INSURANCE COVERAGES

The Company is a participant in the Sponsored Captive, which reinsurers on the Company’s behalf various insurance exposures of the Company’s Members. The coverage provisions of the insurance provided by the Primary Insurer(s) to the Members is specified in policies of insurance issued to each Member. Each Member should rely only on the terms of its policies for a description of the insurance coverage being provided and should carefully review each of its policies upon issuance.

ELIGIBILITY AND APPLICATION PROCEDURES

Eligibility

Only members acceptable to Charter Partners which also meet applicable underwriting standards are eligible to become Members of the Company.  There is no assurance that a particular entity will be eligible to become a Member, or that an entity that becomes a Member will remain eligible to participate in the Reinsurance Program or the Primary Insurers’ insurance programs.

Application Procedure

The insurance application form for participation in the Reinsurance Program (the “Application”) is designed to provide data for the underwriting process and to create a database for evaluation of underwriting standards. The Application is subject to change from time to time, and additional data may be required by the Sponsored Captive, the Company or the Primary Insurer(s). The principal steps in the process of becoming a Member of the Company are as follows:

(i)                               A prospective Member is required to complete and forward the Application to Charter Partners, the Sponsored Captive and the appropriate Primary Insurer(s).

(ii)                             Charter Partners, the Sponsored Captive and the Primary Insurer(s) will review the Application to evaluate the degree of associated risk and whether it meets applicable underwriting standards for the Reinsurance Program.  If the Application meets the Reinsurance Program’s underwriting standards, the Sponsored Captive will prepare and forward to the applicant a statement indicating the annual premium for coverage under the Reinsurance Program and the amount of surplus contribution required.  The Sponsored Captive will include separate invoices for the amount and terms of the payment of each. The amount of the required payments must be received in order for the Member to participate in the Reinsurance Program and/or obtain insurance coverage from the Primary Insurer(s).

(iii)                           Subject to payment of the first premium installment, one year policies of the various insurance coverages will be issued to the Member by the Primary Insurer(s). After submission of a duly executed Membership Agreement (attached as Exhibit E) and payment of the surplus contribution, the Member will be a participant in the Reinsurance Program.

Underwriting Standards

The Primary Insurers and the Sponsored Captive have each developed underwriting standards to be used to evaluate the degree of underwriting risk associated with each Application, and will accept or reject the proposed risk based on those standards. Various factors are considered, including the prospective Member’s risk profile, claims history and geographic location, as provided by filed and approved rating plans, and always subject to various state and federal laws, rules and regulations where insurance coverage is offered. The underwriting standards seek to strike a balance between providing coverage at a reasonable cost, and charging higher premiums for, or declining to cover, certain applicants. The underwriting standards are subject to change at any time. Final underwriting authority rests with the Primary Insurer(s).

Confidentiality

The Sponsored Captive, the Company, and the Primary Insurer(s) take reasonable measures to maintain the confidentiality of disclosures on the Application. With due regard for the preservation of confidentiality, information regarding both open and closed claims may be utilized in connection with the Reinsurance Program’s risk management and loss prevention programs.

Continued Insurance

In order for a Member to remain a Member, it must continue to participate in the Reinsurance Program, regardless of the premium to be charged for coverage by the Primary Insurer(s). Members must also participate in loss prevention and risk management programs presented or sponsored by the Company or the Sponsored Captive on behalf of the Company. A Member’s cessation of active participation in the Company for any reason does not require termination or cancellation of insurance coverage by the Primary Insurer(s). Continuation of that coverage is at the discretion of the Primary Insurer(s) and the former Member, subject always to various state and federal laws, rules and regulations governing insurance. Reinsurance for existing coverage will continue in run-off and future coverage will no longer be eligible for reinsurance by the Sponsored Captive.