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would be effecting a recapture of the business underlying its
reinsurance agreement with Guardian due to NAIC compliance
issues. Guardian did not notify Mr. Gordon or petitioner of this
fact until some time in the fall of 1989.
The 1988 Agreement was terminated on December 28, 1989,
effective as of April 1, 1989. The effective date was the first
day of the second quarter, and it was the day after the
termination of the New York Retro, the earliest of the underlying
agreements to terminate. By the written terms of the 1988
Agreement, Guardian had to recapture the N.Y. Retro SPDA policies
from petitioner, effective March 30, 1989, as a result of the
recapture of those policies by the ceding company.
5. 1989 Agreement
a. In General
Following the termination of the 1988 Agreement, Guardian
and petitioner negotiated and entered into the 1989 Agreement.
The 1989 Agreement was very similar to the 1988 Agreement.
The 1989 Agreement was negotiated by Mr. Gordon (for petitioner)
and Mr. Starr (for Guardian), and it was drafted by Guardian.
Although the 1989 Agreement did not provide for the continuation
of the Trust, petitioner and Guardian continued to maintain the
Trust to secure petitioner’s performance under the 1989 Agreement
and to allow Guardian to receive credit on its annual statements
for statutory accounting purposes.13 Petitioner continued to
13 Petitioner continued to maintain the Trust with Guardian
as its beneficiary until the Trust was terminated in 1994.
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