UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of Earliest Event Reported) September
17, 2007
AmTrust
Financial Services, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-33143
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04-3106389
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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59
Maiden Lane, 6th
Floor, New York, New York
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10038
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code (212)
220-7120
(Former
name or former address, if
changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.133-4 (c))
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Item
1.01
AMENDMENT OF MATERIAL DEFINITIVE AGREEMENT; ENTRY INTO MATERIAL DEFINITIVE
AGREEMENT
Amendment
to Master Agreement entered July 3, 2007
On
September 17, 2007, AmTrust Financial Services, Inc. (“AmTrust” or the
“Company”) and Maiden Holdings, Ltd. (“Maiden Holdings”) entered into an
amendment of the Master Agreement which was entered into on July 3, 2007 (the
“Amendment”). The Company previously reported its entry into the Master
Agreement pursuant to a Current Report on Form 8-K filed July 5, 2007, which
is
incorporated by reference herein.
Maiden
Holdings is Bermuda insurance holding company formed by Michael Karfunkel,
George Karfunkel and Barry Zyskind, the principal shareholders, and,
respectively, the Chairman of the Board of Directors, a Director, and the Chief
Executive Officer and Director of AmTrust. Messrs. Karfunkel and Mr. Zyskind
contributed $50 million to Maiden Holdings. In addition, on July 3, 2007 and
July 13, 2007, Maiden Holdings raised approximately $480.6 million in a private
placement.
Pursuant
to the original Master Agreement, the Company agreed to cause its U.S. insurance
subsidiaries (the “U.S. AmTrust Ceding Insurers”) and Irish and U.K. insurance
subsidiaries (the U.S. AmTrust Ceding Insurers and the Irish and U.K. insurance
subsidiaries are referred to, collectively, as the “AmTrust Ceding Insurers”) to
enter into quota share reinsurance agreements with Maiden Insurance Company,
Ltd. (“Maiden Insurance”), a Bermuda reinsurer and wholly-owned subsidiary of
Maiden Holdings, by which the AmTrust Ceding Insurers would cede to Maiden
Insurance 40% of their premium (net of the cost of unaffiliated inuring
reinsurance) and losses and transfer to Maiden Insurance 40% of their unearned
premium reserves, effective as of July 1, 2007. The Master Agreement further
provided that the AmTrust Ceding Insurers would receive a ceding commission
of
31% of ceded written premiums, which after the first year would be subject
to
adjustment (up to a maximum of 32% and a minimum of 30%) based on the loss
ratio
of the ceded business. The agreements were to have an initial term of three
years, subject to early termination events, and renew for additional three
year
terms unless either party elected not to renew. The reinsurance agreement
between the U.S. AmTrust Ceding Insurers and Maiden Insurance would have been
subject to certain regulatory approvals.
Pursuant
to the Amendment, the Company and Maiden Holdings agreed that Maiden Insurance
would not reinsure the AmTrust Ceding Insurers directly, but would reinsure
AmTrust’s Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd.
(“AII”), which, in turn, would reinsure the AmTrust Ceding Insurers. The
Amendment requires that the Company cause AII to reinsure the AmTrust Ceding
Insurers to the extent required to enable AII to cede 40% of the AmTrust Ceding
Insurers premiums, net of the cost of unaffiliated inuring reinsurance (and
in
the case of AmTrust’s U.K. insurance subsidiary, IGI Insurance Company Limited
(“IGI”), net of commissions) and losses to Maiden Insurance and to transfer to
Maiden Insurance 40% of their unearned premium reserves, effective as of July
1,
2007, with respect to the AmTrust Ceding Insurers’ current lines of business,
excluding risks for which the AmTrust Ceding Insurers’ net retention exceeds $5
million (“Covered Business”). AmTrust also has agreed to cause AII, subject to
regulatory requirements, to reinsure any insurance company which writes Covered
Business in which AmTrust acquires a majority interest to the extent required
to
enable AII to cede to Maiden Insurance 40% of the premiums and losses related
to
such Covered Business.
The
Amendment further provides that Maiden Insurance shall provide to AII sufficient
collateral to secure its proportional share of AII’s obligations to the U.S.
AmTrust Ceding Insurers. AII has agreed to return to Maiden Insurance any assets
of Maiden Insurance in excess of the amount required to secure its proportional
share of AII’s collateral requirements, subject to certain deductions. Pursuant
to the Amendment, the Company has guaranteed AII’s obligations relating to
return of collateral.
Reinsurance
Agreement
On
September 17, 2007, pursuant to the Amendment, AII and Maiden Insurance entered
into a quota share reinsurance agreement (the “Reinsurance Agreement”) by which
Maiden Insurance assumes through AII 40% of the gross written premiums, net
of
the cost of unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K.
insurance subsidiary, IGI Insurance Company Limited, net of commissions) and
40%
of the Ultimate Net Loss of each AmTrust Ceding Insurer related to Covered
Business. “Ultimate Net Loss” means the sum actually paid or to be paid by an
AmTrust Ceding Insurer in settlement of losses for which it is liable, after
making deductions for all unaffiliated reinsurance, whether collectible or
not,
and all other recoveries, and shall include loss adjustment expenses,
extra-contractual obligations and loss in excess of policy limits.
AII
receives a ceding commission of 31% of ceded written premiums, which after
the
first year would be subject to adjustment (up to a maximum of 32% and a minimum
of 30%) based on the loss ratio of the ceded business.
If
the
AmTrust Ceding Insurers, including any insurance subsidiaries acquired in the
future, write business that is not included in their current lines of business,
AII must offer Maiden Insurance the opportunity to reinsure such business.
The
ceding commission on such additional business would be as mutually agreed by
AII
and Maiden Insurance.
The
Reinsurance Agreement has an initial term of three years and will automatically
renew for successive three year terms thereafter, unless either AII or Maiden
Insurance notifies the other of its election not to renew not less than nine
months prior to the end of any such three year term. In addition, either party
is entitled to terminate on thirty day’s notice or less upon the occurrence of
certain early termination events, which include a default in payment,
insolvency, change in control of AII or Maiden Insurance, run-off, or a
reduction of 50% or more of the shareholders’ equity of Maiden Insurance or the
combined shareholders’ equity of AII and the AmTrust Ceding
Insurers.
The
Reinsurance Agreement requires that Maiden Insurance provide to AII sufficient
collateral to secure its proportional share of AII’s obligations to the U.S.
AmTrust Ceding Insurers. AII is required to return to Maiden Insurance any
assets of Maiden Insurance in excess of the amount required to secure its
proportional share of AII’s collateral requirements, subject to certain
deductions.
Item
9.01 FINANCIAL
STATEMENTS AND EXHIBITS.
Exhibit
Number Description
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10.1
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First
Amendment to Master Agreement.
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10.2
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Quota
Share Reinsurance Agreement between AmTrust International Insurance,
LTD
Hamilton Bermuda and Maiden Insurance Company, LTD Hamilton, Bermuda.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AmTrust
Financial Services, Inc.
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(Registrant)
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Date
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September
19, 2007
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/s/
Stephen Ungar
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Stephen
Ungar |
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