Exhibit 10(b)
INSURANCE POOLING AGREEMENT
BETWEEN
ALFA MUTUAL INSURANCE
COMPANY
AND
ALFA MUTUAL FIRE INSURANCE
COMPANY
ALFA MUTUAL GENERAL INSURANCE
COMPANY
ALFA INSURANCE
CORPORATION
ALFA GENERAL INSURANCE
CORPORATION
ALFA SPECIALTY INSURANCE
CORPORATION
ALFA VISION INSURANCE
CORPORATION
AMENDED AND
RESTATED
EFFECTIVE JANUARY 1,
2005
AMENDED AND
RESTATED
INSURANCE POOLING
AGREEMENT
This Agreement is made by and
between Alfa Mutual Insurance Company and certain of its associated
companies signatory hereto by means of exhibits setting forth the
interests and liabilities of the parties, attached hereto and made
a part of this Agreement. Alfa Mutual Insurance Company is
hereinafter referred to as “AMI”, and the remaining
parties hereto are hereinafter referred to as the “Associate
Companies” or as the “Associate Company,” as the
context requires.
The purposes of the Pooling
Agreement dated as of September 26, 1994, and as previously amended
and restated through that certain Ninth Amendment to Insurance
Pooling Agreement Effective as of January 1, 2004, and as further
hereby amended and restated, shall be to effectuate a more
efficient and economical method of operation for all participants
hereto; to increase the solvency protection for policyholders and
shareholders by increasing available surplus to draw on in the
event of a large catastrophe; to increase geographic
diversification, geographic expansion and risk selection; to
increase access to external capital through the public equity,
private equity and debt markets; to assist in the attraction,
motivation and retention of employees; to increase accountability
of directors, officers and employees; to spread and stabilize the
writings of each participating company by providing for common risk
sharing for underwriting operations and to accomplish other
operational and financial goals that are deemed reasonable and
desirable or are required by law.
AMI and each Associate Company
signatory to the Pooling Agreement agree to honor the terms set
forth herein as if this Agreement were solely between AMI and each
such Associate Company. Balances payable to or recoverable from AMI
and any such Associate Company shall not serve to offset any
balances payable to or recoverable from any other Associate Company
signatory to this Agreement. Reports and remittances between AMI
and each Associate Company shall be in sufficient detail to
identify the individual premium and loss obligation of each party
to the other. The Associate Companies each hereby ratify, confirm
and agree to all the terms and provisions of the Pooling Agreement,
except as may be modified by this Agreement.
In consideration of their mutual
agreements hereinafter set forth, the parties hereto agree as
follows:
PART I
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1.1
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The
“opening of business” as used herein means 12:01 a.m.,
January 1, 2005, or the time stated as the opening of business set
forth on Exhibit I.
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1.2
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The “book of business then
in force” as used herein means the net unearned premium
liability of the ceding company, namely, the direct liability of
the ceding company as evidenced by all outstanding policies
of
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2
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insurance naming the ceding
company as insurer, (and including the reinsurance obligations of:
(i) Alfa Mutual Fire Insurance Company resulting from the Quota
Share Reinsurance Treaty with Virginia Mutual Insurance Company,
(ii) Alfa Mutual Fire Insurance Company resulting from the
Intercompany Fire Reinsurance Arrangement with AMI, and (iii) Alfa
Vision Insurance Company resulting from arrangement with the Home
State County Mutual Insurance Company, and including any and all
participation in pools and associations relative to such business
as required by the insurance regulatory authorities, but excluding
any other policies of reinsurance assumed.
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1.3
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The word
“net” as used herein shall mean net after giving effect
to ceded reinsurance transactions, now in effect and those
hereinafter identified in an Exhibit attached to this Agreement,
with other insurers or reinsurers who are not a party to this
Agreement (and including the intercompany reinsurance between AMI
and Alfa Mutual Fire Insurance Company, the Quota Share Reinsurance
Treaty with VMI, and the Home State County Mutual Insurance
Company, each as described in Section 1.3(i), (ii) and (iii),
directly above), and including any and all participation in pools
and association relative to such business as required by insurance
regulatory authorities.
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1.4
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“Premiums” as used herein shall
include direct premiums written by each insurer including any
premium finance fees applicable to such premiums, including
reinsurance premiums assumed from Home State County Mutual
Insurance Company in the State of Texas by Alfa Vision Insurance
Corporation but excluding any reinsurance premiums assumed from
other unassociated third party insurance companies.
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1.5
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The word
“net expenses” means Loss Expenses incurred and all
Other Underwriting Expenses incurred including all expense items
that reflect Underwriting, as opposed to Investment Income and
Expense, and excluding (i) Dividends to Policyholders, (ii) Federal
and foreign income taxes, (iii) charitable contributions and all
other strictly corporate expenses, and (iv) expenses applicable to
the companies’ reinsurance assumed operations (except for
certain expenses associated with reinsurance assumed from Home
State County Mutual Insurance Company in the State of Texas by Alfa
Vision Insurance Corporation and certain expenses associated with
reinsurance assumed from Virginia Mutual Insurance Company by Alfa
Mutual Fire Insurance Company). All Investment Income and Expenses,
including premium tax credits earned from direct investments in
marketable securities, partnerships, and/or limited liability
entities, allocable to investment operations of the participating
companies under generally recognized insurance accounting
principles are not included and are not subject to this
Agreement.
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3
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1.6
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As to each
party the declaration of dividends to policyholders of such party
shall be the decision of such party’s board of directors and
that decision shall be the sole decision of that party’s
board of directors and shall be binding on that party’s
underwriting results only.
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1.7
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A catastrophe
event 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 coverage area of any pool participant to the
extent that said individual losses occurred during any period of
168 consecutive hours arising out of and directly occasioned by the
same event, except that in regard to windstorm, hail, tornado,
hurricane, cyclone, and including ensuing collapse and water
damage, the term catastrophe shall include only those losses
sustained by the company occurring during any period 72 consecutive
hours arising out of and directly occasioned by the same event.
However, the event need not be limited to one state, but must
exceed $1 million in aggregate. If the disaster, accident or loss
event is of greater duration than 72 hours, then the catastrophe
may be divided into two or more “loss occurrences”
provided that the two periods do not overlap. It is further
understood that losses arising from a combination of two or more
perils which result from the same event shall be considered as
having arisen from one catastrophe.
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2.1
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This Agreement
shall become effective as of the opening of business as herein
defined.
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2.2
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In the event of
the insolvency of any of the ceding companies, any claims for
rein
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