MEMBERSHIP ACCOUNT

A membership account is the individual member's capital contribution plus or minus loss performance deductions of their years in the captive. Each Membership Account is subject to significant fluctuation in value, depending on loss experience of the Members, the Company’s overall underwriting results, competitive pressures upon premium structure, and board discretion. 

While a Membership Account could become worthless due to poor loss performance or external factors, the best way to ensure return of capital and distributions is an active, highly engaged, and safe captive community.

DISTRIBUTIONS 

Distributions to Members. The Board may, in its sole discretion, declare and pay cash distributions, returns of surplus and/or policyholder dividends to Members. All such distributions are subject to the prior approval of the Sponsored Captive and the Commissioner, and to the Company’s ability to pay such amounts as determined by the Board in its sole discretion. No Member shall have any entitlement to any distribution unless and until declared by the Board and approved by the Sponsored Captive and the Commissioner.

Payment of Membership Account upon Termination of Membership. Upon cancellation or termination of a Member’s participation in the current insurance or reinsurance programs of the Company, the Company shall pay to the Member a portion of the balance of its Membership Account in accordance with Article 1, Section 7 of the Bylaws of the Company. In all cases, such payment and termination shall be subject to the prior approval of the Sponsored Captive and the Commissioner and may be reduced, delayed or paid in installments at the sole discretion of the Board. The Board may, but need not, provide for the payment of reasonable interest upon unpaid Membership Account balances to be returned. 

For purposes of calculating the amount of a Member’s Membership Account balance payable upon withdrawal, the total amount shall not exceed fifty percent (50%) of such Member’s Membership Account for each policy year, valued using ultimate reserve values calculated at ninety percent (90%) confidence level (the sum the “Payable Balance”). Additionally, the Payable Balance shall be further reduced to account for the duration of the Member’s time of participation in the Company’s insurance or reinsurance programs in keeping with the following: 

Less than three (3) years- No Payment of Any Kind 

Completion of three (3) years, but less than five (5) years- 50% of Payable Balance 

Completion of five (5) years, but less than seven (7) years- 75% of Payable Balance 

Completion of at least seven (7) years- 100% of Payable Balance 

Eligibility

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

Application Procedure

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

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

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

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