HCI Group, Inc. (Form: 10-Q, Received: 08/06/2014 16:07:30)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¨	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.)

5300 West Cypress Street, Suite 100

Tampa, FL 33607

(Address, including zip code, of principal executive offices)

(813) 849-9500

(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 x

The aggregate number of shares of the Registrant’s Common Stock, no par value, outstanding on July 24, 2014 was 11,202,338.

HCI GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page

	PART I – FINANCIAL INFORMATION

Item 1	Financial Statements		1

	Consolidated Balance Sheets: June 30, 2014 (unaudited) and December 31, 2013		1
	Consolidated Statements of Income: Three and six months ended June 30, 2014 and 2013 (unaudited)		2
	Consolidated Statements of Comprehensive Income: Three and six months ended June 30, 2014 and 2013 (unaudited)		3
	Consolidated Statements of Cash Flows: Six months ended June 30, 2014 and 2013 (unaudited)		4-5
	Consolidated Statements of Stockholders’ Equity: Six months ended June 30, 2014 and 2013 (unaudited)		6-7
	Notes to Consolidated Financial Statements (unaudited)		8-25

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26-39

Item 3	Quantitative and Qualitative Disclosures about Market Risk		39-41

Item 4	Controls and Procedures		41

	PART II – OTHER INFORMATION

Item 1	Legal Proceedings		42

Item 1A	Risk Factors		42

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		42-43

Item 3	Defaults upon Senior Securities		43

Item 4	Mine Safety Disclosures		43

Item 5	Other Information		43

Item 6	Exhibits		44

Signatures			51

Certifications

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands, except share amounts)


	June 30, 2014		December 31, 2013
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $117,944 and $110,738, respectively)	$	122,430	$	112,151
Equity securities, available for sale, at fair value (cost: $35,791 and $17,248, respectively)		37,812		17,649
Real estate investments		18,938		16,228

Total investments		179,180		146,028
Cash and cash equivalents		302,048		293,398
Accrued interest and dividends receivable		1,263		1,133
Premiums receivable		28,762		14,674
Prepaid reinsurance premiums		33,277		28,066
Deferred policy acquisition costs		20,083		14,071
Property and equipment, net		12,643		13,132
Other assets		22,399		15,814

Total assets	$	599,655	$	526,316

Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses	$	43,044	$	43,686
Unearned premiums		206,657		171,907
Advance premiums		14,873		4,504
Assumed reinsurance balances payable		316		4,660
Accrued expenses		10,162		4,032
Dividends payable		3,111		19
Income taxes payable		103		543
Deferred income taxes, net		2,951		2,740
Long-term debt		128,205		126,932
Other liabilities		14,140		6,772

Total liabilities		423,562		365,795

Commitments and contingencies (Note 13)
Stockholders’ equity:
7% Series A cumulative convertible preferred stock (liquidation preference $10.00 per share), no par value, 1,500,000 shares authorized, 0 and 110,684 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		—		—
Series B junior participating preferred stock (no par value, 400,000 shares authorized, no shares issued or outstanding)		—		—
Preferred stock (no par value, 18,100,000 shares authorized, no shares issued or outstanding)		—		—
Common stock, (no par value, 40,000,000 shares authorized, 10,690,069 and 10,939,268 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively)		—		—
Additional paid-in capital		36,511		48,966
Retained income		135,585		110,441
Accumulated other comprehensive income, net of taxes		3,997		1,114

Total stockholders’ equity		176,093		160,521

Total liabilities and stockholders’ equity	$	599,655	$	526,316

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Revenue

Gross premiums earned	$	91,221		$	81,952		$	185,109		$	164,499
Premiums ceded		(28,572	)		(24,617	)		(56,080	)		(46,613	)

Net premiums earned		62,649			57,335			129,029			117,886

Net investment income		1,481			295			2,540			434
Policy fee income		638			1,426			895			2,198
Net realized investment gains (losses)		1,167			(8	)		1,171			12
Other		349			285			766			614

Total revenue		66,284			59,333			134,401			121,144


Expenses

Losses and loss adjustment expenses		18,383			17,414			36,948			33,286
Policy acquisition and other underwriting expenses		9,559			7,308			18,688			13,276
Interest expense		2,609			846			5,183			1,532
Other operating expenses		9,350			7,358			18,889			13,473

Total expenses		39,901			32,926			79,708			61,567


Income before income taxes		26,383			26,407			54,693			59,577

Income tax expense		9,953			10,172			20,643			22,955


Net income	$	16,430		$	16,235		$	34,050		$	36,622

Preferred stock dividends		1			(32	)		4			(66	)


Income available to common stockholders	$	16,431		$	16,203		$	34,054		$	36,556


Basic earnings per common share	$	1.53		$	1.44		$	3.14		$	3.31


Diluted earnings per common share	$	1.39		$	1.40		$	2.84		$	3.20


Dividends per common share	$	0.27		$	0.23		$	0.55		$	0.45

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Net income	$	16,430		$	16,235		$	34,050		$	36,622

Other comprehensive income (loss):
Change in unrealized gain on investments:
Unrealized gain (loss) arising during the period		3,541			(1,458	)		5,847			(1,183	)
Call and repayment losses charged to investment income		2			3			17			18
Reclassification adjustment for realized (gains) losses		(1,167	)		8			(1,171	)		(12	)

Net change in unrealized gain (loss)		2,376			(1,447	)		4,693			(1,177	)
Deferred income taxes on above change		(917	)		559			(1,810	)		454

Total other comprehensive income (loss)		1,459			(888	)		2,883			(723	)

Comprehensive income	$	17,889		$	15,347		$	36,933		$	35,899

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Net income	$	34,050		$	36,622
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		4,333			1,474
Net amortization of premiums on investments in fixed-maturity securities		440			134
Depreciation and amortization		2,436			1,045
Deferred income taxes (benefits)		(1,384	)		5,831
Net realized investment gains		(1,171	)		(12	)
Income from real estate investments		(5	)		—
Gain on sale of real estate investment		(1	)		—
Foreign currency remeasurement (gain) loss		(12	)		44
Changes in operating assets and liabilities:
Premiums and reinsurance receivable		(14,088	)		(17,663	)
Advance premiums		10,369			7,244
Prepaid reinsurance premiums		(5,211	)		(22,124	)
Accrued interest and dividends receivable		(130	)		(35	)
Other assets		(6,457	)		(3,431	)
Assumed reinsurance balances payable		(4,344	)		89
Deferred policy acquisition costs		(6,012	)		(8,576	)
Losses and loss adjustment expenses		(642	)		3,581
Unearned premiums		34,750			37,197
Income taxes payable		(440	)		(8,689	)
Accrued expenses and other liabilities		13,449			9,810

Net cash provided by operating activities		59,930			42,541

Cash flows from investing activities:
Investment in real estate under acquisition, development, and construction arrangement		(2,591	)		—
Purchase of property and equipment, net		(166	)		(2,692	)
Purchase of real estate investments		(312	)		(115	)
Purchase of fixed-maturity securities		(28,382	)		(8,601	)
Purchase of equity securities		(24,141	)		(2,582	)
Proceeds from sales of fixed-maturity securities		19,962			1,359
Proceeds from calls, repayments and maturities of fixed-maturity securities		1,630			1,736
Proceeds from sales of equity securities		5,930			1,313
Proceeds from sales of real estate investments		1			—

Net cash used in investing activities		(28,069	)		(9,582	)

Cash flows from financing activities:
Proceeds from the issuance of long-term debt		—			40,250
Proceeds from the exercise of common stock options		125			—
Cash dividends paid		(6,319	)		(5,094	)
Cash dividends received under share repurchase forward contract		342			—
Repurchases of common stock		(597	)		(235	)
Repurchases of common stock under share repurchase plan		(17,810	)		—
Redemption of Series A preferred stock		(34	)		—
Debt issuance costs		(234	)		(1,525	)
Tax benefits on stock-based compensation		1,304			280

Net cash (used in) provided by financing activities		(23,223	)		33,676

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued

(Unaudited)

(Amounts in thousands)


	Six Months Ended June 30,
	2014		2013

Effect of exchange rate changes on cash		12		(37	)


Net increase in cash and cash equivalents		8,650		66,598
Cash and cash equivalents at beginning of period		293,398		230,214

Cash and cash equivalents at end of period	$	302,048	$	296,812


Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	21,050	$	25,535

Cash paid for interest	$	2,652	$	921

Non-cash investing and financing activities:
Unrealized gain (loss) on investments in available-for-sale securities, net of tax	$	2,883	$	(723	)

Conversion of Series A Preferred Stock to common stock	$	991	$	435

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

Six Months Ended June 30, 2014

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


	Series A Preferred Stock					Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income, Net		Total Stockholders’
	Shares			Amount		Shares			Amount		Capital			Income			of Tax		Equity

Balance at December 31, 2013		110,684		$	—		10,939,268		$	—	$	48,966		$	110,441		$	1,114	$	160,521
Net income		—			—		—			—		—			34,050			—		34,050
Total other comprehensive income, net of income taxes		—			—		—			—		—			—			2,883		2,883
Conversion of preferred stock to common stock		(107,298	)		—		107,298			—		—			—			—		—
Issuance of restricted stock		—			—		98,720			—		—			—			—		—
Exercise of common stock options		—			—		50,000			—		125			—			—		125
Forfeiture of restricted stock		—			—		(3,330	)		—		—			—			—		—
Repurchase and retirement of common stock		—			—		(13,541	)		—		(597	)		—			—		(597	)
Repurchase and retirement of common stock under share repurchase plan		—			—		(488,346	)		—		(17,810	)		—			—		(17,810	)
Redemption of Series A preferred stock		(3,386	)		—		—			—		(25	)		(9	)		—		(34	)
Deferred taxes on debt discount		—			—		—			—		215			—			—		215
Common stock dividends		—			—		—			—		—			(8,901	)		—		(8,901	)
Preferred stock dividends		—			—		—			—		—			4			—		4
Tax benefits on stock-based compensation		—			—		—			—		1,304			—			—		1,304
Stock-based compensation		—			—		—			—		4,333			—			—		4,333

Balance at June 30, 2014		—		$	—		10,690,069		$	—	$	36,511		$	135,585		$	3,997	$	176,093

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity - continued

Six Months Ended June 30, 2013

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


	Series A Preferred Stock					Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Income, Net			Total Stockholders’
	Shares			Amount		Shares			Amount		Capital			Income			of Tax			Equity

Balance at December 31, 2012		241,182		$	—		10,877,537		$	—	$	63,875		$	55,758		$	1,620		$	121,253
Net income		—			—		—			—		—			36,622			—			36,622
Total other comprehensive income, net of income taxes		—			—		—			—		—			—			(723	)		(723	)
Conversion of preferred stock to common stock		(49,432	)		—		49,432			—		—			—			—			—
Issuance of restricted stock		—			—		544,000			—		—			—			—			—
Forfeiture of restricted stock		—			—		(29,080	)		—		—			—			—			—
Repurchase and retirement of common stock		—			—		(7,673	)		—		(235	)		—			—			(235	)
Common stock dividends		—			—		—			—		—			(5,020	)		—			(5,020	)
Preferred stock dividends		—			—		—			—		—			(66	)		—			(66	)
Tax benefits on stock-based compensation		—			—		—			—		280			—			—			280
Stock-based compensation		—			—		—			—		1,474			—			—			1,474

Balance at June 30, 2013		191,750		$	—		11,434,216		$	—	$	65,394		$	87,294		$	897		$	153,585

See accompanying Notes to Consolidated Financial Statements.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements for HCI Group, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted 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 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 financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2014 and the results of operations and cash flows for the 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, 2014. 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, 2013 included in the Company’s Form 10-K, which was filed with the SEC on March 12, 2014.

In preparing the interim unaudited consolidated financial statements, management was required to make certain judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex and consequently actual results may differ from these estimates.

Material estimates that are particularly susceptible to significant change in the near term are related to the Company’s losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies specific to reinsurance with retrospective provisions, deferred income taxes, and stock-based compensation expense involve significant judgments and estimates material to the Company’s consolidated financial statements.

All significant intercompany balances and transactions have been eliminated.

Acquisition, Development and Construction Loan Arrangement

The Company has an acquisition, development and construction loan arrangement (“ADC Arrangement”) under which it provides financing to a property developer for the acquisition, development, and construction of a retail shopping center. The Company also expects to participate in the residual profit resulting from the ultimate sale or other use of the property. Classification and accounting for the ADC Arrangement as a loan, an investment in real estate, or joint venture is determined by the Company’s evaluation of the characteristics and the risks and rewards of the ADC Arrangement. If the Company expects to receive more than 50% of the residual profit from the ADC arrangement and it has characteristics similar to a real estate investment, the costs of the real estate project will be capitalized and interest will be recognized in net investment income (see Note 3 — “Investments”).

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

In addition, the Company considers any rights or features embedded in the ADC Arrangement that may require bifurcation and derivative accounting. Due to its participation in the expected residual profit, which is deemed a variable interest, the Company evaluates its involvements in the design and essential activities of the entity to which the Company provides financing for possible consolidation as the primary beneficiary under the Variable Interest Model prescribed by the Financial Accounting Standards Board (“FASB”).

Any subsequent changes in terms, rights or the developer’s equity interest that may result in a reclassification or a change in the accounting treatment of the ADC Arrangement will be evaluated. The Company will continually assess the collectability of principal, accrued interest and fees.

Note 2 — Recent Accounting Pronouncements

Accounting Standards Update No. 2014-12. In June 2014, the FASB issued Accounting Standards Update No. 2014-12 (“ASU 2014-12”), Compensation – Stock Compensation (Topic 718). ASU 2014-12 applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. ASU 2014-12 is effective for all entities for reporting periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Although the Company has share-based awards with performance targets, none of the awards permit vesting when a performance target is achieved after termination of an employee’s service. Adoption of this guidance had no effect on the Company’s consolidated financial statements.

Accounting Standards Update No. 2014-09. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. ASU 2014-09 also amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer to be consistent with the guidance on recognition and measurement in this Update. ASU 2014-09 is effective for public entities for reporting periods beginning after December 15, 2016. Early adoption is not permitted. While the guidance specifically excludes revenues from insurance contracts, investments and financial instruments from the scope of the new guidance, the guidance will be applicable to the Company’s other forms of revenue not specifically exempted from the guidance. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 3 — Investments

The Company holds investments in fixed-maturity securities and equity securities that are classified as available-for-sale. At June 30, 2014 and December 31, 2013, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:


	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
*As of June 30, 2014*
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	1,460	$	49	$	—		$	1,509
Corporate bonds		27,954		928		(9	)		28,873
Commercial mortgage-backed securities		11,295		501		(37	)		11,759
State, municipalities, and political subdivisions		70,601		2,964		(28	)		73,537
Redeemable preferred stock		6,634		120		(2	)		6,752

Total		117,944		4,562		(76	)		122,430
Equity securities		35,791		2,387		(366	)		37,812

Total available-for-sale securities	$	153,735	$	6,949	$	(442	)	$	160,242


*As of December 31, 2013*
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	4,549	$	37	$	(22	)	$	4,564
Corporate bonds		25,139		484		(219	)		25,404
Commercial mortgage-backed securities		10,929		499		(96	)		11,332
State, municipalities, and political subdivisions		69,715		917		(181	)		70,451
Redeemable preferred stock		406		5		(11	)		400

Total		110,738		1,942		(529	)		112,151
Equity securities		17,248		920		(519	)		17,649

Total available-for-sale securities	$	127,986	$	2,862	$	(1,048	)	$	129,800

As of June 30, 2014 and December 31, 2013, $111 and $105, respectively, of U.S. Treasury securities relate to a statutory deposit held in trust for the Treasurer of Alabama.

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities as of June 30, 2014 and December 31, 2013 are as follows:


	Amortized Cost		Estimated Fair Value
*As of June 30, 2014*
Available-for-sale
Due in one year or less	$	2,218	$	2,230
Due after one year through five years		31,124		31,764
Due after five years through ten years		58,468		60,968
Due after ten years		14,839		15,709
Commercial mortgage-backed securities		11,295		11,759

	$	117,944	$	122,430

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)


	Amortized Cost		Estimated Fair Value
*As of December 31, 2013*
Available-for-sale
Due in one year or less	$	2,366	$	2,381
Due after one year through five years		24,829		25,145
Due after five years through ten years		59,083		59,582
Due after ten years		13,531		13,711
Commercial mortgage-backed securities		10,929		11,332

	$	110,738	$	112,151

Investment Sales

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the three and six months ended June 30, 2014 and 2013 were as follows:


	Proceeds		Gross Realized Gains		Gross Realized Losses
Three months ended June 30, 2014
Fixed-maturity securities	$	18,271	$	799	$	—

Equity securities	$	3,166	$	433	$	(65	)


Three months ended June 30, 2013
Fixed-maturity securities	$	322	$	2	$	(3	)

Equity securities	$	952	$	44	$	(51	)


Six months ended June 30, 2014
Fixed-maturity securities	$	19,962	$	864	$	(9	)

Equity securities	$	5,930	$	508	$	(192	)


Six months ended June 30, 2013
Fixed-maturity securities	$	1,359	$	34	$	(3	)

Equity securities	$	1,313	$	64	$	(83	)

Other-than-temporary Impairment (“OTTI”)

The Company regularly reviews its individual investment securities for OTTI. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including:

•

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

•

the length of time and 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;

•

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.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Securities with gross unrealized loss positions at June 30, 2014 and December 31, 2013, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months					Twelve Months or Greater					Total
As of June 30, 2014	Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value

Fixed-maturity securities
Corporate bonds	$	(4	)	$	999	$	(5	)	$	1,227	$	(9	)	$	2,226
Commercial mortgage-backed securities		(3	)		640		(34	)		1,396		(37	)		2,036
State, municipalities, and political subdivisions		(8	)		2,220		(20	)		203		(28	)		2,423
Redeemable preferred stock		(2	)		759		—			49		(2	)		808

Total fixed-maturity securities		(17	)		4,618		(59	)		2,875		(76	)		7,493
Equity securities		(184	)		10,099		(182	)		2,035		(366	)		12,134

Total available-for-sale securities	$	(201	)	$	14,717	$	(241	)	$	4,910	$	(442	)	$	19,627


	Less Than Twelve Months					Twelve Months or Greater					Total
As of December 31, 2013	Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value

Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	(22	)	$	3,291	$	—		$	—	$	(22	)	$	3,291
Corporate bonds		(212	)		9,502		(7	)		230		(219	)		9,732
Commercial mortgage-backed securities		(96	)		2,179		—			—		(96	)		2,179
State, municipalities, and political subdivisions		(181	)		20,233		—			—		(181	)		20,233
Redeemable preferred stock		(11	)		239		—			—		(11	)		239

Total fixed-maturity securities		(522	)		35,444		(7	)		230		(529	)		35,674
Equity securities		(273	)		10,742		(246	)		1,069		(519	)		11,811

Total available-for-sale securities	$	(795	)	$	46,186	$	(253	)	$	1,299	$	(1,048	)	$	47,485

The Company believes there are no fundamental issues such as credit losses or other factors with respect to any of its available-for-sale securities. The unrealized losses on investments in fixed-maturity securities were caused primarily by interest-rate changes. It is expected that the securities will not be settled at a price less than the par value of the investments. In determining whether equity securities are other-than-temporarily impaired, the Company considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost. Because the declines in fair value are attributable to changes in interest rates or market conditions and not credit quality, and because the Company has the ability and intent to hold its available-for-sale investments until a market price recovery or maturity, the Company does not consider any of its investments to be other-than-temporarily impaired at June 30, 2014.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Real Estate Investments

Real estate investments consist of the following as of June 30, 2014 and December 31, 2013:


	June 30, 2014			December 31, 2013
Land	$	11,476		$	11,299
Land improvements		1,399			1,351
Buildings		3,097			3,022
Other		1,273			1,262

Total, at cost		17,245			16,934
Less: accumulated depreciation and amortization		(903	)		(706	)

Real estate, net		16,342			16,228
ADC Arrangement classified as real estate investment		2,596			—

Real estate investments	$	18,938		$	16,228

Depreciation and amortization expense related to real estate investments was $100 and $96, respectively, for the three months ended June 30, 2014 and 2013 and $198 and $191, respectively, for the six months ended June 30, 2014 and 2013.

Acquisition, Development and Construction Loan Arrangement (“ADC Arrangement”)

In June 2014, the Company’s wholly owned subsidiary, Greenleaf Capital, LLC, entered into an ADC Arrangement under which it agreed to provide financing up to a maximum of $9,785 for the acquisition, development and construction of a retail shopping center and appurtenant facilities. Greenleaf Capital has an option to purchase the property when the construction project is completed contingent upon tenant rental commitments for at least 90% of rentable space being secured by the developer. The purchase price is calculated at maturity of the loan using a predetermined capitalization rate and the projected net operating income of the developed property. The loan has an initial term of 24 months and can be extended for an additional 12 months if the purchase option is not exercised by Greenleaf Capital. Prepayment is not permitted while the ADC Arrangement is in effect. The loan bears a fixed annual interest rate of 6% due monthly in arrears. The loan agreement is secured by a) a first mortgage on the land and improvements, b) assignment of all leases, rents, issues, and profits from the land and improvements, and c) personal guarantees.

Under this ADC Arrangement, Greenleaf Capital will provide substantially all necessary funds to complete the development and Greenleaf Capital will receive the entire residual profit of the developed property if it exercises the purchase option. The developer may make multiple draws on the credit facility as the construction progresses. Based on the characteristics of this ADC Arrangement which are similar to those of an investment, combined with the expected residual profit being greater than 50%, the arrangement is accounted for and reported in the balance sheet as a real estate investment. All project costs associated with the ADC Arrangement are capitalized. The loan commitment fee received by Greenleaf Capital is deferred and recognized in investment income on a straight-line basis over the term of the loan agreement.

Because of the purchase option and the substantial financial support provided by Greenleaf Capital, the developer who has no equity interest in the property is a variable interest entity (“VIE”). However, Greenleaf Capital’s involvement is solely as the lender on the mortgage loan with

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

protective rights as the lender. Greenleaf Capital does not have power to direct the activities that most significantly impact economic performance of the VIE. As a result, Greenleaf Capital is not the primary beneficiary and is not required to consolidate the VIE. At June 30, 2014, the Company’s maximum exposure to loss relating to the VIE was $2,596 representing the carrying value of the ADC Arrangement.

In addition, Greenleaf Capital determined that the option to purchase the entire developed property is not a derivative financial instrument pursuant to U.S. GAAP. As such, the embedded feature is not required to be bifurcated and the fair value accounting for the embedded feature at each reporting date is not applicable.

Note 4 — Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair value but does not elect the fair value option for the ADC Arrangement and its long-term debt. 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 or liabilities.
Level 2	-	Other inputs that are observable for the asset and liability, either directly or indirectly.
Level 3	-	Inputs that are unobservable.

The following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis, the estimated fair values of the real estate investment under the ADC Arrangement, and long-term debt that are reflected in the financial statements at carrying value. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2014 and December 31, 2013:


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
*As of June 30, 2014*
Financial Assets:
Cash and cash equivalents	$	302,048	$	—	$	—	$	302,048

Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		668		841		—		1,509
Corporate bonds		27,875		998		—		28,873
Commercial mortgage-backed securities		—		11,759		—		11,759
State, municipalities, and political subdivisions		—		73,537		—		73,537
Redeemable preferred stock		6,752		—		—		6,752

Total fixed-maturity securities		35,295		87,135		—		122,430
Equity securities		37,812		—		—		37,812

Total available-for-sale securities		73,107		87,135		—		160,242

ADC Arrangement classified as real estate investment		—		—		2,522		2,522

Total	$	375,155	$	87,135	$	2,522	$	464,812


Financial Liabilities:
Long-term debt:
8% Senior notes	$	—	$	43,422	$	—	$	43,422
3.875% Convertible senior notes		—		—		99,642		99,642

Total long-term debt	$	—	$	43,422	$	99,642	$	143,064

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
*As of December 31, 2013*
Financial Assets:
Cash and cash equivalents	$	293,398	$	—	$	—	$	293,398

Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		3,520		1,044		—		4,564
Corporate bonds		24,476		928		—		25,404
Commercial mortgage-backed securities		—		11,332		—		11,332
State, municipalities, and political subdivisions		—		70,451		—		70,451
Redeemable preferred stock		400		—		—		400

Total fixed-maturity securities		28,396		83,755		—		112,151
Equity securities		17,649		—		—		17,649

Total available-for-sale securities		46,045		83,755		—		129,800

Total	$	339,443	$	83,755	$	—	$	423,198


Financial Liabilities:
Long-term debt:
8% Senior notes	$	—	$	43,390	$	—	$	43,390
3.875% Convertible senior notes		—		—		86,630		86,630

Total long-term debt	$	—	$	43,390	$	86,630	$	130,020

Valuation Methodology

ADC Arrangement Classified as Real Estate Investment . As described in Note 3 — “Investments” under ADC Arrangement , the ADC Arrangement represents a financing agreement with a purchase option between Greenleaf Capital and a property developer. Based on the characteristics of this ADC Arrangement which are similar to those of an investment, combined with the expected residual profit being greater than 50%, the arrangement is included in real estate investments at its carrying value in the balance sheet. Projected future cash inflows at maturity are discounted using a prevailing borrowing rate to estimate its fair value that relies on Level 3 inputs.

There were no transfers between Level 1, 2 or 3 during the three and six months ended June 30, 2014. During the year ended December 31, 2013, $10,684 of municipal bonds was transferred into Level 2 from Level 1.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 5 — Other Assets

The following table summarizes the Company’s other assets:


	June 30, 2014		December 31, 2013
Benefits receivable related to retrospective reinsurance contracts	$	15,324	$	8,815
Deferred costs related to retrospective reinsurance contracts		353		194
Deferred offering costs on senior notes issued in 2013		3,983		4,305
Prepaid expenses		1,736		771
Other		1,003		1,729

Total other assets	$	22,399	$	15,814

In June 2014, the Company received $1,485 under the terms of one of the retrospective reinsurance contracts, which terminated May 31, 2014.

Note 6 — Long-Term Debt

The following table summarizes the Company’s long-term debt:


	June 30, 2014		December 31, 2013

8% Senior Notes, due January 30, 2020	$	40,250	$	40,250
3.875% Convertible Senior Notes, due March 15, 2019*		87,955		86,682

Total long-term debt	$	128,205	$	126,932

*	net carrying value

For the three months ended June 30, 2014 and 2013, interest expense included the contractual interest coupon, discount amortization and amortization of allocated issuance costs aggregating $2,609 and $846, respectively, the amounts of which included non-cash interest expense of $806 and $41, respectively. For the six months ended June 30, 2014 and 2013, interest expense of $5,183 and $1,532, respectively, included non-cash interest expense of $1,588 and $74, respectively. As of June 30, 2014, the remaining amortization period of the debt discount was 4.7 years.

Note 7 — Reinsurance

The Company cedes a portion of its homeowners insurance exposure to other entities under catastrophe excess of loss reinsurance and quota share treaties. The Company remains liable for claims payments in the event that 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. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st each year. The Company purchases reinsurance taking into consideration probable maximum losses and reinsurance market conditions.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

The impact of the catastrophe excess of loss reinsurance and quota share treaties on premiums written and earned is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Premiums Written:
Direct	$	141,280		$	132,923		$	220,942		$	203,772
Assumed		(360	)		(476	)		(1,083	)		(2,076	)

Gross written		140,920			132,447			219,859			201,696
Ceded		(28,572	)		(24,617	)		(56,080	)		(46,613	)

Net premiums written	$	112,348		$	107,830		$	163,779		$	155,083


Premiums Earned:
Direct	$	81,761		$	64,826		$	160,281		$	117,953
Assumed		9,460			17,126			24,828			46,546

Gross earned		91,221			81,952			185,109			164,499
Ceded		(28,572	)		(24,617	)		(56,080	)		(46,613	)

Net premiums earned	$	62,649		$	57,335		$	129,029		$	117,886

During the three and six months ended June 30, 2014 and 2013, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At June 30, 2014 and December 31, 2013, prepaid reinsurance premiums related to 28 and 27 reinsurers, respectively, and there were no amounts receivable with respect to reinsurers. Thus, there were no concentrations of credit risk associated with reinsurance receivables and prepaid reinsurance premiums as of June 30, 2014 and December 31, 2013.

Certain of the reinsurance contracts include retrospective provisions that adjust premiums, increase the amount of future coverage, or result in profit commissions in the event losses are minimal or zero. These adjustments are reflected in the statements of income as net reductions in ceded premiums of $5,056 and $1,301, respectively, for the three months ended June 30, 2014 and 2013 and $10,540 and $1,301, respectively, for the six months ended June 30, 2014 and 2013. At June 30, 2014 and December 31, 2013, other assets included $15,677 and $9,009, respectively, and prepaid reinsurance premiums included $5,898 and $3,512, respectively, which are related to these adjustments.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 8 — Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred, but not reported.

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Balance, beginning of period	$	43,597		$	41,751		$	43,686		$	41,168

Incurred related to:
Current period		18,648			18,431			37,562			35,362
Prior period		(265	)		(1,017	)		(614	)		(2,076	)

Total incurred		18,383			17,414			36,948			33,286

Paid related to:
Current period		(12,228	)		(9,520	)		(18,835	)		(13,252	)
Prior period		(6,708	)		(4,896	)		(18,755	)		(16,453	)

Total paid		(18,936	)		(14,416	)		(37,590	)		(29,705	)

Balance, end of period	$	43,044		$	44,749		$	43,044		$	44,749

The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made. During the three and six months ended June 30, 2014, the Company experienced favorable development of $265 and $614, respectively, with respect to its net unpaid losses and loss adjustment expenses established as of March 31, 2014 and December 31, 2013. Factors attributable to this favorable development include a lower severity of claims and reduced frequency of claims.

The Company writes insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s monthly or quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 9 — Income Taxes

During the three months ended June 30, 2014 and 2013, the Company recorded approximately $9,953 and $10,172, respectively, of income taxes, which resulted in estimated annual effective tax rates of 37.7% and 38.5%, respectively. During the six months ended June 30, 2014 and 2013, the Company recorded approximately $20,643 and $22,955, respectively, of income taxes, which resulted in estimated annual effective tax rates of 37.7% and 38.5%, respectively. The slight decrease in the 2014 effective tax rate was attributable to an increase related to the investment income earned on tax-exempt securities. The Company’s estimated annual effective tax rate differs from the statutory federal tax rate due to state and foreign income taxes as well as certain nondeductible and tax-exempt items. The Company’s 2011 federal income tax return is currently being examined by the Internal Revenue Service. In addition, as of April 18, 2014, the Florida Department of Revenue completed an audit of the state income tax returns filed for 2010, 2011, and 2012. The audit resulted in no material changes to the state income taxes originally reported.

Note 10 — Earnings Per Share

U.S. GAAP requires the Company to use the two-class method in computing basic earnings per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities effect the computation of both basic and diluted earnings per share during periods of net income.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

A summary of the numerator and denominator of the basic and diluted earnings per common share is presented below:


	Three Months Ended							Three Months Ended
	June 30, 2014							June 30, 2013
	Income			Shares		Per Share		Income			Shares		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount

Net income	$	16,430						$	16,235

Less: Preferred stock dividends		1							(32	)
Less: Income attributable to participating securities		(1,203	)						(763	)


Basic Earnings Per Share:
Income allocated to common stockholders		15,228			9,925	$	1.53		15,440			10,687	$	1.44


Effect of Dilutive Securities:
Stock options		—			133				—			162
Convertible preferred stock		(1	)		3				32			199
Convertible senior notes		1,081			1,649				—			—


Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	16,308			11,710	$	1.39	$	15,472			11,048	$	1.40


	Six Months Ended							Six Months Ended
	June 30, 2014							June 30, 2013
	Income			Shares		Per Share		Income			Shares		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount

Net income	$	34,050						$	36,622

Less: Preferred stock dividends		4							(66	)
Less: Income attributable to participating securities		(2,386	)						(1,274	)


Basic Earnings Per Share:
Income allocated to common stockholders		31,668			10,092	$	3.14		35,282			10,669	$	3.31


Effect of Dilutive Securities:
Stock options		—			141				—			160
Convertible preferred stock		(4	)		41				66			210
Convertible senior notes		2,152			1,649				—			—


Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	33,816			11,923	$	2.84	$	35,348			11,039	$	3.20

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 11 — Stockholders’ Equity

Common Stock

Effective March 18, 2014, the Company’s Board of Directors authorized a plan to repurchase up to $40,000 of the Company’s common shares before commissions and fees. The repurchase plan allows the Company to repurchase shares from time to time through March 31, 2015. The shares may be purchased for cash in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. The share repurchase plan may be modified, suspended, terminated or extended by the Company any time without prior notice. During the three and six months ended June 30, 2014, the Company repurchased and retired a total of 277,510 and 488,346 shares, respectively, at a weighted average price per share of $36.03 and $36.45, respectively, under this authorized repurchase plan. The total costs of shares repurchased, inclusive of fees and commissions, during the three and six months ended June 30, 2014 were $10,005, or $36.05 per share, and $17,810, or $36.47 per share, respectively. At June 30, 2014, a total of $22,200 is available in connection with this plan.

On June 26, 2014, the Company’s Board of Directors declared a quarterly dividend of $0.275 per common share. The dividends are payable on September 19, 2014 to stockholders of record on August 15, 2014.

Preferred Stock

On February 4, 2014, the Company announced its Board of Directors fixed April 1, 2014 as the cancellation date for the conversion rights on its 7% Series A cumulative convertible preferred stock. The Company later extended the conversion privilege in April 2014. On June 2, 2014, 3,386 shares of Series A Preferred were redeemed at $10 per share. During the three and six months ended June 30, 2014, holders of 6,820 and 107,298 shares of Series A Preferred converted their Series A Preferred shares to 6,820 and 107,298 shares of common stock, respectively. As of June 30, 2014, no shares of Series A Preferred were outstanding.

Note 12 — Stock-Based Compensation

Incentive Plans

The Company currently has outstanding stock options and restricted stock granted under the 2007 Stock Option and Incentive Plan and the 2012 Omnibus Incentive Plan. Only the 2012 Plan is available for future grants. At June 30, 2014, there were 4,248,960 shares available for grant under the 2012 plan.

Stock Options

Stock options granted and outstanding under the incentive plans vest over periods ranging from immediately vested to five years and are exercisable over the contractual term of ten years.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

A summary of the stock option activity for the three and six months ended June 30, 2014 and 2013 is as follows (option amounts not in thousands):


						Weighted
				Weighted		Average
				Average		Remaining	Aggregate
	Number of			Exercise		Contractual	Intrinsic
	Options			Price		Term	Value

Outstanding at January 1, 2014		280,000		$	2.91	3.9 years	$	14,166
Exercised		(50,000	)	$	2.50

Outstanding at March 31, 2014		230,000		$	3.00	3.8 years	$	7,683

Outstanding at June 30, 2014		230,000		$	3.00	3.5 years	$	8,649

Exercisable at June 30, 2014		230,000		$	3.00	3.5 years	$	8,649


Outstanding at January 1, 2013		280,000		$	2.91	4.9 years	$	5,007
Outstanding at March 31, 2013		280,000		$	2.91	4.7 years	$	6,816

Outstanding at June 30, 2013		280,000		$	2.91	4.4 years	$	7,788

Exercisable at June 30, 2013		270,000		$	2.78	4.3 years	$	7,543

The following table summarizes information about options exercised for the three and six months ended June 30, 2014 and 2013 (option amounts not in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Options exercised		—		—		50,000		—
Total intrinsic value of exercised options		—		—	$	1,970		—
Fair value of vested stock options	$	17	$	17	$	17	$	17
Tax benefits realized		—		—	$	603		—

The Company recognized compensation expense related to stock options, which is included in other operating expenses, of approximately $1 and $5, respectively, for the three months ended June 30, 2014 and 2013 and $6 and $9, respectively, for the six months ended June 30, 2014 and 2013. At June 30, 2014, there was no unrecognized compensation expense related to stock options. Deferred tax benefits related to stock options for the three and six months ended June 30, 2014 and 2013 were immaterial.

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to certain executive officers, other employees and nonemployee directors in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance and market-based conditions. The fair value of the awards with market-based conditions is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome. The determination of fair value with respect to the awards with only performance or service-based conditions is based on the market value of the Company’s common stock on the grant date.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Information with respect to the activity of unvested restricted stock awards during the three and six months ended June 30, 2014 and 2013 is as follows (share amounts not in thousands):


	Number of			Weighted
	Restricted			Average
	Stock			Grant Date
	Awards			Fair Value

Nonvested at January 1, 2014		735,650		$	25.48
Granted		98,720		$	48.42
Vested		(21,825	)	$	21.56
Forfeited		(505	)	$	32.20

Nonvested at March 31, 2014		812,040		$	28.37

Vested		(32,000	)	$	12.95
Forfeited		(2,825	)	$	43.43

Nonvested at June 30, 2014		777,215		$	28.95


Nonvested at January 1, 2013		246,320		$	14.54
Forfeited		(920	)	$	21.56

Nonvested at March 31, 2013		245,400		$	14.51

Granted		544,000		$	26.58
Vested		(29,000	)	$	13.06
Forfeited		(28,160	)	$	14.68

Nonvested at June 30, 2013		732,240		$	23.53

The Company recognized compensation expense related to restricted stock, which is included in other operating expenses, of $2,247 and $1,080, respectively, for the three months ended June 30, 2014 and 2013 and $4,327 and $1,465, respectively, for the six months ended June 30, 2014 and 2013. At June 30, 2014 and 2013, there was approximately $14,071 and $15,364, respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements. The Company expects to recognize the remaining compensation expense over a weighted-average period of 25 months. The following table summarizes information about deferred tax benefits recognized related to restricted stock awards as well as their paid dividends and the fair value of vested restricted stock for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Deferred tax benefits recognized	$	950	$	478	$	1,828	$	648
Fair value of vested restricted stock	$	414	$	379	$	885	$	379

During the three and six months ended June 30, 2014, none of the awards were issued with market-based conditions. The following presents assumptions used in a Monte Carlo simulation model to determine the fair value of the awards with market-based conditions for the three and six months ended June 30, 2013:


Expected dividends per share		$ 0.90
Expected volatility		41.5 – 51.6%
Risk-free interest rate		0.0 – 2.0%
Estimated cost of capital		9.3%
Expected life (in years)		6.00

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Note 13 — Commitments and Contingencies

Financing Commitment

As described in Note 3 — “Investments” under ADC Arrangement , the Company is contractually committed to provide financing to a property developer for real estate acquisition, development and construction. At June 30, 2014, $7,194 of the available commitment was unused by the property developer.

Premium Tax

In September 2013, the Company received a notice of intent to make audit adjustments from the Florida Department of Revenue in connection with the Department’s audit of the Company’s premium tax returns for the three-year period ended December 31, 2012. The auditor’s proposed adjustments primarily relate to the disallowance of the entire amount of $1,754 in Florida salary credits applicable to that period. The proposed adjustment, which includes interest through September 10, 2013, approximates $1,913. Management has held discussions with the FDR staff and continues working with the Department to resolve this matter. The Company is confident in the merits of its position in claiming the Florida salary credits and intends to vigorously defend its position. As such, and based on the current status of and likelihood of final resolution, the Company has no amount accrued as of June 30, 2014 related to this contingency.

Environmental Matters

In connection with the acquisition of one of the Company’s properties located in Pinellas County, Florida, the Company assumed the liability to complete a site assessment and remediation of environmental contamination that resulted from a petroleum release at the marina site in late 2009. Effective April 17, 2014, the Company received confirmation from the Florida Department of Health in Pinellas County, the agency authorized to administer this case, the site is acceptable and no further action is required.

Note 14 — Related Party Transactions

Claddaugh Casualty Insurance Company, Ltd., the Company’s Bermuda domiciled captive reinsurer has reinsurance treaties with Oxbridge Reinsurance Limited whereby a portion of the business assumed from the Company’s insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”), is ceded by Claddaugh to Oxbridge. With respect to the period from June 1, 2013 through May 31, 2014, Oxbridge assumed $10,100 of the total covered exposure for approximately $4,900 in premiums. With respect to the period from June 1, 2014 through May 31, 2015, Oxbridge assumed $17,800 of the total covered exposure for approximately $4,935 in premiums. The premiums charged by Oxbridge are at rates which management believes to be competitive with market rates available to Claddaugh. Oxbridge has deposited funds into a trust account to satisfy certain collateral requirements under its reinsurance contract with Claddaugh. Trust assets may be withdrawn by HCPCI, the trust beneficiary, in the event amounts are due under the Oxbridge reinsurance agreements. Among the Oxbridge shareholders are Paresh Patel, the Company’s chief executive officer, who is also chairman of the board of directors for Oxbridge, and members of his immediate family and three of the Company’s non-employee directors including Sanjay Madhu who serves as Oxbridge’s president and chief executive officer.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Dollar amounts in thousands, except per share amounts, unless otherwise stated)

Prior to June 1, 2014, Claddaugh also had one reinsurance treaty with Moksha Re SPC Ltd. and multiple capital partners whereby a portion of the business assumed from HCPCI was ceded by Claddaugh to Moksha. With respect to the period from June 1, 2013 through May 31, 2014, Moksha assumed approximately $15,400 of the total covered exposure for approximately $4,300 in premiums, a rate which management believes to be competitive with market rates available to Claddaugh. The $4,300 premium was fully paid by Claddaugh on June 27, 2013. Moksha deposited funds into a trust account to satisfy certain collateral requirements under its reinsurance contract with Claddaugh. Among the Moksha capital partner participants are the Company’s chief executive officer, Paresh Patel, and certain of his immediate family members and Sanjay Madhu, one of the Company’s non-employee directors. This agreement terminated effective May 31, 2014 and has not been renewed.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2014. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries.

All dollar amounts, except per share amounts stated in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands unless specified otherwise.

Forward-Looking Statements

In addition to historical information, this quarterly report contains forward-looking statements as defined under federal securities laws. Such statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. 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; and other risks and uncertainties detailed herein and from time to time in our SEC reports.

OVERVIEW – General

HCI Group, Inc. owns subsidiaries engaged in property and casualty insurance, information technology, real estate and reinsurance. Based on our organizational structure, revenue sources, and evaluation of financial and operating performances by management, we manage our operations under one business segment, which includes the following operations:

Insurance Operations

•

Property and casualty insurance

•

Reinsurance

Other Operations

•

Information technology

•

Real estate

For the three months ended June 30, 2014 and 2013, revenues from property and casualty insurance operations represented 95.6% and 94.9%, respectively, of total revenues of all operating

segments. For the six months ended June 30, 2014 and 2013, revenues from property and casualty insurance operations represented 95.9% and 94.8%, respectively, of total revenues of all operating segments. As a result, our property and casualty insurance operations are our only reportable operating segment.

Insurance Operations

Property and Casualty Insurance

Our subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”), is a leading provider of property and casualty insurance in the state of Florida. HCPCI along with certain of our other subsidiaries currently provides property and casualty insurance to homeowners, condominium owners, and tenants in the state of Florida under our Homeowners Choice brand. HCPCI offers insurance products at competitive rates, while pursuing profitability using selective underwriting criteria.

HCPCI began operations in 2007 by participating in a “take-out program,” which is a legislatively mandated program designed to encourage private insurance companies to assume policies from Citizens Property Insurance Corporation, a Florida state-supported insurer. Our growth since inception has resulted primarily from a series of policy assumptions from Citizens and one from HomeWise Insurance Company. This growth track has been beneficial to us in terms of reduced policy acquisition costs and periods of lower reinsurance costs. Even though expanding our policyholder base through opportunistic assumptions continues to be important to our growth plan, we plan to seek other opportunities to expand and to provide new or additional product offerings. In January 2014, HCPCI began offering flood coverage on a limited basis as a policy endorsement to eligible new and pre-existing Florida customers.

As part of our plan for geographical expansion into other states, Homeowners Choice Assurance Company, Inc. (“HCA”) was organized to enter the Alabama property and casualty insurance market. HCA was approved and licensed by the Alabama Department of Insurance in August 2013. HCA expects to begin writing policies during 2015.

Reinsurance

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd., which participates in HCPCI’s reinsurance program.

Other Operations

Information Technology

Our information technology operations include a team of experienced software developers with extensive knowledge in developing web-based products and applications for mobile devices. The operations, which are primarily in India, are focused on developing cloud-based, innovative products or services that can be marketed to the public in addition to providing affiliates with back-office technology support services that can facilitate and improve ongoing operations.

Some of the technologies originally developed in-house for our own insurance operations have been launched for use by third parties. Exzeo ^TM is a free to join, web-based application available at Exzeo.com that enables seamless integration between organizations, co-workers and business partners. Exzeo allows users to manage projects through communication and collaboration with other participants in a real-time work environment.

We recently introduced to a selected group of independent insurance agents our new web-based tool called Proplet ^TM . Agents can search a property’s insurance-related information such as wind mitigation reports, inspection reports, claims activity reports or flood zone areas by name, address or by dropping a pin on a specific location on a map interface. In addition, agents can get an instant insurance quote from HCPCI via Proplet . We plan to continually improve this technology as part of our commitment to exceptional service to policyholders and agents.

Real Estate

Our real estate operations consist of several properties we own including our headquarters building in Tampa, Florida and a secondary insurance operations site in Ocala, Florida. In addition, the Ocala location serves as our alternative site in the event we experience any significant disruption at our headquarters building. We also own investment real estate in Treasure Island, Florida and Tierra Verde, Florida with a combined 20 acres of waterfront property.

With the exception of the Ocala location, we lease office or retail space at each location to non-affiliates on various terms. In addition, we own and operate one full-service restaurant and two marinas that we acquired in connection with our purchase of the waterfront properties. The combined marina facilities offer to the general public: a) one dry-stack boat storage facility with capacity for approximately 180 boats; b) approximately 70 wet slips; c) two fuel facilities; and d) open areas for parking and storage. Dry-stack boat storage space is generally rented on a monthly or annual basis while the wet slips are rented on a daily or monthly basis.

In June 2014, the Company’s wholly owned subsidiary, Greenleaf Capital, LLC, entered into an Acquisition, Development and Construction loan arrangement (“ADC Arrangement”) under which it agreed to provide financing up to a maximum of $9,785 for the acquisition, development and construction of a retail shopping center and appurtenant facilities. Greenleaf Capital has an option to purchase the property when the construction project is completed contingent upon tenant rental commitments for at least 90% of rentable space being secured by the developer. We believe this opportunity will enable us to grow our real estate portfolio and diversify our future sources of income. See Note 3 — “Investments” under ADC Arrangement to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Recent Events

On June 26, 2014, our Board of Directors declared a quarterly dividend of $0.275 per common share. The dividends are payable on September 19, 2014 to stockholders of record on August 15, 2014.

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the three and six months ended June 30, 2014 and 2013 (dollar amounts in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013

Operating Revenue
Gross premiums earned	$	91,221		$	81,952		$	185,109		$	164,499
Premiums ceded		(28,572	)		(24,617	)		(56,080	)		(46,613	)

Net premiums earned		62,649			57,335			129,029			117,886

Net investment income		1,481			295			2,540			434
Policy fee income		638			1,426			895			2,198
Net realized investment gains (losses)		1,167			(8	)		1,171			12
Other income		349			285			766			614

Total operating revenue		66,284			59,333			134,401			121,144


Operating Expenses
Losses and loss adjustment expenses		18,383			17,414			36,948			33,286
Policy acquisition and other underwriting expenses		9,559			7,308			18,688			13,276
Interest expense		2,609			846			5,183			1,532
Other operating expenses		9,350			7,358			18,889			13,473

Total operating expenses		39,901			32,926			79,708			61,567

Income before income taxes		26,383			26,407			54,693			59,577
Income tax expense		9,953			10,172			20,643			22,955

Net income	$	16,430		$	16,235		$	34,050		$	36,622
Preferred stock dividends		1			(32	)		4			(66	)

Income available to common stockholders	$	16,431		$	16,203		$	34,054		$	36,556


Ratios to Net Premiums Earned:
Loss Ratio		29.34	%		30.37	%		28.64	%		28.24	%
Expense Ratio		34.35	%		27.06	%		33.14	%		23.99	%

Combined Ratio		63.69	%		57.43	%		61.78	%		52.23	%


Ratios to Gross Premiums Earned:
Loss Ratio		20.15	%		21.25	%		19.96	%		20.23	%
Expense Ratio		23.59	%		18.93	%		23.10	%		17.20	%

Combined Ratio		43.74	%		40.18	%		43.06	%		37.43	%


Per Share Data:
Basic earnings per common share	$	1.53		$	1.44		$	3.14		$	3.31

Diluted earnings per common share	$	1.39		$	1.40		$	2.84		$	3.20

Comparison of the Three Months ended June 30, 2014 to the Three Months ended June 30, 2013

Our results of operations for the three months ended June 30, 2014 reflect income available to common stockholders of $16,431, or $1.39 earnings per diluted common share, compared with $16,203, or $1.40 earnings per diluted common share, for the three months ended June 30, 2013.

Revenue

Gross Premiums Earned for the three months ended June 30, 2014 and 2013 were $91,221 and $81,952, respectively. The $9,269 increase over the corresponding period in 2013 was primarily attributable to revenue from the Citizens assumption completed in November 2013.

Premiums Ceded for the three months ended June 30, 2014 and 2013 were approximately $28,572 and $24,617, respectively. Our premiums ceded represent amounts paid to reinsurers to cover losses from catastrophes that exceed thresholds defined by our catastrophe excess of loss reinsurance treaties. For the three months ended June 30, 2014 and 2013, premiums ceded reflect reductions of $5,056 and $1,301, respectively, related to the provisions under certain reinsurance contracts. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.” Our reinsurance rates are based primarily on policy exposures reflected in gross premiums earned. Premiums ceded were 31.3% and 30.0% of gross premiums earned during the three months ended June 30, 2014 and 2013, respectively.

Net Premiums Written during the three months ended June 30, 2014 and 2013 totaled $112,348 and $107,830, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs.

Net Premiums Earned for the three months ended June 30, 2014 and 2013 were $62,649 and $57,335, respectively, and reflect the gross premiums earned less the appropriate reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended June 30, 2014 and 2013:


	Three Months Ended
	June 30,
	2014			2013
Net Premiums Written	$	112,348		$	107,830
Increase in Unearned Premiums		(49,699	)		(50,495	)

Net Premiums Earned	$	62,649		$	57,335

Net Investment Income for the three months ended June 30, 2014 and 2013 was $1,481 and $295, respectively. The increase in 2014 is primarily due to the increase in our investment portfolio, which has grown from $66,468 at June 30, 2013 to $179,180 at June 30, 2014.

Policy Fee Income for the three months ended June 30, 2014 and 2013 was $638 and $1,426, respectively. The decrease in 2014 from the corresponding period is primarily attributable to the change in the fourth quarter of 2013 in the method of recognizing policy fees, which are recognized ratably over the policy coverage period.

Expenses

Our Losses and Loss Adjustment Expenses amounted to $18,383 and $17,414, respectively, during the three months ended June 30, 2014 and 2013. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the three months ended June 30, 2014 and 2013 of $9,559 and $7,308, respectively, primarily reflect the amortization of deferred acquisition costs, commissions payable to agents for production and renewal of policies, premium taxes and brokerage fees. The $2,251 increase from the corresponding period in 2013 is primarily attributable to commissions and premium taxes related to the policies assumed from Citizens in 2012 and 2013 that have renewed and are included in 2014 direct written premiums.

Interest Expense for the three months ended June 30, 2014 and 2013 was $2,609 and $846, respectively. The $1,763 increase was a result of the 3.875% convertible debt offering completed in December 2013.

Other Operating Expenses for the three months ended June 30, 2014 and 2013 were $9,350 and $7,358, respectively. The $1,992 increase is primarily attributable to a $2,075 increase in compensation and related expenses of which $1,485 relates to stock-based compensation and accrued bonus expense. As of June 30, 2014, we had 176 employees located at our headquarters in Florida compared with 161 employees as of June 30, 2013. We also had 82 employees located in Noida, India at June 30, 2014 versus 64 at June 30, 2013.

Income Tax Expense for the three months ended June 30, 2014 and 2013 were $9,953 and $10,172, respectively, for state, federal, and foreign income taxes resulting in an effective tax rate of 37.7% for 2014 and 38.5% for 2013. The slight decrease in the 2014 effective tax rate was primarily attributable to investment income on tax-exempt securities.

Ratios:

The loss ratio applicable to the three months ended June 30, 2014 (losses and loss adjustment expenses incurred related to net premiums earned) was 29.3% compared with 30.4% for the three months ended June 30, 2013. (See Gross Premiums Earned and Losses and Loss Adjustment Expenses above).

The expense ratio applicable to the three months ended June 30, 2014 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 34.4% compared with 27.0% for the three months ended June 30, 2013. The increase in our expense ratio is primarily attributable to the increase in 2014 specific to compensation and related costs and interest expense.

The combined ratio (total of all expenses in relation to net premiums earned) is the measure of underwriting profitability before other income. Our combined ratio for the three months ended June 30, 2014 was 63.7% compared with 57.4% for the three months ended June 30, 2013.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the three months ended June 30, 2014 was 43.7% compared with 40.2% for the three months ended June 30, 2013.

Comparison of the Six Months ended June 30, 2014 to the Six Months ended June 30, 2013

Our results of operations for the six months ended June 30, 2014 reflect income available to common stockholders of $34,054, or $2.84 earnings per diluted common share, compared with $36,556, or $3.20 earnings per diluted common share, for the six months ended June 30, 2013.

Revenue

Gross Premiums Earned for the six months ended June 30, 2014 and 2013 were $185,109 and $164,499, respectively. The $20,610 increase over the corresponding period in 2013 was primarily attributable to revenue from the Citizens assumption completed in November 2013.

Premiums Ceded for the six months ended June 30, 2014 and 2013 were approximately $56,080 and $46,613, respectively. Our premiums ceded represent amounts paid to reinsurers to cover losses from catastrophes that exceed thresholds defined by our catastrophe excess of loss reinsurance treaties. During the six months ended June 30, 2014 and 2013, premiums ceded reflect reductions of $10,540 and $1,301, respectively, that relate to the provisions under certain reinsurance contracts. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.” Our reinsurance rates are based primarily on policy exposures reflected in gross premiums earned. Premiums ceded were 30.3% and 28.3% of gross premiums earned during the six months ended June 30, 2014 and 2013, respectively.

Net Premiums Written during the six months ended June 30, 2014 and 2013 totaled $163,779 and $155,083, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs.

Net Premiums Earned for the six months ended June 30, 2014 and 2013 were $129,029 and $117,886, respectively, and reflect the gross premiums earned less the appropriate reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the six months ended June 30, 2014 and 2013:


	Six Months Ended
	June 30,
	2014			2013
Net Premiums Written	$	163,779		$	155,083
Increase in Unearned Premiums		(34,750	)		(37,197	)

Net Premiums Earned	$	129,029		$	117,886

Net Investment Income for the six months ended June 30, 2014 and 2013 was $2,540 and $434, respectively. The increase in 2014 is primarily due to the increase in our investment portfolio, which has grown from $66,468 at June 30, 2013 to $179,180 at June 30, 2014.

Policy Fee Income for the six months ended June 30, 2014 and 2013 was $895 and $2,198, respectively. The decrease in 2014 from the corresponding period is primarily due to the change in the fourth quarter of 2013 in the method of recognizing policy fees, which are recognized ratably over the policy coverage period.

Expenses

Our Losses and Loss Adjustment Expenses amounted to $36,948 and $33,286, respectively, during the six months ended June 30, 2014 and 2013. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the six months ended June 30, 2014 and 2013 of $18,688 and $13,276, respectively, primarily reflect the amortization of deferred acquisition costs, commissions payable to agents for production and renewal of policies, premium taxes and brokerage fees. The $5,412 increase from the corresponding period in 2013 is primarily attributable to commissions and premium taxes related to the policies assumed from Citizens in 2012 and 2013 that have renewed and are included in 2014 direct written premiums.

Interest Expense for the six months ended June 30, 2014 and 2013 was $5,183 and $1,532, respectively. The $3,651 increase was a result of the 3.875% convertible debt offering completed in December 2013.

Other Operating Expenses for the six months ended June 30, 2014 and 2013 were $18,889 and $13,473, respectively. The $5,416 increase is primarily attributable to a $5,386 increase in compensation and related expenses of which $4,098 relates to stock-based compensation and accrued bonus expense. As of June 30, 2014, we had 176 employees located at our headquarters in Florida compared to 161 employees as of June 30, 2013. We also have 82 employees located in Noida, India at June 30, 2014 versus 64 at June 30, 2013.

Income Tax Expense for the six months ended June 30, 2014 and 2013 were $20,643 and $22,955, respectively, for state, federal, and foreign income taxes resulting in an effective tax rate of 37.7% for 2014 and 38.5% for 2013.

Ratios:

The loss ratio applicable to the six months ended June 30, 2014 (losses and loss adjustment expenses incurred related to net premiums earned) was 28.6% compared with 28.2% for the six months ended June 30, 2013. (See Gross Premiums Earned and Losses and Loss Adjustment Expenses above).

The expense ratio applicable to the six months ended June 30, 2014 (defined as underwriting expenses, interest and other operating expenses related to net premiums earned) was 33.2% compared with 24.0% for the six months ended June 30, 2013. The increase in our expense ratio is primarily attributable to the increase in 2014 specific to compensation and related costs and interest expense.

The combined ratio (total of all expenses in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the six months ended June 30, 2014 was 61.8% compared with 52.2% for the six months ended June 30, 2013.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio measured to gross premiums earned is more relevant in assessing overall performance. The combined ratio to gross premiums earned for the six months ended June 30, 2014 was 43.1% compared with 37.4% for the six months ended June 30, 2013.

Seasonality of Our Business

Our insurance business is seasonal as hurricanes and tropical storms typically occur during the period from June 1 through November 30 each year. Moreover, with our reinsurance treaty year effective June 1 each year, any variation in the cost of our reinsurance, whether due to changes in reinsurance rates or changes in the total insured value of our policy base, will occur and be reflected in our financial results beginning June 1 each year.

LIQUIDITY AND CAPITAL RESOURCES

Over the years, our liquidity requirements have been met through issuance 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 insurance subsidiaries from premiums written and investment income. We may consider raising additional capital through debt and equity offerings to support our growth and future investment opportunities.

Our insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) requires 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 loss and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. A substantial portion of our losses and loss adjustment expenses are fully settled and paid within 90 days of the claim receipt date. Additional cash outflow occurs through payments of commissions, taxes, payroll, and general overhead expenses.

We believe that we maintain sufficient liquidity to pay HCPCI’s 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 dividends and also to fund operating expenses.

Senior Notes

Our long-term debt at June 30, 2014 consisted of 8% Senior Notes due 2020 and 3.875% Senior Convertible Notes due 2019, both of which were issued for gross proceeds of $40,250 and $103,000, respectively, during 2013. We make quarterly interest payments of $805 on the senior notes due 2020 with quarterly payments due on January 30, April 30, July 30 and October 30. We make semiannual interest payments of approximately $1,996 on the convertible notes with payments due in arrears on March 15 and September 15 of each year. See Note 6 — “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Share Repurchase Plan

On March 18, 2014, our Board of Directors approved a one-year plan to repurchase up to $40,000 of common shares under which we may purchase shares of common stock in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. See Note 11 — “Stockholders’ Equity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q and “Part II – Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.

Cash Flows

Cash Flows for the Six months ended June 30, 2014

Net cash provided by operating activities for the six months ended June 30, 2014 was approximately $59,930, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of $28,069 was primarily due to the purchases of available-for-sale securities of $52,523 and the funding of the ADC Arrangement of $2,591 offset by redemptions and repayments of fixed-maturity securities of $1,630, and the proceeds from sales of available-for-sale securities of $25,892. Net cash used in financing activities totaled $23,223, which was primarily due to $17,810 used in our share repurchase plan and $5,977 of net cash dividend payments.

Cash Flows for the Six months ended June 30, 2013

Net cash provided by operating activities for the six months ended June 30, 2013 was approximately $42,541, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses, reinsurance premiums and losses and loss adjustment expenses. Net cash used in investing activities of $9,582 was primarily due to the purchases of available-for-sale securities of $11,183, the purchase of $2,692 in property and equipment and the purchase of $115 in other investments offset by redemptions and repayments of fixed-maturity securities of $1,736, and the proceeds from sales of available-for-sale securities of $2,672. Net cash provided by financing activities totaled $33,676, which was primarily due to $40,250 from the sale of the Notes offset by $1,525 in related underwriting and issuance costs paid during the period and $5,094 of cash dividend payments.

Investments

The main objective of our investment policy is to maximize our after-tax investment income with a minimum of risk given the current financial market. Our excess cash is invested primarily in money market accounts and available-for-sale investments.

At June 30, 2014, we had $160,242 of available-for-sale investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new fixed-maturity investments but increases the market value of existing fixed-maturity investments, creating the opportunity for realized investment gains on disposition.

With the exception of large national banks, it is our current policy not to maintain cash deposits of more than an aggregate of $5,500 in any one bank at any time. From time to time, we

may have in excess of $5,500 of cash designated for investment and on deposit at a single national brokerage firm. In the future, we may alter our investment policy as 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.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2014, we are contractually committed to provide financing for the acquisition, development and construction of one real estate property. Such commitment is not recognized in the financial statements but is required to be disclosed in the notes to the financial statements. See Note 13 — “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q and Contractual Obligations and Commitment below for additional information. As of December 31, 2013, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.

CONTRACTUAL OBLIGATIONS AND COMMITMENT

The following table summarizes our contractual obligations and commitment as of June 30, 2014:


	Payment Due by Period (in thousands)
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years

Operating lease (1)	$	1,066		121		260		286		399
Service agreement (1)		192		22		47		51		72
Reinsurance contracts (2)		38,700		28,700		10,000		—		—
Acquisition, development and construction loan commitment (3)		7,194		7,194		—		—		—
Long-term debt obligations (4)		181,721		7,211		14,423		117,422		42,665

Total	$	228,873		43,248		24,730		117,759		43,136

(1)	Represents the lease and maintenance service agreement for office space in Noida, India. Liabilities were converted from Indian rupees to U.S. dollars using the June 30, 2014 exchange rate.

(2)	Represents the minimum payment of reinsurance premiums under multi-year retrospective reinsurance contracts.

(3)	Represents the unused portion of our commitment related to the ADC Arrangement. See Note 13— “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

(4)	Amounts represent principal and interest payments over the life of the senior notes due January 30, 2020 and the convertible notes due March 15, 2019.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have prepared our consolidated financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make judgments, assumptions and estimates to develop amounts reflected and disclosed in our financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Actual results may differ from these estimates and such differences may be material.

We believe our critical accounting policies and estimates are those related to losses and loss adjustment expenses, reinsurance with retrospective provisions, deferred income taxes, and stock-based

compensation expense. These policies are critical to the portrayal of our financial condition and operating results. They require management to make judgments and estimates about inherently uncertain matters. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment expense reserves, which include amounts estimated for claims incurred but not yet reported, income taxes and reinsurance contracts with retrospective provisions.

Reserves for Losses and Loss Adjustment Expenses

Our liability for losses and loss adjustment expense (“Reserves”) are specific to property insurance, which is HCPCI’s only line of business. The Reserves include both case reserves on reported claims and our reserves for incurred but not reported (“IBNR”) losses. At each period end date, the balance of our Reserves is based on our best estimate of the ultimate cost of each claim for those known cases and the IBNR loss reserves are estimated based primarily on our historical experience. Changes in the estimated liability are charged or credited to operations as the losses and loss adjustment expenses 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. At June 30, 2014, $21,516 of the total $43,044 we have reserved for losses and loss adjustment expenses is specific to our estimate of IBNR. The remaining $21,528 relates to known cases which have been reported but not yet fully settled in which case we have booked a reserve based on our best estimate of the ultimate cost of each claim. At June 30, 2014, $11,317 of the $21,528 in reserves for known cases relates to claims incurred during prior years.

Our Reserves decreased from $43,686 at December 31, 2013 to $43,044 at June 30, 2014. The $642 decrease in our Reserves is comprised of $18,728 in new reserves specific to the 2014 loss year offset by reductions in our Reserves of $13,437 for 2013 and $5,933 for 2012 and prior loss years. The $18,728 in Reserves established for 2014 claims is primarily due to the increase in our policy count and exposures. The decrease of $19,370 specific to our 2013 and prior loss-year reserves is due both to settlement of claims and favorable development related to those loss years. Factors that are attributable to favorable development may include a lower severity of claims than the severity of claims considered in establishing our Reserves, a lower number of new claims reported than anticipated, and actual case development may be more favorable than originally anticipated.

Based on all information known to us, we believe our Reserves at June 30, 2014 are adequate to cover our claims for losses that had occurred as of that date including losses yet to be reported to us. However, these estimates are subject to trends in claim severity and frequency and must continually be reviewed by management. As part of the process, 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 existing unpaid losses and loss adjustment expenses. 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.

Economic Impact of Reinsurance Contracts with Retrospective Provisions

Certain of the reinsurance agreements include retrospective provisions that adjust premiums, increase the amount of future coverage, or result in profit commissions in the event losses are minimal or zero. In accordance with accounting principles generally accepted in the United States of America, we will recognize an asset in the period in which the absence of loss experience gives rise to an increase in future coverage or obligates the reinsurer to pay cash or other consideration under the contract. In the event that a loss arises, we will derecognize such asset in the period in which a loss arises. Such adjustments to the asset, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs.

For the three months ended June 30, 2014 and 2013, we accrued benefits of $4,007 and $802, respectively, and deferred recognition of $1,049 and $499, respectively, in ceded premiums for total reductions in ceded premiums of $5,056 and $1,301, respectively. For the six months ended June 30, 2014 and 2013, we accrued benefits of $7,995 and $802, respectively, and deferred recognition of $2,545 and $499, respectively, in ceded premiums for total reductions in ceded premiums of $10,540 and $1,301, respectively. As of June 30, 2014, we have accrued a benefit of $15,324 and deferred recognition of $6,252 in ceded premiums, amounts that would be charged to earnings in the event we experience a catastrophic loss that exceeds the coverage limits provided under such agreements and in the period that the increased coverage is applicable, respectively.

In addition to Reserves and reinsurance contracts, we believe our accounting policies specific to deferred income taxes and stock-based compensation expense involve our most significant judgments and estimates material to our consolidated financial statements. These accounting estimates and related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on March 12, 2014. For the six months ended June 30, 2014, there have been no material changes with respect to any of our critical accounting policies.

Income Taxes

We account for income taxes in accordance with U.S. GAAP, resulting in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Valuation allowances are provided against assets that are not likely to be realized, if any. We have elected to classify interest and penalties, if any, as income tax expense as permitted by current accounting standards.

Stock-Based Compensation

We account for our stock options and restricted stock under the fair value recognition provisions of accounting principles generally accepted in the United States of America, which require the measurement, and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. We recognize stock-based compensation in the consolidated statements of income on a straight-line basis over the vesting period. We use the Black-Scholes option-pricing model, which requires the following variables for input to calculate the fair value of each stock option on the grant date: 1) expected volatility of our stock price, 2) the risk-free interest rate, 3) expected term of each award, 4) expected dividends, and 5) an expected forfeiture

rate. For restricted stock awards with market-based conditions, we estimate their fair values by using a Monte Carlo simulation model, which requires for input the following variables: 1) expected dividends per share, 2) expected volatility, 3) risk-free interest rate, 4) estimated cost of capital, and 5) expected term of each award.

RECENT ACCOUNTING PRONOUNCEMENTS

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2 to our Notes to Consolidated Financial Statements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investment portfolio at June 30, 2014 included fixed-maturity and equity securities, the purposes of which are not for trading or speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet policyholder 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. Investment securities are managed primarily by investment companies and are overseen by the investment committee appointed by our board of directors.

Our investment portfolios are primarily 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 portfolios.

We classify our fixed-maturity and equity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact the carrying value of our stockholders’ equity.

Interest Rate Risk

Our fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the 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 fixed-maturity securities at June 30, 2014 (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	$	106,963	$	(15,467	)		(12.63	)%
200 basis point increase		112,119		(10,311	)		(8.42	)%
100 basis point increase		117,275		(5,155	)		(4.21	)%
100 basis point decrease		127,457		5,027			4.11	%
200 basis point decrease		132,003		9,573			7.82	%
300 basis point decrease		135,302		12,872			10.51	%

Credit Risk

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our fixed-maturity securities. We mitigate the risk by investing in fixed-maturity securities that are primarily investment grade and by diversifying our investment portfolio to avoid concentrations in any single issuer or business sector.

The following table presents the composition of our fixed-maturity securities, by rating, at June 30, 2014 (in thousands):


Comparable Rating	Amortized Cost		% of Total Amortized Cost		Estimated Fair Value		% of Total Estimated Fair Value
AAA	$	15,165		13	$	15,716		13
AA+, AA, AA-		21,376		18		22,254		18
A+, A, A-		41,856		35		43,532		35
BBB+, BBB, BBB-		25,396		22		26,490		22
BB+, BB, BB-		9,411		8		9,664		8
Not rated		4,740		4		4,774		4

Total	$	117,944		100	$	122,430		100

Equity Price Risk

Our equity investment portfolio at June 30, 2014 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 the risk primarily through industry and issuer diversification and asset allocation techniques.

The following table illustrates the composition of our equity securities at June 30, 2014 (in thousands):


	Estimated Fair Value		% of Total Estimated Fair Value
Stocks by sector:
Financial	$	21,996		58
Energy		4,476		12
Other (1)		2,341		6

		28,813		76

Mutual funds and Exchange traded funds by type:
Debt		8,048		21
Equity		951		3

		8,999		24

Total	$	37,812		100

(1)	Represents an aggregate of less than 5% sectors.

Foreign Currency Exchange Risk

At June 30, 2014, we did not have any material exposure to foreign currency related risk.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, our chief executive officer and our chief financial officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, implementation of possible controls and procedures depends on management’s judgment in evaluating their benefits relative to costs.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

The Company is a party to claims and legal actions arising routinely in the ordinary course of our business. Although we cannot predict with certainty the ultimate resolution of the claims and lawsuits asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 1a – RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the SEC on March 12, 2014.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Sales of Unregistered Securities

None.

(b)

Use of Proceeds

None.

(c)

Repurchases of Securities

The table below summarizes the number of shares of common stock surrendered by employees to satisfy their minimum federal income tax liability associated with the vesting of restricted shares and also the number of common shares repurchased under a share repurchase plan during the three months ended June 30, 2014 (share amounts not in thousands):


For the Month Ended	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)		Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (b)

April 30, 2014		280,229	$	36.03		277,510	$	22,200
May 31, 2014		3,805	$	38.65		—	$	22,200
June 30, 2014		—	$	—		—	$	22,200

		284,034	$	36.06		277,510

(a)	In March 2014, our Board of Directors approved a one-year plan to repurchase up to $40,000 of common shares. See Note 11 — “Stockholders’ Equity” to our consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

(b)	Represents the balances before commissions and fees at the end of each month.

Working Capital Restrictions and Other Limitations on Payment of Dividends

We are not subject to working capital restrictions or other limitations on the payment of dividends. Our insurance subsidiary, however, is subject to restrictions on the dividends it may pay. Those restrictions could impact HCI’s ability to pay future dividends.

Under Florida law, a domestic insurer such as our insurance subsidiary, HCPCI, may not pay any dividend or distribute cash or other property to its stockholder 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, Florida statutes preclude our insurance subsidiary from making dividend payments or distributions to its stockholder, HCI, without prior approval of the Florida Office of Insurance Regulation 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 Florida Office of Insurance Regulation (1) if the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards 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 Florida Office of Insurance Regulation 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 Florida Office of Insurance Regulation has received notice of such dividend or distribution and has not disapproved it within such time.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

None.

ITEM 5 – OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

The following documents are filed as part of this report:


EXHIBIT NUMBER		DESCRIPTION

3.1		Articles of Incorporation, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 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. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed October 18, 2013.

3.2		Bylaws. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 7, 2013.

4.1		Form of common stock certificate. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed November 7, 2013.

4.2		Supplement No. 1, dated as of January 17, 2013, to the Indenture, dated as of January 17, 2013, between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee. Incorporated by reference to the correspondingly numbered exhibit to our Form 8-K filed January 17, 2013.

4.3		Form of 8.00% Senior Note due 2020 (included in Exhibit 4.2). Incorporated by reference to the correspondingly numbered exhibit to our Form 8-K filed January 17, 2013.

4.4		Indenture, dated as of January 17, 2013, between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to Exhibit 4.4 to Amendment No. 1 to our Registration Statement on Form S-3 (File No. 333-185228 ) filed December 10, 2012.

4.6		Form of Subordinated Indenture. Incorporated by reference to the correspondingly numbered exhibit to Amendment No. 1 to our Registration Statement on Form S-3 (File No. 333-185228 ) filed December 10, 2012.

4.7		Rights Agreement, dated as of October 18, 2013, between HCI Group, Inc. and American Stock Transfer & Trust Company, LLC, which includes as Exhibit A thereto a summary of the terms of the Series B Junior Participating Preferred Stock, as Exhibit B thereto the Form of Right Certificate, and as Exhibit C thereto the Summary of Rights to Purchase Preferred Shares. Incorporated by reference to Exhibit 4.1 to our Form 8-K filed October 18, 2013.



4.8		Indenture, dated December 11, 2013, between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. (including Global Note). Incorporated by reference to Exhibit 4.1 to our Form 8-K filed December 12, 2013.

4.9		See Exhibits 3.1, 3.1.1 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		Excess of Loss Retrocession Contract (flood), effective June 1, 2014, issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.2**		Executive Agreement dated May 1, 2007 between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and Richard R. Allen. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513 ), originally filed April 30, 2008, effective July 24, 2008, as amended.

10.3		Reimbursement Contract effective June 1, 2014 between Homeowners Choice Property & Casualty Insurance Company and the State Board of Administration which administers the Florida Hurricane Catastrophe Fund.

10.4**		Executive Employment Agreement dated July 1, 2011 between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and Paresh Patel. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 12, 2011.

10.5**		HCI Group, Inc. 2012 Omnibus Incentive Plan. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 7, 2013.

10.6**		HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) 2007 Stock Option and Incentive Plan. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 29, 2008.

10.7**		Form of Incentive Stock Option Agreement. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513 ), originally filed April 30, 2008, effective July 24, 2008, as amended.



10.8		Catastrophe Aggregate Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (1). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.9		Catastrophe Aggregate Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (2). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.10		Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (1). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.11		Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (2). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.12		Multi Year Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (1). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.13		Multi Year Catastrophe Excess of Loss Reinsurance Contract, effective: June 1, 2014, issued to, Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers (2). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.14		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2014 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.15		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2014 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers (Blue Water 1). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.



10.16		Multi Year Reinstatement Premium Protection Reinsurance Contract effective June 1, 2014 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.17		Form of indemnification agreement for our officers and directors. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 12, 2009.

10.18		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2014 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers (Blue Water 2). Portions of this exhibit have been omitted pursuant to a request for confidential treatment

10.19		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2014 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers (Aeolus year 1). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.20		Per Occurrence Excess Of Loss Reinsurance contract dated June 1, 2012 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 14, 2012.

10.21		Endorsement No. 2 to the Per Occurrence Excess of Loss Reinsurance Contract Effective June 1, 2012 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers.

10.22		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2015 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers (Aeolus year 2). Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

10.24**		Executive Employment Agreement dated March 8, 2012 between HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) and Scott R. Wallace. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-K filed March 30, 2012.



10.27**		Restricted Stock Agreement dated April 20, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 100,000 shares of restricted common stock to Scott R. Wallace. Incorporated by reference to Exhibit 10.27 of our Form 10-Q filed May 14, 2012.

10.28**		Restricted Stock Agreement dated May 8, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 30,000 shares of restricted common stock to Richard R. Allen. Incorporated by reference to Exhibit 10.28 of our Form 8-K filed May 10, 2012.

10.29**		Restricted Stock Agreement dated May 8, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 30,000 shares of restricted common stock to Sanjay Madhu. Incorporated by reference to Exhibit 10.29 of our Form 8-K filed May 10, 2012.

10.30**		Restricted Stock Agreement dated May 8, 2012 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 20,000 shares of restricted common stock to Andrew L. Graham. Incorporated by reference to Exhibit 10.30 of our Form 8-K filed May 10, 2012.

10.32		Endorsement No. 1 to the Per Occurrence Excess of Loss Reinsurance Contract Effective June 1, 2012 by Homeowners Choice Property & Casualty Insurance Company, Inc. and subscribing reinsurers. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed May 9, 2013.

10.33		Working Layer Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2013 issued to Homeowners Choice Property & Casualty Insurance Company by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed May 9, 2013.

10.34**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 400,000 shares of restricted common stock to Paresh Patel. Incorporated by reference to Exhibit 10.34 of our Form 8-K filed May 21, 2013.

10.35**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Sanjay Madhu. Incorporated by reference to Exhibit 10.35 of our Form 8-K filed May 21, 2013.

10.36**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to George Apostolou. Incorporated by reference to Exhibit 10.36 of our Form 8-K filed May 21, 2013.



10.37**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Harish Patel. Incorporated by reference to Exhibit 10.37 of our Form 8-K filed May 21, 2013.

10.38**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Gregory Politis. Incorporated by reference to Exhibit 10.38 of our Form 8-K filed May 21, 2013.

10.39**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Anthony Saravanos. Incorporated by reference to Exhibit 10.39 of our Form 8-K filed May 21, 2013.

10.40**		Restricted Stock Agreement dated May 16, 2013 whereby HCI Group, Inc. (formerly known as Homeowners Choice, Inc.) issued 24,000 shares of restricted common stock to Martin Traber. Incorporated by reference to Exhibit 10.40 of our Form 8-K filed May 21, 2013.

10.41		Endorsement No 1 to Working Layer Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2013 issued to Homeowners Choice Property & Casualty Insurance Company by subscribing reinsurers.

10.49		Excess of Loss Retrocession Contract, effective June 1, 2013, issued to Claddaugh Casualty Insurance Company Ltd. by subscribing reinsurers, including Oxbridge Reinsurance Limited (working layer). Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 7, 2013.

10.52**		Restricted Stock Agreement dated August 29, 2013 whereby HCI Group, Inc. issued 10,000 shares of restricted common stock to Anthony Saravanos. Incorporated by reference to Exhibit 10.52 of our Form 8-K filed August 29, 2013.

10.53**		Restricted Stock Agreement dated November 12, 2013 whereby HCI Group, Inc. issued 24,000 shares of restricted common stock to Wayne Burks. Incorporated by reference to Exhibit 10.11 of our Form 8-K filed November 13, 2013.

10.54**		Restricted Stock Agreement dated November 12, 2013 whereby HCI Group, Inc. issued 24,000 shares of restricted common stock to James J. Macchiarola. Incorporated by reference to Exhibit 10.12 of our Form 8-K filed November 13, 2013.



10.55		Purchase Agreement, dated December 5, 2013, by and between HCI Group, Inc. and JMP Securities LLC, as representative of the several initial purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed December 6, 2013.

10.56		Prepaid Forward Contract, dated December 5, 2013 and effective as of December 11, 2013, between HCI Group, Inc. and Deutsche Bank AG, London Branch. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed December 12, 2013.

10.57		Form of executive restricted stock award contract. Incorporated by reference to Exhibit 10.57 of our Form 10-Q for the quarter ended March 31, 2014 filed May 1, 2014.

31.1		Certification of the Chief Executive Officer

31.2		Certification of the Chief Financial Officer

32.1		Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C.ss.1350

32.2		Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C.ss.1350

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		XBRL Definition Linkbase.

101.LAB		XBRL Taxonomy Extension Label Linkbase.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase.

**	Management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who has signed this report on behalf of the Company.


	HCI GROUP, INC.

August 6, 2014	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
		(Principal Executive Officer)

August 6, 2014	By:	/s/ Richard R. Allen
		Richard R. Allen
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 10.1

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****** INDICATES MATERIAL THAT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION

EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

ISSUED TO

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA

Including any and/or all companies that are or may hereafter become affiliated therewith,

subject to prior agreement of Reinsurer to include any affiliates

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EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
SPECIAL TERMINATION			2
ARTICLE 4
TERRITORY			3
ARTICLE 5
EXCLUSIONS			3
ARTICLE 6
RETENTION AND LIMIT			5
ARTICLE 7
PREMIUM BORDEREAUX REPORTING			6
ARTICLE 8
CLAIM BORDEREAUX REPORTING			8
ARTICLE 9
REINSURANCE REMITTANCES			9
ARTICLE 10
EXPERIENCE ACCOUNT			10
ARTICLE 11
FLORIDA HURRICANE CATASTROPHE FUND			10
ARTICLE 12
DEFINITIONS			11
ARTICLE 13
LOSS OCCURRENCE DEFINITION			14
ARTICLE 14
ACCESS TO RECORDS			15
ARTICLE 15
ARBITRATION			16
ARTICLE 16
CASH CALL			17
ARTICLE 17
COMMUTATION			17

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ARTICLE 18
CONFIDENTIALITY			18
ARTICLE 19
CURRENCY			20
ARTICLE 20
ENTIRE AGREEMENT			20
ARTICLE 21
ERROR AND OMISSIONS			20
ARTICLE 22
FEDERAL EXCISE TAX			20
ARTICLE 23
GOVERNING LAW			21
ARTICLE 24
INSOLVENCY			21
ARTICLE 25
LATE PAYMENTS			22
ARTICLE 26
LIABILITY OF THE REINSURER			24
ARTICLE 27
LOSS NOTICES AND SETTLEMENTS			24
ARTICLE 28
NO ASSIGNMENT			24
ARTICLE 29
NON-WAIVER			25
ARTICLE 30
NOTICES AND AGREEMENT EXECUTION			25
ARTICLE 31
OFFSET			26
ARTICLE 32
OTHER REINSURANCE			26
ARTICLE 33
SALVAGE AND SUBROGATION			26
ARTICLE 34
SERVICE OF SUIT			26
ARTICLE 35
SEVERABILITY			27
ARTICLE 36
TAXES			28

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ARTICLE 37
THIRD PARTY RIGHTS			28
ARTICLE 38
INTERMEDIARY			28

ATTACHMENTS

Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance U.S.A.

Sanction Limitation And Exclusion Clause

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EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

Including any and/or all companies that are or may hereafter become affiliated therewith,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “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 Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling and declared by the Reinsured on each premium bordereau per the Premium Bordereaux Reporting Article, subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

This Contract shall become effective at 12:00:01 a.m., Eastern Time, June 1, 2014, with respect to losses occurring or Loss Occurrences commencing, as applicable, on or after that time and date, and shall remain in force until 11:59:59 p.m., Eastern Time, May 31, 2017, unless earlier terminated in accordance with the provisions of the Special Termination Article herein.

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2.	This Contract shall terminate on a cutoff basis and the Reinsurer shall be released from liability for losses occurring or Loss Occurrences commencing, as applicable, at or after expiration or termination.

Pursuant to the terms of this Contract, the Reinsurer shall not be liable for losses occurring or Loss Occurrences commencing, as applicable, either prior to the effective time and date of this Contract or after the effective time and date of expiration or termination. In the event a Loss Occurrence covered hereunder is in progress at the end of any Contract Year, 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 end of such Contract Year, provided that no part of such Loss Occurrence is claimed in the subsequent Contract Year or against any renewal or replacement of this Contract.

ARTICLE 3

SPECIAL TERMINATION

1.	The Reinsured may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsurer at least 30 days prior to the end of such Contract Year, in the event any of the following circumstances occur:

The Florida Office of Insurance Regulation or other legal authority has ordered the Reinsurer to cease writing business; or

The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision, administration, winding-up or under a scheme of arrangement or similar proceedings (whether voluntary or involuntary), or proceedings have been instituted against the 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.

The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Reinsurance Remittances Article. Should the Reinsured remit payment in full during this notice period, the Reinsurer shall lose the right to terminate, based on the cured failure.

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3.	The Reinsurer may terminate this Contract immediately by giving written notice to the Reinsured in the event any of the following circumstances occur:

The Reinsured has become insolvent or has been placed into liquidation, receivership, supervision, administration, winding-up or under a scheme of arrangement or similar proceedings (whether voluntary or involuntary), or proceedings have been instituted against the Reinsured 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

A change of control and/or sale of the Reinsured.

ARTICLE 4

TERRITORY

The liability of the Reinsurer shall be limited to losses under Policies covering property located within the territorial limits of the State of Florida; but this limitation shall not apply to moveable property if the Reinsured’s Policies provide coverage when said moveable property is outside the aforementioned territorial limits.

ARTICLE 5

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Reinsurance assumed by the Reinsured under obligatory reinsurance agreements, except intercompany reinsurance between the Reinsured and its affiliates and agency reinsurance where the Policies involved are to be re-underwritten in accordance with the underwriting standards of the Reinsured and reissued as Policies of the Reinsured at the next anniversary or expiration date.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

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Earthquake when written as such for standalone Policies where earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority, but this exclusion shall not apply to loss or damage covered under a standard Policy with a standard War Exclusion Clause.

Loss or liability from any Pool, Association or Syndicate and any assessment or similar demand for payment related to the Florida Hurricane Catastrophe Fund or Citizens Property Insurance Corporation.

All liability of the Reinsured 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, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Reinsured 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.

Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke or flood. 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 Reinsured’s property loss under the applicable original Policy.

Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

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With the exception of subparagraphs (c), (f), (g) and (k) of paragraph (1) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Reinsured’s Policy, any amount of loss for which the Reinsured is liable because of such invalidation will not be excluded hereunder.

The Reinsured may submit to the Reinsurer, for special acceptance hereunder, business not covered by this Contract. Within seven days of receipt of such request, each Reinsurer shall accept such request, ask for additional information, or reject the request. If a Reinsurer fails to respond to a special acceptance request within seven days, the Reinsurer shall be deemed to have agreed to the special acceptance. If said business is accepted by the Reinsurer, it will be subject to the terms of this Contract, except as such terms are modified by such acceptance. Any special acceptance business covered under the reinsurance agreement 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 Reinsurer shall automatically accept the same as being a part of this Contract.

ARTICLE 6

RETENTION AND LIMIT

1.	As respects business subject to this Contract, the Reinsured shall retain and be liable in the aggregate during the Term of this Contract, for the Ultimate Net Loss equal to the sum of the following:

$13,000,000; and

20% of Earned Premium as of the end of each Reporting Period less any Adjustment Value, per the Premium Bordereaux Reporting Article.

The amount calculated above shall be referred to herein as Aggregate Retention.

2.	The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds the applicable Aggregate Retention, but the liability of the Reinsurer shall be limited as follows:

For each loss or Loss Occurrence, the amount of the Reinsurer’s liability shall be limited to the Occurrence Limit, which shall be equal to the lesser of:

$200,000,000; or

ii.

The Occurrence Exhaustion Point, less FHCF Recoveries per paragraph (5) of the Florida Hurricane Catastrophe Fund Article, less the Aggregate Retention.

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The Reinsurer’s liability for all losses and Loss Occurrences during the Term of this Contract shall be limited to the Term Aggregate Limit, which shall be equal to the lesser of:

$300,000,000; or

ii.

7.5% of the Cap Basis at the end of each Reporting Period, plus 7.5% of the Flood Cap Basis at the end of each Reporting Period for Policies endorsed to include flood coverage, less FHCF Recoveries per paragraph (5) of the Florida Hurricane Catastrophe Fund Article, less the Aggregate Retention.

3.	“Occurrence Exhaustion Point” for each Loss Occurrence shall equal the sum of the following:

5% of the Cap Basis at the end of the Reporting Period in which the Loss Occurrence takes place; and

5% of the Flood Cap Basis at the end of the Reporting Period in which the Loss Occurrence takes place for Policies endorsed to include flood coverage.

ARTICLE 7

PREMIUM BORDEREAUX REPORTING

Prior to the inception of this Contract, the Reinsured shall declare 7,000 in-force Policies and submit to Reinsurer the initial premium bordereau detailing these declared Policies. Within ten business days of receiving the initial premium bordereau, the Reinsurer shall accept the premium bordereau or ask for additional information to be considered during the review process. If the Reinsurer fails to respond to the initial premium bordereau within ten business days, the Reinsurer shall be deemed to have agreed to the premium bordereau as submitted. The declared Policies shall be subject to a maximum aggregate Cap Basis of $2,000,000,000.

2.	Within 30 days following the end of each Reporting Period, the Reinsured shall submit to the Reinsurer a premium bordereau detailing Policies covered hereunder at the last day of the respective Reporting Period, subject to the following:

The Reinsured may add only Policies endorsed to include flood coverage.

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In the event adding Policies per subparagraph (a) above results in an aggregate Cap Basis exceeding $2,000,000,000, the Reinsured must remove Policies not endorsed to include flood coverage.

Policies shall be removed in the order of first to expire based on Policy expiration date.

ii.

Policies shall be assigned a removal date of the effective date of the flood endorsement for the given Policy added per subparagraph (a) above that subsequently increased the aggregate Cap Basis above $2,000,000,000.

Within 30 days following May 31, 2015 and in the event the aggregate Cap Basis for Policies not endorsed to include flood coverage is greater than $1,000,000,000, the Reinsured shall remove Policies in the order of first to expire based on Policy expiration date until the aggregate Cap Basis for Policies not endorsed to include flood coverage is equal to or less than $1,000,000,000. Policies shall be assigned a removal date of May 31, 2015.

Within 30 days following May 31, 2016, the Reinsured shall remove all Policies not endorsed to include flood coverage. Policies shall be assigned a removal date of May 31, 2016.

3.	Notwithstanding the provisions of paragraph (2) above, the aggregate Cap Basis of Business Covered hereunder shall never exceed $2,000,000,000.

4.	Each premium bordereau submitted by the Reinsured shall include the following information:

Policy number

Policy effective and expiration dates

Policy flood endorsement effective date, if any

Base Coverage A limit

Base Coverage C limit

Physical address

Geographic coordinates

Written Premium for the quarter

Earned Premium for the quarter

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Unearned premium

Premium bordereau addition date

Assigned premium bordereau removal date, if any

Adjustment Value, if any

5.	“Written Premium” as used herein shall be defined as the Reinsured’s gross written premium for the classes of business reinsured hereunder, less cancellations and return premiums, and less premiums, if any, ceded by the Reinsured for reinsurance which inures to the benefit of this Contract.

6.	“Earned Premium” as used herein shall be defined written premiums under this Contract, less unearned premiums under this Contract as of the date of calculation.

7.	“Adjustment Value” as used herein shall apply to Policies removed per this Article and shall be defined as the difference between the unearned premium calculated as of the assigned removal date and the unearned premium calculated as of the last day of the Reporting Period.

ARTICLE 8

CLAIM BORDEREAUX REPORTING

1.	Within 30 days following the end of each Reporting Period, the Reinsured shall submit to the Reinsurer a claim bordereau detailing the Ultimate Net Loss on Policies reinsured by this Contract as of the last day of the respective Reporting Period.

2.	Each claim bordereau submitted by the Reinsured shall include the following information:

Date of loss

Claim number

Paid loss

Paid Loss Adjustment Expense

Outstanding loss

Outstanding Loss Adjustment Expense

Salvage and subrogation

Policy number

Premium bordereau addition date

Assigned premium bordereau removal date, if any

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Any claim where (a) precedes (i) or succeeds (j) shall be not be included on the claim bordereau and the Reinsurer will not be liable for such Ultimate Net Loss.

ARTICLE 9

REINSURANCE REMITTANCES

1.	As promptly as possible after the effective date of this Contract, the Reinsured shall remit to the Reinsurer ****% of the unearned premium applicable to the initial premium bordereau per paragraph (1) of the Premium Bordereaux Reporting Article.

2.	Within 30 days following the end of each Reporting Period, the Reinsured shall remit to the Reinsurer the following:

“Reinsurance Premium” equal to ****% of the amount computed in accordance with the following:

Written Premium for the quarter; plus

ii.

Unearned premium as of the end of the previous quarter for Policies added per paragraph (2) of the Premium Bordereaux Reporting Article; less

iii.

Unearned premium as of the end of the current quarter reassumed by the Reinsured for Policies removed per paragraph (2) of the Premium Bordereaux Reporting Article; less

iv.

Adjustment Value for the quarter;

less

Claim recoveries computed in accordance with the following:

Ultimate Net Loss per the Claim Bordereaux Reporting Article; less

ii.

Aggregate Retention per the Retention and Limit Article; less

iii.

Any recoveries during the quarter under the provisions of the Cash Call Article;

less

Claim recoveries from all prior Reporting Periods calculated per paragraph (b) above.

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If the balance of (a) less (b) less (c) is negative, the Reinsurer shall remit to the Reinsured the balance computed.

ARTICLE 10

EXPERIENCE ACCOUNT

1.	The Reinsurer shall establish a notional Experience Account for the benefit of the Reinsured equal to the following:

Reinsurance Premium; less

Reinsurer expense equal to *****% of Reinsurance Premium; less

Losses paid under this Contract.

If the balance of the Experience Account is positive, the Reinsurer shall pay the Reinsured an amount equal to *****% of the balance within 30 days after all losses, if any, are commuted. Such payment and calculation shall not to be made until the Contract is terminated or its natural expiry. Payment of Experience Account shall be deemed full and final commutation and Reinsurer shall have no further liability under this Contract after such Experience Account payment.

ARTICLE 11

FLORIDA HURRICANE CATASTROPHE FUND

1.	The Reinsured shall provisionally purchase mandatory coverage from the Florida Hurricane Catastrophe Fund (FHCF), which per the paragraphs below shall inure to the benefit of this Contract, with the following limit and retention:

90% of $597,100,000 excess of $223,400,000 (mandatory layer) for Contract Year effective June 1, 2014.

The provisional limit and retention above may increase or decrease in accordance with the provisions of the reimbursement contract between the Reinsured and the State Board of Administration of the State of Florida (SBA).

2.	The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract.

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3.	The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated annually as of June 30 ^th , and the applicable year’s FHCF Payout and Retention Multiples.

The Deemed FHCF Coverage for this Contract shall be based on the mandatory FHCF premium for the Reinsured’s business not covered under this Contract evaluated annually as of June 30 ^th , and the applicable year’s FHCF Payout and Retention Multiples. The Reinsured will report the provisional limit and retention of the Deemed FHCF Coverage to the Reinsurer within 10 business days of the inception of each Contract Year.

5.	The FHCF Recoveries calculated above and below, if positive, shall inure to the benefit of this Contract:

Any loss reimbursement paid or payable to the Reinsured for the mandatory FHCF coverage and resulting from Loss Occurrences commencing during the Term of this Contract; less

The amount hypothetically recoverable under the Deemed FHCF Coverage.

ARTICLE 12

DEFINITIONS

ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used herein shall be defined as the sum or sums (including Loss in Excess of Policy Limits, Extra Contractual Obligations and Loss Adjustment Expense, as hereinafter defined) paid or payable by the Reinsured in settlement of claims and in satisfaction of judgments rendered on account of such claims after deduction of all salvage, all recoveries, and all claims on inuring insurance or reinsurance, whether collectible or not. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Reinsured’s Ultimate Net Loss has been ascertained.

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LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

“Loss in Excess of Policy Limits” shall be defined as 100% of any amount paid or payable by the Reinsured in excess of its Policy limits, but otherwise within the terms of its Policy, such loss in excess of the Reinsured’s Policy limits having been incurred because of, but not limited to, failure by the Reinsured to settle within the Policy limits or by reason of the Reinsured’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.

“Extra Contractual Obligations” shall be defined as 100% of any punitive, exemplary, compensatory or consequential damages paid or payable by the Reinsured, 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 Reinsured to settle within the Policy limits or by reason of the Reinsured’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 Reinsured as a result of any fraudulent and/or criminal act by any officer or director of the Reinsured 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.

Further, any Loss in Excess of Policy Limits and/or Extra Contractual Obligations that are made in connection with this Contract shall not exceed 25% of the contractual loss under all Policies involved in the loss or Loss Occurrence as respects each excess layer hereunder.

LOSS ADJUSTMENT EXPENSE

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outside adjusters, expenses and a pro rata share of salaries of the Reinsured’s field employees and expenses of other employees of the Reinsured 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 Reinsured’s officials incurred in connection with losses covered by this Contract, and Declaratory Judgment Expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto. Loss Adjustment Expense shall not include normal office expenses or salaries of the Reinsured’s employees or officials.

DECLARATORY JUDGMENT EXPENSE

The term “Declaratory Judgment Expense” as used herein shall be defined as the Reinsured’s own costs and legal expense incurred in direct connection with declaratory judgment actions brought to determine the Reinsured’s defense and/or indemnification obligations that are assignable to specific claims arising out of Policies reinsured by this Contract, regardless of whether the declaratory judgment action is successful or unsuccessful. Any Declaratory Judgment Expense shall be deemed to have been fully incurred by the Reinsured on the same date as the original loss, if any, giving rise to the action.

CAP BASIS

“Cap Basis” as used herein shall be defined as the sum of Coverage A and Coverage C of the base Policy coverage for Business Covered.

FLOOD CAP BASIS

“Flood Cap Basis” as used herein shall be defined as the sum of Coverage A and Coverage C of the base Policy coverage for Business Covered, subject to a $250,000 per Policy cap on Coverage A and a $100,000 per Policy cap on Coverage C.

CONTRACT YEAR

“Contract Year” as used herein shall be defined as each period commencing June 1 and ending May 31 and there shall be three Contract Years under this Contract being June 1, 2014 through May 31, 2015, June 1, 2015 through May 31, 2016, and June 1, 2016 through May 31, 2017.

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REPORTING PERIOD

“Reporting Period” as used herein shall be defined as any one period of June 1 through September 30, October 1 through December 31, January 1 through March 31, or April 1 through May 31 of any Contract Year.

TERM OF THIS CONTRACT

“Term of this Contract” as used herein shall be defined as the period from 12:00:01 a.m., Eastern Time, June 1, 2014, through 11:59:59 p.m., Eastern Time, May 31, 2017. However, if this Contract is terminated, Term of this Contract as used herein shall mean the period from 12:00:01 a.m., Eastern Time, June 1, 2014 to the effective time and date of termination.

ARTICLE 13

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

The term “Loss Occurrence” as used herein shall be defined as 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 Reinsured 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:

As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Reinsured occurring during any period of 96 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.

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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.

As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the opening paragraph of this Article) 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 Reinsured’s Loss Occurrence.

As regards freeze, only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks) may be included in the Reinsured’s Loss Occurrence.

As regards firestorms, brush fires and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs (b) and (c) above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Reinsured which occur during any period of 168 consecutive hours within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another may be included in the Reinsured’s Loss Occurrence.

For all Loss Occurrences, the Reinsured 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 Reinsured arising out of that disaster, accident or loss and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any Loss Occurrence referred to in subparagraph (a) or (b) of paragraph (1) above where only one such period of 96 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

ARTICLE 14

ACCESS TO RECORDS

The Reinsurer or its designated representatives shall have access to the books and records of the Reinsured on matters relating to this reinsurance at all reasonable times, and at the

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location where such books and records are maintained in the ordinary course of business, for the purpose of obtaining and making copies of information concerning this Contract or the subject matter thereof. Notification of a request for inspection of records shall be sent to the Reinsured by the Reinsurer in written form. The Reinsurer’s right of audit and inspection shall continue as long as either party has a claim against the other arising out of this Contract.

ARTICLE 15

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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.

3.	If more than one reinsurer is involved in the same dispute, all such reinsurers shall, at the option of the Reinsured, constitute and act as one party for purposes of this Article and communications shall be made by the Reinsured to each of the reinsurers constituting one

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party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint.

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.

5.	Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract. Notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 16

CASH CALL

In the event that at any time the Reinsured becomes obligated to make a payment or series of payments for losses which exceed the Aggregate Retention, the Reinsured shall present to the Reinsurer an itemized statement of the amounts payable hereunder. The Reinsurer shall be obligated (subject to the terms and conditions of this Contract) to make a payment to the Reinsured of the amount requested within 10 days of receipt of the statement from the Reinsured. Cash loss amounts specifically remitted by the Reinsurer as set forth herein shall be credited to the next quarterly account.

ARTICLE 17

COMMUTATION

The Reinsured may request commutation of the Reinsurer’s portion of any excess loss hereunder represented by any outstanding claim or claims at termination or anytime within 36 months thereafter. The Reinsured shall submit a statement of valuation of the outstanding claim or claims showing the elements considered reasonable to establish the Ultimate Net Loss and the Reinsurer shall pay the amount requested.

If agreement, as outlined in paragraph (1) above, cannot be reached, the effort can be abandoned or alternately the Reinsured and the Reinsurer may mutually appoint an actuary or appraiser to investigate, determine and capitalize such claim or claims. If both parties then agree, the Reinsurer shall pay its proportion of the amount so determined to be the capitalized value of such claim or claims.

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If the parties, as outlined in the paragraphs (1) and (2) above, fail to agree, they may abandon the effort or they may agree to settle any difference using a panel of three actuaries, one to be chosen by each party and the third by the two so chosen. If either party refuses or neglects to appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of a 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. All the actuaries shall be Fellows of the Casualty Actuarial Society or of the American Academy of Actuaries. None of the actuaries shall be under the control of either party to this Contract.

Each party shall submit its case to its actuary within 30 days of the appointment of the third actuary. The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties. The expense of the actuaries and of the commutation shall be equally divided between the two parties. Said commutation shall take place in Tampa, Florida unless some other place is mutually agreed upon by the Reinsured and the Reinsurer.

ARTICLE 18

CONFIDENTIALITY

The Reinsurer hereby acknowledges that the terms and conditions of this Contract, any materials provided in the course of audit or inspection and any documents, information and data provided to it by the Reinsured, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (hereinafter referred to as “Confidential Information”) are proprietary and confidential to the Reinsured. Confidential Information shall not include documents, information or data that the Reinsurer can show:

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

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Absent the written consent of the Reinsured, 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:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business;

When required by attorneys in connection with an actual or potential dispute hereunder; or

When required for the Reinsurer’s internal operations directly related to carrying out the terms and conditions of this Contract.

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.

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 the extent legally permissible to provide the Reinsured with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Reinsured in maintaining the confidentiality provided for in this Article.

4.	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.

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ARTICLE 19

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 20

ENTIRE AGREEMENT

This Contract and any related trust agreement, Letter of Credit and/or special acceptance, shall constitute the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or modification to this Contract shall be null and void unless made by written amendment to this Contract and signed by a duly authorized officer of each of the parties hereto.

ARTICLE 21

ERROR 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 22

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 23

GOVERNING LAW

This Contract shall be governed by and construed in accordance with the laws of the State of Florida.

ARTICLE 24

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

In the event of the insolvency of one or more of the Reinsured’s companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

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3.	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 Reinsured.

It is further understood and agreed that, in the event of the insolvency of one or more of the Reinsured’s companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Reinsured 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 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 Reinsured or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Reinsured as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Reinsured 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 25

LATE PAYMENTS

1.	The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract.

In the event any premium, loss or other payment due either party is not received by the payment due date, the party to whom payment is due may 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 at a per annum rate of 5%.

It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the party to whom payment is due.

If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law or is held unenforceable by an arbitrator or a court of competent jurisdiction, 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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4.	The establishment of the due date shall, for purposes of this Article, be determined as follows:

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. 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 of the initial billing for each such payment.

Any claim or loss payment due the Reinsured 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 will accrue on the payment amount overdue in accordance with paragraphs (2) and (3) above, from the date the proof of loss or demand for payment was transmitted to the Reinsurer.

As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs (a) and (b) 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 30 days following transmittal of written notification that the provisions of this Article have been invoked.

Nothing herein shall be construed as limiting or prohibiting a 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 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.

6.	Interest penalties arising out of the application of this Article that are $1,000 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 26

LIABILITY OF THE REINSURER

The liability of the Reinsurer shall follow that of the Reinsured in every case and be subject in all respects to all the general and specific stipulations, clauses, waivers, interpretations and modifications of the Reinsured’s Policies and any endorsements thereon. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

2.	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 27

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

All loss settlements made by the Reinsured, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured. Notwithstanding the foregoing, and subject to the provisions set forth under paragraph (2) of the Exclusions Article, should any judicial, regulatory, or legislative entity having legal jurisdiction require that the Reinsured be liable for any amounts that are otherwise outside the terms of the Reinsured’s original Policies, the Reinsurer agrees that such amounts shall be subject always to the terms and conditions of this Contract.

ARTICLE 28

NO ASSIGNMENT

Neither party shall assign its rights or obligations hereunder to any other entity, whether or not an affiliate, without the express written consent of the other party, and any purported assignment in violation of this provision shall be deemed to not have occurred for the purposes of this Contract.

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ARTICLE 29

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies with respect to similar situations in the future.

ARTICLE 30

NOTICES AND AGREEMENT EXECUTION

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.

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

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.

3.	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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ARTICLE 31

OFFSET

ARTICLE 32

OTHER REINSURANCE

Notwithstanding the provisions of the Florida Hurricane Catastrophe Fund Article, the Reinsured shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Reinsured and be entirely disregarded in applying all of the provisions of this Contract, other than FHCF recoveries as set forth herein.

ARTICLE 33

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon 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 Reinsured for its primary loss. The Reinsured hereby agrees to enforce its rights to salvage or 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 if, in the Reinsured’s opinion, it is economically reasonable to do so.

ARTICLE 34

SERVICE OF SUIT

(Applicable if the 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.)

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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.

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any Reinsurer participant upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the Office of the General Counsel, Berkshire Hathaway Insurance Group, 100 First Stamford Place, Suite 200, Stamford CT 06902, upon whom service of process may be served by any lawful process in any action, suit or proceeding instituted by or on behalf of the Reinsured or any beneficiary hereunder arising out of this Contract.

ARTICLE 35

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.

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ARTICLE 36

TAXES

In consideration of the terms under which this Contract is issued, the Reinsured 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 of the District of Columbia.

ARTICLE 37

THIRD PARTY RIGHTS

This Contract is solely between the Reinsured and the Reinsurer, and in no instance shall any other party have any rights under this Contract except as expressly provided otherwise in the Insolvency Article.

ARTICLE 38

INTERMEDIARY

Advocate Reinsurance Partners, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, reports and statements) relating to this Contract will be transmitted to the Reinsured or the Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street, Suite 1250, Dallas, Texas 75201. Notwithstanding the foregoing, all payments (including but not limited to premium, return premium, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) under this Contract shall be made directly between the Reinsured and the Reinsurer.

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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 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.

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 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:

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.

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 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 Reinsured 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.

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ARP 35B

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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 Reinsured, 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 Reinsured 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.	Reinsured 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 Reinsured 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 Reinsured 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.

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ARP 35B

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SANCTION LIMITATION AND EXCLUSION 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 regulation of the European Union, United Kingdom or United States of America.

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ARP 950

Exhibit 10.3

STATE BOARD OF ADMINISTRATION

OF FLORIDA

1801 HERMITAGE BOULEVARD TALLAHASSEE, FLORIDA 32308

(850) 488-4406

POST OFFICE BOX 13300

32317-3300

RICK SCOTT

GOVERNOR

CHAIR

JEFF ATWATER

CHIEF FINANCIAL OFFICER

PAM BONDI

ATTORNEY GENERAL

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

REIMBURSEMENT CONTRACT

Effective: June 1, 2014

(Contract)

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

The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes (Statute), which directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith. All provisions in the principal document are equally applicable to each Addendum unless specifically superseded by one of the Addenda.

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, an Authorized Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, 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 Loss Occurrence commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

FHCF-2014K

Rule 19-8.010 F.A.C.

ARTICLE II - PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the FHCF. In no instance shall any insured of the Company or any claimant against an insured of the Company, or any other third party, have any rights under this Contract, except as provided in Article XIV. The SBA will only disburse funds to the Company, except as provided for in Article XIV of this Contract. The Company shall not, without the prior approval of the 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

This Contract shall apply to Loss Occurrences which commence during the period from 12:00:01 a.m., Eastern Time, June 1, 2014, to 12:00 midnight, Eastern Time, May 31, 2015 (Contract Year).

The Company must designate a coverage level, make the required selections, and return this fully executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time, March 1, 2014. Failure to do so may result in a referral to the Office of Insurance Regulation within the Department of Financial Services for administrative action. Furthermore, the Company’s coverage level under this Contract will be deemed as follows:

(1)

For Companies that are 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 FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.

(2)	For Companies that are 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.

(3)	For New Participants, as that term is defined in Article V(21), that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.

(4)

For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed.

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be responsible for such Loss Occurrence 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 Loss Occurrence in progress.

ARTICLE IV - LIABILITY OF THE FHCF

(1)

The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus 5% of the reimbursed losses for Loss Adjustment Expense Reimbursement.

(2)	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XVIII.

FHCF-2014K

Rule 19-8.010 F.A.C.

(3)	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this Contract Year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding loss reimbursement calculations, see section (3)(c) of Article X herein.

(4)

Upon the occurrence of a Covered Event, the SBA shall 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 mandatory 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.

(5)	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.

(6)

After the end of the calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the SBA shall publish in the Florida Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of December 31.

(7)

The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or through other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (FA.C.).

ARTICLE V - DEFINITIONS

(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, or through other means available by law to the SBA, up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.

(2)	Actuarially Indicated

This term means, with respect to Premiums paid by Companies for reimbursement provided by the FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a), Florida Statutes.

(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 the coverage 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 with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 8200 Tower, 5600 West 83 ^rd Street, Suite 1100, Minneapolis, Minnesota 55437. The telephone number is (800) 689-3863, and the facsimile number is (800) 264-0492.

(5)	Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6)	Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves.

FHCF-2014K

Rule 19-8.010 F.A.C.

(7)	Citizens Property Insurance Corporation (Citizens)

This term means the entity formed under Section 627.351(6), Florida Statutes, and refers to both Citizens Property Insurance Corporation Coastal Account and Citizens Property Insurance Corporation Personal Lines and Commercial Lines Accounts.

(8)	Contract

This term means this Reimbursement Contract for the current Contract Year.

(9)	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.

(10)	Covered Policy or Covered Policies

(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, as defined in definition (27) herein, or the contents of a Residential Structure, located in the State of Florida.

(b)

Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624,424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as:

Fire

Allied Lines

Farmowners Multiple Peril

Homeowners Multiple Peril

Commercial Multiple Peril (non liability portion, covering condominiums and apartments)

Inland Marine

Note that where particular insurance exposures, e.g., mobile homes, are reported on an annual statement is not dispositive of whether or not the exposure is a Covered Policy.

(c)

This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.

(d)

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 the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.

(e)

See Article VI of this Contract for specific exclusions.

(11)	Deductible Buy-Back Policies

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.

(12)	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.

FHCF-2014K

Rule 19-8.010 F.A.C.

(13)	Excess Policies

This term, for the purposes of this Contract, means 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.

(14)	Florida Department of Financial Services (Department)

This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida Statutes, which is charged with regulating the Florida insurance market and administering the Florida Insurance Code.

(15)	Florida Insurance Code

This term means those chapters identified in Section 624.01, Florida Statutes, which are designated as the Florida Insurance Code.

(16)	Formula or the Premium Formula

This term means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula. The Formula, shall, pursuant to Section 215.555(5)(b), Florida Statutes, include a cash build-up factor in the amount specified therein.

(17)	Fund Balance or Balance of the Fund as of December 31

These terms mean the amount of assets available to pay claims, not including any bonding proceeds, resulting from Covered Events which occurred during the Contract Year.

(18)	Insurer Group

For purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the National Association of Insurance Commissioners (NAIC) for purposes of filing consolidated financial statements. 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 recognized by the NAIC.

(19)	Loss Occurrence

This term means the sum of individual insured Losses incurred under Covered Policies resulting from the same Covered Event. “Losses” means all incurred losses under Covered Policies, 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, and excludes allocated or unallocated Loss Adjustment Expenses.

(20)	Loss Adjustment Expense Reimbursement

(a)

Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.

(b)

To the extent that loss reimbursements are limited to the Payout Multiple applied to each Company, the 5% Loss Adjustment Expense is included in the total Payout Multiple applied to each Company.

(21)	New Participant(s)

This term means all Companies which begin writing Covered Policies on or after the beginning of the Contract Year. A Company that removes exposure from either Citizens entity, as that term is defined in (7) above, 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.

(22)	Office of Insurance Regulation

This term means that office within the Department of Financial Services and which was created in Section 20.121(3), Florida Statutes.

(23)	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 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.

FHCF-2014K

Rule 19-8.010 F.A.C.

(24)	Premium

This term means the same as Reimbursement Premium.

(25)	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.

(26)	Reimbursement Premium

This term means the Premium 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.

(27)	Residential Structures

This term means units or buildings used for dwelling or habitational occupancies, including the primary structure and appurtenant structures insured under the same policy and any other structures covered under endorsements associated with a policy covering a residential structure. Covered Residential Structures do not include any structures listed under Article VI herein or structures used solely for non-residential purposes.

(28)	Retention

The Company’s Retention means the amount of hurricane losses under Covered Policies which must be incurred by the Company before it is eligible for reimbursement from the FHCF.

(a)

When the Company experiences covered 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 experiences covered 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 covered losses for the Company. For each other Covered Event resulting in covered losses, the Company’s Retention shall be reduced to one-third of its full Retention and applied to all other Covered Events.

All reimbursement of covered 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 December 31 of the Contract Year provided the Company reports its losses as specified in this Contract.

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, and the reduction to one-third of the full Retention shall be applied to all other Covered Events for the Contract Year. After this initial determination, any subsequent adjustments shall be made by the SBA only if the quarterly loss reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

(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.

(d)

Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.

FHCF-2014K

Rule 19-8.010 F.A.C.

(29)	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 2014/2015 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2012/2013 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% reimbursement percentage level for the Contract Year as determined by the SBA.

(b)

The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:

If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;

If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or

If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.

(30)	Ultimate Net Loss

(a)

This term means all Losses of the Company under Covered Policies in force at the time of a Covered Event, as defined under (9) above, prior to the application of the Company’s FHCF Retention, as defined under (28) above, and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI herein, arising from each Loss Occurrence during the Contract Year, provided, however, that the Company’s Ultimate Net Loss shall be determined in accordance with the deductible level written under the policy sustaining the loss.

(b)

Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

(c)

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.

(d)

Nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.

(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.

ARTICLE VI - EXCLUSIONS

This Contract does not provide reimbursement for:

(1)	Any losses not defined as being within the scope of a Covered Policy.

(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, as defined in Article V(27) herein, that provides a layer of coverage underneath an Excess Policy, as defined in Article V(13) herein, issued by a different insurer; or

	(b)	Any other policy providing a layer of windstorm or hurricane coverage for a particular structure 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 single structure using separate policy forms.

	(c)	The exclusions in this subsection do not apply to primary quota share policies written by Citizens Property Insurance Corporation under Section 627.351(6)(c)2., Florida Statutes.

FHCF-2014K

Rule 19-8.010 F.A.C.

(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(10)(d) herein.

(7)	Any reinsurance assumed by the Company.

(8)	Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes.

(9)	Any exposure for homeowner associations if no habitational structures are insured under the policy.

(10)	Any exposure for homes and condominium structures or units that are non-owner occupied and rented for six (6) or more rental periods by different parties during the course of a twelve (12) month period.

(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.

(15)	Any exposure for builders risk coverage or new Residential Structures still under construction.

(16)	Any exposure for recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing and written on a separate policy or endorsement.

(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, 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 each 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 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 for the applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract Year).

(20)	Any losses for 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-LIB (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 sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to 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 Authorized Insurer 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”

FHCF-2014K

Rule 19-8.010 F.A.C.

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)	The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean 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)	Policies and endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:

(a)

A policy or endorsement covering Specialized Fine Arts Risks and not covering any Residential Structure and/or contents thereof (other than such specialized fine arts items covered in the Specialized Fine Arts policy or endorsement) if it meets the description in subparagraph 1 and if all the conditions in subparagraphs 2. through 4. immediately below are met.

For purposes of this exemption, a Specialized Fine Arts Risk policy or endorsement is a policy or endorsement that:

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;

Charges a minimum premium of $500;

Insures scheduled items valued, in the aggregate, at no less than $100,000; and

Requires an investment by the insured in loss control measures to protect the Specialized Fine Arts Risks being insured.

The insurer must perform a periodic and thorough specialized inspection and must provide a specialized loss prevention service designed to prevent or minimize loss.

The structure and its fine arts contents must be provided with satisfactory watchman or alarm service or its equivalent where necessary.

The insurer must maintain a force of trained and competent loss prevention specialists, who perform the following tasks:

Make loss prevention surveys of each Specialized Fine Arts Risk;

Make available a specialized loss prevention service for the purpose of providing consultation regarding hazards to the fine arts being insured;

Confirm through periodic inspections that loss prevention devices are properly maintained;

Investigate reported losses; and

Confer with the policyholder and confirm through periodic and unannounced inspections that recommended safety and loss control improvements are actually made.

(b)

Any individual policy written to solely cover personal property, scheduled or written under a blanket limit, with a policy limit equal to or exceeding $500,000 and which predominantly covers one or more classes of collectible types of property shall be exempt from coverage under the Fund. Generally such classes of collectible property have unusually high values due to their investible, artistic, or unique intrinsic nature. Additionally, such exempt policy may also include coverage for incidental items of personal property that may also be scheduled although such property may not be considered as a collectible. The predominant class of property covered

FHCF-2014K

Rule 19-8.010 F.A.C.

under such excluded policy represents an unusually high exposure value and such policy 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.

(28)	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 XIII relating to inspection of records and examinations.

ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS

(1)	Offsets

The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under any Contract Year and the Company’s full Premium for the current Contract Year (regardless of installment due dates), against any reimbursement or advance amounts, or 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.

(2)	Reimbursement Adjustments

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess loss reimbursements which have been paid to the Company along with interest thereon. Excess loss 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 loss reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, 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 credits, and for interest charges for adjustments beyond the Company’s control, will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges on excess loss reimbursements due to adjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%. All interest will continue to accrue if not paid by the due date.

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 FHCF Reimbursement Premium or impact its FHCF

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coverage. FHCF 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 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 Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF’s 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 Premium billed but is less than the final Premium, interest will not accrue. If the 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 Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%.

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 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 a report 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. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the submission, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Reports sent to the FHCF Administrator in Minneapolis, Minnesota, will be returned to the sender. Reports not in the physical possession of the SBA by 4 p.m., Eastern Time, on the applicable due date are late.

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(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 to be determined by the FHCF. 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 the Company is under administrative supervision, or if any control or oversight of the Company has been transferred through any legal or regulatory action to a state regulator or court appointed receiver or rehabilitator (referred to in the aggregate as “state action”):

The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable on August 1, or the date that such State action occurs after August 1 of the Contract Year.

Failure by such Company to pay the full annual provisional Reimbursement Premium as specified in 1. above by the applicable due date(s) shall result in the 45% coverage level being deemed for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a hurricane event occurred or triggered coverage.

The provisions required in 1. and 2. above will not apply when the state regulator, receiver, or rehabilitator provides a letter of assurance to the FHCF that the Company will have the resources and will pay the full Reimbursement Premium for the coverage level selected through the execution of this Contract.

When control or oversight has been transferred, in whole or in part, through a legal or regulatory action, the controlling management of the Company shall specify by August 1 or as soon thereafter as possible (but not to exceed two weeks after any regulatory or legal action) in a letter to the FHCF as to the Company’s intentions to either pay the full FHCF Reimbursement Premium as specified in 1. above, to default to the 45% coverage being deemed as specified in 2. above, or to provide the assurances as specified in 3. above.

(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 upon execution of this Contract 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 February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total 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 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 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 upon execution of this Contract.

(e)

The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be in the physical possession of the FHCF no later than 2 p.m., Eastern Time, on the due date applicable to the particular installment. If remitted by check to the FHCF’s Post Office Box, the check shall be physically in the Post Office Box 100822, Atlanta, GA 30384-0822, as set out on the invoice sent to the Company. If remitted by check by hand delivery, the check shall be physically on the premises of the FHCF’s bank in College Park, Georgia, as set

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out on the invoice sent to the Company. If remitted electronically, the wire transfer shall have been completed to the FHCF’s account at its bank in Tampa, Florida, as set out on the invoice sent to the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the United States Postal Service postmark nor a postage meter date is in any way determinative. Premium checks sent to the SBA in Tallahassee, Florida, or to the FHCF’s Administrator in Minneapolis, Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical possession of the FHCF by 2 p.m., Eastern Time, on the applicable due date are late.

(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 revenue bonds. Pursuant to Section 215,555(6)(a)1., Florida Statutes, Reimbursement Premiums and earnings thereon may be used for payments relating to revenue bonds in the event emergency assessments are insufficient If Reimbursement Premiums or earnings thereon are used for debt service on 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 revenue bonds and any other purposes for which emergency assessments were levied.

(3)	Claims and Losses

(a)

In General

Claims and losses resulting from Loss Occurrences commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreement(s) with Citizens Property Insurance Corporation Coastal Account, Citizens and the Company shall report only their respective portion of losses under the quota share primary insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, 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.

If the Company is in non-compliance with Section 215.555, Florida Statutes for any Contract Year, including deadlines for sending in Contracts, addenda or attachments to Contracts, Data Call submissions or resubmissions, loss reports, or in responding to SBA exam requirements, the SBA reserves the right to withhold any payments or advances until such time the Company becomes compliant.

(b)

Loss Reports

At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Loss Occurrence to provide information to the SBA in determining 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 in no less than fourteen days from the date of the notice from the SBA that such a report is required.

FHCF loss reimbursements will be issued based on 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.

To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the report.

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The Company must also submit a detailed claims listing (as outlined on the Proof of Loss Report) 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, and should be prepared to supply a detailed claims listing for any subsequent Proof of Loss Report upon request.

While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a Loss Occurrence, all Companies shall submit a mandatory Proof of Loss Report for each Loss Occurrence no earlier than December 1 and no later than December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss reimbursements or advances already received. Reports may be faxed only if the Company does not qualify for a reimbursement.

For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and 4. below, the Company shall submit its Proof of Loss Reports by each quarter-end or year-end using the most current data available. However, the date of such data shall not be more than sixty days prior to the applicable quarter-end or year-end date.

Updated Proof of Loss Reports for each Loss Occurrence are due quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year , in which the Loss Occurrence(s) occurred.

Guidelines follow:

Quarterly Proof of Loss Reports are due by March 31 from an insurer whose losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Loss Occurrence(s).

Quarterly Proof of Loss Reports are due by June 30 from an insurer whose losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Loss Occurrence(s).

Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from an insurer whose losses exceed, or are expected to exceed, its FHCF Retention for a specific Loss Occurrence(s).

If the Company’s Retention must be recalculated as the result of an exposure resubmission, and if the recalculated Retention changes the FHCF’s reimbursement obligations, then the Company shall submit additional Proof of Loss Reports for recalculation of the FHCF’s obligations.

Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable, using the most current data available, accompanied by a detailed claims listing (as outlined on the Proof of Loss Report). This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the commutation process described in (3)(d) below or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries.

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. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of losses.

The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.

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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.

The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements submitted by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.

All Proof of Loss Reports received 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 loss examinations to determine the reasonableness of the reported losses. Except as noted in paragraph 4, above, 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 which, as the Data Call impacts the Company’s Premium, Retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.

(c)

Loss Reimbursement Calculations

In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after December 31 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company sustaining reimbursable losses will receive the amount of reimbursement due under the 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 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.

In determining reimbursements under this Contract, the SBA shall reimburse each of the Companies, including entities created pursuant to Section 627.351(6), Florida Statutes, for the amount (if any) of reimbursement due under the individual Company’s Contract, but not to exceed for all Loss Occurrences, an amount equal to the Projected Payout Multiple or the Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.

Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable losses for the previous Contract Year, 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.

(d)

Commutation

Not 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(s), with the exception of Companies having no reportable losses as described in paragraph (3)(d)1.a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in paragraph (3)(d)1.b. below. The Company and

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SBA may mutually agree to initiate commutation after 36 months and prior to 60 months after the end of the Contract Year. The commutation negotiations shall begin at the later of 60 months after the end of the Contract Year or upon completion of the FHCF loss examination for the Company and the resolution of all outstanding examination issues.

If the Company’s most recently submitted Proof of Loss Report(s) indicate that it has no losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA shall after 36 months request that the Company execute a final commutation agreement. The final commutation agreement shall constitute a complete and final release of all obligations of the SBA with respect to all claims and losses. If the Company chooses not to execute a final commutation agreement, the SBA shall be released from all obligations 60 months following the end of the Contract Year if no Proof of Loss Report(s) indicating reimbursable losses have been filed and the commutation shall be deemed concluded. However during this time, if the Company determines that it does have losses to report for FHCF reimbursement, the Company must submit an updated Proof of Loss Report(s) prior to the end of 60 months after the Contract Year and the Company shall be required to follow the commutation provisions and time frames otherwise specified in this section.

If the Company has submitted a Proof of Loss Report(s) indicating that it does have losses resulting from a Loss Occurrence(s) during the Contract Year, the SBA may require the Company to submit within 30 days an updated, current Proof of Loss Report(s) for each Loss Occurrence during the Contract Year. The Proof of Loss Report(s) must include all paid losses as well as all outstanding losses and incurred but not reported losses, which are not finally settled and which may be reimbursable losses under this Contract, and must be accompanied by 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. Failure of the Company to provide an updated current Proof of Loss Report(s), supporting documentation, and an opinion by the date requested by the SBA may result in referral to the Office of Insurance Regulation for a violation of the Contract. 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.

Determining the present value of outstanding claims and losses.

If the Company exceeds or expects to exceed its Retention, the Company and the SBA or their respective representatives shall attempt, by mutual agreement, to agree upon the present value of all outstanding claims and losses, both reported and incurred but not reported, resulting from Loss Occurrences during the Contract Year. 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 in respect of all claims and losses, both reported and unreported, under this Contract.

If agreement on present value cannot be reached within 90 days of the FHCF’s receipt of the final Proof of Loss Report(s) and supporting documentation, the Company and the SBA may mutually appoint an actuary, adjuster, or appraiser to investigate and determine such claims or losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such claims or losses.

If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, as provided in this paragraph.

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, the other party may appoint two actuaries. If the two actuaries fail to agree on the

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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.

ii.

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.

iii.

None of the actuaries shall be under the control of either party to this Contract.

iv.

Each party shall submit its case to the panel in writing on the 30 ^th day after the appointment of the third actuary. Following the submission of the case to the panel, the parties are prohibited from providing any further information or other communication except at the request of the panel. Such responses to requests from the panel must be in writing and simultaneously provided to the other party and all members of the panel, except that the panel may require the response to be provided in a meeting or teleconference attended by both parties and all members of the panel.

The decision in writing of any two actuaries, when filed with the parties hereto, shall be final and binding on both parties.

The reasonable and customary expense of the actuaries and of the commutation (as a result of b. and c. above) 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.

(4)	Advances

(a)

In accordance with Section 215.555(4)(e), Florida Statutes, 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 [IBNR] losses) as reported on a Proof of Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under paragraph (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 an advance of a specific amount and any other information required for the specific type of advance under subparagraphs (c) and (e) below. All reimbursements due to a Company shall be offset against any amount of outstanding advances plus the interest due thereon.

(b)

For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, 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. In addition to the prime rate, an additional 5% interest charge will apply on excess advances. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding advance(s) issued to the Company, interest will continue to accrue on the outstanding balance of the advance(s) until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advance(s). 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 FHCF 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 Company is required to have an actuary certify outstanding and incurred but not reported losses as reported on the applicable December Proof of Loss Report.

(d)

The specific type of advances enumerated in Section 215.555, Florida Statutes, follow.

Advances to Companies to prevent insolvency, as defined under Article XIV of this Contract.

Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.

In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates 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, and the Company provides the following information:

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

Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.

The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

Advances to entities created pursuant to Section 627.351 (6), Florida Statutes,

Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF,

In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.

(e)

In determining whether or not to grant an advance and the amount of an advance, the SBA:

Shall 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;

Shall review and consider all the information submitted by such Companies;

Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;

Shall consult with all relevant regulatory agencies to seek all relevant information;

Shall review the damage caused by the Covered Event and when that Covered Event occurred;

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Shall consider whether the Company has substantially exhausted amounts previously advanced;

Shall consider any other factors deemed relevant; and

Shall 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 or Covered Events which have precipitated the immediate need to continue to pay additional claims as they become due.

(5)	Delinquent Payments

Failure to submit a payment when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set forth in Article VIII(2) and Article IX(2) of this Contract.

(6)	Inadequate Data Submissions

If exposure data or other information required to be reported by the Company under the terms of this Contract is not received by the FHCF in the format specified by the FHCF or is inadequate to the extent that the FHCF 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.

(7)	Delinquent Submissions

Failure to submit an exposure submission, resubmission, loss report, or commutation documentation when due is a violation of the terms of this Contract and Section 215.555, Florida Statutes.

(8)	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 other information submitted by the Company to the FHCF could reasonably be ruled a “trade secret” as defined in Section 812.081, Florida Statutes, such information must be clearly marked “Trade Secret Information.”

ARTICLE XI - TAXES

In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Premium herein when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made.

ARTICLE XIII - 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

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Rule 19-8.010 F.A.C.

Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or loss examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or loss reimbursement 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 (formerly known as the FHCF 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 (10)(d) of Article V herein, 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 for the dwelling in place under the lapsed homeowner’s policy.

(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 FHCF 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 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 loss reimbursement 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 19-8.030, 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, adopted for the Contract Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C.

(4)	Examination Procedures

(a)

The FHCF will send an examination notice 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 FHCF upon request. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

FHCF-2014K

Rule 19-8.010 F.A.C.

(b)

The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF 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 examiner is on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported losses which are provided after the examiner has left the work-site 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 already in progress. All 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 FHCF will forward an examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations.

(d)

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.

(e)

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.


(f)		1.		If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. Once the resubmission is received, the FHCF’s 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.

If the recommendation of the examiner is to give the Company the option to either resubmit the exposure data or to pay the estimated Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIII(3)(f)1. apply.

(g)

If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then 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.

(h)

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 the whole universe of 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.

(4)	Costs of the Examinations

The costs of the examinations shall be borne by the SBA. However, in order to remove any incentive for a Company to delay preparations for an examination, the SBA shall be reimbursed by

FHCF-2014K

Rule 19-8.010 F.A.C.

the Company for any examination expenses incurred in addition to the usual and customary costs, which additional expenses were incurred as a result of the Company’s failure, despite proper notice, to be prepared for the examination or as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.

ARTICLE XIV - INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Except as otherwise provided below, no covered loss reimbursements will be made until the FHCF has completed and closed its examination of the insolvent Company’s losses, unless an agreement is entered into by the court appointed receiver specifying that all data and computer systems required for FHCF exposure and loss examinations will be maintained until completion of the Company’s exposure and loss examinations. Except as otherwise provided below, in order to account for potential erroneous reporting, the SBA shall hold back 25% of requested loss reimbursements until the exposure and loss examinations for the Company are completed. 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 the “net amount of all reimbursement moneys” due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. 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. In light of the need for an immediate infusion 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 loss examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make loss reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed and before the response time expires for claims filing by reinsurers and financial institutions, which have a priority interest in those funds pursuant to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or if claims are filed by reinsurers or financial institutions having a priority interest in these funds, that the funds will be repaid to the FHCF by FIGA within a reasonable time.

ARTICLE XV - TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules.

ARTICLE XVI - VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of this Contract by the Company constitutes a violation of the Insurance Code of the State of Florida. Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is authorized to take any action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida Statutes, and the provisions and requirements of this Contract.

ARTICLE XVII - 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.

FHCF-2014K

Rule 19-8.010 F.A.C.

ARTICLE XVIII – REIMBURSEMENT CONTRACT ELECTIONS

(1)	Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company is a member of an NAIC group, all members must elect the same reimbursement percentage, 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 reimbursement percentage 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% reimbursement percentage. The Company shall not be permitted to change its reimbursement percentage during the Contract Year. The Company shall be permitted to change its reimbursement percentage at the beginning of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required the issuance of revenue bonds, until the bonds have been fully repaid.

IMPORTANT NOTE: The State Board of Administration Finance Corporation has issued revenue bonds as a result of its liabilities for Coveted Events under the Contract Year effective June 1, 2005. As those bonds have not been fully repaid, the Company may not select a Reimbursement Percentage that is less than its selection under the prior Contract Year effective June 1, 2013.

The Reimbursement Percentage elected by the Company for the prior Contract Year effective June 1, 2013 was as follows: Homeowners Choice Property and Casualty Insurance Company - 90%

(a)

NAIC Group Affirmation : Initial the following box if the Company is part of an NAIC Group:

(b)

Reimbursement Percentage Election : The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2014, to 12:00 a.m., Eastern Time, May 31, 2015, (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% OR

75% OR

90%

(2)	Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and Commercial Non-Habitational Exposure, Written on a Commercial Policy

This section is applicable to all Companies which either have exposure for single structures with a mix of commercial habitational and commercial non-habitational exposure written under a Commercial Policy, or have the authority to write such policies. If the Company does not have the authority to write this type of exposure, this section does not apply; initial the N/A box at the end of this section, which completes this section of ARTICLE XVIII. If the Company does write, or has the authority to write, this type of exposure, please read and complete the remainder of this section.

FHCF-2014K

Rule 19-8.010 F.A.C.

For the purpose of determining the predominant use of mixed-use single structures under this Contract, the FHCF considers predominant use to be greater than 50% of the total insured value of the structure as justified by the company on the basis of number of floors, square footage, or other reasonable methodology presented to the Administrator (e.g., a classification plan explaining how predominance is determined, and likely to include commercial residential and commercial non-residential or business class codes) for approval prior to the Data Call submission under this Contract. Exposure shall be reported under the Company’s Data Call in accordance with the following:

Predominant Use is Dwelling or Habitational Occupancies

If a single structure is used for both habitational and non-habitational purposes and the predominant use is dwelling or habitational occupancies, the entire exposure for the structure should be reported to the FHCF under the Data Call, and the FHCF will reimburse losses for the entire structure.

Predominant Use is Non-Dwelling or Non-Habitational Occupancies

If a single structure is used for both habitational and non-habitational purposes and the predominant use is non-dwelling or non-habitational occupancies, the habitational portion of that structure should be identified and reported to the FHCF under the Data Call.

However, in recognition of the unusual nature of commercial structures with incidental habitational exposure and the hardship some companies may face in having to carve out such incidental habitational exposure, as well as the losses to such structures, the FHCF will accommodate these companies by allowing them to exclude the entire exposure for the single structure from their Data Call submission, providing the following two conditions are met:

(a)

The decision to not carve out and report the incidental habitational exposure shall apply to all such structures insured by the Company; and

(b)

If the incidental habitational exposure is not reported to the FHCF, the Company agrees it shall not report losses to the structure and the FHCF shall not reimburse any losses to the structure.

Initial the CARVING box below if the Company is able to carve out and report its incidental habitational exposure, OR , if this requirement presents a hardship, the Company must communicate its decision to not carve out and to not report the incidental exposure by having the individual executing this Contract on behalf of the Company placing his or her initials in the NOT CARVING box below. If the Company does not currently write such policies, but has the authority to write such policies after the start date of this Contract, the decision to carve or not carve out the incidental habitational exposure must be indicated below.

CARVING

NOT CARVING

NOT

APPLICABLE

By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable decision for the corresponding Contract Year Data Call submission and any subsequent resubmissions.

Important Note: Since this election will impact your Data Call submission, please share this decision with the individual(s) responsible for compiling your Data Call submission.

FHCF-2014K

Rule 19-8.010 F.A.C.

(3)	Additional Living Expense (ALE) Written as Time Element Coverage

If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e., coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the ‘Yes – Time Element ALE’ box below. If your Company does not write time element ALE coverage, initial ‘No – Time Element ALE’ box below.


	OR

Yes – Time		No – Time
Element ALE		Element ALE

ARTICLE XIX – SIGNATURES

Approved by:


Florida Hurricane Catastrophe Fund
By:	State Board of Administration of the State of Florida

By:		6/5/14

	Ashbel C. Williams	Date
	Executive Director & CIO

Approved as to legality:

	APPROVED AS TO LEGALITY:

By:		6/5/14

	CRAIG A. MEYER ASSISTANT GENERAL COUNSEL	Date


	Homeowners Choice Property and Casualty Insurance Company

	Scott R. Wallace – President
	Typed/Printed Name and Title

By:		2/25/2014

	Signature	Date

FHCF-2014K

Rule 19-8.010 F.A.C.

EXHIBIT 10.8

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			2
ARTICLE 4
RETENTION AND LIMIT			4
ARTICLE 5
INURING REINSURANCE			4
ARTICLE 6
REINSURANCE PREMIUM			7
ARTICLE 7
DEFINITIONS			8
ARTICLE 8
LOSS OCCURRENCE DEFINITION			10
ARTICLE 9
ACCESS TO RECORDS			12
ARTICLE 10
AGENCY			12
ARTICLE 11
ARBITRATION			12
ARTICLE 12
CASH CALL			13
ARTICLE 13
COLLATERAL			14
ARTICLE 14
COLLATERAL RELEASE			15
ARTICLE 15
CONFIDENTIALITY			16
ARTICLE 16
CURRENCY			18
ARTICLE 17
ENTIRE AGREEMENT			18

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ARTICLE 18
ERRORS AND OMISSIONS			18
ARTICLE 19
FEDERAL EXCISE TAX			19
ARTICLE 20
GOVERNING LAW			19
ARTICLE 21
INSOLVENCY			19
ARTICLE 22
LATE PAYMENTS			20
ARTICLE 23
LIABILITY OF THE REINSURER			21
ARTICLE 24
LIMITED RECOURSE AND BERMUDA REGULATIONS			22
ARTICLE 25
LOSS NOTICES AND SETTLEMENTS			23
ARTICLE 26
NET RETAINED LINES			23
ARTICLE 27
NON-WAIVER			24
ARTICLE 28
NOTICES AND AGREEMENT EXECUTION			24
ARTICLE 29
OFFSET			25
ARTICLE 30
OTHER REINSURANCE			25
ARTICLE 31
SALVAGE AND SUBROGATION			25
ARTICLE 32
SANCTIONS			26
ARTICLE 33
SERVICE OF SUIT			26
ARTICLE 34
SEVERABILITY			27
ARTICLE 35
TAXES			27
ARTICLE 36
TERRITORY			27
ARTICLE 37
INTERMEDIARY			27

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ATTACHMENTS

Collateral Collection Table
Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.
Trust Agreement

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CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies”) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, 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., Local Standard Time, June 1, 2015. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

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.

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3.	Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

The Reinsurer has reinsured its entire liability under this Contract without the Reinsured’s prior written consent, except that this provision shall not apply to any intercompany reinsurance or intercompany pooling arrangements entered into by the Reinsurer.

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

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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 25.0% of the Reinsured’s property loss under the applicable original Policy.

Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

With the exception of subparagraphs (c), (f), (g) and (k) of paragraph (1) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Reinsured’s policy, any amount of loss for which the Reinsured is liable because of such invalidation with not be excluded hereunder.

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ARTICLE 4

RETENTION AND LIMIT

The Reinsured shall retain and be liable for the first $10,000,000 of Ultimate Net Loss arising out of each Loss Occurrence. The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds the Reinsured’s retention, but the liability of the Reinsurer shall not exceed ***% of $30,000,000 as respects any one Loss Occurrence, nor shall it exceed ***% of $30,000,000 as respects all Loss Occurrences commencing during the Term of this Contract.

Notwithstanding the provisions above, no claim shall be made hereunder as respects losses arising out of Loss Occurrences commencing during the Term of this Contract unless at least two risks insured or reinsured by the Reinsured are involved in such Loss Occurrence. For purposes hereof, the Reinsured shall be the sole judge of what constitutes “one risk.”

3.	It is understood the Reinsured may maintain in force excess reinsurance, recoveries under which shall inure, unless otherwise stated in the Inuring Reinsurance Article, solely to the Reinsured’s benefit and be entirely disregarded in applying all of the provisions of this Contract.

ARTICLE 5

INURING REINSURANCE

1.	The Reinsured shall maintain property catastrophe excess of loss reinsurance, recoveries under which shall inure to the benefit of this Contract, for the following layers:

$8,000,000 in excess of $10,000,000 any one Loss Occurrence, subject to an annual limit of $16,000,000; and

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$20,000,000 in excess of $18,000,000 any one Loss Occurrence, subject to an annual limit of $40,000,000 and covering hurricane events only; and

80.0% of $44,000,000 in excess of $38,000,000 any one Loss Occurrence, subject to an annual limit of $74,000,000; and

20.0% of $44,000,000 in excess of $38,000,000 any one Loss Occurrence, subject to an annual limit of $44,000,000; and

$122,000,000 in excess of $82,000,000 any one Loss Occurrence, subject to an annual limit of $244,000,000; and

$54,600,000 in excess of $204,000,000 any one Loss Occurrence, subject to an annual limit of $109,200,000; and

$200,000,000 in excess of $258,600,000 any one Loss Occurrence, subject to an annual limit of $400,000,000.

2.	The Reinsured shall provisionally purchase mandatory coverage from the Florida Hurricane Catastrophe Fund (FHCF) with the following limit and retention:

90.0% of $597,100,000 excess of $223,400,000.

The FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

The FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples.

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Any loss reimbursement paid or payable to the Reinsured for the mandatory coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting from Loss Occurrences commencing during the Term of this Contract, shall inure to the benefit of this Contract, subject to the lesser of the following:

The loss reimbursement paid or payable with a provisional FHCF limit and retention equal to 90.0% of $545,700,000 excess of $204,100,000, based on the mandatory FHCF premium for the Reinsured’s Business Covered under this Contract evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples. The provisional limit and retention may increase or decrease in accordance with the provisions of the reimbursement contract between the Reinsured and the State Board of Administration of the State of Florida (SBA); or

The maximum recovery allowed in accordance with subparagraph (a) of paragraph (2) above.

Any FHCF loss reimbursement shall be deemed paid to the Reinsured in accordance with the reimbursement contract between the Reinsured and the SBA at the full payout level set forth therein. It is further deemed that any loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

Prior to final calculation of the Reinsured’s FHCF retention and payout for the mandatory layer provided by the reimbursement contract between the Reinsured and the SBA, the Reinsurer’s liability hereunder will provisionally be calculated based on the projected FHCF payout and in accordance with paragraph (3) above. Following the FHCF’s final calculation of the payout for the coverage layer provided by 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 hereunder in any one Loss Occurrence is less than the amount previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

6.	If an FHCF reimbursement amount is based on the Reinsured’s losses in more than one Loss Occurrence commencing during the Term of this Contract, and the FHCF does not

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designate the amount allocable to each Loss Occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Reinsured’s losses in each Loss Occurrence bear to the Reinsured’s total losses arising out of all Loss Occurrences to which the FHCF reimbursement applies.

ARTICLE 6

REINSURANCE PREMIUM

1.	As respects the reinsurance provided hereunder, the Reinsured shall pay the Reinsurer the greater of the following:

***% of *******; or

*******% of ***% of the Reinsured’s Total Insured Value as of September 30, 2014 (the “adjusted premium”). However, in the event the difference between the adjusted premium and the deposit premium is less than or equal to 5.0% of the deposit premium, the premium due hereunder shall be ******% of $********. Further, in the event the adjusted premium hereunder is greater than *****% of $********, the premium due hereunder shall be equal to the *******% of $********* plus the difference between the adjusted premium and ******% of $*********. Further, in the event the adjusted premium hereunder is less than *******% of $*********, the premium due hereunder shall be equal to *******% of $******* less the difference between ******% of $********* and the adjusted premium.

The Reinsured shall pay the Reinsurer a deposit premium installment of *****% of ******* on June 1, 2014 and the Adjusted Deposit Installment, defined in paragraph (3) below, on January 1, 2015. However, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

3.	“Adjusted Deposit Installment” as used herein shall mean:

The premium due hereunder, computed in accordance with paragraph (1) above; less

*******% of *******.

4.	In the event this Contract is terminated in accordance with the provisions of paragraph (3) of the Term Article, the reinsurance premium due hereunder shall be prorated based on the period of the Reinsurer’s participation hereunder.

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No later than January 1, 2015 (or as promptly as possible following termination in the event this Contract is terminated prior to January 1, 2015), the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (1) or (4) above (as applicable) and the adjusted deposit installment, computed in accordance with paragraph (3) above. In the event this Contract is terminated prior to January 1, 2015, any additional premium due the Reinsurer or return premium due the Reinsured shall be remitted promptly.

6.	The Reinsured shall furnish the Reinsurer with such information as the Reinsurer may require to complete its Annual Convention Statement.

7.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D on Business Covered as defined in the Business Covered Article.

ARTICLE 7

DEFINITIONS

ULTIMATE NET LOSS

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

“Loss in Excess of Policy Limits” shall be defined as any amount paid or payable by the Reinsured in excess of its Policy limits, but otherwise within the terms of its Policy, such loss in excess of the Reinsured’s Policy limits having been incurred because of, but not limited to, failure by the Reinsured to settle within the Policy limits or by reason of the Reinsured’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.

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“Extra Contractual Obligations” shall be defined as any punitive, exemplary, compensatory or consequential damages paid or payable by the Reinsured, 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 Reinsured to settle within the Policy limits or by reason of the Reinsured’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.

Further, any Loss in Excess of Policy Limits and/or Extra Contractual Obligations that are made in connection with this Contract shall not exceed 25.0% of the contractual loss under all Policies involved in the Loss Occurrence hereunder.

LOSS ADJUSTMENT EXPENSE

The term “Loss Adjustment Expense” as used herein shall be defined as 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 Reinsured’s field employees and expenses of other employees of the Reinsured 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 Reinsured’s officials incurred in connection with losses covered by this Contract, and Declaratory Judgment Expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto. Loss Adjustment Expense shall not include normal office expenses or salaries of the Reinsured’s employees or officials.

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DECLARATORY JUDGMENT EXPENSE

TERM OF THIS CONTRACT

“Term of this Contract” as used herein shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 through 12:01 a.m., Local Standard Time, June 1, 2015. However, if this Contract is terminated, “Term of this Contract” as used herein shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 until the effective time and date of termination.

ARTICLE 8

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Reinsured 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 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.

For all Loss Occurrences the Reinsured 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 Reinsured arising out of that disaster, accident or loss and provided that only one such period of 168 consecutive hours shall apply with respect to one event, except for any Loss Occurrence referred to in subparagraph (a) or (b) of paragraph (1) above where only one such period of 96 consecutive hours shall apply with respect to one event, regardless of the duration of the event.

3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

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ARTICLE 9

ACCESS TO RECORDS

The Reinsurer or its designated representatives shall have access to the books and records of the Reinsured on matters relating to this reinsurance at all reasonable times, 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. Notification of a request for inspection of records shall be sent to the Reinsured by the Reinsurer in written form, and shall normally be given four weeks in advance. Notwithstanding the above, the Reinsurer shall not have any right of access to the records of the Reinsured if it is not current in all undisputed payments due the Reinsured.

ARTICLE 10

AGENCY

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

ARTICLE 11

ARBITRATION

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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.

If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this Article and communications shall be made by the Reinsured to each of the reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint.

5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 12

CASH CALL

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obligated (subject to the terms and conditions of this Contract) to make a payment to the Reinsured of the amount requested within 10 working days of receipt of the statement from the Reinsured.

ARTICLE 13

COLLATERAL

As promptly as possible following execution of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets having a market value greater than or equal to $21,000,000 (the “Collateral”) less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Reinsurance Premium Article shall be deposited into the Trust Account.

The Reinsured agrees that if the Reinsurer makes indemnity payment(s) to the Reinsured under this Contract, the Reinsurer may withdraw Assets from the Trust Account, reducing the market value of Assets in the Trust Account to an amount at least equal to the unused Reinsurance Limit, in accordance with the provisions of the Trust Agreement.

3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of Section 5 of the Trust Agreement.

4.	At any time prior to expiration or termination of this Contract, if the value of the Assets in the Trust Account is less than the Reinsurer’s Obligations hereunder, the Reinsurer shall promptly deposit the difference into the Trust Account.

5.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

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ARTICLE 14

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust, as follows:

For each potentially covered Loss Occurrence, the Reinsured shall multiply the Loss Amount (being equal to the sum of losses and Loss Adjustment Expenses paid plus reserves for losses and Loss Adjustment Expense outstanding plus reserves for losses incurred but not yet reported) by the appropriate Buffer Loss Factor from the table below, based upon the type of Loss Occurrence and the number of months which have elapsed since the event. The product of this calculation shall be defined as the Buffered Loss Amount (“BLA”).


Buffer Loss Factor Table
Number of Calendar Months Since Date of Loss Occurrence	*Windstorm/Brushfire**			Earthquake and Fire Following			Other
0 to 3		200	%		300	%		250	%
> 3 to 6		150	%		200	%		175	%
> 6 to 9		125	%		175	%		150	%
> 9 to 12		110	%		150	%		130	%
> 12 to 15		105	%		125	%		115	%
> 15 to 18		100	%		120	%		110	%
Thereafter		100	%		100	%		100	%

*	For the purpose of this Article, the term “Windstorm” shall include Hurricane, Rainstorm, Storm, Tempest, Tornado, Cyclone, Typhoon and Hail.

The BLA will be reduced by the $10,000,000 retention and any inuring reinsurance recoveries to compute the Presumed Ultimate Net Loss. The Presumed Ceded Loss will be defined as the lesser of ***% of the Presumed Ultimate Net Loss and the limit of ***% of $30,000,000.

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The Presumed Total Ceded Loss will equal the lesser of the limit of ***% of $30,000,000 and the Presumed Ceded Loss. An amount equal to the Presumed Total Ceded Loss less losses paid by the Reinsurer under this Contract shall be retained in the Trust and any excess in the Trust shall be released to the Reinsurer.

Notwithstanding the aforementioned, at December 31, 2014, the parties agree to consider the release of collateral. The intention is to release collateral for all limits for which there is essentially no possibility of loss from past or future events before the expiration of this Contract. All collateral securing what the parties agree are unreachable limits will be released within three business days.

Thirty-six months following the expiration of this Contract, the Reinsurer shall have the option to commute this Contract by sending the Reinsured written notice thereof. In such event, the Reinsurer shall pay to the Reinsured an amount equal to the loss and loss adjustment expense reserves hereunder, including reserves for incurred but not reported losses, as estimated by the Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of such amount, both parties shall be completely released from all liability under this Contract, whether known or unknown.

So long as there is any security on deposit in the Trust, the Reinsured shall perform the calculation set forth above within 10 business days after the end of each month and deliver a report substantially in the form of the Collateral Calculation Table attached to this Contract to the Reinsurer and the Trustee named in the Trust Agreement. Collateral will be adjusted monthly based on this calculation. To the extent the calculation indicates that collateral may be reduced, the delivery of the report to the Trustee will constitute a directive to return excess collateral to the Reinsurer. In the event the calculation indicates additional collateral is required, the Reinsurer will have 10 business days from receipt of the report to deposit the required collateral into the Trust.

ARTICLE 15

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

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 Reinsured with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Reinsured in maintaining the confidentiality provided for in this Article.

4.	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 16

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 17

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 18

ERRORS AND OMISSIONS

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ARTICLE 19

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

ARTICLE 20

GOVERNING LAW

This Contract shall be governed as to performance, administration and interpretation in accordance with the laws of the State of Florida, exclusive of the rules with respect to conflicts of law; however, with respect to credit for reinsurance, the applicable rules of all states shall apply.

ARTICLE 21

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the

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approval of the court, against the Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

3.	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 Reinsured.

It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the Reinsured 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 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 Reinsured or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations of the Reinsured as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Reinsured 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 22

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

With the exception of payments due from the Reinsurer in accordance with the Cash Call Article, payments due from the Reinsurer to the Reinsured shall have as a due date the date on which the agreed proof of loss is received by the Reinsurer, and shall be overdue 30 days thereafter. Payment to the Intermediary is deemed to be payment to the Reinsured for purposes of this Article.

Payments due from the Reinsured to the Reinsurer shall have as a due date the date specified in this Contract. Payments shall be overdue 30 days thereafter. Premium adjustments shall be overdue 30 days following the due date set forth under the terms of this Contract.

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The Reinsured shall provide a copy of the original insured’s proof of loss, and a copy of the claim adjuster’s report(s) or other evidence of indemnification for losses exceeding the excess limit on an incurred basis. If, subsequent to receipt of this evidence, the information contained therein is insufficient or not in accordance with the contractual conditions, then the payment due date as defined in subparagraph (a) shall be deemed to be the date upon which the Reinsurer received additional information necessary to approve payment of the claim or the claim is presented in an acceptable manner. Interest as stipulated in subparagraph (d) shall be payable should a disputed claim be ultimately settled and if the period set out in subparagraph (a) is exceeded, but only to the extent that the final loss payment exactly tracks with the original proof of loss.

Overdue amounts shall bear simple interest from the overdue date at the 90-day United States Treasury Bill rate set forth by the Federal Reserve Board for the first Monday of the calendar month in which the amount becomes overdue, as published in the Federal Reserve Statistical Release. If the interest generated for 100% in respect of any overdue payment as outlined in subparagraph (a) or (b) is $500 or less, then the interest penalty shall be waived.

For the purposes of this Article, reinsuring Underwriters at Lloyd’s shall be viewed as one entity. The provisions set forth herein shall not be applicable until the creditor party shall have manifested to the debtor party its intent to invoke the terms of this Article.

ARTICLE 23

LIABILITY OF THE REINSURER

2.	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.

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ARTICLE 24

LIMITED RECOURSE AND BERMUDA REGULATIONS

1.	The Reinsured understands and accepts that Aeolus Re Ltd. is registered as a segregated account company under the Bermuda Segregated Accounts Companies Act 2000 and that Aeolus Re Ltd. in respect of its Spire Segregated Account (the “Reinsurer”) is a segregated account of Aeolus Re Ltd.

All corporate matters relating to the creation of the Reinsurer, including, but not limited to, the capacity of the Reinsurer, the segregated nature of the Reinsurer and Aeolus Re Ltd., and the operation and liquidation of the Reinsurer, will be governed by, and construed in accordance with, the laws of Bermuda. The Reinsured acknowledges that the Reinsurer has written and/or will write other reinsurance or retrocession policies and that the assets and liabilities attributable to each such contract shall be linked to the segregated account of the Reinsurer. Accordingly, the Reinsurer will have assets and liabilities relating to a multiple of reinsurance contracts. The Reinsured has had the opportunity to take advice and to obtain all such additional information that it considers necessary to evaluate the terms, conditions and risks of entering into this Contract with the Reinsurer.

Notwithstanding any other provision of this Contract to the contrary, the liability of the Reinsurer for the performance and discharge of all of its obligations, however they may arise, in relation to this Contract (the “SAC Obligations”) will be limited to and payable solely from the assets linked to the Reinsurer. Accordingly there will be no recourse to any other assets of Aeolus Re Ltd. (including, for the avoidance of doubt, any assets linked to any other segregated account of Aeolus Re Ltd. or to its general account). In the event that the assets linked to the Reinsurer are insufficient to meet all of its SAC Obligations, any SAC Obligations remaining after the application of such assets linked to the Reinsurer will be extinguished, and the Reinsured undertakes in such circumstances to take no further action against the Reinsurer, Aeolus Re Ltd. or any other segregated accounts of Aeolus Re Ltd. in respect of any such SAC Obligations. In particular, neither the Reinsured nor any party acting on its behalf will petition or take any steps for the winding up or receivership of the Reinsurer, Aeolus Re Ltd., or any other segregated account of Aeolus Re Ltd.

4.	This Limited Recourse and Bermuda Regulations Article shall survive termination of this Contract.

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ARTICLE 25

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

All loss settlements made by the Reinsured, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured. Notwithstanding the foregoing and subject to the provisions set forth under paragraph (2) of the Exclusions Article, should any judicial, regulatory, or legislative entity having legal jurisdiction require that the Reinsured be liable for any amounts that are otherwise outside the terms of the Reinsured’s original Policies, the Reinsurer agrees that such amounts shall be subject always to the terms and conditions of this Contract.

ARTICLE 26

NET RETAINED LINES

This Contract applies only to that portion of any Policy which the Reinsured 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 Reinsured retains net for its own account shall be included.

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 Reinsured 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.

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ARTICLE 27

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 28

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

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.

3.	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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ARTICLE 29

OFFSET

The Reinsured and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, Loss Adjustment Expenses or salvages due from one party to the other under this Contract or under any other reinsurance agreement heretofore or hereafter entered into between the Reinsured and the Reinsurer, whether acting as assuming reinsurer or as ceding company; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

ARTICLE 30

OTHER REINSURANCE

The Reinsured shall be permitted to carry other reinsurance, recoveries under which shall inure solely to the benefit of the Reinsured and be entirely disregarded in applying all of the provisions of this Contract.

ARTICLE 31

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as a retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon 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 Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

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ARTICLE 32

SANCTIONS

Neither the Reinsured nor any 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 33

SERVICE OF SUIT

(Applicable if the 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.)

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

3.	Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent,

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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 Reinsured or any beneficiary hereunder arising out of this Contract.

ARTICLE 34

SEVERABILITY

ARTICLE 35

TAXES

ARTICLE 36

TERRITORY

ARTICLE 37

INTERMEDIARY

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Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street, Suite 1250, Dallas, TX 75201. Payments by the Reinsured to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Reinsured only to the extent that such payments are actually received by the Reinsured.

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COLLATERAL COLLECTION TABLE

CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

Collateral Release Calculation as of [ ]

Line No.

Col. 1

Col. 2

Col. 3

Col. 4

Col. 5

Col. 6

Col. 7

Col. 8

Col. 9

Date of Loss Event

Description

Loss Amount

Buffer Loss Factor

Buffer Loss
Amount
(Col. 3 x Col. 4)

Inuring
Reinsurance
Coverage

Buffered Loss
Amount net of
Inuring
Reinsurance
(Col. 5 - Col. 6)

Less
$[ ]
Retention

Balance
(Col. 7 - Col.8)

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Collateral Collection Table

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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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 Reinsured 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.	Reinsured 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)

(b)

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TRUST AGREEMENT

(copy to be included)

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Trust Agreement

Exhibit 10.9

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission

CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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, subject to prior agreement of Reinsurer to include any affiliates

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CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			2
ARTICLE 4
RETENTION AND LIMIT			4
ARTICLE 5
INURING REINSURANCE			5
ARTICLE 6
REINSURANCE PREMIUM			7
ARTICLE 7
DEFINITIONS			8
ARTICLE 8
LOSS OCCURRENCE DEFINITION			10
ARTICLE 9
ACCESS TO RECORDS			12
ARTICLE 10
AGENCY			12
ARTICLE 11
ARBITRATION			12
ARTICLE 12
CASH CALL			13
ARTICLE 13
COLLATERAL			14
ARTICLE 14
COLLATERAL RELEASE			15
ARTICLE 15
CONFIDENTIALITY			16
ARTICLE 16
CURRENCY			17
ARTICLE 17
ENTIRE AGREEMENT			18

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ARTICLE 18
ERRORS AND OMISSIONS			18
ARTICLE 19
FEDERAL EXCISE TAX			18
ARTICLE 20
GOVERNING LAW			19
ARTICLE 21
INSOLVENCY			19
ARTICLE 22
LATE PAYMENTS			20
ARTICLE 23
LIABILITY OF THE REINSURER			21
ARTICLE 24
LIMITED RECOURSE AND CAYMAN ISLANDS REGULATIONS			21
ARTICLE 25
LOSS NOTICES AND SETTLEMENTS			22
ARTICLE 26
NET RETAINED LINES			23
ARTICLE 27
NON-WAIVER			23
ARTICLE 28
NOTICES AND AGREEMENT EXECUTION			23
ARTICLE 29
OFFSET			24
ARTICLE 30
OTHER REINSURANCE			24
ARTICLE 31
SALVAGE AND SUBROGATION			24
ARTICLE 32
SANCTIONS			25
ARTICLE 33
SERVICE OF SUIT			25
ARTICLE 34
SEVERABILITY			26
ARTICLE 35
TAXES			26
ARTICLE 36
TERRITORY			26

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ARTICLE 37
INTERMEDIARY			27

ATTACHMENTS

Collateral Collection Table Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A. Trust Agreement

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CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies”) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

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3.	Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

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Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

With the exception of subparagraphs (c), (f), (g) and (k) of paragraph (1) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Reinsured’s policy, any amount of loss for which the Reinsured is liable because of such invalidation with not be excluded hereunder.

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ARTICLE 4

RETENTION AND LIMIT

The Reinsured shall retain and be liable for the first $10,000,000 of Ultimate Net Loss arising out of each Loss Occurrence. The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds the Reinsured’s retention, but the liability of the Reinsurer shall not exceed ******% of $30,000,000 as respects any one Loss Occurrence, nor shall it exceed ******% of $30,000,000 as respects all Loss Occurrences commencing during the Term of this Contract.

3.	It is understood the Reinsured may maintain in force excess reinsurance, recoveries under which shall inure, unless otherwise stated in the Inuring Reinsurance Article, solely to the Reinsured’s benefit and be entirely disregarded in applying all of the provisions of this Contract.

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ARTICLE 5

INURING REINSURANCE

1.	The Reinsured shall maintain property catastrophe excess of loss reinsurance, recoveries under which shall inure to the benefit of this Contract, for the following layers:

$8,000,000 in excess of $10,000,000 any one Loss Occurrence, subject to an annual limit of $16,000,000; and

$20,000,000 in excess of $18,000,000 any one Loss Occurrence, subject to an annual limit of $40,000,000 and covering hurricane events only; and

80.0% of $44,000,000 in excess of $38,000,000 any one Loss Occurrence, subject to an annual limit of $74,000,000; and

20.0% of $44,000,000 in excess of $38,000,000 any one Loss Occurrence, subject to an annual limit of $44,000,000; and

$122,000,000 in excess of $82,000,000 any one Loss Occurrence, subject to an annual limit of $244,000,000; and

$54,600,000 in excess of $204,000,000 any one Loss Occurrence, subject to an annual limit of $109,200,000; and

$200,000,000 in excess of $258,600,000 any one Loss Occurrence, subject to an annual limit of $400,000,000.

2.	The Reinsured shall provisionally purchase mandatory coverage from the Florida Hurricane Catastrophe Fund (FHCF) with the following limit and retention:

90.0% of $597,100,000 excess of $223,400,000.

The FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

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The maximum recovery allowed in accordance with subparagraph (a) of paragraph (2) above.

6.	If an FHCF reimbursement amount is based on the Reinsured’s losses in more than one Loss Occurrence commencing during the Term of this Contract, and the FHCF does not

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ARTICLE 6

REINSURANCE PREMIUM

1.	As respects the reinsurance provided hereunder, the Reinsured shall pay the Reinsurer the greater of the following:

*****% of $*********; or

**********% of *******% of the Reinsured’s Total Insured Value as of September 30, 2014 (the “adjusted premium”). However, in the event the difference between the adjusted premium and the deposit premium is less than or equal to 5.0% of the deposit premium, the premium due hereunder shall be ******% of *******. Further, in the event the adjusted premium hereunder is greater than ******% of *******, the premium due hereunder shall be equal to the ******% of ******* plus the difference between the adjusted premium and ******% of *******. Further, in the event the adjusted premium hereunder is less than ******% of *******, the premium due hereunder shall be equal to ******% of ******* less the difference between ******% of ******* and the adjusted premium.

The Reinsured shall pay the Reinsurer a deposit premium installment of ******% of ******* on June 1, 2014 and the Adjusted Deposit Installment, defined in paragraph (3) below, on January 1, 2015. However, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

3.	“Adjusted Deposit Installment” as used herein shall mean:

The premium due hereunder, computed in accordance with paragraph (1) above; less

******% of *******.

4.	In the event this Contract is terminated in accordance with the provisions of paragraph (3) of the Term Article, the reinsurance premium due hereunder shall be prorated based on the period of the Reinsurer’s participation hereunder.

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6.	The Reinsured shall furnish the Reinsurer with such information as the Reinsurer may require to complete its Annual Convention Statement.

7.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D on Business Covered as defined in the Business Covered Article.

ARTICLE 7

DEFINITIONS

ULTIMATE NET LOSS

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

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LOSS ADJUSTMENT EXPENSE

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DECLARATORY JUDGMENT EXPENSE

TERM OF THIS CONTRACT

ARTICLE 8

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

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ARTICLE 9

ACCESS TO RECORDS

ARTICLE 10

AGENCY

ARTICLE 11

ARBITRATION

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 12

CASH CALL

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obligated (subject to the terms and conditions of this Contract) to make a payment to the Reinsured of the amount requested within 10 working days of receipt of the statement from the Reinsured.

ARTICLE 13

COLLATERAL

As promptly as possible following execution of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets having a market value greater than or equal to $9,000,000 (the “Collateral”) less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Reinsurance Premium Article shall be deposited into the Trust Account.

3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of the Trust Agreement.

4.	At any time prior to expiration or termination of this Contract, if the value of the Assets in the Trust Account is less than the Reinsurer’s Obligations hereunder, the Reinsurer shall promptly deposit the difference into the Trust Account.

5.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

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ARTICLE 14

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust, as follows:


Buffer Loss Factor Table
Number of Calendar Months Since Date of Loss Occurrence	*Windstorm/Brushfire**			Earthquake and Fire Following			Other
0 to 3		200	%		300	%		250	%
> 3 to 6		150	%		200	%		175	%
> 6 to 9		125	%		175	%		150	%
> 9 to 12		110	%		150	%		130	%
> 12 to 15		105	%		125	%		115	%
> 15 to 18		100	%		120	%		110	%
Thereafter		100	%		100	%		100	%

*	For the purpose of this Article, the term “Windstorm” shall include Hurricane, Rainstorm, Storm, Tempest, Tornado, Cyclone, Typhoon and Hail.

The BLA will be reduced by the $10,000,000 retention and any inuring reinsurance recoveries to compute the Presumed Ultimate Net Loss. The Presumed Ceded Loss will be defined as the lesser of ******% of the Presumed Ultimate Net Loss and the limit of ******% of $30,000,000.

The Presumed Total Ceded Loss will equal the lesser of the limit of ******% of $30,000,000 and the Presumed Ceded Loss. An amount equal to the Presumed Total Ceded Loss less losses paid by the Reinsurer under this Contract shall be retained in the Trust and any excess in the Trust shall be released to the Reinsurer.

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ARTICLE 15

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 16

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

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ARTICLE 17

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 18

ERRORS AND OMISSIONS

ARTICLE 19

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 20

GOVERNING LAW

ARTICLE 21

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

3.	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 Reinsured.

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ARTICLE 22

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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to be the date upon which the Reinsurer received additional information necessary to approve payment of the claim or the claim is presented in an acceptable manner. Interest as stipulated in subparagraph (d) shall be payable should a disputed claim be ultimately settled and if the period set out in subparagraph (a) is exceeded, but only to the extent that the final loss payment exactly tracks with the original proof of loss.

ARTICLE 23

LIABILITY OF THE REINSURER

2.	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 24

LIMITED RECOURSE AND CAYMAN ISLANDS REGULATIONS

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assets of the Reinsurer, whether or not allocated to any other segregated portfolio or the general account of the Reinsurer. In the event that the proceeds of realization of the assets of the Reinsurance Trust are insufficient to meet all Obligations, any Obligations remaining after the application of such proceeds shall be extinguished, and the Reinsured undertakes in such circumstances to take no further action against the Reinsurer in respect of any such Obligations. In particular, neither the Reinsured nor any party acting on its behalf shall petition or take any steps for the winding up or receivership of the Reinsurer.

Notwithstanding any matter referred to herein, the Reinsured understands and accepts that all corporate matters relating to the creation of the Reinsurer, capacity of the Reinsurer, operation and liquidation of the Reinsurer and any matters relating to the Reinsurer thereof shall be governed by, and construed in accordance with, the laws of the Cayman Islands. The Reinsurer has had the opportunity to take advice and to obtain all such additional information that it considers necessary to evaluate the terms, conditions and risks of entering into this Contract with the Reinsurer.

ARTICLE 25

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

All loss settlements made by the Reinsured, provided they are within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured. Notwithstanding the foregoing and subject to the provisions set forth under paragraph (2) of the Exclusions Article, should any judicial, regulatory, or legislative entity having legal jurisdiction require that the Reinsured be liable for any amounts that are otherwise outside the terms of the Reinsured’s original Policies, the Reinsurer agrees that such amounts shall be subject always to the terms and conditions of this Contract.

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ARTICLE 26

NET RETAINED LINES

ARTICLE 27

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 28

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

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Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 29

OFFSET

ARTICLE 30

OTHER REINSURANCE

ARTICLE 31

SALVAGE AND SUBROGATION

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their priority according to their participation before being used in any way to reimburse the Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 32

SANCTIONS

ARTICLE 33

SERVICE OF SUIT

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the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the 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 Reinsured or any beneficiary hereunder arising out of this Contract.

ARTICLE 34

SEVERABILITY

ARTICLE 35

TAXES

ARTICLE 36

TERRITORY

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ARTICLE 37

INTERMEDIARY

Advocate Reinsurance Partners, LLC is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including, but not limited to, notices, statements, premium, return premium, commissions, taxes, losses, Loss Adjustment Expense, salvages and loss settlements) relating thereto shall be transmitted to the Reinsured or the Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street, Suite 1250, Dallas, TX 75201. Payments by the Reinsured to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Reinsured only to the extent that such payments are actually received by the Reinsured.

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COLLATERAL COLLECTION TABLE

CATASTROPHE AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

Collateral Release Calculation as of [ ]

Line No.

Col. 1

Col. 2

Col. 3

Col. 4

Col. 5

Col. 6

Col. 7

Col. 8

Col. 9

Date of Loss Event

Description

Loss Amount

Buffer Loss Factor

Buffer Loss
Amount
(Col. 3 x Col. 4)

Inuring
Reinsurance
Coverage

Buffered Loss
Amount net of
Inuring
Reinsurance
(Col. 5 - Col. 6)

Less
$[ ]
Retention

Balance
(Col. 7 - Col.8)

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Collateral Collection Table

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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ARP 35B

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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 Reinsured 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.	Reinsured 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)

(b)

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ARP 35B

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TRUST AGREEMENT

(copy to be included)

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Trust Agreement

EXHIBIT 10.10

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			3
ARTICLE 4
RETENTION AND LIMIT			5
ARTICLE 5
REINSTATEMENT			5
ARTICLE 6
FLORIDA HURRICANE CATASTROPHE FUND			7
ARTICLE 7
RATE AND PREMIUM			9
ARTICLE 8
DEFINITIONS			10
ARTICLE 9
LOSS OCCURRENCE DEFINITION			12
ARTICLE 10
ACCESS TO RECORDS			14
ARTICLE 11
AGENCY			14
ARTICLE 12
ARBITRATION			14
ARTICLE 13
CASH CALL			15
ARTICLE 14
CONFIDENTIALITY			16
ARTICLE 15
CURRENCY			17
ARTICLE 16
ENTIRE AGREEMENT			17
ARTICLE 17
ERROR AND OMISSIONS			18
ARTICLE 18
FEDERAL EXCISE TAX			18

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ARTICLE 19
FUNDING OF RESERVES			18
ARTICLE 20
GOVERNING LAW			21
ARTICLE 21
INSOLVENCY			22
ARTICLE 22
LATE PAYMENTS			23
ARTICLE 23
LIABILITY OF THE REINSURER			24
ARTICLE 24
LOSS NOTICES AND SETTLEMENTS			24
ARTICLE 25
NET RETAINED LINES			25
ARTICLE 26
NON-WAIVER			25
ARTICLE 27
NOTICES AND AGREEMENT EXECUTION			25
ARTICLE 28
OFFSET			26
ARTICLE 29
OTHER REINSURANCE			26
ARTICLE 30
SALVAGE AND SUBROGATION			26
ARTICLE 31
SANCTIONS			27
ARTICLE 32
SERVICE OF SUIT			27
ARTICLE 33
SEVERABILITY			28
ARTICLE 34
TAXES			28
ARTICLE 35
TERRITORY			28
ARTICLE 36
INTERMEDIARY			29

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ATTACHMENTS

Schedule A

Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies’’) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations set forth herein and in Schedule A attached to and forming part of this Contract.

ARTICLE 2

TERM

2.	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

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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.

Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur. The effective date of reduction or termination shall be the date selected by the Reinsured, which may be a date that is retroactively applied up to a maximum of 65 days prior to the date of public announcement for subparagraphs (a) through (e) below or upon discovery for subparagraphs (f) through (h) below, subject to the condition that such selected date must be the last day of a calendar month:

The Reinsurer’s policyholders’ surplus (or its equivalent under the Reinsurer’s accounting system) as reported in such financial statements of the Reinsurer as designated by the Reinsured, has been reduced by 20.0% of the amount of surplus (or the applicable equivalent) at any date during the prior 12-month period (including the 12-month period prior to the inception of this Contract); or

The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

The Reinsurer has become insolvent or has been placed into liquidation, receivership, supervision, administration, winding-up or under a scheme of arrangement, or similar proceedings (whether voluntary or involuntary) or proceedings have been instituted against the 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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The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance U.S.A.” attached to and forming part of this Contract.

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Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

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ARTICLE 4

RETENTION AND LIMIT

As respects Excess Layer 5 of reinsurance coverage provided by this Contract, the Reinsured shall retain and be liable for the first amount of Ultimate Net Loss, shown as “Reinsured’s Retention” in Schedule A attached hereto, arising out of each Loss Occurrence. The Reinsurer shall then be liable for the amount by which such Ultimate Net Loss exceeds the Reinsured’s applicable retention, but the liability of the Reinsurer shall not exceed:

The amount, shown as “Reinsurer’s Per Occurrence Limit” in Schedule A plus the Special Reinstated Limit resulting from any prior Loss Occurrences, if any, per the provisions of paragraph (2) of the Reinstatement Article as respects any Loss Occurrence; nor

The amount, shown as “Reinsurer’s Contract Limit” in Schedule A as respects all loss or losses arising out of Loss Occurrences commencing during the Term of this Contract.

Notwithstanding the provisions above, no claim shall be made under Excess Layer 5 as respects losses arising out of Loss Occurrences commencing during the Term of this Contract unless at least two risks insured or reinsured by the Reinsured are involved in such Loss Occurrence. For purposes hereof, the Reinsured shall be the sole judge of what constitutes “one risk.”

ARTICLE 5

REINSTATEMENT

1.	In the event the Ultimate Net Loss of a Loss Occurrence exceeds the Trigger Point as defined in paragraph (6) below, the following shall apply:

The “Special Reinstated Limit,” applicable to Excess Layer 5, shall be calculated as follows:

The Ultimate Net Loss of such Loss Occurrence less the Trigger Point (the total of which is subject to a minimum of zero and a maximum of $25,000,000); divided by

ii.

$25,000,000; multiplied by

iii.

“Reinsurer’s Contract Limit” for Excess Layer 5 less the “Reinsurer’s Per Occurrence Limit” for Excess Layer 5 in Schedule A.

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The Reinsured agrees to pay additional premium equal to the product of the following:

The percentage of the “Reinsurer’s Per Occurrence Limit” for Excess Layer 5 in Schedule A (based on the Special Reinstated Limit); times

ii.

The adjusted premium for Excess Layer 5 for the Term of this Contract (exclusive of reinstatement premium), as calculated in accordance with the Rate and Premium Article.

In the event any portion of the reinsurance under Excess Layer 5 of reinsurance coverage provided by this Contract is exhausted by loss, and if the Special Reinstated Limit is less than the “Reinsurer’s Per Occurrence Limit” for Excess Layer 5 in Schedule A, the amount so exhausted shall be reinstated immediately from the time the Loss Occurrence commences hereon. For each amount so reinstated, the Reinsured agrees to pay additional premium equal to the product of the following:

The percentage of the “Reinsurer’s Per Occurrence Limit” for Excess Layer 5 reinstated (based on the Ultimate Net Loss paid by the Reinsurer under Excess Layer 5); times

The adjusted premium for Excess Layer 5 for the Term of this Contract (exclusive of reinstatement premium), as calculated in accordance with the Rate and Premium Article.

Whenever the Reinsured requests payment by the Reinsurer of any loss under Excess Layer 5 hereunder, the Reinsured shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer. If the adjusted premium has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due shall be based on the deposit premium and shall be readjusted when the premium has been finally determined; furthermore, any reinstatement premium shown to be due the Reinsurer as reflected by such statement (less prior payments, if any) shall be payable by the Reinsured concurrently with payment by the Reinsurer of the requested loss. Any return reinstatement premium shown to be due the Reinsured shall be remitted by the Reinsurer as promptly as possible after receipt and verification of the Reinsured’s statement.

4.	Notwithstanding anything stated herein, the liability of the Reinsurer under Excess Layer 5 of reinsurance coverage provided by this Contract shall not exceed the amount shown as “Reinsurer’s Contract Limit” in Schedule A, in all during the Term of this Contract.

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5.	The Reinsured shall not pay reinstatement premium exceeding 100% of the adjusted premium for the Term of this Contract (exclusive of reinstatement premium), as calculated in accordance with the Rate and Premium Article.

6.	“Trigger Point” as used herein shall be equal to the following:

Deemed FHCF Coverage retention; plus

Deemed FHCF Coverage limit (not reduced for 90.0% placement); less

$25,000,000.

ARTICLE 6

FLORIDA HURRICANE CATASTROPHE FUND

1.	The Reinsured shall provisionally purchase mandatory coverage, hereinafter referred to as “Actual FHCF Coverage,” from the Florida Hurricane Catastrophe Fund (FHCF) with the following limit and retention:

90.0% of $597,100,000 excess of $223,400,000 (mandatory layer).

2.	The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

3.	The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples.

4.	“Deemed FHCF Coverage” shall have the following provisional limit and retention:

90.0% of $545,700,000 excess of $204,100,000.

The Deemed FHCF Coverage for this Contract shall be based on the mandatory FHCF premium for the Reinsured’s Business Covered under this Contract evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples. The provisional limit and retention above may increase or decrease in accordance with the provisions of the reimbursement contract between the Reinsured and the State Board of Administration of the State of Florida (SBA).

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The loss reimbursement paid or payable in accordance with paragraph (4) above; or

The maximum recovery allowed in accordance with paragraph (1) above.

Prior to final calculation of the Reinsured’s FHCF retention and payout for the mandatory layer provided by the reimbursement contract between the Reinsured and the SBA, the Reinsurer’s liability hereunder will provisionally be calculated based on the projected FHCF payout and in accordance with paragraph (5) above. Following the FHCF’s final calculation of the payout for the coverage layer provided by 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 hereunder in any one Loss Occurrence is less than the amount previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

If an FHCF reimbursement amount is based on the Reinsured’s losses in more than one Loss Occurrence commencing during the Term of this Contract, and the FHCF does not designate the amount allocable to each Loss Occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Reinsured’s losses in each Loss Occurrence bear to the Reinsured’s total losses arising out of all Loss Occurrences to which the FHCF reimbursement applies.

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ARTICLE 7

RATE AND PREMIUM

1.	As premium for Excess Layer 5 of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” in Schedule A attached hereto; or

The percentage, shown as “Exposure Rate” in Schedule A, of the Reinsured’s Total Insured Value as of September 30, 2014 (the “adjusted premium”), subject to the provisions of paragraph (3) below.

The Reinsured shall pay the Reinsurer a deposit premium of the amount, shown as “Deposit Premium” in Schedule A, payable in installment amounts and at the dates set forth in the “Deposit Payment Schedule” in Schedule A. No deposit premium installments shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

No later than April 1, 2015 (or the effective date of termination in the event this Contract is terminated prior to April 1, 2015), the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (1) above, and any amounts due either party shall be remitted promptly. However, no return premium shall be due the Reinsured or additional premium due the Reinsurer as respects any excess layer hereunder unless the difference between the adjusted premium and the “Deposit Premium” is greater than 5.0%. In the event the adjusted premium hereunder is greater than the “Deposit Premium” by more than 5.0%, the premium due hereunder shall be equal to the deposit premium plus the difference between the adjusted premium and 105% of the deposit premium. Further, in the event the adjusted premium hereunder is less than the deposit premium by more than 5.0%, the premium due hereunder shall be equal to the “Deposit Premium” less the difference between 95.0% of the deposit premium and the adjusted premium.

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4.	If the Reinsured elects to reduce or terminate a Reinsurer’s participation percentage in accordance with paragraph (3) of the Term Article, the “Minimum Premium” shall not apply. Further, the adjusted premium as otherwise determined above shall be replaced with the following:

In the event a loss occurs prior to the effective date of reduction or termination and the Reinsurer’s liability for such Loss Occurrence exceeds the “Deposit Premium,” the reinsurance premium for the Term of this Contract shall equal the “Deposit Premium” times the ratio the loss recoverable bears to the “Reinsurer’s Per Occurrence Limit.”

In the event no loss occurs prior to the effective date of reduction or termination or a loss occurs whereby the Reinsurer’s liability for such Loss Occurrence is less than the “Deposit Premium,” the reinsurance premium for the Term of this Contract shall equal the pro rata portion of the reinsurance premium otherwise due hereunder based on the proportion the Term of this Contract bears to the original 12-month term of this Contract.

5.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D for Business Covered as defined in the Business Covered Article for the Term of this Contract.

ARTICLE 8

DEFINITIONS

ULTIMATE NET LOSS

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

“Loss in Excess of Policy Limits” shall be defined as 100% of any amount paid or payable by the Reinsured in excess of its Policy limits, but otherwise within the terms of its

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Policy, such loss in excess of the Reinsured’s Policy limits having been incurred because of, but not limited to, failure by the Reinsured to settle within the Policy limits or by reason of the Reinsured’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.

LOSS ADJUSTMENT EXPENSE

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Contract, expenses of the Reinsured’s officials incurred in connection with losses covered by this Contract, and Declaratory Judgment Expenses or other legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto. Loss Adjustment Expense shall not include normal office expenses or salaries of the Reinsured’s employees or officials.

DECLARATORY JUDGMENT EXPENSE

TERM OF THIS CONTRACT

ARTICLE 9

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

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ARTICLE 10

ACCESS TO RECORDS

ARTICLE 11

AGENCY

ARTICLE 12

ARBITRATION

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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.

5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 13

CASH CALL

In the event that at any time the Reinsured becomes obligated to make a payment or series of payments for losses which exceed the Reinsured’s retention, the Reinsured shall present to the

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Reinsurer an itemized statement of the amounts payable hereunder. The Reinsurer shall be obligated (subject to the terms and conditions of this Contract) to make a payment to the Reinsured of the amount requested within 10 days of receipt of the statement from the Reinsured.

ARTICLE 14

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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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.

4.	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 15

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 16

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

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ARTICLE 17

ERROR AND OMISSIONS

ARTICLE 18

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

ARTICLE 19

FUNDING OF RESERVES

The Reinsurer agrees to fund its share of the Reinsured’s ceded unearned premium (including, but not limited to, the unearned portion of any deposit premium installment as calculated by the Reinsured) and outstanding loss and Loss Adjustment Expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known Loss Occurrences) by:

Clean, irrevocable and unconditional Letter 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

Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

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if the Reinsurer:

Is unauthorized in any state of the United States of America or the District of Columbia having jurisdiction over the Reinsured and if, without such funding, a penalty would accrue to the Reinsured on any financial statement it is required to file with the insurance regulatory authorities involved; or

Has experienced any of the circumstances described in paragraph (3) of the Term Article. However, if such circumstance is rectified, then no special funding requirements shall apply and any such current funding in accordance with the provisions above shall be released to the Reinsurer.

For purposes of this Contract, the Lloyd’s United States Credit for Reinsurance Trust Fund shall be considered an acceptable funding instrument. The Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the insurance regulatory authorities involved.

With regard to funding in whole or in part by Letters of Credit, it is agreed that each Letter of Credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will involve 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 Reinsured not less than 60 days prior to said expiration date. The Reinsured and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said Letter of Credit may be drawn upon by the Reinsured or its successors in interest at any time, without diminution because of the insolvency of the Reinsured or the Reinsurer, but only for one or more of the following purposes:

To reimburse itself for the Reinsurers’ share of losses and/or Loss Adjustment Expense paid under the terms of Policies reinsured hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To fund a cash account in an amount equal to the Reinsurer’s share of any ceded unearned premium and/or outstanding loss and Loss Adjustment Expense reserves (including all case reserves plus any reasonable amount estimated to be unreported for known Loss Occurrences) 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 Reinsurer 10 days prior to its expiration date;

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To refund to the Reinsurer any sums in excess of the actual amount required to fund the Reinsurer’s share of the Reinsured’s ceded unearned premium and/or outstanding loss and Loss Adjustment Expense reserves (including all case reserves plus any reasonable amount estimated to be unreported from known Loss Occurrences), if so requested by the Reinsurer; and

To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

In the event the amount drawn by the Reinsured on any Letter of Credit is in excess of the actual amount required for (2a), (2c), or (2e), or in the case of (2b), the actual amount determined to be due, the Reinsured shall promptly return to the Reinsurer the excess amount so drawn.

3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

At annual intervals, or more frequently at the discretion of the Reinsured, but never more frequently than quarterly, the Reinsured shall prepare a specific statement of the Reinsurer’s funding obligations for the sole purpose of amending the Letter of Credit or other method of funding, in the following manner:

If the statement shows that the Reinsurer’s funding obligations exceed the balance of the Letter of Credit as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Reinsured 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, within the time period outlined above, increase such funding by the amount of such difference.

If, however, the statement shows that the Reinsurer’s funding obligations are less than the balance of the Letter of Credit as of the statement date, the Reinsured shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit available by the amount of such excess credit. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, decrease such funding by the amount of such excess.

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5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

As respects a Reinsurer that is unauthorized in any state of the United States of America or District of Columbia having jurisdiction over the Reinsured, December 31 of the calendar year in which the funding was required;

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

ARTICLE 20

GOVERNING LAW

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ARTICLE 21

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

3.	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 Reinsured.

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insured or insureds has assumed such Policy obligations of the Reinsured as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Reinsured 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 22

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 23

LIABILITY OF THE REINSURER

2.	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 24

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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ARTICLE 25

NET RETAINED LINES

ARTICLE 26

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 27

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

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Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 28

OFFSET

ARTICLE 29

OTHER REINSURANCE

ARTICLE 30

SALVAGE AND SUBROGATION

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Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 31

SANCTIONS

ARTICLE 32

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers 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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ARTICLE 33

SEVERABILITY

ARTICLE 34

TAXES

ARTICLE 35

TERRITORY

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ARTICLE 36

INTERMEDIARY

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SCHEDULE A

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


	Excess Layer 5
Reinsured’s Retention	$	258,600,000
Reinsurer’s Per Occurrence Limit	$	200,000,000
Reinsurer’s Contract Limit	$	400,000,000
Rate on Line		*****	%
Exposure Rate		*****	%
Minimum Premium	$	*****
Deposit Premium	$	******
Deposit Payment Schedule:
Installment Due June 1, 2014	$	******
Installment Due September 1, 2014	$	******
Installment Due January 1, 2015	$	******
Installment Due April 1, 2015	$	***** *

*	plus applicable adjustment per Rate and Premium Article

All figures listed above are based on a projected TIV of $38,246,531,382 and shown at 100% and shall apply to each Reinsurer in the percentage share expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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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 Reinsured 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.	Reinsured 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)

(b)

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ARP 35B

Exhibit 10.11

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			3
ARTICLE 4
RETENTION AND LIMIT			5
ARTICLE 5
REINSTATEMENT			5
ARTICLE 6
FLORIDA HURRICANE CATASTROPHE FUND			6
ARTICLE 7
RATE AND PREMIUM			8
ARTICLE 8
DEFINITIONS			9
ARTICLE 9
LOSS OCCURRENCE DEFINITION			12
ARTICLE 10
ACCESS TO RECORDS			13
ARTICLE 11
AGENCY			13
ARTICLE 12
ARBITRATION			14
ARTICLE 13
CASH CALL			15
ARTICLE 14
CONFIDENTIALITY			15
ARTICLE 15
CURRENCY			16
ARTICLE 16
ENTIRE AGREEMENT			17
ARTICLE 17
ERROR AND OMISSIONS			17
ARTICLE 18
FEDERAL EXCISE TAX			17

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ARTICLE 19
FUNDING OF RESERVES			18
ARTICLE 20
GOVERNING LAW			21
ARTICLE 21
INSOLVENCY			21
ARTICLE 22
LATE PAYMENTS			22
ARTICLE 23
LIABILITY OF THE REINSURER			23
ARTICLE 24
LOSS NOTICES AND SETTLEMENTS			23
ARTICLE 25
NET RETAINED LINES			24
ARTICLE 26
NON-WAIVER			24
ARTICLE 27
NOTICES AND AGREEMENT EXECUTION			25
ARTICLE 28
OFFSET			25
ARTICLE 29
OTHER REINSURANCE			26
ARTICLE 30
SALVAGE AND SUBROGATION			26
ARTICLE 31
SANCTIONS			26
ARTICLE 32
SERVICE OF SUIT			27
ARTICLE 33
SEVERABILITY			27
ARTICLE 34
TAXES			28
ARTICLE 35
TERRITORY			28
ARTICLE 36
INTERMEDIARY			28

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ATTACHMENTS

Schedule A

Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies’’) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations set forth herein and in Schedule A attached to and forming part of this Contract.

ARTICLE 2

TERM

2.	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

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The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

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The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

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Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

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ARTICLE 4

RETENTION AND LIMIT

The amount, shown as “Reinsurer’s Contract Limit” in Schedule A as respects all loss or losses arising out of Loss Occurrences commencing during the Term of this Contract.

ARTICLE 5

REINSTATEMENT

1.	In the event the Ultimate Net Loss of a Loss Occurrence exceeds the Trigger Point as defined in paragraph (4) below, the following shall apply:

The “Special Reinstated Limit,” applicable to Excess Layer 5, shall be calculated as follows:

The Ultimate Net Loss of such Loss Occurrence less the Trigger Point (the total of which is subject to a minimum of zero and a maximum of $25,000,000); divided by

ii.

$25,000,000; multiplied by

iii.

“Reinsurer’s Contract Limit” for Excess Layer 5 less the “Reinsurer’s Per Occurrence Limit” for Excess Layer 5 in Schedule A.

No additional premium shall be due.

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3.	Notwithstanding anything stated herein, the liability of the Reinsurer under Excess Layer 5 of reinsurance coverage provided by this Contract shall not exceed the amount shown as “Reinsurer’s Contract Limit” in Schedule A, in all during the Term of this Contract.

4.	“Trigger Point” as used herein shall be equal to the following:

Deemed FHCF Coverage retention; plus

Deemed FHCF Coverage limit (not reduced for 90.0% placement); less

$25,000,000.

ARTICLE 6

FLORIDA HURRICANE CATASTROPHE FUND

1.	The Reinsured shall provisionally purchase mandatory coverage, hereinafter referred to as “Actual FHCF Coverage,” from the Florida Hurricane Catastrophe Fund (FHCF) with the following limit and retention:

90.0% of $597,100,000 excess of $223,400,000 (mandatory layer).

2.	The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

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3.	The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples.

4.	“Deemed FHCF Coverage” shall have the following provisional limit and retention:

90.0% of $545,700,000 excess of $204,100,000.

The loss reimbursement paid or payable in accordance with paragraph (4) above; or

The maximum recovery allowed in accordance with paragraph (1) above.

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the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

ARTICLE 7

RATE AND PREMIUM

1.	As premium for Excess Layer 5 of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” in Schedule A attached hereto; or

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any excess layer hereunder unless the difference between the adjusted premium and the “Deposit Premium” is greater than 5.0%. In the event the adjusted premium hereunder is greater than the “Deposit Premium” by more than 5.0%, the premium due hereunder shall be equal to the deposit premium plus the difference between the adjusted premium and 105% of the deposit premium. Further, in the event the adjusted premium hereunder is less than the deposit premium by more than 5.0%, the premium due hereunder shall be equal to the “Deposit Premium” less the difference between 95.0% of the deposit premium and the adjusted premium.

4.	If the Reinsured elects to reduce or terminate a Reinsurer’s participation percentage in accordance with paragraph (3) of the Term Article, the “Minimum Premium” shall not apply. Further, the adjusted premium as otherwise determined above shall be replaced with the following:

5.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D for Business Covered as defined in the Business Covered Article for the Term of this Contract.

ARTICLE 8

DEFINITIONS

ULTIMATE NET LOSS

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recoveries, and all claims on inuring insurance or reinsurance, whether collectible or not. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Reinsured’s Ultimate Net Loss has been ascertained.

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

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LOSS ADJUSTMENT EXPENSE

DECLARATORY JUDGMENT EXPENSE

TERM OF THIS CONTRACT

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ARTICLE 9

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

ARTICLE 10

ACCESS TO RECORDS

ARTICLE 11

AGENCY

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ARTICLE 12

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 13

CASH CALL

In the event that at any time the Reinsured becomes obligated to make a payment or series of payments for losses which exceed the Reinsured’s retention, the Reinsured shall present to the Reinsurer an itemized statement of the amounts payable hereunder. The Reinsurer shall be obligated (subject to the terms and conditions of this Contract) to make a payment to the Reinsured of the amount requested within 10 days of receipt of the statement from the Reinsured.

ARTICLE 14

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

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2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 15

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

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ARTICLE 16

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 17

ERROR AND OMISSIONS

ARTICLE 18

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 19

FUNDING OF RESERVES

Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

if the Reinsurer:

To reimburse itself for the Reinsurers’ share of losses and/or Loss Adjustment Expense paid under the terms of Policies reinsured hereunder, unless paid in cash by the Reinsurer;

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To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

If the statement shows that the Reinsurer’s funding obligations exceed the balance of the Letter of Credit as of the statement date, the Reinsurer shall, within 30 days after

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receipt of the statement, secure delivery to the Reinsured 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, within the time period outlined above, increase such funding by the amount of such difference.

5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law or is held unenforceable by an arbitrator or a court of competent

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jurisdiction, 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.

ARTICLE 20

GOVERNING LAW

ARTICLE 21

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

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3.	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 Reinsured.

ARTICLE 22

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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conditions, then the payment due date as defined in subparagraph (a) shall be deemed to be the date upon which the Reinsurer received additional information necessary to approve payment of the claim or the claim is presented in an acceptable manner. Interest as stipulated in subparagraph (d) shall be payable should a disputed claim be ultimately settled and if the period set out in subparagraph (a) is exceeded, but only to the extent that the final loss payment exactly tracks with the original proof of loss.

ARTICLE 23

LIABILITY OF THE REINSURER

2.	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 24

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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ARTICLE 25

NET RETAINED LINES

ARTICLE 26

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

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ARTICLE 27

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 28

OFFSET

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ARTICLE 29

OTHER REINSURANCE

ARTICLE 30

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as a retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon 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 Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 31

SANCTIONS

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ARTICLE 32

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 33

SEVERABILITY

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ARTICLE 34

TAXES

ARTICLE 35

TERRITORY

ARTICLE 36

INTERMEDIARY

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SCHEDULE A

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


	Excess Layer 5
Reinsured’s Retention	$	258,600,000
Reinsurer’s Per Occurrence Limit	$	200,000,000
Reinsurer’s Contract Limit	$	400,000,000
Rate on Line		***	%
Exposure Rate		******	%
Minimum Premium	$	******
Deposit Premium	$	******
Deposit Payment Schedule:
Installment Due June 1, 2014	$	******
Installment Due September 1, 2014	$	******
Installment Due January 1, 2015	$	******
Installment Due April 1, 2015	$	***** *

*	plus applicable adjustment per Rate and Premium Article

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Schedule A

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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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 Reinsured 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.	Reinsured 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)

(b)

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ARP 35B

Exhibit 10.12

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			3
ARTICLE 4
RETENTION AND LIMIT			5
ARTICLE 5
REINSTATEMENT			6
ARTICLE 6
FLORIDA HURRICANE CATASTROPHE FUND			7
ARTICLE 7
RATE AND PREMIUM			11
ARTICLE 8
ANNUAL EXPOSURE CHANGE			14
ARTICLE 9
DEFINITIONS			15
ARTICLE 10
LOSS OCCURRENCE DEFINITION			17
ARTICLE 11
ACCESS TO RECORDS			18
ARTICLE 12
AGENCY			19
ARTICLE 13
ARBITRATION			19
ARTICLE 14
CASH CALL			20
ARTICLE 15
CONFIDENTIALITY			20
ARTICLE 16
CURRENCY			22
ARTICLE 17
ENTIRE AGREEMENT			22
ARTICLE 18
ERROR AND OMISSIONS			22

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ARTICLE 19
FEDERAL EXCISE TAX			22
ARTICLE 20
FUNDING OF RESERVES			23
ARTICLE 21
GOVERNING LAW			26
ARTICLE 22
INSOLVENCY			26
ARTICLE 23
LATE PAYMENTS			27
ARTICLE 24
LIABILITY OF THE REINSURER			28
ARTICLE 25
LOSS NOTICES AND SETTLEMENTS			29
ARTICLE 26
NET RETAINED LINES			29
ARTICLE 27
NON-WAIVER			30
ARTICLE 28
NOTICES AND AGREEMENT EXECUTION			30
ARTICLE 29
OFFSET			30
ARTICLE 30
OTHER REINSURANCE			31
ARTICLE 31
SALVAGE AND SUBROGATION			31
ARTICLE 32
SANCTIONS			31
ARTICLE 33
SERVICE OF SUIT			32
ARTICLE 34
SEVERABILITY			32
ARTICLE 35
TAXES			33
ARTICLE 36
TERRITORY			33
ARTICLE 37
INTERMEDIARY			33

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ATTACHMENTS

Schedule A

Schedule B

Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.

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MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies’’) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations set forth herein and in Schedule A and Schedule B attached to and forming part of this Contract.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, 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., Local Standard Time, June 1, 2016. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

2.	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

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The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

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The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

5.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsured in the event any of the following circumstances occur:

A change of control and/or sale of the Reinsured.

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

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Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

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ARTICLE 4

RETENTION AND LIMIT

1.	As regards to Contract Year 1:

As respects Excess Layer 3 and/or Excess Layer 4 of reinsurance coverage provided by this Contract, the Reinsured shall retain and be liable for the first amount of Ultimate Net Loss, shown as “Reinsured’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 Reinsured’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, as respects any one Loss Occurrence, nor shall it exceed the amount, shown as “Reinsurer’s Contract Limit” as respects all loss or losses arising out of Loss Occurrences commencing during the term of Contract Year 1.

2.	As regards to Contract Year 2:

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respects each excess layer, for the amount by which such Ultimate Net Loss exceeds the Reinsured’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 B attached hereto, as respects any one Loss Occurrence, nor shall it exceed the amount, shown as “Reinsurer’s Contract Limit” for that excess layer in Schedule B attached hereto as respects all loss or losses arising out of Loss Occurrences commencing during the term of Contract Year 2.

Notwithstanding the provisions above, no claim shall be made under any excess layer as respects losses arising out of Loss Occurrences commencing during the Term of this Contract unless at least two risks insured or reinsured by the Reinsured are involved in such Loss Occurrence. For purposes hereof, the Reinsured shall be the sole judge of what constitutes “one risk.”

ARTICLE 5

REINSTATEMENT

In the event all or any portion of the reinsurance under Excess Layer 3 and/or Excess Layer 4 of reinsurance coverage provided by this Contract is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the Loss Occurrence commences hereon. For each amount so reinstated, the Reinsured agrees to pay additional premium equal to the product of the following:

The percentage of the “Reinsurer’s Per Occurrence Limit” in Schedule A or Schedule B respectively attached hereto for the excess layer reinstated (based on the Ultimate Net Loss paid by the Reinsurer under that excess layer for the applicable Contract Year); times

The adjusted premium for that excess layer reinstated for the term of the applicable Contract Year (exclusive of reinstatement premium), as calculated in accordance with the Rate and Premium Article.

As respects loss or losses arising out of any one Loss Occurrence, the liability of the Reinsurer shall not exceed the amount shown as “Reinsurer’s Per Occurrence Limit” for Excess Layer 3 and/or Excess Layer 4 in Schedule A or Schedule B respectively.

2.	Whenever the Reinsured requests payment by the Reinsurer of any loss under any excess layer hereunder, the Reinsured shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer for that excess layer. For any given excess layer and Contract

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Year, if the adjusted premium has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due shall be based on the deposit premium and shall be readjusted when the premium has been finally determined; furthermore, any reinstatement premium shown to be due the Reinsurer as reflected by such statement (less prior payments, if any) shall be payable by the Reinsured concurrently with payment by the Reinsurer of the requested loss. Any return reinstatement premium shown to be due the Reinsured shall be remitted by the Reinsurer as promptly as possible after receipt and verification of the Reinsured’s statement.

Notwithstanding anything stated herein, the liability of the Reinsurer under any excess layer of reinsurance coverage provided by this Contract shall not exceed the amount shown as “Reinsurer’s Contract Limit” for any excess layer in Schedule A or Schedule B respectively, in all during the applicable Contract Year.

4.	For any excess layer hereunder, the Reinsured shall not pay reinstatement premium exceeding 100% of the adjusted premium for the excess layer reinstated for the term of the applicable Contract Year (exclusive of reinstatement premium), as calculated in accordance with the Rate and Premium Article.

ARTICLE 6

FLORIDA HURRICANE CATASTROPHE FUND

1.	As regards to Contract Year 1:

The Reinsured shall provisionally purchase mandatory coverage, hereinafter referred to as “Actual FHCF Coverage,” from the Florida Hurricane Catastrophe Fund (FHCF) with the following limit and retention:

90.0% of $597,100,000 excess of $223,400,000 (mandatory layer).

The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2014, and the 2014 FHCF Payout and Retention Multiples.

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“Deemed FHCF Coverage” shall have the following provisional limit and retention:

90.0% of $545,700,000 excess of $204,100,000.

Any loss reimbursement paid or payable to the Reinsured for the mandatory coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting from Loss Occurrences commencing during Contract Year 1, shall inure to the benefit of this Contract, subject to the lesser of the following:

The loss reimbursement paid or payable in accordance with subparagraph (d) above; or

ii.

The maximum recovery allowed in accordance with subparagraph (a) above.

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loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

If an FHCF reimbursement amount is based on the Reinsured’s losses in more than one Loss Occurrence commencing during Contract Year 1, and the FHCF does not designate the amount allocable to each Loss Occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Reinsured’s losses in each Loss Occurrence bear to the Reinsured’s total losses arising out of all Loss Occurrences to which the FHCF reimbursement applies.

2.	As regards to Contract Year 2:

The Reinsured shall provisionally purchase mandatory coverage, hereinafter referred to as “Actual FHCF Coverage,” from the Florida Hurricane Catastrophe Fund (FHCF) based on in-force business for Contract Year 2.

The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2015, and the 2015 FHCF Payout and Retention Multiples.

“Deemed FHCF Coverage” shall have a provisional limit and retention based on in-force Business Covered for Contract Year 2.

The Deemed FHCF Coverage for this Contract shall be based on the mandatory FHCF premium for the Reinsured’s Business Covered under this Contract evaluated as of June 30, 2015, and the 2015 FHCF Payout and Retention Multiples.

Any loss reimbursement paid or payable to the Reinsured for the mandatory coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting from Loss Occurrences commencing during Contract Year 2, shall inure to the benefit of this Contract, subject to the lesser of the following:

The loss reimbursement paid or payable in accordance with subparagraph (d) above; or

ii.

The maximum recovery allowed in accordance with subparagraph (a) above.

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Prior to final calculation of the Reinsured’s FHCF retention and payout for the mandatory layer provided by the reimbursement contract between the Reinsured and the SBA, the Reinsurer’s liability hereunder will provisionally be calculated based on the projected FHCF payout and in accordance with subparagraph (e) above. Following the FHCF’s final calculation of the payout for the coverage layer provided by the reimbursement contract, the Ultimate Net Loss under Contract Year 2 will be recalculated. If, as a result of such calculation, the loss to the Reinsurer hereunder in any one Loss Occurrence is less than the amount previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

If an FHCF reimbursement amount is based on the Reinsured’s losses in more than one Loss Occurrence commencing during Contract Year 2, and the FHCF does not designate the amount allocable to each Loss Occurrence, the FHCF reimbursement amount shall be prorated in the proportion that the Reinsured’s losses in each Loss Occurrence bear to the Reinsured’s total losses arising out of all Loss Occurrences to which the FHCF reimbursement applies.

Should the FHCF not offer coverage in Contract Year 2, coverage shall be deemed in place based on Contract Year 1 rates and FHCF Payout and Retention Multiples using Contract Year 2 exposure.

Furthermore, should the Contract Year 2 FHCF reduce the $17 billion industry coverage by more than 10%, coverage shall be deemed in place based on the then current FHCF Payout and Retention Multiples grossed up to a $17 billion level.

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ARTICLE 7

RATE AND PREMIUM

1.	As regards to Contract Year 1:

As premium for each excess layer of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” for that excess layer in Schedule A attached hereto; or

ii.

The percentage, shown as “Exposure Rate” for that excess layer in Schedule A, of the Reinsured’s Total Insured Value as of September 30, 2014 (the “adjusted premium”), subject to the provisions of subparagraph (c) below.

The Reinsured shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “Deposit Premium” for that excess layer in Schedule A, payable in installment amounts and at the dates set forth in the “Deposit Payment Schedule” for each excess layer in Schedule A. No deposit premium installments shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

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difference between the adjusted premium for such excess layer and 105% of the deposit premium for such excess layer. Further, in the event the adjusted premium for any excess layer hereunder is less than the deposit premium for such excess layer by more than 5.0%, the premium due hereunder for such excess layer shall be equal to the “Deposit Premium” for such excess layer less the difference between 95.0% of the deposit premium for such excess layer and the adjusted premium for such excess layer.

As respects any excess layer hereunder, if the Reinsured elects to reduce or terminate a Reinsurer’s participation percentage in accordance with paragraph (3) of the Term Article, the “Minimum Premium” as respects such excess layer shall not apply. Further, the adjusted premium as otherwise determined above as respects each excess layer shall be replaced with the following:

In the event a loss occurs prior to the effective date of reduction or termination and the Reinsurer’s liability for such Loss Occurrence exceeds the “Deposit Premium” for such excess layer, the reinsurance premium for such excess layer in Contract Year 1 shall equal the “Deposit Premium” for such excess layer times the ratio the loss recoverable under such excess layer bears to the “Reinsurer’s Per Occurrence Limit” for such excess layer.

ii.

In the event no loss occurs prior to the effective date of reduction or termination or a loss occurs whereby the Reinsurer’s liability for such Loss Occurrence is less than the “Deposit Premium” applicable to such excess layer, the reinsurance premium for such excess layer in Contract Year 1 shall equal the pro rata portion of the reinsurance premium otherwise due hereunder for such excess layer based on the proportion the term of Contract Year 1 bears to the original 12-month term.

2.	As regards to Contract Year 2:

No later than May 1, 2015, the Reinsured shall report to the Reinsurer the projected Total Insured Value as of September 30, 2015, derived from the RMS v13 Hurricane Model using Historical event frequencies with Loss Amplification and Secondary Uncertainty but without Storm Surge. The Total Insured Value projection must be equal to the exposure projections distributed in conjunction with the placement of the Reinsured’s annual reinsurance program.

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As premium for each excess layer of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” for that excess layer in Schedule B attached hereto; or

ii.

The percentage, shown as “Exposure Rate” for that excess layer in Schedule B attached hereto, of the Reinsured’s Total Insured Value as of September 30, 2015 (the “adjusted premium”), subject to the provisions of subparagraph (d) below.

The Reinsured shall pay the Reinsurer a deposit premium for each excess layer of the amount, shown as “Deposit Premium” for that excess layer in Schedule B attached hereto, payable in installment amounts and at the dates set forth in the “Deposit Payment Schedule” for each excess layer in Schedule B attached hereto. However, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

No later than April 1, 2016 (or the effective date of termination in the event this Contract is terminated prior to April 1, 2016), the Reinsured shall provide a report to the Reinsurer setting forth the premium due under each excess layer hereunder, computed in accordance with subparagraph (b) above, and any amounts due either party shall be remitted promptly. However, no return premium shall be due the Reinsured or additional premium due the Reinsurer as respects any excess layer hereunder unless the difference between the adjusted premium for such excess layer and the “Deposit Premium” for such excess layer is greater than 5.0%. In the event the adjusted premium for any excess layer hereunder is greater than the “Deposit Premium” for such excess layer by more than 5.0%, the premium due hereunder for such excess layer shall be equal to the deposit premium for such excess layer plus the difference between the adjusted premium for such excess layer and 105% of the deposit premium for such excess layer. Further, in the event the adjusted premium for any excess layer hereunder is less than the deposit premium for such excess layer by more than 5.0%, the premium due hereunder for such excess layer shall be equal to the “Deposit Premium” for such excess layer less the difference between 95.0% of the deposit premium for such excess layer and the adjusted premium for such excess layer.

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In the event a loss occurs prior to the effective date of reduction or termination and the Reinsurer’s liability for such Loss Occurrence exceeds the “Deposit Premium” for such excess layer, the reinsurance premium for such excess layer in Contract Year 2 shall equal the “Deposit Premium” for such excess layer times the ratio the loss recoverable under such excess layer bears to the “Reinsurer’s Per Occurrence Limit” for such excess layer.

ii.

In the event no loss occurs prior to the effective date of reduction or termination or a loss occurs whereby the Reinsurer’s liability for such Loss Occurrence is less than the “Deposit Premium” applicable to such excess layer, the reinsurance premium for such excess layer in Contract Year 2 shall equal the pro rata portion of the reinsurance premium otherwise due hereunder for such excess layer based on the proportion the term of Contract Year 2 bears to the original 12-month term.

3.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D for Business Covered as defined in the Business Covered Article for the respective Contract Year.

ARTICLE 8

ANNUAL EXPOSURE CHANGE

1.	No later than April 1, 2015, the Reinsured shall report to the Reinsurer the actual Total Insured Value for Contract Year 1 as of September 30, 2014.

If the difference between the amount calculated in paragraph (1) above and the Total Insured Value projection for Contract Year 2 as of September 30, 2015, per the provisions of subparagraph (a) of paragraph (2) of the Rate and Premium Article, is greater than 20%, then the Reinsurer’s “Participation” on the Interests & Liabilities Agreement attached hereto shall be adjusted such that its “Dollar Line” on the Interests & Liabilities Agreement changes no more than 20% relative to its Contract Year 1 limit of liability for each excess layer and subject to maximum placement of 100% for each excess layer.

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ARTICLE 9

DEFINITIONS

ULTIMATE NET LOSS

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

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LOSS ADJUSTMENT EXPENSE

DECLARATORY JUDGMENT EXPENSE

CONTRACT YEAR

“Contract Year” as used herein shall be defined as each 12-month period beginning June 1 during the Term of this Contract. “Contract Year 1” shall be defined as the period from 12:01 a.m.,

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Local Standard Time, June 1, 2014 through 12:01 a.m., Local Standard Time, June 1, 2015. “Contract Year 2” shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2015 through 12:01 a.m., Local Standard Time, June 1, 2016.

TERM OF THIS CONTRACT

“Term of this Contract” as used herein shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 through 12:01 a.m., Local Standard Time, June 1, 2016. However, if this Contract is terminated, “Term of this Contract” as used herein shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 until the effective time and date of termination.

ARTICLE 10

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

ARTICLE 11

ACCESS TO RECORDS

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Notification of a request for inspection of records shall be sent to the Reinsured by the Reinsurer in written form, and shall normally be given four weeks in advance. Notwithstanding the above, the Reinsurer shall not have any right of access to the records of the Reinsured if it is not current in all undisputed payments due the Reinsured.

ARTICLE 12

AGENCY

ARTICLE 13

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 14

CASH CALL

ARTICLE 15

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 16

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 17

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 18

ERROR AND OMISSIONS

ARTICLE 19

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 20

FUNDING OF RESERVES

Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

if the Reinsurer:

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To reimburse itself for the Reinsurers’ share of losses and/or Loss Adjustment Expense paid under the terms of Policies reinsured hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

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3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

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times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

ARTICLE 21

GOVERNING LAW

ARTICLE 22

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

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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 Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

3.	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 Reinsured.

ARTICLE 23

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 24

LIABILITY OF THE REINSURER

2.	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.

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ARTICLE 25

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

ARTICLE 26

NET RETAINED LINES

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ARTICLE 27

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 28

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 29

OFFSET

The Reinsured and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, Loss Adjustment Expenses or salvages due

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from one party to the other under this Contract or under any other reinsurance agreement heretofore or hereafter entered into between the Reinsured and the Reinsurer, whether acting as assuming reinsurer or as ceding company; provided, however, that in the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with applicable statutes and regulations.

ARTICLE 30

OTHER REINSURANCE

ARTICLE 31

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as a retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon 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 Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 32

SANCTIONS

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ARTICLE 33

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 34

SEVERABILITY

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ARTICLE 35

TAXES

ARTICLE 36

TERRITORY

ARTICLE 37

INTERMEDIARY

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SCHEDULE A

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 1	Excess Layer 3			Excess Layer 4
Reinsured’s Retention	$	82,000,000		$	204,000,000
Reinsurer’s Per Occurrence Limit	$	122,000,000		$	54,600,000
Reinsurer’s Contract Limit	$	244,000,000		$	109,200,000
Rate on Line		****	%		*****	%
Exposure Rate		*****	%		******	%
Minimum Premium	$	******		$	******
Deposit Premium	$	******		$	******
Deposit Payment Schedule:
Installment Due June 1, 2014	$	******		$	******
Installment Due September 1, 2014	$	*******		$	******
Installment Due January 1, 2015	$	*******		$	*******
Installment Due April 1, 2015	$	***** *		$	***** *

*	plus applicable adjustment per Rate and Premium Article

All figures listed above are based on a projected TIV of $38,246,531,382 and shown at 100% for each excess layer and shall apply to each Reinsurer in the percentage share for that excess layer expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

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SCHEDULE B

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 2	Excess Layer 3	Excess Layer 4
Reinsured’s Retention	Per below definition (1)	Per below definition (7)
Reinsurer’s Per Occurrence Limit	Per below definition (2)	Per below definition (8)
Reinsurer’s Contract Limit	Per below definition (3)	Per below definition (9)
Rate on Line	*****%	*****%
Exposure Rate	Per below definition (4)	Per below definition (10)
Minimum Premium	Per below definition (5)	Per below definition (11)
Deposit Premium	Per below definition (6)	Per below definition (12)
Deposit Payment Schedule:
Installment Due June 1, 2015
Installment Due September 1, 2015
Installment Due January 1, 2016
Installment Due April 1, 2016

*	plus applicable adjustment per Rate and Premium Article

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Schedule B

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EXCESS LAYER 3

1.	“Reinsured’s Retention” shall be defined as the greater of:

$82,000,000; or

The retention plus limit of the Reinsured’s Working Layer Catastrophe Excess of Loss Reinsurance Contract, contract year effective June 1, 2015.

2.	“Reinsurer’s Per Occurrence Limit” shall be defined as:

An Exhaustion Point equal to the Deemed FHCF Coverage retention for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article; less

The Reinsured’s Retention per (1) above.

3.	“Reinsurer’s Contract Limit” shall be defined as 200% of the Reinsurer’s Per Occurrence Limit per (2) above.

4.	“Exposure Rate” shall be defined as the Deposit Premium per (6) below divided by the Total Insured Value projection for Contract Year 2 as of September 30, 2015, per the provisions of subparagraph (a) of paragraph (2) of the Rate and Premium Article.

5.	“Minimum Premium” shall be defined as 85% of the Deposit Premium per (6) below.

6.	“Deposit Premium” shall be defined as the Rate on Line in this Schedule B for Excess Layer 3 multiplied by the Reinsurer’s Per Occurrence Limit per (2) above.

EXCESS LAYER 4

7.	“Reinsured’s Retention” shall be defined as the Deemed FHCF Coverage retention for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article.

8.	“Reinsurer’s Per Occurrence Limit” shall be defined as 10% of:

An Exhaustion Point equal to the Deemed FHCF Coverage retention plus limit (not reduced for 90% placement) for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article; less

The Reinsured’s Retention per (7) above.

9.	“Reinsurer’s Contract Limit” shall be defined as 200% of the Reinsurer’s Per Occurrence Limit per (8) above.

10.	“Exposure Rate” shall be defined as the Deposit Premium per (12) below divided by the Total Insured Value projection for Contract Year 2 as of September 30, 2015, per the provisions of subparagraph (a) of paragraph (2) of the Rate and Premium Article.

11.	“Minimum Premium” shall be defined as 85% of the Deposit Premium per (12) below.

12.	“Deposit Premium” shall be defined as the Rate on Line in this Schedule B for Excess Layer 4 multiplied by the Reinsurer’s Per Occurrence Limit per (8) above.

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Schedule B

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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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 Reinsured 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.	Reinsured 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)

(b)

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Exhibit 10.13

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
EXCLUSIONS			3
ARTICLE 4
RETENTION AND LIMIT			5
ARTICLE 5
REINSTATEMENT			6
ARTICLE 6
FLORIDA HURRICANE CATASTROPHE FUND			7
ARTICLE 7
RATE AND PREMIUM			10
ARTICLE 8
ANNUAL EXPOSURE CHANGE			14
ARTICLE 9
DEFINITIONS			14
ARTICLE 10
LOSS OCCURRENCE DEFINITION			17
ARTICLE 11
ACCESS TO RECORDS			18
ARTICLE 12
AGENCY			18
ARTICLE 13
ARBITRATION			19
ARTICLE 14
CASH CALL			20
ARTICLE 15
CONFIDENTIALITY			20
ARTICLE 16
CURRENCY			21
ARTICLE 17
ENTIRE AGREEMENT			22
ARTICLE 18
ERROR AND OMISSIONS			22

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ARTICLE 19
FEDERAL EXCISE TAX			22
ARTICLE 20
FUNDING OF RESERVES			22
ARTICLE 21
GOVERNING LAW			26
ARTICLE 22
INSOLVENCY			26
ARTICLE 23
LATE PAYMENTS			27
ARTICLE 24
LIABILITY OF THE REINSURER			28
ARTICLE 25
LOSS NOTICES AND SETTLEMENTS			28
ARTICLE 26
NET RETAINED LINES			29
ARTICLE 27
NON-WAIVER			29
ARTICLE 28
NOTICES AND AGREEMENT EXECUTION			30
ARTICLE 29
OFFSET			30
ARTICLE 30
OTHER REINSURANCE			31
ARTICLE 31
SALVAGE AND SUBROGATION			31
ARTICLE 32
SANCTIONS			31
ARTICLE 33
SERVICE OF SUIT			32
ARTICLE 34
SEVERABILITY			32
ARTICLE 35
TAXES			33
ARTICLE 36
TERRITORY			33
ARTICLE 37
INTERMEDIARY			33

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ATTACHMENTS

Schedule A
Schedule B
Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.

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MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured 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, contracts and binders of insurance or reinsurance (hereinafter called “Policies’’) not covered by the Reinsured’s flood contract, in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Reinsured as the property perils of Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms, conditions and limitations set forth herein and in Schedule A and Schedule B attached to and forming part of this Contract.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, 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., Local Standard Time, June 1, 2016. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

2.	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

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The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

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The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

5.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsured in the event any of the following circumstances occur:

A change of control and/or sale of the Reinsured.

ARTICLE 3

EXCLUSIONS

1.	This Contract does not apply to and specifically excludes the following:

All excess of loss reinsurance assumed by the Reinsured.

Financial guarantee and insolvency.

Insurance Policies classified by the Reinsured as Accident and Health, Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit business.

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Flood and/or earthquake when written as such for standalone Policies where flood and/or earthquake is the only named peril.

Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance U.S.A.” attached to and forming part of this Contract.

Loss, damage, cost or expense arising out of an act of terrorism involving the use of any biological, chemical, nuclear or radioactive agent, material, device or weapon.

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.

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ARTICLE 4

RETENTION AND LIMIT

1.	As regards to Contract Year 1:

2.	As regards to Contract Year 2:

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ARTICLE 5

REINSTATEMENT

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ARTICLE 6

FLORIDA HURRICANE CATASTROPHE FUND

1.	As regards to Contract Year 1:

90.0% of $597,100,000 excess of $223,400,000 (mandatory layer).

The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

“Deemed FHCF Coverage” shall have the following provisional limit and retention:

90.0% of $545,700,000 excess of $204,100,000.

Any loss reimbursement paid or payable to the Reinsured for the mandatory coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting from Loss Occurrences commencing during Contract Year 1, shall inure to the benefit of this Contract, subject to the lesser of the following:

The loss reimbursement paid or payable in accordance with subparagraph (d) above; or

ii.

The maximum recovery allowed in accordance with subparagraph (a) above.

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Prior to final calculation of the Reinsured’s FHCF retention and payout for the mandatory layer provided by the reimbursement contract between the Reinsured and the SBA, the Reinsurer’s liability hereunder will provisionally be calculated based on the projected FHCF payout and in accordance with subparagraph (e) above. Following the FHCF’s final calculation of the payout for the coverage layer provided by the reimbursement contract, the Ultimate Net Loss under Contract Year 1 will be recalculated. If, as a result of such calculation, the loss to the Reinsurer hereunder in any one Loss Occurrence is less than the amount previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

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2.	As regards to Contract Year 2:

The Actual FHCF Coverage shall cover both the Business Covered under this Contract and the business covered under the Reinsured’s flood contract.

The Actual FHCF Coverage shall be calculated based on the mandatory FHCF premium for both the Business Covered under this Contract and the Reinsured’s business not covered under this Contract, evaluated as of June 30, 2015, and the 2015 FHCF Payout and Retention Multiples.

“Deemed FHCF Coverage” shall have a provisional limit and retention based on in-force Business Covered for Contract Year 2.

Any loss reimbursement paid or payable to the Reinsured for the mandatory coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting from Loss Occurrences commencing during Contract Year 2, shall inure to the benefit of this Contract, subject to the lesser of the following:

The loss reimbursement paid or payable in accordance with subparagraph (d) above; or

ii.

The maximum recovery allowed in accordance with subparagraph (a) above.

Prior to final calculation of the Reinsured’s FHCF retention and payout for the mandatory layer provided by the reimbursement contract between the Reinsured and

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the SBA, the Reinsurer’s liability hereunder will provisionally be calculated based on the projected FHCF payout and in accordance with subparagraph (e) above. Following the FHCF’s final calculation of the payout for the coverage layer provided by the reimbursement contract, the Ultimate Net Loss under Contract Year 2 will be recalculated. If, as a result of such calculation, the loss to the Reinsurer hereunder in any one Loss Occurrence is less than the amount previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss Occurrence hereunder is greater than the amount previously paid by the Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured. For purposes of both the provisional and final calculation of Reinsurer liability referenced above, it is deemed that any FHCF loss reimbursement shall not be reduced by any reduction or exhaustion of the actual claims paying capacity of the FHCF and that the FHCF fund balance is deemed funded to the fullest extent allowable by Florida statute.

Should the FHCF not offer coverage in Contract Year 2, coverage shall be deemed in place based on Contract Year 1 rates and FHCF Payout and Retention Multiples using Contract Year 2 exposure.

ARTICLE 7

RATE AND PREMIUM

1.	As regards to Contract Year 1:

As premium for each excess layer of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” for that excess layer in Schedule A attached hereto; or

ii.

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No later than April 1, 2015 (or the effective date of termination in the event this Contract is terminated prior to April 1, 2015), the Reinsured shall provide a report to the Reinsurer setting forth the premium due under each excess layer hereunder, computed in accordance with subparagraph (a) above, and any amounts due either party shall be remitted promptly. However, no return premium shall be due the Reinsured or additional premium due the Reinsurer as respects any excess layer hereunder unless the difference between the adjusted premium for such excess layer and the “Deposit Premium” for such excess layer is greater than 5.0%. In the event the adjusted premium for any excess layer hereunder is greater than the “Deposit Premium” for such excess layer by more than 5.0%, the premium due hereunder for such excess layer shall be equal to the deposit premium for such excess layer plus the difference between the adjusted premium for such excess layer and 105% of the deposit premium for such excess layer. Further, in the event the adjusted premium for any excess layer hereunder is less than the deposit premium for such excess layer by more than 5.0%, the premium due hereunder for such excess layer shall be equal to the “Deposit Premium” for such excess layer less the difference between 95.0% of the deposit premium for such excess layer and the adjusted premium for such excess layer.

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ii.

In the event no loss occurs prior to the effective date of reduction or termination or a loss occurs whereby the Reinsurer’s liability for such Loss Occurrence is less than the “Deposit Premium” applicable to such excess layer, the reinsurance premium for such excess layer in Contract Year 1 shall equal the pro rata portion of the reinsurance premium otherwise due hereunder for such excess layer based on the proportion the term of Contract Year 1 bears to the original 12-month term.

2.	As regards to Contract Year 2:

As premium for each excess layer of reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the following:

The amount, shown as “Minimum Premium” for that excess layer in Schedule B attached hereto; or

ii.

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In the event a loss occurs prior to the effective date of reduction or termination and the Reinsurer’s liability for such Loss Occurrence exceeds the “Deposit Premium” for such excess layer, the reinsurance premium for such excess layer in Contract Year 2 shall equal the “Deposit Premium” for such excess layer times the ratio the loss recoverable under such excess layer bears to the “Reinsurer’s Per Occurrence Limit” for such excess layer.

ii.

In the event no loss occurs prior to the effective date of reduction or termination or a loss occurs whereby the Reinsurer’s liability for such Loss Occurrence is less than the “Deposit Premium” applicable to such excess layer, the reinsurance premium for such excess layer in Contract Year 2 shall equal the pro rata portion of the reinsurance premium otherwise due hereunder for such excess layer based on the proportion the term of Contract Year 2 bears to the original 12-month term.

3.	“Total Insured Value” as used herein shall be defined as the sum of Coverage A, B, C and D for Business Covered as defined in the Business Covered Article for the respective Contract Year.

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ARTICLE 8

ANNUAL EXPOSURE CHANGE

1.	No later than April 1, 2015, the Reinsured shall report to the Reinsurer the actual Total Insured Value for Contract Year 1 as of September 30, 2014.

ARTICLE 9

DEFINITIONS

ULTIMATE NET LOSS

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LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations” as used herein shall be defined as follows:

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LOSS ADJUSTMENT EXPENSE

DECLARATORY JUDGMENT EXPENSE

CONTRACT YEAR

“Contract Year” as used herein shall be defined as each 12-month period beginning June 1 during the Term of this Contract. “Contract Year 1” shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 through 12:01 a.m., Local Standard Time, June 1, 2015. “Contract Year 2” shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2015 through 12:01 a.m., Local Standard Time, June 1, 2016.

TERM OF THIS CONTRACT

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ARTICLE 10

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

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3.	No individual losses occasioned by an event that would be covered by the 96 hours clauses may be included in any Loss Occurrence claimed under the 168 hours provision.

ARTICLE 11

ACCESS TO RECORDS

ARTICLE 12

AGENCY

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ARTICLE 13

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

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ARTICLE 14

CASH CALL

ARTICLE 15

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

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When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 16

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

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ARTICLE 17

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 18

ERROR AND OMISSIONS

ARTICLE 19

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

ARTICLE 20

FUNDING OF RESERVES

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Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

if the Reinsurer:

To reimburse itself for the Reinsurers’ share of losses and/or Loss Adjustment Expense paid under the terms of Policies reinsured hereunder, unless paid in cash by the Reinsurer;

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To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s portion of the unearned reinsurance premium paid to the Reinsurer hereunder.

3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

If the statement shows that the Reinsurer’s funding obligations exceed the balance of the Letter of Credit as of the statement date, the Reinsurer shall, within 30 days after

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5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

If the interest rate provided under this Article exceeds the maximum interest rate allowed by any applicable law or is held unenforceable by an arbitrator or a court of competent

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ARTICLE 21

GOVERNING LAW

ARTICLE 22

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

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3.	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 Reinsured.

ARTICLE 23

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 24

LIABILITY OF THE REINSURER

2.	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 25

LOSS NOTICES AND SETTLEMENTS

1.	Whenever losses sustained by the Reinsured appear likely to result in a claim hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of such losses at its own expense.

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ARTICLE 26

NET RETAINED LINES

ARTICLE 27

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

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ARTICLE 28

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 29

OFFSET

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ARTICLE 30

OTHER REINSURANCE

ARTICLE 31

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Reinsured, less the actual cost, excluding salaries of officials and employees of the Reinsured and sums paid to attorneys as a retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon 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 Reinsured for its primary loss. The Reinsured 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 if, in the Reinsured’s opinion, it is economically reasonable to do so. Should the Reinsured neglect or refuse to enforce such rights, the Reinsurer is hereby empowered and authorized to institute the appropriate action in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 32

SANCTIONS

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ARTICLE 33

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 34

SEVERABILITY

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ARTICLE 35

TAXES

ARTICLE 36

TERRITORY

ARTICLE 37

INTERMEDIARY

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SCHEDULE A

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 1	Excess Layer 3			Excess Layer 4
Reinsured’s Retention	$	82,000,000		$	204,000,000
Reinsurer’s Per Occurrence Limit	$	122,000,000		$	54,600,000
Reinsurer’s Contract Limit	$	244,000,000		$	109,200,000
Rate on Line		*****	%		****	%
Exposure Rate		*****	%		*****	%
Minimum Premium	$	*******		$	*******
Deposit Premium	$	*******		$	*******
Deposit Payment Schedule:
Installment Due June 1, 2014	$	*******		$	********
Installment Due September 1, 2014	$	*******		$	********
Installment Due January 1, 2015	$	********		$	*******
Installment Due April 1, 2015	$	***** *		$	****** *

*	plus applicable adjustment per Rate and Premium Article

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Schedule A

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SCHEDULE B

MULTI-YEAR CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 2	Excess Layer 3	Excess Layer 4
Reinsured’s Retention	Per below definition (1)	Per below definition (7)
Reinsurer’s Per Occurrence Limit	Per below definition (2)	Per below definition (8)
Reinsurer’s Contract Limit	Per below definition (3)	Per below definition (9)
Rate on Line	****%	*****%
Exposure Rate	Per below definition (4)	Per below definition (10)
Minimum Premium	Per below definition (5)	Per below definition (11)
Deposit Premium	Per below definition (6)	Per below definition (12)
Deposit Payment Schedule:
Installment Due June 1, 2015
Installment Due September 1, 2015
Installment Due January 1, 2016
Installment Due April 1, 2016

*	plus applicable adjustment per Rate and Premium Article

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Schedule B

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EXCESS LAYER 3

1.	“Reinsured’s Retention” shall be defined as the greater of:

$82,000,000; or

The retention plus limit of the Reinsured’s Working Layer Catastrophe Excess of Loss Reinsurance Contract, contract year effective June 1, 2015.

2.	“Reinsurer’s Per Occurrence Limit” shall be defined as:

An Exhaustion Point equal to the Deemed FHCF Coverage retention for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article; less

The Reinsured’s Retention per (1) above.

3.	“Reinsurer’s Contract Limit” shall be defined as 200% of the Reinsurer’s Per Occurrence Limit per (2) above.

4.	“Exposure Rate” shall be defined as the Deposit Premium per (6) below divided by the Total Insured Value projection for Contract Year 2 as of September 30, 2015, per the provisions of subparagraph (a) of paragraph (2) of the Rate and Premium Article.

5.	“Minimum Premium” shall be defined as 85% of the Deposit Premium per (6) below.

6.	“Deposit Premium” shall be defined as the Rate on Line in this Schedule B for Excess Layer 3 multiplied by the Reinsurer’s Per Occurrence Limit per (2) above.

EXCESS LAYER 4

7.	“Reinsured’s Retention” shall be defined as the Deemed FHCF Coverage retention for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article.

8.	“Reinsurer’s Per Occurrence Limit” shall be defined as 10% of:

The Reinsured’s Retention per (7) above.

9.	“Reinsurer’s Contract Limit” shall be defined as 200% of the Reinsurer’s Per Occurrence Limit per (8) above.

10.	“Exposure Rate” shall be defined as the Deposit Premium per (12) below divided by the Total Insured Value projection for Contract Year 2 as of September 30, 2015, per the provisions of subparagraph (a) of paragraph (2) of the Rate and Premium Article.

11.	“Minimum Premium” shall be defined as 85% of the Deposit Premium per (12) below.

12.	“Deposit Premium” shall be defined as the Rate on Line in this Schedule B for Excess Layer 4 multiplied by the Reinsurer’s Per Occurrence Limit per (8) above.

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Schedule B

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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 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.

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.

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

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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 Reinsured 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.	Reinsured 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)

(b)

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EXHIBIT 10.14

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			3
ARTICLE 4
RATE AND PREMIUM			3
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			4
ARTICLE 6
ACCESS TO RECORDS			5
ARTICLE 7
AGENCY			5
ARTICLE 8
ARBITRATION			5
ARTICLE 9
CONFIDENTIALITY			6
ARTICLE 10
CURRENCY			8
ARTICLE 11
ENTIRE AGREEMENT			8
ARTICLE 12
ERRORS AND OMISSIONS			8
ARTICLE 13
FEDERAL EXCISE TAX			8
ARTICLE 14
FUNDING OF RESERVES			9
ARTICLE 15
GOVERNING LAW			12
ARTICLE 16
INSOLVENCY			12
ARTICLE 17
LATE PAYMENTS			13

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ARTICLE 18
NON-WAIVER			14
ARTICLE 19
NOTICES AND AGREEMENT EXECUTION			15
ARTICLE 20
OFFSET			15
ARTICLE 21
SERVICE OF SUIT			16
ARTICLE 22
SEVERABILITY			17
ARTICLE 23
TAXES			17
ARTICLE 24
INTERMEDIARY			17

ATTACHMENTS

Schedule A

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

By this Contract the Reinsurer agrees to indemnify the Reinsured for 100% of any net reinstatement premium which the Reinsured pays or becomes liable to pay under the provisions of any excess layer of the Reinsured’s Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2014 (hereinafter referred to as the “Original Contract”), subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, with respect to reinstatement premium payable by the Reinsured under the provisions of the Original Contract, and shall remain in force until 12:01 a.m., Local Standard Time, June 1, 2015. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

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announcement for subparagraphs (a) through (e) below or upon discovery for subparagraphs (f) through (h) below, subject to the condition that such selected date must be the last day of a calendar month:

The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

If the Reinsured elects to terminate this Contract in accordance with the provisions of paragraph (2) above, the premium due hereunder shall be prorated based on the Reinsurer’s period of participation under this Contract and shall be due as promptly as possible following determination of the final adjusted reinsurance premium paid by the Reinsured under the Original Contract.

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ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.

ARTICLE 4

RATE AND PREMIUM

1.	As premium for the reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the amount, shown as “RPP Annual Minimum Premium” in Schedule A attached to and forming part of this Contract, or the product of the following:

“RPP Factor” as shown in Schedule A attached to and forming part of this Contract; times

The Final Adjusted Rate on Line for the corresponding excess layer; times

The final adjusted reinsurance premium for the corresponding excess layer of the Original Contract (subject to the minimum premium under the Original Contract, if applicable).

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for the corresponding excess layer of the Original Contract divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for the corresponding excess layer in Schedule A attached to and forming part of the Original Contract.

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The Reinsured shall pay the Reinsurer an annual deposit premium, shown as “RPP Annual Deposit Premium” in Schedule A attached hereto, payable in installment amounts and at the dates set forth in the “RPP Deposit Payment Schedule” in Schedule A attached hereto. No deposit premium shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

3.	On or before April 1, 2015, the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (1) above, and any amount due either party shall be remitted promptly.

ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under any excess layer of the Original Contract, the Reinsured shall notify the Reinsurer.

All reinstatement premium settlements made by the Reinsured under the Original Contract, provided they are within the terms of the Original Contract and within the terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid within 14 days) by the Reinsured.

As promptly as possible after the end of each Contract Quarter, the Reinsured shall report to the Reinsurer its reinstatement premiums paid during the Contract Quarter and its outstanding loss reserves (being the sum of all reinstatement premiums paid by the Reinsured under the Original Contract but not yet recovered from the Reinsurer, plus the Reinsured’s reserves for reinstatement premiums due under the Original Contract, if any) as of the end of the Contract Quarter on any reinstatement premiums reported to the Reinsurer in accordance with paragraph (1) above. This paragraph shall not apply to any Contract Quarter in which there were no loss payments subject to this Contract.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2014 through August 31, 2014, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

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ARTICLE 6

ACCESS TO RECORDS

ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 9

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 10

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 11

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 12

ERRORS AND OMISSIONS

ARTICLE 13

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 14

FUNDING OF RESERVES

1.	The Reinsurer agrees to fund its share of the Reinsured’s ceded unearned premium (including, but not limited to, the unearned portion of any deposit premium installment as calculated by the Reinsured) and outstanding reinstatement premium reserves by:

Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

if the Reinsurer:

Has experienced any of the circumstances described in paragraph (2) of the Term Article. However, if such circumstance is rectified, then no special funding requirements shall apply and any such current funding in accordance with the provisions above shall be released to the Reinsurer.

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To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of reinstatement premiums paid by the Reinsurer under the terms of the Original Contract, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

To fund a cash account in an amount equal to the Reinsurer’s share of amounts, including but not limited to, any ceded unearned premium and/or outstanding reinstatement premium reserves 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 Reinsurer 10 days prior to its expiration date;

To refund to the Reinsurer any sums in excess of the actual amount required to fund the Reinsurer’s share of the Reinsured’s ceded unearned premium and/or outstanding reinstatement premium reserves, if so requested by the Reinsurer.

In the event the amount drawn by the Reinsured on any Letter of Credit is in excess of the actual amount required for (2a), (2b), or (2d), or in the case of (2c), the actual amount determined to be due, the Reinsured shall promptly return to the Reinsurer the excess amount so drawn.

3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

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5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

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times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

ARTICLE 15

GOVERNING LAW

ARTICLE 16

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

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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 Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

3.	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 Reinsured.

ARTICLE 17

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

Payments due from the Reinsurer to the Reinsured shall have as a due date the date on which the agreed proof of loss is received by the Reinsurer, and shall be overdue 30 days thereafter. Payment to the Intermediary is deemed to be payment to the Reinsured for purposes of this Article.

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ARTICLE 18

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

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ARTICLE 19

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 20

OFFSET

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ARTICLE 21

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers 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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ARTICLE 22

SEVERABILITY

ARTICLE 23

TAXES

ARTICLE 24

INTERMEDIARY

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SCHEDULE A

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


	Excess Layer 5
Reinsurer’s Per Occurrence Limit in Original Contract	$	200,000,000
RPP Factor		*****
RPP Annual Deposit Premium	$	********
RPP Annual Minimum Premium	$	*******
RPP Deposit Payment Schedule:
June 1, 2014	$	*******
September 1, 2014	$	*******
January 1, 2015	$	****
April 1, 2015	$	******

*	plus applicable adjustment per Rate and Premium Article

The figures listed above are at 100% and shall apply to each Reinsurer in the percentage share as expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

Exhibit 10.15

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			2
ARTICLE 4
RATE AND PREMIUM			2
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			3
ARTICLE 6
ACCESS TO RECORDS			4
ARTICLE 7
AGENCY			4
ARTICLE 8
ARBITRATION			4
ARTICLE 9
COLLATERAL			6
ARTICLE 10
COLLATERAL RELEASE			6
ARTICLE 11
CONFIDENTIALITY			7
ARTICLE 12
CURRENCY			8
ARTICLE 13
ENTIRE AGREEMENT			8
ARTICLE 14
ERRORS AND OMISSIONS			9
ARTICLE 15
FEDERAL EXCISE TAX			9
ARTICLE 16
GOVERNING LAW			9
ARTICLE 17
INSOLVENCY			9

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ARTICLE 18
LATE PAYMENTS			11
ARTICLE 19
LIMITED RECOURSE AND BERMUDA REGULATIONS			12
ARTICLE 20
NON-WAIVER			12
ARTICLE 21
NOTICES AND AGREEMENT EXECUTION			13
ARTICLE 22
OFFSET			13
ARTICLE 23
SERVICE OF SUIT			14
ARTICLE 24
SEVERABILITY			15
ARTICLE 25
TAXES			15
ARTICLE 26
INTERMEDIARY			15

ATTACHMENTS

Schedule A

Trust Agreement

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

ARTICLE 2

TERM

Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur. The effective date of reduction or termination shall be the date selected by the Reinsured, which may be a date that is retroactively applied to the date of public announcement for subparagraph (a) below or upon discovery for subparagraph (b) below, subject to the condition that such selected date must be the last day of a calendar month:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

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ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.

ARTICLE 4

RATE AND PREMIUM

1.	As premium for the reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the amount, shown as “RPP Annual Minimum Premium” in Schedule A attached to and forming part of this Contract, or the product of the following:

“RPP Factor” as shown in Schedule A attached to and forming part of this Contract; times

The Final Adjusted Rate on Line for the corresponding excess layer; times

The final adjusted reinsurance premium for the corresponding excess layer of the Original Contract (subject to the minimum premium under the Original Contract, if applicable).

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3.	On or before April 1, 2015, the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (1) above, and any amount due either party shall be remitted promptly.

ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under any excess layer of the Original Contract, the Reinsured shall notify the Reinsurer.

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as of the end of the Contract Quarter on any reinstatement premiums reported to the Reinsurer in accordance with paragraph (1) above. This paragraph shall not apply to any Contract Quarter in which there were no loss payments subject to this Contract.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2014 through August 31, 2014, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

ARTICLE 6

ACCESS TO RECORDS

ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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Underwriters at Lloyd’s. 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.

5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

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ARTICLE 9

COLLATERAL

As promptly as possible following execution of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets having a market value greater than or equal to $2,400,000 (the “Collateral,” which is not subject to the percentage share as expressed in the Interests and Liabilities Agreement attached hereto), less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Rate and Premium Article shall be deposited into the Trust Account.

The Reinsured agrees that if the Reinsurer makes payment(s) to the Reinsured under this Contract, the Reinsurer may withdraw Assets from the Trust Account, reducing the market value of Assets in the Trust Account to an amount at least equal to the unused Reinsurance Limit, in accordance with the provisions of the Trust Agreement.

3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of Section 2 of the Trust Agreement.

4.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

ARTICLE 10

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust.

Notwithstanding the aforementioned, at December 31, 2014, the parties agree to consider the release of collateral. The intention is to release collateral for all limits for which there is essentially no possibility of reinstatement premium protection from past or future events before the expiration of this Contract. All collateral securing what the parties agree are unreachable limits will be released within three business days.

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Thirty-six months following the expiration of this Contract, the Reinsurer shall have the option to commute this Contract by sending the Reinsured written notice thereof. In such event, the Reinsurer shall pay to the Reinsured an amount equal to the reinstatement premium reserves hereunder, as estimated by the Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of such amount, both parties shall be completely released from all liability under this Contract, whether known or unknown.

ARTICLE 11

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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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.

4.	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

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 13

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

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ARTICLE 14

ERRORS AND OMISSIONS

ARTICLE 15

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

ARTICLE 16

GOVERNING LAW

ARTICLE 17

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

2.	In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or

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statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

3.	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 Reinsured.

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ARTICLE 18

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 19

LIMITED RECOURSE AND BERMUDA REGULATIONS

The liability of the Reinsurer for the performance and discharge of all of its obligations, however they may arise, in relation to this Contract (together “Obligations” for purposes of this Article), shall be limited to and payable solely from the proceeds of realization of the assets of the Trust Fund established in accordance with this Contract, and accordingly there shall be no recourse to any other assets of the Blue Water Re Master Fund Ltd., whether or not allocated to any other separate account or the general account of the Blue Water Re Master Fund Ltd. In the event that the proceeds of realization of the assets of the Trust Fund are insufficient to meet all Obligations, any Obligations remaining after the application of such proceeds shall be extinguished, and the Reinsured undertakes in such circumstances to take no further action against the Reinsurer in respect of any such Obligations. In particular, neither the Reinsured nor any party acting on its behalf shall petition or take any steps for the winding up or receivership of the Reinsurer or the Blue Water Re Master Fund Ltd.

Notwithstanding any matter referred to herein, the Reinsured understands and accepts that the Reinsurer acts on behalf of one or more separate accounts of the Blue Water Re Master Fund Ltd. and that all corporate matters relating to the creation of the Reinsurer, capacity of the Reinsurer, operation and liquidation of the Reinsurer and any matters relating to the Reinsurer thereof shall be governed by, and construed in accordance with, the laws of Bermuda. The Reinsured has had the opportunity to take advice and to obtain all such additional information that it considers necessary to evaluate the terms, conditions and risks of entering into this Contract with the Reinsurer.

ARTICLE 20

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

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ARTICLE 21

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 22

OFFSET

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ARTICLE 23

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers 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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ARTICLE 24

SEVERABILITY

ARTICLE 25

TAXES

ARTICLE 26

INTERMEDIARY

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SCHEDULE A

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


	Excess Layer 5
Reinsurer’s Per Occurrence Limit in Original Contract	$	200,000,000
RPP Factor		*****
RPP Annual Deposit Premium	$	*********
RPP Annual Minimum Premium	$	*********
RPP Deposit Payment Schedule:
June 1, 2014	$	*********
January 1, 2015	$	******** *

*	plus applicable adjustment per Rate and Premium Article

The figures listed above are at 100% and shall apply to each Reinsurer in the percentage share as expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

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TRUST AGREEMENT

(a copy to be included)

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Trust Agreement

Exhibit 10.16

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			3
ARTICLE 4
RATE AND PREMIUM			4
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			6
ARTICLE 6
ACCESS TO RECORDS			6
ARTICLE 7
AGENCY			7
ARTICLE 8
ARBITRATION			7
ARTICLE 9
CONFIDENTIALITY			8
ARTICLE 10
CURRENCY			9
ARTICLE 11
ENTIRE AGREEMENT			10
ARTICLE 12
ERRORS AND OMISSIONS			10
ARTICLE 13
FEDERAL EXCISE TAX			10
ARTICLE 14
FUNDING OF RESERVES			11
ARTICLE 15
GOVERNING LAW			14
ARTICLE 16
INSOLVENCY			14
ARTICLE 17
LATE PAYMENTS			15

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ARTICLE 18
NON-WAIVER			16
ARTICLE 19
NOTICES AND AGREEMENT EXECUTION			16
ARTICLE 20
OFFSET			17
ARTICLE 21
SERVICE OF SUIT			17
ARTICLE 22
SEVERABILITY			18
ARTICLE 23
TAXES			19
ARTICLE 24
INTERMEDIARY			19

ATTACHMENTS

Schedule A

Schedule B

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MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

By this Contract the Reinsurer agrees to indemnify the Reinsured for 100% of any net reinstatement premium which the Reinsured pays or becomes liable to pay under the provisions of any excess layer of the Reinsured’s Multi-Year Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2014 (hereinafter referred to as the “Original Contract”), subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, with respect to reinstatement premium payable by the Reinsured under the provisions of the Original Contract, and shall remain in force until 12:01 a.m., Local Standard Time, June 1, 2016. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

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The Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or its Standard & Poor’s rating has been assigned or downgraded below BBB+; or

The Reinsurer has become merged with, acquired by or controlled by any other entity or unaffiliated individual(s) not controlling the Reinsurer’s operations at the inception of this Contract; or

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

The Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business; or

The 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.

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4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

5.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsured in the event any of the following circumstances occur:

A change of control and/or sale of the Reinsured.

ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured 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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ARTICLE 4

RATE AND PREMIUM

1.	As regards to Contract Year 1:

As premium for the reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the amount, shown as “RPP Annual Minimum Premium” in Schedule A attached to and forming part of this Contract, or the product of the following:

“RPP Factor” for the corresponding excess layer as shown in Schedule A attached to and forming part of this Contract; times

ii.

The Final Adjusted Rate on Line for the corresponding excess layer; times

iii.

The final adjusted reinsurance premium for the corresponding excess layer of the Original Contract for the applicable Contract Year (subject to the minimum premium under the Original Contract, if applicable).

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for the corresponding excess layer of the Original Contract for the applicable Contract Year divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for the corresponding excess layer in Schedule A attached to and forming part of the Original Contract.

The Reinsured shall pay the Reinsurer an annual deposit premium, shown as “RPP Annual Deposit Premium” in Schedule A attached hereto, payable in installment amounts and at the dates set forth in the “RPP Deposit Payment Schedule” for each excess layer in Schedule A attached hereto. No deposit premium shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

On or before April 1, 2015, the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (a) above, and any amount due either party shall be remitted promptly.

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2.	As regards to Contract Year 2:

As premium for the reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the amount, shown as “RPP Annual Minimum Premium” in Schedule B attached to and forming part of this Contract, or the product of the following:

“RPP Factor” for the corresponding excess layer as shown in Schedule B attached to and forming part of this Contract; times

ii.

The Final Adjusted Rate on Line for the corresponding excess layer; times

iii.

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for the corresponding excess layer of the Original Contract for the applicable Contract Year divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for the corresponding excess layer in Schedule B attached to and forming part of the Original Contract.

The Reinsured shall pay the Reinsurer an annual deposit premium, shown as “RPP Annual Deposit Premium” in Schedule B attached hereto, payable in installment amounts and at the dates set forth in the “RPP Deposit Payment Schedule” for each excess layer in Schedule B attached hereto. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

On or before April 1, 2016, the Reinsured shall provide a report to the Reinsurer setting forth the premium due hereunder, computed in accordance with paragraph (a) above, and any amount due either party shall be remitted promptly.

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ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under any excess layer of the Original Contract, the Reinsured shall notify the Reinsurer.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2014 through August 31, 2014, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

ARTICLE 6

ACCESS TO RECORDS

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ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 9

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

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When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 10

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

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ARTICLE 11

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 12

ERRORS AND OMISSIONS

ARTICLE 13

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 14

FUNDING OF RESERVES

1.	The Reinsurer agrees to fund its share of the Reinsured’s ceded unearned premium (including, but not limited to, the unearned portion of any deposit premium installment as calculated by the Reinsured) and outstanding reinstatement premium reserves by:

Escrow accounts for the benefit of the Reinsured; and/or

Cash advances;

if the Reinsurer:

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anything to the contrary in this Contract, that said Letter of Credit may be drawn upon by the Reinsured or its successors in interest at any time, without diminution because of the insolvency of the Reinsured or the Reinsurer, but only for one or more of the following purposes:

To reimburse itself for the Reinsurer’s share of unearned premiums returned to insureds on account of policy cancellations, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of reinstatement premiums paid by the Reinsurer under the terms of the Original Contract, unless paid in cash by the Reinsurer;

To reimburse itself for the Reinsurer’s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

3.	The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

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5.	If a Reinsurer fails to fulfill its funding obligation, if any, under this Article, the Reinsured may, at its option, require the Reinsurer to pay, and the Reinsurer agrees to pay, any interest charge on the funding obligation calculated on the last business day of each month as follows:

The number of full days that have expired since the earliest of the applicable following dates:

ii.

As respects a Reinsurer that has experienced any of the circumstances described in paragraph (3) of the Term Article, the first date such circumstance occurs;

times:

1/365ths of the sum of 2.0% and the U.S. prime rate as quoted in The Wall Street Journal on the first day of the month for which the calculation is made; times

The funding obligation, less the amount, if any, funded by the Reinsurer prior to the applicable date determined in subparagraph (a) above.

It is agreed that interest shall accumulate until the full interest charge amount as provided for in this paragraph and the funding obligation are paid.

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ARTICLE 15

GOVERNING LAW

ARTICLE 16

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense undertaken by the Reinsurer.

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3.	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 Reinsured.

ARTICLE 17

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 18

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 19

NOTICES AND AGREEMENT EXECUTION

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2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 20

OFFSET

ARTICLE 21

SERVICE OF SUIT

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In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 22

SEVERABILITY

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ARTICLE 23

TAXES

ARTICLE 24

INTERMEDIARY

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SCHEDULE A

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 1	Excess Layer 3		Excess Layer 4
Reinsurer’s Per Occurrence Limit in Original Contract	$	122,000,000	$	54,600,000
RPP Factor		******		******
RPP Annual Deposit Premium	$	*********	$	*********
RPP Annual Minimum Premium	$	*********	$	*********
RPP Deposit Payment Schedule:
June 1, 2014	$	*********	$	********
September 1, 2014	$	*********	$	********
January 1, 2015	$	*********	$	********
April 1, 2015	$	******** *	$	****** *

*	plus applicable adjustment per Rate and Premium Article

The figures listed above are at 100% for each excess layer and shall apply to each Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

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SCHEDULE B

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 2	Excess Layer 3	Excess Layer 4
Reinsurer’s Per Occurrence Limit in Original Contract	Per below definition (1)	Per below definition (4)
RPP Factor	*****	******
RPP Annual Deposit Premium	Per below definition (2)	Per below definition (5)
RPP Annual Minimum Premium	Per below definition (3)	Per below definition (6)
RPP Deposit Payment Schedule:
June 1, 2015
September 1, 2015
January 1, 2016
April 1, 2016

*	plus applicable adjustment per Rate and Premium Article

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Schedule B

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EXCESS LAYER 3

1.	“Reinsurer’s Per Occurrence Limit in Original Contract” shall be defined as:

An Exhaustion Point equal to the Deemed FHCF Coverage retention for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article of the Original Contract; less

The Reinsured’s Retention in Original Contract, defined as the greater of:

$82,000,000; or

ii.

The retention plus limit of the Reinsured’s Working Layer Catastrophe Excess of Loss Reinsurance Contract, contract year effective June 1, 2015.

2.	“RPP Annual Deposit Premium” shall be defined as the Reinsurer’s Per Occurrence Limit in Original Contract per (1) above, multiplied by the square of ******%, multiplied by the RPP Factor in this Schedule B for Excess Layer 3.

3.	“RPP Annual Minimum Premium” shall be defined as ***% of the RPP Annual Deposit Premium per (2) above.

EXCESS LAYER 4

4.	“Reinsurer’s Per Occurrence Limit in Original Contract” shall be defined as 10% of the Deemed FHCF Coverage limit (not reduced for 90% placement) for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article of the Original Contract.

5.	“RPP Annual Deposit Premium” shall be defined as the Reinsurer’s Per Occurrence Limit in Original Contract per (4) above, multiplied by the square of ****%, multiplied by the RPP Factor in this Schedule B for Excess Layer 4.

6.	“RPP Annual Minimum Premium” shall be defined as ****% of the RPP Annual Deposit Premium per (5) above.

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Schedule B

Exhibit 10.18

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			2
ARTICLE 4
RATE AND PREMIUM			3
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			5
ARTICLE 6
ACCESS TO RECORDS			5
ARTICLE 7
AGENCY			6
ARTICLE 8
ARBITRATION			6
ARTICLE 9
COLLATERAL			7
ARTICLE 10
COLLATERAL RELEASE			8
ARTICLE 11
CONFIDENTIALITY			8
ARTICLE 12
CURRENCY			10
ARTICLE 13
ENTIRE AGREEMENT			10
ARTICLE 14
ERRORS AND OMISSIONS			10
ARTICLE 15
FEDERAL EXCISE TAX			10
ARTICLE 16
GOVERNING LAW			11
ARTICLE 17
INSOLVENCY			11

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ARTICLE 18
LATE PAYMENTS			12
ARTICLE 19
LIMITED RECOURSE AND BERMUDA REGULATIONS			13
ARTICLE 20
NON-WAIVER			14
ARTICLE 21
NOTICES AND AGREEMENT EXECUTION			14
ARTICLE 22
OFFSET			15
ARTICLE 23
SERVICE OF SUIT			15
ARTICLE 24
SEVERABILITY			16
ARTICLE 25
TAXES			16
ARTICLE 26
INTERMEDIARY			16

ATTACHMENTS

Schedule A

Schedule B

Trust Agreement

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MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

By this Contract the Reinsurer agrees to indemnify the Reinsured for 100% of any net reinstatement premium which the Reinsured pays or becomes liable to pay under the provisions of any excess layer of the Reinsured’s Multi-Year Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2014 (hereinafter referred to as the “Original Contract”), subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2014, with respect to reinstatement premium payable by the Reinsured under the provisions of the Original Contract, and shall remain in force until 12:01 a.m., Local Standard Time, June 1, 2016. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

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Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur. The effective date of reduction or termination shall be the date selected by the Reinsured, which may be a date that is retroactively applied to the date of public announcement for subparagraph (a) below or upon discovery for subparagraph (b) below, subject to the condition that such selected date must be the last day of a calendar month:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

5.	The Reinsurer may terminate this Contract at the end of any Contract Year by giving written notice to the Reinsured in the event any of the following circumstances occur:

A change of control and/or sale of the Reinsured.

ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured 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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ARTICLE 4

RATE AND PREMIUM

1.	As regards to Contract Year 1:

“RPP Factor” for the corresponding excess layer as shown in Schedule A attached to and forming part of this Contract; times

ii.

The Final Adjusted Rate on Line for the corresponding excess layer; times

iii.

The Reinsured shall pay the Reinsurer an annual deposit premium, shown as “RPP Annual Deposit Premium” in Schedule A attached hereto, payable in installment amounts and at the dates set forth in the “RPP Deposit Payment Schedule” for each excess layer in Schedule A attached hereto. No deposit premium shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

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2.	As regards to Contract Year 2:

As premium for the reinsurance coverage provided by this Contract, the Reinsured shall pay the Reinsurer the greater of the amount, shown as “RPP Annual Minimum Premium” in Schedule B attached to and forming part of this Contract, or the product of the following:

“RPP Factor” for the corresponding excess layer as shown in Schedule B attached to and forming part of this Contract; times

ii.

The Final Adjusted Rate on Line for the corresponding excess layer; times

iii.

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for the corresponding excess layer of the Original Contract for the applicable Contract Year divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for the corresponding excess layer in Schedule B attached to and forming part of the Original Contract.

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ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under any excess layer of the Original Contract, the Reinsured shall notify the Reinsurer.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2014 through August 31, 2014, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

ARTICLE 6

ACCESS TO RECORDS

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ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 9

COLLATERAL

As promptly as possible following execution of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets for Contract Year 1 having a market value greater than or equal to $2,506,625 (the “Collateral,” which is not subject to the percentage share as expressed in the Interests and Liabilities Agreement attached hereto), less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Rate and Premium Article shall be deposited into the Trust Account.

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3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of Section 2 of the Trust Agreement.

4.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

ARTICLE 10

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust.

Notwithstanding the aforementioned, at December 31, 2015, the parties agree to consider the release of collateral. The intention is to release collateral for all limits for which there is essentially no possibility of reinstatement premium protection from past or future events before the expiration of this Contract. All collateral securing what the parties agree are unreachable limits will be released within three business days.

Thirty-six months following the expiration of this Contract, the Reinsurer shall have the option to commute this Contract by sending the Reinsured written notice thereof. In such event, the Reinsurer shall pay to the Reinsured an amount equal to the reinstatement premium reserves hereunder, as estimated by the Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of such amount, both parties shall be completely released from all liability under this Contract, whether known or unknown.

ARTICLE 11

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 12

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 13

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 14

ERRORS AND OMISSIONS

ARTICLE 15

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 16

GOVERNING LAW

ARTICLE 17

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the

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3.	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 Reinsured.

ARTICLE 18

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 19

LIMITED RECOURSE AND BERMUDA REGULATIONS

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ARTICLE 20

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 21

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

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3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 22

OFFSET

ARTICLE 23

SERVICE OF SUIT

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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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 24

SEVERABILITY

ARTICLE 25

TAXES

ARTICLE 26

INTERMEDIARY

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salvages and loss settlements) relating thereto shall be transmitted to the Reinsured or the Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street, Suite 1250, Dallas, TX 75201. Payments by the Reinsured to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Reinsured only to the extent that such payments are actually received by the Reinsured.

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SCHEDULE A

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 1	Excess Layer 3		Excess Layer 4
Reinsurer’s Per Occurrence Limit in Original Contract	$	122,000,000	$	54,600,000
RPP Factor		*******		*******
RPP Annual Deposit Premium	$	*******	$	*******
RPP Annual Minimum Premium	$	*******	$	*******
RPP Deposit Payment Schedule:
June 1, 2014	$	*******	$	*******
January 1, 2015	$	******* *	$	******* *

*	plus applicable adjustment per Rate and Premium Article

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Schedule A

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SCHEDULE B

MULTI-YEAR REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 2	Excess Layer 3	Excess Layer 4
Reinsurer’s Per Occurrence Limit in Original Contract	Per below definition (1)	Per below definition (4)
RPP Factor	*******	*******
RPP Annual Deposit Premium	Per below definition (2)	Per below definition (5)
RPP Annual Minimum Premium	Per below definition (3)	Per below definition (6)
RPP Deposit Payment Schedule:
June 1, 2015
January 1, 2016

*	plus applicable adjustment per Rate and Premium Article

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Schedule B

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EXCESS LAYER 3

1.	“Reinsurer’s Per Occurrence Limit in Original Contract” for Excess Layer 3 shall be defined as:

The Reinsured’s Retention in Original Contract, defined as the greater of:

$82,000,000; or

ii.

The retention plus limit of the Reinsured’s Working Layer Catastrophe Excess of Loss Reinsurance Contract, contract year effective June 1, 2015.

2.	“RPP Annual Deposit Premium” shall be defined as the Reinsurer’s Per Occurrence Limit in Original Contract per (1) above, multiplied by the square of *******%, multiplied by the RPP Factor in this Schedule B for Excess Layer 3.

3.	“RPP Annual Minimum Premium” shall be defined as *******% of the RPP Annual Deposit Premium per (2) above.

EXCESS LAYER 4

“Reinsurer’s Per Occurrence Limit in Original Contract” for Excess Layer 4 shall be defined as 10% of the Deemed FHCF Coverage limit (not reduced for *******% placement) for Contract Year 2 per the provisions of paragraph (2) of the Florida Hurricane Catastrophe Fund Article of the Original Contract.

5.	“RPP Annual Deposit Premium” shall be defined as the Reinsurer’s Per Occurrence Limit in Original Contract per (4) above, multiplied by the square of *******%, multiplied by the RPP Factor in this Schedule B for Excess Layer 4.

6.	“RPP Annual Minimum Premium” shall be defined as *******% of the RPP Annual Deposit Premium per (5) above.

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Schedule B

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TRUST AGREEMENT

(a copy to be included)

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Trust Agreement

Exhibit 10.19

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			2
ARTICLE 4
RATE AND PREMIUM			2
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			4
ARTICLE 6
ACCESS TO RECORDS			4
ARTICLE 7
AGENCY			5
ARTICLE 8
ARBITRATION			5
ARTICLE 9
COLLATERAL			6
ARTICLE 10
COLLATERAL RELEASE			7
ARTICLE 11
CONFIDENTIALITY			7
ARTICLE 12
CURRENCY			9
ARTICLE 13
ENTIRE AGREEMENT			9
ARTICLE 14
ERRORS AND OMISSIONS			9
ARTICLE 15
FEDERAL EXCISE TAX			9
ARTICLE 16
GOVERNING LAW			10
ARTICLE 17
INSOLVENCY			10

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ARTICLE 18
LATE PAYMENTS			11
ARTICLE 19
LIMITED RECOURSE AND BERMUDA REGULATIONS			12
ARTICLE 20
NON-WAIVER			13
ARTICLE 21
NOTICES AND AGREEMENT EXECUTION			13
ARTICLE 22
OFFSET			14
ARTICLE 23
SERVICE OF SUIT			14
ARTICLE 24
SEVERABILITY			15
ARTICLE 25
TAXES			16
ARTICLE 26
INTERMEDIARY			16

ATTACHMENTS

Schedule A

Trust Agreement

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2014

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

By this Contract the Reinsurer agrees to indemnify the Reinsured for ***% of any net reinstatement premium which the Reinsured pays or becomes liable to pay under the provisions of Excess Layer 3 of the Reinsured’s Multi-Year Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2014 (hereinafter referred to as the “Original Contract”), subject to the terms, conditions and limitations hereinafter set forth.

ARTICLE 2

TERM

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Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur. The effective date of reduction or termination shall be the date selected by the Reinsured, which may be a date that is retroactively applied to the date of public announcement for subparagraph (a) below or upon discovery for subparagraph (b) below, subject to the condition that such selected date must be the last day of a calendar month:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.

ARTICLE 4

RATE AND PREMIUM

1.	As regards to Contract Year 1:

“RPP Factor” for Excess Layer 3 as shown in Schedule A attached to and forming part of this Contract; times

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ii.

The Final Adjusted Rate on Line for Excess Layer 3; times

iii.

****% of the final adjusted reinsurance premium for Excess Layer 3 of the Original Contract for Contract Year 1 (subject to the minimum premium under the Original Contract, if applicable).

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for Excess Layer 3 of the Original Contract for Contract Year 1 divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for Excess Layer 3 in Schedule A attached to and forming part of the Original Contract.

The Reinsured shall pay the Reinsurer an annual deposit premium, shown as “RPP Annual Deposit Premium” in Schedule A attached hereto, payable in installment amounts and at the dates set forth in the “RPP Deposit Payment Schedule” for Excess Layer 3 in Schedule A attached hereto. No deposit premium shall be due to a Reinsurer hereunder until that Reinsurer has executed its Interests and Liabilities Agreement attached to and forming part of this Contract. Further, if this Contract is terminated, no deposit premium installments shall be due after the effective date of termination.

“Contract Year” as used herein shall be defined as each 12-month period beginning June 1 during the term of the Original Contract. “Contract Year 1” shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2014 through 12:01 a.m., Local Standard Time, June 1, 2015. “Contract Year 2” shall be defined as the period from 12:01 a.m., Local Standard Time, June 1, 2015 through 12:01 a.m., Local Standard Time, June 1, 2016.

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ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under Excess Layer 3 of the Original Contract, the Reinsured shall notify the Reinsurer.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2014 through August 31, 2014, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

ARTICLE 6

ACCESS TO RECORDS

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ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 9

COLLATERAL

As promptly as possible following execution of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets having a market value greater than or equal to $8,692,500 (the “Collateral”) less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Rate and Premium Article shall be deposited into the Trust Account.

3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of Section 5 of the Trust Agreement.

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4.	At any time prior to expiration or termination of this Contract, if the value of the Assets in the Trust Account is less than the Reinsurer’s Obligations hereunder, the Reinsurer shall promptly deposit the difference into the Trust Account.

5.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

ARTICLE 10

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust.

Notwithstanding the aforementioned, at December 31, 2014, the parties agree to consider the release of collateral. The intention is to release collateral for all limits for which there is essentially no possibility of reinstatement premium protection from past or future events before the expiration of this Contract. All collateral securing what the parties agree are unreachable limits will be released within three business days.

Thirty-six months following the expiration of this Contract, the Reinsurer shall have the option to commute this Contract by sending the Reinsured written notice thereof. In such event, the Reinsurer shall pay to the Reinsured an amount equal to the reinstatement premium reserves hereunder, as estimated by the Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of such amount, both parties shall be completely released from all liability under this Contract, whether known or unknown.

ARTICLE 11

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

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Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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.

4.	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 12

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 13

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

ARTICLE 14

ERRORS AND OMISSIONS

ARTICLE 15

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

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ARTICLE 16

GOVERNING LAW

ARTICLE 17

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or statutory successor, with reasonable provision for verification, on the basis of the liability of the Reinsured 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 Reinsured or because the liquidator, receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written notice to the Reinsurer of the pendency of a claim against the Reinsured 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 Reinsured or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the

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3.	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 Reinsured.

ARTICLE 18

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 19

LIMITED RECOURSE AND BERMUDA REGULATIONS

1.	The Reinsured understands and accepts that Aeolus Re Ltd. is registered as a segregated account company under the Bermuda Segregated Accounts Companies Act 2000 and that Aeolus Re Ltd. in respect of its Keystone Segregated Account (the “Reinsurer”) is a segregated account of Aeolus Re Ltd.

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of the Reinsurer. Accordingly, the Reinsurer will have assets and liabilities relating to a multiple of reinsurance contracts. The Reinsured has had the opportunity to take advice and to obtain all such additional information that it considers necessary to evaluate the terms, conditions and risks of entering into this Contract with the Reinsurer.

Notwithstanding any other provision of this Contract to the contrary, the liability of the Reinsurer for the performance and discharge of all of its obligations, however they may arise, in relation to this Agreement (the “ SAC Obligations” ) will be limited to and payable solely from the assets linked to the Reinsurer. Accordingly there will be no recourse to any other assets of Aeolus Re Ltd. (including, for the avoidance of doubt, any assets linked to any other segregated account of Aeolus Re Ltd. or to its general account). In the event that the assets linked to the Reinsurer are insufficient to meet all of its SAC Obligations, any SAC Obligations remaining after the application of such assets linked to the Reinsurer will be extinguished, and the Reinsured undertakes in such circumstances to take no further action against the Reinsurer, Aeolus Re Ltd. or any other segregated accounts of Aeolus Re Ltd. in respect of any such SAC Obligations. In particular, neither the Reinsured nor any party acting on its behalf will petition or take any steps for the winding up or receivership of the Reinsurer, Aeolus Re Ltd., or any other segregated account of Aeolus Re Ltd.

4.	This Limited Recourse and Bermuda Regulations Article shall survive termination of this Contract.

ARTICLE 20

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 21

NOTICES AND AGREEMENT EXECUTION

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2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

ARTICLE 22

OFFSET

ARTICLE 23

SERVICE OF SUIT

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In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers upon this Contract, will abide by the final decision of such court or of any Appellate Court in the event of an appeal.

ARTICLE 24

SEVERABILITY

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ARTICLE 25

TAXES

ARTICLE 26

INTERMEDIARY

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SCHEDULE A

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2014

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 1	Excess Layer 3
Reinsurer’s Per Occurrence Limit in Original Contract		$122,000,000
RPP Factor		******
RPP Annual Deposit Premium		*% of $*********
RPP Annual Minimum Premium		*% of $*********
RPP Deposit Payment Schedule:
June 1, 2014		*% of $*********
January 1, 2015		*% of $*********

*	plus applicable adjustment per Rate and Premium Article

The figures listed above shall apply to each Reinsurer in the percentage share for that excess layer as expressed in its Interests and Liabilities Agreement attached hereto.

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Schedule A

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TRUST AGREEMENT

(a copy to be included)

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Trust Agreement

EXHIBIT 10.21

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ENDORSEMENT NO. 2

to the

PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2012

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA

(hereinafter called the “Reinsured”)

NATIONAL LIABILITY & FIRE INSURANCE COMPANY

(hereinafter called, with other participants, the “Reinsurers”)

Effective June 1, 2014, the Contract has been amended as follows:

ARTICLE 6 – RETENTION AND LIMIT, Paragraph (4), shall now read as follows:

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2012, shall equal $7,500,000.

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2013, shall equal $11,000,000.

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2014, shall equal $18,000,000.

All other Terms and Conditions remain unchanged.

Signed in , on this day of , 2014

NATIONAL LIABILITY & FIRE INSURANCE COMPANY


BY:

TITLE:

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ARP-HCI-02-LAC-001-12

DOC: April 8, 2014

Endorsement No. 2 – BRK

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Signed in , on this day of , 2014

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA


BY:

TITLE:

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ARP-HCI-02-LAC-001-12

DOC: April 8, 2014

Endorsement No. 2 – BRK

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ENDORSEMENT NO. 2

to the

PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2012

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA

(hereinafter called the “Reinsured”)

CLADDAUGH CASUALTY INSURANCE COMPANY, LTD.

(hereinafter called, with other participants, the “Reinsurers”)

Effective June 1, 2014, the Contract has been amended as follows:

ARTICLE 6 – RETENTION AND LIMIT, Paragraph (4), shall now read as follows:

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2012, shall equal $7,500,000.

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2013, shall equal $11,000,000.

“Reinsured’s Retention,” as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2014, shall equal $18,000,000.

All other Terms and Conditions remain unchanged.

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Endorsement No. 2 – CLAD

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Signed in , on this day of , 2014

CLADDAUGH CASUALTY INSURANCE COMPANY, LTD.


BY:

TITLE:

Signed in , on this day of , 2014

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA


BY:

TITLE:

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ARP-HCI-02-LAC-001-12

DOC: April 8, 2014

Endorsement No. 2 – CLAD

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<<CONTRACT_NO>>

DOC: <<Contract_Document_Date>>

Endorsement No. 2 -

<<reinsurer_20_code>>

Exhibit 10.22

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****** indicates material that has been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the U.S. Securities and Exchange Commission.

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2015

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,

subject to prior agreement of Reinsurer to include any affiliates

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

TABLE OF CONTENTS


ARTICLE 1
BUSINESS COVERED			1
ARTICLE 2
TERM			1
ARTICLE 3
CONCURRENCY OF CONDITIONS			3
ARTICLE 4
RATE AND PREMIUM			3
ARTICLE 5
LOSS NOTICES AND SETTLEMENTS			4
ARTICLE 6
ACCESS TO RECORDS			5
ARTICLE 7
AGENCY			5
ARTICLE 8
ARBITRATION			5
ARTICLE 9
COLLATERAL			6
ARTICLE 10
COLLATERAL RELEASE			7
ARTICLE 11
CONFIDENTIALITY			8
ARTICLE 12
CURRENCY			9
ARTICLE 13
ENTIRE AGREEMENT			9
ARTICLE 14
ERRORS AND OMISSIONS			10
ARTICLE 15
FEDERAL EXCISE TAX			10
ARTICLE 16
GOVERNING LAW			10
ARTICLE 17
INSOLVENCY			10

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ARTICLE 18
LATE PAYMENTS			12
ARTICLE 19
LIMITED RECOURSE AND BERMUDA REGULATIONS			13
ARTICLE 20
NON-WAIVER			14
ARTICLE 21
NOTICES AND AGREEMENT EXECUTION			14
ARTICLE 22
OFFSET			15
ARTICLE 23
SERVICE OF SUIT			15
ARTICLE 24
SEVERABILITY			16
ARTICLE 25
TAXES			16
ARTICLE 26
INTERMEDIARY			16

ATTACHMENTS

Schedule A

Trust Agreement

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REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2015

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,

subject to prior agreement of Reinsurer to include any affiliates

(hereinafter called the “Reinsured”)

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABILITIES AGREEMENT

ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

ARTICLE 2

TERM

This Contract shall become effective at 12:01 a.m., Local Standard Time, June 1, 2015, with respect to reinstatement premium payable by the Reinsured under the provisions of the Original Contract, and shall remain in force until 12:01 a.m., Local Standard Time, June 1, 2016. “Local Standard Time” as used herein shall be defined as the local standard time at the location where the Loss Occurrence commences.

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Notwithstanding the provisions of paragraph (1) above, the Reinsured may reduce or terminate a Reinsurer’s percentage share in this Contract at any time by giving written notice to the Reinsurer in the event any of the following circumstances occur. The effective date of reduction or termination shall be the date selected by the Reinsured, which may be a date that is retroactively applied to the date of public announcement for subparagraph (a) below or upon discovery for subparagraph (b) below, subject to the condition that such selected date must be the last day of a calendar month:

A State Insurance Department or other legal authority has ordered the Reinsurer to cease writing business; or

4.	The Reinsurer may immediately terminate this Contract by giving 10 days’ written notice to the Reinsured in the event the Reinsured fails to remit any premium installment payment due in accordance with the provisions of the Rate and Premium Article.

5.	The Reinsurer may terminate this Contract prior to the effective date by giving written notice to the Reinsured in the event any of the following circumstances occur during Contract Year 1:

A change of control and/or sale of the Reinsured.

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ARTICLE 3

CONCURRENCY OF CONDITIONS

1.	It is agreed that this Contract will follow those terms, conditions, exclusions, definitions, warranties and settlements of the Reinsured under the Original Contract, including any addenda thereto, which are not inconsistent with the provisions of this Contract.

2.	The Reinsured shall advise the Reinsurer of any material changes in the Original Contract which may affect the liability of the Reinsurer under this Contract.

ARTICLE 4

RATE AND PREMIUM

1.	As regards to Contract Year 2:

“RPP Factor” for Excess Layer 3 as shown in Schedule A attached to and forming part of this Contract; times

ii.

The Final Adjusted Rate on Line for Excess Layer 3; times

iii.

******% of the final adjusted reinsurance premium for Excess Layer 3 of the Original Contract for Contract Year 2 (subject to the minimum premium under the Original Contract, if applicable).

“Final Adjusted Rate on Line” as used herein shall be defined as the final adjusted premium paid for Excess Layer 3 of the Original Contract for Contract Year 2 divided by the Reinsurer’s limit of liability, shown as “Reinsurer’s Per Occurrence Limit” for Excess Layer 3 in Schedule B attached to and forming part of the Original Contract.

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ARTICLE 5

LOSS NOTICES AND SETTLEMENTS

1.	Whenever reinstatement premium settlements are made by the Reinsured under Excess Layer 3 of the Original Contract, the Reinsured shall notify the Reinsurer.

4.	“Contract Quarter” as used herein shall mean the period from June 1, 2015 through August 31, 2015, both days inclusive, and each respective three-month period (or portion thereof) thereafter during the term of this Contract.

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ARTICLE 6

ACCESS TO RECORDS

ARTICLE 7

AGENCY

ARTICLE 8

ARBITRATION

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, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Reinsured, 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 active or retired disinterested executive officers of insurance or reinsurance companies or Underwriters at Lloyd’s. 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.

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5.	Any arbitration proceedings shall take place in Tampa, Florida; however, the location may be changed if mutually agreed upon by the parties of this Contract. Notwithstanding the location of arbitration, all proceedings pursuant hereto shall be governed by the law of the State of Florida.

ARTICLE 9

COLLATERAL

As promptly as possible at effective date of this Contract, the Reinsurer (as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer shall provide collateral in the form of eligible Assets deposited and held in a Trust Account, with such Assets having a market value greater than or equal to the Original Contract Deposit Premium (the “Collateral”) less unpaid premium (net of brokerage and applicable Federal Excise Tax). It is understood that deposit premium paid in accordance with the Rate and Premium Article shall be deposited into the Trust Account.

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3.	The Trust Fund may be drawn upon by the Reinsured at any time and the Assets may be used at the Reinsured’s option in accordance with the provisions of Section 5 of the Trust Agreement.

4.	At any time prior to expiration or termination of this Contract, if the value of the Assets in the Trust Account is less than the Reinsurer’s Obligations hereunder, the Reinsurer shall promptly deposit the difference into the Trust Account.

5.	Except as provided in the Collateral Release Article, the Reinsured agrees to release the Assets in the Trust Account required under this Article as promptly as provided in the Trust Agreement.

6.	“Original Contract Deposit Premium” shall be defined as:

23.75%; times

Reinsurer’s Per Occurrence Limit in Original Contract as defined in paragraph (1) of Schedule A attached hereto.

ARTICLE 10

COLLATERAL RELEASE

1.	At the expiration or termination of this Contract, if the Trust has not yet been terminated, the Reinsured shall calculate on a monthly basis, how much, if any, of the collateral shall be released from the Trust.

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Thirty-six months following the expiration of this Contract, the Reinsurer shall have the option to commute this Contract by sending the Reinsured written notice thereof. In such event, the Reinsurer shall pay to the Reinsured an amount equal to the reinstatement premium reserves hereunder, as estimated by the Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of such amount, both parties shall be completely released from all liability under this Contract, whether known or unknown.

ARTICLE 11

CONFIDENTIALITY

Are publicly available or have become publicly available through no unauthorized act of the Reinsurer;

Have been rightfully received from a third person without obligation of confidentiality; or

Were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

2.	Absent the written consent of the Reinsured, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies, except:

When required by retrocessionaires subject to the business ceded to this Contract;

When required by regulators performing an audit of the Reinsurer’s records and/or financial condition;

When required by external auditors performing an audit of the Reinsurer’s records in the normal course of business; or

When required by attorneys or arbitrators in connection with an actual or potential dispute hereunder.

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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.

4.	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

CURRENCY

1.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

2.	Amounts paid or received by the Reinsured 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 Reinsured.

ARTICLE 13

ENTIRE AGREEMENT

2.	Any change or modification to this Contract shall be null and void unless made by an addendum and signed by the parties hereto.

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ARTICLE 14

ERRORS AND OMISSIONS

ARTICLE 15

FEDERAL EXCISE TAX

1.	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.

2.	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 Reinsured or its agent should take steps to recover the tax from the United States Government.

ARTICLE 16

GOVERNING LAW

ARTICLE 17

INSOLVENCY

1.	If more than one reinsured company is included within the definition of “Reinsured” hereunder, this Article shall apply individually to each such company.

2.	In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the Reinsured or to its liquidator, receiver, conservator or

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3.	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 Reinsured.

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ARTICLE 18

LATE PAYMENTS

1.	The interest penalties provided for in this Article shall apply to the Reinsurer or to the Reinsured in the following circumstances:

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ARTICLE 19

LIMITED RECOURSE AND BERMUDA REGULATIONS

1.	The Reinsured understands and accepts that Aeolus Re Ltd. is registered as a segregated account company under the Bermuda Segregated Accounts Companies Act 2000 and that Aeolus Re Ltd. in respect of its Keystone Segregated Account (the “Reinsurer”) is a segregated account of Aeolus Re Ltd.

Notwithstanding any other provision of this Contract to the contrary, the liability of the Reinsurer for the performance and discharge of all of its obligations, however they may arise, in relation to this Agreement (the “ SAC Obligations” ) will be limited to and payable solely from the assets linked to the Reinsurer. Accordingly there will be no recourse to any other assets of Aeolus Re Ltd. (including, for the avoidance of doubt, any assets linked to any other segregated account of Aeolus Re Ltd. or to its general account). In the event that the assets linked to the Reinsurer are insufficient to meet all of its SAC Obligations, any SAC Obligations remaining after the application of such assets linked to the Reinsurer will be extinguished, and the Reinsured undertakes in such circumstances to take no further action against the Reinsurer, Aeolus Re Ltd. or any other segregated accounts of Aeolus Re Ltd. in respect of any such SAC Obligations. In particular, neither the Reinsured nor any party acting on its behalf will petition or take any steps for the winding up or receivership of the Reinsurer, Aeolus Re Ltd., or any other segregated account of Aeolus Re Ltd.

4.	This Limited Recourse and Bermuda Regulations Article shall survive termination of this Contract.

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ARTICLE 20

NON-WAIVER

The failure of the Reinsured 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 or remedies contained herein nor stop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedies in the future.

ARTICLE 21

NOTICES AND AGREEMENT EXECUTION

2.	The use of any of the following shall constitute a valid execution of this Contract or any amendments thereto:

Paper documents with an original ink signature;

Facsimile or electronic copies of paper documents showing an original ink signature; and/or

3.	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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ARTICLE 22

OFFSET

ARTICLE 23

SERVICE OF SUIT

In the event the Reinsurer fails to pay any amount claimed to be due hereunder or fails to otherwise perform its obligations hereunder, the Reinsurer, at the request of the Reinsured, will 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 accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Reinsurers 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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ARTICLE 24

SEVERABILITY

ARTICLE 25

TAXES

ARTICLE 26

INTERMEDIARY

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SCHEDULE A

REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2015

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA


Contract Year 2		Excess Layer 3
Reinsurer’s Per Occurrence Limit in Original Contract		Per below definition (1)
RPP Factor		******
RPP Annual Deposit Premium		Per below definition (2)
RPP Annual Minimum Premium		Per below definition (3)
RPP Deposit Payment Schedule:
June 1, 2015
January 1, 2016

*	plus applicable adjustment per Rate and Premium Article

1.	“Reinsurer’s Per Occurrence Limit in Original Contract” for Excess Layer 3 shall be defined as:

The Reinsured’s Retention in Original Contract, defined as the greater of:

$82,000,000; or

ii.

The retention plus limit of the Reinsured’s Working Layer Catastrophe Excess of Loss Reinsurance Contract, contract year effective June 1, 2015.

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ARP-HCI-02-RPP-203-15

DOC: July 10, 2014

Schedule A

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2.	“RPP Annual Deposit Premium” shall be defined as the 30% of the Reinsurer’s Per Occurrence Limit in Original Contract per (1) above, multiplied by the square of 23.75%, multiplied by the RPP Factor in this Schedule A for Excess Layer 3.

3.	“RPP Annual Minimum Premium” shall be defined as 30% of 85% of the RPP Annual Deposit Premium per (2) above.

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ARP-HCI-02-RPP-203-15

DOC: July 10, 2014

Schedule A

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TRUST AGREEMENT

(a copy to be included)

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ARP-HCI-02-RPP-203-15

DOC: July 10, 2014

Trust Agreement

EXHIBIT 10.41

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ENDORSEMENT NO. 1

to the

WORKING LAYER CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2013

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA

(hereinafter called the “Reinsured”)

NATIONAL LIABILITY & FIRE INSURANCE COMPANY

(hereinafter called, with other participants, the “Reinsurers”)

Effective June 1, 2014, the Contract has been amended as follows:

Subparagraph (b) of Paragraph (1) of ARTICLE 6 – RETENTION AND LIMIT, shall now read as follows:

Reinsured’s Retention, as respects all loss or losses arising out of Loss Occurrences commencing during the Contract Year effective June 1, 2014, shall equal $38,000,000.

Sub-subparagraph (ii) of Subparagraph (a) of Paragraph (3) of ARTICLE 6 – RETENTION AND LIMIT, shall now read as follows:

$44,000,000 for Contract Year effective June 1, 2014.

All other Terms and Conditions remain unchanged.

Signed in , on this day of , 2014

NATIONAL LIABILITY & FIRE INSURANCE COMPANY


BY:

TITLE:

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ARP-HCI-02-CAT-WRK-13

DOC: May 16, 2014

Endorsement No. 1 – BRK

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Signed in , on this day of , 2014

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY

TAMPA, FLORIDA


BY:

TITLE:

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ARP-HCI-02-CAT-WRK-13

DOC: May 16, 2014

Endorsement No. 1 – BRK

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
August 6, 2014		Paresh Patel
		Chief Executive Officer (Principal Executive Officer)

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard R. Allen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCI Group, Inc.;

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/ RICHARD R. ALLEN
August 6, 2014		Richard R. Allen
		Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.1

Written Statement of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350

Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Executive Officer of HCI Group, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on August 6, 2014 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ PARESH PATEL

Paresh Patel

Chief Executive Officer

August 6, 2014

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Written Statement of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Financial Officer of HCI Group, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on August 6, 2014 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RICHARD R. ALLEN

Richard R. Allen

Chief Financial Officer

August 6, 2014

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.