Agreement) as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall decrease such funding by the amount of the difference set forth in the statement within 30 days after receipt of the statement.
F. Should the Subscribing Reinsurer be in breach of its obligations under this Article, or any Trust Agreement that the Subscribing Reinsurer enters into to collateralize the Reinsurer's Obligations hereunder, notwithstanding anything to the contrary elsewhere in this Contract, including but not limited to the Arbitration Article, the Company may seek immediate relief in respect of said breach from any court sitting in Pinellas County, Florida having
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competent jurisdiction of the parties hereto or the state and federal courts having jurisdiction for disputes from Pinellas County, as determined by the Company, and the parties consent to jurisdiction of such court. The Subscribing Reinsurer agrees that in addition to obeying the order of such court, it will bear all costs, including reasonable attorneys' fees and court costs, incurred by the Company in seeking the relief sought from such breach. In the alternative, at the sole discretion of the Company, the Company may elect to demand arbitration of such dispute pursuant to the provisions of the Arbitration Article.
G. Notwithstanding any other provision of this Article, as respects a Subscribing Reinsurer that is a Reciprocal Jurisdiction Reinsurer, the Subscribing Reinsurer agrees to provide collateral for 100% of the Subscribing Reinsurer’s obligations under this Contract, if the Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration or arbitral award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, if applicable. Further, with respect to Certain Underwriting Members of Lloyd's, this Contract does not constitute an American Reinsurance Policy as defined under the Lloyd’s US Situs Credit for Reinsurance Trust Deed or the Lloyd’s American Credit for Reinsurance Joint Asset Trust Deed. Therefore, the Company does not have recourse to those trust funds with respect to this Contract.
# Article 20 - Access to Records
The Reinsurer or its duly appointed representative shall have access to the books and records of the Company on matters relating to this reinsurance upon reasonable advance written notice to the Company and at reasonable times during the regular business hours of the Company, at the location where such books and records are maintained in the ordinary course of business, for the purpose of obtaining information concerning this Contract or the subject matter thereof. However, the Reinsurer shall have such access only if it is current in all Undisputed payments due to the Company in accordance with the provisions of this Contract. It is understood that reasonable advance written notice shall not be less than five business days. The Reinsurer may make copies of records of the Company related to this Contract, but at the Reinsurer's sole expense. "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why the payments are disputed.
# Article 21 - Confidentiality
A. The Reinsurer hereby acknowledges that the terms and conditions of this Contract, documents, information and data provided to it by the Company, whether directly or through an authorized agent, during the course of negotiation, administration, and performance of this Contract, and any submission or other materials related to any renewal hereof (hereinafter referred to as "Confidential Information") are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:
1. Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;
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2. Have been rightfully received from a third person without obligation of confidentiality; or
3. Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.
B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:
1. When required by retrocessionaires as respects the business ceded to this Contract;
2. When required by regulators performing an audit of the Reinsurer's records and/or financial condition;
3. When required by external auditors performing an audit of the Reinsurer's records in the normal course of business;
4. When required by courts or arbitrators in connection with an actual or potential dispute hereunder; or
5. When affiliates are involved in the management or operation of reinsurance business assumed.
Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.
C. Notwithstanding the above, in the event the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
D. The provisions of this Article shall extend to the officers, directors, shareholders and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
# Article 22 - Errors and Omissions
Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.
# Article 23 - Currency
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.
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B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.
# Article 24 - Taxes
In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.
# Article 25 - Federal Excise Tax
A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
# Article 26 - Insolvency
A. If more than one reinsured company is included within the definition of "Company" hereunder, this Article shall apply individually to each such company.
B. 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, with reasonable provision for verification, on the basis of the liability of the Company or on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. 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 Company indicating the Policy or bond reinsured which claim 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation 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.
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C. 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 this Contract as though such expense had been incurred by the Company.
D. It is further understood and agreed that, in the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except (1) where this Contract specifically provides another payee or other party as more specifically limited by any statute or regulation applicable hereto, of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. However, the exceptions provided in (1) and (2) above shall apply only to the extent that applicable statutes or regulations specifically permit such exceptions.
# Article 27 - Arbitration
A. As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion shall be submitted to arbitration. One arbiter shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration, all of whom shall be disinterested active or former officials or experienced individuals who have operated in, or been involved in, business placed in the United States insurance or reinsurance industry for at least 10 years. In the event that either party should fail to choose an arbiter within 30 days following a written request by the other party to do so, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. If the two arbiters fail to agree upon the selection of an umpire within 30 days following their appointment, the two arbiters shall request the American Arbitration Association to appoint the umpire. If the American Arbitration Association fails to appoint the umpire within 30 days after it has been requested to do so, either party may request a justice of a Court of general jurisdiction of the state in which the arbitration is to be held to appoint the umpire. Notwithstanding the above, in the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company may, at its option, choose to forgo arbitration and may bring an action in any court of competent jurisdiction. Such court shall award costs and expenses, including reasonable attorneys' fees and other expenses, if the Company prevails in such action.
B. Each party shall present its case to the arbiters within 30 days following the date of appointment of the umpire. The arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the arbiters shall be final and binding on 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. Judgment upon the final decision of the arbiters may be entered in any court of competent jurisdiction. The arbiters may award costs and expenses, including reasonable attorneys' fees and other expenses.
C. If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party
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for purposes of this Article and communications shall be made by the Company to each of the Subscribing Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers participating under the terms of this Contract from several to joint.
D. Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 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.
E. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.
F. In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in accordance with applicable law as soon as practicable after their decision. The arbiters shall award any necessary and legally permissible punitive damages to the Company.
# Article 28 - Service of Suit
(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)
A. This Article will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
B. The parties agree that the state and federal courts located in Pinellas County, Florida or state and federal courts having jurisdiction for disputes from Pinellas County, are the courts of competent personal and subject matter jurisdiction and are the proper venue for any court proceedings permitted under this Article or under this Contract. The parties further agree not to assert, by way of motion, as a defense, or otherwise in any such proceeding, that the venue of the suit is improper or that the agreement or the subject matter may not be enforced by such courts.
C. In the event a Subscribing Reinsurer fails to pay any amount claimed to be due hereunder or otherwise fails to perform its obligations hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the jurisdiction of the state or federal courts in Pinellas County, Florida or the state and federal courts having jurisdiction for disputes from Pinellas County, as determined by the Company. The Subscribing Reinsurer will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Subscribing Reinsurer upon this Contract, will abide by the final decision of such court or of any appellate court in the event of an appeal.
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D. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Office of Insurance Regulation, Commissioner of Insurance for the State of Florida or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.
# Article 29 - Run-off Subscribing Reinsurers
A. "Run-off Subscribing Reinsurer" as used herein shall mean a Subscribing Reinsurer that experiences one or more of the following circumstances:
1. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business or has been placed under regulatory supervision or in rehabilitation; or
2. The Subscribing Reinsurer has ceased all or substantially all of its underwriting operations; or
3. The Subscribing Reinsurer has transferred all or substantially all of its claims-paying authority to an unaffiliated entity; or
4. The Subscribing Reinsurer has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity, without prior written consent of the Company.
Notwithstanding the foregoing, the transfer of claims-paying authority or administration to a third party, if the Subscribing Reinsurer maintains control over claims settlement decisions, shall not constitute a transfer of claims-paying authority or delegation of its obligations for the purposes of subparagraphs 3 and 4 of this paragraph.
B. Notwithstanding any other provision of this Contract, in the event a Subscribing Reinsurer becomes a Run-off Subscribing Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Subscribing Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Subscribing Reinsurer's participation hereunder:
1. If the Run-off Subscribing Reinsurer does not pay a claim or raise a query concerning the claim within 30 days of billing, it shall be estopped from denying such claim and must pay immediately.
2. If payment of any claim has been received from Subscribing Reinsurers constituting at least 50.0% of the interests and liabilities of all Subscribing Reinsurers who participated on this Contract and who are not classified as Run-off Subscribing Reinsurers as of the due date, the Run-off Subscribing Reinsurer shall be estopped from denying such claim and must pay within 10 days following transmittal to the Run-off Subscribing Reinsurer of written notification of such payments.
3. Should the Run-off Subscribing Reinsurer refuse to pay claims as required by subparagraphs 1 and/or 2 above, the interest penalty specified in the Late Payments
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Article shall be increased by 1.0% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%, it being understood that in no event shall the maximum amount exceed the amount permitted by applicable law.
4. The Company may require the Run-off Subscribing Reinsurer to provide funding in accordance with the provisions of the Funding of Reserves Article or the Company may require that the Run-off Subscribing Reinsurer's liability for losses arising out of Loss Occurrences commencing during the Term of this Contract be commuted. If the Company elects to commute, the parties shall agree on the commutation amount. If the parties fail to agree within 30 days following the Company's election of commutation, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally the expense of the actuary and/or appraiser. If the Company and the Run-off Subscribing Reinsurer fail to agree on an actuary and/or appraiser within 45 days following the Company's election of commutation, the Company and the Run-off Subscribing Reinsurer shall each nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. None of the actuaries and/or appraisers shall have a financial interest in, nor be a current or former employee of, either of the parties to this Contract. The decision in writing of the actuary or appraiser shall be final and binding on both parties. The expense of the actuary or appraiser and of the commutation will be equally divided between the two parties. The Run-off Subscribing Reinsurer shall promptly pay the amount so determined. Payment by the Run-off Subscribing Reinsurer of the commutation amount shall constitute a full and final release of both parties under this Contract.
5. The provisions of the Offset Article shall not apply.
6. The provisions of the Arbitration Article shall not apply.
C. The Company's waiver of any rights provided in this Article shall not constitute a future waiver of that right, or any other rights, of the Company under this Contract.
# Article 30 - Severability
If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
# Article 31 - Governing Law
This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of the rules with respect to conflicts of law.
# Article 32 - Entire Agreement
A. This Contract and any related trust agreement, letter of credit and/or special acceptance(s), shall constitute the entire agreement between the parties hereto with respect to the
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business reinsured hereunder and there are no understandings between the parties other than as expressed in this Contract.
B. Any change to or modification of this Contract shall be null and void unless made by an addendum signed by both parties. Notwithstanding the foregoing, the provisions of this paragraph shall not apply to special acceptances made in accordance with the provisions of the Special Acceptance Article.
# Article 33 - Mode of Execution
A. This Contract (including any addenda thereto) may be executed by any of the following methods:
1. An original written ink signature of paper documents;
2. Facsimile or electronic copies of paper documents showing an original ink signature; and/or
3. Electronic signature technology employing computer software and a digital signature or digitizer pad to capture a person's handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of the methods set forth in paragraph A above shall constitute a valid execution of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.
# Article 34 - Intermediary
Aon Re, Inc., or one of its affiliated corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) relating to this Contract shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date specified below:
This ________________ day of ____________________________ in the year ____________.
CORE Risk Managers, LLC as Attorney-In-Fact for Condo Owners Reciprocal Exchange
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Pools, Associations and Syndicates Exclusion Clause
(Non-Catastrophe)
This Contract excludes loss or liability arising from:
A. Business derived directly or indirectly from any pool, association, or syndicate which maintains its own reinsurance facilities. This paragraph A shall not apply with respect to:
1. Residual market mechanisms formed to provide coverage for business classified as Automobile Physical Damage.
2. Inter-agency or inter-government joint underwriting or risk purchasing associations (however styled) created by or permitted by statute or regulation.
B. Those perils insured by the Company that the Company knows, at the time the risk is bound, to be insured by or in excess of amounts insured or reinsured by any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks. This paragraph B shall not apply:
1. If the total insured value over all interests of the risk is less than $250,000,000.
2. To interests traditionally underwritten as Inland Marine or Stock or Contents written on a blanket basis.
3. To Contingent Business Interruption liability, except when it is known to the Company, at the time the risk is bound, that the key location is insured by or through any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks; unless the total insured value over all interests of the risk is less than $250,000,000.
9/11/2014
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)
1. This reinsurance does not cover any loss or liability accruing to the Company, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this Clause, this reinsurance does not cover any loss or liability accruing to the Company, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the site, or
II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material", and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this reinsurance does not cover any loss or liability by radioactive contamination accruing to the Company, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate
(a) where the Company does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However, on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this reinsurance does not cover any loss or liability by radioactive contamination accruing to the Company, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Company to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. The Company to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
Note: - Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
(a) all policies issued by the Company on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the Company on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
NMA1119
12/12/1957
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada)
1. This Agreement does not cover any loss or liability accruing to the Reinsured directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
(a) Nuclear reactor power plants including all auxiliary property on the site, or
(b) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c) Installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d) Installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:
(a) where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6. The term "radioactive material" means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7. The Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:
(a) by any nuclear incident as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof, or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(b) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured whether new, renewal or replacement which become effective on or after December 31, 1992.
NMA1980a
01/04/1996
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PROPERTY CYBER AND DATA ENDORSEMENT
1 Notwithstanding any provision to the contrary within this Policy or any endorsement thereto this Policy excludes any:
1.1 Cyber Loss, unless subject to the provisions of paragraph 2;
1.2 loss, damage, liability, claim, cost, expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data, unless subject to the provisions of paragraph 3;
regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2 Subject to all the terms, conditions, limitations and exclusions of this Policy or any endorsement thereto, this Policy covers physical loss or physical damage to property insured under this Policy caused by any ensuing fire or explosion which directly results from a Cyber Incident, unless that Cyber Incident is caused by, contributed to by, resulting from, arising out of or in connection with a Cyber Act including, but not limited to, any action taken in controlling, preventing, suppressing or remediating any Cyber Act.
3 Subject to all the terms, conditions, limitations and exclusions of this Policy or any endorsement thereto, should Data Processing Media owned or operated by the Insured suffer physical loss or physical damage insured by this Policy, then this Policy will cover the cost to repair or replace the Data Processing Media itself plus the costs of copying the Data from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling the Data. If such media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank Data Processing Media. However, this Policy excludes any amount pertaining to the value of such Data, to the Insured or any other party, even if such Data cannot be recreated, gathered or assembled.
4 In the event any portion of this endorsement is found to be invalid or unenforceable, the remainder shall remain in full force and effect.
5 This endorsement supersedes and, if in conflict with any other wording in the Policy or any endorsement thereto having a bearing on Cyber Loss, Data or Data Processing Media, replaces that wording.
Definitions
6 Cyber Loss means any loss, damage, liability, claim, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with any Cyber Act or Cyber Incident including, but not limited to, any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident.
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7 Cyber Act means an unauthorised, malicious or criminal act or series of related unauthorised, malicious or criminal acts, regardless of time and place, or the threat or hoax thereof involving access to, processing of, use of or operation of any Computer System.
8 Cyber Incident means:
8.1 any error or omission or series of related errors or omissions involving access to, processing of, use of or operation of any Computer System; or
8.2 any partial or total unavailability or failure or series of related partial or total unavailability or failures to access, process, use or operate any Computer System.
9 Computer System means:
9.1 any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility,
owned or operated by the Insured or any other party.
10 Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.
11 Data Processing Media means any property insured by this Policy on which Data can be stored but not the Data itself.
LMA5400
11 November 2019
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Limited Communicable Disease Exclusion No. 2
(Property Treaty Reinsurance)
1. Notwithstanding any provision to the contrary within this Contract, this Contract excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2. Subject to the other terms, conditions and exclusions contained in this Contract, this Contract will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.
Definitions
3. "Communicable Disease" means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:
3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and
3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and
3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.
4. "Time Element Loss" means business interruption, contingent business interruption or any other consequential losses.
LMA5503
15 May 2020
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---
## EX-10.11
SEC source: [hci-ex10_11.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_11.htm)
EXHIBIT 10.11
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
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Table of Contents
Article Page
| | | |
| --- | --- | --- |
| 1 Classes of Business Reinsured | | 1 |
| 2 Term | | 1 |
| 3 Special Termination | | 2 |
| 4 Territory (BRMA 51A) | | 3 |
| 5 Exclusions | | 3 |
| 6 Special Acceptances | | 5 |
| 7 Retention and Limit | | 5 |
| 8 Reinstatement | | 5 |
| 9 Florida Hurricane Catastrophe Fund | | 6 |
| 10 Terrorism | | 7 |
| 11 Definitions | | 7 |
| 12 Other Reinsurance | | 10 |
| 13 Loss Occurrence | | 10 |
| 14 Loss Notices and Settlements | | 11 |
| 15 Cash Call | | 12 |
| 16 Salvage and Subrogation | | 12 |
| 17 Premium and Rate | | 12 |
| 18 Sanctions | | 13 |
| 19 Late Payments | | 13 |
| 20 Offset (BRMA 36C) | | 14 |
| 21 Access to Records | | 14 |
| 22 Confidentiality | | 15 |
| 23 Net Retained Lines (BRMA 32E) | | 16 |
| 24 Errors and Omissions (BRMA 14F) | | 16 |
| 25 Currency | | 17 |
| 26 Taxes | | 17 |
| 27 Federal Excise Tax | | 17 |
| 28 Reserves | | 17 |
| 29 Insolvency | | 20 |
| 30 Arbitration | | 21 |
| 31 Service of Suit | | 22 |
| 32 Governing Law (BRMA 71B) | | 22 |
| 33 Non-Waiver | | 22 |
| 34 Severability | | 23 |
| 35 Notices and Contract Execution | | 23 |
| 36 Intermediary | | 23 |
| | Schedule A | 25 |
| | Schedule B | 26 |
| Excluded Counties in the State of Florida | | 27 |
26\C0KT1013
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
entered into by and between
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
and
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to individually as the "Subscribing Reinsurer"
and collectively as the "Reinsurer")
# Article 1 - Classes of Business Reinsured
A. The Reinsurer shall reinsure the excess liability which may accrue to the Company under its policies in force at the effective time and date hereof or issued or renewed at or after that time and date, and classified by the Company as Direct and Assumed Property business, including business assumed by the Company in connection with depopulation of Policies from insurers of last resort, including but not limited to Citizens Property Insurance Corporation and any successor organization of such entity, subject to the terms, conditions and limitations set forth herein and in Schedules A and B attached to and forming part of this Contract.
B. The liability of the Reinsurer shall follow that of the Company in every case, including judicial interpretation, policy reformation and regulatory changes, and be subject in all respects to all the general and specific stipulations, clauses, interpretations, waivers, modifications and alterations of the Company's policies and any endorsements thereon.
C. Nothing herein shall in any manner create any obligation or establish any right against the Reinsurer in favor of third parties or any persons not parties to this Contract, except as provided in the Insolvency Article.
# Article 2 - Term
A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2026, with respect to losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2027.
B. If this Contract is terminated or expires while a loss occurrence covered hereunder is in progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the termination or expiration
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of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.
# Article 3 - Special Termination
A. Notwithstanding the provisions of paragraph A of the Term Article, the Company may terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:
1. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at the effective time and date of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) 12 months prior to that date; or
2. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at any time during the term of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) at the date of the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's most recent financial statement filed with regulatory authorities and available to the public as of the effective time and date of this Contract; or
3. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system) experiences a reduction of 20.0% or more during any 12-month period; or
4. The Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been suspended or withdrawn or has been assigned or downgraded below A-, or the Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been downgraded two or more notches during the term of this Contract even if the resulting A.M. Best's and/or Standard & Poor's Financial Strength Rating is A- or better; or
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or
6. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
7. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
8. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
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9. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
10. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
11. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity; or
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated or has its principal office and the country in which the Subscribing Reinsurer (or its group or holding company) is incorporated or has its principal office as a result of war, currency regulations, or any circumstances arising out of political, financial or economic emergency; or
13. The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the Reserves Article.
B. In the event any of the circumstances set forth in paragraph A above occur, it is solely at the Company's option to terminate or allow a Subscribing Reinsurer to continue to participate on this Contract.
C. As respects the terminated share of the Subscribing Reinsurer's original share, if a Subscribing Reinsurer's participation under any excess layer is terminated, no future deposit premium installments shall be due the Subscribing Reinsurer for that excess layer on or after the effective date of termination. The Subscribing Reinsurer shall immediately return the unearned portion of any premium paid for any excess layer, and the minimum premium requirements set forth in the Premium and Rate Article for that excess layer shall be waived.
D. The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the events set forth in paragraph A above. If the Subscribing Reinsurer fails to provide the Company with such notification, the Company may terminate the Subscribing Reinsurer based on a public announcement or discovery of the occurrence of such event.
E. The provisions of this Article shall survive termination or expiration of the Contract.
# Article 4 - Territory (BRMA 51A)
The territorial limits of this Contract shall be identical with those of the Company's policies.
# Article 5 - Exclusions
A. This Contract shall not apply to and shall specifically exclude the following:
1. Liability assumed by the Company under any form of treaty reinsurance; however, group intra-company reinsurance (if applicable), agency reinsurance accepted in the normal course of business, and/or policies written by another carrier at the Company's request and reinsured 100% by the Company shall not be excluded hereunder.
2. Financial guarantee or insolvency.
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3. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority; however, this exclusion shall not apply to:
a. Loss or damage covered under a reinsured policy containing a standard war exclusion;
b. Loss or damage arising out of or caused by an act of terrorism as defined in the Definitions Article; or
c. Loss or damage occasioned by riots, strikes, civil commotion, vandalism, malicious damage, including acts committed by agents of any government, party or faction engaged in war, hostilities or other warlike operation, provided such agents are acting secretly and not in connection with any operations of military or naval armed forces in the country where the interests insured are situated.
4. Loss or liability excluded by the Pools, Associations and Syndicates Exclusion Clause (Catastrophe) attached to and forming part of this Contract.
5. Loss or liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund, or other arrangement, howsoever denominated, established, or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.
6. Nuclear risks as defined in the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.) and the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada) attached to and forming part of this Contract.
7. Loss arising from communicable disease in accordance with the Limited Communicable Disease Exclusion No. 2 (Property Treaty Reinsurance) LMA 5503 (amended) attached to and forming part of this Contract.
8. Cyber Risks, E-Risks (i.e. coverage not restricted to physical loss or damage and subsequent business interruption) as per Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance) No. 1 LMA 5410 (amended) attached to and forming part of this Contract.
9. Homeowners Choice Property & Casualty Insurance Company, Inc. business in the following:
a. The counties within the State of Florida as set forth in Schedule B attached to and forming part of this Contract; and
b. Any state outside the State of Florida.
B. However, should any arbitration panel or any judicial, regulatory, or legislative entity having legal jurisdiction invalidate any exclusion in the Company's policy or the underlying policy on which the Company's policy follows form, any amount of loss for which the Company is liable because of such invalidation shall not be excluded hereunder.
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C. The exclusions enumerated above shall not apply when they are merely incidental to the main operations of the insured, provided such main operations are covered by the Company and are not themselves excluded from the scope of this Contract. The Company shall determine what is "incidental."
D. Should the Company, by reason of an inadvertent act, error, or omission, be bound to afford coverage excluded hereunder or should an existing insured extend its operations to include coverage excluded hereunder, the Reinsurer shall waive the exclusion(s). The duration of said waiver shall not extend beyond the time that notice of such coverage has been received by the responsible underwriting authority of the Company plus the minimum time period required thereafter for the Company to terminate such coverage.
# Article 6 - Special Acceptances
The Company may submit to the Reinsurer for special acceptance business not covered by this
Contract. Such business, if accepted by the Reinsurer, shall be covered hereunder, and shall
be subject to the terms and conditions of this Contract, except as otherwise modified by such
special acceptance. A Subscribing Reinsurer shall be deemed to have accepted a risk if it has
not responded within five business days after receipt of the request for special acceptance. Any
business covered by special acceptance under the reinsurance contract being replaced by this
Contract will be automatically covered hereunder. Further, in the event a reinsurer becomes a
party to this Contract subsequent to the special acceptance of any business not normally
covered hereunder, the new reinsurer will automatically accept the same as being a part of this
Contract.
# Article 7 - Retention and Limit
As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as "Company's Retention" for that excess layer in Schedule A attached hereto, arising out of each loss occurrence. The Reinsurer shall then be liable, as respects each excess layer, for the amount by which such ultimate net loss exceeds the Company's applicable retention, but the liability of the Reinsurer under each excess layer shall not exceed the amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss occurrence.
# Article 8 - Reinstatement
A. In the event all or any portion of the reinsurance under the First and/or Second Excess Layer is exhausted by ultimate net loss, the amount so exhausted shall be reinstated immediately from the time the loss occurrence commences hereon. For each amount so reinstated under the First and/or Second Excess Layer, the Company agrees to pay additional premium equal to the product of the following:
1. The percentage of the loss occurrence limit for the First and/or Second Excess Layer (based on the ultimate net loss paid by the Reinsurer) reinstated; multiplied by
2. The earned reinsurance premium for the First and/or Second Excess Layer for the term of this Contract (exclusive of reinstatement premium).
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B. Whenever the Company requests payment by the Reinsurer of any ultimate net loss under the First and/or Second Excess Layer of reinsurance coverage provided hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer for the First and/or Second Excess Layer.
C. Notwithstanding anything stated herein, the liability of the Reinsurer under each excess layer of reinsurance coverage provided hereunder shall not exceed either of the following:
1. The amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss occurrence; or
2. The amount, shown as "Reinsurer's Term Limit" for that excess layer in Schedule A attached hereto, in the aggregate for all loss occurrences commencing during the term of this Contract.
# Article 9 - Florida Hurricane Catastrophe Fund
A. The Florida Hurricane Catastrophe Fund (hereinafter referred to as "FHCF") mandatory layer of coverage, which is purchased by the Company, shall be deemed to inure to the benefit of this Contract. As respects loss occurrences subject to this Contract, it is understood and agreed that the only FHCF mandatory layer of coverage deemed to inure to the benefit of this Contract are those of Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange. In the event any portion of the mandatory layer of coverage is eroded or exhausted, only the remaining limit of such coverage shall be deemed to inure to the benefit of this Contract. However, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the FHCF reimbursement contract at the full payout level set forth therein and will be deemed not to be reduced by any inability of The State Board of Administration of the State of Florida to satisfy the actual claims-paying capacity of the FHCF.
B. Prior to the determination of the Company's FHCF retention and payout, if any, under the reimbursement contract between the Company and the State Board of Administration of the State of Florida, the Reinsurer's liability hereunder will be determined provisionally based on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C. If an FHCF reimbursement amount is based on the Company's losses in more than one loss occurrence commencing during the term of this Contract, the allocation of the total FHCF reimbursement received by the Company to individual loss occurrences shall be at the sole discretion of the Company, provided that:
1. The amount allocated by the Company to any individual loss occurrence shall not exceed the amount of FHCF reimbursement to which the Company would be entitled for that loss occurrence alone; and
2. The total amount allocated by the Company to all such loss occurrences shall be equal to the total FHCF reimbursement received by the Company for such loss occurrences.
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D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.
E. Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange have opted for 45.0% coverage selection from the FHCF.
# Article 10 - Terrorism
A. Except as provided in paragraph B below, any loss reimbursement the Company receives from the United States Government under the Terrorism Risk Insurance Act of 2002 or any subsequent amendments, extensions or reauthorizations thereof (the "Terrorism Act") as a result of loss occurrences commencing during the term of this Contract shall inure solely to the benefit of the Company and shall be entirely disregarded in applying all of the provisions of this Contract.
B. If one or more loss occurrences commencing during the term of this Contract result(s) in recoveries made by the Company for insured losses (as defined in the Terrorism Act) under this Contract and under the Terrorism Act, and such recoveries, together with any other reinsurance recoveries made by the Company for insured losses applicable to said loss occurrence(s), exceed the amount permitted by the Terrorism Act, a percentage of any amount in excess thereof shall reduce the ultimate net loss subject to this Contract for the loss occurrence(s) to which the recoveries apply. Such percentage for each loss occurrence to which recoveries apply shall be determined by dividing the recoveries made by the Company for insured losses under this Contract in that loss occurrence by the total treaty reinsurance recoveries made by the Company for insured losses in that loss occurrence.
C. For purposes hereof, if a loss reimbursement received by the Company under the Terrorism Act is based on the Company's insured losses in more than one loss occurrence and the United States Government does not designate the amount allocable to each loss occurrence, the reimbursement shall be prorated in the proportion that the Company's insured losses in each loss occurrence bear to the Company's total insured losses arising out of all loss occurrences to which the recovery applies.
D. If a loss occurrence under this Contract involves both insured losses as defined in the Terrorism Act and losses covered hereunder which are not insured losses under the Terrorism Act, any recoveries made by the Company under this Contract in such loss occurrence shall be deemed to be made by the Company for insured losses, but only for an amount not exceeding the Company's insured losses in that loss occurrence.
# Article 11 - Definitions
A. "Act of terrorism" as used in this Contract shall mean any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:
1. Involves violence against one or more persons; or
2. Involves damage to property; or
3. Endangers life other than the person committing the action; or
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4. Creates a risk to health or safety of the public or a section of the public.
B. "Active Subscribing Reinsurer" as used in this Contract shall mean a Subscribing Reinsurer that is not a Runoff Subscribing Reinsurer as of the due date of the claim (as specified in the Late Payments Article).
C. "Loss adjustment expense" as used in this Contract shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense, and/or appeal of claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, interest on judgments, expenses of outside adjusters, expenses and a pro rata share of salaries of the Company's field employees and other employees of the Company who have been temporarily diverted from their normal and customary duties and assigned to the adjustment of losses covered by this Contract, expenses of the Company's officials incurred in connection with losses covered by this Contract, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, advertising or other extraordinary communication expenses incurred as a result of a covered loss occurrence, costs of supersedeas and appeal bonds, and extraordinary expenses arising out of a covered loss occurrence, whether or not they are allocable to a specific claim. Loss adjustment expense shall not include normal office expenses or salaries of the Company's officials except as provided for above.
D. "Loss in excess of policy limits" and "extra contractual obligations" as used in this Contract shall mean:
1. "Loss in excess of policy limits" shall mean any amount paid or payable by the Company in excess of its policy limits, but otherwise within the terms of its policy, such loss in excess of the Company's policy limits having been incurred because of, but not limited to, failure by the Company to settle within the policy limits, failure by the Company to settle within a timely manner, or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action.
2. "Extra contractual obligations" shall mean any punitive, exemplary, compensatory or consequential damages paid or payable by the Company, not covered by any other provision of this Contract and which arise from the handling of any claim on business subject to this Contract, such liabilities arising because of, but not limited to, failure by the Company to settle within the policy limits, failure by the Company to settle within a timely manner, or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action. An extra contractual obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the policy.
Coverage for extra contractual obligations and/or loss in excess of policy limits shall not apply when such loss has been incurred due to a finally adjudicated finding of fraud committed by a member of the board of directors or a corporate officer of the Company acting individually or collectively or in collusion with a member of the board of directors or a corporate officer or a partner of any other corporation or partnership.
Recoveries from any form of insurance which protects the Company against claims the subject matter of this paragraph shall inure to the benefit of this Contract.
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A Runoff Subscribing Reinsurer shall be precluded from asserting that a claim otherwise payable hereunder is loss in excess of policy limits and/or extra contractual obligations, if an Active Subscribing Reinsurer has not made such assertion.
Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.
E. "Policy" as used in this Contract shall mean policies, binders, contracts, endorsements, or agreements of insurance or reinsurance, whether written or oral.
F. "Runoff Subscribing Reinsurer" as used in this Contract shall mean a Subscribing Reinsurer that experiences one or more of the following circumstances:
1. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
2. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
3. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
4. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
5. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
6. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity.
G. "Term of this Contract" as used in this Contract shall mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, to 12:01 a.m., Eastern Standard Time, June 1, 2027. However, if a Subscribing Reinsurer's share is terminated in accordance with the Special Termination Article, "term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, to the effective time and date of termination.
H. "Ultimate net loss" as used in this Contract shall mean the sum or sums (including loss in excess of policy limits, extra contractual obligations and loss adjustment expense, as defined herein) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all claims on inuring reinsurance (if any), whether collectible or not, and all salvage and other recoveries. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company's ultimate net loss has been ascertained. In the event a verdict or judgment is reduced by an appeal or a settlement subsequent to the entry of the judgment thereby resulting in an ultimate saving on such verdict or judgment, or a judgment is reversed outright, the loss adjustment expense incurred in securing such final reduction or reversal shall be prorated between the
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Reinsurer and the Company in the proportion that each benefits from such reduction or reversal. However, for the purposes of this Contract, loss in excess of policy limits and extra contractual obligations arising out of any one loss occurrence shall not exceed 25.0% of ultimate net loss as calculated prior to the consideration of such 25.0% limitation.
# Article 12 - Other Reinsurance
The Company shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.
# Article 13 - Loss Occurrence
A. "Loss occurrence" as used in this Contract shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event. However, the duration and extent of any one "loss occurrence" shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term "loss occurrence" shall be further defined as follows:
1. As regards any "named storm," all individual losses sustained by the Company arising out of and directly occasioned by such named storm, without regard to the limitations of duration and extent set forth above. "Named storm" means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a named storm shall be considered part of that named storm, once it has merged. A named storm shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A named storm shall be deemed to end 96 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.
2. As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage other than named storm, all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event.
3. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours, and, with the exception of coordinated union activities (for which there are no geographical restrictions), within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses which occur beyond such 96 consecutive hours during the continued occupation of an insured's premises by strikers, provided such occupation commenced during the aforesaid period.
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4. As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company's loss occurrence.
5. As regards freeze, only individual losses directly occasioned by collapse, breakage of glass and water damage (including but not limited to those caused by freezing and/or melting of ice, snow or sleet, or ice damming on structures, or by bursting frozen pipes and tanks) may be included in the Company's loss occurrence.
6. Notwithstanding the above, as regards firestorms, brush fires and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs A(3) and A(4) above), all individual losses sustained by the Company which commence during any period of 240 consecutive hours within a 250-mile radius of any fixed point selected by the Company may be included in the Company's loss occurrence. However, an individual loss subject to this subparagraph cannot be included in more than one loss occurrence.
B. For all loss occurrences, other than those referred to in subparagraph A(3) above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 or 240 consecutive hours shall apply with respect to one event, except as otherwise provided for in this Article.
C. As respects those loss occurrences referred to in subparagraph A(3) above, if the disaster, accident, or loss occasioned by the event is of greater duration than 96 consecutive hours, the Company may divide that disaster, accident, or loss into two or more loss occurrences and may choose the date and time when each such period of consecutive hours commences, provided no two periods overlap and no individual loss is included in more than one such period, and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.
D. Losses arising from a combination of two or more perils as a result of the same event may be considered as having arisen from one loss occurrence. Notwithstanding the foregoing, the hourly limitations as stated in paragraph A above shall not be exceeded as respects the applicable perils and no single loss occurrence shall encompass a time period greater than 168 consecutive hours, except as otherwise provided for in this Article.
# Article 14 - Loss Notices and Settlements
A. As respects each excess layer hereunder, whenever losses sustained by the Company appear likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.
B. The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.
C. Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer. The Reinsurer shall pay within 10 business days to the Company its share of
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amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.
# Article 15 - Cash Call
Notwithstanding the provisions of the Loss Notices and Settlements Article, upon the request of the Company, the Reinsurer shall pay any amount with regard to a loss settlement or settlements that are scheduled to be made (including any payments projected to be made) within the next 30 days by the Company, subject to receipt by the Reinsurer of a satisfactory proof of loss. Such agreed payment shall be made within 14 days from the date the demand for payment was transmitted to the Reinsurer.
# Article 16 - Salvage and Subrogation
The Reinsurer shall be credited with salvage or recoveries from subrogation (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving this Contract. Salvage thereon or subrogation recoveries shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company shall enforce its rights to salvage or subrogation relating to any loss, a part of which loss has been sustained by the Reinsurer, and shall prosecute all claims arising out of such rights if, in the Company's opinion, it is economically reasonable to do so.
# Article 17 - Premium and Rate
A. As premium for each excess layer of reinsurance provided by this Contract, the Company shall pay the Reinsurer the amount shown as "Deposit Premium" for the excess layer in Schedule A attached hereto in four equal installments of the amount, shown as "Quarterly Deposit Premium" for each excess layer in Schedule A attached hereto on July 1 and October 1 of 2026, and January 1 and April 1 of 2027.
B. The Company shall adjust the deposit premium of each excess layer in Schedule A attached hereto by applying the rate shown as "Premium Rate" for each excess layer in Schedule A attached hereto to its actual total insured value as of September 30, 2026, subject to the amount shown as "Minimum Premium" for each excess layer in Schedule A attached hereto. Any additional premium shall be remitted promptly to the Reinsurer. In the event there is return premium due the Company, such return premium shall be remitted promptly to the Company.
C. Notwithstanding the foregoing, within 45 days following the expiration of this Contract, if the actual total insured value as of September 30, 2026, varies from the projected total insured value as of September 30, 2026, by greater than or equal to 95.0% and less than or equal to 105%, there shall be no premium adjustment. It is agreed and understood that the projected total insured value of September 30, 2026, is $21,563,729,958. Should the actual total insured value exceed the projected total insured value, the Company shall immediately pay the Reinsurer the difference in excess of 105% of the projected total insured value. Should the actual total insured value be less than 95.0% of the projected total insured value, the Reinsurer shall immediately pay the Company the difference below 95.0% of the projected total insured value.
D. "Total Insured Value" as used herein shall mean the overall limit of policies reinsured hereunder, for all property coverages combined.
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# Article 18 - Sanctions
Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under this Contract if it would result in a violation of any mandatory sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America that are applicable to either party.
# Article 19 - Late Payments
A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. However, any Subscribing Reinsurer that has experienced any of the circumstances set forth in paragraph A of the Special Termination Article shall not be allowed to implement the provisions of this Article against the Company.
B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (hereinafter referred to as the "Intermediary") by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party shall pay, any and all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection or enforcement of any payment obligations of the debtor party, except those costs and expenses the parties are required to share equally pursuant to the Arbitration Article, plus an interest charge on the amount past due calculated for each such payment on the last business day of each month as follows:
1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of 4.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3. The amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest charges have been received by the Intermediary.
Notwithstanding the provisions of subparagraph B(2) above and the immediately preceding sentence, the interest rate for a Runoff Subscribing Reinsurer shall increase by 1.0% for every month that payment of the claim is past due, subject to a maximum annual interest rate of 12.0%.
C. If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated in any way.
D. The establishment of the due date shall, for purposes of this Article, be determined as follows:
1. As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract, and such payments shall be deemed overdue 30 days past the provided due date. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
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2. As respects a "cash call" made in accordance with the Cash Call Article, payment shall be deemed due 20 days after the demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 20 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the demand for payment was transmitted to the Reinsurer.
3. Any claim or loss payment due the Company hereunder other than as set forth in subparagraph 2 above shall be deemed due 30 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 30 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
4. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs D(1), D(2) and D(3) above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days following transmittal of written notification that the provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.
E. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest charges due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest charge on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.
F. Interest charges arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.
# Article 20 - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise.
# Article 21 - Access to Records
A. By giving the Company 15 days of prior notice, the Reinsurer or its designated representatives shall have access at any reasonable time to underwriting, claims and accounting files of the Company which pertain in any way to this Contract. However, a Subscribing Reinsurer or its designated representatives shall not have any right of access to the records of the Company if it
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is not current in all undisputed payments due the Company, nor shall any right of access be construed to allow the Reinsurer the right to delay or withhold payment for any undisputed losses which shall fall due hereunder.. "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why the payments are disputed.
B. Prior to the access and review by the Reinsurer of certain books and records, the Company may redact names and any other information the Company, in its sole judgment, considers proprietary and any information the Company is required by law or regulation to redact.
# Article 22 - Confidentiality
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract, including all information obtained through any audits and any claims information between the Company and the Reinsurer, and any submission or other materials relating to any renewal (hereinafter referred to as "confidential information") are proprietary and confidential to the Company.
B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any confidential information to any third parties, including but not limited to the Reinsurer's subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates, underwriting agencies, research organizations, any unaffiliated entity engaged in modeling insurance or reinsurance data, and statistical rating organizations.
C. Confidential information may be used by the Reinsurer only in connection with the performance of its obligations or enforcement of its rights under this Contract and shall only be disclosed when required by (1) retrocessionaires subject to the business ceded to this Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial condition, (3) external auditors performing an audit of the Reinsurer's records in the normal course of business, (4) the Reinsurer's legal counsel, or (5) subsidiaries or affiliates of the Reinsurer that assist in underwriting or administrative obligations directly related to this Contract (however, this subparagraph 5 shall not include subsidiaries or affiliates in competition with the Company); provided that the Reinsurer advises such parties of the confidential nature of the confidential information and their obligation to maintain its confidentiality. The Company may require that any third-party representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article or by a separate written confidentiality agreement, containing terms no less stringent than those set forth in this Article. If a third-party representative of the Reinsurer is not bound, in writing, by this Confidentiality Article or by a separate written confidentiality agreement, the Reinsurer shall be responsible for any breach of this provision by such third-party representative of the Reinsurer.
D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the confidential information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure, to the extent legally permissible, and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
E. Any disclosure of personally identifiable information shall comply with all applicable statutes and regulations governing the disclosure of personally identifiable information that apply by law to the parties of this Contract. "Personally identifiable information" shall be defined as this term or a similar term is defined in any applicable state, provincial, territory, federal or international law.
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Disclosing or using this information for any purpose not authorized by applicable law is expressly forbidden without the prior consent of the Company.
F. The parties agree that any information subject to privilege, including the attorney-client privilege or attorney work product doctrine (collectively "privilege") shall not be disclosed to the Reinsurer until, in the Company's opinion, such privilege is deemed to be waived or otherwise compromised by virtue of its disclosure pursuant to this Contract. Furthermore, the Reinsurer shall not assert that any privilege otherwise applicable to the confidential information has been waived or otherwise compromised by virtue of its disclosure pursuant to this Contract.
G. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
H. If confidential information is acquired by or made available to an unauthorized third party due to a Subscribing Reinsurer's breach of this Article, the following shall apply:
1. The Subscribing Reinsurer shall notify the Company immediately in writing. However, with respect to personally identifiable information acquired by or made available to an unauthorized third party due to a Subscribing Reinsurer's breach of this Article, that Subscribing Reinsurer shall notify the Company that such a breach has occurred in compliance with any applicable laws and regulations that apply by law to the parties to this Contract. A Subscribing Reinsurer shall indemnify the Company for any and all losses, claims, fines, and expenses, including but not limited to attorneys' fees and costs and credit monitoring expenses, incurred by the Company as a result of that Subscribing Reinsurer's breach of this Article.
2. The Company may, at its option, seek relief by forgoing arbitration as provided in this Contract and bringing an action in any court of competent jurisdiction. The Subscribing Reinsurer acknowledges that any such unauthorized disclosure of confidential information may cause irreparable harm to the Company, and the Company shall be entitled to specific performance, including immediate issuance of a temporary restraining order or preliminary injunction. The court or other tribunal may award damages, costs and expenses, including reasonable attorneys' fees and other expenses, and any other remedies available under the law due to that Subscribing Reinsurer's breach of this Article.
# Article 23 - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
# Article 24 - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay,
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error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.
# Article 25 - Currency
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to mean United States Dollars, and all transactions under this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.
# Article 26 - Taxes
In consideration of the terms under which this Contract is issued, the Company shall not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.
# Article 27 - Federal Excise Tax
A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
# Article 28 - Reserves
A. The Subscribing Reinsurer agrees to fund 100% of its share of the Company's ceded United States unearned premium, if any, and/or outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves), and all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer (hereinafter the "Subscribing Reinsurer's United States obligations") by:
1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2. Trust accounts established solely for the benefit of the Company; and/or
3. Cash advances;
if the Subscribing Reinsurer:
1. As of the inception of this Contract (irrespective of any certification date that may be backdated) or during the term of the Contract or thereafter, is unauthorized in any state of
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the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
2. Is not domiciled in the United States of America or its territories or possessions, and has become certified, authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
3. Is a Runoff Subscribing Reinsurer; or
4. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
Notwithstanding the provisions above, if the Subscribing Reinsurer became authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves before January 1, 2010, then the Subscribing Reinsurer may provide funding via a multi-beneficiary trust amounting to 100% of the Subscribing Reinsurer's United States obligations, and such funding shall be deemed to satisfy the funding requirements under this Article. Any funding in a multi-beneficiary trust shall include an amount of incurred but not reported loss reserves as calculated by the Company.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's United States obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
B. As respects reinsurers that have become certified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves, any deferred funding as permitted by certain states in the event of a catastrophe shall not apply to the Subscribing Reinsurer.
C. The Subscribing Reinsurer shall fund 120% of its share of the Company's ceded Canadian unearned premium, if any, and/or outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) (hereinafter the "Subscribing Reinsurer's Canadian obligations") by:
1. A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2. Cash advances for the remaining balance of the funding required;
if the Subscribing Reinsurer:
1. Is unauthorized in any province or jurisdiction of Canada and if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved; or
2. Is a Runoff Subscribing Reinsurer; or
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3. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
The Subscribing Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the Company and the insurance regulatory authorities involved.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's Canadian obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
D. With regard to funding in whole or in part by letters of credit, each letter of credit shall be in a form acceptable to insurance regulatory authorities involved, shall be issued for a term of at least one year and shall include an "evergreen clause," which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. Notwithstanding anything to the contrary in this Contract, said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Subscribing Reinsurer, but only for one or more of the following purposes:
1. To reimburse the Company for the Subscribing Reinsurer's share of unearned premiums, if any, returned to insureds on account of policy cancellations, unless paid in cash by the Subscribing Reinsurer;
2. To reimburse the Company for the Subscribing Reinsurer's share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Subscribing Reinsurer;
3. To reimburse the Company for the Subscribing Reinsurer's share of any other amounts claimed to be due hereunder, unless paid in cash by the Subscribing Reinsurer;
4. To fund a cash account in an amount equal to the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Subscribing Reinsurer 10 days prior to its expiration date;
5. To refund to the Subscribing Reinsurer any sum in excess of the actual amount required to fund the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations, if so requested by the Subscribing Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for D(1), D(2) or D(4) above, or in the case of D(3) above, the actual amount determined to be due, the Company shall promptly return to the Subscribing Reinsurer the excess amount so drawn.
E. At annual intervals, or more frequently as determined by the Company (but never more frequently than quarterly), the Company shall prepare a specific statement, for the sole purpose of amending the respective letters of credit, of the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations. Amendments shall be made to said letters of credit in accordance with the following:
1. If the statement shows that the Subscribing Reinsurer's United States obligations exceed the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of the Subscribing Reinsurer's Canadian obligations which
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the Subscribing Reinsurer has elected to fund by letter of credit, if any, exceeds the balance of credit applicable thereto as of the statement date, the Subscribing Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment or amendments of the respective letters of credit increasing the amount of credit by the amount of the applicable difference.
2. If, however, the statement shows that the Subscribing Reinsurer's United States obligations are less than the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, is less than the balance of credit applicable thereto as of the statement date, the Company shall, within 30 days after receipt of written request from the Subscribing Reinsurer, release such excess credit by agreeing to secure an amendment or amendments to the respective letters of credit reducing the amount of credit available by the amount of the applicable excess credit.
F. Notwithstanding any other provision of this Article, as respects a Subscribing Reinsurer that is a Reciprocal Jurisdiction Reinsurer, the Subscribing Reinsurer agrees to provide collateral for 100% of the Subscribing Reinsurer's obligations under this Contract, if the Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration or arbitral award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, if applicable.
Further, with respect to Certain Underwriting Members of Lloyd's, this Contract does not constitute an American Reinsurance Policy as defined under the Lloyd's US Situs Credit for Reinsurance Trust Deed or the Lloyd's American Credit for Reinsurance Joint Asset Trust Deed. Therefore, the Company does not have recourse to those trust funds with respect to this Contract.
# Article 29 - Insolvency
A. This Article shall apply severally to each reinsured company referenced within the definition of "Company" in this Contract. Further, this Article and the laws of the domiciliary jurisdiction shall apply in the event of the insolvency of any company intended to be covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary jurisdiction of any company intended to be covered hereunder, that domiciliary jurisdiction's laws shall prevail.
B. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. However, 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 Company indicating the policy or bond reinsured which claim 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 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation or liquidation to the extent of a pro
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rata share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
C. Where two or more Subscribing 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 this Contract as though such expense had been incurred by the Company.
D. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the Company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Company to such payees.
# Article 30 - Arbitration
A. As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion shall be submitted to arbitration. One arbiter shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration, all of whom shall be disinterested active or former officials or experienced individuals who have operated in, or been involved in, business placed in the United States insurance or reinsurance industry for at least 10 years. In the event that either party should fail to choose an arbiter within 30 days following a written request by the other party to do so, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. If the two arbiters fail to agree upon the selection of an umpire within 30 days following their appointment, the two arbiters shall request the American Arbitration Association to appoint the umpire. If the American Arbitration Association fails to appoint the umpire within 30 days after it has been requested to do so, either party may request a justice of a Court of general jurisdiction of the state in which the arbitration is to be held to appoint the umpire. Notwithstanding the above, in the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company may, at its option, choose to forgo arbitration and may bring an action in any court of competent jurisdiction. Such court shall award costs and expenses, including reasonable attorneys' fees and other expenses, if the Company prevails in such action.
B. Each party shall present its case to the arbiters within 30 days following the date of appointment of the umpire. The arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the arbiters shall be final and binding on 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. Judgment upon the final decision of the arbiters may be entered in any court of competent jurisdiction. The arbiters may award costs and expenses, including reasonable attorneys' fees and other expenses.
C. If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Subscribing Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers participating under the terms of this Contract from several to joint.
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D. Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 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.
E. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.
F. In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in accordance with applicable law as soon as practicable after their decision. The arbiters shall award any necessary and legally permissible punitive damages to the Company.
# Article 31 - Service of Suit
(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)
A. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
B. In the event the Subscribing Reinsurer fails to perform its obligations hereunder, the Subscribing Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Subscribing Reinsurer, once the appropriate Court is accepted by the Subscribing Reinsurer or is determined by removal, transfer or otherwise, as provided for above, shall comply with all requirements necessary to give said Court jurisdiction and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, shall abide by the final decision of such Court or of any Appellate Court in the event of an appeal.
C. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his or her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.
# Article 32 - Governing Law (BRMA 71B)
This Contract shall be governed by and construed in accordance with the laws of the State of Florida.
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# Article 33 - Non-Waiver
The failure of the Company to insist on compliance with this Contract or to exercise any right, remedy or option hereunder shall not: (1) constitute a waiver of any rights contained in this Contract, (2) prevent the Company from thereafter demanding full and complete compliance, (3) prevent the Company from exercising such remedy in the future, nor (4) affect the validity of this Contract or any part thereof.
# Article 34 - Severability
If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, regulatory body or court, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
# Article 35 - Notices and Contract Execution
A. Whenever a notice, statement, report or any other written communication is required by this Contract, unless otherwise specified, such notice, statement, report or other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first class mail is also acceptable.
B. The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:
1. Paper documents with an original ink signature;
2. Facsimile or electronic copies of paper documents showing an original ink signature; and/or
3. Electronic records with an electronic signature made via an electronic agent. For the purposes of this Contract, the terms "electronic record," "electronic signature" and "electronic agent" shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto.
C. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.
# Article 36 - Intermediary
Aon Re, Inc., or one of its affiliated corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating to this Contract shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
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In Witness Whereof, the Company has caused this Contract to be executed by its duly authorized representatives, who also confirm the Company's review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as of the date specified below:
This ________________ day of ____________________________ in the year ____________.
CORE Risk Managers, LLC as Attorney-In-Fact for Condo Owners Reciprocal Exchange
This ________________ day of ____________________________ in the year ____________.
Tailrow Risk Managers, LLC as Attorney-In-Fact for Tailrow Insurance Exchange
This ________________ day of ____________________________ in the year ____________.
Homeowners Choice Property & Casualty Insurance Company, Inc.
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# Schedule A
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
| Line item | First Excess | Second Excess | Third Excess |
| --- | --- | --- | --- |
| Company's Retention | $15,000,000 | $100,000,000 | $200,000,000 |
| Reinsurer's Per Occurrence Limit | $85,000,000 | $100,000,000 | $135,000,000 |
| Reinsurer's Term Limit | $170,000,000 | $200,000,000 | $135,000,000 |
| Minimum Premium | [REDACTED] | [REDACTED] | [REDACTED] |
| Premium Rate | [REDACTED] | [REDACTED] | [REDACTED] |
| Deposit Premium | [REDACTED] | [REDACTED] | [REDACTED] |
| Quarterly Deposit Premium | [REDACTED] | [REDACTED] | [REDACTED] |
The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.
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# Schedule B
Excluded Counties in the State of Florida
for Homeowners Choice Property & Casualty Insurance Company, Inc. Business:
BREVARD
BROWARD
CHARLOTTE
CITRUS
COLLIER
DESOTO
GLADES
HARDEE
HENDRY
HERNANDO
HIGHLANDS
HILLSBOROUGH
INDIAN RIVER
LAKE
LEE
MANATEE
MARION
MARTIN
MIAMI-DADE
MONROE
OKEECHOBEE
ORANGE
OSCEOLA
PALM BEACH
PASCO
PINELLAS
POLK
SARASOTA
SEMINOLE
ST. LUCIE
SUMTER
VOLUSIA
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# Excluded Counties in the State of Florida
# for Homeowners Choice Property & Casualty Insurance Company, Inc. Business
The above map is for illustrative purposes only. Any discrepancy between the listing of Subject Counties in Schedule B and the above map shall be resolved in favor of the listing in Schedule B.
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Pools, Associations and Syndicates Exclusion Clause
(Catastrophe)
It is hereby understood and agreed that:
A. This Contract excludes loss or liability arising from:
1. Business derived directly or indirectly from any pool, association, or syndicate which maintains its own reinsurance facilities. This subparagraph 1 shall not apply with respect to:
a. Residual market mechanisms created by statute. This Contract shall not extend, however, to afford coverage for liability arising from the inability of any other participant or member in the residual market mechanism to meet its obligations, nor shall this Contract extend to afford coverage for liability arising from any claim against the residual market mechanism brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract). For the purposes of this Clause, the California Earthquake Authority shall be deemed to be a "residual market mechanism."
b. Inter-agency or inter-government joint underwriting or risk purchasing associations (however styled) created by or permitted by statute or regulation.
2. Those perils insured by the Company that the Company knows, at the time the risk is bound, to be insured by or in excess of amounts insured or reinsured by any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks. This subparagraph 2 shall not apply:
a. If the total insured value over all interests of the risk is less than $250,000,000.
b. To interests traditionally underwritten as Inland Marine or Stock or Contents written on a blanket basis.
c. To Contingent Business Interruption liability, except when it is known to the Company, at the time the risk is bound, that the key location is insured by or through any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks; unless the total insured value over all interests of the risk is less than $250,000,000.
B. With respect to loss or liability arising from the Company's participation or membership in any residual market mechanism created by statute, the Company may include in its ultimate net loss only amounts for which the Company is assessed as a direct consequence of a covered loss occurrence, subject to the following provisions:
1. Recovery is limited to perils otherwise protected hereunder.
2. In the event the terms of the Company's participation or membership in any such residual market mechanism permit the Company to recoup any such direct assessment attributed to a loss occurrence by way of a specific policy premium surcharge or similar levy on policyholders, the amount received by the Company as a result of such premium surcharge or levy shall reduce the Company's ultimate net loss for such loss occurrence.
3. The result of any rate increase filing permitted by the terms of the Company's participation or membership in any such residual market mechanism following any
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assessment shall have no effect on the Company's ultimate net loss for any covered loss occurrence.
4. The result of any premium tax credit filing permitted by the terms of the Company's participation or membership in any such residual market mechanism following any assessment shall reduce the Company's ultimate net loss for any covered loss occurrence.
5. The Company may not include in its ultimate net loss any amount resulting from an assessment that, pursuant to the terms of the Company's participation or membership in the residual market mechanism, the Company is required to pay only after such assessment is collected from the policyholder.
6. The ultimate net loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of a residual market mechanism nor any fines or penalties imposed on the Company for late payment.
7. If, however, a residual market mechanism only provides for assessment based on an aggregate of losses in any one contract or plan year of said mechanism, then the amount of that assessment to be included in the ultimate net loss for any one loss occurrence shall be determined by multiplying the Company's share of the aggregate assessment by a factor derived by dividing the Company's ultimate net loss (net of the assessment) with respect to the loss occurrence by the total of all of its ultimate net losses (net of assessments) from all loss occurrences included by the mechanism in determining the assessment.
8/1/2012
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)
1. This reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the site, or
II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material", and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate
(a) where the Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However, on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
NMA1119
12/12/1957
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada)
1. This Agreement does not cover any loss or liability accruing to the Reinsured directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
(a) Nuclear reactor power plants including all auxiliary property on the site, or
(b) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c) Installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d) Installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:
(a) where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6. The term "radioactive material" means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7. The Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:
(a) by any nuclear incident as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof, or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(b) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured whether new, renewal or replacement which become effective on or after December 31, 1992.
NMA1980a
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01/04/1996
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Limited Communicable Disease Exclusion No. 2
(Property Treaty Reinsurance)
1. Notwithstanding any provision to the contrary within this Contract, this Contract excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2. Subject to the other terms, conditions and exclusions contained in this Contract, this Contract will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any perils otherwise covered hereunder.
Definitions
3. "Communicable Disease" means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:
3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and
3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and
3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.
4. "Time Element Loss" means business interruption, contingent business interruption or any other consequential losses.
LMA5503 (amended)
15 May 2020
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Cyber Loss Limited Exclusion Clause
(Property Treaty Reinsurance) No. 1
1. Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:
1.1 any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;
1.2 any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly occasioned by any perils otherwise covered hereunder.
Definitions
3. Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.
4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.
5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5410 (amended)
06 March 2020
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---
## EX-10.12
SEC source: [hci-ex10_12.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_12.htm)
EXHIBIT 10.12
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
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Table of Contents
Article Page
| | | |
| --- | --- | --- |
| 1 Classes of Business Reinsured | | 1 |
| 2 Term | | 2 |
| 3 Special Termination | | 2 |
| 4 Territory (BRMA 51A) | | 4 |
| 5 Exclusions | | 4 |
| 6 Special Acceptances | | 6 |
| 7 Retention and Limit | | 6 |
| 8 Reinstatement | | 6 |
| 9 Florida Hurricane Catastrophe Fund | | 7 |
| 10 Definitions | | 8 |
| 11 Other Reinsurance | | 10 |
| 12 Loss Occurrence | | 11 |
| 13 Loss Notices and Settlements | | 12 |
| 14 Cash Call | | 12 |
| 15 Salvage and Subrogation | | 13 |
| 16 Premium and Rate | | 13 |
| 17 Sanctions (LMA3100) | | 13 |
| 18 Late Payments | | 14 |
| 19 Offset | | 15 |
| 20 Access to Records | | 16 |
| 21 Confidentiality | | 16 |
| 22 Net Retained Lines (BRMA 32E) | | 17 |
| 23 Errors and Omissions (BRMA 14F) | | 17 |
| 24 Currency | | 18 |
| 25 Taxes | | 18 |
| 26 Federal Excise Tax | | 18 |
| 27 Reserves | | 18 |
| 28 Insolvency | | 22 |
| 29 Arbitration | | 22 |
| 30 Service of Suit | | 24 |
| 31 Governing Law (BRMA 71B) | | 24 |
| 32 Non-Waiver | | 24 |
| 33 Severability | | 25 |
| 34 Notices and Contract Execution | | 25 |
| 35 Intermediary | | 25 |
| | Schedule A | 27 |
| | Schedule B | 28 |
| Excluded Counties in the State of Florida | | 29 |
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Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
entered into by and between
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
and
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to individually as the "Subscribing Reinsurer"
and collectively as the "Reinsurer")
# Article 1 - Classes of Business Reinsured
A. The Reinsurer shall reinsure the excess liability which may accrue to the Company under its policies in force at the effective time and date hereof or issued or renewed at or after that time and date, and classified by the Company as Direct and Assumed Property business, including business assumed by the Company in connection with depopulation of Policies from insurers of last resort, including but not limited to Citizens Property Insurance Corporation and any successor organization of such entity, subject to the terms, conditions and limitations set forth herein and in Schedules A and B attached to and forming part of this Contract.
B. The liability of the Reinsurer shall follow that of the Company in every case, including judicial interpretation, policy reformation and regulatory changes, and be subject in all respects to all the general and specific stipulations, clauses, interpretations, waivers, modifications and alterations of the Company's policies and any endorsements thereon, except as may be modified by the terms and conditions of this Contract.
C. Nothing herein shall in any manner create any obligation or establish any right against the Reinsurer in favor of third parties or any persons not parties to this Contract, except as provided in the Insolvency Article.
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# Article 2 - Term
A. This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2026, with respect to losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2027.
B. If this Contract is terminated or expires while a loss occurrence covered hereunder is in progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.
# Article 3 - Special Termination
A. Notwithstanding the provisions of paragraph A of the Term Article, the Company may terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:
1. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at the effective time and date of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) 12 months prior to that date; or
2. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at any time during the term of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) at the date of the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's most recent financial statement filed with regulatory authorities and available to the public as of the effective time and date of this Contract; or
3. Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system) experiences a reduction of 20.0% or more during any 12-month period; or
4. The Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been suspended or withdrawn or has been assigned or downgraded below A-, or the Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's Financial Strength Rating has been downgraded two or more notches during the term of this Contract even if the resulting A.M. Best's and/or Standard & Poor's Financial Strength Rating is A- or better; or
5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or
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6. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
7. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
8. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
9. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
10. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
11. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity; however, agreement by the Subscribing Reinsurer to follow claim settlement procedures of the Lloyd’s Claims Lead Arrangements (and any successors thereto) shall not constitute a transfer or delegation of its claims-paying authority, for purposes of this subparagraph; or
12. There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated or has its principal office and the country in which the Subscribing Reinsurer (or its group or holding company) is incorporated or has its principal office as a result of war, currency regulations, or any circumstances arising out of political, financial or economic emergency; or
13. The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the Reserves Article.
B. In the event any of the circumstances set forth in paragraph A above occur, it is solely at the Company's option to terminate or allow a Subscribing Reinsurer to continue to participate on this Contract.
C. As respects the terminated share of the Subscribing Reinsurer's original share, if a Subscribing Reinsurer's participation under any excess layer is terminated, no future deposit premium installments shall be due the Subscribing Reinsurer for that excess layer on or after the effective date of termination. The Subscribing Reinsurer shall immediately return the unearned portion of any premium paid for any excess layer, and the minimum premium requirements set forth in the Premium and Rate Article for that excess layer shall be waived.
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D. The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the events set forth in paragraph A above. If the Subscribing Reinsurer fails to provide the Company with such notification, the Company may terminate the Subscribing Reinsurer based on a public announcement or discovery of the occurrence of such event.
E. The provisions of this Article shall survive termination or expiration of the Contract.
# Article 4 - Territory (BRMA 51A)
The territorial limits of this Contract shall be identical with those of the Company's policies.
# Article 5 - Exclusions
A. This Contract shall not apply to and shall specifically exclude the following:
1. Liability assumed by the Company under any form of treaty reinsurance; however, group intra-company reinsurance (if applicable), agency reinsurance accepted in the normal course of business, and/or policies written by another carrier at the Company's request and reinsured 100% by the Company shall not be excluded hereunder.
2. Financial guarantee or insolvency.
3. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority; however, this exclusion shall not apply to:
a. Loss or damage covered under a reinsured policy containing a standard war exclusion;
b. Loss or damage occasioned by riots, strikes, civil commotion, vandalism or malicious damage.
4. Loss or liability excluded by the Pools, Associations and Syndicates Exclusion Clause (Catastrophe) attached to and forming part of this Contract.
5. Loss or liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund, or other arrangement, howsoever denominated, established, or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.
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6. Nuclear risks as defined in the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.) and the Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada) attached to and forming part of this Contract.
7. Loss arising from communicable disease in accordance with the Limited Communicable Disease Exclusion No. 2 (Property Treaty Reinsurance) LMA 5503 attached to and forming part of this Contract.
8. Loss or liability excluded by the Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance) No. 1 LMA 5410 attached to and forming part of this Contract.
9. Third party liability (other than property in the care, custody or control of the original insured).
10. Loss or liability excluded by the Fungi Coverage Limitation (Property Catastrophe Reinsurance) NMA 2955 attached to and forming part of this Contract.
11. Loss or liability excluded by the Pollution and Seepage Exclusion Clause (BRMA 39A) attached to and forming part of this Contract.
12. Loss, damage, cost or expense arising out of any Act of Terrorism.
An "Act of Terrorism" includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:
(i) involves violence against one or more persons; or
(ii) involves damage to property; or
(iii) endangers life other than that of the person committing the action; or
(iv) creates a risk to health or safety of the public or a section of the public; or
(v) is designed to interfere with or to disrupt an electronic system.
13. Flood and earthquake, when written as such.
14. Homeowners Choice Property & Casualty Insurance Company, Inc. business in the following:
a. The counties within the State of Florida as set forth in Schedule B attached to and forming part of this Contract; and
b. Any state outside the State of Florida.
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B. However, should any judicial, regulatory, or legislative entity having legal jurisdiction invalidate any exclusion in the Company's policy or the underlying policy on which the Company's policy follows form, any amount of loss for which the Company is liable because of such invalidation shall not be excluded hereunder. This provision will not apply to the exclusions set forth in subparagraphs A(2), A(3), A(5), A(6), A(7), A(8) and A(12) above.
C. The exclusions enumerated above shall not apply when they are merely incidental to the main operations of the insured, provided such main operations are covered by the Company and are not themselves excluded from the scope of this Contract. The Company shall determine what is "incidental." This provision will not apply to the exclusions set forth in subparagraphs A(2), A(3), A(5), A(6), A(7), A(8) and A(12) above.
D. Should the Company, by reason of an inadvertent act, error, or omission, be bound to afford coverage excluded hereunder or should an existing insured extend its operations to include coverage excluded hereunder, the Reinsurer shall waive the exclusion(s), except subparagraphs A(2), A(3), A(5), A(6), A(7), A(8) and A(12) above. The duration of said waiver shall not extend beyond the time that notice of such coverage has been received by the responsible underwriting authority of the Company plus the minimum time period required thereafter for the Company to terminate such coverage.
# Article 6 - Special Acceptances
The Company may submit to the Reinsurer for special acceptance business not covered by this
Contract. Such business, if accepted by the Reinsurer, shall be covered hereunder, and shall
be subject to the terms and conditions of this Contract, except as otherwise modified by such
special acceptance. A Subscribing Reinsurer shall be deemed to have accepted a risk if it has
not responded within five business days after receipt of the request for special acceptance. Any
business covered by special acceptance under the reinsurance contract being replaced by this
Contract will be automatically covered hereunder. Further, in the event a reinsurer becomes a
party to this Contract subsequent to the special acceptance of any business not normally
covered hereunder, the new reinsurer will automatically accept the same as being a part of this
Contract.
# Article 7 - Retention and Limit
As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as "Company's Retention" for that excess layer in Schedule A attached hereto, arising out of each loss occurrence. The Reinsurer shall then be liable, as respects each excess layer, for the amount by which such ultimate net loss exceeds the Company's applicable retention, but the liability of the Reinsurer under each excess layer shall not exceed the amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss occurrence. It is understood and agreed that no claim shall be made in any one loss occurrence unless at least two risks insured or reinsured by the Company are involved in such loss occurrence.
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# Article 8 - Reinstatement
A. In the event all or any portion of the reinsurance under the First and/or Second Excess Layer is exhausted by ultimate net loss, the amount so exhausted shall be reinstated immediately from the time the loss occurrence commences hereon. For each amount so reinstated under the First and/or Second Excess Layer, the Company agrees to pay additional premium equal to the product of the following:
1. The percentage of the loss occurrence limit for the First and/or Second Excess Layer (based on the ultimate net loss paid by the Reinsurer) reinstated; multiplied by
2. The earned reinsurance premium for the First and/or Second Excess Layer for the term of this Contract (exclusive of reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any ultimate net loss under the First and/or Second Excess Layer of reinsurance coverage provided hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer for the First and/or Second Excess Layer. The provisional reinstatement premium, based on the deposit premium, will be paid by the Company at the same time the Reinsurers pay the loss and will be finally adjusted as set forth in the Premium and Rate Article.
C. Notwithstanding anything stated herein, the liability of the Reinsurer under each excess layer of reinsurance coverage provided hereunder shall not exceed either of the following:
1. The amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss occurrence; or
2. The amount, shown as "Reinsurer's Term Limit" for that excess layer in Schedule A attached hereto, in the aggregate for all loss occurrences commencing during the term of this Contract.
# Article 9 - Florida Hurricane Catastrophe Fund
A. The Florida Hurricane Catastrophe Fund (hereinafter referred to as "FHCF") mandatory layer of coverage, which is purchased by the Company, shall be deemed to inure to the benefit of this Contract. As respects loss occurrences subject to this Contract, it is understood and agreed that the only FHCF mandatory layer of coverage deemed to inure to the benefit of this Contract are those of Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange. In the event any portion of the mandatory layer of coverage is eroded or exhausted, only the remaining limit of such coverage shall be deemed to inure to the benefit of this Contract. However, any FHCF loss reimbursement shall be deemed to be paid to the Company in accordance with the FHCF reimbursement contract at the full payout level set forth therein and will be deemed not to be reduced by any inability of The State Board of Administration of the State of Florida to satisfy the actual claims-paying capacity of the FHCF.
B. Prior to the determination of the Company's FHCF retention and payout, if any, under the reimbursement contract between the Company and the State Board of Administration of the State of Florida, the Reinsurer's liability hereunder will be determined provisionally based
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on the projected payout, determined in accordance with the provisions of the reimbursement contract. Following determination of the payout under the reimbursement contract, the ultimate net loss under this Contract will be recalculated. If, as a result of such calculation, the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is less than the amount previously paid by the Reinsurer under that excess layer, the Company shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer under any excess layer of this Contract in any one loss occurrence is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Company.
C. If an FHCF reimbursement amount is based on the Company's losses in more than one loss occurrence commencing during the term of this Contract, the allocation of the total FHCF reimbursement received by the Company to individual loss occurrences shall be at the sole discretion of the Company, provided that:
1. The amount allocated by the Company to any individual loss occurrence shall not exceed the amount of FHCF reimbursement to which the Company would be entitled for that loss occurrence alone; and
2. The total amount allocated by the Company to all such loss occurrences shall be equal to the total FHCF reimbursement received by the Company for such loss occurrences.
D. Any reimbursement premiums or emergency assessment paid by the Company under the FHCF shall be deemed to be premiums paid for inuring reinsurance.
E. Condo Owners Reciprocal Exchange and Tailrow Insurance Exchange have opted for 45.0% coverage selection from the FHCF.
# Article 10 - Definitions
A. "Active Subscribing Reinsurer" as used in this Contract shall mean a Subscribing Reinsurer that is not a Runoff Subscribing Reinsurer as of the due date of the claim (as specified in the Late Payments Article).
B. "Loss adjustment expense" as used in this Contract shall mean expenses assignable to the investigation, appraisal, adjustment, settlement, litigation, defense, and/or appeal of claims, regardless of how such expenses are classified for statutory reporting purposes. Loss adjustment expense shall include, but not be limited to, interest on judgments, expenses of outside adjusters, expenses and a pro rata share of salaries of the Company's field employees and other employees of the Company who have been temporarily diverted from their normal and customary duties and assigned to the adjustment of losses covered by this Contract, expenses of the Company's officials incurred in connection with losses covered by this Contract, declaratory judgment expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, advertising or other extraordinary communication expenses incurred as a result of a covered loss occurrence, costs of supersedeas and appeal bonds, and extraordinary expenses arising out of a covered loss occurrence, whether or not they are allocable to a specific claim. Loss adjustment expense shall not include normal office expenses or salaries of the Company's officials except as provided for above.
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C. "Loss in excess of policy limits" and "extra contractual obligations" as used in this Contract shall mean:
1. "Loss in excess of policy limits" shall mean any amount paid or payable by the Company in excess of its policy limits, but otherwise within the terms of its policy, such loss in excess of the Company's policy limits having been incurred because of, but not limited to, failure by the Company to settle within the policy limits, failure by the Company to settle within a timely manner, or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action.
2. "Extra contractual obligations" shall mean any punitive, exemplary, compensatory or consequential damages paid or payable by the Company, not covered by any other provision of this Contract and which arise from the handling of any claim on business subject to this Contract, such liabilities arising because of, but not limited to, failure by the Company to settle within the policy limits, failure by the Company to settle within a timely manner, or by reason of the Company's alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such an action. An extra contractual obligation shall be deemed, in all circumstances, to have occurred on the same date as the loss covered or alleged to be covered under the policy.
Coverage for extra contractual obligations and/or loss in excess of policy limits shall not apply when such loss has been incurred due to a finally adjudicated finding of fraud committed by a member of the board of directors or a corporate officer of the Company acting individually or collectively or in collusion with a member of the board of directors or a corporate officer or a partner of any other corporation or partnership.
Recoveries from any form of insurance which protects the Company against claims the subject matter of this paragraph shall inure to the benefit of this Contract.
A Runoff Subscribing Reinsurer shall be precluded from asserting that a claim otherwise payable hereunder is loss in excess of policy limits and/or extra contractual obligations, if an Active Subscribing Reinsurer has not made such assertion.
Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that such coverage is not permitted under New York law.
D. "Policy" as used in this Contract shall mean policies, binders, contracts, endorsements, or agreements of insurance or reinsurance, whether written or oral.
E. "Runoff Subscribing Reinsurer" as used in this Contract shall mean a Subscribing Reinsurer that experiences one or more of the following circumstances:
1. A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
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2. The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
3. The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
4. The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
5. The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
6. The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity, however, agreement by the Subscribing Reinsurer to follow claim settlement procedures of the Lloyd’s Claims Lead Arrangements (and any successors thereto) shall not constitute a transfer or delegation of its claims-paying authority, for purposes of this subparagraph.
F. "Term of this Contract" as used in this Contract shall mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, to 12:01 a.m., Eastern Standard Time, June 1, 2027. However, if a Subscribing Reinsurer's share is terminated in accordance with the Special Termination Article, "term of this Contract" as used herein shall mean the period from 12:01 a.m., Eastern Standard Time, June 1, 2026, to the effective time and date of termination.
G. "Ultimate net loss" as used in this Contract shall mean the sum or sums (including loss in excess of policy limits, extra contractual obligations and loss adjustment expense, as defined herein) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all claims on inuring reinsurance (if any), whether collectible or not, and all salvage and other recoveries. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company's ultimate net loss has been ascertained. In the event a verdict or judgment is reduced by an appeal or a settlement subsequent to the entry of the judgment thereby resulting in an ultimate saving on such verdict or judgment, or a judgment is reversed outright, the loss adjustment expense incurred in securing such final reduction or reversal shall be prorated between the Reinsurer and the Company in the proportion that each benefits from such reduction or reversal. However, for the purposes of this Contract, loss in excess of policy limits and extra contractual obligations arising out of any one loss occurrence shall not exceed 25.0% of ultimate net loss as calculated prior to the consideration of such 25.0% limitation.
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# Article 11 - Other Reinsurance
The Company shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Company and be entirely disregarded in applying all of the provisions of this Contract.
# Article 12 - Loss Occurrence
A. "Loss occurrence" as used in this Contract shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event. However, the duration and extent of any one "loss occurrence" shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term "loss occurrence" shall be further defined as follows:
1. As regards any "named storm," all individual losses sustained by the Company arising out of and directly occasioned by such named storm, without regard to the limitations of duration and extent set forth above. "Named storm" means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a named storm shall be considered part of that named storm, once it has merged. A named storm shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A named storm shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.
2. As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage other than named storm, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event.
3. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours, and within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses which occur beyond such 96 consecutive hours during the continued occupation of an insured's premises by strikers, provided such occupation commenced during the aforesaid period.
4. As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire
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following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company's loss occurrence.
5. As regards freeze, only individual losses directly occasioned by collapse, breakage of glass and water damage (including but not limited to those caused by freezing and/or melting of ice, snow or sleet, or ice damming on structures, or by bursting frozen pipes and tanks) may be included in the Company's loss occurrence.
6. As regards firestorms, brush fires and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs A(3) and A(4) above), all individual losses sustained by the Company which commence during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company (which is within the burn area) may be included in the Company's loss occurrence. However, an individual loss subject to this subparagraph cannot be included in more than one loss occurrence.
B. For all loss occurrences the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 96 or 168 consecutive hours shall apply with respect to one event, except as otherwise provided for in this Article.
C. Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one loss occurrence. Notwithstanding the foregoing, the hourly limitations as stated in paragraph A above shall not be exceeded as respects the applicable perils and no single loss occurrence shall encompass a time period greater than 168 consecutive hours, except as otherwise provided for in this Article.
# Article 13 - Loss Notices and Settlements
A. As respects each excess layer hereunder, whenever losses sustained by the Company appear likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.
B. The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.
C. Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer. The Reinsurer shall pay within 10 business days to the Company its share of amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.
# Article 14 - Cash Call
Notwithstanding the provisions of the Loss Notices and Settlements Article, upon the request of the Company, the Reinsurer shall pay any amount with regard to a loss settlement or
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settlements that are scheduled to be made (including any payments projected to be made) within the next 30 days by the Company, subject to receipt by the Reinsurer of a satisfactory proof of loss. Such agreed payment shall be made within 14 days from the date the demand for payment was transmitted to the Reinsurer.
# Article 15 - Salvage and Subrogation
The Reinsurer shall be credited with salvage or recoveries from subrogation (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving this Contract. Salvage thereon or subrogation recoveries shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company shall enforce its rights to salvage or subrogation relating to any loss, a part of which loss has been sustained by the Reinsurer, and shall prosecute all claims arising out of such rights if, in the Company's opinion, it is economically reasonable to do so.
# Article 16 - Premium and Rate
A. As premium for each excess layer of reinsurance provided by this Contract, the Company shall pay the Reinsurer the amount shown as "Deposit Premium" for the excess layer in Schedule A attached hereto in four equal installments of the amount, shown as "Quarterly Deposit Premium" for each excess layer in Schedule A attached hereto on July 1 and October 1 of 2026, and January 1 and April 1 of 2027.
B. The Company shall adjust the deposit premium of each excess layer in Schedule A attached hereto by applying the rate shown as "Premium Rate" for each excess layer in Schedule A attached hereto to its actual total insured value as of September 30, 2026, subject to the amount shown as "Minimum Premium" for each excess layer in Schedule A attached hereto. Any additional premium shall be remitted promptly to the Reinsurer. In the event there is return premium due the Company, such return premium shall be remitted promptly to the Company.
C. Notwithstanding the foregoing, within 45 days following the expiration of this Contract, if the actual total insured value as of September 30, 2026, varies from the projected total insured value as of September 30, 2026, by greater than or equal to 95.0% and less than or equal to 105%, there shall be no premium adjustment. It is agreed and understood that the projected total insured value of September 30, 2026, is $21,563,729,958. Should the actual total insured value exceed the projected total insured value, the Company shall immediately pay the Reinsurer the difference in excess of 105% of the projected total insured value. Should the actual total insured value be less than 95.0% of the projected total insured value, the Reinsurer shall immediately pay the Company the difference below 95.0% of the projected total insured value.
D. "Total Insured Value" as used herein shall mean the overall limit of policies reinsured hereunder, for all property coverages combined.
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# Article 17 - Sanctions (LMA3100)
No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.
# Article 18 - Late Payments
A. The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. However, any Subscribing Reinsurer that has experienced any of the circumstances set forth in paragraph A of the Special Termination Article shall not be allowed to implement the provisions of this Article against the Company.
B. In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (hereinafter referred to as the "Intermediary") by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party shall pay, any and all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection or enforcement of any payment obligations of the debtor party, except those costs and expenses the parties are required to share equally pursuant to the Arbitration Article, plus an interest charge on the amount past due calculated for each such payment on the last business day of each month as follows:
1. The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2. 1/365th of the sum of 4.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3. The amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest charges have been received by the Intermediary.
Notwithstanding the provisions of subparagraph B(2) above and the immediately preceding sentence, the interest rate for a Runoff Subscribing Reinsurer shall increase by 1.0% for every month that payment of the claim is past due, subject to a maximum annual interest rate of 12.0%.
C. If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated in any way.
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D. The establishment of the due date shall, for purposes of this Article, be determined as follows:
1. As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract, and such payments shall be deemed overdue 30 days past the provided due date. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment.
2. As respects a "cash call" made in accordance with the Cash Call Article, payment shall be deemed due 20 days after the demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 20 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the demand for payment was transmitted to the Reinsurer.
3. Any claim or loss payment due the Company hereunder other than as set forth in subparagraph 2 above shall be deemed due 30 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 30 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
4. As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs D(1), D(2) and D(3) above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days following transmittal of written notification that the provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.
E. Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest charges due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest charge on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.
F. Interest charges arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.
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# Article 19 - Offset
The Company and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise.
In the event that the Reinsurer is liable to pay a total loss under any excess layer of this Contract, prior to any installments of deposit premium being due under any such excess layer, then, in addition to any reinstatement premium due the Reinsurer, the Reinsurer shall also have to the right to offset the amount of unpaid installments of deposit premium against loss payment due the Company with only the net amount being remitted by the debtor party.
# Article 20 - Access to Records
A. By giving the Company 15 days of prior notice, the Reinsurer or its designated representatives shall have access at any reasonable time to underwriting, claims and accounting files of the Company which pertain in any way to this Contract. However, a Subscribing Reinsurer or its designated representatives shall not have any right of access to the records of the Company if it is not current in all undisputed payments due the Company, nor shall any right of access be construed to allow the Reinsurer the right to delay or withhold payment for any undisputed losses which shall fall due hereunder.. "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why the payments are disputed.
B. Prior to the access and review by the Reinsurer of certain books and records, the Company may redact names and any other information the Company, in its sole judgment, considers proprietary and any information the Company is required by law or regulation to redact.
# Article 21 - Confidentiality
A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract, including all information obtained through any audits and any claims information between the Company and the Reinsurer, and any submission or other materials relating to any renewal (hereinafter referred to as "confidential information") are proprietary and confidential to the Company.
B. Except as provided for in paragraph C below, the Reinsurer shall not disclose any confidential information to any third parties, including but not limited to the Reinsurer's subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates, underwriting agencies, research organizations, any unaffiliated entity engaged in modeling insurance or reinsurance data, and statistical rating organizations.
C. Confidential information may be used by the Reinsurer only in connection with the performance of its obligations or enforcement of its rights under this Contract and shall only be disclosed when required by (1) retrocessionaires subject to the business ceded to this Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial
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condition, (3) external auditors performing an audit of the Reinsurer's records in the normal course of business, (4) the Reinsurer's legal counsel, or (5) subsidiaries or affiliates of the Reinsurer that assist in underwriting or administrative obligations directly related to this Contract (however, this subparagraph 5 shall not include subsidiaries or affiliates in competition with the Company); provided that the Reinsurer advises such parties of the confidential nature of the confidential information. The Company may require that any third-party representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article or by a separate written confidentiality agreement, containing terms no less stringent than those set forth in this Article. If a third-party representative of the Reinsurer is not bound, in writing, by this Confidentiality Article or by a separate written confidentiality agreement, the Reinsurer shall be responsible for any breach of this provision by such third-party representative of the Reinsurer.
D. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the confidential information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure, to the extent legally permissible, and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
E. Any disclosure of personally identifiable information shall comply with all applicable statutes and regulations governing the disclosure of personally identifiable information that apply by law to the parties of this Contract. "Personally identifiable information" shall be defined as this term or a similar term is defined in any applicable state, provincial, territory, federal or international law. Disclosing or using this information for any purpose not authorized by applicable law is expressly forbidden without the prior consent of the Company.
F. The parties agree that any information subject to privilege, including the attorney-client privilege or attorney work product doctrine (collectively "privilege") shall not be disclosed to the Reinsurer until, in the Company's opinion, such privilege is deemed to be waived or otherwise compromised by virtue of its disclosure pursuant to this Contract. Furthermore, the Reinsurer shall not assert that any privilege otherwise applicable to the confidential information has been waived or otherwise compromised by virtue of its disclosure pursuant to this Contract.
G. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
# Article 22 - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which the Company retains net for its own account (prior to deduction of any underlying reinsurance specifically permitted in this Contract), and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from
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such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
# Article 23 - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.
# Article 24 - Currency
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to mean United States Dollars, and all transactions under this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.
# Article 25 - Taxes
In consideration of the terms under which this Contract is issued, the Company shall not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.
# Article 26 - Federal Excise Tax
A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
# Article 27 - Reserves
A. The Subscribing Reinsurer agrees to fund 100% of its share of the Company's ceded United States unearned premium, if any, and/or outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves), and all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer (hereinafter the "Subscribing Reinsurer's United States obligations") by:
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1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2. Trust accounts established solely for the benefit of the Company; and/or
3. Cash advances;
if the Subscribing Reinsurer:
1. As of the inception of this Contract (irrespective of any certification date that may be backdated) or during the term of the Contract or thereafter, is unauthorized in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
2. Is not domiciled in the United States of America or its territories or possessions, and has become certified, authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
3. Is a Runoff Subscribing Reinsurer; or
4. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
Notwithstanding the provisions above, if the Subscribing Reinsurer became authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves before January 1, 2010, then the Subscribing Reinsurer may provide funding via a multi-beneficiary trust amounting to 100% of the Subscribing Reinsurer's United States obligations, and such funding shall be deemed to satisfy the funding requirements under this Article. Any funding in a multi-beneficiary trust shall include an amount of incurred but not reported loss reserves as calculated by the Company.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's United States obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
B. As respects reinsurers that have become certified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves, any deferred funding as permitted by certain states in the event of a catastrophe shall not apply to the Subscribing Reinsurer.
C. The Subscribing Reinsurer shall fund 120% of its share of the Company's ceded Canadian unearned premium, if any, and/or outstanding loss and loss adjustment expense reserves
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(including incurred but not reported loss reserves) (hereinafter the "Subscribing Reinsurer's Canadian obligations") by:
1. A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2. Cash advances for the remaining balance of the funding required;
if the Subscribing Reinsurer:
1. Is unauthorized in any province or jurisdiction of Canada and if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved; or
2. Is a Runoff Subscribing Reinsurer; or
3. Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
The Subscribing Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the Company and the insurance regulatory authorities involved.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's Canadian obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
D. With regard to funding in whole or in part by letters of credit, each letter of credit shall be in a form acceptable to insurance regulatory authorities involved, shall be issued for a term of at least one year and shall include an "evergreen clause," which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. Notwithstanding anything to the contrary in this Contract, said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Subscribing Reinsurer, but only for one or more of the following purposes:
1. To reimburse the Company for the Subscribing Reinsurer's share of unearned premiums, if any, returned to insureds on account of policy cancellations, unless paid in cash by the Subscribing Reinsurer;
2. To reimburse the Company for the Subscribing Reinsurer's share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Subscribing Reinsurer;
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3. To reimburse the Company for the Subscribing Reinsurer's share of any other amounts claimed to be due hereunder, unless paid in cash by the Subscribing Reinsurer;
4. To fund a cash account in an amount equal to the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Subscribing Reinsurer 10 days prior to its expiration date;
5. To refund to the Subscribing Reinsurer any sum in excess of the actual amount required to fund the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations, if so requested by the Subscribing Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for D(1), D(2) or D(4) above, or in the case of D(3) above, the actual amount determined to be due, the Company shall promptly return to the Subscribing Reinsurer the excess amount so drawn.
E. At annual intervals, or more frequently as determined by the Company (but never more frequently than quarterly), the Company shall prepare a specific statement, for the sole purpose of amending the respective letters of credit, of the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations. Amendments shall be made to said letters of credit in accordance with the following:
1. If the statement shows that the Subscribing Reinsurer's United States obligations exceed the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of the Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, exceeds the balance of credit applicable thereto as of the statement date, the Subscribing Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment or amendments of the respective letters of credit increasing the amount of credit by the amount of the applicable difference.
2. If, however, the statement shows that the Subscribing Reinsurer's United States obligations are less than the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, is less than the balance of credit applicable thereto as of the statement date, the Company shall, within 30 days after receipt of written request from the Subscribing Reinsurer, release such excess credit by agreeing to secure an amendment or amendments to the respective letters of credit reducing the amount of credit available by the amount of the applicable excess credit.
F. Notwithstanding any other provision of this Article, as respects a Subscribing Reinsurer that is a Reciprocal Jurisdiction Reinsurer, the Subscribing Reinsurer agrees to provide collateral for 100% of the Subscribing Reinsurer's obligations under this Contract, if the Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration or
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arbitral award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, if applicable.
Further, with respect to Certain Underwriting Members of Lloyd's, this Contract does not constitute an American Reinsurance Policy as defined under the Lloyd's US Situs Credit for Reinsurance Trust Deed or the Lloyd's American Credit for Reinsurance Joint Asset Trust Deed. Therefore, the Company does not have recourse to those trust funds with respect to this Contract.
# Article 28 - Insolvency
A. This Article shall apply severally to each reinsured company referenced within the definition of "Company" in this Contract. Further, this Article and the laws of the domiciliary jurisdiction shall apply in the event of the insolvency of any company intended to be covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary jurisdiction of any company intended to be covered hereunder, that domiciliary jurisdiction's laws shall prevail.
B. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. However, 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 Company indicating the policy or bond reinsured which claim 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 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation 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.
C. Where two or more Subscribing 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 this Contract as though such expense had been incurred by the Company.
D. In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the Company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Company to such payees.
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# Article 29 - Arbitration
A. As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion shall be submitted to arbitration. One arbiter shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration, all of whom shall be disinterested active or former officials or experienced individuals who have operated in, or been involved in, business placed in the United States insurance or reinsurance industry for at least 10 years. In the event that either party should fail to choose an arbiter within 30 days following a written request by the other party to do so, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. If the two arbiters fail to agree upon the selection of an umpire within 30 days following their appointment, the two arbiters shall request the American Arbitration Association to appoint the umpire. If the American Arbitration Association fails to appoint the umpire within 30 days after it has been requested to do so, either party may request a justice of a Court of general jurisdiction of the state in which the arbitration is to be held to appoint the umpire. Notwithstanding the above, in the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company may, at its option, choose to forgo arbitration and may bring an action in any court of competent jurisdiction. Such court shall award costs and expenses, including reasonable attorneys' fees and other expenses, if the Company prevails in such action.
B. Each party shall present its case to the arbiters within 30 days following the date of appointment of the umpire. The arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the arbiters shall be final and binding on 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. Judgment upon the final decision of the arbiters may be entered in any court of competent jurisdiction. The arbiters may award costs and expenses, including reasonable attorneys' fees and other expenses.
C. If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Subscribing Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers participating under the terms of this Contract from several to joint.
D. Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 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.
E. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.
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F. In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in accordance with applicable law as soon as practicable after their decision. The arbiters shall award any necessary and legally permissible punitive damages to the Company.
# Article 30 - Service of Suit
(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)
A. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
B. In the event the Subscribing Reinsurer fails to perform its obligations hereunder, the Subscribing Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Subscribing Reinsurer, once the appropriate Court is accepted by the Subscribing Reinsurer or is determined by removal, transfer or otherwise, as provided for above, shall comply with all requirements necessary to give said Court jurisdiction and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, shall abide by the final decision of such Court or of any Appellate Court in the event of an appeal.
C. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his or her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.
# Article 31 - Governing Law (BRMA 71B)
This Contract shall be governed by and construed in accordance with the laws of the State of Florida.
# Article 32 - Non-Waiver
The failure of the Company to insist on compliance with this Contract or to exercise any right, remedy or option hereunder shall not: (1) constitute a waiver of any rights contained in this Contract, (2) prevent the Company from thereafter demanding full and complete compliance, (3)
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prevent the Company from exercising such remedy in the future, nor (4) affect the validity of this Contract or any part thereof.
# Article 33 - Severability
If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, regulatory body or court, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
# Article 34 - Notices and Contract Execution
A. Whenever a notice, statement, report or any other written communication is required by this Contract, unless otherwise specified, such notice, statement, report or other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first class mail is also acceptable.
B. The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:
1. Paper documents with an original ink signature;
2. Facsimile or electronic copies of paper documents showing an original ink signature; and/or
3. Electronic records with an electronic signature made via an electronic agent. For the purposes of this Contract, the terms "electronic record," "electronic signature" and "electronic agent" shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto.
C. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.
# Article 35 - Intermediary
Aon Re, Inc., or one of its affiliated corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating to this Contract shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
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In Witness Whereof, the Company has caused this Contract to be executed by its duly authorized representatives, who also confirm the Company's review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as of the date specified below:
This ________________ day of ____________________________ in the year ____________.
CORE Risk Managers, LLC as Attorney-In-Fact for Condo Owners Reciprocal Exchange
This ________________ day of ____________________________ in the year ____________.
Tailrow Risk Managers, LLC as Attorney-In-Fact for Tailrow Insurance Exchange
This ________________ day of ____________________________ in the year ____________.
Homeowners Choice Property & Casualty Insurance Company, Inc.
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# Schedule A
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
| Line item | First Excess | Second Excess | Third Excess |
| --- | --- | --- | --- |
| Company's Retention | $15,000,000 | $100,000,000 | $200,000,000 |
| Reinsurer's Per Occurrence Limit | $85,000,000 | $100,000,000 | $135,000,000 |
| Reinsurer's Term Limit | $170,000,000 | $200,000,000 | $135,000,000 |
| Minimum Premium | [REDACTED] | [REDACTED] | [REDACTED] |
| Premium Rate | [REDACTED] | [REDACTED] | [REDACTED] |
| Deposit Premium | [REDACTED] | [REDACTED] | [REDACTED] |
| Quarterly Deposit Premium | [REDACTED] | [REDACTED] | [REDACTED] |
The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.
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# Schedule B
Excluded Counties in the State of Florida
for Homeowners Choice Property & Casualty Insurance Company, Inc. Business:
BREVARD
BROWARD
CHARLOTTE
CITRUS
COLLIER
DESOTO
GLADES
HARDEE
HENDRY
HERNANDO
HIGHLANDS
HILLSBOROUGH
INDIAN RIVER
LAKE
LEE
MANATEE
MARION
MARTIN
MIAMI-DADE
MONROE
OKEECHOBEE
ORANGE
OSCEOLA
PALM BEACH
PASCO
PINELLAS
POLK
SARASOTA
SEMINOLE
ST. LUCIE
SUMTER
VOLUSIA
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# Excluded Counties in the State of Florida
# for Homeowners Choice Property & Casualty Insurance Company, Inc. Business
The above map is for illustrative purposes only. Any discrepancy between the listing of Subject Counties in Schedule B and the above map shall be resolved in favor of the listing in Schedule B.
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Pools, Associations and Syndicates Exclusion Clause
(Catastrophe)
It is hereby understood and agreed that:
A. This Contract excludes loss or liability arising from:
1. Business derived directly or indirectly from any pool, association, or syndicate which maintains its own reinsurance facilities. This subparagraph 1 shall not apply with respect to:
a. Residual market mechanisms created by statute. This Contract shall not extend, however, to afford coverage for liability arising from the inability of any other participant or member in the residual market mechanism to meet its obligations, nor shall this Contract extend to afford coverage for liability arising from any claim against the residual market mechanism brought by or on behalf of any insolvency fund (as defined in the Insolvency Fund Exclusion Clause incorporated in this Contract). For the purposes of this Clause, the California Earthquake Authority shall be deemed to be a "residual market mechanism."
b. Inter-agency or inter-government joint underwriting or risk purchasing associations (however styled) created by or permitted by statute or regulation.
2. Those perils insured by the Company that the Company knows, at the time the risk is bound, to be insured by or in excess of amounts insured or reinsured by any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks. This subparagraph 2 shall not apply:
a. If the total insured value over all interests of the risk is less than $250,000,000.
b. To interests traditionally underwritten as Inland Marine or Stock or Contents written on a blanket basis.
c. To Contingent Business Interruption liability, except when it is known to the Company, at the time the risk is bound, that the key location is insured by or through any pool, association or syndicate formed for the purpose of insuring oil, gas, or petro-chemical plants; oil or gas drilling rigs; and/or aviation risks; unless the total insured value over all interests of the risk is less than $250,000,000.
B. With respect to loss or liability arising from the Company's participation or membership in any residual market mechanism created by statute, the Company may include in its ultimate net loss only amounts for which the Company is assessed as a direct consequence of a covered loss occurrence, subject to the following provisions:
1. Recovery is limited to perils otherwise protected hereunder.
2. In the event the terms of the Company's participation or membership in any such residual market mechanism permit the Company to recoup any such direct assessment attributed to a loss occurrence by way of a specific policy premium surcharge or similar levy on policyholders, the amount received by the Company as a result of such premium surcharge or levy shall reduce the Company's ultimate net loss for such loss occurrence.
3. The result of any rate increase filing permitted by the terms of the Company's participation or membership in any such residual market mechanism following any
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assessment shall have no effect on the Company's ultimate net loss for any covered loss occurrence.
4. The result of any premium tax credit filing permitted by the terms of the Company's participation or membership in any such residual market mechanism following any assessment shall reduce the Company's ultimate net loss for any covered loss occurrence.
5. The Company may not include in its ultimate net loss any amount resulting from an assessment that, pursuant to the terms of the Company's participation or membership in the residual market mechanism, the Company is required to pay only after such assessment is collected from the policyholder.
6. The ultimate net loss hereunder shall not include any monies expended to purchase or retire bonds as a consequence of being a member of a residual market mechanism nor any fines or penalties imposed on the Company for late payment.
7. If, however, a residual market mechanism only provides for assessment based on an aggregate of losses in any one contract or plan year of said mechanism, then the amount of that assessment to be included in the ultimate net loss for any one loss occurrence shall be determined by multiplying the Company's share of the aggregate assessment by a factor derived by dividing the Company's ultimate net loss (net of the assessment) with respect to the loss occurrence by the total of all of its ultimate net losses (net of assessments) from all loss occurrences included by the mechanism in determining the assessment.
8/1/2012
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)
1. This reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the site, or
II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material", and for reprocessing, salvaging, chemically separating, storing or disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate
(a) where the Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However, on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that
(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.
NMA1119
12/12/1957
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Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (Canada)
1. This Agreement does not cover any loss or liability accruing to the Reinsured directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:
(a) Nuclear reactor power plants including all auxiliary property on the site, or
(b) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or
(c) Installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating, storing or disposing of spent nuclear fuel or waste materials, or
(d) Installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except that this paragraph 3 shall not operate:
(a) where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.
5. This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.
6. The term "radioactive material" means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy.
7. The Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:
(a) by any nuclear incident as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof, or nuclear explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas;
(b) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured whether new, renewal or replacement which become effective on or after December 31, 1992.
NMA1980a
26\C0KT1019
Page 33
01/04/1996
26\C0KT1019
Page 34
Limited Communicable Disease Exclusion No. 2
(Property Treaty Reinsurance)
1. Notwithstanding any provision to the contrary within this reinsurance agreement, this reinsurance agreement excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.
Definitions
3. Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:
3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and
3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and
3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.
4. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5503
15 May 2020
26\C0KT1019
Page 35
Cyber Loss Limited Exclusion Clause
(Property Treaty Reinsurance) No. 1
1. Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:
1.1. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;
1.2. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.
2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly occasioned by any of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow
Definitions
3. Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.
4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.
5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.
LMA5410
06 March 2020
26\C0KT1019
Page 36
# Fungi Coverage Limitation
(Property Catastrophe Reinsurance)
This reinsurance agreement excludes absolutely any loss, damage, cost, expense or liability arising from Fungi unless directly caused by or arising from one of the following listed perils:
Earthquake, Seaquake, Seismic and/or Volcanic Disturbance/Eruption, Hurricane, Rainstorm, Windstorm, Tornado, Cyclone, Typhoon, Tsunami, Flood, Hail, Freeze, Ice Storm, Weight of Snow or Ice, Avalanche, Meteor/Asteroid Impact, Landslip, Landslide, Mudslide, Bush Fire, Forest Fire, Lightning, Explosion, Fire, Aircraft and Vehicle Impact, Riots, Strikes and Civil Commotion.
Such losses arising from Fungi may only be included in the Reinsured's Ultimate Net Loss if they manifest themselves, and are reported to the Reinsured, within 12 months of the start of the event identified in relation to that Ultimate Net Loss.
Losses arising from Fungi shall not in and of themselves constitute an event for the purposes of recovery hereunder.
If this reinsurance agreement includes cover for Extra Contractual Obligations or Excess of Policy Limit payments, then such losses which arise out of claims where Fungi are present or alleged to be present may be included in the Ultimate Net Loss but only up to a maximum of 25% of the Ultimate Net Loss.
For the purposes of this reinsurance agreement, Fungi shall be taken to include any type or form of fungus, mold or mildew and any mycotoxins, spores, scents or by products produced or released by fungi.
NMA2955
14/11/2002
26\C0KT1019
Page 37
# Pollution And Seepage Exclusion Clause (BRMA 39A)
This Contract excludes loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company's property loss under the applicable original policy.
26\C0KT1019
Page 38
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## EX-10.13
SEC source: [hci-ex10_13.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_13.htm)
EXHIBIT 10.13
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
Table of Contents
ArticlePage
1Classes of Business Reinsured1
2Term1
3Special Termination2
4Concurrency of Conditions3
5Premium and Rate4
6Sanctions4
7Loss Notices and Settlements4
8Late Payments5
9Offset (BRMA 36C)6
10Access to Records7
11Confidentiality7
12Errors and Omissions (BRMA 14F)9
13Currency9
14Taxes9
15Federal Excise Tax9
16Reserves9
17Insolvency13
18Arbitration13
19Service of Suit15
20Governing Law (BRMA 71B)15
21Non-Waiver15
22Severability16
23Notices and Contract Execution16
24Intermediary16
Schedule A
Schedule B
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
entered into by and between
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
and
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to individually as the "Subscribing Reinsurer"
and collectively as the "Reinsurer")
Classes of Business Reinsured
A.By this Contract the Reinsurer agrees to indemnify the Company for any reinstatement premium which the Company pays or becomes liable to pay as a result of loss occurrences covered under the First and Second Excess Layers of the Company's Excess Catastrophe Reinsurance Contract, effective June 1, 2026, (reference number 26\C0KT1013, hereinafter referred to as the "Original Contract"), subject to the terms, conditions and limitations set forth herein and in Schedules A and B attached to and forming part of this Contract.
B.The liability of the Reinsurer shall follow that of the Company in every case, including judicial interpretation, policy reformation and regulatory changes, and be subject in all respects to all the general and specific stipulations, clauses, interpretations, waivers, modifications and alterations of the Company's Original Contract.
C.Nothing herein shall in any manner create any obligation or establish any right against the Reinsurer in favor of third parties or any persons not parties to this Contract, except as provided in the Insolvency Article.
Term
A.This Contract shall become effective at 12:01 a.m., Eastern Standard Time, June 1, 2026, with respect to reinstatement premium payable by the Company under the First and Second Excess Layers of the Original Contract as a result of losses arising out of loss occurrences commencing at or after that time and date, and shall remain in force until 12:01 a.m., Eastern Standard Time, June 1, 2027.
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B.If this Contract is terminated or expires while a loss occurrence covered under the Original Contract is in progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the termination or expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.
Special Termination
A.Notwithstanding the provisions of paragraph A of the Term Article, the Company may terminate a Subscribing Reinsurer's percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event any of the following circumstances occur:
1.Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at the effective time and date of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) 12 months prior to that date; or
2.Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system), at any time during the term of this Contract, has been reduced by 20.0% or more of the amount of surplus (or the applicable equivalent) at the date of the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's most recent financial statement filed with regulatory authorities and available to the public as of the effective time and date of this Contract; or
3.Either the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's policyholders' surplus (or its equivalent under the Subscribing Reinsurer's or the Subscribing Reinsurer's group or holding company's accounting system) experiences a reduction of 20.0% or more during any 12-month period; or
4.The Subscribing Reinsurer's A.M. Best's and/or Standard & Poor's rating has been assigned or downgraded below A-; or
5.The Subscribing Reinsurer has become, or has announced its intention to become, merged with, acquired by or controlled by any other entity or individual(s) not controlling the Subscribing Reinsurer's operations previously; or
6.A State Insurance Department or other legal authority has ordered the Subscribing Reinsurer to cease writing business; or
7.The Subscribing Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision or administration (whether voluntary or involuntary), or proceedings have been instituted against the Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, supervisor, administrator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or
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8.The Subscribing Reinsurer has become involved in a scheme of arrangement or similar proceeding (whether voluntary or involuntary) which enables the Subscribing Reinsurer to settle its claims liabilities, including but not limited to any estimated or undetermined claims liabilities under this Contract, on an accelerated basis; or
9.The Subscribing Reinsurer has reinsured its entire liability under this Contract with an unaffiliated entity or entities without the Company's prior written consent; or
10.The Subscribing Reinsurer has ceased assuming new or renewal property or casualty treaty reinsurance business; or
11.The Subscribing Reinsurer has transferred or delegated its claims-paying authority, as respects business subject to this Contract, to an unaffiliated entity; or
12.There is a severance or obstruction of free and unfettered communication and/or normal commercial and/or financial intercourse between the country in which the Company is incorporated or has its principal office and the country in which the Subscribing Reinsurer (or its group or holding company) is incorporated or has its principal office as a result of war, currency regulations, or any circumstances arising out of political, financial or economic emergency; or
13.The Subscribing Reinsurer has failed to comply with the funding requirements set forth in the Reserves Article.
B.In the event any of the circumstances set forth in paragraph A above occur, it is solely at the Company's option to terminate or allow a Subscribing Reinsurer to continue to participate on this Contract.
C.As respects the terminated share of the Subscribing Reinsurer's original share, if a Subscribing Reinsurer's participation under any excess layer is terminated, no future deposit premium installments shall be due the Subscribing Reinsurer for that excess layer on or after the effective date of termination. The Subscribing Reinsurer shall immediately return the unearned portion of any premium paid for any excess layer, and the minimum premium requirements set forth in the Premium and Rate Article for that excess layer shall be waived.
D.The Subscribing Reinsurer shall notify the Company immediately of the occurrence of any of the events set forth in paragraph A above. If the Subscribing Reinsurer fails to provide the Company with such notification, the Company may terminate the Subscribing Reinsurer based on a public announcement or discovery of the occurrence of such event.
Concurrency of Conditions
A.It is agreed that this Contract shall follow the terms, conditions, exclusions, definitions, warranties and settlements of the Company under the Original Contract, which are not inconsistent with the provisions of this Contract.
B.The Company shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.
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Premium and Rate
A.As premium for each excess layer of reinsurance provided by this Contract, the Company shall pay the Reinsurer the product of the following (or a pro rata portion thereof in the event the term of this Contract is less than 12 months and for purposes of calculating subparagraph 3 below, the term of the Original Contract is a full 12 months):
1.The amount, shown as "Reinstatement Factor" for that excess layer in Schedule B attached hereto; times
2.The Final Adjusted Rate on Line for the corresponding excess layer of the Original Contract; times
3.An amount equal to 100% reinsurance placement percentage under each excess layer of the Original Contract of the final adjusted premium paid by the Company for the corresponding excess layer of the Original Contract.
"Final Adjusted Rate on Line" as used herein shall mean an amount equal to a 100% reinsurance placement percentage under each excess layer of the Original Contract of the final adjusted premium paid by the Company for the corresponding excess layer of the Original Contract divided by the amount, shown as the "Reinsurer's Per Occurrence Limit" for that excess layer under the Original Contract in Schedule A attached hereto.
B.The Company shall pay the Reinsurer an annual deposit premium for each excess layer of the amount, shown as "Deposit Premium" for that excess layer in Schedule B attached hereto, in four equal installments of the amount, shown as "Quarterly Deposit Premium" for that excess layer in Schedule B attached hereto, July 1 and October 1 of 2026, and January 1 and April 1 of 2027.
C.On or before June 1, 2027, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for each excess layer, computed in accordance with paragraph A above, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted within 45 days following the expiration of this Contract.
Sanctions
Neither the Company nor any Subscribing Reinsurer shall be liable for premium or loss under this Contract if it would result in a violation of any mandatory sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America that are applicable to either party.
Loss Notices and Settlements
A.As respects each excess layer hereunder, whenever losses sustained by the Company appear likely, in the Company's opinion, to result in a claim hereunder, the Company shall notify the Reinsurer.
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B.The Company alone and in its sole discretion shall adjust, settle or compromise all claims and losses hereunder.
C.Loss payments, whether made by the Company as a result of adjustment, settlement or compromise, provided they are within the terms of this Contract, shall be binding on the Reinsurer. The Reinsurer shall pay within 10 business days to the Company its share of amounts due upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.
Late Payments
A.The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. However, any Subscribing Reinsurer that has experienced any of the circumstances set forth in paragraph A of the Special Termination Article shall not be allowed to implement the provisions of this Article against the Company.
B.In the event any premium, loss or other payment due either party is not received by the intermediary named in the Intermediary Article (hereinafter referred to as the "Intermediary") by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party shall pay, any and all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection or enforcement of any payment obligations of the debtor party, except those costs and expenses the parties are required to share equally pursuant to the Arbitration Article, plus an interest charge on the amount past due calculated for each such payment on the last business day of each month as follows:
1.The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times
2.1/365th of the sum of 4.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made; times
3.The amount past due, including accrued interest.
Interest shall accumulate until payment of the original amount due plus interest charges have been received by the Intermediary.
Notwithstanding the provisions of subparagraph B(2) above and the immediately preceding sentence, the interest rate for a Runoff Subscribing Reinsurer shall increase by 1.0% for every month that payment of the claim is past due, subject to a maximum annual interest rate of 12.0%.
C.If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law, such interest rate shall be modified to the highest rate permitted by the applicable law, and all remaining provisions of this Article and Contract shall remain in full force and effect without being impaired or invalidated in any way.
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D.The establishment of the due date shall, for purposes of this Article, be determined as follows:
1.As respects the payment of routine deposits and premiums due the Reinsurer, the due date shall be as provided for in the applicable section of this Contract, and such payments shall be deemed overdue 30 days past the provided due date. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days after the date of transmittal by the Intermediary of the initial billing for each such payment. Such payments shall be deemed overdue 30 days past the provided due date.
2.Any claim or loss payment due the Company hereunder shall be deemed due 30 days after the proof of loss or demand for payment is transmitted to the Reinsurer. If such loss or claim payment is not received within the 30 days, interest shall accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.
3.As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs D(1) and D(2) above, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is not specifically stated for a given payment, it shall be deemed due 30 days following transmittal of written notification that the provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary.
E.Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense of any claim or suit, or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest charges due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the interest charge on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting, and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.
F.Interest charges arising out of the application of this Article that are $100 or less from any party shall be waived unless there is a pattern of late payments consisting of three or more items over the course of any 12-month period.
Offset(BRMA 36C)
The Company and the Reinsurer shall have the right to offset any balance or amounts due from one party to the other under the terms of this Contract. The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise.
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Access to Records
A.By giving the Company 15 days of prior notice, the Reinsurer or its designated representatives shall have access at any reasonable time to underwriting, claims and accounting files of the Company which pertain in any way to this Contract. However, a Subscribing Reinsurer or its designated representatives shall not have any right of access to the records of the Company if it is not current in all undisputed payments due the Company, nor shall any right of access be construed to allow the Reinsurer the right to delay or withhold payment for any undisputed losses which shall fall due hereunder.. "Undisputed" as used herein shall mean any amount that the Subscribing Reinsurer has not contested in writing to the Company specifying the reason(s) why the payments are disputed.
B.Prior to the access and review by the Reinsurer of certain books and records, the Company may redact names and any other information the Company, in its sole judgment, considers proprietary and any information the Company is required by law or regulation to redact.
Confidentiality
A.The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract, including all information obtained through any audits and any claims information between the Company and the Reinsurer, and any submission or other materials relating to any renewal (hereinafter referred to as "confidential information") are proprietary and confidential to the Company.
B.Except as provided for in paragraph C below, the Reinsurer shall not disclose any confidential information to any third parties, including but not limited to the Reinsurer's subsidiaries and affiliates, other insurance companies and their subsidiaries and affiliates, underwriting agencies, research organizations, any unaffiliated entity engaged in modeling insurance or reinsurance data, and statistical rating organizations.
C.Confidential information may be used by the Reinsurer only in connection with the performance of its obligations or enforcement of its rights under this Contract and shall only be disclosed when required by (1) retrocessionaires subject to the business ceded to this Contract, (2) regulators performing an audit of the Reinsurer's records and/or financial condition, (3) external auditors performing an audit of the Reinsurer's records in the normal course of business, (4) the Reinsurer's legal counsel, or (5) subsidiaries or affiliates of the Reinsurer that assist in underwriting or administrative obligations directly related to this Contract (however, this subparagraph 5 shall not include subsidiaries or affiliates in competition with the Company); provided that the Reinsurer advises such parties of the confidential nature of the confidential information and their obligation to maintain its confidentiality. The Company may require that any third-party representatives of the Reinsurer agree, in writing, to be bound by this Confidentiality Article or by a separate written confidentiality agreement, containing terms no less stringent than those set forth in this Article. If a third-party representative of the Reinsurer is not bound, in writing, by this Confidentiality Article or by a separate written confidentiality agreement, the Reinsurer shall be responsible for any breach of this provision by such third-party representative of the Reinsurer.
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D.Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the confidential information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure, to the extent legally permissible, and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.
E.Any disclosure of personally identifiable information shall comply with all applicable statutes and regulations governing the disclosure of personally identifiable information that apply by law to the parties of this Contract. "Personally identifiable information" shall be defined as this term or a similar term is defined in any applicable state, provincial, territory, federal or international law. Disclosing or using this information for any purpose not authorized by applicable law is expressly forbidden without the prior consent of the Company.
F.The parties agree that any information subject to privilege, including the attorney-client privilege or attorney work product doctrine(collectively "privilege") shall not be disclosed to the Reinsurer until, in the Company's opinion, such privilege is deemed to be waived or otherwise compromised by virtue of its disclosure pursuant to this Contract. Furthermore, the Reinsurer shall not assert that any privilege otherwise applicable to the confidential information has been waived or otherwise compromised by virtue of its disclosure pursuant to this Contract.
G.The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.
H.If confidential information is acquired by or made available to an unauthorized third party due to a Subscribing Reinsurer's breach of this Article, the following shall apply:
1.The Subscribing Reinsurer shall notify the Company immediately in writing. However, with respect to personally identifiable information acquired by or made available to an unauthorized third party due to a Subscribing Reinsurer's breach of this Article, that Subscribing Reinsurer shall notify the Company that such a breach has occurred in compliance with any applicable laws and regulations that apply by law to the parties to this Contract. A Subscribing Reinsurer shall indemnify the Company for any and all losses, claims, fines, and expenses, including but not limited to attorneys' fees and costs and credit monitoring expenses, incurred by the Company as a result of that Subscribing Reinsurer's breach of this Article.
2.The Company may, at its option, seek relief by forgoing arbitration as provided in this Contract and bringing an action in any court of competent jurisdiction. The Subscribing Reinsurer acknowledges that any such unauthorized disclosure of confidential information may cause irreparable harm to the Company, and the Company shall be entitled to specific performance, including immediate issuance of a temporary restraining order or preliminary injunction. The court or other tribunal may award damages, costs and expenses, including reasonable attorneys' fees and other expenses, and any other remedies available under the law due to that Subscribing Reinsurer's breach of this Article.
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Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.
Currency
A.Whenever the word "Dollars" or the "$" sign appears in this Contract, it shall be construed to mean United States Dollars, and all transactions under this Contract shall be in United States Dollars.
B.Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.
Taxes
In consideration of the terms under which this Contract is issued, the Company shall not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America, the District of Columbia or Canada.
Federal Excise Tax
A.The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B.In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
Reserves
A.The Subscribing Reinsurer agrees to fund 100% of its share of the Company's ceded United States unearned premium, if any, all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer, and/or outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract but not yet recovered from the Reinsurer, plus the Company's reserves for reinstatement premium due under the First and Second Excess Layers of the Original Contract, if any) (hereinafter the "Subscribing Reinsurer's United States obligations") by:
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1.Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2.Trust accounts established solely for the benefit of the Company; and/or
3.Cash advances;
if the Subscribing Reinsurer:
1.As of the inception of this Contract (irrespective of any certification date that may be backdated) or during the term of the Contract or thereafter, is unauthorized in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
2.Is not domiciled in the United States of America or its territories or possessions, and has become certified, authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves; or
3.Is a Runoff Subscribing Reinsurer; or
4.Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
Notwithstanding the provisions above, if the Subscribing Reinsurer became authorized, trusteed, accepted, approved or qualified in any state of the United States of America, any of its territories or possessions, or the District of Columbia having jurisdiction over the Company's reserves before January 1, 2010, then the Subscribing Reinsurer may provide funding via a multi-beneficiary trust amounting to 100% of the Subscribing Reinsurer's United States obligations, and such funding shall be deemed to satisfy the funding requirements under this Article. Any funding in a multi-beneficiary trust shall include an amount of incurred but not reported loss reserves as calculated by the Company.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's United States obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
B.The Subscribing Reinsurer shall fund 120% of its share of the Company's ceded Canadian unearned premium, if any, all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer, and/or outstanding loss reserves (being the sum of all reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract but not yet recovered from the Reinsurer, plus the Company's reserves for reinstatement premium due under the First and Second Excess Layers of the Original Contract, if any) (hereinafter the "Subscribing Reinsurer's Canadian obligations") by:
1.A clean, irrevocable and unconditional letter of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a
Page 10
Canadian bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities, for no more than 15/115ths of the total funding required; and/or
2.Cash advances for the remaining balance of the funding required;
if the Subscribing Reinsurer:
1.Is unauthorized in any province or jurisdiction of Canada and if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved; or
2.Is a Runoff Subscribing Reinsurer; or
3.Has its A.M. Best's and/or Standard & Poor's Financial Strength Rating suspended or withdrawn or assigned or downgraded below A-.
The Subscribing Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the Company and the insurance regulatory authorities involved.
Notwithstanding the provisions of the Arbitration Article, if a Runoff Subscribing Reinsurer fails to fund its share of the Subscribing Reinsurer's Canadian obligations under this Contract as set forth above, the Company retains its right to apply to a court of competent jurisdiction for equitable or interim relief.
C.With regard to funding in whole or in part by letters of credit, each letter of credit shall be in a form acceptable to insurance regulatory authorities involved, shall be issued for a term of at least one year and shall include an "evergreen clause," which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. Notwithstanding anything to the contrary in this Contract, said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Subscribing Reinsurer, but only for one or more of the following purposes:
1.To reimburse the Company for the Subscribing Reinsurer's share of unearned premiums, if any, returned to insureds on account of policy cancellations, unless paid in cash by the Subscribing Reinsurer;
2.To reimburse the Company for the Subscribing Reinsurer's share of reinstatement premiums paid by the Company under the First and Second Excess Layers of the Original Contract, unless paid in cash by the Subscribing Reinsurer;
3.To reimburse the Company for the Subscribing Reinsurer's share of any other amounts claimed to be due hereunder, unless paid in cash by the Subscribing Reinsurer;
4.To fund a cash account in an amount equal to the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has
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not been renewed or replaced by the Subscribing Reinsurer 10 days prior to its expiration date;
5.To refund to the Subscribing Reinsurer any sum in excess of the actual amount required to fund the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations, if so requested by the Subscribing Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for C(1), C(2) or C(4) above, or in the case of C(3) above, the actual amount determined to be due, the Company shall promptly return to the Subscribing Reinsurer the excess amount so drawn.
D.At annual intervals, or more frequently as determined by the Company (but never more frequently than quarterly), the Company shall prepare a specific statement, for the sole purpose of amending the respective letters of credit, of the Subscribing Reinsurer's United States obligations and/or the Subscribing Reinsurer's Canadian obligations. Amendments shall be made to said letters of credit in accordance with the following:
1.If the statement shows that the Subscribing Reinsurer's United States obligations exceed the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of the Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, exceeds the balance of credit applicable thereto as of the statement date, the Subscribing Reinsurer shall, within 30 days after receipt of notice of such excess, secure delivery to the Company of an amendment or amendments of the respective letters of credit increasing the amount of credit by the amount of the applicable difference.
2.If, however, the statement shows that the Subscribing Reinsurer's United States obligations are less than the balance of credit applicable thereto as of the statement date, and/or if the statement shows that the portion of Subscribing Reinsurer's Canadian obligations which the Subscribing Reinsurer has elected to fund by letter of credit, if any, is less than the balance of credit applicable thereto as of the statement date, the Company shall, within 30 days after receipt of written request from the Subscribing Reinsurer, release such excess credit by agreeing to secure an amendment or amendments to the respective letters of credit reducing the amount of credit available by the amount of the applicable excess credit.
F.Notwithstanding any other provision of this Article, as respects a Subscribing Reinsurer that is a Reciprocal Jurisdiction Reinsurer, the Subscribing Reinsurer agrees to provide collateral for 100% of the Subscribing Reinsurer’s obligations under this Contract, if the Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration or arbitral award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, if applicable.
Further, with respect to Certain Underwriting Members of Lloyd's, this Contract does not constitute an American Reinsurance Policy as defined under the Lloyd’s US Situs Credit for Reinsurance Trust Deed or the Lloyd’s American Credit for Reinsurance Joint Asset Trust Deed. Therefore, the Company does not have recourse to those trust funds with respect to this Contract.
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Insolvency
A.This Article shall apply severally to each reinsured company referenced within the definition of "Company" in this Contract. Further, this Article and the laws of the domiciliary jurisdiction shall apply in the event of the insolvency of any company intended to be covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary jurisdiction of any company intended to be covered hereunder, that domiciliary jurisdiction's laws shall prevail.
B.In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly to the Company or to its liquidator, receiver, conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. However, 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 Company indicating the policy or bond reinsured which claim 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 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 or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the Company as part of the expense of conservation 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.
C.Where two or more Subscribing 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 this Contract as though such expense had been incurred by the Company.
D.In the event of the insolvency of the Company, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the Company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the Company to such payees.
Arbitration
A.As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, such dispute or difference of opinion shall be submitted to arbitration. One arbiter shall be chosen by the Company, the other by the Reinsurer, and an umpire shall be chosen by the two arbiters before they enter upon arbitration, all of whom shall be disinterested active or former officials or experienced individuals who have operated in, or been involved in, business placed in the United States insurance or reinsurance industry for at least 10 years. In the event that either party should fail to choose an arbiter within 30 days following a written request by the
Page 13
other party to do so, the requesting party may choose two arbiters who shall in turn choose an umpire before entering upon arbitration. If the two arbiters fail to agree upon the selection of an umpire within 30 days following their appointment, the two arbiters shall request the American Arbitration Association to appoint the umpire. If the American Arbitration Association fails to appoint the umpire within 30 days after it has been requested to do so, either party may request a justice of a Court of general jurisdiction of the state in which the arbitration is to be held to appoint the umpire. Notwithstanding the above, in the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer, the Company may, at its option, choose to forgo arbitration and may bring an action in any court of competent jurisdiction. Such court shall award costs and expenses, including reasonable attorneys' fees and other expenses, if the Company prevails in such action.
B.Each party shall present its case to the arbiters within 30 days following the date of appointment of the umpire. The arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the arbiters shall be final and binding on 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. Judgment upon the final decision of the arbiters may be entered in any court of competent jurisdiction. The arbiters may award costs and expenses, including reasonable attorneys' fees and other expenses.
C.If more than one Subscribing Reinsurer is involved in the same dispute, all such Subscribing Reinsurers shall, at the option of the Company, constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the Subscribing Reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such Subscribing Reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Subscribing Reinsurers participating under the terms of this Contract from several to joint.
D.Each party shall bear the expense of its own arbiter, and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 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.
E.Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.
F.In the event the dispute or difference of opinion involves a Runoff Subscribing Reinsurer and the Company prevails in the arbitration, the arbiters shall conduct a bad-faith assessment in accordance with applicable law as soon as practicable after their decision. The arbiters shall award any necessary and legally permissible punitive damages to the Company.
Page 14
Service of Suit
(Applicable if the Subscribing Reinsurer is not domiciled in the United States of America, and/or is not authorized in any state, territory or district of the United States where authorization is required by insurance regulatory authorities)
A.This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.
B.In the event the Subscribing Reinsurer fails to perform its obligations hereunder, the Subscribing Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Subscribing Reinsurer, once the appropriate Court is accepted by the Subscribing Reinsurer or is determined by removal, transfer or otherwise, as provided for above, shall comply with all requirements necessary to give said Court jurisdiction and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, shall abide by the final decision of such Court or of any Appellate Court in the event of an appeal.
C.Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Subscribing Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his or her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.
Governing Law (BRMA 71B)
This Contract shall be governed by and construed in accordance with the laws of the State of Florida.
Non-Waiver
The failure of the Company to insist on compliance with this Contract or to exercise any right, remedy or option hereunder shall not: (1) constitute a waiver of any rights contained in this Contract, (2) prevent the Company from thereafter demanding full and complete compliance, (3) prevent the Company from exercising such remedy in the future, nor (4) affect the validity of this Contract or any part thereof.
Page 15
Severability
If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, regulatory body or court, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
Notices and Contract Execution
A.Whenever a notice, statement, report or any other written communication is required by this Contract, unless otherwise specified, such notice, statement, report or other written communication may be transmitted by certified or registered mail, nationally or internationally recognized express delivery service, personal delivery, electronic mail, or facsimile. With the exception of notices of termination, first class mail is also acceptable.
B.The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:
1.Paper documents with an original ink signature;
2.Facsimile or electronic copies of paper documents showing an original ink signature; and/or
3.Electronic records with an electronic signature made via an electronic agent. For the purposes of this Contract, the terms "electronic record," "electronic signature" and "electronic agent" shall have the meanings set forth in the Electronic Signatures in Global and National Commerce Act of 2000 or any amendments thereto.
C.This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract.
Intermediary
Aon Re, Inc., or one of its affiliated corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating to this Contract shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.
Page 16
In Witness Whereof, the Company has caused this Contract to be executed by its duly authorized representatives, who also confirm the Company's review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, as of the date specified below:
This ________________ day of ____________________________ in the year ____________.
CORE Risk Managers, LLC as Attorney-In-Fact for Condo Owners Reciprocal Exchange
This ________________ day of ____________________________ in the year ____________.
Tailrow Risk Managers, LLC as Attorney-In-Fact for Tailrow Insurance Exchange
This ________________ day of ____________________________ in the year ____________.
Homeowners Choice Property & Casualty Insurance Company, Inc.
Page 17
Schedule A
Property Catastrophe
Excess of Loss
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
| Line item | First Excess | Second Excess |
| --- | --- | --- |
| Company's Retention | $15,000,000 | $100,000,000 |
| Reinsurer's Per Occurrence Limit | $85,000,000 | $100,000,000 |
| Reinsurer's Term Limit | $170,000,000 | $200,000,000 |
| Minimum Premium | [REDACTED] | [REDACTED] |
| Premium Rate | [REDACTED] | [REDACTED] |
| Deposit Premium | [REDACTED] | [REDACTED] |
| Quarterly Deposit Premium | [REDACTED] | [REDACTED] |
Schedule A
Schedule B
Reinstatement Premium Protection
Reinsurance Contract
Effective: June 1, 2026
Condo Owners Reciprocal Exchange
and
Tailrow Insurance Exchange
and
Homeowners Choice Property & Casualty Insurance Company, Inc.
all of Tampa, Florida
(hereinafter referred to as the "Company")
First
Excess Second
Excess
Reinstatement Factor [REDACTED] [REDACTED]
Annual Deposit Premium [REDACTED] [REDACTED]
Quarterly Deposit Premium [REDACTED] [REDACTED]
The figures listed above for each excess layer shall apply to each Subscribing Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.
Schedule B
---
## EX-10.14
SEC source: [hci-ex10_14.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_14.htm)
STATE BOARD OF ADMINISTRATION OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100 TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300 RON DESANTIS GOVERNOR CHAIR
BLAISE INGOGLIA CHIEF FINANCIAL OFFICER
JAMES UTHMEIER ATTORNEY GENERAL
CHRIS SPENCER EXECUTIVE DIRECTOR
REIMBURSEMENT CONTRACT EXHIBIT 10.14
Coverage Effective: June 1, 2026
(“Contract”)
This Contract is between:
Condo Owners Reciprocal Exchange
(“Company”)
NAIC # 17547
and
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)
PREAMBLE
Section 215.555, Florida Statutes, creates the FHCF and directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Appendix A, is subject to Section 215.555, Florida Statutes, and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.
In consideration of the promises set forth in this Contract, the parties agree as follows:
ARTICLE I - SCOPE OF AGREEMENT
As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each
1 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: 21AEC3FD-0D63-4A72-B33D-C0ABE836FC99
Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.
ARTICLE II - PARTIES TO THE CONTRACT
This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies
under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any insured of the Company, any claimant against an insured of the Company, or any other third party have any rights under this Contract, except as provided in Article XVI. The SBA will disburse funds only to the Company, except as provided for in Article XVI. The Company shall not, without the prior approval of the Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.
ARTICLE III - TERM; EXECUTION
(1)
Term
This Contract applies to Losses from Covered Events which commence during the period from
12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 midnight, Eastern Time, May 31, 2027 (the “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.
(2)
Mandatory Nature of this Contract
(a)
Statutory Requirement
This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in
fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.
(b)
Duty to Provide a Fully and Timely Executed Copy of this Contract to the Administrator The Company must provide a fully executed copy of this Contract in electronic form to the
Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.
2 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: 21AEC3FD-0D63-4A72-B33D-C0ABE836FC99
(3)
Contract Deemed Executed Notwithstanding Execution Errors
Except with respect to New Participants, this Contract is deemed to have been executed by the Company as of the March 1 statutory deadline, notwithstanding the fact that the Coverage Level election in Article XXI(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the Contract on the part of the Company may have lacked the requisite authority. With respect to New Participants, this Contract is deemed to have been executed by the New Participant as of the date on which the New Participant began writing Covered Policies; coverage shall be determined as provided in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or if the executed Contract includes an invalid Coverage Level election under Article XXI, the Company’s Coverage Level shall be deemed as follows:
(a)
For a Company that is a member of a National Association of Insurance Commissioners (NAIC) group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the Administrator, the Coverage Level from the prior Contract Year shall be deemed.
(b)
For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.
(c)
For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.
(d)
For a New Participant that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45 percent, 75 percent, or 90 percent Coverage Levels may be selected if the Administrator receives an executed Contract within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45 percent Coverage Level shall be deemed to have been selected.
ARTICLE IV - LIABILITY OF THE FHCF
(1)
The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company’s Limit.
(2)
Section 215.555(4)(c)1., Florida Statutes, provides that the obligation of the FHCF with respect to all Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of the FHCF up to a specified dollar limit.
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Rule 19-8.010 F.A.C.
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(3)
In order to assure that reimbursements do not exceed the statutory limit of the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
(4)
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to further reimbursements.
ARTICLE V - DEFINITIONS
As used in this Contract, the following words and phrases are defined to mean:
(1)
Actual Claims-Paying Capacity of the FHCF
This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any
reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds under Section 215.555(6), Florida Statutes.
(2)
Actuarially Indicated
This term means an amount determined according to principles of actuarial science to be adequate, but
not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including additional amounts if needed to pay debt service on revenue bonds and to provide required debt service coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined according to principles of actuarial science to reflect each insurer’s relative exposure to hurricane losses.
(3)
Additional Living Expense (ALE)
ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential
Structure or its contents based on how the coverage is provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF.
(4)
Administrator
This term means the entity the SBA contracts with to perform administrative services associated with
the operation of the FHCF.
(5)
Authorized Insurer
This term is defined in Section 624.09(1), Florida Statutes.
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Rule 19-8.010 F.A.C.
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(6)
Balance of the Fund as of December 31 or Fund Balance
This term means the amount of assets available to pay claims resulting from Covered Events which
occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or proceeds from other financing mechanisms.
(7)
Borrowing Capacity
This term means the amount of funds available or which can be raised by the issuance of revenue bonds
or through other financing mechanisms, less bond issuance expenses and reserves.
(8)
Citizens Property Insurance Corporation (Citizens)
This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida
Statutes.
(9)
Commutation
This term means the estimation, payment, and complete discharge of all future obligations for Losses,
regardless of future loss development. The final Commutation shall constitute a complete and final release of all obligations of the SBA with respect to Losses. Commutation may be per Covered Event or by Contract Year as determined by the FHCF.
(10)
Covered Event
This term means any one storm declared to be a hurricane by the National Hurricane Center which
causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.
(11)
Coverage Level
This term means the level of reimbursement (90 percent, 75 percent, or 45 percent), as elected by the
Company under Article XXI or deemed under Article III(3), which is used in determining reimbursement under Article IV.
(12)
Covered Policy
(a)
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean
only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
(b)
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to
1.
the coverage amount for the dwelling in place under the lapsed homeowner’s policy,
2.
the coverage amount that the homeowner has been notified of by the collateral protection insurer, or
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3. the coverage amount that the homeowner requests from the collateral protection insurer,
if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.
(c)
A Company will be deemed to be able to accurately report data if the Company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.
(d)
Covered Policy does not include any policy or exposure excluded under Article VI.
(13)
Deductible Buy-Back Policy
This term means a specific policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a policy issued by another insurer.
(14)
Estimated Claims-Paying Capacity of the FHCF
This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year,
plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.
(15)
Excess Policy
This term means, for the purposes of this Contract, a policy that provides insurance protection for large
commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.
(16)
Insurer Group
For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group
means the group designation assigned by the NAIC for regulatory purposes. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group.
(17)
Limit
This term means the maximum amount that a Company may recover under this Contract, calculated by
multiplying the Company’s Reimbursement Premium by the Payout Multiple.
(18)
Loss
This term means an incurred loss under a Covered Policy from a Covered Event, including Additional
Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does not include allocated or unallocated loss adjustment expenses or any item for which this Contract does not provide reimbursement pursuant to the exclusions in Article VI.
(19)
Loss Adjustment Expense Allowance
(a) The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under
this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
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(b) The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.
(20)
New Participant
This term means a Company that begins writing Covered Policies on or after the beginning of the
Contract Year. A Company that removes Covered Policies from Citizens or an Unsound Insurer pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.
(21)
Payout Multiple
This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes,
which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.
(22)
Premium Formula
This term means the formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and
approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.
(23)
Projected Payout Multiple
The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section
215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.
(24)
Reimbursement Premium or Premium
These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000
of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.
(25)
Residential Structure
In general, this term means a unit or building used exclusively or predominantly for dwelling or
habitational occupancies, including the primary structure and appurtenant structures insured under the same Covered Policy and any other structures covered under endorsements associated with the Covered Policy covering the Residential Structure.
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(a)
With respect to a unit or home insured under a personal lines residential policy form, such unit or home is deemed to have a habitational occupancy and to be a Residential Structure regardless of the term of its occupancy.
(b)
With respect to a condominium structure or complex insured under a commercial lines policy, such structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless of the term of occupancy of individual units.
(c)
A single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and is insured under a commercial lines policy, is considered a Residential Structure if 50 percent or more of the total insured value of the structure is used for habitational occupancies.
(d)
Residential Structures do not include any structures excluded under Article VI. (26) Retention
This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.
(a) When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
(b) When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
1.
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
2.
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made, at a minimum, quarterly by the SBA after all required Proof of Loss Reports are received.
(c) The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
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(27) Retention Multiple
(a)
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2026/2027 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2024/2025 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.
(b)
The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:
1.
If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);
2.
If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or
3.
If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).
(28) Subscription Policy
This term means a Covered Policy where a single policy form is used by multiple Companies to provide vertical layers of primary hurricane coverage on a percentage basis for risks written under the policy. Each subscribing Company must be an Authorized Insurer, and the sum of all subscribers’ participation percentages on a single policy must total 100 percent.
(29) Ultimate Net Loss
(a)
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.
(b)
In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.
(c)
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
(d)
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
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(e) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
(30) Unsound Insurer
This term means an insurer determined by the Office of Insurance Regulation to be in unsound
condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.
ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a
loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
(2) Any policy which excludes wind or hurricane coverage.
(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;
(b)
Any policy providing a layer of windstorm or hurricane coverage for a structure(s) above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a structure(s) using separate policy forms;
(c)
Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or
(d)
The exclusions in this subsection do not apply to primary quota share policies written by Citizens under Section 627.351(6)(c)2., Florida Statutes.
(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).
(7) Any reinsurance assumed by the Company.
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(8)
Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does not apply to any policy identified as covering a residential condominium association or to any policy on which the insured is a residential condominium association, unless it is classified and rated as a hotel, motel, timeshare, shelter, camp, retreat or other similar structure.
(9)
Retail, office, mercantile, or manufacturing facilities, or other similar structures.
(10)
Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.
(11)
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(12)
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
(13)
Policies covering only Additional Living Expense.
(14)
Any exposure for barns or barns with apartments or living quarters.
(15)
Any exposure for builders risk coverage or new Residential Structures under construction.
(16)
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
(17)
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, interest, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
(18)
Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and Additional Living Expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
(19)
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call (unless policy limits have changed effective after June 30 of the Contract Year).
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(20)
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
(21)
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
(22)
Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.
(23)
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Company and Citizens are covered by this Contract.
(24)
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
(25)
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(26)
Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(27)
A policy providing personal property coverage separate from coverage of personal property included in a homeowner’s, mobile homeowner’s, condominium unit owner’s, or tenant’s policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of Covered Policy.
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(28) Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
(a) An endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement
that:
a.
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
b.
Charges a minimum premium of $500; and
c.
Insures scheduled items valued, in the aggregate, at no less than $100,000.
2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
a.
Collection risk assessments;
b.
Fire and security loss prevention;
c.
Warehouse inspections to protect items stored off-site;
d.
Assistance with collection inventory management; or
e.
Collection valuation reviews.
(b) An endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such endorsements are subject to the exclusion provided in this paragraph when the endorsement limit equals or exceeds $500,000. Generally, such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such an endorsement represents an unusually high exposure value and such endorsement is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
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(29) Any losses under liability coverages.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIV relating to inspection of records and examinations.
ARTICLE VIII - REIMBURSEMENT ADJUSTMENTS
Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, Retention adjustments as provided for under Article V(26)(b), incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1)
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
(2)
The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company’s Reimbursement Premium or impact its FHCF coverage. Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall
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exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.
(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures
(a)
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values
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under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)
The requirement that the Data Call is due on a certain date means that the report shall be received
by the SBA no later than 4 p.m. Eastern Time on the due date.
(2) Reimbursement Premium
(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts determined by the SBA. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.
(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as “receivership”):
1.
The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.
2.
Failure by such Company to pay the full annual provisional Reimbursement Premium as
specified in subparagraph 1. by the applicable due date may result in the 45 percent Coverage Level being deemed by the SBA for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a Covered Event occurred or triggered coverage. As such, the annual provisional Reimbursement Premium owed by the Company will be adjusted to reflect the 45 percent Coverage Level for the Contract Year.
(c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before
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February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.
(d)
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
(e)
The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
(f)
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
(3) Losses
(a) In General
Losses resulting from a Covered Event commencing during the Contract Year shall be reported by the Company and reimbursed by the SBA as provided herein and in accordance with Section 215.555, Florida Statutes, this Contract, and any rules adopted pursuant thereto. For a Company participating in a quota share primary insurance agreement(s) with Citizens , Citizens and the Company shall report only their respective portion of Losses under the quota share primary
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insurance agreement(s). The SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the Limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.
(b) Loss Reports
1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from
each Covered Event to allow the SBA to determine any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due at least 14 days from the date of the notice from the SBA that such a report is required.
2. Reimbursements will be issued based on paid Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C.
a.
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
b.
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event.
c.
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received, and shall include a Detailed Claims Listing.
d.
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an “as of” date not more than 60 days prior to the applicable quarter-end date and shall include a Detailed Claims Listing.
3. The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information.
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The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
a.
The SBA shall have the right to consult with relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
b.
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
c.
The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.
4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company’s request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company’s Reimbursement Premium, Retention, and coverage for the Contract Year.
(c) Loss Reimbursement Calculations
In general, the Company’s paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s
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reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
(d) Reserve Established
The SBA will establish a reserve for the outstanding reimbursable Losses for all Contract Years, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
(4) Advances
(a)
The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report and shall include a Loss Adjustment Expense Allowance as calculated by the SBA. Any request for an advance must be accompanied by a Proof of Loss Report and a Detailed Claims Listing, and the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for the specific type of advance requested under paragraph (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus interest due thereon.
(b)
For advances, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the SBA has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the SBA for the overpayment.
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(c)
If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the SBA may require the Company have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.
(d)
The three types of advances enumerated in Section 215.555(4)(e), Florida Statutes, follow.
1. Advances to Companies to prevent insolvency.
a. In order for the Company to demonstrate it is likely to qualify for reimbursement and that
the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, the Company shall provide the following information:
i.
Current assets;
ii.
Current liabilities other than liabilities due to the Covered Event;
iii.
Current surplus as to policyholders;
iv.
Estimate of other expected liabilities not due to the Covered Event; and
v.
Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.
b. The SBA’s final decision shall be based on the totality of the circumstances, including the
SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c. If demonstrated in accordance with subparagraph a., the SBA shall advance the Company
the amount necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.
a.
The SBA may advance the entity up to 90 percent of the lesser of: the SBA’s estimate of the reimbursement due to that entity or the entity’s share of the actual aggregate Reimbursement Premium paid for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c.
The entity must demonstrate the advance is essential to allow the entity to pay claims for a Covered Event.
3. Advances to limited apportionment companies under Section 627.351(2)(b)3, Florida Statutes.
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a.
The SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
(e) In determining whether to grant an advance and the amount of an advance, the SBA shall:
1.
Determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.
Review and consider all the information submitted by such Companies;
3.
Review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.
Consult with relevant regulatory agencies to seek all relevant information;
5.
Review the damage caused by the Covered Event and when that Covered Event occurred;
6.
Consider whether the Company has substantially exhausted amounts previously advanced;
7.
Consider any other factors deemed relevant; and
8.
Require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event.
(5) Inadequate Data Submissions
If exposure data or other information required to be reported by the Company under the terms of this Contract are not received by the SBA in the format specified by the SBA or is inadequate to the extent that the SBA requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.
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(6) Confidential Information/Trade Secret Information
Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the SBA intending to seek trade secret protection, as defined in Section 688.002, Florida Statutes, the Company shall comply with all provisions of Florida law to protect such disclosure.
ARTICLE XI - COMMUTATION
(1) Timeframe for Commutation Process
(a)
The Company and SBA may mutually agree to initiate and complete a Commutation agreement for zero dollars at any time. Such zero-dollar Commutation, once completed, eliminates the mandatory Proof of Loss Report filing requirements for the applicable Covered Event(s) for all reporting periods after the completion of the Commutation.
(b)
The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.
(c)
Provided the Company and SBA do not mutually initiate the Commutation process in subparagraph (a) or (b), the Commutation process will begin upon the later to occur: 60 months after the end of the Contract Year or upon completion of the claims examination for the Company and the resolution of all outstanding examination issues.
(2) Final Proof of Loss Report(s)
(a)
No less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report for each Covered Event during the Contract Year, except for a Company that has entered into a Commutation agreement as described in sub-subparagraph (1)(a). All outstanding Losses and incurred but not reported Losses must be submitted on an undiscounted basis.
(b)
The final Proof of Loss Report must include the following supporting documentation:
1.
All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not settled and which may be reimbursable Losses under this Contract.
2.
Requested supporting documentation (at a minimum, an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary.
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(c) Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or Commutation.
(3) The Loss Valuation Process
Subject to the timeframes outlined in sub-paragraph (1), if the Company has submitted a Proof of Loss Report indicating that it exceeds or expects to exceed its Retention, the Company and the SBA, or their respective representatives, shall attempt to agree upon the present value of all outstanding Losses, both reported and incurred but not reported, resulting from Covered Events during the Contract Year.
(a)
The Loss valuation process may only begin after all other issues arising under this Contract have been resolved, including completion of the claims examination, and shall be suspended pending resolution of any such issues that arise during the Loss valuation process.
(b)
Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA with respect to all Losses, both reported and unreported, under this Contract.
(c)
If agreement on present value cannot be reached within 90 days of the SBA’s receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.
(d)
If the parties fail to agree on the valuation of any Losses, any difference in valuation of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph. Either the SBA or the Company may initiate the process under this subparagraph by providing written notice to the other party stating that the parties are at an impasse with respect to valuation of Losses and specifying the dollar amounts in dispute.
1.
One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days after the initiation of the process, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.
2.
All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.
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3.
None of the actuaries shall be under the control of either party to this Contract.
4.
Each party shall submit a written statement related to its valuation of Losses to the panel of
actuaries and the opposing party no later than 30 days after the appointment of the third actuary. Within 15 days after receiving the other party’s submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.
5.
The written decision of a majority of the panel as to the disagreement over the valuation of Losses identified in the written notice of impasse, when filed with the parties hereto, shall be final and binding on both parties.
(e)
The reasonable and customary expense of the actuaries and of the Commutation (as a result of sub-subparagraph (3)(c) and subparagraph (d)) shall be equally divided between the two parties. Said Commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.
(f)
Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys’ fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.
ARTICLE XII - TAXES
The Company agrees not to make a deduction for the Reimbursement Premium when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company for the Reimbursement Premium, the Company agrees not to make a claim to the SBA for reimbursement of such taxes.
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ARTICLE XIII - ERRORS AND OMISSIONS
Any inadvertent delay, omission, or error on the part of the SBA shall not relieve the Company from any
liability which would attach to it hereunder if such delay, omission, or error had not been made.
ARTICLE XIV - INSPECTION OF RECORDS
The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage amount for the dwelling in place under the lapsed homeowner’s policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.
(1) Purpose of FHCF Examination
The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or in its entirety. The Company should not rely on the SBA to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year, so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any
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changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.
(2)
Examination Requirements for Exposure Verification
The Company shall retain complete and accurate records, in policy level detail, of all exposure data
submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.
(3)
Examination Requirements for Loss Reports
The Company shall retain complete and accurate records of all reported Losses and/or advances
submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.
(4)
Examination Procedures
(a)
The SBA will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the SBA. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
(b)
The reports and data are required to be provided to the SBA as set forth in an examination notice letter, and the SBA will provide the information to the examiner. If the SBA receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All
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costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
(c)
At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the SBA will forward an examination report to the Company.
(d)
Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the SBA. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
(e)
If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
(f)
If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(g)
1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the
Contract Year in question, the SBA will send the Company a letter outlining the process for resubmission and include a deadline to resubmit. Once the resubmission is received, the Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
2. If the recommendation of the examiner is to give the Company the option to either resubmit
the exposure data or to pay the estimated Reimbursement Premium difference, the SBA will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and include a deadline for the resubmission or the payment to be received by the Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.
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(h)
If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the SBA will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and include a deadline to file. Once the Proof of Loss Report(s) is received by the Administrator, the Administrator will calculate a revised reimbursement. The SBA shall review the submitted Proof of Loss Report(s) with respect to the examiner’s findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.
(i)
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than all the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
(5) Costs of the Examinations
The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.
ARTICLE XV - OFFSETS
The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company’s full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.
ARTICLE XVI - INSOLVENCY OF THE COMPANY
For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the SBA has completed and closed its examination of the insolvent Company’s Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion
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of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the SBA determines that it overpaid FIGA on behalf of the Company, the funds will be repaid to the FHCF by FIGA within a reasonable time.
ARTICLE XVII - TERMINATION
The FHCF and the obligations of both parties under this Contract may only be terminated by law.
ARTICLE XVIII - VIOLATIONS
(1) Statutory Provisions
(a)
Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.
(b)
Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.
(2) Noncompliance
(a)
As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).
(b)
If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments or advances due to the Company until the SBA determines that the Company is no longer in a state of noncompliance.
ARTICLE XIX - APPLICABLE LAW
This Contract shall be governed by and construed according to the laws of the State of Florida in respect of
any matter relating to or arising out of this Contract.
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ARTICLE XX - DUE DATES
If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or a legal State of Florida or federal holiday.
ARTICLE XXI - REIMBURSEMENT CONTRACT ELECTIONS
(1) Coverage Level
For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with Section 215.555, Florida Statutes, the Company has the option to elect a 45 percent, 75 percent, or 90 percent Coverage Level under this Contract. If the Company is a member of an NAIC group, all members must elect the same Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same Coverage Level as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90 percent Coverage Level. The Company shall not be permitted to change its Coverage Level once the contract has been executed or after the statutory deadline of March 1, whichever comes first. The Company shall be permitted to change its Coverage Level upon timely execution of the Contract for the next Contract Year but may not reduce its Coverage Level if revenue bonds issued under Section 215.555(6), Florida Statutes, after a Covered Event are outstanding.
The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2025 was as follows: Condo Owners Reciprocal Exchange
90%
(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):
Yes
(b) Coverage Level Election: The Company hereby elects the following Coverage Level for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 a.m., Eastern Time, May 31, 2027, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 45%
| | | |
| --- | --- | --- |
| 45% OR | 75% OR | 90% |
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ARTICLE XXII - COMPANY COVERAGE OF UNSOUND INSURERS
If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer’s Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.
(1) Providing Coverage for an Unsound Insurer’s Policies Under Company’s Reimbursement Contract
(a)
If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer’s Reimbursement Contract and cannot cover such policies under the Company’s Reimbursement Contract through an assumption of the Unsound Insurer’s Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own Reimbursement Contract for those policies assumed from an Unsound Insurer.
(b)
Responsibilities relating to the assumption of an Unsound Insurer’s Covered Policies by the Company:
1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.
a.
For an assumption of an Unsound Insurer’s Covered Policies that occurs on or before June 30, 2026, the Company shall report the exposure in effect for such policies as of June 30, 2026. This includes assumed policies renewed with the Company on or before June 30, 2026. As outlined in the Data Call, all such policies must be combined with the Company’s Covered policies written as its direct business and reported as a single submission due September 1, 2026.
b.
For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2026, and before December 1, 2026, the Company shall report exposure in effect for such policies as of June 30, 2026, and the SBA shall treat all such policies as if they were in effect as of June 30, 2026, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2026, in a single Data Call file combined with the Company’s Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2026, or a maximum 60 days from the date of the assumption, whichever is
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later. If the Company’s Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.
c.
If the Company is unable to submit the combined Data Call file by September 1, 2026, the Company must initially submit its Data Call file with all of its direct written Covered Policies that were in effect as of June 30, 2026 (prior to the assumption of additional Covered Policies from an Unsound Insurer) by September 1, 2026. The Company will then need to resubmit the combined Data Call file no later than 60 days from the date of the assumption.
d.
If a policy assumed by the Company from the Unsound Insurer is not reported in the Company’s Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.
e.
For an assumption of an Unsound Insurer’s Covered Policies on or after December 1, 2026, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.
f.
Except as noted above, for purposes of reporting Losses to the SBA, the Company shall report all Losses including those associated with Covered Policies assumed from the Unsound Insurer on Forms FHCF-L1A and FHCF-L1B as required under the Contract.
2.
The Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2026, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company’s Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company’s Retention and its share of the FHCF’s capacity.
3.
An administrative fee of $1,000 shall apply to each resubmission of exposure data for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the first examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. Resubmission fees shall be invoiced along with the Reimbursement Premium billing discussed in (b) above.
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4.
The Company shall ensure that the books and records related to the Covered Policies assumed from the Unsound Insurer are preserved and accessible to the SBA for its exposure and claims examinations. The Company shall retain data related to the FHCF examinations as required in Forms FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for the exposure assumed from the Unsound Insurer.
5.
The Company is required to provide the SBA with a complete listing of all assumed policies, including Covered Policies and other policies not covered by the FHCF. As outlined in the Data Call, the listing must include each policy number and the policy’s effective and expiration dates. In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.
(2) Acceptance of an Assignment of an Unsound Insurer’s Reimbursement Contract
(a) Responsibilities relating to assigned Reimbursement Contracts:
1.
The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.
2.
The Company is responsible for the Reimbursement Premiums due under the assigned Reimbursement Contract. Should any Reimbursement Premium be owed at the time paid Losses for Covered Policies under the assigned Reimbursement Contract exceed the Retention under the assigned Reimbursement Contract, all Reimbursement Premiums (as well as any applicable fees and interest) shall be offset before the issuance of any reimbursement payment.
3.
The Company has the responsibility to report all exposure and Loss information for Covered Policies under the assigned Reimbursement Contract separately for each assigned Reimbursement Contract pursuant to the reporting requirements specified in the Reimbursement Contract. If the Unsound Insurer has already submitted the required Data Call, the Company has the responsibility of filing any resubmissions as necessary.
4.
The Company has the responsibility to ensure that the books and records related to the assigned Reimbursement Contract are preserved and accessible to the SBA for its exposure and claims examinations. The Company has the responsibility to retain data related to FHCF examinations as required in FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for each assigned Reimbursement Contract.
(b) The Company will not be reimbursed by the FHCF for any Losses occurring prior to the date it first provides coverage for such transferred policies. Reimbursements for those Losses shall be made to the Unsound Insurer, the court-appointed receiver, or the applicable guaranty association, as provided by statute.
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ARTICLE XXIII - SIGNATURES
Approved by:
Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.
2/27/2026
By: Date
Authority to sign on behalf of the Company:
The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with the requisite authority to bind the Company and make the representations on behalf of the Company as set forth in this Contract.
Condo Owners Reciprocal Exchange
Mark Harmsworth CFO
Printed Name and Title
2/26/2026
By: ____________
Signature Date
35
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## EX-10.15
SEC source: [hci-ex10_15.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex10_15.htm)
STATE BOARD OF ADMINISTRATION OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100 TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300 RON DESANTIS GOVERNOR CHAIR
BLAISE INGOGLIA CHIEF FINANCIAL OFFICER
JAMES UTHMEIER ATTORNEY GENERAL
CHRIS SPENCER EXECUTIVE DIRECTOR
This Contract is between: Tailrow Insurance Exchange (“Company”)
NAIC # 17706 EXHIBIT 10.15
and
REIMBURSEMENT CONTRACT
Coverage Effective: June 1, 2026 (“Contract”)
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)
PREAMBLE
Section 215.555, Florida Statutes, creates the FHCF and directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Appendix A, is subject to Section 215.555, Florida Statutes, and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.
In consideration of the promises set forth in this Contract, the parties agree as follows:
ARTICLE I - SCOPE OF AGREEMENT
As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each
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Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.
ARTICLE II - PARTIES TO THE CONTRACT
This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies
under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any insured of the Company, any claimant against an insured of the Company, or any other third party have any rights under this Contract, except as provided in Article XVI. The SBA will disburse funds only to the Company, except as provided for in Article XVI. The Company shall not, without the prior approval of the Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.
ARTICLE III - TERM; EXECUTION
(1)
Term
This Contract applies to Losses from Covered Events which commence during the period from
12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 midnight, Eastern Time, May 31, 2027 (the “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.
(2)
Mandatory Nature of this Contract
(a)
Statutory Requirement
This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in
fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.
(b)
Duty to Provide a Fully and Timely Executed Copy of this Contract to the Administrator The Company must provide a fully executed copy of this Contract in electronic form to the
Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.
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(3)
Contract Deemed Executed Notwithstanding Execution Errors
Except with respect to New Participants, this Contract is deemed to have been executed by the Company as of the March 1 statutory deadline, notwithstanding the fact that the Coverage Level election in Article XXI(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the Contract on the part of the Company may have lacked the requisite authority. With respect to New Participants, this Contract is deemed to have been executed by the New Participant as of the date on which the New Participant began writing Covered Policies; coverage shall be determined as provided in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or if the executed Contract includes an invalid Coverage Level election under Article XXI, the Company’s Coverage Level shall be deemed as follows:
(a)
For a Company that is a member of a National Association of Insurance Commissioners (NAIC) group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the Administrator, the Coverage Level from the prior Contract Year shall be deemed.
(b)
For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.
(c)
For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.
(d)
For a New Participant that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45 percent, 75 percent, or 90 percent Coverage Levels may be selected if the Administrator receives an executed Contract within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45 percent Coverage Level shall be deemed to have been selected.
ARTICLE IV - LIABILITY OF THE FHCF
(1)
The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company’s Limit.
(2)
Section 215.555(4)(c)1., Florida Statutes, provides that the obligation of the FHCF with respect to all Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of the FHCF up to a specified dollar limit.
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(3)
In order to assure that reimbursements do not exceed the statutory limit of the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
(4)
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to further reimbursements.
ARTICLE V - DEFINITIONS
As used in this Contract, the following words and phrases are defined to mean:
(1)
Actual Claims-Paying Capacity of the FHCF
This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any
reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds under Section 215.555(6), Florida Statutes.
(2)
Actuarially Indicated
This term means an amount determined according to principles of actuarial science to be adequate, but
not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including additional amounts if needed to pay debt service on revenue bonds and to provide required debt service coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined according to principles of actuarial science to reflect each insurer’s relative exposure to hurricane losses.
(3)
Additional Living Expense (ALE)
ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential
Structure or its contents based on how the coverage is provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF.
(4)
Administrator
This term means the entity the SBA contracts with to perform administrative services associated with
the operation of the FHCF.
(5)
Authorized Insurer
This term is defined in Section 624.09(1), Florida Statutes.
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(6)
Balance of the Fund as of December 31 or Fund Balance
This term means the amount of assets available to pay claims resulting from Covered Events which
occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or proceeds from other financing mechanisms.
(7)
Borrowing Capacity
This term means the amount of funds available or which can be raised by the issuance of revenue bonds
or through other financing mechanisms, less bond issuance expenses and reserves.
(8)
Citizens Property Insurance Corporation (Citizens)
This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida
Statutes.
(9)
Commutation
This term means the estimation, payment, and complete discharge of all future obligations for Losses,
regardless of future loss development. The final Commutation shall constitute a complete and final release of all obligations of the SBA with respect to Losses. Commutation may be per Covered Event or by Contract Year as determined by the FHCF.
(10)
Covered Event
This term means any one storm declared to be a hurricane by the National Hurricane Center which
causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.
(11)
Coverage Level
This term means the level of reimbursement (90 percent, 75 percent, or 45 percent), as elected by the
Company under Article XXI or deemed under Article III(3), which is used in determining reimbursement under Article IV.
(12)
Covered Policy
(a)
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean
only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
(b)
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to
1.
the coverage amount for the dwelling in place under the lapsed homeowner’s policy,
2.
the coverage amount that the homeowner has been notified of by the collateral protection insurer, or
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3. the coverage amount that the homeowner requests from the collateral protection insurer,
if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.
(c)
A Company will be deemed to be able to accurately report data if the Company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.
(d)
Covered Policy does not include any policy or exposure excluded under Article VI.
(13)
Deductible Buy-Back Policy
This term means a specific policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a policy issued by another insurer.
(14)
Estimated Claims-Paying Capacity of the FHCF
This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year,
plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.
(15)
Excess Policy
This term means, for the purposes of this Contract, a policy that provides insurance protection for large
commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.
(16)
Insurer Group
For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group
means the group designation assigned by the NAIC for regulatory purposes. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group.
(17)
Limit
This term means the maximum amount that a Company may recover under this Contract, calculated by
multiplying the Company’s Reimbursement Premium by the Payout Multiple.
(18)
Loss
This term means an incurred loss under a Covered Policy from a Covered Event, including Additional
Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does not include allocated or unallocated loss adjustment expenses or any item for which this Contract does not provide reimbursement pursuant to the exclusions in Article VI.
(19)
Loss Adjustment Expense Allowance
(a) The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under
this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
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(b) The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.
(20)
New Participant
This term means a Company that begins writing Covered Policies on or after the beginning of the
Contract Year. A Company that removes Covered Policies from Citizens or an Unsound Insurer pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.
(21)
Payout Multiple
This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes,
which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.
(22)
Premium Formula
This term means the formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and
approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.
(23)
Projected Payout Multiple
The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section
215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.
(24)
Reimbursement Premium or Premium
These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000
of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.
(25)
Residential Structure
In general, this term means a unit or building used exclusively or predominantly for dwelling or
habitational occupancies, including the primary structure and appurtenant structures insured under the same Covered Policy and any other structures covered under endorsements associated with the Covered Policy covering the Residential Structure.
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(a)
With respect to a unit or home insured under a personal lines residential policy form, such unit or home is deemed to have a habitational occupancy and to be a Residential Structure regardless of the term of its occupancy.
(b)
With respect to a condominium structure or complex insured under a commercial lines policy, such structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless of the term of occupancy of individual units.
(c)
A single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and is insured under a commercial lines policy, is considered a Residential Structure if 50 percent or more of the total insured value of the structure is used for habitational occupancies.
(d)
Residential Structures do not include any structures excluded under Article VI. (26) Retention
This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.
(a) When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
(b) When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
1.
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
2.
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made, at a minimum, quarterly by the SBA after all required Proof of Loss Reports are received.
(c) The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
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(27) Retention Multiple
(a)
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2026/2027 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2024/2025 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.
(b)
The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:
1.
If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);
2.
If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or
3.
If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).
(28) Subscription Policy
This term means a Covered Policy where a single policy form is used by multiple Companies to provide vertical layers of primary hurricane coverage on a percentage basis for risks written under the policy. Each subscribing Company must be an Authorized Insurer, and the sum of all subscribers’ participation percentages on a single policy must total 100 percent.
(29) Ultimate Net Loss
(a)
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.
(b)
In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.
(c)
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
(d)
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
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(e) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
(30) Unsound Insurer
This term means an insurer determined by the Office of Insurance Regulation to be in unsound
condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.
ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a
loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
(2) Any policy which excludes wind or hurricane coverage.
(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;
(b)
Any policy providing a layer of windstorm or hurricane coverage for a structure(s) above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a structure(s) using separate policy forms;
(c)
Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or
(d)
The exclusions in this subsection do not apply to primary quota share policies written by Citizens under Section 627.351(6)(c)2., Florida Statutes.
(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).
(7) Any reinsurance assumed by the Company.
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(8)
Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does not apply to any policy identified as covering a residential condominium association or to any policy on which the insured is a residential condominium association, unless it is classified and rated as a hotel, motel, timeshare, shelter, camp, retreat or other similar structure.
(9)
Retail, office, mercantile, or manufacturing facilities, or other similar structures.
(10)
Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.
(11)
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
(12)
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
(13)
Policies covering only Additional Living Expense.
(14)
Any exposure for barns or barns with apartments or living quarters.
(15)
Any exposure for builders risk coverage or new Residential Structures under construction.
(16)
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
(17)
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, interest, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
(18)
Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and Additional Living Expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
(19)
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call (unless policy limits have changed effective after June 30 of the Contract Year).
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(20)
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
(21)
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
(22)
Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.
(23)
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Company and Citizens are covered by this Contract.
(24)
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
(25)
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
(26)
Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
(27)
A policy providing personal property coverage separate from coverage of personal property included in a homeowner’s, mobile homeowner’s, condominium unit owner’s, or tenant’s policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of Covered Policy.
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(28) Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
(a) An endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement
that:
a.
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
b.
Charges a minimum premium of $500; and
c.
Insures scheduled items valued, in the aggregate, at no less than $100,000.
2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
a.
Collection risk assessments;
b.
Fire and security loss prevention;
c.
Warehouse inspections to protect items stored off-site;
d.
Assistance with collection inventory management; or
e.
Collection valuation reviews.
(b) An endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such endorsements are subject to the exclusion provided in this paragraph when the endorsement limit equals or exceeds $500,000. Generally, such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such an endorsement represents an unusually high exposure value and such endorsement is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
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(29) Any losses under liability coverages.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIV relating to inspection of records and examinations.
ARTICLE VIII - REIMBURSEMENT ADJUSTMENTS
Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, Retention adjustments as provided for under Article V(26)(b), incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1)
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
(2)
The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company’s Reimbursement Premium or impact its FHCF coverage. Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall
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exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.
(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the six months preceding the start of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.
ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures
(a)
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(b)
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values
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under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
(c)
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
(d)
The requirement that the Data Call is due on a certain date means that the report shall be received
by the SBA no later than 4 p.m. Eastern Time on the due date.
(2) Reimbursement Premium
(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts determined by the SBA. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.
(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as “receivership”):
1.
The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.
2.
Failure by such Company to pay the full annual provisional Reimbursement Premium as
specified in subparagraph 1. by the applicable due date may result in the 45 percent Coverage Level being deemed by the SBA for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a Covered Event occurred or triggered coverage. As such, the annual provisional Reimbursement Premium owed by the Company will be adjusted to reflect the 45 percent Coverage Level for the Contract Year.
(c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before
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February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.
(d)
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
(e)
The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
(f)
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
(3) Losses
(a) In General
Losses resulting from a Covered Event commencing during the Contract Year shall be reported by the Company and reimbursed by the SBA as provided herein and in accordance with Section 215.555, Florida Statutes, this Contract, and any rules adopted pursuant thereto. For a Company participating in a quota share primary insurance agreement(s) with Citizens , Citizens and the Company shall report only their respective portion of Losses under the quota share primary
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insurance agreement(s). The SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the Limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.
(b) Loss Reports
1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from
each Covered Event to allow the SBA to determine any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due at least 14 days from the date of the notice from the SBA that such a report is required.
2. Reimbursements will be issued based on paid Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C.
a.
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
b.
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event.
c.
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received, and shall include a Detailed Claims Listing.
d.
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an “as of” date not more than 60 days prior to the applicable quarter-end date and shall include a Detailed Claims Listing.
3. The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information.
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The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
a.
The SBA shall have the right to consult with relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
b.
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
c.
The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.
4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company’s request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company’s Reimbursement Premium, Retention, and coverage for the Contract Year.
(c) Loss Reimbursement Calculations
In general, the Company’s paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s
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reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
(d) Reserve Established
The SBA will establish a reserve for the outstanding reimbursable Losses for all Contract Years, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
(4) Advances
(a)
The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report and shall include a Loss Adjustment Expense Allowance as calculated by the SBA. Any request for an advance must be accompanied by a Proof of Loss Report and a Detailed Claims Listing, and the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for the specific type of advance requested under paragraph (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus interest due thereon.
(b)
For advances, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the SBA has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the SBA for the overpayment.
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(c)
If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the SBA may require the Company have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.
(d)
The three types of advances enumerated in Section 215.555(4)(e), Florida Statutes, follow.
1. Advances to Companies to prevent insolvency.
a. In order for the Company to demonstrate it is likely to qualify for reimbursement and that
the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, the Company shall provide the following information:
i.
Current assets;
ii.
Current liabilities other than liabilities due to the Covered Event;
iii.
Current surplus as to policyholders;
iv.
Estimate of other expected liabilities not due to the Covered Event; and
v.
Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.
b. The SBA’s final decision shall be based on the totality of the circumstances, including the
SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c. If demonstrated in accordance with subparagraph a., the SBA shall advance the Company
the amount necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.
a.
The SBA may advance the entity up to 90 percent of the lesser of: the SBA’s estimate of the reimbursement due to that entity or the entity’s share of the actual aggregate Reimbursement Premium paid for that Contract Year, multiplied by the current available liquid assets of the FHCF.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
c.
The entity must demonstrate the advance is essential to allow the entity to pay claims for a Covered Event.
3. Advances to limited apportionment companies under Section 627.351(2)(b)3, Florida Statutes.
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a.
The SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.
b.
The SBA’s final decision shall be based on the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year.
(e) In determining whether to grant an advance and the amount of an advance, the SBA shall:
1.
Determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
2.
Review and consider all the information submitted by such Companies;
3.
Review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
4.
Consult with relevant regulatory agencies to seek all relevant information;
5.
Review the damage caused by the Covered Event and when that Covered Event occurred;
6.
Consider whether the Company has substantially exhausted amounts previously advanced;
7.
Consider any other factors deemed relevant; and
8.
Require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event.
(5) Inadequate Data Submissions
If exposure data or other information required to be reported by the Company under the terms of this Contract are not received by the SBA in the format specified by the SBA or is inadequate to the extent that the SBA requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.
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(6) Confidential Information/Trade Secret Information
Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the SBA intending to seek trade secret protection, as defined in Section 688.002, Florida Statutes, the Company shall comply with all provisions of Florida law to protect such disclosure.
ARTICLE XI - COMMUTATION
(1) Timeframe for Commutation Process
(a)
The Company and SBA may mutually agree to initiate and complete a Commutation agreement for zero dollars at any time. Such zero-dollar Commutation, once completed, eliminates the mandatory Proof of Loss Report filing requirements for the applicable Covered Event(s) for all reporting periods after the completion of the Commutation.
(b)
The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.
(c)
Provided the Company and SBA do not mutually initiate the Commutation process in subparagraph (a) or (b), the Commutation process will begin upon the later to occur: 60 months after the end of the Contract Year or upon completion of the claims examination for the Company and the resolution of all outstanding examination issues.
(2) Final Proof of Loss Report(s)
(a)
No less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report for each Covered Event during the Contract Year, except for a Company that has entered into a Commutation agreement as described in sub-subparagraph (1)(a). All outstanding Losses and incurred but not reported Losses must be submitted on an undiscounted basis.
(b)
The final Proof of Loss Report must include the following supporting documentation:
1.
All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not settled and which may be reimbursable Losses under this Contract.
2.
Requested supporting documentation (at a minimum, an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary.
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(c) Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or Commutation.
(3) The Loss Valuation Process
Subject to the timeframes outlined in sub-paragraph (1), if the Company has submitted a Proof of Loss Report indicating that it exceeds or expects to exceed its Retention, the Company and the SBA, or their respective representatives, shall attempt to agree upon the present value of all outstanding Losses, both reported and incurred but not reported, resulting from Covered Events during the Contract Year.
(a)
The Loss valuation process may only begin after all other issues arising under this Contract have been resolved, including completion of the claims examination, and shall be suspended pending resolution of any such issues that arise during the Loss valuation process.
(b)
Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA with respect to all Losses, both reported and unreported, under this Contract.
(c)
If agreement on present value cannot be reached within 90 days of the SBA’s receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.
(d)
If the parties fail to agree on the valuation of any Losses, any difference in valuation of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph. Either the SBA or the Company may initiate the process under this subparagraph by providing written notice to the other party stating that the parties are at an impasse with respect to valuation of Losses and specifying the dollar amounts in dispute.
1.
One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days after the initiation of the process, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.
2.
All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.
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3.
None of the actuaries shall be under the control of either party to this Contract.
4.
Each party shall submit a written statement related to its valuation of Losses to the panel of
actuaries and the opposing party no later than 30 days after the appointment of the third actuary. Within 15 days after receiving the other party’s submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.
5.
The written decision of a majority of the panel as to the disagreement over the valuation of Losses identified in the written notice of impasse, when filed with the parties hereto, shall be final and binding on both parties.
(e)
The reasonable and customary expense of the actuaries and of the Commutation (as a result of sub-subparagraph (3)(c) and subparagraph (d)) shall be equally divided between the two parties. Said Commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.
(f)
Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys’ fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.
ARTICLE XII - TAXES
The Company agrees not to make a deduction for the Reimbursement Premium when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company for the Reimbursement Premium, the Company agrees not to make a claim to the SBA for reimbursement of such taxes.
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ARTICLE XIII - ERRORS AND OMISSIONS
Any inadvertent delay, omission, or error on the part of the SBA shall not relieve the Company from any
liability which would attach to it hereunder if such delay, omission, or error had not been made.
ARTICLE XIV - INSPECTION OF RECORDS
The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage amount for the dwelling in place under the lapsed homeowner’s policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.
(1) Purpose of FHCF Examination
The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or in its entirety. The Company should not rely on the SBA to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year, so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any
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changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.
(2)
Examination Requirements for Exposure Verification
The Company shall retain complete and accurate records, in policy level detail, of all exposure data
submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.
(3)
Examination Requirements for Loss Reports
The Company shall retain complete and accurate records of all reported Losses and/or advances
submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.
(4)
Examination Procedures
(a)
The SBA will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the SBA. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
(b)
The reports and data are required to be provided to the SBA as set forth in an examination notice letter, and the SBA will provide the information to the examiner. If the SBA receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All
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costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
(c)
At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the SBA will forward an examination report to the Company.
(d)
Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the SBA. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
(e)
If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
(f)
If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
(g)
1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the
Contract Year in question, the SBA will send the Company a letter outlining the process for resubmission and include a deadline to resubmit. Once the resubmission is received, the Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
2. If the recommendation of the examiner is to give the Company the option to either resubmit
the exposure data or to pay the estimated Reimbursement Premium difference, the SBA will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and include a deadline for the resubmission or the payment to be received by the Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.
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(h)
If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the SBA will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and include a deadline to file. Once the Proof of Loss Report(s) is received by the Administrator, the Administrator will calculate a revised reimbursement. The SBA shall review the submitted Proof of Loss Report(s) with respect to the examiner’s findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.
(i)
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than all the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
(5) Costs of the Examinations
The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.
ARTICLE XV - OFFSETS
The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company’s full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.
ARTICLE XVI - INSOLVENCY OF THE COMPANY
For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the SBA has completed and closed its examination of the insolvent Company’s Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion
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of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the SBA determines that it overpaid FIGA on behalf of the Company, the funds will be repaid to the FHCF by FIGA within a reasonable time.
ARTICLE XVII - TERMINATION
The FHCF and the obligations of both parties under this Contract may only be terminated by law.
ARTICLE XVIII - VIOLATIONS
(1) Statutory Provisions
(a)
Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.
(b)
Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.
(2) Noncompliance
(a)
As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).
(b)
If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments or advances due to the Company until the SBA determines that the Company is no longer in a state of noncompliance.
ARTICLE XIX - APPLICABLE LAW
This Contract shall be governed by and construed according to the laws of the State of Florida in respect of
any matter relating to or arising out of this Contract.
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ARTICLE XX - DUE DATES
If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or a legal State of Florida or federal holiday.
ARTICLE XXI - REIMBURSEMENT CONTRACT ELECTIONS
(1) Coverage Level
For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with Section 215.555, Florida Statutes, the Company has the option to elect a 45 percent, 75 percent, or 90 percent Coverage Level under this Contract. If the Company is a member of an NAIC group, all members must elect the same Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same Coverage Level as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90 percent Coverage Level. The Company shall not be permitted to change its Coverage Level once the contract has been executed or after the statutory deadline of March 1, whichever comes first. The Company shall be permitted to change its Coverage Level upon timely execution of the Contract for the next Contract Year but may not reduce its Coverage Level if revenue bonds issued under Section 215.555(6), Florida Statutes, after a Covered Event are outstanding.
The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2025 was as
follows: Tailrow Insurance Exchange
90%
(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):
Yes
(b) Coverage Level Election: The Company hereby elects the following Coverage Level for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2026, to 12:00 a.m., Eastern Time, May 31, 2027, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 45%
| | | |
| --- | --- | --- |
| 45% OR | 75% OR | 90% |
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ARTICLE XXII - COMPANY COVERAGE OF UNSOUND INSURERS
If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer’s Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.
(1) Providing Coverage for an Unsound Insurer’s Policies Under Company’s Reimbursement Contract
(a)
If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer’s Reimbursement Contract and cannot cover such policies under the Company’s Reimbursement Contract through an assumption of the Unsound Insurer’s Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own Reimbursement Contract for those policies assumed from an Unsound Insurer.
(b)
Responsibilities relating to the assumption of an Unsound Insurer’s Covered Policies by the Company:
1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.
a.
For an assumption of an Unsound Insurer’s Covered Policies that occurs on or before June 30, 2026, the Company shall report the exposure in effect for such policies as of June 30, 2026. This includes assumed policies renewed with the Company on or before June 30, 2026. As outlined in the Data Call, all such policies must be combined with the Company’s Covered policies written as its direct business and reported as a single submission due September 1, 2026.
b.
For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2026, and before December 1, 2026, the Company shall report exposure in effect for such policies as of June 30, 2026, and the SBA shall treat all such policies as if they were in effect as of June 30, 2026, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2026, in a single Data Call file combined with the Company’s Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2026, or a maximum 60 days from the date of the assumption, whichever is
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later. If the Company’s Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.
c.
If the Company is unable to submit the combined Data Call file by September 1, 2026, the Company must initially submit its Data Call file with all of its direct written Covered Policies that were in effect as of June 30, 2026 (prior to the assumption of additional Covered Policies from an Unsound Insurer) by September 1, 2026. The Company will then need to resubmit the combined Data Call file no later than 60 days from the date of the assumption.
d.
If a policy assumed by the Company from the Unsound Insurer is not reported in the Company’s Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.
e.
For an assumption of an Unsound Insurer’s Covered Policies on or after December 1, 2026, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.
f.
Except as noted above, for purposes of reporting Losses to the SBA, the Company shall report all Losses including those associated with Covered Policies assumed from the Unsound Insurer on Forms FHCF-L1A and FHCF-L1B as required under the Contract.
2.
The Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2026, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company’s Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company’s Retention and its share of the FHCF’s capacity.
3.
An administrative fee of $1,000 shall apply to each resubmission of exposure data for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the first examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. Resubmission fees shall be invoiced along with the Reimbursement Premium billing discussed in (b) above.
33 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: B8764681-2A69-4D48-93E5-8D3286D1B6CB
4.
The Company shall ensure that the books and records related to the Covered Policies assumed from the Unsound Insurer are preserved and accessible to the SBA for its exposure and claims examinations. The Company shall retain data related to the FHCF examinations as required in Forms FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for the exposure assumed from the Unsound Insurer.
5.
The Company is required to provide the SBA with a complete listing of all assumed policies, including Covered Policies and other policies not covered by the FHCF. As outlined in the Data Call, the listing must include each policy number and the policy’s effective and expiration dates. In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.
(2) Acceptance of an Assignment of an Unsound Insurer’s Reimbursement Contract
(a) Responsibilities relating to assigned Reimbursement Contracts:
1.
The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.
2.
The Company is responsible for the Reimbursement Premiums due under the assigned Reimbursement Contract. Should any Reimbursement Premium be owed at the time paid Losses for Covered Policies under the assigned Reimbursement Contract exceed the Retention under the assigned Reimbursement Contract, all Reimbursement Premiums (as well as any applicable fees and interest) shall be offset before the issuance of any reimbursement payment.
3.
The Company has the responsibility to report all exposure and Loss information for Covered Policies under the assigned Reimbursement Contract separately for each assigned Reimbursement Contract pursuant to the reporting requirements specified in the Reimbursement Contract. If the Unsound Insurer has already submitted the required Data Call, the Company has the responsibility of filing any resubmissions as necessary.
4.
The Company has the responsibility to ensure that the books and records related to the assigned Reimbursement Contract are preserved and accessible to the SBA for its exposure and claims examinations. The Company has the responsibility to retain data related to FHCF examinations as required in FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for each assigned Reimbursement Contract.
(b) The Company will not be reimbursed by the FHCF for any Losses occurring prior to the date it first provides coverage for such transferred policies. Reimbursements for those Losses shall be made to the Unsound Insurer, the court-appointed receiver, or the applicable guaranty association, as provided by statute.
34 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
Docusign Envelope ID: B8764681-2A69-4D48-93E5-8D3286D1B6CB
ARTICLE XXIII - SIGNATURES
Approved by:
Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.
2/27/2026
By: Date
Authority to sign on behalf of the Company:
The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with the requisite authority to bind the Company and make the representations on behalf of the Company as set forth in this Contract.
Tailrow Insurance Exchange
Mark Harmsworth CFO
Printed Name and Title
2/26/2026
By: ____________
Signature Date
35 FHCF-2026K Rev. 11/25
Rule 19-8.010 F.A.C.
---
## EX-31.1
SEC source: [hci-ex31_1.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex31_1.htm)
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paresh Patel, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of HCI Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Paresh Patel
Date: August 7, 2026 Paresh Patel
Chief Executive Officer
(Principal Executive Officer)
---
## EX-31.2
SEC source: [hci-ex31_2.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex31_2.htm)
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, James Mark Harmsworth, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of HCI Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ James Mark Harmsworth
Date: August 7, 2026 James Mark Harmsworth
Chief Financial Officer
(Principal Financial and Accounting Officer)
---
## EX-32.1
SEC source: [hci-ex32_1.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex32_1.htm)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2022
In connection with the Quarterly Report on Form 10-Q of HCI Group, Inc. (the “Company”) for the quarter ended June 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paresh Patel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2022, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 7, 2026 /s/ Paresh Patel
Paresh Patel
Chief Executive Officer
---
## EX-32.2
SEC source: [hci-ex32_2.htm](https://www.sec.gov/Archives/edgar/data/1400810/000119312526340280/hci-ex32_2.htm)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2022
In connection with the Quarterly Report on Form 10-Q of HCI Group, Inc. (the “Company”) for the quarter ended June 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Mark Harmsworth, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2022, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 7, 2026 /s/ James Mark Harmsworth
James Mark Harmsworth
Chief Financial Officer