- 27 -
Because petitioner could not withhold funds in excess of the $1
million ceding commission, petitioner had to pay Guardian losses
in excess of the amounts it was entitled to withhold if the
absolute value of the negative EAB exceeded $1 million. In the
event of Guardian’s insolvency, petitioner was obligated to
continue to fulfill its contractual liabilities under the 1988
Agreement without increase or diminution.
When Guardian and petitioner signed the 1988 Agreement, each
elected to exercise its right to withhold funds. No cash changed
hands at that time.
f. Recapture
The 1988 Agreement provided that Guardian would
automatically recapture a contract (but not all contracts) if the
ceding company elected to recapture. Subject to termination upon
recapture by the ceding company, the term of the 1988 Agreement
was unlimited and could not be terminated unilaterally by
petitioner. The 1988 Agreement provided that petitioner's
liability with respect to a contract would terminate on the date
of recapture.
g. Termination
Termination dates for reinsurance agreements, including
retroactive termination dates, are subject to negotiation, but a
termination date cannot be made retroactive to a prior calendar
year. The termination date of the 1988 Agreement was negotiated
between the parties.
On or about February 8, 1989, UPL notified Guardian that UPL
Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 NextLast modified: May 25, 2011