EXHIBIT 10.1

SEPARATION AGREEMENT

AGREEMENT (the “Agreement”), dated as of March 13, 2009 between CRM Holdings,
Ltd., a Bermuda company (together with its subsidiaries from time to time and
its successors and assigns, the “Company”), and Daniel G. Hickey, Jr. (the
“Executive”).

W I T N E S S E T H:

WHEREAS Executive and the Company are currently parties to an Employment
Agreement;

WHEREAS Executive and the Company have agreed that Executive will resign from
the Company as of the Resignation Date; and

WHEREAS the parties wish to document the terms and conditions pertaining to the
resignation;

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Company and Executive hereby agree as follows:

1. Definitions.

The capitalized terms used herein shall have the following meanings:

“Agreement” shall mean this Separation Agreement, together with Exhibit A.

“Board of Directors” shall mean the board of directors or other governing body
of Company, and from time to time the boards of directors, or other governing
bodies, of the Company Subsidiaries.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

“Company Subsidiaries” shall mean all the Company’s subsidiary companies and
affiliates, collectively, including but not limited to, Twin Bridges (Bermuda),
Ltd., CRM USA Holdings Inc., Compensation Risk Managers, LLC, Compensation Risk
Managers of California, LLC, EIMAR, LLC, Compensation Risk Claims Services, LLC,
Embarcadero Insurance Holdings, Inc., Majestic Insurance Company, Great Western
Insurance Services, Inc. and Redhorse Insurance Company.

“Company” shall mean CRM Holdings, Ltd., together with its successors and
assigns.

“Competition” shall have the meaning ascribed to it in Section 4(d)(ii).
“Confidential Information” shall have the meaning ascribed to it in
Section 4(a)(ii).

“Covenant Term” shall have the meaning ascribed to it in Section 4.

“Employment Agreement” shall mean the employment agreement entered into between
the Company and Executive dated November 3, 2005.

“Executive” shall mean Daniel G. Hickey, Jr.

“Proceeding” shall have the meaning ascribed to it in Section 3(d)(iii)(A).

“Release” shall mean the release executed by Executive of even date herewith, in
the form of Exhibit A.

“Releasees” shall have the meaning ascribed to it in the Release.

“Resignation Date” shall be March 13, 2009.

“Restrictive Covenants” shall the meaning ascribed to it in Section 4.

2. Resignation.

(a) Executive hereby resigns from each of the following positions effective as
of the Resignation Date: (i) Chief Executive Officer of the Company; (ii) Chief
Executive Officer of each of the Company Subsidiaries; (iii) member of the Board
of Directors of the Company and all Company Subsidiaries; and (iv) all other
positions Executive holds by reason of or in connection with his employment by
the Company.

(b) During the initial 6 months after the Resignation Date, Executive shall
provide reasonable assistance to the Company with regard to transition issues
and make himself reasonably available during regular business hours to confer on
Company business matters; provided, however, that (i) Executive shall not be
required to assist or confer if and to the extent such activities interfere with
his then current professional or business activities; and (ii) Executive shall
be reimbursed by the Company on an after-tax basis for all expenses reasonably
incurred in any given month in connection with such activities for the Company;
provided, however, that any expenses in an amount exceeding one-thousand
($1,000) dollars that are incurred, or reasonably estimated to be incurred, must
be pre-approved by the Company.

(c) Executive hereby agrees to execute and deliver any and all further
documentation and take all such other action reasonably requested by the Company
to evidence and effect the resignations contemplated by this Agreement.
Executive hereby further agrees that the Employment Agreement is hereby
terminated as of the Resignation Date and from and after the Resignation Date,
the Employment Agreement shall have no further force or effect.

3. Payments.

In consideration for Executive entering into this Agreement and executing the
Release, the Company agrees that the Company shall provide Executive with the
following payments and benefits, all of which are expressly conditioned on
Executive’s ongoing compliance with the Restrictive Covenants:

(a) Cash Severance Payment. The Company shall pay to Executive payments in the
aggregate gross amount of three million three hundred thousand dollars
($3,300,000) in three payments as follows: (i) a payment in the gross amount of
one million five hundred thousand dollars ($1,500,000) payable six months and
one day after the Resignation Date; (ii) a further payment in the gross amount
of one million five hundred thousand dollars ($1,500,000) payable twelve months
after the Termination Date; and (iii) a payment in the gross amount of three
hundred thousand dollars ($300,000) payable thirty months after the Resignation
Date.

(b) Welfare Benefits Continuation. To the extent permitted under the terms of
such plans, Executive and his family shall be entitled to continued
participation in all medical, health and life insurance plans at the same
benefit level at which Executive and his family were participating on the
Resignation Date until the earlier of (A) the third anniversary of the
Resignation Date, or (B) the date, or dates, Executive receives substantially
similar coverage and benefits under the plans and programs of a subsequent
employer (such coverage and benefits to be determined on a coverage-by-coverage,
or benefit-by-benefit, basis). To the extent permitted under the terms of such
plans, such coverage shall be determined as if Executive had continued to be an
active employee of the Company, and the Company shall continue to pay the costs
of such coverage under such plans on the same basis as is applicable to active
employees covered thereunder. At the Company’s option, Executive’s rights under
this Section 3(b) may be conditioned upon Executive’s election of continued
coverage in accordance with COBRA either (a) as of the Resignation Date in the
event that Executive may not remain an active participant under the terms of the
Company’s medical and health plans, in which event the Company shall subsidize
such coverage to the same extent it subsidizes coverage for active employees of
the Company, or (b) as of eighteen months after the Resignation Date.

(c) Vesting of Restricted Stock. Any and all restrictions with respect to
restricted stock granted to Executive on January 16, 2008 shall be removed
effective as of the Resignation Date and such stock shall be distributed to
Executive in accordance with the terms of such grant.

(d) Other Benefits. Executive shall be entitled to receive such other benefits
as follows:

(i) Executive shall receive any and all benefits accrued under any deferred
compensation or qualified or non-qualified pension plan in which he currently
participates (other than any severance plan) in accordance with, and subject to,
the terms thereof; provided that no such deferred compensation or non-qualified
pension benefits shall be paid prior to the first date on which they would not
be subject to the imposition of any excise tax pursuant to Section 409A of the
Code.

(ii) Executive shall be paid any (A) base salary (at the rate of salary in
effect immediately prior to the Resignation Date) to the extent earned but
unpaid as of the Resignation Date, (B) accrued but untaken vacation (not to
exceed five weeks of such vacation), and (C) reasonable business and fringe
benefit expenses incurred by him prior to the Resignation Date in accordance
with Company policy in effect on the Resignation Date which have not yet been
reimbursed. Such payments shall be made in accordance with the Company’s
standard payroll and expense reimbursement practices.

(iii) Executive shall be reimbursed by the Company in an amount not to exceed
five thousand ($5,000) dollars for attorney’s fees incurred in connection with
the negotiation of this Agreement.

(iv) Executive may retain the used office furniture and related furnishings in
his office.

(v) Indemnification.

(A) Company Indemnity. The Company agrees that if Executive is at any time made
a party, or is threatened to be made a party, to any third-party action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
“Proceeding”), by reason of the fact that he was a director, officer or employee
of the Company or was serving at the Company’s request as a director, officer,
member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is Executive’s alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, and including Proceedings arising from or relating to Executive’s
resignation and his execution of this Agreement, Executive shall be indemnified
and held harmless by the Company to the fullest extent legally permitted or
authorized by the Company’s bye-laws or resolutions of the Board of Directors
or, if greater, by the laws of the State of New York, against all cost, expense,
liability and loss (including, without limitation, reasonable attorney’s fees,
judgments, fines, interest on same, if any, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
Executive in connection therewith. The Company shall advance to Executive all
reasonable costs and expenses to be incurred by him in connection with a
Proceeding within 30 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by Executive to repay
the amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses. The provisions of
this Section 3(d)(v)(A) shall not be deemed exclusive of any other rights of
indemnification to which Executive may be entitled or which may be granted to
him, and it shall be in addition to any rights of indemnification to which he
may be entitled under any policy of insurance.

(B) Liability Insurance. The Company agrees to continue and maintain a directors
and officers’ liability insurance policy covering Executive to the extent and
for as long as the Company provides such coverage for its executive officers.

(e) Except as explicitly provided in this Section 3, Executive shall not be
entitled to receive any compensation, other payments, or benefits of any kind
from the Company, any of the Company Subsidiaries or their respective
affiliates.

4. Disclosure; Restrictive Covenants Against Competition and Solicitation.

Executive and Company hereby acknowledge and agree that for a period of three
years beginning on the Resignation Date (“Covenant Term”), or as otherwise
specified in this Agreement, Executive and Company shall continue to be bound by
the following restrictive covenants and other provisions (collectively referred
to as the “Restrictive Covenants”):

(a) Confidentiality.

(i) During the Covenant Term and at all times thereafter, Executive shall not
disclose to anyone or make use of any Confidential Information, except when
required to do so by legal process, by any governmental agency having
supervisory authority over the business of the Company and the Company
Subsidiaries or by any administrative or legislative body (including a committee
thereof) that requires him to divulge, disclose or make accessible such
information. In the event that Executive is so ordered, he shall give prompt
written notice to the Company to allow the Company the opportunity to object to
or otherwise resist such order.

(ii) For purposes of this Agreement, “Confidential Information” shall mean all
information concerning the business of the Company, the Company Subsidiaries and
their respective affiliates relating to any of their products, product
development, trade secrets, customers, suppliers, finances, and business plans
and strategies. Excluded from the definition of Confidential Information is
information (1) that is or becomes part of the public domain, other than through
the breach of this Agreement by Executive or (2) regarding the Company’s
business or industry properly acquired by Executive in the course of his career
as an executive in the Company’s industry and independent of Executive’s
employment by the Company that is not proprietary information of the Company or
the Company Subsidiaries or their respective affiliates. For this purpose,
information known or available generally within the trade or industry of the
Company shall be deemed to be known or available to the public.

(b) Litigation Cooperation. During the Covenant Term and at all times
thereafter, Executive agrees to cooperate reasonably with the Company, Company
Subsidiaries and their respective affiliates by making himself reasonably
available to testify on behalf of the Company, Company Subsidiaries and their
respective affiliates in any action, suit, proceeding, or investigation, whether
civil, criminal, administrative, or otherwise, and to assist the Company,
Company Subsidiaries and their respective affiliates, in any such action, suit,
proceeding, or investigation, by providing information and documents and meeting
and consulting with the Board of Directors or its representatives or counsel, or
representatives or counsel to the Company, Company Subsidiaries and their
respective affiliates, as reasonably requested. The Company agrees to reimburse
Executive for all expenses reasonably incurred in connection with his provision
of testimony or assistance; provided, however, that any expenses in an amount
exceeding one-thousand ($1,000) dollars that are incurred, or reasonably
estimated to be incurred, must be pre-approved by the Company.

(c) Non-Disparagement. During the Covenant Term, Executive agrees that he will
not make statements or representations, or otherwise communicate, directly or
indirectly, in writing, orally, or otherwise, or take any action which may,
directly or indirectly, disparage the Company, Company Subsidiaries or their
respective affiliates or their respective officers, directors, employees,
advisors, businesses or reputations. The Company agrees that it will direct its
directors and executive officers that, during the Covenant Term, they should not
make statements or representations, or otherwise communicate, directly or
indirectly, in writing, orally, or otherwise, or take any action which may
directly or indirectly, disparage Executive, his business or reputation.
However, nothing in this Agreement shall preclude either of Executive or the
Company from making truthful statements or disclosures required by applicable
law, regulation or legal process or made in connection with an investigation by
any governmental or regulatory authority, the Company, or any Company
Subsidiary.

(d) Non-competition.

(i) During the Covenant Term, Executive shall not engage in Competition with the
Company or any of the Company Subsidiaries or their respective affiliates.

(ii) “Competition” shall mean engaging in any activity relating to the
establishment of or provision of services to or in connection with any self
insured workers compensation group plan operating within the State of
California, whether as an employee, consultant, principal, agent, officer,
director, partner, shareholder (except as a less than one percent shareholder of
a publicly traded company) or otherwise.

(e) Non-solicitation.

(i) During the period beginning on the Resignation Date and ending on the second
anniversary thereof, Executive shall not solicit, induce or encourage employees
of the Company or any of the Company Subsidiaries or their respective affiliates
to terminate their employment or to violate any agreement with any of them.

(ii) During the Covenant Term, Executive shall not solicit, induce or encourage
any customers, brokers or agents of the Company, the Company’s Subsidiaries or
their respective affiliates, or any corporation, limited liability company,
partnership, limited partnership, sole proprietorship, joint venture or any
other entity in a joint venture relationship (directly or indirectly) with the
Company, the Company’s Subsidiaries or their respective affiliates, to terminate
or diminish its relationship with the Company, the Company’s Subsidiaries or
their respective affiliates or to violate any agreement with any of them.

(iii) During the period beginning on the Resignation Date and ending on the
second anniversary thereof, Executive shall not, either directly or through any
employee, agent or representative, hire or cause to be hired any employee of the
Company, the Company’s Subsidiaries or their respective affiliates, or any
person who was employed by the Company, the Company’s Subsidiaries or their
respective affiliates, within 180 days of such hiring; provided, however, that
the Company agrees that this Section 4(e) shall not apply solely to Executive’s
hiring of his current administrative assistant.

5. Right to Withhold or Cancel Payments; No Mitigation.

(a) If, after written notice and provided (to the extent the breach is curable)
such breach is not cured within seven (7) days of the receipt of the written
notice, Executive breaches or has breached any of the Restrictive Covenants,
(i) the Company shall immediately be relieved of any further obligation to make
any additional payments to Executive pursuant to Section 3, and (ii) the
Company, any of the Company Subsidiaries or their respective affiliates may seek
injunctive relief and/or damages for such breach. Executive acknowledges that a
breach of the Restrictive Covenants would cause irreparable injury, money
damages would not provide an adequate remedy for the Company, and the Company
shall be entitled to injunctive relief or other equitable relief without posting
any bond; provided, however, that the foregoing shall not prevent Executive from
contesting the issuance of any such injunction on the ground that no violation
or threatened violation of the Restrictive Covenants has occurred. The Company’s
remedies under this Section 5(a), or as provided by law, shall be cumulative and
not exclusive of one another.

(b) No payments or benefits payable to or with respect to Executive pursuant to
this Agreement shall be reduced by any amount Executive may earn or receive from
employment with another employer or from any other source. Executive shall have
no duty to mitigate his damages by seeking other employment.

6. Announcements.

To the extent consistent with its reporting obligations under applicable laws
and regulations, the Company will use reasonable efforts to consult with
Executive regarding the wording of all written internal and external
announcements regarding Executive’s resignation from the Company. The Company
further agrees that oral communications made to the Company’s employees by a
Company spokesperson acting in his official capacity and on behalf of the
Company shall conform in material respects with any previously agreed upon
internal or external announcement regarding Executive’s resignation from the
Company.

7. Binding Effect; Revocation; Modification.

(a) The Company and Executive hereby understand and agree that:

(i) this Agreement is final and binding and constitutes the complete and
exclusive statement of the terms and conditions relating to Executive’s
resignation;

(ii) this Agreement supersedes all prior agreements and understandings, whether
oral or written, between or among Executive and the Releasees relating to
Executive’s employment, Resignation Date, or severance, including but not
limited to the Employment Agreement; and

(iii) no representations or commitments were made by the parties to induce this
Agreement other than as expressly set forth herein.

(b) Executive represents that Executive has been advised to consult with
counsel, has had the opportunity and time to consult with legal counsel and
other personal or financial advisors of his own choosing concerning the
provisions of this Agreement and the Release and that Executive has been given
twenty-one (21) days within which to execute this Agreement and the Release and
seven (7) days following that execution to revoke the Release. To be effective,
any such revocation must be in writing and actually delivered in accordance with
Section 9(g) no later than the close of business on the 7th day following
Executive’s execution of this Agreement and the Release. If Executive revokes
the Release, then this Agreement and the Release shall be null and void. No
obligation upon the Company set forth herein shall be effective, and no payment
or other benefit shall be required to be made or provided to Executive
hereunder, any earlier than the 8th day following Executive’s execution of the
Release. This Agreement may not be modified or supplemented except by a
subsequent written agreement signed by both parties.

8. Withholding.

The Company may withhold from any amounts payable under this Agreement such
federal, state and local taxes as may be required to be withheld pursuant to
applicable laws or regulations.

9. Miscellaneous.

(a) Assignability; Binding Nature. This Agreement shall be binding upon and
inure to the benefit of the Releasees and to their heirs, administrators,
representatives, executors, successors and assigns. No rights or obligations of
the Company under this Agreement may be assigned or transferred by the Company,
except that such rights or obligations may be assigned or transferred to any
purchaser of all or substantially all of the Company’s business or assets or any
successor to the Company (whether direct or indirect, by purchase, merger,
consolidation or otherwise) without prior notice to, or consent of, Executive.
The Company will require in a writing delivered to Executive that any such
purchaser, successor or assignee (and any parent entity of any such purchaser,
successor or assignee) expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such purchase, succession or assignment had taken place. No
rights or obligations of Executive under this Agreement may be assigned or
transferred by Executive.

(b) Representation. The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement between
it and any other person, firm or organization.

(c) Entire Agreement. This Agreement contains the entire understanding and
agreement between the Company and Executive concerning the subject matter
hereof.

(d) Amendment or Waiver. No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. Except as set forth herein, no delay or omission to
exercise any right, power or remedy accruing to the Company or the Executive
shall impair any such right, power or remedy or shall be construed to be a
waiver of or an acquiescence to any breach hereof. No waiver by either the
Company or the Executive of any breach by the other party of any condition or
provision contained in this Agreement to be performed by such other party shall
be deemed a waiver of a similar or dissimilar condition or provision at the same
or any prior or subsequent time. Any waiver must be in writing and signed by
Executive or an authorized director or officer of the Company, as the case may
be.

(e) Survivorship. The respective rights and obligations of the Company and the
Executive shall survive to the extent necessary to the intended preservation of
such rights and obligations.

(f) Beneficiaries/References. Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive’s death by giving the Company written notice thereof. In the event of
Executive’s death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.

(g) Notices. Any notice given to the Company or the Executive shall be in
writing and shall be deemed to have been given when delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of:

      If to the Company:  
CRM Holdings, Ltd.
Attention:  Louis Viglotti, Esq.
FB Perry Building
40 Church Street
P.O. Box HM 2062
Hamilton HM HX
Bermuda
Facsimile No.: 441-295-6689
e-mail:  lviglotti@logic.bm
   
 
With a copy to:  
Louis Viglotti, Esq.

     
General Counsel
 
Compensation Risk Managers, LLC

2515 South Road
 
Poughkeepsie, New York 12601
Facsimile No.: 845-473-6154
e-mail: lviglotti@trustcrm.com
 

If to Executive:
  Mr. Daniel G. Hickey, Jr.

     
70 Pond Hills Court
 
Pleasant Valley, New York 12569

With a copy to:
  Donald D. Brown, Jr., Esq.

Spiegel Brown Fichera & Coté LLP
272 Mill Street
Poughkeepsie, New York 12601
Facsimile No.: 845-452-4731
e-mail: sbfc@sbfclaw.com

(h) Headings. The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

10. Governing Law/Jurisdiction.

This Agreement shall be governed by, construed, interpreted and enforced in
accordance with the laws of New York without reference to principles of conflict
of laws. The Company and Executive hereby consent to the exclusive jurisdiction
of any or all of the following courts for purposes of resolving any dispute
under this Agreement: (i) the United States District Court for the Southern
District of New York or (ii) the Supreme Court of the State of New York venued
in and for the County of Dutchess. The Company and Executive further agree that
any service of process or notice requirements in any such proceeding shall be
satisfied if the rules of such court relating thereto have been substantially
satisfied. The Company and Executive hereby waive, to the fullest extent
permitted by applicable law, any objection which it or he may now or hereafter
have to such jurisdiction and any defense of inconvenient forum.

11. Drafting.

This Agreement represents the joint efforts of the parties involved and should
not be construed as having been drafted by either party for purposes of
resolving ambiguities in the language contained herein.

12. Counterparts.

This Agreement may be executed by either of the parties hereto in counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

CRM HOLDINGS, LTD.

By: /s/ James J. Scardino
Name: James J. Scardino
Title: Chief Financial Officer

/s/ Daniel G. Hickey, Jr.
Daniel G. Hickey, Jr.

EXHIBIT A

RELEASE

As a material inducement to CRM Holdings, Ltd., a Bermuda company (together with
its subsidiaries from time to time and its successors and assigns, the
“Company”), to enter into the annexed Separation Agreement with Daniel G.
Hickey, Jr. (the “Executive”) executed of even date herewith (the “Agreement”),
and for and in consideration of the payments and other benefits provided
therein, Executive hereby irrevocably and unconditionally releases, acquits and
forever discharges the Company, its subsidiaries and affiliates, and their
respective directors, officers, executives, agents, stockholders, members,
representatives, subsidiaries, divisions, parent corporations and affiliates,
and all other persons acting by, through or in concert with any of them and the
successors, assigns, heirs and personal representatives of any of the foregoing
(collectively, the “Releasees”), from any and all charges, complaints, claims,
demands, liabilities, obligations, promises, agreements, actions, causes of
action, at law, in equity, or otherwise, costs, damages, expenses (including
attorneys’ fees and costs actually incurred), or any rights of any and every
kind or nature, accrued or unaccrued, contingent or otherwise, known or unknown,
which Executive has or claims to have arising out of facts or circumstances
which have occurred or existed prior to, or which are occurring and do exist as
of, the date of Executive’s execution of the Agreement against each or any of
the Releasees. This release (“Release”) pertains to but is in no way limited to
all matters relating to or arising out of Executive’s employment and the
cessation of his employment with the Company and all claims for severance
benefits or other payments which are not express obligations of the Company
under the Agreement. This Release further pertains to, but is in no way limited
to, rights and claims under the Age Discrimination in Employment Act of 1967
(“ADEA”), Title VII of the Civil Rights Act, as amended, the Americans With
Disabilities Act, the Family Medical Leave Act, the New York State Human Rights
Law, and all other federal, state, local or municipal fair employment and
discrimination laws, and all claims under common law, whether based in tort or
contract, law or equity.

Notwithstanding anything herein to the contrary, this Release does not apply to:
(i) claims that arise after the execution of this Release; (ii) the Executive’s
rights under any tax-qualified pension or claims for accrued vested benefits
under any other employee benefit plan, policy or arrangements maintained by the
Company or under COBRA; (iii) worker’s compensation claims and any other claims
that cannot be waived by law; or (iv) Executive’s rights to enforce the
Agreement.

IN WITNESS WHEREOF, I have executed this Release this       13       day of
March, 2009.

/s/ Daniel G. Hickey, Jr.
Daniel G. Hickey, Jr., an individual