<PAGE>

                                                                   Exhibit 10(a)

         This ASSET PURCHASE AGREEMENT is made and effective, as of January 10,
2000, by and between RISK CAPITAL HOLDINGS, INC., a Delaware corporation
("RCHI"), RISK CAPITAL REINSURANCE COMPANY, a stock insurance company organized
under the laws of the State of Nebraska (the "COMPANY"; and together with RCHI,
the "SELLER"), FOLKSAMERICA HOLDING COMPANY, INC., a New York corporation
("FHC") and FOLKSAMERICA REINSURANCE COMPANY, a stock insurance company
organized under the laws of the State of New York ("FRC"; and together with FHC,
the "PURCHASER").

                              W I T N E S S E T H:

         WHEREAS, the Seller wishes to sell the reinsurance operations of the
Company to the Purchaser and to consummate the other transactions contemplated
herein and the Purchaser wishes to purchase such reinsurance operations from the
Seller and to consummate the other transactions contemplated herein, on the
terms and subject to the conditions set forth herein; and

         WHEREAS, to induce the Purchaser to enter into this Agreement, Marsh &
McLennan Risk Capital Holdings, Ltd., XL Capital Ltd. and The Trident
Partnership, L.P. have entered into certain voting agreements with the Purchaser
which are attached hereto as EXHIBIT A;

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
agreements  and covenants  hereinafter  set forth,  the Purchaser and the Seller
hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

         "ACCOUNTANTS OPINION" has the meaning specified in Section 2.02(b).

         "ACQUISITION AGREEMENT" has the meaning specified in Section 5.08(b).

         "ACQUISITION PROPOSAL" has the meaning specified in Section 5.08(a).

         "ACTUARIAL OPINION" has the meaning specified in Section 2.02(b).

         "ADJUSTED PURCHASE PRICE" has the meaning specified in Section 2.02(a).

         "ADJUSTMENT ALLOCATION" has the meaning specified in Section 7.05.


<PAGE>


         "ADJUSTMENT ALLOCATION STATEMENT" has the meaning specified in Section
7.05.

         "AFFILIATE" with respect to any Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, in the case of the
Seller, the term "control" (or "controlled" or "controlling", as the context may
require) shall have the meaning specified in Section 44-2121 under the Nebraska
Insurance Code, as in effect on the date hereof, and in the case of the
Purchaser, "control" (or "controlled" or "controlling", as the context may
require) shall have the meaning specified in Section 1501(a)(2) of the New York
Insurance Law, as in effect on the date hereof, PROVIDED, HOWEVER, that for
purposes of Sections 3.02 and 5.13 of this Agreement, XL, Marsh & McLennan
Companies, Inc. and Trident and their respective Subsidiaries shall be deemed
Affiliates of the Company for all purposes other than with respect to
Reinsurance Agreements.

         "AFFILIATE AGREEMENTS" has the meaning specified in Section 5.13(b).

         "AGREED ADJUSTMENTS" has the meaning specified in Section 2.02(b)(iv).

         "AMENDED PLANS" has the meaning specified in Section 6.03(b).

         "ANNUAL STATUTORY STATEMENTS" means (a) in the case of the Company, the
Annual Statement of the Company, as filed with the Nebraska Insurance
Department, for the years ended December 31, 1998, 1997 and 1996, in each case
including all exhibits, interrogatories, notes and schedules thereto and any
auditor's report, actuarial opinion, affirmation or certification filed in
connection therewith and (b) in the case of FRC, the Annual Statement of FRC, as
filed with the New York Insurance Department, for the year ended December 31,
1998, including all exhibits, interrogatories, notes and schedules thereto and
any auditor's report, actuarial opinion, affirmation or certification filed in
connection therewith.

         "APPLICABLE INSURANCE DEPARTMENTS" has the meaning specified in Section
5.05(a).

         "APPOINTED EXPERTS" means (i) an independent actuary and/or (ii) a firm
of independent public accountants, which shall be one of the "Big Five" firms of
public accountants, each of which shall be satisfactory to the Purchaser and the
Seller.

         "ARROWHEAD" has the meaning specified in Section 5.05(c).

         "ARX" has the meaning specified in Section 5.05(c).

         "ASSUMED BUSINESS" means the business of the Company to be assumed by
FRC pursuant to the Transfer and Assumption Agreement.


<PAGE>


         "BEGINNING RESERVES" means, after disregarding any Agreed Adjustment
for the Swiss Air Loss,  the  Reserves for Subject  Liabilities  other than CPIS
Subject Liabilities set forth on the Closing Date Balance Sheet.

         "BROCKBANK TREATIES" means the Reinsurance Agreements between the
Company and Brockbank/Metcalf identified by the Company as Treaty numbers AV1009
and AV1010, reinsuring Lloyd's Syndicate Nos. 588, 861 and 1209.

         "BUSINESS" means the business of the Company as it is
currently conducted by the Company as of the date hereof and, when applicable,
as of the Closing Date.

         "BUSINESS DAY" means a day of the year on which banks are not required
or authorized to be closed in the City of New York.

         "CLOSING" has the meaning specified in Section 2.03(a).

         "CLOSING DATE" has the meaning specified in Section 2.03(a).

         "CLOSING DATE ADJUSTED GAAP BOOK VALUE" has the meaning specified in
Section 2.04(a).

        "CLOSING DATE AUDITORS' REPORT" has the meaning specified in Section
2.04(a).

         "CLOSING DATE AUDITORS' TAX REPORT" has the meaning specified in
Section 2.04(a).

         "CLOSING DATE BALANCE SHEET" has the meaning specified in Section
2.04(a).

         "CLOSING DATE BASIS REDUCTION AMOUNT" has the meaning specified in
Section 2.04(a).

         "CLOSING DATE TAX AMOUNT" has the meaning specified in Section 2.04(a).

         "CLOSING DATE TAX ASSETS" has the meaning specified in Section 2.04(a).

         "CLOSING DATE TAX BALANCE SHEET" has the meaning specified in Section
2.04(a).

         "COMMERCIALLY REASONABLE EFFORTS" of any Person means efforts of that
Person that a reasonable Person would exert for its own account under similar
circumstances but without the expenditure of funds except the payment of the
fees and expenses of any applicable attorneys, consultants or other advisors
retained by it and applicable filing fees.

         "COMPANY" means Risk Capital Reinsurance Company, a stock insurance


<PAGE>

company organized under the laws of the State of Nebraska.

         "CONFIDENTIALITY AGREEMENT" has the meaning specified in Section 5.04.

         "CONTEST" has the meaning specified in Section 7.04(b).

         "CONTINUING EMPLOYEES" has the meaning specified in Section 6.02.

         "CONTRACT" means all written mortgages, indentures, debentures, notes,
loans, bonds, agreements, contracts, leases, subleases, licenses, franchises,
obligations, instruments or other legally binding commitments, arrangements or
undertakings of any kind (excluding Reinsurance Agreements and insurance
policies) to which the Company is a party or by which the Company or any of its
Properties may be bound or affected.

         "CPIS" means Capital Protection Insurance Services, LLC.

         "CPIS BOUND CEDENT" has the meaning specified in Section 3.21(b).

         "CPIS SUBJECT LIABILITIES" has the meaning specified in Section
2.02(b)(ii).

         "CREDIT FOR REINSURANCE FACILITY(IES)" means any and all reinsurance
trusts, letters of credit, statutory deposits, funds withheld deposits and other
similar agreements or mechanisms which have been established by, on behalf of,
or for the benefit of, the Company which permits a cedent to take statutory
credit for reinsurance ceded pursuant to any Reinsurance Agreement or
Retrocessional Arrangement.

         "DESIGNATED INTEGRATED SOLUTIONS" has the meaning specified in Section
5.05(c).

         "DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated as of the
date hereof, delivered to the Purchaser by the Seller.

         "DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.

         "EMPLOYEES" shall mean employees, former employees or independent
contractors of the Company and/or the Seller.

         "ENCUMBRANCES" means any lien, pledge, mortgage, security interest,
assessment, claim, lease, charge, option, right of first refusal, imperfection
of title, easement, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation of any kind
whatsoever.

         "ENDING RESERVES" means the Reserves for Non-CPIS Subject Liabilities
as of the



<PAGE>

Valuation Date. The determination of Ending Reserves shall be (i) conducted by
the independent actuary making such determination (x) using its independent
judgment based on prevailing facts, circumstances and trends, (y) in accordance
with generally accepted actuarial standards and principles and (z) to the extent
not inconsistent with the foregoing, in a manner and applying a method
consistent with the determination of the Beginning Reserves and (ii) consistent
with Purchaser's audited financial statements for the fiscal year that includes
the Valuation Date. It is understood that such actuary shall in no way be
inhibited in the use of its independent judgment.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and interpretations thereunder.

         "ESCROW AGENT" has the meaning specified in Section 2.03(d).

         "ESCROW AGREEMENT" has the meaning specified in Section 2.03(d).

         "ESCROW AGREEMENTS" means the Escrow Agreement and the Supplemental
Escrow Agreement.

         "ESTIMATED CLOSING DATE ADJUSTED GAAP BOOK VALUE" has the meaning
specified in Section 2.02(d).

         "ESTIMATED CLOSING DATE BALANCE SHEET" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE BASIS REDUCTION AMOUNT" has the meaning
specified in Section 2.02(d).

         "ESTIMATED CLOSING DATE COMPANY REPORT" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX AMOUNT" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX ASSETS" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX BALANCE SHEET" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX LIABILITIES" has the meaning specified in
Section 2.02(d).


<PAGE>


         "ESTIMATED CLOSING DATE TAX REPORT" has the meaning specified in
Section 2.02(d).

         "EXCESS AVIATION PREMIUM" has the meaning specified in Section 5.16(b).

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.

         "EXCLUDED CLAIMS" has the meaning specified in Section 9.03(b).

         "EXCLUDED LIABILITIES" has the meaning specified in Section 2.01(d).

         "EXCLUDED SECURITIES" has the meaning specified in Section 3.07(a).

         "FHC" means Folksamerica Holding Company, Inc., a New York corporation.

         "FLEET" has the meaning specified in Section 5.05(d).

         "FRC" means Folksamerica Reinsurance Company, a New York stock
insurance company.

         "GAAP" has the meaning specified in Section 2.02(b)(iii)

         "GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
government, political subdivision, legislature, court, agency, department,
bureau, commission or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory authority.

         "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.

         "INDEMNIFIED PARTY" has the meanings specified in Sections 9.02(a) and
9.03(a), as applicable.

         "INITIAL ALLOCATION" has the meaning specified in Section 7.05.

         "INITIAL ALLOCATION STATEMENT" has the meaning specified in Section
7.05.

         "INTEGRATED SOLUTIONS" has the meaning specified in Section 3.07(b).

         "INTELLECTUAL PROPERTY RIGHTS" has the meaning specified in Section
3.15


<PAGE>


         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.

         "INVESTMENT PORTFOLIO" means a list provided by the Seller to the
Purchaser setting forth all investments, including, without limitation, bills,
notes and bonds owned by the Company which are expected to be transferred to the
Purchaser as of a particular date, the issuer of the investments, the amount
owned and the market value of the investments as of such date; PROVIDED, that
such list shall not include publicly-traded equity securities, privately held
equity securities, Integrated Solutions investments, the Company's high yield
securities or securities which are illiquid.

         "IRS" means the Internal Revenue Service.

         "LIABILITY" or "LIABILITIES" means, with respect to any Person, any
liability, obligation or commitment of such Person of any kind, character or
description, whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise and whether or not the same is required to be accrued on the financial
statements of such Person.

         "MATERIAL ADVERSE EFFECT" means:

         (a) With respect to the Seller or the Company, any change in, or effect
     on, the Company or the Business which is, or which is reasonably likely to
     be, materially adverse to the Business, operations, assets, Liabilities,
     results of operations or condition (financial or otherwise) of the Company
     to the extent related to the Assumed Business, or which will, or is
     reasonably likely to, prevent the transactions contemplated by this
     Agreement.

         (b) With respect to the Purchaser, any change in, or effect on, the
     Purchaser which is, or which is reasonably likely to be, materially adverse
     to the Purchaser's business, operations, assets, Liabilities, results of
     operations or condition (financial or otherwise) on a consolidated basis,
     or which will, or is reasonably likely to, prevent the transactions
     contemplated by this Agreement.

         "MMRC" means Marsh & McLennan Risk Capital Holdings Ltd.

         "MOODY'S" means Moody's Investors Services, Inc.

         "MULTIEMPLOYER PLAN" has the meaning specified in Section 3.19(b) .

         "MULTIPLE EMPLOYER PLAN" has the meaning specified in Section 3.19(b).

         "NAIC" means the National Association of Insurance Commissioners.


<PAGE>


         "NEBRASKA INSURANCE CODE" means the insurance laws of the State of
Nebraska,   including   the   published   rules,   regulations,   bulletins  and
interpretations promulgated thereunder.

         "NEBRASKA INSURANCE DEPARTMENT" means the Department of Insurance of
the State of Nebraska.

         "NEW YORK INSURANCE CODE" means the insurance laws of the State of New
York, including the published rules, regulations, bulletins and interpretations
promulgated thereunder.

         "NEW YORK INSURANCE DEPARTMENT" means the Department of Insurance of
the State of New York.

         "1998 REPORT" has the meaning specified in Section 2.02(b)(ii).

         "90% QUOTA SHARE AGREEMENT" has the meaning specified in Section
3.21(a).

         "NON-CPIS SUBJECT LIABILITIES" has the meaning specified in Section
2.02(b)(ii)

         "OBJECTION NOTICE" means a written notice to Purchaser that Seller
disputes the Reserve Deficiency/Reserve Redundancy, Paid Losses, Ending Reserves
and/or any component of any of the foregoing, and specifying in reasonable
detail the Seller's reasons for such dispute.

         "OBJECTION PERIOD" means the period of sixty (60) days following
Seller's receipt of the last report referred to in Section 2.05(a).

         "PAID LOSSES" means losses and loss adjustment expenses of the Assumed
Business (other than losses and loss adjustment expenses paid with respect to
the business produced by CPIS for the account of the Company) actually paid by
or on behalf of FRC from (but excluding) the Closing Date to (and including) the
Valuation Date, less (x) any amounts actually received as of the Valuation Date
in respect of such losses and loss adjustment expenses pursuant to insurance,
reinsurance, retrocession or similar contracts, treaties, agreements or
arrangements and (y) salvage and subrogation actually received as of the
Valuation Date in respect of such losses and loss adjustment expenses; PROVIDED
that the portion of unallocated loss adjustment expenses included in such loss
adjustment expenses shall not exceed the amount of unallocated loss adjustment
expenses included in the Beginning Reserves except as the result of the
recharacterization as unallocated loss adjustment expenses, pursuant to a change
prescribed by the NAIC or the New York Insurance Department, of an item that at
the date hereof would constitute allocated loss adjustment expenses. For
purposes of this provision, unallocated loss adjustment expenses shall mean
internal expenses for compensation of FRC's officers and employees and related
overhead expenses. The calculation of Paid Losses shall be (x) made in
accordance with GAAP and (y) consistent with Purchaser's financial statements
for the fiscal



<PAGE>

period that includes the Valuation Date.

         "PERMITS" has the meaning specified in Section 3.14.

         "PERMITTED ENCUMBRANCES" has the meaning specified in Section 3.16.

         "PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority or other entity.

         "PLAN" and "PLANS" mean all retirement, pension, savings,
profit-sharing, bonus, incentive compensation, deferred compensation, stock
option or stock compensation, welfare benefit, severance or termination, change
in control, stay-bonus, retention, or similar "pay-to-stay" arrangements,
retiree medical, dental or life insurance, supplemental retirement, employment
or consulting agreements and similar or other plans, agreements, policies,
programs, contracts and arrangements (including automobile rental or usage
arrangements) sponsored, maintained, executed or contributed to by the Company
and/or the Seller covering Employees, including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA; PROVIDED, HOWEVER,
that "Plan" shall not include plans or other arrangements of Purchaser or its
subsidiaries covering Continuing Employees.

         "POST-CLOSING PERIODS" means any taxable period thereof beginning after
the Closing Date. If a taxable period begins before the Closing Date and ends
after the Closing Date, then the portion of the taxable period that begins on
the day following the Closing Date shall constitute a Post-Closing Period.

         "PRE-CLOSING PERIOD" means any taxable period or portion thereof that
is not a Post-Closing Period.

         "PROPERTY" and "PROPERTIES" mean real, personal or mixed property,
tangible or intangible.

         "PROVISIONAL PURCHASE PRICE" has the meaning specified in Section
2.02(a).

         "PROXY STATEMENT" has the meaning specified in Section 3.10.

         "PURCHASED ASSETS" has the meaning specified in Section 2.01(a).

         "PURCHASER" means FRC and FHC collectively.

         "PURCHASER'S ACCOUNTANTS" has the meaning specified in Section
2.02(b)(iii).


<PAGE>


         "PURCHASER CLOSING COSTS" has the meaning specified in Section
2.02(b)(iv).

         "QUARTERLY STATUTORY STATEMENTS" means (a) in the case of the Company,
the Quarterly Statement of the Condition and Affairs of the Company, as filed
with the Nebraska Insurance Department, for the quarterly periods ended March
31, June 30 and September 30, 1999 and (b) in the case of FRC, the Quarterly
Statement of the Condition and Affairs of FRC, as filed with the New York
Insurance Department, for the quarterly periods ended March 31, June 30 and
September 30, 1999.

         "RCHI" means Risk Capital Holdings, Inc., a Delaware corporation.

         "REFERENCE DATE" means December 31, 1999.

         "REFERENCE DATE ADJUSTED GAAP BOOK VALUE" has the meaning specified in
Section 2.02(b)(iv).

         "REFERENCE DATE AUDITORS' REPORT" has the meaning specified in Section
2.02(b)(iv).

         "REFERENCE DATE AUDITORS' TAX REPORT" has the meaning specified in
Section 2.02(b)(iii).

         "REFERENCE DATE BALANCE SHEET" has the meaning specified in Section
2.02(b).

         "REFERENCE DATE BASIS REDUCTION AMOUNT" has the meaning specified in
Section 2.02(b)(iii).

         "REFERENCE DATE TAX AMOUNT" has the meaning specified in Section
2.02(b)(iv).

         "REFERENCE DATE TAX ASSETS" has the meaning specified in Section
2.02(b)(iii).

         "REFERENCE DATE TAX BALANCE SHEET" has the meaning specified in Section
2.02(b)(iii).

         "REFERENCE DATE TAX LIABILITIES" has the meaning specified in Section
2.02(b)(iii).

         "REINSURANCE AGREEMENTS" has the meaning specified in Section 3.17(a).

         "RESERVES" means all unearned premium reserves and all reserves for
incurred losses including, without limitation, case reserves, reserves for
incurred but not reported losses and reserves for loss adjustment expenses, both
allocated and unallocated, and also any adjustments to such items on account of
reinsurance receivables, salvage and subrogation,



<PAGE>

reinsurance retrospective premiums and reinsurance profit commissions.

         "RESERVE DEFICIENCY" has the meaning specified in Section 2.05(a)(iii).

         "RESERVE REDUNDANCY" has the meaning specified in Section 2.05(a)(iii).

         "RETAINED EMPLOYEES" has the meaning specified in Section 6.03(a).

         "RETAINED NAMES AND MARKS" has the meaning specified in Section 5.07.

         "RETROCESSION AGREEMENT" has the meaning specified in Section 3.17(c).

         "RUNOFF COVERAGE" has the meaning specified in Section 5.16(a).

         "RUNOFF COVERAGE PREMIUM SHORTFALL" has the meaning specified in
Section 5.16(b).

         "SAP" means, with respect to a reinsurance or insurance company, the
statutory accounting procedures and practices prescribed or permitted from time
to time by the National Association of Insurance Commissioners and the Nebraska
Insurance Department with respect to the Company or the New York Insurance
Department with respect to FRC and applied in a consistent manner throughout the
periods involved.

         "S&P" means Standard & Poor's Ratings Group.

         "SEC" means the Securities and Exchange Commission.

         "SECURITIES ACT" means the Securities Act of 1993, as amended, together
with the rules and regulations promulgated thereunder.

         "SELLER" means RCHI and the Company, collectively.

         "SELLER FINANCIAL STATEMENTS" has the meaning specified in Section
3.05(b).

         "SELLER SEC DOCUMENTS" means all reports, schedules, registration
statements and definitive proxy statements filed by RCHI with the SEC since
January 1, 1999.

         "SELLER'S ACCOUNTANTS" has the meaning specified in Section 2.02(b)(i).

         "SELLER'S ACTUARIES" has the meaning specified in Section 2.02(b).

         "SELLER'S STOCKHOLDER APPROVAL" has the meaning specified in Section
3.01.



<PAGE>


         "SENIOR EXECUTIVES" has the meaning specified in Section 6.03(a).

         "SEPTEMBER 30 BALANCE SHEET" has the meaning specified in Section
3.05(d).

         "SEVERANCE PLAN" has the meaning specified in Section 6.03(b).

         "SETTLEMENT DATE" means (a) if Seller does not give an Objection Notice
within the Objection Period, the second Business Day following the end of the
Objection Period, and (b) if Seller gives an Objection Notice within the
Objection Period, the second Business Day following the later of (x) the
determinations and confirmations by the Appointed Experts pursuant to Section
2.05(b) or (y) resolution of any dispute regarding Paid Losses.

         "60 DAY PERIOD" has the meaning specified in Section 6.03(a).

         "SOFTWARE LICENSES" has the meaning specified in Section 5.15.

         "SPECIAL MEETING" has the meaning specified in Section 3.10.

         "SUBJECT LIABILITIES" has the meaning specified in Section 2.02(b)(ii).

         "SUBSIDIARY" means any and all other corporations, limited liability
companies, partnerships, joint ventures, associations and other entities of
which the Company, directly or indirectly (through one or more Subsidiaries or
otherwise), owns or controls more than 50% of the voting securities or other
voting interests.

         "SUNSHINE" has the meaning specified in Section 5.05(c).

         "SUPPLEMENTAL ESCROW AGREEMENT" has the meaning specified in Section
2.04(b)(iii).

         "SUPERIOR PROPOSAL" has the meaning specified in Section 5.08(b).

         "SWISS AIR LOSS" has the meaning specified in Section 2.02(b)(ii).

         "TAX" or "TAXES" means (i) all taxes, fees, duties and other
assessments imposed by the United States or any state, local or foreign
government or political subdivision or taxing authority thereof or therein,
including, without limitation, any income, estimated, premium, profits, windfall
profits, environmental, alternative, minimum, license, import, transfer,
registration, stamp, franchise, sales, use, value added, gross receipts, excise,
utility, property (real or personal), severance, ad valorem, net proceeds, deed,
lease, service, capital, customs, occupation, payroll, wage, workman's
compensation, employment, withholding and social



<PAGE>

     security taxes, including all interest, penalties and additions to taxes
     imposed by any taxing authority with respect thereto, whether disputed or
     not and (ii) any liability of the Company for amounts described in clause
     (i) as a result of being a member of any affiliated, consolidated, combined
     or unitary group on or prior to the Closing Date.

         "TAX RETURN" means any return, report or statement (including any
information returns) required to be filed for purposes of a particular Tax.

         "TERMINATION FEE" has the meaning specified in Section 5.09(b).

         "THIRD PARTY" has the meaning specified in Section 5.09(b).

         "TRANSFER AND ASSUMPTION AGREEMENT" has the meaning specified in
Section 2.01(c).

         "TREASURY REGULATIONS" means regulations promulgated by the U.S.
Treasury under the Internal Revenue Code.

         "TREATY LIABILITIES" has the meaning specified in Section 2.01(b).

         "TRIDENT" means Trident Partnership, L.P.

         "VALUATION DATE" means the fifth anniversary of the Closing Date

         "XL" means XL Capital Ltd.



<PAGE>



                                   ARTICLE II

                    PURCHASE AND SALE OF THE ASSUMED BUSINESS

         SECTION 2.01. PURCHASE OF THE ASSUMED BUSINESS.

         (a) On the Closing Date and subject to the terms and conditions stated
in this Agreement, the Company shall sell to FRC, and RCHI shall cause the
Company to sell to FRC, and FRC shall purchase from the Company, as provided in
Section 2.03(b), all of the Company's right, title and interest in and to the
following assets related to the Assumed Business (the "PURCHASED ASSETS"):

      (i)      Fixed Income Securities at market value;
      (ii)     Cash and Accrued Investment Income;
      (iii)    Premiums Receivables;
      (iv)     Reinsurance Recoverables;
      (v)      Deferred Acquisition Costs;
      (vi)     Deferred Tax Assets;
      (vii)    Funds Held;
      (viii)   Contingent Commissions Recoverables; and
      (ix)     Related and Incidental Assets as specified in the Transfer and
                                    Assumption Agreement.

         (b) In consideration of the sale, transfer, conveyance and assignment
of the Purchased Assets and in reliance on the representations and warranties
made herein by the Seller and the Company, FRC agrees to, and the Purchaser
agrees to cause FRC to, assume the Treaty Liabilities (as defined in the
Transfer and Assumption Agreement) reflected on the Closing Date Balance Sheet.

         (c) The transfer of the Purchased Assets and assumption of the Treaty
Liabilities shall be further evidenced by the execution on the Closing Date by
the Company and FRC of a portfolio transfer and assumption reinsurance agreement
in the form annexed hereto as EXHIBIT B (together with all other assignments,
bills of sale, assignment and assumption agreements and other title transfer
documentation necessary to effectuate the transfer of the Purchased Assets and
assumption of the Treaty Liabilities, collectively the "TRANSFER AND ASSUMPTION
AGREEMENT").

         (d) Notwithstanding the foregoing, the Purchaser shall not assume, and
shall not at any time hereafter (including on or after the Closing Date) become
obligated to pay, perform, satisfy or discharge, any Liabilities (whether or not
asserted prior to the Closing Date) of the Seller, or of any of its Affiliates,
Subsidiaries, Plans or any shareholder of Seller, other than the Treaty
Liabilities (such Liabilities not being assumed being hereinafter referred to as
the "EXCLUDED LIABILITIES"). The assumption by the Purchaser of the Treaty
Liabilities shall in no way



<PAGE>

expand the rights or remedies of third parties against FRC as compared to the
rights and remedies which such parties would have had against the Company had
the transactions contemplated by this Agreement not been consummated.

         SECTION 2.02. PURCHASE PRICE.

         (a) The purchase price for the Assumed Business shall be equal to $15
million (the "PROVISIONAL PURCHASE PRICE"), which amount shall be redetermined
and adjusted to reflect the Closing Date Adjusted GAAP Book Value of the Assumed
Business, determined as provided in Section 2.04(a) (the "ADJUSTED PURCHASE
PRICE"). At the Closing, the Purchaser shall be entitled to a credit against the
Provisional Purchase Price equal to the Estimated Closing Date Tax Amount
determined as provided in Section 2.03(c), which credit shall be redetermined
and adjusted to reflect the Closing Date Tax Amount as provided in Section
2.04(a).

         (b) Reference Date Adjusted GAAP Book Value and Reference Date Tax
Amount shall be determined as follows:

                  (i) Promptly after the Reference Date, the Seller shall cause
         an audit of the accounts and records of the Seller (on a consolidated
         basis) at the Reference Date to be conducted by PricewaterhouseCoopers,
         the Seller's independent public accountants ("SELLER'S ACCOUNTANTS"),
         in accordance with generally accepted auditing standards in the case of
         the Reference Date Adjusted GAAP Book Value.

                  (ii) Promptly after the Reference Date, the Seller shall also
         cause an evaluation (on both a gross and net of reinsurance basis) of
         the loss and loss adjustment expense Liabilities of the Company arising
         under the Reinsurance Agreements set forth in Section 3.17(b)(1) and
         Section 3.17(c)(1) of the Disclosure Schedule (collectively, the
         "SUBJECT LIABILITIES") at the Reference Date to be conducted by William
         M. Mercer, Incorporated, the Seller's actuaries ("SELLER'S ACTUARIES")
         in accordance with generally accepted actuarial standards and
         principles consistent with those applied in the evaluation of loss
         reserves as of December 31, 1998 of the Company by the Seller's
         Actuaries, which is attached hereto as EXHIBIT C (the "1998 REPORT"),
         except that such evaluation at the Reference Date shall (A) exclude any
         Subject Liabilities and premiums associated with the Brockbank Treaties
         and (B) separately evaluate (x) Subject Liabilities associated with
         business produced by CPIS for the account of the Company (the "CPIS
         SUBJECT LIABILITIES"), (y) Subject Liabilities associated with the
         Swiss Air Flight 111 loss, (the "SWISS AIR LOSS") and (z) all other
         Subject Liabilities of the Company (the "NON-CPIS SUBJECT
         LIABILITIES"). Promptly following the conclusion of such evaluation,
         Seller's Actuaries shall issue their opinion (the "ACTUARIAL OPINION")
         that, with respect to each of the matters severally set forth in



<PAGE>

         clauses (x), (y) and (z) of the preceding sentence, in their opinion
         the amount of Subject Liabilities recorded by the Company as at the
         Reference Date (A) meet the requirements of the insurance laws of the
         State of Nebraska; (B) are computed in accordance with generally
         accepted loss reserving standards and principles; and (C) make a
         reasonable provision for all unpaid loss and loss adjustment expense
         obligations of the Company under the terms of the Reinsurance
         Agreements set forth in Section 3.17(b)(1) and Section 3.17(c)(1) of
         the Disclosure Schedule. Copies of the Actuarial Opinion shall be
         delivered to the Seller, the Seller's Accountants, the Purchaser and
         the Purchaser's Accountants.

                  (iii) During the period of the audit, Seller's Accountants
         shall keep the Purchaser and an independent public accounting firm
         designated by the Purchaser ("PURCHASER'S ACCOUNTANTS"), fully informed
         as to the progress of the audit. Upon conclusion of the audit, Seller
         shall submit to the Purchaser and Purchaser's Accountants (A) a balance
         sheet of the Assumed Business at the Reference Date in the form of
         EXHIBIT D hereto (the "REFERENCE DATE BALANCE SHEET") prepared in
         accordance with United States generally accepted accounting principles
         ("GAAP"), (B) an unqualified opinion of Seller's Accountants (the
         "ACCOUNTANTS OPINION") stating that the Reference Date Balance Sheet
         (x) has been prepared in accordance with GAAP and (y) presents fairly,
         in all material respects, the financial position of the Assumed
         Business at the Reference Date, (C) a tax balance sheet of the Assumed
         Business at the Reference Date (the "REFERENCE DATE TAX BALANCE SHEET")
         prepared in accordance with applicable U.S. federal income tax
         provisions setting forth the tax basis of the assets specified in
         Section 2.01(a) (other than deferred tax assets and deferred
         acquisition costs and determined by using the fair market value of the
         fixed income securities instead of tax basis) (the "REFERENCE DATE TAX
         ASSETS") and setting forth the Liabilities specified in Section 2.01(b)
         (other than deferred tax liabilities) determined in accordance with
         Section 1060 of the Internal Revenue Code and the Treasury Regulations
         promulgated thereunder (the "REFERENCE DATE TAX LIABILITIES"), (D) a
         computation of the Reference Date Tax Amount and (E) a report by the
         Seller's Accountants as to the application to the Reference Date Tax
         Balance Sheet and the Reference Date Tax Amount (as defined below) of
         specified procedures reasonably agreed upon by Seller and Purchaser
         (the "REFERENCE DATE AUDITORS' TAX REPORT").

                  (iv) The Reference Date Balance Sheet shall also be
         accompanied by a report of Seller's Accountants (the "REFERENCE DATE
         AUDITORS' REPORT") setting forth a computation of the Reference Date
         Adjusted GAAP Book Value (as defined below). As used in this Section
         2.02(b), the term "REFERENCE DATE ADJUSTED GAAP BOOK VALUE" shall mean
         the assets of the Company minus the Liabilities of the Company as
         reflected on the Reference Date Balance Sheet,



<PAGE>

         adjusted (i) so that no value is attributed to any assets or
         Liabilities other than those specified in Section 2.01(a) and Section
         2.01(b) above (it being understood that no Excluded Securities or
         securities rated below investment grade will be included for purposes
         of Sections 2.02(d) and 2.04); (ii) so as to establish an amount of
         cash equivalents and fixed income securities (including accrued income)
         with a fair market value determined in accordance with GAAP such that
         the fair market value of the cash equivalents and fixed income
         securities (including accrued income) is equal to the excess of (A) the
         Liabilities specified in Section 2.01(b) over (B) the assets (other
         than cash equivalents and fixed income securities) specified in Section
         2.01(a); (iii) so as to eliminate any assets and Liabilities in respect
         of the Brockbank Treaties; and (iv) so as to eliminate from the
         Reserves in respect of the Swiss Air Loss any increase in the amounts
         thereof from the amounts thereof included in the September 30 Balance
         Sheet (as defined in Section 3.05(d)) up to an aggregate of $5 million,
         net of all Tax effects (the adjustments set forth in clauses (i)
         through (iv) above, collectively the "AGREED ADJUSTMENTS"). The
         Reference Date Balance Sheet shall segregate in a separate line item
         the Excluded Securities. The Reference Date Tax Balance Sheet shall
         also be accompanied by the Reference Date Auditors' Tax Report. The
         "REFERENCE DATE TAX AMOUNT" shall mean (A) if the Reference Date Basis
         Reduction Amount (as defined below) is not in excess of $15 million,
         the lesser of (i) the product of (x) 17.5% and (y) the Reference Date
         Basis Reduction Amount and (ii) $2 million and (B) if the Reference
         Date Basis Reduction Amount is greater than $15 million, the sum of (i)
         $2 million and (ii) the product of (a) 35% and (b) the excess of the
         Reference Date Basis Reduction Amount over $15 million. The "REFERENCE
         DATE BASIS REDUCTION AMOUNT" shall mean the excess, if any, of the
         Reference Date Tax Assets over the sum of (i) Reference Date Tax
         Liabilities, (ii) the Provisional Purchase Price, and (iii) the sum of
         the transaction costs of the Purchaser as estimated in good faith by
         Purchaser (including legal accounting and investment banking fees and
         expenses) and the amount of the payment under Section 6.04 hereof
         ("PURCHASER CLOSING COSTS").

                  (v) Purchaser shall notify the Seller of the Purchaser's good
         faith estimate of Purchaser Closing Costs at least five (5) Business
         Days prior to each date Seller is required to deliver the items
         required to be delivered pursuant to Sections 2.02(b)(iii), 2.02(d) and
         2.04(a).

         (c) Promptly following the delivery of the Reference Date Balance
Sheet, the Reference Date Auditors' Report, the Reference Date Tax Balance
Sheet, the computation of the Reference Date Tax Amount, the Reference Date
Auditors' Tax Report and the Accountants Opinion pursuant to Section 2.02(b),
Seller shall make available to the Purchaser and Purchaser's Accountants for
review such information regarding the accounts and records of the Company from
Seller's Accountants' work papers as the Purchaser and Purchaser's Accountants
may







<PAGE>

                                                                   Exhibit 10(a)

         This ASSET PURCHASE AGREEMENT is made and effective, as of January 10,
2000, by and between RISK CAPITAL HOLDINGS, INC., a Delaware corporation
("RCHI"), RISK CAPITAL REINSURANCE COMPANY, a stock insurance company organized
under the laws of the State of Nebraska (the "COMPANY"; and together with RCHI,
the "SELLER"), FOLKSAMERICA HOLDING COMPANY, INC., a New York corporation
("FHC") and FOLKSAMERICA REINSURANCE COMPANY, a stock insurance company
organized under the laws of the State of New York ("FRC"; and together with FHC,
the "PURCHASER").

                              W I T N E S S E T H:

         WHEREAS, the Seller wishes to sell the reinsurance operations of the
Company to the Purchaser and to consummate the other transactions contemplated
herein and the Purchaser wishes to purchase such reinsurance operations from the
Seller and to consummate the other transactions contemplated herein, on the
terms and subject to the conditions set forth herein; and

         WHEREAS, to induce the Purchaser to enter into this Agreement, Marsh &
McLennan Risk Capital Holdings, Ltd., XL Capital Ltd. and The Trident
Partnership, L.P. have entered into certain voting agreements with the Purchaser
which are attached hereto as EXHIBIT A;

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
agreements  and covenants  hereinafter  set forth,  the Purchaser and the Seller
hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

         "ACCOUNTANTS OPINION" has the meaning specified in Section 2.02(b).

         "ACQUISITION AGREEMENT" has the meaning specified in Section 5.08(b).

         "ACQUISITION PROPOSAL" has the meaning specified in Section 5.08(a).

         "ACTUARIAL OPINION" has the meaning specified in Section 2.02(b).

         "ADJUSTED PURCHASE PRICE" has the meaning specified in Section 2.02(a).

         "ADJUSTMENT ALLOCATION" has the meaning specified in Section 7.05.


<PAGE>


         "ADJUSTMENT ALLOCATION STATEMENT" has the meaning specified in Section
7.05.

         "AFFILIATE" with respect to any Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, in the case of the
Seller, the term "control" (or "controlled" or "controlling", as the context may
require) shall have the meaning specified in Section 44-2121 under the Nebraska
Insurance Code, as in effect on the date hereof, and in the case of the
Purchaser, "control" (or "controlled" or "controlling", as the context may
require) shall have the meaning specified in Section 1501(a)(2) of the New York
Insurance Law, as in effect on the date hereof, PROVIDED, HOWEVER, that for
purposes of Sections 3.02 and 5.13 of this Agreement, XL, Marsh & McLennan
Companies, Inc. and Trident and their respective Subsidiaries shall be deemed
Affiliates of the Company for all purposes other than with respect to
Reinsurance Agreements.

         "AFFILIATE AGREEMENTS" has the meaning specified in Section 5.13(b).

         "AGREED ADJUSTMENTS" has the meaning specified in Section 2.02(b)(iv).

         "AMENDED PLANS" has the meaning specified in Section 6.03(b).

         "ANNUAL STATUTORY STATEMENTS" means (a) in the case of the Company, the
Annual Statement of the Company, as filed with the Nebraska Insurance
Department, for the years ended December 31, 1998, 1997 and 1996, in each case
including all exhibits, interrogatories, notes and schedules thereto and any
auditor's report, actuarial opinion, affirmation or certification filed in
connection therewith and (b) in the case of FRC, the Annual Statement of FRC, as
filed with the New York Insurance Department, for the year ended December 31,
1998, including all exhibits, interrogatories, notes and schedules thereto and
any auditor's report, actuarial opinion, affirmation or certification filed in
connection therewith.

         "APPLICABLE INSURANCE DEPARTMENTS" has the meaning specified in Section
5.05(a).

         "APPOINTED EXPERTS" means (i) an independent actuary and/or (ii) a firm
of independent public accountants, which shall be one of the "Big Five" firms of
public accountants, each of which shall be satisfactory to the Purchaser and the
Seller.

         "ARROWHEAD" has the meaning specified in Section 5.05(c).

         "ARX" has the meaning specified in Section 5.05(c).

         "ASSUMED BUSINESS" means the business of the Company to be assumed by
FRC pursuant to the Transfer and Assumption Agreement.


<PAGE>


         "BEGINNING RESERVES" means, after disregarding any Agreed Adjustment
for the Swiss Air Loss,  the  Reserves for Subject  Liabilities  other than CPIS
Subject Liabilities set forth on the Closing Date Balance Sheet.

         "BROCKBANK TREATIES" means the Reinsurance Agreements between the
Company and Brockbank/Metcalf identified by the Company as Treaty numbers AV1009
and AV1010, reinsuring Lloyd's Syndicate Nos. 588, 861 and 1209.

         "BUSINESS" means the business of the Company as it is
currently conducted by the Company as of the date hereof and, when applicable,
as of the Closing Date.

         "BUSINESS DAY" means a day of the year on which banks are not required
or authorized to be closed in the City of New York.

         "CLOSING" has the meaning specified in Section 2.03(a).

         "CLOSING DATE" has the meaning specified in Section 2.03(a).

         "CLOSING DATE ADJUSTED GAAP BOOK VALUE" has the meaning specified in
Section 2.04(a).

        "CLOSING DATE AUDITORS' REPORT" has the meaning specified in Section
2.04(a).

         "CLOSING DATE AUDITORS' TAX REPORT" has the meaning specified in
Section 2.04(a).

         "CLOSING DATE BALANCE SHEET" has the meaning specified in Section
2.04(a).

         "CLOSING DATE BASIS REDUCTION AMOUNT" has the meaning specified in
Section 2.04(a).

         "CLOSING DATE TAX AMOUNT" has the meaning specified in Section 2.04(a).

         "CLOSING DATE TAX ASSETS" has the meaning specified in Section 2.04(a).

         "CLOSING DATE TAX BALANCE SHEET" has the meaning specified in Section
2.04(a).

         "COMMERCIALLY REASONABLE EFFORTS" of any Person means efforts of that
Person that a reasonable Person would exert for its own account under similar
circumstances but without the expenditure of funds except the payment of the
fees and expenses of any applicable attorneys, consultants or other advisors
retained by it and applicable filing fees.

         "COMPANY" means Risk Capital Reinsurance Company, a stock insurance


<PAGE>

company organized under the laws of the State of Nebraska.

         "CONFIDENTIALITY AGREEMENT" has the meaning specified in Section 5.04.

         "CONTEST" has the meaning specified in Section 7.04(b).

         "CONTINUING EMPLOYEES" has the meaning specified in Section 6.02.

         "CONTRACT" means all written mortgages, indentures, debentures, notes,
loans, bonds, agreements, contracts, leases, subleases, licenses, franchises,
obligations, instruments or other legally binding commitments, arrangements or
undertakings of any kind (excluding Reinsurance Agreements and insurance
policies) to which the Company is a party or by which the Company or any of its
Properties may be bound or affected.

         "CPIS" means Capital Protection Insurance Services, LLC.

         "CPIS BOUND CEDENT" has the meaning specified in Section 3.21(b).

         "CPIS SUBJECT LIABILITIES" has the meaning specified in Section
2.02(b)(ii).

         "CREDIT FOR REINSURANCE FACILITY(IES)" means any and all reinsurance
trusts, letters of credit, statutory deposits, funds withheld deposits and other
similar agreements or mechanisms which have been established by, on behalf of,
or for the benefit of, the Company which permits a cedent to take statutory
credit for reinsurance ceded pursuant to any Reinsurance Agreement or
Retrocessional Arrangement.

         "DESIGNATED INTEGRATED SOLUTIONS" has the meaning specified in Section
5.05(c).

         "DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated as of the
date hereof, delivered to the Purchaser by the Seller.

         "DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.

         "EMPLOYEES" shall mean employees, former employees or independent
contractors of the Company and/or the Seller.

         "ENCUMBRANCES" means any lien, pledge, mortgage, security interest,
assessment, claim, lease, charge, option, right of first refusal, imperfection
of title, easement, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation of any kind
whatsoever.

         "ENDING RESERVES" means the Reserves for Non-CPIS Subject Liabilities
as of the



<PAGE>

Valuation Date. The determination of Ending Reserves shall be (i) conducted by
the independent actuary making such determination (x) using its independent
judgment based on prevailing facts, circumstances and trends, (y) in accordance
with generally accepted actuarial standards and principles and (z) to the extent
not inconsistent with the foregoing, in a manner and applying a method
consistent with the determination of the Beginning Reserves and (ii) consistent
with Purchaser's audited financial statements for the fiscal year that includes
the Valuation Date. It is understood that such actuary shall in no way be
inhibited in the use of its independent judgment.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and interpretations thereunder.

         "ESCROW AGENT" has the meaning specified in Section 2.03(d).

         "ESCROW AGREEMENT" has the meaning specified in Section 2.03(d).

         "ESCROW AGREEMENTS" means the Escrow Agreement and the Supplemental
Escrow Agreement.

         "ESTIMATED CLOSING DATE ADJUSTED GAAP BOOK VALUE" has the meaning
specified in Section 2.02(d).

         "ESTIMATED CLOSING DATE BALANCE SHEET" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE BASIS REDUCTION AMOUNT" has the meaning
specified in Section 2.02(d).

         "ESTIMATED CLOSING DATE COMPANY REPORT" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX AMOUNT" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX ASSETS" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX BALANCE SHEET" has the meaning specified in
Section 2.02(d).

         "ESTIMATED CLOSING DATE TAX LIABILITIES" has the meaning specified in
Section 2.02(d).


<PAGE>


         "ESTIMATED CLOSING DATE TAX REPORT" has the meaning specified in
Section 2.02(d).

         "EXCESS AVIATION PREMIUM" has the meaning specified in Section 5.16(b).

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.

         "EXCLUDED CLAIMS" has the meaning specified in Section 9.03(b).

         "EXCLUDED LIABILITIES" has the meaning specified in Section 2.01(d).

         "EXCLUDED SECURITIES" has the meaning specified in Section 3.07(a).

         "FHC" means Folksamerica Holding Company, Inc., a New York corporation.

         "FLEET" has the meaning specified in Section 5.05(d).

         "FRC" means Folksamerica Reinsurance Company, a New York stock
insurance company.

         "GAAP" has the meaning specified in Section 2.02(b)(iii)

         "GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
government, political subdivision, legislature, court, agency, department,
bureau, commission or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory authority.

         "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.

         "INDEMNIFIED PARTY" has the meanings specified in Sections 9.02(a) and
9.03(a), as applicable.

         "INITIAL ALLOCATION" has the meaning specified in Section 7.05.

         "INITIAL ALLOCATION STATEMENT" has the meaning specified in Section
7.05.

         "INTEGRATED SOLUTIONS" has the meaning specified in Section 3.07(b).

         "INTELLECTUAL PROPERTY RIGHTS" has the meaning specified in Section
3.15


<PAGE>


         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.

         "INVESTMENT PORTFOLIO" means a list provided by the Seller to the
Purchaser setting forth all investments, including, without limitation, bills,
notes and bonds owned by the Company which are expected to be transferred to the
Purchaser as of a particular date, the issuer of the investments, the amount
owned and the market value of the investments as of such date; PROVIDED, that
such list shall not include publicly-traded equity securities, privately held
equity securities, Integrated Solutions investments, the Company's high yield
securities or securities which are illiquid.

         "IRS" means the Internal Revenue Service.

         "LIABILITY" or "LIABILITIES" means, with respect to any Person, any
liability, obligation or commitment of such Person of any kind, character or
description, whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise and whether or not the same is required to be accrued on the financial
statements of such Person.

         "MATERIAL ADVERSE EFFECT" means:

         (a) With respect to the Seller or the Company, any change in, or effect
     on, the Company or the Business which is, or which is reasonably likely to
     be, materially adverse to the Business, operations, assets, Liabilities,
     results of operations or condition (financial or otherwise) of the Company
     to the extent related to the Assumed Business, or which will, or is
     reasonably likely to, prevent the transactions contemplated by this
     Agreement.

         (b) With respect to the Purchaser, any change in, or effect on, the
     Purchaser which is, or which is reasonably likely to be, materially adverse
     to the Purchaser's business, operations, assets, Liabilities, results of
     operations or condition (financial or otherwise) on a consolidated basis,
     or which will, or is reasonably likely to, prevent the transactions
     contemplated by this Agreement.

         "MMRC" means Marsh & McLennan Risk Capital Holdings Ltd.

         "MOODY'S" means Moody's Investors Services, Inc.

         "MULTIEMPLOYER PLAN" has the meaning specified in Section 3.19(b) .

         "MULTIPLE EMPLOYER PLAN" has the meaning specified in Section 3.19(b).

         "NAIC" means the National Association of Insurance Commissioners.


<PAGE>


         "NEBRASKA INSURANCE CODE" means the insurance laws of the State of
Nebraska,   including   the   published   rules,   regulations,   bulletins  and
interpretations promulgated thereunder.

         "NEBRASKA INSURANCE DEPARTMENT" means the Department of Insurance of
the State of Nebraska.

         "NEW YORK INSURANCE CODE" means the insurance laws of the State of New
York, including the published rules, regulations, bulletins and interpretations
promulgated thereunder.

         "NEW YORK INSURANCE DEPARTMENT" means the Department of Insurance of
the State of New York.

         "1998 REPORT" has the meaning specified in Section 2.02(b)(ii).

         "90% QUOTA SHARE AGREEMENT" has the meaning specified in Section
3.21(a).

         "NON-CPIS SUBJECT LIABILITIES" has the meaning specified in Section
2.02(b)(ii)

         "OBJECTION NOTICE" means a written notice to Purchaser that Seller
disputes the Reserve Deficiency/Reserve Redundancy, Paid Losses, Ending Reserves
and/or any component of any of the foregoing, and specifying in reasonable
detail the Seller's reasons for such dispute.

         "OBJECTION PERIOD" means the period of sixty (60) days following
Seller's receipt of the last report referred to in Section 2.05(a).

         "PAID LOSSES" means losses and loss adjustment expenses of the Assumed
Business (other than losses and loss adjustment expenses paid with respect to
the business produced by CPIS for the account of the Company) actually paid by
or on behalf of FRC from (but excluding) the Closing Date to (and including) the
Valuation Date, less (x) any amounts actually received as of the Valuation Date
in respect of such losses and loss adjustment expenses pursuant to insurance,
reinsurance, retrocession or similar contracts, treaties, agreements or
arrangements and (y) salvage and subrogation actually received as of the
Valuation Date in respect of such losses and loss adjustment expenses; PROVIDED
that the portion of unallocated loss adjustment expenses included in such loss
adjustment expenses shall not exceed the amount of unallocated loss adjustment
expenses included in the Beginning Reserves except as the result of the
recharacterization as unallocated loss adjustment expenses, pursuant to a change
prescribed by the NAIC or the New York Insurance Department, of an item that at
the date hereof would constitute allocated loss adjustment expenses. For
purposes of this provision, unallocated loss adjustment expenses shall mean
internal expenses for compensation of FRC's officers and employees and related
overhead expenses. The calculation of Paid Losses shall be (x) made in
accordance with GAAP and (y) consistent with Purchaser's financial statements
for the fiscal



<PAGE>

period that includes the Valuation Date.

         "PERMITS" has the meaning specified in Section 3.14.

         "PERMITTED ENCUMBRANCES" has the meaning specified in Section 3.16.

         "PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority or other entity.

         "PLAN" and "PLANS" mean all retirement, pension, savings,
profit-sharing, bonus, incentive compensation, deferred compensation, stock
option or stock compensation, welfare benefit, severance or termination, change
in control, stay-bonus, retention, or similar "pay-to-stay" arrangements,
retiree medical, dental or life insurance, supplemental retirement, employment
or consulting agreements and similar or other plans, agreements, policies,
programs, contracts and arrangements (including automobile rental or usage
arrangements) sponsored, maintained, executed or contributed to by the Company
and/or the Seller covering Employees, including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA; PROVIDED, HOWEVER,
that "Plan" shall not include plans or other arrangements of Purchaser or its
subsidiaries covering Continuing Employees.

         "POST-CLOSING PERIODS" means any taxable period thereof beginning after
the Closing Date. If a taxable period begins before the Closing Date and ends
after the Closing Date, then the portion of the taxable period that begins on
the day following the Closing Date shall constitute a Post-Closing Period.

         "PRE-CLOSING PERIOD" means any taxable period or portion thereof that
is not a Post-Closing Period.

         "PROPERTY" and "PROPERTIES" mean real, personal or mixed property,
tangible or intangible.

         "PROVISIONAL PURCHASE PRICE" has the meaning specified in Section
2.02(a).

         "PROXY STATEMENT" has the meaning specified in Section 3.10.

         "PURCHASED ASSETS" has the meaning specified in Section 2.01(a).

         "PURCHASER" means FRC and FHC collectively.

         "PURCHASER'S ACCOUNTANTS" has the meaning specified in Section
2.02(b)(iii).


<PAGE>


         "PURCHASER CLOSING COSTS" has the meaning specified in Section
2.02(b)(iv).

         "QUARTERLY STATUTORY STATEMENTS" means (a) in the case of the Company,
the Quarterly Statement of the Condition and Affairs of the Company, as filed
with the Nebraska Insurance Department, for the quarterly periods ended March
31, June 30 and September 30, 1999 and (b) in the case of FRC, the Quarterly
Statement of the Condition and Affairs of FRC, as filed with the New York
Insurance Department, for the quarterly periods ended March 31, June 30 and
September 30, 1999.

         "RCHI" means Risk Capital Holdings, Inc., a Delaware corporation.

         "REFERENCE DATE" means December 31, 1999.

         "REFERENCE DATE ADJUSTED GAAP BOOK VALUE" has the meaning specified in
Section 2.02(b)(iv).

         "REFERENCE DATE AUDITORS' REPORT" has the meaning specified in Section
2.02(b)(iv).

         "REFERENCE DATE AUDITORS' TAX REPORT" has the meaning specified in
Section 2.02(b)(iii).

         "REFERENCE DATE BALANCE SHEET" has the meaning specified in Section
2.02(b).

         "REFERENCE DATE BASIS REDUCTION AMOUNT" has the meaning specified in
Section 2.02(b)(iii).

         "REFERENCE DATE TAX AMOUNT" has the meaning specified in Section
2.02(b)(iv).

         "REFERENCE DATE TAX ASSETS" has the meaning specified in Section
2.02(b)(iii).

         "REFERENCE DATE TAX BALANCE SHEET" has the meaning specified in Section
2.02(b)(iii).

         "REFERENCE DATE TAX LIABILITIES" has the meaning specified in Section
2.02(b)(iii).

         "REINSURANCE AGREEMENTS" has the meaning specified in Section 3.17(a).

         "RESERVES" means all unearned premium reserves and all reserves for
incurred losses including, without limitation, case reserves, reserves for
incurred but not reported losses and reserves for loss adjustment expenses, both
allocated and unallocated, and also any adjustments to such items on account of
reinsurance receivables, salvage and subrogation,



<PAGE>

reinsurance retrospective premiums and reinsurance profit commissions.

         "RESERVE DEFICIENCY" has the meaning specified in Section 2.05(a)(iii).

         "RESERVE REDUNDANCY" has the meaning specified in Section 2.05(a)(iii).

         "RETAINED EMPLOYEES" has the meaning specified in Section 6.03(a).

         "RETAINED NAMES AND MARKS" has the meaning specified in Section 5.07.

         "RETROCESSION AGREEMENT" has the meaning specified in Section 3.17(c).

         "RUNOFF COVERAGE" has the meaning specified in Section 5.16(a).

         "RUNOFF COVERAGE PREMIUM SHORTFALL" has the meaning specified in
Section 5.16(b).

         "SAP" means, with respect to a reinsurance or insurance company, the
statutory accounting procedures and practices prescribed or permitted from time
to time by the National Association of Insurance Commissioners and the Nebraska
Insurance Department with respect to the Company or the New York Insurance
Department with respect to FRC and applied in a consistent manner throughout the
periods involved.

         "S&P" means Standard & Poor's Ratings Group.

         "SEC" means the Securities and Exchange Commission.

         "SECURITIES ACT" means the Securities Act of 1993, as amended, together
with the rules and regulations promulgated thereunder.

         "SELLER" means RCHI and the Company, collectively.

         "SELLER FINANCIAL STATEMENTS" has the meaning specified in Section
3.05(b).

         "SELLER SEC DOCUMENTS" means all reports, schedules, registration
statements and definitive proxy statements filed by RCHI with the SEC since
January 1, 1999.

         "SELLER'S ACCOUNTANTS" has the meaning specified in Section 2.02(b)(i).

         "SELLER'S ACTUARIES" has the meaning specified in Section 2.02(b).

         "SELLER'S STOCKHOLDER APPROVAL" has the meaning specified in Section
3.01.



<PAGE>


         "SENIOR EXECUTIVES" has the meaning specified in Section 6.03(a).

         "SEPTEMBER 30 BALANCE SHEET" has the meaning specified in Section
3.05(d).

         "SEVERANCE PLAN" has the meaning specified in Section 6.03(b).

         "SETTLEMENT DATE" means (a) if Seller does not give an Objection Notice
within the Objection Period, the second Business Day following the end of the
Objection Period, and (b) if Seller gives an Objection Notice within the
Objection Period, the second Business Day following the later of (x) the
determinations and confirmations by the Appointed Experts pursuant to Section
2.05(b) or (y) resolution of any dispute regarding Paid Losses.

         "60 DAY PERIOD" has the meaning specified in Section 6.03(a).

         "SOFTWARE LICENSES" has the meaning specified in Section 5.15.

         "SPECIAL MEETING" has the meaning specified in Section 3.10.

         "SUBJECT LIABILITIES" has the meaning specified in Section 2.02(b)(ii).

         "SUBSIDIARY" means any and all other corporations, limited liability
companies, partnerships, joint ventures, associations and other entities of
which the Company, directly or indirectly (through one or more Subsidiaries or
otherwise), owns or controls more than 50% of the voting securities or other
voting interests.

         "SUNSHINE" has the meaning specified in Section 5.05(c).

         "SUPPLEMENTAL ESCROW AGREEMENT" has the meaning specified in Section
2.04(b)(iii).

         "SUPERIOR PROPOSAL" has the meaning specified in Section 5.08(b).

         "SWISS AIR LOSS" has the meaning specified in Section 2.02(b)(ii).

         "TAX" or "TAXES" means (i) all taxes, fees, duties and other
assessments imposed by the United States or any state, local or foreign
government or political subdivision or taxing authority thereof or therein,
including, without limitation, any income, estimated, premium, profits, windfall
profits, environmental, alternative, minimum, license, import, transfer,
registration, stamp, franchise, sales, use, value added, gross receipts, excise,
utility, property (real or personal), severance, ad valorem, net proceeds, deed,
lease, service, capital, customs, occupation, payroll, wage, workman's
compensation, employment, withholding and social



<PAGE>

     security taxes, including all interest, penalties and additions to taxes
     imposed by any taxing authority with respect thereto, whether disputed or
     not and (ii) any liability of the Company for amounts described in clause
     (i) as a result of being a member of any affiliated, consolidated, combined
     or unitary group on or prior to the Closing Date.

         "TAX RETURN" means any return, report or statement (including any
information returns) required to be filed for purposes of a particular Tax.

         "TERMINATION FEE" has the meaning specified in Section 5.09(b).

         "THIRD PARTY" has the meaning specified in Section 5.09(b).

         "TRANSFER AND ASSUMPTION AGREEMENT" has the meaning specified in
Section 2.01(c).

         "TREASURY REGULATIONS" means regulations promulgated by the U.S.
Treasury under the Internal Revenue Code.

         "TREATY LIABILITIES" has the meaning specified in Section 2.01(b).

         "TRIDENT" means Trident Partnership, L.P.

         "VALUATION DATE" means the fifth anniversary of the Closing Date

         "XL" means XL Capital Ltd.



<PAGE>



                                   ARTICLE II

                    PURCHASE AND SALE OF THE ASSUMED BUSINESS

         SECTION 2.01. PURCHASE OF THE ASSUMED BUSINESS.

         (a) On the Closing Date and subject to the terms and conditions stated
in this Agreement, the Company shall sell to FRC, and RCHI shall cause the
Company to sell to FRC, and FRC shall purchase from the Company, as provided in
Section 2.03(b), all of the Company's right, title and interest in and to the
following assets related to the Assumed Business (the "PURCHASED ASSETS"):

      (i)      Fixed Income Securities at market value;
      (ii)     Cash and Accrued Investment Income;
      (iii)    Premiums Receivables;
      (iv)     Reinsurance Recoverables;
      (v)      Deferred Acquisition Costs;
      (vi)     Deferred Tax Assets;
      (vii)    Funds Held;
      (viii)   Contingent Commissions Recoverables; and
      (ix)     Related and Incidental Assets as specified in the Transfer and
                                    Assumption Agreement.

         (b) In consideration of the sale, transfer, conveyance and assignment
of the Purchased Assets and in reliance on the representations and warranties
made herein by the Seller and the Company, FRC agrees to, and the Purchaser
agrees to cause FRC to, assume the Treaty Liabilities (as defined in the
Transfer and Assumption Agreement) reflected on the Closing Date Balance Sheet.

         (c) The transfer of the Purchased Assets and assumption of the Treaty
Liabilities shall be further evidenced by the execution on the Closing Date by
the Company and FRC of a portfolio transfer and assumption reinsurance agreement
in the form annexed hereto as EXHIBIT B (together with all other assignments,
bills of sale, assignment and assumption agreements and other title transfer
documentation necessary to effectuate the transfer of the Purchased Assets and
assumption of the Treaty Liabilities, collectively the "TRANSFER AND ASSUMPTION
AGREEMENT").

         (d) Notwithstanding the foregoing, the Purchaser shall not assume, and
shall not at any time hereafter (including on or after the Closing Date) become
obligated to pay, perform, satisfy or discharge, any Liabilities (whether or not
asserted prior to the Closing Date) of the Seller, or of any of its Affiliates,
Subsidiaries, Plans or any shareholder of Seller, other than the Treaty
Liabilities (such Liabilities not being assumed being hereinafter referred to as
the "EXCLUDED LIABILITIES"). The assumption by the Purchaser of the Treaty
Liabilities shall in no way



<PAGE>

expand the rights or remedies of third parties against FRC as compared to the
rights and remedies which such parties would have had against the Company had
the transactions contemplated by this Agreement not been consummated.

         SECTION 2.02. PURCHASE PRICE.

         (a) The purchase price for the Assumed Business shall be equal to $15
million (the "PROVISIONAL PURCHASE PRICE"), which amount shall be redetermined
and adjusted to reflect the Closing Date Adjusted GAAP Book Value of the Assumed
Business, determined as provided in Section 2.04(a) (the "ADJUSTED PURCHASE
PRICE"). At the Closing, the Purchaser shall be entitled to a credit against the
Provisional Purchase Price equal to the Estimated Closing Date Tax Amount
determined as provided in Section 2.03(c), which credit shall be redetermined
and adjusted to reflect the Closing Date Tax Amount as provided in Section
2.04(a).

         (b) Reference Date Adjusted GAAP Book Value and Reference Date Tax
Amount shall be determined as follows:

                  (i) Promptly after the Reference Date, the Seller shall cause
         an audit of the accounts and records of the Seller (on a consolidated
         basis) at the Reference Date to be conducted by PricewaterhouseCoopers,
         the Seller's independent public accountants ("SELLER'S ACCOUNTANTS"),
         in accordance with generally accepted auditing standards in the case of
         the Reference Date Adjusted GAAP Book Value.

                  (ii) Promptly after the Reference Date, the Seller shall also
         cause an evaluation (on both a gross and net of reinsurance basis) of
         the loss and loss adjustment expense Liabilities of the Company arising
         under the Reinsurance Agreements set forth in Section 3.17(b)(1) and
         Section 3.17(c)(1) of the Disclosure Schedule (collectively, the
         "SUBJECT LIABILITIES") at the Reference Date to be conducted by William
         M. Mercer, Incorporated, the Seller's actuaries ("SELLER'S ACTUARIES")
         in accordance with generally accepted actuarial standards and
         principles consistent with those applied in the evaluation of loss
         reserves as of December 31, 1998 of the Company by the Seller's
         Actuaries, which is attached hereto as EXHIBIT C (the "1998 REPORT"),
         except that such evaluation at the Reference Date shall (A) exclude any
         Subject Liabilities and premiums associated with the Brockbank Treaties
         and (B) separately evaluate (x) Subject Liabilities associated with
         business produced by CPIS for the account of the Company (the "CPIS
         SUBJECT LIABILITIES"), (y) Subject Liabilities associated with the
         Swiss Air Flight 111 loss, (the "SWISS AIR LOSS") and (z) all other
         Subject Liabilities of the Company (the "NON-CPIS SUBJECT
         LIABILITIES"). Promptly following the conclusion of such evaluation,
         Seller's Actuaries shall issue their opinion (the "ACTUARIAL OPINION")
         that, with respect to each of the matters severally set forth in



<PAGE>

         clauses (x), (y) and (z) of the preceding sentence, in their opinion
         the amount of Subject Liabilities recorded by the Company as at the
         Reference Date (A) meet the requirements of the insurance laws of the
         State of Nebraska; (B) are computed in accordance with generally
         accepted loss reserving standards and principles; and (C) make a
         reasonable provision for all unpaid loss and loss adjustment expense
         obligations of the Company under the terms of the Reinsurance
         Agreements set forth in Section 3.17(b)(1) and Section 3.17(c)(1) of
         the Disclosure Schedule. Copies of the Actuarial Opinion shall be
         delivered to the Seller, the Seller's Accountants, the Purchaser and
         the Purchaser's Accountants.

                  (iii) During the period of the audit, Seller's Accountants
         shall keep the Purchaser and an independent public accounting firm
         designated by the Purchaser ("PURCHASER'S ACCOUNTANTS"), fully informed
         as to the progress of the audit. Upon conclusion of the audit, Seller
         shall submit to the Purchaser and Purchaser's Accountants (A) a balance
         sheet of the Assumed Business at the Reference Date in the form of
         EXHIBIT D hereto (the "REFERENCE DATE BALANCE SHEET") prepared in
         accordance with United States generally accepted accounting principles
         ("GAAP"), (B) an unqualified opinion of Seller's Accountants (the
         "ACCOUNTANTS OPINION") stating that the Reference Date Balance Sheet
         (x) has been prepared in accordance with GAAP and (y) presents fairly,
         in all material respects, the financial position of the Assumed
         Business at the Reference Date, (C) a tax balance sheet of the Assumed
         Business at the Reference Date (the "REFERENCE DATE TAX BALANCE SHEET")
         prepared in accordance with applicable U.S. federal income tax
         provisions setting forth the tax basis of the assets specified in
         Section 2.01(a) (other than deferred tax assets and deferred
         acquisition costs and determined by using the fair market value of the
         fixed income securities instead of tax basis) (the "REFERENCE DATE TAX
         ASSETS") and setting forth the Liabilities specified in Section 2.01(b)
         (other than deferred tax liabilities) determined in accordance with
         Section 1060 of the Internal Revenue Code and the Treasury Regulations
         promulgated thereunder (the "REFERENCE DATE TAX LIABILITIES"), (D) a
         computation of the Reference Date Tax Amount and (E) a report by the
         Seller's Accountants as to the application to the Reference Date Tax
         Balance Sheet and the Reference Date Tax Amount (as defined below) of
         specified procedures reasonably agreed upon by Seller and Purchaser
         (the "REFERENCE DATE AUDITORS' TAX REPORT").

                  (iv) The Reference Date Balance Sheet shall also be
         accompanied by a report of Seller's Accountants (the "REFERENCE DATE
         AUDITORS' REPORT") setting forth a computation of the Reference Date
         Adjusted GAAP Book Value (as defined below). As used in this Section
         2.02(b), the term "REFERENCE DATE ADJUSTED GAAP BOOK VALUE" shall mean
         the assets of the Company minus the Liabilities of the Company as
         reflected on the Reference Date Balance Sheet,



<PAGE>

         adjusted (i) so that no value is attributed to any assets or
         Liabilities other than those specified in Section 2.01(a) and Section
         2.01(b) above (it being understood that no Excluded Securities or
         securities rated below investment grade will be included for purposes
         of Sections 2.02(d) and 2.04); (ii) so as to establish an amount of
         cash equivalents and fixed income securities (including accrued income)
         with a fair market value determined in accordance with GAAP such that
         the fair market value of the cash equivalents and fixed income
         securities (including accrued income) is equal to the excess of (A) the
         Liabilities specified in Section 2.01(b) over (B) the assets (other
         than cash equivalents and fixed income securities) specified in Section
         2.01(a); (iii) so as to eliminate any assets and Liabilities in respect
         of the Brockbank Treaties; and (iv) so as to eliminate from the
         Reserves in respect of the Swiss Air Loss any increase in the amounts
         thereof from the amounts thereof included in the September 30 Balance
         Sheet (as defined in Section 3.05(d)) up to an aggregate of $5 million,
         net of all Tax effects (the adjustments set forth in clauses (i)
         through (iv) above, collectively the "AGREED ADJUSTMENTS"). The
         Reference Date Balance Sheet shall segregate in a separate line item
         the Excluded Securities. The Reference Date Tax Balance Sheet shall
         also be accompanied by the Reference Date Auditors' Tax Report. The
         "REFERENCE DATE TAX AMOUNT" shall mean (A) if the Reference Date Basis
         Reduction Amount (as defined below) is not in excess of $15 million,
         the lesser of (i) the product of (x) 17.5% and (y) the Reference Date
         Basis Reduction Amount and (ii) $2 million and (B) if the Reference
         Date Basis Reduction Amount is greater than $15 million, the sum of (i)
         $2 million and (ii) the product of (a) 35% and (b) the excess of the
         Reference Date Basis Reduction Amount over $15 million. The "REFERENCE
         DATE BASIS REDUCTION AMOUNT" shall mean the excess, if any, of the
         Reference Date Tax Assets over the sum of (i) Reference Date Tax
         Liabilities, (ii) the Provisional Purchase Price, and (iii) the sum of
         the transaction costs of the Purchaser as estimated in good faith by
         Purchaser (including legal accounting and investment banking fees and
         expenses) and the amount of the payment under Section 6.04 hereof
         ("PURCHASER CLOSING COSTS").

                  (v) Purchaser shall notify the Seller of the Purchaser's good
         faith estimate of Purchaser Closing Costs at least five (5) Business
         Days prior to each date Seller is required to deliver the items
         required to be delivered pursuant to Sections 2.02(b)(iii), 2.02(d) and
         2.04(a).

         (c) Promptly following the delivery of the Reference Date Balance
Sheet, the Reference Date Auditors' Report, the Reference Date Tax Balance
Sheet, the computation of the Reference Date Tax Amount, the Reference Date
Auditors' Tax Report and the Accountants Opinion pursuant to Section 2.02(b),
Seller shall make available to the Purchaser and Purchaser's Accountants for
review such information regarding the accounts and records of the Company from
Seller's Accountants' work papers as the Purchaser and Purchaser's Accountants
may






<PAGE>

reasonably request. The Seller shall provide the Purchaser and Purchaser's
Accountants with full access to any accounting and tax records pertaining to the
Assumed Business for the purpose of such review. In the event that within thirty
(30) days after the receipt by Purchaser's Accountants of such materials,
Seller's Accountants and Purchaser's Accountants are unable to agree on the
manner in which any item or items were treated in the Reference Date Balance
Sheet or the Reference Date Tax Balance Sheet, in the computation of the
Reference Date Adjusted GAAP Book Value contained in the Reference Date
Auditors' Report or in the computation of the Reference Date Tax Amount, then a
separate written report of such item or items shall be made by each such
accounting firm in concise form and both reports shall be submitted promptly to
the Seller and the Purchaser for consideration and settlement. The Seller and
the Purchaser shall then in good faith endeavor to resolve such treatment and
agree upon the computation of the Reference Date Adjusted GAAP Book Value or the
Reference Date Tax Amount as soon as possible. If the Seller and the Purchaser
are unable to agree thereon within ten (10) Business Days after receipt of such
reports, then such item or items shall be referred promptly to an Appointed
Expert for resolution within ten (10) Business Days from the date of such
referral; and the manner in which such Appointed Expert shall in writing
determine that such item or items should be treated in the computation of the
Estimated Closing Date Adjusted GAAP Book Value and Closing Date Adjusted GAAP
Book Value (as those terms are defined in Section 2.02(d) and Section 2.04(a),
respectively) and of the Estimated Closing Date Tax Amount and Closing Date Tax
Amount (as those terms are defined in Section 2.02(d) and Section 2.04(a),
respectively) shall be final; PROVIDED, HOWEVER, that the Purchaser shall not be
entitled to dispute the Subject Liabilities component of the Reference Date
Balance Sheet. The Seller shall pay the fees and expenses of Seller's
Accountants and the Purchaser shall pay the fees and expenses of Purchaser's
Accountants in connection with any auditing and accounting services performed
pursuant to this Section 2.02(c). The fees and expenses of such Appointed
Expert, if retained pursuant to this Section 2.02(c), shall be borne equally by
the Seller and the Purchaser.

         (d) Within three (3) Business Days prior to the Closing Date, the
Seller shall prepare an estimated balance sheet in the form of EXHIBIT D hereto
(the "ESTIMATED CLOSING DATE BALANCE SHEET") and a report of the Company (the
"ESTIMATED CLOSING DATE COMPANY REPORT") setting forth the computation of the
Estimated Closing Date Adjusted GAAP Book Value (as defined below), an estimated
tax balance sheet of the Company as of the Closing Date (the "ESTIMATED CLOSING
DATE TAX BALANCE SHEET") and a report of the Company (the "ESTIMATED CLOSING
DATE TAX REPORT") setting forth the computation of the Estimated Closing Date
Tax Amount (as defined below). Each of the foregoing (A) shall be produced in
accordance with the procedures specified in Section 2.02(b) but shall not be
subject to dispute in the absence of manifest error; (B) shall be consistent
with prior periods and calculations including any dispute resolution previously
conducted pursuant to Section 2.02(c); and (C) shall take into account
adjustments in the value of the assets and Liabilities of the Company having
occurred, or reasonably estimated to have occurred, between the Reference Date
and the Closing Date; PROVIDED, HOWEVER, the foregoing need not be audited but
shall include all adjustments necessary



<PAGE>

for a fair statement of the results for the interim period. As used in this
Section 2.02(d), the term "ESTIMATED CLOSING DATE ADJUSTED GAAP BOOK VALUE"
shall mean the assets of the Company minus the Liabilities of the Company as
reflected on the Estimated Closing Date Balance Sheet, adjusted in accordance
with the Agreed Adjustments (and disregarding the payment of premiums to the
Purchaser under Section 5.16 and all premiums paid under Section 5.17). As used
in this Section 2.02(d), the term "ESTIMATED CLOSING DATE TAX AMOUNT" shall mean
(A) if the Estimated Closing Date Basis Reduction Amount (as defined below) is
not in excess of $15 million, the lesser of (i) the product of (x) 17.5% and (y)
the Estimated Closing Date Basis Reduction Amount and (ii) $2 million and (B) if
the Estimated Closing Date Basis Reduction Amount is greater than $15 million,
the sum of (i) $2 million and (ii) the product of (a) 35% and (b) the excess of
the Estimated Closing Date Basis Reduction Amount over $15 million. The
"ESTIMATED CLOSING DATE BASIS REDUCTION AMOUNT" shall mean the excess, if any,
of the Estimated Closing Date Tax Assets over the sum of (i) the Estimated
Closing Date Tax Liabilities, (ii) the Provisional Purchase Price, and (iii) the
Purchaser Closing Costs. The "ESTIMATED CLOSING DATE TAX ASSETS" shall mean the
tax basis of the assets specified in Section 2.01(a) (other than deferred tax
assets and deferred acquisition costs and determined by using the fair market
value of fixed income securities instead of tax basis) prepared in accordance
with applicable U.S. federal income tax provisions consistently applied with
prior periods and before giving effect to the purchase or sale of assets by
Purchaser and the "ESTIMATED CLOSING DATE TAX LIABILITIES" shall mean the
Liabilities specified in Section 2.01(b) (other than deferred tax Liabilities)
determined in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder, each of which shall be set forth in the
Estimated Closing Date Tax Balance Sheet.

         SECTION 2.03. CLOSING.

         (a) Subject to the terms and conditions of this Agreement, the sale and
purchase of the Assumed Business contemplated hereby shall take place at a
closing (the "CLOSING") at 10:00 a.m., local time, on the fifth Business Day
after the satisfaction or waiver of all of the conditions to closing set forth
in Article VIII, at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue,
New York, New York, or at such other time or on such other date or at such other
place as the Seller and the Purchaser may mutually agree upon in writing (the
date on which the Closing takes place being the "CLOSING DATE").

         (b) At the Closing, each of the Company and FRC shall deliver or cause
to be delivered to the other a duly executed Transfer and Assumption Agreement,
and the Company shall pursuant thereto sell, transfer and assign to FRC the
Purchased Assets in the respective amounts included in the calculation of
Estimated Closing Date Adjusted GAAP Book Value as provided in Section 2.02(d),
and FRC shall pursuant thereto assume from the Company the Treaty Liabilities
calculated as of the Closing Date by reference to the Estimated Closing Date
Adjusted GAAP Book Value.



<PAGE>

         (c) At the Closing, the Purchaser shall pay to the Seller in cash by
wire transfer (to an account designated by the Seller in writing at least three
(3) Business Days prior to Closing), bank check, certified check or any other
instrument agreed to by the Purchaser and the Seller in advance, the (i)
Provisional Purchase Price, plus (ii) the payments contemplated by Sections 5.17
and 6.04 and minus (iii) the Estimated Closing Date Tax Amount and the payment,
if any, contemplated by Section 5.16. In addition, the Seller and the Purchaser
shall deliver to each other the opinions, certificates and other documents
described in Article VIII hereof.

         (d) At the Closing, an escrow agreement substantially in the form
annexed hereto as EXHIBIT E (the "ESCROW AGREEMENT") shall be executed and
delivered by the parties thereto. Seller shall at the Closing deposit or cause
to be deposited with Citibank, N.A. or another mutually acceptable financial
institution, as escrow agent (the "ESCROW AGENT"), $20 million, such funds to be
held, invested and released by the Escrow Agent in accordance with the Escrow
Agreement.

         SECTION 2.04. CERTAIN POST-CLOSING PAYMENTS.

         (a) Promptly following the Closing Date, the Seller shall cause an
audit of the accounts and records of the Company at the Closing Date to be
conducted as of such Closing Date, and for an actuarial evaluation of the
Subject Liabilities of the Company to be performed as of such Closing Date, in
accordance with the procedures specified in Section 2.02(b). Upon conclusion of
the actuarial evaluation and the audit, a balance sheet of the Company at such
Closing Date in the form of EXHIBIT D hereto (the "CLOSING DATE BALANCE SHEET")
and a report of Seller's Accountants (the "CLOSING DATE AUDITORS' REPORT")
setting forth the computation of the Closing Date Adjusted GAAP Book Value (as
defined below), a tax balance sheet of the Company at such Closing Date (the
"CLOSING DATE TAX BALANCE SHEET"), a computation of the Closing Date Tax Amount,
a report of Seller's Accountants (the "CLOSING DATE AUDITORS' TAX REPORT") as to
the application to the Closing Date Tax Balance Sheet and the Closing Date Tax
Amount of the procedures referred to in Section 2.02(b)(iii)(E) and setting
forth the computation of the Closing Date Tax Amount (as defined below), an
Accountants Opinion with respect to the Closing Date Balance Sheet and an
Actuarial Opinion as at the Closing Date shall be produced. Each of the
foregoing (A) shall be produced in accordance with the procedures specified in
Section 2.02(b) and (c) including, without limitation, the dispute resolution
procedures therein contemplated; (B) shall be consistent with prior periods and
calculations including any dispute resolution previously conducted pursuant to
Section 2.02(c); and (C) shall take into account adjustments in the amounts of
the assets and Liabilities of the Company having occurred between the Reference
Date and the Closing Date. Notwithstanding the foregoing, (A) the CPIS Subject
Liabilities recorded by the Company as at the Closing Date shall not be more
than two percent (2%) less than the Seller's Actuaries' estimate for such
Subject Liabilities as at the Closing Date as specified in its Actuarial Opinion
as at the Closing Date and (B), after disregarding any Agreed Adjustment for the
Swiss Air Loss, the Reserves for the Subject Liabilities other than the CPIS
Subject Liabilities recorded by the Company as at the Closing Date shall not be
more than the sum of X and Y (the "NON-CPIS MARGIN") less than the Seller's



<PAGE>

Actuaries' estimate for such Subject Liabilities as at the Closing Date as
specified in its Actuarial Opinion as at the Closing Date, with "X" being equal
to $5 million and "Y" being equal to one-half percent (0.5%) of such Seller's
Actuaries' estimate. Subject to the preceding sentence, the Purchaser shall not
be entitled to dispute (and the dispute provisions of this Section 2.04 shall
not apply to) the Subject Liabilities component of the Closing Date Balance
Sheet. As used in this Section 2.04(a), the term "CLOSING DATE ADJUSTED GAAP
BOOK VALUE" shall mean the assets of the Company minus the Liabilities of the
Company as reflected on the Closing Date Balance Sheet, adjusted (which
adjustment may result in a negative number) in accordance with the Agreed
Adjustments (excluding clause (ii) of the definition thereof and disregarding
the premiums paid to Purchaser pursuant to Section 5.16 and all premiums paid
under Section 5.17) and, if the deficiency in the CPIS Subject Liabilities
exceeds two percent (2%), further adjusted to restate the CPIS Subject
Liabilities at an amount equal to the Seller's Actuaries' estimate of such
Subject Liabilities as at the Closing Date as specified in its Actuarial Opinion
as at the Closing Date reduced by two percent (2%), and further, if the
deficiency in the Reserves for the Subject Liabilities other than the CPIS
Subject Liabilities exceeds the Non-CPIS Margin, further adjusted to restate the
Reserves for the Subject Liabilities other than the CPIS Subject Liabilities at
an amount equal to the Seller's Actuaries' estimate of such Subject Liabilities
as at the Closing Date as specified in its Actuarial Opinion as at the Closing
Date reduced by the Non-CPIS Margin. As used in this Section 2.04(a), the term
"CLOSING DATE TAX AMOUNT" shall mean (A) if the Closing Date Basis Reduction
Amount (as defined below) is not in excess of $15 million, the lesser of (i) the
product of (x) 17.5% and (y) the Closing Date Basis Reduction Amount and (ii) $2
million and (B) if the Closing Date Basis Reduction Amount is greater than $15
million, the sum of (i) $2 million and (ii) the product of (a) 35% and (b) the
excess of the Closing Date Basis Reduction Amount over $15 million. The "CLOSING
DATE BASIS REDUCTION AMOUNT" shall mean the excess, if any, of the Closing Date
Tax Assets over the sum of (i) the Closing Date Tax Liabilities, (ii) the
Provisional Purchase Price (taking into account only those post-Closing Date
adjustments to the Provisional Purchase Price under this Section 2.04(a)), and
(iii) Purchaser Closing Costs. The "CLOSING DATE TAX ASSETS" shall mean the tax
basis of the assets specified in Section 2.01(a) (other than deferred tax assets
and deferred acquisition costs and determined using the fair market value of
fixed income securities rather than their tax basis) prepared in accordance with
applicable U.S. federal income tax provisions consistently applied with prior
periods and before giving effect to the purchase of such assets by Purchaser and
"CLOSING DATE TAX LIABILITIES" shall mean Liabilities specified in Section
2.01(b) (other than deferred tax liabilities) determined in accordance with
Section 1060 of the Internal Revenue Code, each of which shall be set forth in
the Closing Date Tax Balance Sheet. Prior to the delivery of the final Closing
Date Balance Sheet, the final Closing Date Tax Balance Sheet, the final Closing
Date Auditors' Report, the final computation of the Closing Date Tax Amount, the
final Accountants Opinion and the final Closing Date Auditors' Tax Report
pursuant to this Section 2.04(a), the Seller's Accountants, Purchaser's
Accountants, the Company, the Seller and the Purchaser shall with respect
thereto follow the procedures (including, without limitation, the dispute
resolution procedures and payment of fees and expenses) specified in Section
2.02(b) and (c).



<PAGE>

         (b) Within five (5) Business Days after the date on which the
computation of the Closing Date Adjusted GAAP Book Value and the Closing Date
Tax Amount has become final pursuant to the procedures referred to in Section
2.04(a):

                  (i) if (i) the Closing Date Adjusted GAAP Book Value minus the
         Closing Date Tax Amount is less than (ii) the Estimated Closing Date
         Adjusted GAAP Book Value minus the Estimated Closing Date Tax Amount,
         then the Seller shall pay to the Purchaser in cash the full amount of
         such difference, by wire transfer (to an account designated by the
         Purchaser in writing at least three (3) Business Days prior to such
         payment), bank check, certified check or any other instrument agreed to
         by the Purchaser and the Seller in advance; or

                  (ii) if (i) the Closing Date Adjusted GAAP Book Value minus
         the Closing Date Tax Amount is greater than (ii) the Estimated Closing
         Date Adjusted GAAP Book Value minus the Estimated Closing Date Tax
         Amount, then the Purchaser shall pay to the Seller in cash the full
         amount of such difference, by wire transfer (to an account designated
         by the Seller in writing at least three (3) Business Days prior to such
         payment), bank check, certified check or any other instrument agreed to
         by the Purchaser and the Seller in advance;

                  (iii) if, after disregarding any Agreed Adjustment for the
         Swiss Air Loss, the Reserves for the Subject Liabilities other than the
         CPIS Subject Liabilities recorded by the Company as at the Closing Date
         are more than one-half percent (0.5%) less than the Seller's Actuaries'
         estimate for such Subject Liabilities as at the Closing Date as
         specified in its Actuarial Opinion as at the Closing Date, then (i) an
         escrow agreement substantially in the form annexed hereto as EXHIBIT F
         (the "SUPPLEMENTAL ESCROW AGREEMENT") shall be executed and delivered
         by the parties hereto and (ii) Seller shall deposit or cause to be
         deposited an amount, if any, equal to the excess of the deficiency over
         such one-half percent (0.5%) with the Escrow Agent pursuant to the
         Supplemental Escrow Agreement, PROVIDED HOWEVER, that the maximum
         amount to be so deposited shall be $5 million.

                  (iv) in each case under clauses (i) and (ii), together with
         interest on the amount of such difference for the period from the
         Closing Date until the date of payment at an effective annual rate
         equal to the annual interest rate for 90-day United States Treasury
         Bills prevailing on the Closing Date plus 50 basis points.

         SECTION 2.05. NON-CPIS SUBJECT LIABILITY REDUNDANCY ADJUSTMENTS.

         (a) REPORTS ON PAID LOSSES, ENDING RESERVES AND RESERVE DEFICIENCY/
REDUNDANCY CALCULATION. As soon as practicable (but not later than ninety (90)
days) after the Valuation Date, the Purchaser shall deliver to Seller each of
the following:



<PAGE>

                  (i) A report of independent public accountants designated by
         Purchaser (who may also be the independent public accountants of Seller
         or Purchaser but shall not be an employee of either) setting forth the
         amount of Paid Losses and showing in reasonable detail the calculation
         thereof.

                  (ii) A report by an independent actuary designated by
         Purchaser (who may also be the independent actuary of Seller or
         Purchaser but shall not be an employee of either) setting forth the
         amount of Ending Reserves and showing in reasonable detail the
         calculation thereof.

                  (iii) A report of independent public accountants designated by
         Purchaser (who may also be the independent public accountants of Seller
         or Purchaser) setting forth the difference of (1) the Beginning
         Reserves over (2) the sum of Paid Losses plus Ending Reserves. Such
         difference shall be called "RESERVE DEFICIENCY" if it is negative and
         "RESERVE REDUNDANCY" if it is positive. Such report shall show such
         calculation in reasonable detail.

         (b) DISPUTES

                  (i) If at any time within the Objection Period Seller gives an
         Objection Notice, Appointed Experts shall be engaged to separately
         determine the Reserve Deficiency/Reserve Redundancy, and/or Ending
         Reserves and confirm the calculation of Paid Losses within forty-five
         (45) days of the date Seller gives such notice. The determination by an
         actuary that is an Appointed Expert shall be conducted (x) using its
         independent judgment based on prevailing facts, circumstances and
         trends, (y) in accordance with generally accepted actuarial standards
         and principles, and (2) to the extent not inconsistent with the
         foregoing, in a manner and applying a method consistent with the
         determination of the Beginning Reserves. It is understood that such
         actuary shall in no way be inhibited in the use of its independent
         judgment. Except as provided in subsection (iii) below, the Appointed
         Experts' determinations and confirmations shall be final and binding on
         all parties. Fees and expenses of the Appointed Experts shall be borne
         equally by Purchaser and Seller.

                  (ii) Purchaser and Seller agree to cooperate with and use all
         commercially reasonable efforts to assist the Appointed Experts,
         including by furnishing all information reasonably requested by them,
         in performing the services specified hereby, and to negotiate in good
         faith to resolve the disputes under sub-sections (i) and (iii) of this
         Section 2.05(b).

                  (iii) Seller shall be entitled to dispute Paid Losses the
         calculation of which shall have been confirmed by the Appointed Experts
         only to the extent



<PAGE>

         Seller can show that Paid Losses shall not have been incurred by
         Purchaser in its exercise of the reasonable business judgment of a
         reasonable reinsurer under similar circumstances where it would bear
         the entire cost of such Paid Losses (it being recognized that
         Purchaser's rights to control payment of losses by cedent are limited).

         (c) On the Settlement Date, if there is a Reserve Redundancy, then the
Purchaser shall pay to the Seller in cash the full amount of such Reserve
Redundancy up to $2 million, by wire transfer (to an account designated by the
Seller in writing at least three (3) Business Days prior to such payment), bank
check, certified check or any other instrument agreed by the Purchaser and the
Seller in advance.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

         As an inducement to the Purchaser to enter into this Agreement, the
Company and RCHI, jointly and severally, hereby represent and warrant to the
Purchaser as follows:

         SECTION 3.01. INCORPORATION AND AUTHORITY OF THE SELLER. Each of RCHI
and the Company is a company duly organized, validly existing and in good
standing under the laws of the State of Delaware, in the case of RCHI, or the
laws of the State of Nebraska, in the case of the Company, and has all necessary
corporate power and authority to own, lease and operate its respective
Properties, to conduct its respective business as now being conducted and to
enter into this Agreement, the Escrow Agreements, the Transfer and Assumption
Agreement and each other agreement and instrument required to be executed and
delivered by it pursuant hereto, and, subject to the approval of this Agreement
and the transactions contemplated hereby by the requisite vote of the
stockholders of RCHI (the "SELLER'S STOCKHOLDER APPROVAL") to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by each of RCHI and the Company of this Agreement, the Escrow
Agreement, the Transfer and Assumption Agreement and each other agreement and
instrument required to be executed and delivered by it pursuant hereto, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all requisite corporate action, subject to
the Seller's Stockholder Approval. This Agreement has been, and at the Closing
the Escrow Agreement, the Transfer and Assumption Agreement and the other
agreements and instruments required pursuant hereto and to which RCHI or the
Company is a party will have been, duly and validly executed and delivered by
RCHI and the Company, and (assuming due authorization, execution and delivery by
the Purchaser of this Agreement and by the Purchaser and each other party (other
than the Seller) to any other document delivered hereunder), each of this
Agreement, the Escrow Agreement, the Transfer and Assumption Agreement and such
other documents at the Closing will constitute a legal, valid and binding
obligation of RCHI and the Company, enforceable against RCHI and the Company in



<PAGE>

accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures which,
individually or in the aggregate, would not have a Material Adverse Effect. The
Company is licensed or authorized to write reinsurance or insurance in each of
the jurisdictions listed in Section 3.01 of the Disclosure Schedule. True and
correct copies of the licenses issued by each such jurisdiction have been
provided to the Purchaser.

         SECTION 3.02. NECESSARY PROPERTY HELD BY SUBSIDIARIES OR AFFILIATES.
There are no assets or Properties owned by, or in the possession of, the Seller
or any Subsidiary (or any other Affiliate of the Company) which are material to
and required in the conduct of the Assumed Business. Except as set forth in
Section 3.02 of the Disclosure Schedule, none of the Subsidiaries nor any other
Affiliate of the Company has any debts, Liabilities, obligations or other
commitments (other than those which are to be satisfied prior to Closing
pursuant to Section 5.13 hereof or those arising under the Reinsurance
Agreements disclosed in Section 3.17(b)(1) and Section 3.17(c)(1) of the
Disclosure Schedule) relating to the Assumed Business for which the Company may
be liable.

         SECTION 3.03. NO CONFLICT.

         (a) Except as set forth in Section 3.03 of the Disclosure Schedule,
neither RCHI nor the Company is in violation or default in any material respect
(and is not in default in any respect regarding any indebtedness, loan or credit
agreement) under any indenture, agreement or instrument involving or relating to
the Assumed Business to which it is a party or by which it or any of its assets
or properties relating to the Assumed Business may be bound. Neither RCHI nor
the Company is in default under any order, writ, injunction, judgment or decree
of any Governmental Authority or arbitrator(s) relating to the Assumed Business.

         (b) Assuming all consents, approvals, authorizations, orders and other
actions described in Section 3.04 have been obtained and/or taken, and all
filings and notifications described in Section 3.04 have been made, except as
may result from any facts or circumstances relating solely to the Purchaser or
its Affiliates, the execution, delivery and performance of this Agreement and
the Escrow Agreements by the Seller and of the Transfer and Assumption Agreement
by the Company, the transfer of the Assumed Business pursuant to this Agreement
and the Transfer and Assumption Agreement and the consummation by RCHI and the
Company of the transactions contemplated hereby and thereby do not and will not
(a) violate or conflict with the respective charter documents of either RCHI or
the Company, (b) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to RCHI,
the Company or the Assumed Business, or (c) except as set forth in



<PAGE>

Section 3.03(b) of the Disclosure Schedule, result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Company
relating to the Assumed Business pursuant to any Contract, Permit or other
instrument relating to such assets or properties to which RCHI or the Company is
a party or by which any of such assets or properties is bound or affected,
except in the case of clauses (b) and (c) for such conflicts, violations,
breaches or defaults which, individually or in the aggregate, do not have, and
are not reasonably likely to have, a Material Adverse Effect; PROVIDED, HOWEVER,
that clause (c) shall exclude all Reinsurance Agreements.

         SECTION 3.04. CONSENTS AND APPROVALS. The execution and delivery by
each of RCHI and the Company of this Agreement, the Escrow Agreements, the
Transfer and Assumption Agreement and each other agreement and instrument
required to be executed and delivered by RCHI or the Company in connection
herewith, transfer and sale of the Assumed Business pursuant to this Agreement
and the Transfer and Assumption Agreement, and consummation of the transactions
contemplated hereby and thereby do not, and RCHI's and the Company's performance
of this Agreement, the Escrow Agreements, the Transfer and Assumption Agreement
and each other agreement and instrument required to be executed and delivered by
RCHI or the Company in connection herewith will not, require any consent,
approval, authorization, order or other action by, or filing with or
notification to, any Governmental Authority, except (a) the approval of the
Nebraska, California, New York and Florida insurance regulatory authorities, (b)
filings under the Exchange Act, and (c) the notification requirements under the
HSR Act.

         SECTION 3.05. SEC DOCUMENTS; FINANCIAL INFORMATION.

         (a) As of their respective dates and to the extent related to the
Assumed Business, (i) the Seller SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to the Seller
SEC Documents and (ii) none of the Seller SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

         (b) As of their respective dates and to the extent related to the
Assumed Business, the financial statements of RCHI included in the Seller SEC
Documents (the "SELLER FINANCIAL STATEMENTS") (i) complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, and (ii) present fairly
the consolidated financial position of RCHI and its subsidiaries and the related
consolidated results of operations, changes in stockholders' equity and cash
flows as of the dates and for the periods indicated, in accordance with GAAP,
subject in the case of interim financial statements to normal year-end
adjustments and except for the absence of



<PAGE>

certain footnote information in the unaudited statements.

         (c) The Company has heretofore delivered to the Purchaser true and
complete copies of the Company's Annual Statutory Statements and Quarterly
Statutory Statements. Each of the Annual Statutory Statements and Quarterly
Statutory Statements was prepared in accordance with SAP consistently applied
throughout the periods involved, was prepared in accordance with the books and
records of the Company, has been audited by Seller's Accountants, and presents
fairly, in all material respects, the statutory assets, Liabilities, capital and
surplus of the Company at the respective dates thereof and the statutory results
of operations and cash flows of the Company for the respective periods then
ended, except that the Company's Quarterly Statutory Statements have not been
audited and are subject to normal year-end audit adjustments. Each of the
Company's Annual Statutory Statements and Quarterly Statutory Statements (i)
complies in all material respects with the Nebraska Insurance Code, (ii) was
complete and correct in all material respects when filed, (iii) was filed with
or submitted to the Nebraska Insurance Department in a timely manner on forms
prescribed or permitted by the Nebraska Insurance Department, and (iv) was not
prepared utilizing any material accounting practices that are permitted rather
than prescribed by the Nebraska Insurance Department. Except as set forth in
Section 3.05 of the Disclosure Schedule, no material deficiency which has not
been rectified as of the date hereof has been asserted with respect to any of
the Company's Annual Statutory Statements or Quarterly Statutory Statements by
the Nebraska Insurance Department or any other Governmental Authority.

         (d) The Company has heretofore delivered to the Purchaser a true and
complete copy of a balance sheet of the Company at September 30, 1999 (the
"SEPTEMBER 30 BALANCE SHEET") prepared in accordance with GAAP. The September 30
Balance Sheet was prepared in accordance with the books and records of the
Company, and presents fairly, in all material respects, the GAAP financial
position of the Company at the date thereof (subject to normal year-end audit
adjustments). Attached hereto as EXHIBIT D is a pro forma balance sheet of the
Assumed Business which reflects the Assumed Business as at September 30, 1999.
Exhibit D was prepared in accordance with the books and records of the Company,
and presents fairly, in all material respects, the GAAP financial position and
Tax position of the Assumed Business as at September 30, 1999 (subject to normal
year-end audit adjustments).

         SECTION 3.06. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed
in Section 3.06 of the Disclosure Schedule, there are no debts, Liabilities,
obligations or commitments of the Company involving or relating to the Assumed
Business of any kind whatsoever, whether accrued, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, contingent,
absolute, known or unknown, determined, determinable or otherwise, and there is
no existing condition, situation or set of circumstances which could reasonably
be expected to result in such a debt, Liability, obligation or commitment other
than:

         (a) as, and to the extent, reflected or reserved against in the
September 30 Balance Sheet; PROVIDED, HOWEVER, that in no event shall this
Section 3.06 or any other provision



<PAGE>

of this Agreement constitute a representation or warranty by the Seller of any
nature whatsoever regarding the adequacy of the Company's Reserves;

         (b) as, and to the extent, specifically disclosed in any of the
subsections of this Article III or the Disclosure Schedule;

         (c) with respect to the tax matters addressed in Section 3.20 and
Article VII (which shall be governed solely by the terms of such Section 3.20
and Article VII);

         (d) Liabilities arising under any Reinsurance Agreements written by the
Company;

         (e) Liabilities arising under this Agreement or the Escrow Agreements;
or

         (f) Liabilities incurred since the date of the September 30 Balance
Sheet in the ordinary course of business and consistent with past practice,
which, individually and in the aggregate, would not have a Material Adverse
Effect.

         SECTION 3.07. INVESTMENTS; INTEGRATED SOLUTIONS.

         (a) Except as set forth in Section 3.07(a) of the Disclosure Schedule,
the Company has good and marketable title to all of the investments listed in
the most recent Investment Portfolio provided to the Purchaser, free and clear
of all Encumbrances other than Permitted Encumbrances. Section 3.07(a) of the
Disclosure Schedule sets forth the Investment Portfolio as of September 30,
1999. Attached hereto as EXHIBIT G is a list of investments which have been
identified by Purchaser as investments to be excluded from the Investment
Portfolio (such investments, "EXCLUDED SECURITIES"). Except as set forth in
Section 3.07(a) of the Disclosure Schedule and as such list is updated pursuant
to Section 5.10, none of the investments listed in the Investment Portfolio is
in default in the payment of principal or interest and none of such investments
(x) is rated below investment grade or (y) is an Excluded Security. All such
investments comply with the investment guidelines adopted by the Board of
Directors (or investment committee) of the Company and substantially comply with
any and all investment restrictions under the Nebraska Insurance Code.

         (b) Section 3.07(b) of the Disclosure Schedule separately sets forth
the material terms of the reinsurance component of each transaction or
commitment made, or any contract or agreement entered into, which combines
reinsurance with capital investments (collectively, "INTEGRATED SOLUTIONS") in
respect of which the Company had any liability, obligation or commitment as at
September 30, 1999, including, without limitation, the ceding company's
commitment, if any, with respect to the volume of premium to be ceded to the
Company and the other terms and conditions of such reinsurance cessions.

         (c) Except as set forth in Section 3.07(c) of the Disclosure Schedule,
the Company has no obligation or commitment to accept or reinsure cessions of
reinsurance under



<PAGE>

any of its Integrated Solutions or any other Reinsurance Agreements.

         SECTION 3.08. CERTAIN EVENTS.

         (a) Except as set forth in Section 3.08 of the Disclosure Schedule,
since September 30, 1999 there has been no change in the business, operations,
assets, Properties, condition (financial or otherwise) or results of operations
of the Company involving or relating to the Assumed Business which, individually
or in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect.

         (b) Except as set forth in Section 3.08 of the Disclosure Schedule
since September 30, 1999 the business of the Company involving or relating to
the Assumed Business has been conducted only in the ordinary course of business
consistent with past practice and there has not been, except as contemplated
hereby:

                  (i) any material change in the underwriting, reinsurance,
         accounting, establishment of reserves, investment or claims adjustment
         policies and practices of the Company involving or relating to the
         Assumed Business, including, without limitation, any change which has
         had the effect of materially accelerating the recording and billing of
         premiums or accounts receivable or retarding the payment of expenses or
         establishing Reserves in connection with the Assumed Business, or has
         had the effect of materially altering, modifying or changing the
         historic operating, financial or accounting practices or policies of
         the Company involving or relating to the Assumed Business;

                  (ii) any severance or termination agreement or arrangement
         entered into, or amended, between the Company and a director, officer
         or other employee or consultant for a material engagement of the
         Company;

                  (iii) any indebtedness incurred by the Company for borrowed
         money involving or relating to the Assumed Business;

                  (iv) the creation of any Encumbrance on all or any portion of
         any material assets, Properties or rights of the Company involving or
         relating to the Assumed Business, except Permitted Encumbrances;

                  (v) any amendment, modification, alteration, failure to renew
         or termination of any Contract or Reinsurance Agreement involving or
         relating to the Assumed Business which, individually or in the
         aggregate with such other amendments, modifications, alterations,
         failure to renew or terminations, has had or could reasonably be
         expected to have a Material Adverse Effect;

                  (vi) any waiver of any rights of material value or any
         cancellation or forgiveness of any claims, debts or accounts receivable
         owing to the Company and relating to the Assumed



<PAGE>

         Business other than in the ordinary course of business and consistent
         with past practice;

                  (vii) any transaction or commitment made, or any contract or
         agreement entered into, between the Company on the one hand, and the
         Seller or any of its Affiliates on the other hand and involving or
         relating to the Assumed Business;

                  (viii) any entry into any joint venture, partnership or
         similar arrangement with any Person involving or relating to the
         Assumed Business;

                  (ix) any incurrence by the Company of any material Liability
         for rate roll-backs or premium refunds, or failure by the Company to
         pay in full all guaranty fund assessments of which written notice has
         been received from any Governmental Authority;

                  (x) any authorization, approval, agreement or commitment to do
         any of the foregoing; or

                  (xi) any other event or occurrence which has had or is
         reasonably likely to have a Material Adverse Effect.

         SECTION 3.09. INSURANCE RESERVES AND REPORTS.

         (a) Since September 30, 1999, the Company has not adjusted its case
Reserves except in the ordinary course of business consistent with past
practice.

         (b) The Seller has delivered or made available to the Purchaser true
and complete copies of all actuarial reports, actuarial certificates and loss
and loss adjustment expense reserve reports prepared by the Seller's Actuary or
Seller's Accountants and any other report prepared by any third party actuarial
consultant on behalf of or made available to the Seller or any of its
Affiliates, in each case relating to the Reserves of the Company for any period
ended on or after December 31, 1995.

         SECTION 3.10. PROXY STATEMENT. None of the information supplied by RCHI
or the Company in writing for inclusion in the proxy statement (as amended or
supplemented, the "PROXY STATEMENT") required to be distributed to holders of
common stock of RCHI in connection with the transactions contemplated by this
Agreement will, at the respective times that the Proxy Statement or any
amendments or supplements thereto are filed with the SEC and are first published
or sent or given to stockholders of RCHI, and, at the time that it or any
amendment or supplement thereto is mailed to RCHI's stockholders or at the time
of the special meeting (the "SPECIAL MEETING") of the holders of common stock of
RCHI in connection with this Agreement, contain any statement which, at the time
and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier Proxy Statement
which has become false or



<PAGE>

misleading. The Proxy Statement will comply as to form in all material respects
with applicable federal securities laws, except that no representation is made
by the Seller with respect to information supplied by the Purchaser for
inclusion in the Proxy Statement.

         SECTION 3.11. JUDGMENTS, DECREES AND ORDERS. Except as set forth in
Section 3.11 of the Disclosure Schedule, neither the Company nor any of its
directors, officers or employees (in their capacity as such) is a party to or
subject to any judgment, decree, order, writ, award, or injunction of any
Governmental Authority or arbitrator which, individually or in the aggregate
with all such other judgments, decrees, orders, writs, awards and injunctions,
has had or is reasonably likely to have a Material Adverse Effect on the Assumed
Business. There is no default in any material respect on the part of the Company
with respect to any judgment, order, writ, arbitration award, injunction, decree
or award of any Governmental Authority or arbitrator to which it is subject.

         SECTION 3.12. LITIGATION. Except as set forth in Section 3.12 of the
Disclosure Schedule, there are no claims, actions, suits, investigations,
arbitrations or legal, administrative or other proceedings pending and, to the
knowledge of the Seller, none are threatened, against or affecting the Company
relating to the Assumed Business at law or in equity, or before or by any
Governmental Authority or arbitrator.

         SECTION 3.13. COMPLIANCE WITH LAWS. The Company is in compliance with
(a) the terms of its certificate or articles of incorporation, its by-laws and
any other charter or organization documents, (b) all laws, statutes, ordinances,
rules, regulations or other legal requirements, whether federal, state, local or
foreign, applicable to the Company and by which any of the Assumed Business may
be bound, (c) all applicable licenses, authorizations, orders, writs,
judgements, injunctions, awards and decrees of any court, the Nebraska Insurance
Department or other Governmental Authority, or any arbitrator involving or
relating to the Assumed Business and (d) its Permits, except, in the case of
clauses (b), (c) and (d), where the failure to comply would not, individually or
in the aggregate, have a Material Adverse Effect on the Assumed Business.

         SECTION 3.14. LICENSES AND PERMITS. Except as set forth in Section 3.14
of the Disclosure Schedule, the Company has all governmental licenses, permits
and authorizations (other than those relating to the writing of insurance which
are covered by the next sentence) necessary to carry on the Assumed Business now
being conducted by the Company (collectively, the "PERMITS"), all of which are
valid and in full force and effect, except for such Permits the absence of
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Assumed Business. Section 3.01 of the Disclosure Schedule lists
all jurisdictions in which the Company is licensed, authorized or permitted to
write insurance or reinsurance. The Company has been duly authorized by the
relevant state, foreign and other insurance regulatory authorities to write the
lines of insurance or reinsurance that it is currently writing in the respective
jurisdictions in which it does business. Except as set forth in Section 3.14 of
the Disclosure Schedule, the Company does not conduct any business or underwrite



<PAGE>

reinsurance in any foreign jurisdiction which requires any license or approval
for the Company to conduct the Assumed Business as currently conducted. No
insurance regulator in any state has notified the Company, orally or in writing,
that the Company is commercially domiciled in any jurisdiction, and neither the
Seller nor the Company is aware of any facts that would result in the Company
being commercially domiciled in any state. The insurance licenses attached to
Section 3.01 of the Disclosure Schedule are the licenses necessary for the
Company to conduct the Assumed Business in the manner and in the areas in which
the Assumed Business is currently being conducted except where the failure to be
so licensed would not, individually or in the aggregate, have a Material Adverse
Effect on the Assumed Business, and all of the insurance licenses are valid and
in full force and effect. The Company has not received any notice, oral or
written, that it has, and to its knowledge it has not, engaged in any activity
which would cause modification, limitation, non-renewal, revocation or
suspension of any insurance license or Permit involving or relating to the
Assumed Business, and no action, inquiry, investigation or proceeding looking to
or contemplating the revocation, modification, limitation, non-renewal or
suspension of any thereof is pending or threatened. Except as set forth in
Section 3.14 of the Disclosure Schedule, (i) all reports, statements, documents,
registrations, filings and submissions to state insurance regulatory authorities
involving or relating to the Assumed Business complied in all respects with
applicable law in effect when filed and (ii) no deficiencies have been asserted
by any such regulatory authority with respect to such reports, statements,
documents, registrations, filings or submissions that have not been satisfied
except to the extent that any non-compliance, failure to file such items or such
deficiencies would not, individually or in the aggregate, result in a Material
Adverse Effect on the Assumed Business.

         SECTION 3.15. INTELLECTUAL PROPERTY RIGHTS. Section 3.15 of the
Disclosure Schedule sets forth a list of each trade name, service mark,
trademark, logo, copyright, patent and other intangible property used by the
Company which is material to the conduct of the Assumed Business, other than
computer software generally available in the market (collectively, "INTELLECTUAL
PROPERTY RIGHTS"), which are all the material intellectual property rights that
are required to conduct the Assumed Business. Except as set forth in Section
3.15 of the Disclosure Schedule, the Company owns and has good and marketable
title or has valid and enforceable licenses relating to all of the Intellectual
Property Rights and such computer software, and has the right to use the
Intellectual Property Rights and such computer software, free and clear of any
royalty or other payment obligation (except as provided in any license) or
claims of infringement or other Encumbrance. The Seller has not received any
notice of any conflict with or violation or infringement of, any rights of any
other Person with respect to any Intellectual Property Right or such computer
software. The Intellectual Property Rights have been registered to the extent
required with the appropriate Governmental Authority and such registrations have
been continuously maintained and are in full force and effect. To the best of
the knowledge of the Seller, the rights of the Company to the Intellectual
Property Rights are not being infringed by others. No licenses have been granted
by the Company, and there is no obligation requiring the Company to grant any
license, with respect to any of the Intellectual Property Rights.



<PAGE>

         SECTION 3.16. PROPERTY. Except as set forth in Section 3.16 of the
Disclosure Schedule, the Company has good and marketable title to all its
Property material and necessary for the conduct of the Assumed Business free and
clear of all Encumbrances except (i) liens for Taxes and assessments not yet
payable; (ii) liens and imperfections of title which do not, either individually
or in the aggregate, materially detract from the value of, or interfere with the
present use of, the Properties subject thereto or affected thereby; and (iii)
pledges of collateral securing Credit for Reinsurance Faculties, where such
collateral will be released as of the Closing pursuant to Section 5.05(d) (the
exceptions in clauses (i) through (iii) being herein called "PERMITTED
ENCUMBRANCES").

         SECTION 3.17. ASSUMED AND CEDED REINSURANCE AGREEMENTS.

         (a) As used in this Agreement, the term "REINSURANCE AGREEMENTS" shall
mean all assumed and ceded reinsurance and retrocession agreements, contracts,
treaties, obligations, instruments or other reinsurance or retrocession
commitments, arrangements or undertakings of any kind to which the Company is a
party or by which the Company or any of its respective Properties may be bound
or affected.

         (b) Set forth in Section 3.17(b)(1) of the Disclosure Schedule are
complete and accurate lists as of December 23, 1999 of each Reinsurance
Agreement pursuant to which the Company has assumed business, including a
description of certain of the terms thereof (including the name of the ceding
company, whether such Reinsurance Agreement is related to an Integrated
Solution, the name of the broker, type of contract, inception date, estimated
premium and limits of liability (it being understood that the description of
"limits of liability" is qualified in its entirety by reference to the
applicable Reinsurance Agreement and subject to the description of such limits
set forth in Section 3.17(b) of the Disclosure Schedule)). Set forth in Section
3.17(b)(2) of the Disclosure Schedule is a complete and accurate list of all
Credit for Reinsurance Facilities established by, or on behalf of, the Company
with respect to the Reinsurance Agreements set forth in Section 3.17(b)(1) of
the Disclosure Schedule. The Seller will deliver to the Purchaser at the Closing
a complete and accurate list of each assumed Reinsurance Agreement and any
related Credit for Reinsurance Facility in force five (5) Business Days prior to
the Closing Date, including information similar to Sections 3.17(b)(1) and (2)
of the Disclosure Schedule.

         (c) As used in this Agreement, the term "RETROCESSION AGREEMENT" shall
mean any Reinsurance Agreement pursuant to which the Company has ceded or
transferred any portion of its obligations or Liabilities under any reinsurance
or insurance agreement, including, without limitation, common account
reinsurance arrangements. The Company has heretofore delivered to the Purchaser
the cover notes relating to each Retrocession Agreement other than Retrocession
Agreements which are common account reinsurance arrangements. Set forth on
Section 3.17(c)(1) of the Disclosure Schedule is (i) a complete and accurate
list, as of December 23, 1999, of each Retrocession Agreement (other than
Retrocession Agreements which are common account reinsurance arrangements),
including a description of certain of the



<PAGE>

terms thereof which description shall include the name of the retrocessionaire,
type of contract, limits of liability (as such limits are reported in the
Company's SICS Reinsurance System ("SICS") and inception date and (ii) a
complete and accurate list of the premiums ceded to common account reinsurers to
the date hereof under Retrocession Agreements which are common account
reinsurance arrangements. Except as set forth in Section 3.17(c)(1) of the
Disclosure Schedule, (i) to the knowledge of the Seller, none of such
retrocessionaires is insolvent or the subject of a rehabilitation, liquidation,
conservatorship, receivership, bankruptcy or similar proceeding; (ii) to the
knowledge of the Seller, the financial condition of any such retrocessionaire is
not impaired to the extent that a default thereunder is reasonably anticipated,
(iii) no notice of intended cancellation has been received by the Seller from
any of such retrocessionaires; and (iv) the Company is entitled under the
Nebraska Insurance Code to take full credit in its Annual Statutory Statements
for all amounts recoverable by it pursuant to any Retrocession Agreements, and
all such amounts recoverable have been properly recorded in the books and
records of account of the Company and are properly reflected in the Company's
Annual Statutory Statements. No such Retrocession Agreement contains any
provision providing that any such party thereto may terminate, cancel, or
commute the same by reason of the transactions contemplated by this Agreement
and the Transfer and Assumption Agreement. Set forth in Section 3.17(c)(2) of
the Disclosure Schedule is a complete and accurate list of all Credit for
Reinsurance Facilities established for the benefit of the Company with respect
to the Retrocessional Agreements set forth in Section 3.17(c)(1) of the
Disclosure Schedule. The Seller will deliver to the Purchaser at the Closing a
complete and accurate list of each Retrocession Agreement and any related Credit
for Reinsurance Facility in force five (5) Business Days prior to the Closing
Date including information similar to Sections 3.17(c)(1) and (2) of the
Disclosure Schedule.

         (d) All of the Reinsurance Agreements and Credit for Reinsurance
Facilities referred to in clauses (b) and (c) of this Section 3.17 are valid,
binding and enforceable against the Company and, to the knowledge of the Seller
and the Company, against the other parties thereto in accordance with their
terms and are in full force and effect. Except as set forth on Section 3.17(d)
of the Disclosure Schedule, the Company is not, and to the knowledge of the
Seller and the Company, no other party thereto is, in or claimed to be in
material breach or material default under any such Reinsurance Agreement or
Credit for Reinsurance Facility, and, to the knowledge of the Seller and the
Company, no event has occurred which (after notice or lapse of time or both)
would become a material breach or material default under, or would permit
modification, cancellation, acceleration or termination of, any such Reinsurance
Agreement or Credit for Reinsurance Facility or result in the creation of any
material Encumbrance upon, or result in any Person obtaining any right to
acquire, any Properties, assets or rights of the Company. Except as set forth in
Section 3.17(d) of the Disclosure Schedule, there are, to the knowledge of the
Seller, no unresolved disputes under any such Reinsurance Agreement or Credit
for Reinsurance Facility.

         (e) Except as set forth in Section 3.17(e) of the Disclosure Schedule,
the accounts receivable of the Company (including, without limitation, premiums
receivable,



<PAGE>

reinsurance receivable, funds held and contingent commission receivable)
reflected on the September 30 Balance Sheet are, and all such accounts
receivable to be included in the Estimated Closing Date GAAP Book Value and
Closing Date GAAP Book Value will be, (i) legal, valid and binding obligations
of the respective debtors enforceable in accordance with their respective terms,
(ii) not subject to any valid set-off or counterclaim, (iii) to the knowledge of
the Seller, collectible in the ordinary course of business consistent with past
practice in the aggregate recorded amounts thereof, net of any applicable
reserve reflected in the September 30 Balance Sheet or in the computation of the
Estimated Closing Date GAAP Book Value and Closing Date GAAP Book Value, as the
case may be, (iv) not the subject of any claims, actions, suits, arbitrations or
other proceedings brought by or on behalf of the Company or by the account
debtor, and (v) not subject to any pledge as collateral by the Company.

         (f) The Reinsurance Agreement identified on Section 3.17(b)(1) of the
Disclosure Schedule as Treaty No. SP0001007A relating to Societe de Reassurance
is the only Reinsurance Agreement entered into by the Company covering satellite
launch risks or operations after December 31, 1999 and such Reinsurance
Agreement is 100% reinsured by Liberty Syndicate 282, Hiscox Syndicate 33 and
ERC Frankona (Munich, Germany) identified by the Company as Retrocession
Agreement No. 430.

         SECTION 3.18. OTHER CONTRACTS.

         (a) Set forth in Section 3.18 of the Disclosure Schedule is a complete
and accurate list of (x) each Contract which is material to the Assumed Business
and (y) without regard to materiality, each of the following Contracts involving
or relating to the Assumed Business (access to correct and complete copies or,
if none exist, written descriptions, of all Contracts called for by clauses (x)
and (y) having been provided to the Purchaser):

                  (i) All Contracts involving or relating to the Assumed
         Business out of the ordinary course of business representing,
         individually or in the aggregate, non-terminable future Liabilities in
         excess of $50,000;

                  (ii) All Contracts with any Person containing any provision or
         covenant limiting the ability of the Company to engage in the Assumed
         Business in any geographical area or to compete with any Person;

                  (iii) All reinsurance pools relating to the Assumed Business
         pursuant to which the Company has assumed reinsurance risks currently
         in force and all assigned pools relating to the Assumed Business in
         which the Company is participating, other than state FAIR plans,
         assigned risk plans, joint underwriting associations and similar
         associations arising from the requirements of state insurance rules and
         regulations;

                  (iv) Each Contract (other than Contracts cancelable at will or
         with thirty (30) days' notice, in each case without penalty) involving
         or related to the Assumed Business which obligates the



<PAGE>

         Company to provide services to a third party; and

                  (v) Any power of attorney relating to the Assumed Business
         which is currently effective and outstanding, other than powers of
         attorney which are required by law or which have been granted pursuant
         to requirements of applicable state insurance or securities rules and
         regulations.

         (b) All of the Contracts referred to in clause (a) above are, to the
knowledge of the Seller, valid, binding and enforceable against the parties
thereto in accordance with their terms and are in full force and effect, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Except as set forth in Section 3.18(b) of the Disclosure Schedule, the Company
is not, and to the best of the knowledge of the Seller, no other party thereto
is, in or claimed to be in material breach or material default under any
Contract referred to in clause (a) above, and no event has occurred which (after
notice or lapse of time or both) would become a material breach or material
default under or would permit modification, cancellation, acceleration or
termination of, any Contract referred to in clause (a) above or result in the
creation of any material Encumbrance (other than Permitted Encumbrances) upon,
or any Person obtaining any right to acquire, any Properties, assets or rights
of the Company involving or relating to the Assumed Business. There are no
unresolved disputes under any Contract referred to in clause (a) above. Except
as set forth in Section 3.18(b) of the Disclosure Schedule, no material Contract
contains any provision providing that any other party thereto may terminate or
cancel the same by reason of the transactions contemplated by this Agreement.

         SECTION 3.19. EMPLOYEE BENEFIT MATTERS.

         (a) Set forth in Section 3.19 of the Disclosure Schedule is a complete
and correct list of all Plans. True and complete copies of each Plan document
have heretofore been made available to the Purchaser.

         (b) None of the Plans is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN") or a single
employer plan, within the meaning of Section 4001(a)(15) of ERISA, for which the
Seller or the Company could incur liability under Section 4063 or 4064 of ERISA
(a "MULTIPLE EMPLOYER PLAN").

         (c) Except pursuant to Plans or agreements set forth in Section 3.19 of
the Disclosure Schedule, no benefit under any plan or agreement between the
Company or RCHI and an Employee will be triggered or become accelerated, vested
or payable by reason of this Agreement or any transaction contemplated hereby.

         SECTION 3.20. TAXES. Except as set forth in Section 3.20 of the
Disclosure Schedule:




<PAGE>


         (a) All Tax Returns required to be filed in respect of the Company or
with respect to the Assumed Business that are due, taking into account timely
extensions of the filing period, on or prior to the Closing Date have been duly
and timely filed (or will have been duly and timely filed by the Closing Date)
in accordance with all applicable laws and each such Tax Return is correct,
accurate and complete in all material respects. With respect to the Assumed
Business, the Company has (or will have by the Closing Date) paid, or has (or
will have by the Closing Date) made a specific provision for Taxes (as opposed
to any reserve for deferred Taxes to reflect timing differences between book and
Tax income) on its books in accordance with GAAP for the payment of, all Taxes,
whether or not yet due and payable and whether or not disputed, in respect of
the periods covered by Tax Returns which are due on or before the Closing Date,
and has (or will have by the Closing Date) accrued or otherwise adequately
reserved prorated Liabilities on its books in accordance with GAAP for the
payment of all Taxes for periods beginning before and ending after the Closing
Date for which Tax Returns have not yet been filed.

         (b) The Company has made all withholdings of Taxes with respect to the
Assumed Business required to be made under all applicable federal, state, local
and foreign Tax laws and regulations on or before the Closing Date in connection
with payments made to any employee, former employee, creditor, shareholder,
affiliate, customer or supplier, and to the extent required to be paid, such
withholdings have been paid to the respective governmental agencies.

         (c) There have been made available to the Purchaser true and complete
copies of all material Tax Returns with respect to the Assumed Business, as may
be relevant to the Assumed Business since the incorporation of the Company.

         (d) No deficiencies, adjustments, or changes in assessments for any
Taxes have been proposed, asserted or assessed with respect to the Assumed
Business. All Liabilities in respect of federal income Taxes with respect to the
Assumed Business have been finally determined for all taxable years prior to and
including the years set forth in Section 3.20(d) of the Disclosure Schedule.
There is no action, suit, proceeding, audit, investigation or claim pending or,
to the best knowledge of the Seller and the Company, threatened, in respect of
any Taxes with respect to the Assumed Business, including as a transferee of the
assets of, or successor to, any entity. All deficiencies proposed as a result of
any audits have been paid or finally settled and no deficiencies have been
proposed in the course of any pending audit. No issue has been raised during the
past five years by the IRS in any audit with respect to the Assumed Business
which, by application of similar principles, could be expected to result in a
material proposed deficiency for any period not yet audited or for periods under
audit.

         (e) The Company has not executed or filed with the IRS or any other
taxing authority any agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any Taxes with respect
to the Assumed Business.


<PAGE>


         (f) The Company qualifies as an insurance company under the Internal
Revenue Code and neither the Seller nor the Company has received any notice or
other communication relating to or affecting such qualification of the Company
as an insurance company.

         (g) There are no material Encumbrances for Taxes upon the assets of the
Assumed Business except Encumbrances for Taxes not yet due and payable.

         (h) None of the Purchased Assets constitutes tax-exempt bond financed
property or tax-exempt use property, within the meaning of Section 168 of the
Internal Revenue Code, or is a "safe harbor lease" that is subject to the
provisions of Section 168(f)(8) of the Internal Revenue Code as in effect prior
to the Tax Reform Act of 1986, and the Company is not a party to any "long-term
contract" within the meaning of Section 460 of the Internal Revenue Code.

         (i) The Company has not received any written ruling of a taxing
authority related to Taxes or, since its formation, entered into any material
written and legally binding agreement with a taxing authority relating to Taxes
except as regards the extension of any statute of limitations.

         (j) Section 3.20(j) of the Disclosure Schedule contains a list of all
states, territories and jurisdictions (foreign or domestic) to which any tax is
properly payable with respect to the Assumed Business. No claim has ever been
made by any taxing authority in a jurisdiction in which the Company does not
file tax returns that it is or may be subject to Tax in that jurisdiction with
respect to the Assumed Business.

         SECTION 3.21. AGENTS.

         (a) To the best of Seller's knowledge, all Persons through whom the
Company has placed or sold reinsurance and insurance are duly licensed (to the
extent such licensing is required) to sell or place reinsurance and insurance in
the jurisdictions where they do so on behalf of the Company. Set forth in
Section 3.21 of the Disclosure Schedule is a complete and accurate list of each
agency, brokerage, consultation or representation Contract with any agent,
managing general agent, reinsurance intermediary, claims adjuster or
administrator or broker of the Company who (i) generated more than 10% of the
aggregate net written premium of the Company during the years ended December 31,
1997 or December 31, 1998 or for the nine months ended September 30, 1999; or
(ii) to whom any underwriting or claims settlement authority has been delegated
by the Company. Except as set forth in Section 3.21 of the Disclosure Schedule,
the Company is not a party to any 90% Quota Share Agreement to assume or cede
reinsurance or insurance for any other Person. For this purpose, the term "90%
QUOTA SHARE AGREEMENT" shall mean an assumed or ceded Reinsurance Agreement on
which the Company participates that was written on a quota share basis where the
amount of the business ceded to all participating reinsurers is 90% or greater.


<PAGE>


         (b) Except as set forth in Section 3.21(b)(i) of the Disclosure
Schedule, CPIS has ceased doing any business and has no known Liabilities,
contingent or otherwise, to any third party and since March 8, 1999, CPIS has
had no authority to solicit, underwrite or bind insurance or reinsurance on
behalf of the Company or on behalf of any other company which is reinsured by
the Company with respect to such insurance or reinsurance (a "CPIS BOUND
CEDENT"). A list of each CPIS Bound Cedent is set forth in Section 3.21(b)(i) of
the Disclosure Schedule. Except as set forth in Section 3.21(b)(ii) of the
Disclosure Schedule, there are no claims, actions, suits, investigations,
arbitrations, mediations or legal, administrative or other proceedings pending,
or to the knowledge of the Seller, threatened against CPIS, the Company, or, to
the knowledge of Seller, any CPIS Bound Cedent relating directly or indirectly
to the Assumed Business. For purposes of this Agreement, any Liabilities arising
out of or relating to CPIS, other than Treaty Liabilities, shall be deemed to be
Excluded Liabilities.

         SECTION 3.22. YEAR 2000.

         (a) To the extent Year 2000 issues potentially could impact the Assumed
Business, the description of Year 2000 issues contained in RCHI's most recent
Form 10-Q, as filed with the SEC, does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

         (b) Based on its review and study of Year 2000 issues as reflected in
RCHI's Form 10-Q referred to in clause (a) above, the Seller believes that
neither Year 2000 problems nor commercially reasonable and foreseeable
remediation costs have had, or will have, a Material Adverse Effect with respect
to the software and computer systems of the Seller relating to the Assumed
Business.

         SECTION 3.23. BROKERS. Except for DLJ, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Seller or the Company. The Seller is
solely responsible for the fees and expenses of DLJ.

                                   ARTICLE IV

         REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         As an inducement to the Seller to enter into this Agreement, FHC and
FRC, jointly and severally hereby represent and warrant to the Seller as
follows:

         SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASER. Each of FHC
and FRC is a corporation duly incorporated, validly existing and in good
standing under the laws of



<PAGE>

the State of New York and has all necessary corporate power and authority to
own, lease and operate its respective properties, to conduct its respective
business as now being conducted, to enter into this Agreement, the Escrow
Agreements, the Transfer and Assumption Agreement and each other agreement and
instrument required to be executed and delivered by it pursuant hereto, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
of FHC and FRC of this Agreement, the Escrow Agreements, the Transfer and
Assumption Agreement and each other agreement and instrument required to be
executed and delivered by it pursuant hereto and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on the part of FHC or FRC are necessary to authorize the foregoing. This
Agreement has been, and at the Closing, the Escrow Agreements, the Transfer and
Assumption Agreement and the other agreements and instruments required pursuant
hereto and to which FHC or FRC is a party will have been, duly and validly
executed and delivered by FHC and FRC, and (assuming the due authorization,
execution and delivery by the Seller of this Agreement and by the Seller and
each other party (other than the Purchaser) to any other document delivered
hereunder), each of this Agreement, the Escrow Agreements, the Transfer and
Assumption Agreement and such other documents executed by it at the Closing will
constitute a legal, valid and binding obligation of FHC and FRC enforceable
against FHC and FRC in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

         SECTION 4.02. NO CONFLICT. Assuming all consents, approvals,
authorizations, orders and other actions described in Section 4.04 have been
obtained and/or taken, all filings and other notifications described in Section
4.04 have been made, except as may result from any facts or circumstances
relating solely to the Seller, the execution, delivery and performance of this
Agreement and the Escrow Agreements by the Purchaser and of the Transfer and
Assumption Agreement by FHC and FRC and the transfer of the Assumed Business
pursuant to this Agreement and the Transfer and Assumption Agreement and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby do not and will not (a) violate or conflict with the respective
Certificates of Incorporation or By-laws (or other similar applicable documents)
of FHC and FRC, (b) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Purchaser, or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of FHC and FRC pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument relating to such assets or properties to which FHC or FRC is a
party or by which any of such assets or properties is bound or affected, which
conflict, violation, breach or default in the case of clauses (b) and (c) would
have, or is reasonably likely to have, a Material Adverse Effect with respect to
the Purchaser.



<PAGE>


         SECTION 4.03. ABSENCE OF LITIGATION. No claim, action, proceeding or
investigation is pending against FHC or FRC or any of their respective
Affiliates which seeks to materially delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict their ability to consummate the transactions
contemplated hereby.

         SECTION 4.04. CONSENTS AND APPROVALS. The execution and delivery of
this Agreement, the Transfer and Assumption Agreement and the Escrow Agreement
by FHC and FRC and the purchase of the Assumed Business pursuant to this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby do not and will not, require any consent, approval,
authorization, order or other action by, or filing with or notification to, any
Governmental Authority, except (a) the approval of the Nebraska, California, New
York and Florida insurance regulatory authorities, (b) filings under the
Exchange Act, and (c) the notification requirements under the HSR Act.

         SECTION 4.05. FINANCIAL INFORMATION. The Purchaser has heretofore
delivered to the Seller true and complete copies of FRC's Annual Statutory
Statement and Quarterly Statutory Statements. Each of FRC's Annual Statutory
Statements and Quarterly Statutory Statements was prepared in accordance with
SAP consistently applied throughout the periods involved, was prepared in
accordance with the books and records of FRC, has been audited by the
Purchaser's Accountants, and presents fairly, in all material respects, the
statutory assets, Liabilities, capital and surplus of FRC at the respective
dates thereof and the statutory results of operations and cash flows of FRC for
the respective periods then ended, except that FRC's Quarterly Statutory
Statements have not been audited and are subject to normal year-end audit
adjustments. Each of FRC's Annual Statutory Statement and Quarterly Statutory
Statements (i) complies in all material respects with the New York Insurance
Code, (ii) was complete and correct in all material respects when filed, (iii)
was filed with or submitted to the New York Insurance Department in a timely
manner on forms prescribed or permitted by the New York Insurance Department,
and (iv) was not prepared utilizing any material accounting practices that are
permitted rather than prescribed by the New York Insurance Department. Except as
set forth in Section 4.05 of the Disclosure Schedule, no material deficiency has
been asserted with respect to FRC's Annual Statutory Statement or Quarterly
Statutory Statements by the New York Insurance Department or any other
Governmental Authority.

         SECTION 4.06. FINANCIAL ABILITY. The Purchaser has the financial
resources to perform its obligations under this Agreement, the Transfer and
Assumption Agreement and the Escrow Agreements.

         SECTION 4.07. PROXY STATEMENT. The information supplied by the
Purchaser in writing for inclusion in the Proxy Statement will not, at the
respective times that the Proxy Statement or any amendments or supplements
thereto are filed with the SEC and are first published or sent or given to
holders of common stock of RCHI or at the time of the Special Meeting, contain
any statement which, at the time and in the light of the circumstances under




<PAGE>

which it is made, is false or misleading with respect to any material fact, or
which omits to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier Proxy Statement which has become false or misleading.

         SECTION 4.08. BROKERS. Except for Lehman Brothers, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser. The Purchaser is
solely responsible for the fees and expenses of Lehman Brothers.

                                    ARTICLE V

                              ADDITIONAL AGREEMENTS

         RCHI and the Company, jointly and severally, hereby covenant and agree
as follows:

         SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING.

         (a) Between the date hereof and the Closing Date, the Company shall
conduct the Assumed Business in the ordinary course and consistent with its
prior practice except as described in Section 5.01(a) of the Disclosure Schedule
or except as otherwise specifically provided in this Agreement.

         (b) Except as otherwise specifically provided in this Agreement, prior
to the Closing and without making any commitment on Purchaser's behalf, the
Company will (i) use all commercially reasonable efforts to preserve
substantially intact its business organization, goodwill, Permits and insurance
licenses, (ii) comply in all respects with all laws, statutes, ordinances, rules
and regulations applicable to the Company, (iii) use all commercially reasonable
efforts to preserve the current relationships of the Company with its brokers,
reinsurance intermediaries, ceding companies, reinsurers, agents, managing
general agents, suppliers and other persons with which the Company has
significant business relationships, and (iv) perform its obligations under all
Reinsurance Agreements, Contracts and commitments to which it is a party or by
or to which it is bound or subject, except, in each case, as would not,
individually or in the aggregate, have a Material Adverse Effect.

         (c) Prior to the Closing Date, the Company will maintain its books and
records in the usual, regular and ordinary manner consistent with past
practices; and use commercially reasonable efforts to continue in full force and
effect all policies of insurance (other than Reinsurance Agreements) maintained
in the ordinary course of business or comparable substitute policies and will
promptly notify the Purchaser of any cancellation or




<PAGE>

non-renewal of such insurance.

         (d) Except as set forth in Section 5.01(a) of the Disclosure Schedule,
the Company will not amend, commute, terminate or waive any of its rights under
any Reinsurance Agreement pursuant to which the Company has ceded or transferred
any portion of its obligations or Liabilities.

         (e) The Company will commence preparation of and, consistent with past
practice and on a timely basis, if required prior to the Closing Date, file with
or submit to the Nebraska Insurance Department and any other insurance
department or other regulatory authority with which the Company is required to
make such filings or submissions, and, if filed prior to the Closing Date,
deliver to the Purchaser true and complete copies of, the quarterly statutory
statement for each quarter of 1999 and 2000 ended prior to the Closing Date, and
the annual statutory statement for 1999, together with all related notes,
exhibits and schedules thereto. All such quarterly and annual statements filed
with or submitted to the Nebraska Insurance Department and any other insurance
department, or regulatory authority (i) shall be prepared from the books of
account and other financial records of the Company, (ii) shall be filed with or
submitted to the Nebraska Insurance Department, and such other insurance
departments and regulatory authorities, on forms prescribed or permitted
thereby, (iii) shall be prepared in accordance with SAP applied on a basis
consistent with the past practices of the Company (except as set forth in the
notes, exhibits or schedules thereto), and shall comply on their respective
dates of filing or submission with the Nebraska Insurance Code and the laws of
such other jurisdictions, (iv) shall present fairly the statutory assets,
Liabilities, capital and surplus, results of operations and cash flows of the
Company as of the dates thereof or for the periods covered thereby (in the case
of quarterly statements, subject to normal estimation of accruals and reserves
and normal year-end audit adjustments), and (v) shall not use any accounting
practices that are permitted rather than prescribed by the Nebraska Insurance
Department.

         (f) Prior to the Closing, the Company will not amend its Charter or
By-laws or merge or consolidate or sell all or substantially all of its assets
(other than ordinary course trading of its investment portfolio and other than
assets not listed on EXHIBIT D), or obligate itself to do so, with or into or to
any other entity, without the prior written consent of the Purchaser.

         (g) Except as otherwise specifically permitted by this Agreement or as
set forth in the Disclosure Schedule, without the prior written consent of the
Purchaser, the Company will not, prior to the Closing:
     (i) change in any material respect its accounting methods, principles or
practices involving or relating to the Assumed Business except as required by
SAP or GAAP or change in any material respect its underwriting, reinsurance,
establishment of reserves, investment or claims adjustment policies or practices
involving or relating to the Assumed Business;



<PAGE>


     (ii) create, incur, assume, maintain or permit to exist any Encumbrances on
any Property of the Assumed Business other than Permitted Encumbrances;

     (iii) pay or discharge any material claim, Liability or Encumbrance
involving or relating to the Assumed Business (whether absolute, accrued,
contingent or otherwise), or waive any right involving or relating to the
Assumed Business, other than in the ordinary course of business consistent with
past practice or pursuant to binding contractual obligations of the Company in
existence on the date hereof;

     (iv) become a par ty to any agreement (other than Reinsurance Agreements in
the ordinary course of business consistent with past practice) which, if it
existed on the date hereof, would be required to be listed in the Disclosure
Schedule, or, other than in the ordinary course of business and consistent with
past practice, amend or terminate any existing Reinsurance Agreement or, other
than in the ordinary course of business and consistent with past practice, amend
or terminate any other Contract involving or relating to the Assumed Business;

     (v) dispose of or a cquire any assets of the Assumed Business other than in
the ordinary course of business for fair value and consistent with past
practice;

     (vi) with respect to the Investment Portfolio, upon the sale or maturity of
any fixed income securities, the Company shall not reinvest the proceeds of such
fixed income securities except in United States Treasuries or mutually agreed
liquid fixed income investments;

     (vii) abandon, modify, waive, terminate or otherwise change any of the
insurance licenses described in Section 3.01 of the Disclosure Schedule or
Permits of the Company involving or relating to the Assumed Business, except as
may be required by law or by any applicable insurance or other regulatory
authority;

     (viii) enter into any commutation of any Retrocession Agreements;

     (ix) subject to Section 5.13, enter into any transaction, commitment,
contract or agreement involving or relating to the Assumed Business between the
Company on the one hand and the Seller, MMRC, XL or any of their Affiliates on
the other hand, except Reinsurance Agreements in the ordinary course of business
consistent with past practices;

     (x) enter into any joint venture, partnership, managing general agency or
similar arrangement with any Person involving or relating to the Assumed
Business;

     (xi) settle or compromise any material claims against the Company involving
or relating to the Assumed Business (other than the payment of claims on
Reinsurance Agreements in the ordinary course of business consistent with past
practice);

     (xii) take any action or course of action inconsistent with its compliance
with the



<PAGE>

covenants and agreements contained in this Agreement; or

     (xiii) take or agree to commit to take any action that would make any
representation or warranty of the Seller contained herein inaccurate in any
material respect at the Closing or omit to take any action necessary to prevent
any such representation or warranty from being inaccurate in any material
respect at such time.

         (h) Between the date hereof and the Closing Date, with respect to its
Reserves relating to the Reinsurance Agreements produced by CPIS, the Company
will not lower its projections to ultimate without promptly notifying the
Purchaser thereof and the reasons therefor. If the Purchaser objects to such
change within ten (10) Business Days after receipt of such notice, then such
objection shall be referred promptly to an Appointed Expert for resolution
within ten (10) Business Days from the date of such referral and the
determination of such Appointed Expert shall be final and binding upon the
parties. The fees and expenses of the Appointed Expert, if retained pursuant to
this Section 5.01(h), shall be borne equally by the Seller and the Purchaser.

         SECTION 5.02. ACCESS TO INFORMATION. From the date hereof until the
Closing, upon reasonable notice, the Seller shall cause its respective officers,
directors, employees, auditors and agents to, (i) afford the officers, employees
and authorized agents and representatives of the Purchaser reasonable access,
during normal business hours and upon reasonable advance notice, to the offices,
properties, books and records of the Company and to its respective officers,
employees, agents, accountants and actuaries and (ii) furnish to the officers,
employees and authorized agents and representatives of the Purchaser such
additional financial and operating data and other information regarding the
assets, properties, goodwill and Assumed Business of the Company as are
available to the Seller or as may be prepared or compiled by the Seller without
undue burden or expense as the Purchaser may from time to time reasonably
request. No investigation or access to information pursuant to this Section 5.02
shall affect any representation or warranty made by the Seller to the Purchaser
hereunder or otherwise affect the rights and remedies available to the Purchaser
hereunder. The Confidentiality Agreement shall apply to all information,
materials and documents provided or made available to the Purchaser or its
officers, employees or authorized agents or representatives under this Section
5.02.

         SECTION 5.03. STOCKHOLDER APPROVALS; PROXY STATEMENT.

         (a) The Special Meeting shall be called to be held as soon as
practicable, after at least twenty (20) days' prior written notice thereof to
the stockholders of RCHI, to consider and vote upon this Agreement and the
transactions contemplated hereby. RCHI will duly convene and hold the Special
Meeting and use its commercially reasonable efforts consistent with applicable
law to obtain the necessary stockholder approval for this Agreement and the
transactions contemplated hereby.



<PAGE>


         (b) The Seller shall take all steps necessary to prepare and file with
the SEC and shall disseminate to the holders of the RCHI's common stock, as soon
as practicable after the date hereof, the Proxy Statement for the Special
Meeting to be held in accordance with clause (a) hereof. The Seller shall give
Purchaser and its counsel the opportunity to review the Proxy Statement prior to
its being filed with the SEC and shall consult with Purchaser and its counsel
regarding comments made by the SEC. The Proxy Statement shall include the
recommendation of the RCHI's Board of Directors that the stockholders of RCHI
approve this Agreement and the transactions contemplated hereby, in each case
except to the extent that RCHI's Board of Directors determines in good faith,
based on the advice of counsel, that it is necessary to withhold its
recommendation in order to comply with their fiduciary duties to RCHI's
stockholders under applicable law. The Seller shall hire a proxy solicitor and
otherwise shall use all reasonable and lawful efforts to solicit proxies in
favor of this Agreement and the transactions contemplated hereby.

         SECTION 5.04. CONFIDENTIALITY. The terms of the letter agreement,
agreed and consented to by the Purchaser on June 15, 1999, between the Seller
and the Purchaser (the "CONFIDENTIALITY AGREEMENT") are hereby incorporated by
reference and shall continue in full force and effect until the Closing, at
which time such Confidentiality Agreement and the obligations of the Purchaser
under this Section 5.04 shall terminate; PROVIDED, HOWEVER, that the
Confidentiality Agreement shall not terminate in respect of that portion of such
confidential information relating exclusively to matters not related to the
transactions contemplated by this Agreement or the Assumed Business. If this
Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement shall continue in full force and effect in respect of
such confidential information. After the Closing Date, the Seller shall keep all
non-public information relating to the Assumed Business confidential on the same
terms as set forth for the Purchaser in the Confidentiality Agreement.

         SECTION 5.05. REGULATORY AND OTHER CONSENTS AND AUTHORIZATIONS; THIRD
                       PARTY CONSENTS.

         (a) Each party hereto will use all commercially reasonable efforts to
obtain all authorizations, consents, orders and approvals of all Governmental
Authorities (including, without limitation, the insurance regulatory authorities
of Nebraska, Florida, California and New York) that may be or become necessary
(including all informational and notice filings) for its execution, delivery and
performance of this Agreement, the Transfer and Assumption Agreement and the
transfer of the Assumed Business (such Governmental Authorities, the "APPLICABLE
INSURANCE DEPARTMENTS"), and will cooperate fully with the other parties in
promptly seeking to obtain all such authorizations, consents, orders and
approvals, subject to the proviso in Section 5.05(e). Each party hereto agrees
to make an applicable filing of a Notification and Report Form pursuant to the
HSR Act with respect to the transactions contemplated hereby as soon as
reasonably practicable after the date hereof and to supply promptly any
additional information and



<PAGE>

documentary material that may be requested pursuant to the HSR Act. The Seller
agrees to promptly make all initial filings with the Applicable Insurance
Departments upon the execution of this Agreement and to supply promptly any
additional information and documentary material that may be requested by any
Applicable Insurance Department in connection therewith. The Seller agrees to
provide a draft of such filings to the Purchaser for its review and to consult
with the Purchaser relating to any issues arising as a result of the Purchaser's
review, prior to the submission of such filings by the Seller to the Applicable
Insurance Departments; PROVIDED that such consultation does not delay the timely
filing of such filings or any amendments or supplements thereto and it being
agreed that the final determination as to the content of such filings or any
amendments or supplements thereto shall remain with the Seller. The Seller
agrees to provide the Purchaser with a copy of such filings and each amendment
or supplement thereto in final form upon the submission thereof to the
Applicable Insurance Departments. The Seller and the Purchaser each agree to
make all other appropriate filings with the Applicable Insurance Departments and
such other filings as may be required under the insurance laws of any other
state or jurisdiction in which the Company does business. The parties hereto
will not knowingly take any action that will have the effect of materially
delaying, impairing or impeding the receipt of any required approvals.

         (b) From the date hereof to the Closing Date the Seller will use its
commercially reasonable efforts to obtain the written consents, in form and
substance reasonably satisfactory to the Purchaser, of (i) the other party to
all contracts and other agreements to be transferred pursuant to the Transfer
and Assumption Agreement which by their terms require the consent of such party
to the assignment thereof to FRC (including all Retrocession Agreements which by
their terms require consent, but excluding cedents under Reinsurance Agreements
other than Designated Integrated Solutions), consenting to such assignment, and
(ii) any other party (other than Fleet which is the subject of subsection (d)
below) to, or beneficiary of, or obligee with respect to, any Credit for
Reinsurance Facility to be transferred, amended or replaced pursuant to the
Transfer and Assumption Agreement, to the assignment of such Credit for
Reinsurance Facility (including the transfer to FRC of any assets of the Company
which are subject to Encumbrances in connection with such Credit for Reinsurance
Facilities), consenting to such transfer, amendment or replacement, and that the
Seller will, at the Closing Date, deliver to the Purchaser such consents as have
then been received by the Seller. The Seller further agrees that, at all times
after the Closing Date, at the reasonable request of the Purchaser, the Seller
will use all commercially reasonable efforts to cooperate fully with the
Purchaser in order to obtain any such consents not previously obtained by the
Seller.

         (c) With respect to the reinsurance component described in Section
3.07(b) of the Disclosure Schedule of each Integrated Solution with (i) American
Independent Insurance Company, (ii) Arrowhead Management Company, Clarendon
National Insurance Company, Arrowhead General Insurance Agency and Sorrento
Holdings Inc., (collectively, "ARROWHEAD"), (iii) Sunshine State Insurance
Company and Sunshine State Holding Corporation (collectively, "SUNSHINE"), and
(iv) ARX Holding Corp. and American Strategic Insurance Company (collectively,
"ARX") (or any Affiliate of any of the foregoing) (collectively, the "DESIGNATED
INTEGRATED SOLUTIONS") the Seller shall prior to the Closing Date (x) obtain
from each party to a Designated Integrated Solution an affirmation, in form and
substance reasonably satisfactory to




<PAGE>

the Purchaser, regarding the terms of the reinsurance commitments (as described
in Section 3.07(b) of the Disclosure Schedule) by the ceding company and that
such reinsurance commitments by the ceding company will pursuant to the Transfer
and Assumption Agreement be transferred to, and inure to the benefit of, FRC;
and (y) obtain from each party to a Designated Integrated Solution an
affirmation, in form and substance reasonably satisfactory to the Purchaser,
that after the Closing Date neither the Company nor FRC will have any obligation
to accept cessions of reinsurance under, or any other obligation under or in
respect of, the Designated Integrated Solution. The Seller shall not reduce its
ownership of the outstanding shares of Common Stock of ARX (calculated on a
fully diluted basis) below 5% if as a result of such reduction FRC's rights with
respect to the reinsurance commitments of ARX being transferred to FRC would
terminate prior to the third anniversary of the Closing Date.

         (d) Prior to the Closing Date, the Seller will use all commercially
reasonable efforts to obtain the consent of Fleet National Bank ("FLEET") to (i)
the assignment to FRC pursuant to the Transfer and Assumption Agreement of the
Company's Credit for Reinsurance Facility with Fleet, and the transfer to FRC of
any assets of the Company supporting such Credit for Reinsurance Facility, or
(ii) the termination of such Credit for Reinsurance Facility at the Closing and
transfer and/or release to FRC at the Closing of any assets of the Company
supporting such terminated Credit for Reinsurance Facility free and clear of any
Encumbrances.

         (e) The Purchaser and the Seller will use all their respective
commercially reasonable efforts to assist one another in obtaining the consents
and approvals referred to in this Section 5.05, including, without limitation,
providing to such parties such financial statements and other financial
information with respect to the Purchaser as such parties may reasonably
request, if and to the extent such information may reasonably be required;
PROVIDED, HOWEVER, that neither the Purchaser nor the Seller shall be obligated
with respect to such assistance to take any actions with respect to their
respective businesses or the Business of the Company which, in its reasonable
judgement, is materially adverse.

         SECTION 5.06. NO SOLICITATION OF EMPLOYEES. For a period of three (3)
years following the Closing and other than through ordinary help-wanted
advertising, (a) the Seller shall not, directly or indirectly, actively solicit
or induce any employee of the Purchaser or any of its subsidiaries (including
any Employee employed by the Purchaser following the Closing) to leave such
employment and become an employee of the Seller or any of its Affiliates and (b)
the Purchaser shall not, directly or indirectly, actively solicit or induce any
employee of the Seller (other than as contemplated by Section 6.03) to leave
such employment and become an employee of the Purchaser or any of its
Affiliates; PROVIDED, HOWEVER, that nothing in this Section 5.06 shall prohibit
the Seller or any of its Affiliates or the Purchaser or any of its Affiliates
from employing any person who contacts them on his or her own initiative and
without any direct or indirect solicitation (it being understood that ordinary
help wanted advertising shall not be considered solicitation) by the Seller or
any of its Affiliates or the Purchaser or any of its Affiliates, as the case may
be.



<PAGE>


         SECTION 5.07. USE OF NAME. Anything herein to the contrary
notwithstanding, the Purchaser shall not acquire any interest in or right
(except as permitted below) to use the name "Risk Capital Reinsurance Company"
or any logo, trademark or trade name including such name (collectively, the
"RETAINED NAMES AND MARKS"). Promptly following the Closing, (i) the Company
shall file such documents as are necessary and appropriate to change its
corporate name so as not to contain "Risk Capital Reinsurance Company" or any
name similar thereto, including, without limitation, amendments to the Charter
of the Company, and amendments to all filings made by the Company to qualify to
do business as a foreign corporation and amendments to all filings made by the
Company with insurance regulatory authorities in order to be licensed or
authorized to write reinsurance or insurance and (ii) the Seller shall cease and
desist from using the name "Risk Capital Reinsurance Company" or any name
similar thereto, including, without limitation, in any corporate name or in any
logo, trademark or trade name. Notwithstanding the foregoing, the Purchaser
shall be entitled, without any payment therefor, for a period of eighteen (18)
months following the Closing to use the name "Risk Capital Reinsurance Company"
in connection with its efforts to renew existing Reinsurance Agreements.

         SECTION 5.08. NO SOLICITATION OF OFFERS, ETC.

         (a) The Seller shall not, nor shall it permit any of its affiliates to,
nor shall it authorize or permit any of its or their officers or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or by them to, directly or indirectly, (i)
solicit, initiate or knowingly encourage (including by way of furnishing
information), or take any other action designed to facilitate, the making of any
offer or proposal which constitutes or reasonably may be expected to lead to any
Acquisition Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding any Acquisition Proposal; PROVIDED, HOWEVER, that if
at any time the Board of Directors of the RCHI determines in good faith, based
on the advice of counsel, that it is necessary to do so in order to comply with
its fiduciary duties to RCHI's stockholders under applicable law, the Seller
may, in response to a Superior Proposal (as defined in Section 5.08(b)) which
was not solicited by it or which did not otherwise result from a breach of this
Section 5.08(a), (x) furnish information with respect to the Seller and its
subsidiaries to any person making a Superior Proposal pursuant to a customary
confidentiality agreement and (y) participate in discussions and/or negotiations
regarding such Superior Proposal. For purposes of this Agreement, "ACQUISITION
PROPOSAL" means any proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 15% or more of
the consolidated net revenues, net income or assets of RCHI, or 15% or more of
any class of equity securities of RCHI or the Company, or any merger,
consolidation, share exchange or other business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction involving the
Seller, other than (i) the transactions contemplated by this Agreement and (ii)
transactions that would not prevent the consummation



<PAGE>

of the transactions contemplated by this Agreement.

         (b) Except as expressly permitted by this Section 5.08, neither the
Board of Directors of RCHI nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to the
Purchaser, the approval or recommendation by such Board of Directors or such
committee of this Agreement and the transactions contemplated hereby, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (iii) cause the Seller to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each, an "ACQUISITION AGREEMENT") relating to any Acquisition Proposal.
Notwithstanding the foregoing, in the event of any Superior Proposal which was
not solicited by the Seller and which did not otherwise result from a breach of
this Section 5.08, the Board of Directors of RCHI may terminate this Agreement
and, concurrently with or after such termination, if it so chooses, cause RCHI
to enter into any Acquisition Agreement with respect to any Superior Proposal,
and withdraw its approval and recommendation of the transactions contemplated
hereby and approve and recommend to its stockholders a Superior Proposal, but
only at a time that is after the second Business Day following the Purchaser's
receipt of written notice advising the Purchaser that the Board of Directors of
RCHI is prepared to accept a Superior Proposal and specifying the material terms
and conditions of such Superior Proposal. For purposes of this Agreement, a
"SUPERIOR PROPOSAL" means any bona fide Acquisition Proposal made by a
financially responsible third party which the Board of Directors of RCHI
determines in its good faith judgment (based on the written advice of a
financial advisor of nationally recognized reputation) to be more favorable to
RCHI's stockholders than this Agreement and the transactions contemplated
hereby.

         (c) Nothing contained in this Section 5.08 shall prohibit RCHI from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
RCHI's stockholders if, in the good faith judgment of the Board of Directors of
RCHI, based on the advice of counsel, failure so to disclose would be
inconsistent with its obligations under applicable law.

         SECTION 5.09. FEES AND EXPENSES.

         (a) Subject to the provisions of Section 5.09(b) and except as
otherwise provided in this Agreement, all costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.

         (b) In the event that (i) Seller's Stockholder Approval is not obtained
as a result of direct solicitation of RCHI's stockholders by a third party (the
"THIRD PARTY") and thereafter this Agreement is terminated by either the
Purchaser or the Seller pursuant to Section 10.01(b) or (g) or (ii) this
Agreement is terminated by the Seller pursuant to Section 10.01(f), then the
Seller shall promptly, but in no event later than two (2) days after the date of
such



<PAGE>

termination, pay the Purchaser a fee equal to $1.5 million (the "TERMINATION
FEE"), payable by wire transfer of same day funds; PROVIDED, HOWEVER, that no
Termination Fee shall be payable to the Purchaser pursuant to clause (i) of
this paragraph (b) unless and until within twelve (12) months of such
termination the Seller or any of its subsidiaries enters into any Acquisition
Agreement or consummates any Acquisition Proposal with the Third Party which
has made such direct solicitation (for the purposes of the foregoing proviso
the terms "Acquisition Agreement" and "Acquisition Proposal" shall have the
meanings assigned to such terms in Section 5.08). The Seller acknowledges
that the agreements contained in this Section 5.09(b) are an integral part of
the transactions contemplated by this Agreement and constitute liquidated
damages and not a penalty, and that, without these agreements, the Purchaser
would not enter into this Agreement; accordingly, if the Seller fails
promptly to pay the amount due pursuant to this Section 5.09(b), and, in
order to obtain such payment, the Purchaser commences a suit which results in
a judgment against the Seller for the fee set forth in this Section 5.09(b),
the Seller shall pay to Purchaser its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate as reported in the WALL
STREET JOURNAL on the date such payment was required to be made.

         SECTION 5.10. INVESTMENT PORTFOLIO. Prior to the Closing Date, the
Seller shall update the Investment Portfolio as of the end of each month and
shall deliver the updated Investment Portfolio to the Purchaser within ten (10)
Business Days of the end of such month.

         SECTION 5.11. NOTICE OF CERTAIN MATTERS.

         (a) Prior to the Closing Date, the Seller shall give prompt notice in
writing to the Purchaser of: (i) any information that indicates that any
representation or warranty of the Seller contained herein was not true and
correct in any material respect as of the date hereof or will not be true and
correct in any material respect as of the Closing Date, (ii) the occurrence of
any event which will result, or has a reasonable prospect of resulting, in the
failure to satisfy a condition specified in Article VIII hereof, (iii) any
notice or other written, or, to the knowledge of the Seller, oral communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement,
(iv) any notice of, or other communication relating to, any default or event
which, with notice or lapse of time or both, would become a default under any
Reinsurance Agreement or material Contract, and (v) any fact, condition or
change that, individually or in the aggregate, has resulted or is reasonably
likely to result in a Material Adverse Effect with respect to the Assumed
Business.

         (b) Prior to the Closing Date, the Purchaser covenants and agrees to
give prompt notice in writing to the Seller of: (i) any information that
indicates that any representation or warranty of the Purchaser contained herein
was not true and correct in any material respect as of the date hereof or will
not be true and correct in any material respect as of the Closing Date, (ii) the
occurrence of any event which will result, or has a reasonable prospect of
resulting, in the failure to satisfy a condition specified in Article VIII
hereof, (iii) any notice



<PAGE>

or other written or, to the knowledge of the Purchaser, oral communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement and
(iv) any fact, condition or change that, individually or in the aggregate, has
resulted or is reasonably likely to result in a Material Adverse Effect with
respect to the Purchaser.

         (c) The giving of any such notice under this Section 5.11 or the
providing of the financial statements contemplated by Section 5.12 shall in no
way change or modify the Seller's or the Purchaser's representations and
warranties or the conditions to either party's obligations contained herein or
otherwise affect the remedies available to the Purchaser or Seller hereunder.
The party receiving any such notice under this Section 5.11 shall promptly
notify the other parties if it has made the determinations contemplated by
Section 10.01(c) or Section 10.01(e), as the case may be, and intends to
terminate this Agreement pursuant thereto.

         SECTION 5.12. INTERIM FINANCIAL STATEMENTS.

         (a) The Seller shall, as soon as available, but no later than sixty
(60) days after the end of the relevant quarter, as the case may be, deliver
promptly to the Purchaser any and all quarterly financial statements for the
Company, audited or unaudited, prepared for the management of the Company after
the date of this Agreement and prior to the Closing Date. In addition, the
Seller will deliver to the Purchaser copies of the Company's audited 1999 Annual
Statutory Statement as soon as it has been delivered by Seller's Accountants.

         (b) The Purchaser shall from time to time until the termination of the
Escrow Agreements provide, (i) upon the reasonable request of the Seller (but
not more than once annually), written confirmation to the Seller that it has the
financial resources to perform its obligations under the Escrow Agreements and
that FRC is capable of performing its obligations with respect to the assets and
Liabilities transferred to it under the Transfer and Assumption Agreement, and
(ii) copies of FRC's Quarterly and Annual Statutory Statements.

         SECTION 5.13. AFFILIATE AGREEMENTS; INTERCOMPANY ACCOUNTS.

         (a) Except as set forth in Section 5.13(a) of the Disclosure Schedule,
the Seller shall cause all intercompany accounts receivable or payable (whether
or not currently due or payable) between (i) the Company involving or relating
to the Assumed Business, on the one hand, and (ii) RCHI or any of its Affiliates
(other than the Company) involving or relating to the Assumed Business, or any
of the officers or directors of any of RCHI and its Affiliates (other than the
Company) involving or relating to the Assumed Business, on the other hand, to be
settled in full (without any premium or penalty) at or prior to the Closing.

         (b) Section 5.13(b) of the Disclosure Schedule sets forth all
agreements between (i) the Company involving or relating to the Assumed
Business, on the one hand, and (ii) RCHI or any of its Affiliates (other than
the Company) on the other hand (collectively, "



<PAGE>

AFFILIATE AGREEMENTS"). All Affiliate Agreements shall be terminated and
discharged without any further liability or obligation thereunder effective at
the Closing, upon terms and pursuant to instruments reasonably satisfactory to
the Purchaser, unless otherwise noted on Section 5.13(b) of the Disclosure
Schedule.

          SECTION 5.14. RENEWAL RIGHTS. From and after the Closing, the Seller
shall refer all communications received from cedents or broker producers with
respect to the Assumed Business (including, without limitation, the
modification, renewal or replacement of any Reinsurance Agreement forming part
of the Assumed Business) to FRC on an exclusive basis, and shall use
commercially reasonable efforts to promote FRC for such business to the broker
producers and ceding companies of such business. Following the Closing, the
Seller agrees to direct to FRC, and the Purchaser agrees to cause FRC to assume,
at the contract's next anniversary date (in the case of continuous contracts) or
at its renewal date (in the case of all other contracts), or in each case any
earlier date agreed to by the parties, such of that business which meets FRC's
underwriting guidelines, subject, where applicable, to the ceding company's
agreement on each contract. For four (4) years from the Closing Date, the Seller
agrees for itself and its Subsidiaries (including, without limitation, the
Company) now or hereinafter in existence not to compete with FRC to acquire or
reinsure, in whole or in part, any of the business included in the Assumed
Business. As used herein, the term "business" shall mean the coverage provided
under the treaties included in the Assumed Business.

         SECTION 5.15. CERTAIN SOFTWARE LICENSES. On the Closing Date, the
Seller shall transfer and assign all the Software Licenses (as defined below) to
FRC. The Seller shall take all action necessary (including, without limitation,
making any required payments) to assure that any and all software licenses
relating to the SICS Reinsurance System (the "SOFTWARE LICENSES") are in full
force and effect and usable by the Company on the Closing Date and, subject to
the consent referenced in Section 5.05(b) of the Disclosure Schedule, by FRC
after the Closing Date. Anything in this Agreement to the contrary
notwithstanding, the Seller hereby agrees to indemnify the Purchaser against and
hold the Purchaser harmless, dollar for dollar, from and shall pay any and all
claims, losses, damages, expenses, obligations and Liabilities (including costs
of investigation, reasonable attorney's fees and expenses and other costs of
defense) arising out of or otherwise in respect of any suit or claim of
violation or infringement of the Software Licenses or the software subject
thereto brought by the owners of the Software Licenses against FHC or FRC.

         SECTION 5.16. AVIATION BUSINESS.

         (a) Prior to the Closing Date, the Seller will, in consultation with
the Purchaser, arrange reinsurance protections covering the Company's aviation
business with net financial position exposures substantially consistent with the
expiring program, on terms, and with reinsurance security, reasonably acceptable
to the Purchaser (the "RUNOFF COVERAGE"). It is the intent of the parties hereto
that the expiration of the Runoff Coverage shall be coterminous with the final
expiration of exposure to losses from the Company's aviation business running


<PAGE>

off, in-force, new or renewed as of the Closing Date.

         (b) The Runoff Coverage will be purchased by the Company. The Company
wi ll use the Excess Aviation Premium (as defined below) to purchase such Runoff
Coverage. The "EXCESS AVIATION PREMIUM" shall mean the amount by which premiums
earned after the Reference Date from assumed aviation business exceeds premiums
earned after the Reference Date for ceded aviation reinsurance protections,
other than the Runoff Coverage. In the event that the Excess Aviation Premium is
insufficient to fully absorb the premium for the Runoff Coverage, the Seller
will indemnify the Purchaser for any shortfall (the "RUNOFF COVERAGE PREMIUM
SHORTFALL") in the manner below.

         (c) On or before January 31, 2000, the Company will provide for the
Purchaser's review a proposal for the Runoff Coverage and preliminary versions
of the statements referred to in the following paragraph.

         (d) On the Closing Date, the Seller will provide the Purchaser with a
statement setting forth: (i) the Excess Aviation Premium from the Reference Date
to the Closing Date; (ii) an estimate of the Excess Aviation Premium from the
Closing Date to the termination of all loss exposure with regard to the aviation
business; and (iii) an estimate of the premium for the Runoff Coverage, such
statement to be reviewed and agreed to by the Purchaser. If the amounts
contained in such statement will result in an estimated Runoff Coverage Premium
Shortfall, the Seller will pay such amount to the Purchaser on the Closing Date.

         SECTION 5.17. REINSURANCE. Contemporaneous with, and contingent upon,
the Closing, the Seller will purchase such aggregate excess or other reinsurance
protections on the Assumed Business as the Purchaser shall designate not less
than ten (10) Business Days prior to the Closing. The premium for such coverage
together with any taxes and other expenses directly related to such reinsurance
will be borne by the Company and the Purchaser shall, at the Closing, increase
the Provisional Purchase Price by an amount equal to the sum of such premium,
taxes and other expenses, which increase shall not be subject to adjustment
pursuant to Section 2.04. The Purchaser shall provide the Seller with a
preliminary estimate of the amount of the premium to be paid for such
reinsurance no later than February 15, 2000.

         SECTION 5.18. FURTHER ACTION. Each of the parties hereto shall execute
and deliver such documents and other papers and take such further actions as may
be reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated hereby.

                                   ARTICLE VI

                                EMPLOYEE MATTERS


<PAGE>


         SECTION 6.01. SELLER. Except as specifically provided in Section 6.03
or 6.04, from and after the Closing Date, the Seller and the Company shall be
and remain solely responsible for the payment of any and all Liabilities which
have arisen or may arise in connection with (i) any Plan (including, but not
limited to, Liabilities arising from income or excise tax assessments,
participant benefit claims, fiduciary conduct, or under ERISA or the Internal
Revenue Code); (ii) the employment, compensation or benefits of any employee or
former employee of the Seller, the Company or any affiliate, including but not
limited to the Employees, or the termination thereof, including, without
limitation, any Liability arising out of or relating to any act or omission by
the Seller, the Company or any Affiliate (other than those which may arise with
respect to Continuing Employees under new arrangements which commence after the
Closing Date); (iii) any violation of or non-compliance by the Seller, Company
or any Affiliate with any applicable law respecting employment, compensation or
benefits of the Employees; and (iv) severance pay, change in control, or
stay-bonus, retention or similar "pay-to-stay" arrangements (whether or not
triggered by virtue of the transactions contemplated by this Agreement), accrued
vacation pay, sick pay, health and medical claims and requests for
reimbursements, and similar and other benefits, relating to any period of
employment with the Seller, the Company or any affiliate on or prior to the
Closing Date (other than those which may arise with respect to Continuing
Employees under new arrangements which commence after the Closing Date). Except
as specifically provided in Section 6.03 or 6.04, the Purchaser shall neither
adopt, become a sponsoring employer of, and the Purchaser shall have no
obligations, responsibility or Liabilities under, the Plans (including, but not
limited to, any funding or payment obligation), or to the Employees with respect
to any matters (other than those which may arise with respect to Continuing
Employees under new arrangements which commence after the Closing Date),
including but not limited to the Plans.

         SECTION 6.02 PURCHASER. The Purchaser shall offer employment to Brian
Gulbransen, Joann DeBlasis, Samuel Gaccione, and Michael Ricci effective as of
the Closing Date (such four Employees, the "CONTINUING EMPLOYEES"), on such
terms and conditions as are mutually acceptable to the Purchaser and such
Employees (which terms shall not be identical between and among such Employees
and such terms shall include a release of the Seller from Liability under the
Severance Plan from such Continuing Employees other than Ms. DeBlasis whose
employment agreement shall include a release of the Seller from all Liability
under the Change in Control Agreement dated February 25, 1999), pursuant to
employment agreements and severance agreements effective as of the Closing Date.
The Seller agrees to pay on the Closing Date an aggregate amount equal to
$665,000 to the Continuing Employees as "signing bonuses" pursuant to and in the
amounts set forth in the employment and severance agreements entered into
between the Continuing Employees and the Purchaser. The Seller shall use
commercially reasonable efforts to assist the Purchaser in hiring the Continuing
Employees, and shall not offer other employment (or arrange to have another
Person offer employment) to any such Continuing Employee without the prior
written consent of the Purchaser. Nothing herein express or implied shall be
construed to prevent the Purchaser, at any time after the Closing Date, from
terminating or modifying to any extent or in any respect at any time or from
time to time (i) the Purchaser's employment relationship with any employee,
including any Continuing



<PAGE>

Employee, (ii) the terms and conditions of the employment of any employee,
including the Continuing Employees, including but not limited to wages and/or
salaries, hours and employee benefits, or (iii) any of the Purchaser's "employee
benefit plans" as defined under ERISA or similar or other plans, programs,
arrangements or agreements.

         SECTION 6.03. SELLER'S CONTINUATION OF EMPLOYMENT AND PAYROLL;
AMENDMENT OF SEVERANCE AND "PAY-TO-STAY" ARRANGEMENTS AND OTHER PAYMENTS.

         (a) From and after the Closing Date and for a period of sixty (60)
calendar days thereafter (the "60 DAY PERIOD"), the Seller agrees to (i) offer
to retain in the employ of the Seller for the 60 Day Period all Employees who
are engaged in the operation of the Business, other than Robert Clements, Mark
Mosca, Peter Appel and Paul Malvasio (such four Employees, the "SENIOR
EXECUTIVES"), and other than the Continuing Employees (all such Employees other
than the Senior Executives and the Continuing Employees, the "RETAINED
EMPLOYEES"), (ii) retain the payroll function of the Company for all Retained
Employees (and Senior Executives to the extent that the Seller retains such
Executives in the employ of the Seller after the Closing Date), and (iii) retain
all responsibility and obligations as the "employer" from and after the Closing
Date for all Retained Employees and Senior Executives. The Seller shall continue
all Retained Employees (and the Senior Executives, to the extent they remain
employed by the Seller) in the Plans during the 60 Day Period. During the 60 Day
Period, the Seller agrees that the Retained Employees shall render their
services exclusively for and at the direction of the Purchaser, at the offices
of the Seller at 20 Horseneck Lane, Greenwich, Connecticut. In the event that
the Purchaser determines in its discretion that it does not require the services
of any one or more of the Retained Employees during the 60 Day Period, the
Seller shall cause any such Retained Employee's services to be redeployed within
Seller's operations (or the Seller may terminate such Employee, at its
discretion). The Purchaser shall reimburse the Seller for all salaries, benefits
and other direct compensation related costs associated with Seller's employment
of all Retained Employees which are incurred during the 60 Day Period, other
than those Employees whom the Purchaser has identified to the Seller as not
required pursuant to the immediately previous sentence (but only compensation
costs for periods after the Purchaser has so identified such Employees to the
Seller). The Purchaser may, in its discretion, offer employment to any Retained
Employees at any time during or at the end of the 60 Day Period, upon terms and
conditions as are mutually acceptable to the Purchaser and any such Employees
(in which case the reimbursement obligation with respect to such Employee set
forth in the immediately previous sentence for periods thereafter shall
immediately cease).

         (b) The Seller agrees to (x) cause to be amended the Risk Capital
Holdings, Inc. Amended and Restated Change in Control Severance Plan and Summary
Plan Description (the "SEVERANCE PLAN") with respect to all Employees who are
eligible to participate therein, and (y) use all commercially reasonable efforts
to cause to be amended all other existing severance plans, policies,
arrangements and agreements, and all existing stay bonus, "pay-to-stay" and



<PAGE>

similar arrangements or individual agreements with or for the benefit of the
Employees listed in Section 6.03(b) of the Disclosure Schedule (such list not to
include the Senior Executives) (all of such plans, policies, arrangements and
agreements, the "AMENDED PLANS"), to the effect that such Employees will not
receive such severance or "pay-to-stay" (or similar) payment unless such
Employees either (i) remain continuously employed with the Seller pursuant to
Section 6.03(a) during the 60 Day Period, or (ii) are involuntarily terminated
by action of the Seller during the 60 Day Period. The Seller shall also use all
commercially reasonable efforts to obtain waivers from the Employees set forth
on Section 6.03(b) of the Disclosure Schedule with respect to such amendments.
The obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the condition that the Severance Plan is, in
fact, amended to the reasonable satisfaction of the Purchaser (with prior notice
to the Purchaser, and an opportunity for the Purchaser to comment on same) on or
prior to the Closing Date. The Seller shall remain responsible for and obligated
to determine the eligibility for, and providing payment to, all Employees,
including the Continuing Employees, with respect to all benefits and obligations
pursuant to the Plans (including, but not limited to, any severance, change in
control agreements, change in control plans, "pay-to-stay" arrangements and
similar or other plans or arrangements), whether amended by this Section 6.03 or
otherwise, and whether such payment obligations arise prior to or after the
Closing Date.

         SECTION 6.04. PURCHASER'S PAYMENT WITH RESPECT TO SEVERANCE, CHANGE IN
CONTROL AND "PAY-TO-STAY" COSTS. Upon the Closing, the Purchaser shall pay to
the Seller an amount equal to $5,335,000 as payment in respect of severance,
change in control, "pay-to-stay" and similar costs incurred by Seller with
respect to the Employees.


                                   ARTICLE VII

                                   TAX MATTERS

         SECTION 7.01. INDEMNITY.

         The Seller agrees to indemnify and hold harmless the Purchaser against
(i) all Taxes of the Company, the Seller or any subsidiary or Affiliate of the
Seller (or the Company) and (ii) all Taxes imposed with respect to the Assumed
Business for any Pre-Closing Period (other than, with respect to this (ii),
Taxes imposed on the acquisition of the Assumed Business) PROVIDED, HOWEVER,
that the Company shall not be required to indemnify the Purchaser and its
Affiliates for the Liabilities of any entity other than itself. The Purchaser
shall be responsible for, and shall indemnify and hold harmless the Seller
against all Taxes in respect of the Assumed Business for which the Purchaser is
not eligible for indemnification pursuant to the first sentence hereof. Nothing
in this Section 7.01 shall be interpreted as requiring the Purchaser to make
payments of any Taxes to any taxing authority before the Closing Date.

         SECTION 7.02. [RESERVED].



<PAGE>

         SECTION 7.03. [RESERVED]

         SECTION 7.04. CONTESTS.

         (a) After the Closing, the Purchaser shall reasonably promptly after
becoming aware thereof notify the Seller in writing of the commencement of any
Tax audit or administrative or judicial proceeding and shall also separately
notify the Seller in writing of any demand or claim on the Purchaser which, if
determined adversely to the taxpayer or after the lapse of time would be grounds
for indemnification by the Seller under this Article VII. Such notice shall
contain factual information (to the extent known to the Purchaser) describing
the asserted Tax liability in reasonable detail and shall include copies of any
notice or other document received from any taxing authority in respect of any
such asserted Tax liability. If the Purchaser fails to give the Seller
reasonably prompt notice of an asserted Tax liability as required by this
Section 7.04, then (i) if the Seller is precluded by the failure to give
reasonably prompt notice from contesting the asserted Tax liability in both the
administrative and judicial forums, then the Seller shall not have any
obligation to indemnify for any loss or damage arising out of such asserted Tax
liability, and (ii) if the Seller is not so precluded from contesting but such
failure to give reasonably prompt notice results in an actual detriment to the
Seller, then any amount which the Seller is otherwise required to pay the
Purchaser pursuant to this Article VII with respect to such liability shall be
reduced by the amount of such detriment.

         (b) The Seller, promptly after receiving notice, may elect to direct,
through counsel of its own choosing and at its own expense, any audit, claim for
refund and administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought against the Seller under
this Article VII (any such audit, claim for refund or proceeding relating to an
asserted Tax liability are referred to herein collectively as a "CONTEST"). If
the Seller elects to direct the Contest of an asserted Tax liability, the
Purchaser shall cooperate in all reasonable respects, at the Seller's expense,
in each phase of such Contest. If the Seller does not either reasonably promptly
give notice to direct the Contest or commence the direction of the Contest or if
it contests its obligation to indemnify under Section 7.01, the Purchaser may
pay, compromise or contest, at its own expense, such asserted liability without
waiving any of its rights to indemnification hereunder. However, in such case,
the Purchaser may not settle or compromise any asserted liability over the
objection of the Seller; PROVIDED, HOWEVER, that the Seller's consent to
settlement or compromise shall not be unreasonably withheld or delayed. In any
event, each of the Purchaser and the Seller may participate, at their own
expense, in the Contest. If the Seller chooses to direct the Contest, the
Purchaser shall promptly empower (by power of attorney and such other
documentation as may be appropriate) such representatives of the Seller as
Seller may designate to represent the Purchaser or its successor in the Contest
insofar as the Contest involves an asserted Tax liability for which the Seller
would be liable under this Article VII. If, with respect to any proposed
settlement referred to in clause (x) of the previous sentence, the Seller
proposes in good faith to settle a claim, suit, action or proceeding with
respect to any Tax, which settlement offer is accepted by the relevant taxing
authority, the Purchaser may elect to continue to contest such claim, suit,



<PAGE>

action or proceeding; PROVIDED that notwithstanding how such matter is
ultimately settled or decided, the liability of the Seller with respect to such
claim, suit, action or proceeding shall be no greater than the amount which
would have been payable if the Purchaser had consented to the settlement
proposed by the Seller.

         (c) The Purchaser shall have the sole obligation and right to direct,
at its own expense, a Contest regarding any Tax Return for any taxable period
commencing after the Closing Date in the case of a Tax Return which is filed on
a combined, consolidated, unitary or similar basis with the Purchaser; PROVIDED,
HOWEVER, that the Purchaser shall advise and consult with the Seller regarding
the status of any such Contest that involves an asserted Tax liability for which
the Seller would be liable under this Article VII and PROVIDED, FURTHER, that,
Purchaser shall not, without the prior written consent of the Seller (which
shall not be unreasonably withheld or delayed) settle any such contest.

         SECTION 7.05. PURCHASE PRICE ALLOCATION. As soon as practicable after
the date hereof, the Purchaser shall prepare a statement setting forth the
allocation of the purchase price among the assets of the Assumed Business, which
shall be agreed upon by the Seller (collectively, the "INITIAL ALLOCATION"). The
Initial Allocation shall be determined in accordance with Section 1060 of the
Internal Revenue Code and the applicable Treasury Regulations thereunder. The
Initial Allocation shall be set forth on a statement (the "INITIAL ALLOCATION
STATEMENT") dated the Closing Date. If any increase or decrease in the purchase
price occurs, as a result of an adjustment to the purchase price under the
provisions of Article II of this Agreement or otherwise, then the amount of such
increase or decrease and the allocation thereof among the assets of the Company
(collectively, the "ADJUSTMENT ALLOCATION") shall be set forth on a statement
(the "ADJUSTMENT ALLOCATION STATEMENT") prepared by the Purchaser and agreed
upon by the Seller. The Initial Allocation Statement and any Adjustment
Allocation Statement shall be signed by the president or a vice president of
Seller and Purchaser. The Seller and Purchaser shall, to the maximum extent
permitted under applicable law, (i) file, or cause to be filed, all Tax Returns
in a manner consistent with the Initial Allocation and any Adjustment Allocation
and (ii) not take any action inconsistent therewith.

         SECTION 7.06. COOPERATION AND EXCHANGE OF INFORMATION. The Seller and
the Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax Return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities, but in no event shall either
party be required to disclose to the other party any information relating to its
operations other than the Assumed Business. The Seller and the Purchaser shall
make their employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. The Seller and
the Purchaser will retain all Tax Returns, schedules and work papers and all
material records or



<PAGE>

other documents relating to Tax matters of the Company and the Assumed Business
for its taxable period first ending after the Closing Date and for all prior
taxable periods until the later of: (i) the expiration of the statute of
limitations of the taxable periods to which such returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods; or (ii) six
(6) years following the due date (without extension) for such returns. After
such time, before either the Seller or the Purchaser shall dispose of any of
such books and records, at least ninety (90) calendar days prior written notice
to such effect shall be given to the other party, and such other party shall be
given an opportunity, at its cost and expense, to remove and retain all or any
part of such books and records as such party may select; PROVIDED, HOWEVER, that
in no event shall either party be required to disclose to the other party any
information relating to its operations other than the Assumed Business. Any
information obtained under this Section 7.06 shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting an audit or other proceeding.

         SECTION 7.07. CONVEYANCE TAXES. The Seller agrees to assume liability
for and to hold the Purchaser harmless against any sales, use, transfer, stamp,
stock transfer, real property transfer or gains, and value added taxes, any
transfer, registration, recording or other fees, and any similar Taxes incurred
as a result of the transactions contemplated hereby, and shall file such
applications and documents as shall permit any such Tax to be assessed and paid
on or prior to the Closing Date in accordance with any available pre-sale filing
procedure.

         SECTION 7.08. MISCELLANEOUS.

         (a) The Seller and the Purchaser agree to treat all payments made by
either to or for the benefit of the other under this Article VII and under other
indemnity provisions of this Agreement, as adjustments to the purchase price for
Tax purposes and that such agreed treatment shall govern for Tax purposes
hereof.

         (b) Regardless of whether a Contest is commenced, if the Seller becomes
aware of the commencement of any Tax audit or administrative or judicial
proceeding which could result in any liability for which the Seller has agreed
to indemnify the Purchaser pursuant to the provisions of Section 7.01, the
Seller shall reasonably promptly so inform the Purchaser in writing (if it has
not previously done so).

         (c) All indemnities under this Article VII shall be paid
dollar-for-dollar, in accordance with their terms, without regard to any caps,
floors, baskets or other similar limitations.

                                  ARTICLE VIII

                              CONDITIONS TO CLOSING



<PAGE>

         SECTION 8.01. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation
of the Seller to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or written waiver, at or prior to the
Closing, of each of the following conditions:

         (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all respects as of the Closing with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(except, in each case, where the failure to be so true and correct would not
have a Material Adverse Effect with respect to the Purchaser); PROVIDED,
HOWEVER, that if any such portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
8.01(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects, and all the covenants contained in
this Agreement to be complied with by the Purchaser on or before the Closing
shall have been complied with in all material respects (other than the covenants
contained in Section 5.01 which shall be complied with in all respects, except
where the failure to so comply would not have a Material Adverse Effect with
respect to the Purchaser), and the Seller shall have received a certificate of
the Purchaser to such effect signed by a duly authorized officer thereof;

         (b) NO ORDER. No United States or state governmental authority or other
agency or commission or United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions or which would have a Material Adverse Effect
with respect to the Purchaser; PROVIDED, HOWEVER, that the parties hereto shall
use their commercially reasonable efforts to have any such order or injunction
vacated;

         (c) GOVERNMENTAL FILINGS AND CONSENTS. All authorizations, consents,
orders and approvals of Governmental Authorities to the transactions
contemplated by this Agreement and the Transfer and Assumption Agreement shall
have been obtained and be in effect on the Closing Date, except to the extent
that the failure to obtain any such consent would not have the effect of making
the transactions contemplated by this Agreement and the Transfer and Assumption
Agreement illegal or otherwise restrain or prohibit consummation of such
transactions or result in a material liability to the Seller;

         (d) THIRD PARTY CONSENTS. The Seller shall have received the third
party consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement and the Transfer and Assumption Agreement, if
any, in form and substance reasonably satisfactory to the Seller from the
parties listed in Section 8.01(d) of the Disclosure Schedule, except to the
extent that failure to obtain any such consents would not have the effect



<PAGE>

of making the transactions contemplated by this Agreement and the Transfer and
Assumption Agreement illegal or otherwise restrain or prohibit consummation of
such transactions or result in a material liability to the Seller;

         (e) HSR ACT. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase and transfer of the Assumed Business
contemplated hereby shall have expired or shall have been terminated without any
material adverse action taken by the Federal Trade Commission or Department of
Justice.

         (f) LEGAL OPINION. The Seller shall have received from Morgan, Lewis &
Bockius LLP, counsel to the Purchaser, a legal opinion addressed to the Seller
and dated the Closing Date which shall be reasonably satisfactory to the Seller;

         (g) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
stockholders of RCHI by the requisite vote in accordance with applicable law;

         (h) INCUMBENCY CERTIFICATE. The Seller shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser authorized
to sign this Agreement and any other document required to be delivered
hereunder;

         (i) ESCROW AGREEMENT. The Purchaser shall have executed and delivered
the Escrow Agreement as required by Section 2.03(d);

         (j) PROCEEDINGS. All proceedings, corporate or otherwise, taken by the
Purchaser in connection with the transactions contemplated hereby and all
instruments and documents incident thereto shall be reasonably satisfactory in
form and substance to the Seller.

         SECTION 8.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or written waiver, at or prior to
the Closing, of each of the following conditions:

         (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Seller contained in this Agreement shall be true and correct
in all respects as of the Closing with the same force and effect as if made as
of the Closing, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date (except where the
failure to be so true and correct would not have a Material Adverse Effect with
respect to the Seller or the Assumed Business); PROVIDED, HOWEVER, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 8.02(a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects, and all the covenants contained in this Agreement to be



<PAGE>

complied with by the Seller on or before the Closing shall have been complied
with in all material respects (other than the covenants contained in Section
5.01 which shall be complied with in all respects, except where the failure to
so comply would not have a Material Adverse Effect with respect to the Seller or
the Assumed Business), and the Purchaser shall have received a certificate of
the Seller to such effect signed by a duly authorized officer thereof;

         (b) NO ORDER. No United States or state governmental authority or other
agency or commission shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or otherwise
restraining or prohibiting consummation of such transactions or which would have
a Material Adverse Effect; PROVIDED, HOWEVER, that the parties hereto shall use
their commercially reasonable efforts to have any such order or injunction
vacated;

         (c) GOVERNMENTAL FILINGS AND CONSENTS. All authorizations, consents,
orders and approvals of Governmental Authorities to the transactions
contemplated by this Agreement and the Transfer and Assumption Agreement shall
have been obtained and be in effect on the Closing Date, except to the extent
that the failure to obtain any such consent would not have a Material Adverse
Effect or result in a material liability to the Purchaser; PROVIDED, however,
that the failure to obtain the approvals of the Nebraska, California, Florida
and New York Insurance Departments will be deemed to be a Material Adverse
Effect;

         (d) THIRD PARTY CONSENTS. The Purchaser shall have received the third
party consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement and the Transfer and Assumption Agreement, if
any, in form and substance reasonably satisfactory to the Purchaser as required
pursuant to Sections 5.05 (c) and (d), except to the extent that the failure,
individually and in the aggregate, to obtain any such affirmations or consents
would not have a Material Adverse Effect, PROVIDED, HOWEVER, that the failure to
obtain the consents to be obtained pursuant to Sections 5.05(c) and (d) shall be
deemed to have a Material Adverse Effect;

         (e) HSR ACT. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase and transfer of the Assumed Business
contemplated hereby shall have expired or shall have been terminated without any
material adverse action taken by the Federal Trade Commission or Department of
Justice and neither shall have imposed any conditions upon Purchaser which would
have a Material Adverse Effect with respect to the Purchaser or the Assumed
Business.

         (f) LEGAL OPINION. The Purchaser shall have received from Lawson, Dugan
& Murray and Cahill Gordon & Reindel, counsel to the Seller, legal opinions
addressed to the Purchaser and dated the Closing Date which shall be reasonably
satisfactory to the Purchaser;

         (g) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated



<PAGE>

hereby shall have been approved by the affirmative vote of the stockholders of
RCHI by the requisite vote in accordance with applicable law.

         (h) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, no
event or events shall have occurred which, individually or in the aggregate,
have had, or are reasonably likely to have, a Material Adverse Effect and
PROVIDED, FURTHER, that for this purpose, the parties agree that if (i) Joann
DeBlasis does not agree to execute an employment agreement with FRC (which
agreement shall be effective as at the Closing Date) within ten (10) Business
Days following the date hereof or, if, despite having signed such employment
agreement, she leaves the employ of the Company prior to Closing, or (ii) if
Brian Gulbransen does not agree to execute an employment agreement with FRC
within fifteen (15) Business Days following the date hereof, then such events
shall be deemed to have a Material Adverse Effect;

         (i) INCUMBENCY CERTIFICATE. The Purchaser shall have received a
certificate of the Secretary of each of RCHI and the Company certifying the
names and signatures of the officers of each of RCHI and the Company authorized
to sign this Agreement and any other document required to be delivered
hereunder;

         (j) SOFTWARE LICENSES. The Seller shall have fulfilled its obligations
under Section 5.15 with respect to the Software Licenses and obtained all
consents necessary to permit Purchaser to utilize the SICS Reinsurance System;

         (k) AVIATION BUSINESS AND REINSURANCE. The Seller shall have fulfilled
its obligations under Section 5.16 with respect to the aviation business of the
Company and Section 5.17 with respect to aggregate excess or other reinsurance;

         (l) ESCROW AGREEMENT. The Seller shall have executed and delivered the
Escrow Agreement, and shall have deposited $20,000,000 with the Escrow Agent, as
required by Section 2.03;

         (m) EMPLOYEE MATTERS. The Seller shall have fulfilled its obligations,
and the Severance Plan shall have been, in fact, amended, as provided in Article
VI without regard to the efforts of the Seller;

         (n) PROCEEDINGS. All proceedings, corporate or otherwise, taken by the
Seller in connection with the transactions contemplated hereby and all
instruments and documents incidental thereto shall be reasonably satisfactory in
form and substance to the Purchaser and its counsel.

                                   ARTICLE IX

                                 INDEMNIFICATION



<PAGE>

         SECTION 9.01. SURVIVAL. The representations and warranties and
covenants to be performed at or before the Closing of the parties hereto
contained herein shall not survive the Closing; PROVIDED, HOWEVER, that the
representations and warranties contained in the first sentence of Section 3.01,
Section 3.02, Section 3.03, Section 3.06, Section 3.07, Section 3.08(a) and
(b)(i) and (v), Section 3.09, Section 3.17, Section 3.18(a)(ii), Section 3.21,
Section 3.23, the first sentence of Section 4.01, the first sentence of Section
4.02 and Section 4.08 shall survive the Closing and remain in full force and
effect, regardless of any investigation made by or on behalf of the Seller or
the Purchaser, for the period from the Closing to and including the date one (1)
year after the Closing; PROVIDED, FURTHER, that representations and warranties
contained in Section 3.20 and the agreements and covenants which by their terms
require performance after the Closing Date shall survive the Closing and remain
in full force and effect until the applicable period under the statute of
limitations therefor has expired; PROVIDED, FURTHER, that the representations
and warranties contained in Section 3.17 shall to the extent related to
Reinsurance Agreements covering the CPIS Subject Liabilities and the Seller's
indemnification obligations with respect to Excluded Liabilities shall survive
the Closing and remain in full force and effect and shall not expire.

         SECTION 9.02. INDEMNIFICATION BY THE PURCHASER.

         (a) FHC and FRC, jointly and severally, agree, subject to the other
terms and conditions of this Agreement, to indemnify the Seller and its
Affiliates, and their respective officers, directors, employees, agents, heirs,
successors and assigns (as used in this Section 9.02, each an "INDEMNIFIED
PARTY") against and hold them harmless from, and shall pay, all Liabilities of
and costs and damages (including any costs of investigation, reasonable
attorneys' fees and expenses and other costs of defense) arising out of or
related to (i) the breach of any representation, warranty, covenant or agreement
of the Purchaser herein, and (ii) any and all debts, Liabilities, obligations
and commitments assumed by FRC pursuant to the Transfer and Assumption Agreement
but excluding any of the Excluded Liabilities. Anything in Section 9.01 to the
contrary notwithstanding, no claim may be asserted nor may any action be
commenced against the Purchaser under this Section 9.02 for breach of any
representation, warranty, covenant or agreement contained herein, unless written
notice of such claim or action is received by the Purchaser describing in
reasonable detail the facts and circumstances known to the Seller with respect
to the subject matter of such claim or action on or prior to the date on which
the representation, warranty, covenant or agreement on which such claim or
action is based ceases to survive as set forth in Section 9.01; and any claim
made by the Seller under this Article IX within the aforesaid time periods shall
be considered timely made even if such claim is not resolved until after the
expiration of the aforesaid periods; PROVIDED, HOWEVER, that a claim may be
asserted and an action may be commenced against the Purchaser for breach of the
agreements and covenants which by their terms are to be performed after the
Closing Date (including, without limitation, the indemnities contained herein)
until the applicable period under the statute of limitations therefor has
expired.



<PAGE>

         (b) No claim may be made against the Purchaser for indemnification
pursuant to Section 9.02(a)(i) with respect to any item of Liability or damage
relating to the breach of a representation or warranty unless the aggregate of
all such Liabilities and damages of the Indemnified Parties with respect to
Section 9.02(a)(i) shall exceed $500,000 and the Purchaser shall not be required
to pay or be liable for the first $500,000 in aggregate amount of such
Liabilities and damages. No Indemnified Party shall be indemnified pursuant to
Section 9.02(a)(i) with respect to any item of Liability or damage for a breach
of a representation or warranty if the aggregate of all such Liabilities and
damages of the Indemnified Parties for which the Indemnified Parties have
received indemnification pursuant to Section 9.02(a)(i) shall have exceeded $5
million.

         (c) Payments by the Purchaser pursuant to Section 9.02(a) shall be
limited to the amount of any Liability or damage that remains after deducting
therefrom any insurance proceeds and any indemnity, contribution or other
similar payment recoverable by the Indemnified Party from any third party with
respect thereto and shall be determined on an after-tax basis.

         (d) An Indemnified Party shall give the Purchaser reasonably prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which such Indemnified Party has knowledge concerning any
Liability or damage as to which such Indemnified Party may request
indemnification hereunder. Failure to give such notice shall not waive any right
to indemnification on the part of the Indemnified Party or Parties who fail to
give such notice, except only to the extent of any damage or loss actually
suffered by the Purchaser by reason of the delay in receiving such notice. The
Purchaser shall have the right to direct, through counsel of its own choosing,
provided such counsel is reasonably satisfactory to the Indemnified Party, the
defense or settlement of any such claim or proceeding at its own expense,
provided that the Purchaser vigorously and diligently pursues such defense in
good faith and keeps the Indemnified Party and its attorneys reasonably informed
as to the progress of the defense and any proposed settlement. If the Purchaser
elects to assume the defense of any such claim or proceeding, the Indemnified
Party may participate in such defense, but in such case the expenses of the
Indemnified Party shall be paid by the Indemnified Party. The Indemnified Party
shall provide the Purchaser with access to such Indemnified Party's records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the Purchaser in the
defense or settlement thereof, and the Purchaser shall reimburse the Indemnified
Party for all the reasonable out-of-pocket expenses of such Indemnified Party in
connection therewith. If the Purchaser elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability, (i) unless
the Purchaser consents in writing to such payment which consent shall not be
unreasonably withheld, or (ii) unless the Purchaser, subject to the last
sentence of this Section 9.02(d), withdraws from the defense of such asserted
liability, or (iii) unless a final judgment from which no appeal may be taken by
or on behalf of the Purchaser is entered against the Indemnified Party for such
liability, or (iv) unless there is a material risk if such asserted liability is
not paid that



<PAGE>

an injunction or other equitable relief will be granted which will materially
adversely affect the business of the Seller or there is a material risk of the
seizure of any material assets of the Seller or a material risk that a lien or
liens will be imposed on any such material assets. The Purchaser shall have the
right, in its discretion exercised in good faith and with the advice of counsel,
to settle any such claim with the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld; provided that the
Indemnified Party may withhold its consent to any settlement if, in its
reasonable judgment, such settlement would materially adversely affect the
conduct of the business of the Seller or does not include a general release to
all Indemnified Parties. If the Purchaser shall fail to defend, or if, after
commencing or undertaking any such defense, the Purchaser fails to diligently
prosecute and defend or withdraws from such defense, the Indemnified Party shall
have the right to undertake the defense or settlement thereof, at the
Purchaser's expense. If the Indemnified Party assumes the defense of any such
claim or proceeding pursuant to this Section 9.02(d) and proposes to settle such
claim or proceeding prior to a final judgment thereon or to forego any appeal
with respect thereto, then the Indemnified Party shall give the Purchaser prompt
written notice thereof and the Purchaser shall have the right to participate in
the settlement or assume or reassume the defense of such claim or proceeding
subject to the conditions set forth above; PROVIDED, HOWEVER, if the Purchaser
does not assume or reassume the defense within ten (10) Business Days or any
earlier time that such offer to settle expires and post a letter of credit
reasonably satisfactory to the Seller in the amount of the proposed settlement,
then the Indemnified Party can settle such claim in good faith without the
consent of the Purchaser.

         (e) Except as set forth in this Agreement, the Escrow Agreements, the
Transfer and Assumption Agreement or any other agreement delivered pursuant to
the provisions hereof, the Purchaser is not making any representation, warranty,
covenant or agreement with respect to the matters contained herein or therein.
Anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant or agreement contained herein or therein
shall give rise to any right on the part of the Indemnified Party, after the
consummation of the transfer of the Assumed Business contemplated by this
Agreement, to rescind this Agreement, the Transfer and Assumption Agreement or
any of the transactions contemplated hereby.

         SECTION 9.03. INDEMNIFICATION BY THE SELLER.

         (a) RCHI and the Company, jointly and severally, agree, subject to the
other terms and conditions of this Agreement, to indemnify the Purchaser and its
Affiliates and their respective officers, directors, employees, agents, heirs,
successors and assigns (as used in this Section 9.03, each an "INDEMNIFIED
PARTY") against and hold them harmless from, and shall pay, all Liabilities of
and costs and damages (including any costs of investigation, reasonable
attorneys' fees and expenses and other costs of defense) arising out of or
related to (i) the breach of any representation, warranty, covenant or agreement
of the Seller herein, (ii) Excluded Liabilities of any kind whatsoever whether
or not described in this Agreement or in the Disclosure Schedule, (iii) any
amounts which are uncollectible from GIO Re in excess of the



<PAGE>

face amount of any applicable letter of credit in force as the Closing Date,
(iv) any return premiums, profit commissions, paid recoveries or other amounts
which the Purchaser is unable to collect from Underwriters Reinsurance Company
and/or London Life & Casualty Reinsurance under the Retrocession Agreements
identified as Nos. 408, 409, 410, 424, 425 as a result of, or in connection
with, directly or indirectly, any of the matters described in Item 1 of Section
3.17(d) of the Disclosure Schedule, except to the extent that the risk of such
uncollectibility is adequately reflected in the Closing Date Balance Sheet, and
(v) any fines or penalties imposed by any Governmental Authority for the matters
disclosed in Section 3.11 of the Disclosure Schedule PROVIDED, HOWEVER, that the
Company shall not be required to indemnify the Purchaser and its Affiliates for
the Liabilities of any entity other than itself. Anything in Section 9.01 to the
contrary notwithstanding, no claim may be asserted nor any action commenced
against the Seller under this Section 9.03 for breach of any representation,
warranty, covenant or agreement contained herein, unless written notice of such
claim or action is received by the Seller describing in reasonable detail the
facts and circumstances known to the Purchaser with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action is
based ceases to survive as set forth in Section 9.01; and any claim made by
Purchaser under the provisions of this Article IX within the aforesaid time
periods shall be considered timely made even if such claim is not resolved until
after the expiration of the aforesaid periods; PROVIDED, HOWEVER, that a claim
may be asserted and an action may be commenced against the Seller for breach of
the agreements and covenants which by their terms are to be performed after the
Closing Date (including, without limitation, the indemnities contained herein)
until the applicable period under the statute of limitations therefor has
expired.

         (b) No claim may be made against the Seller for indemnification
pursuant to Section 9.03(a)(i) with respect to any item of Liability or damage
with respect to a breach of a representation or warranty, unless the aggregate
of all such Liabilities and damages of the Indemnified Parties with respect to
Section 9.03(a)(i) shall exceed $500,000, and the Seller shall not be required
to pay or be liable for the first $500,000 in aggregate amount of any such
Liabilities and damages; PROVIDED, HOWEVER, that the Seller agrees that such
$500,000 exclusion shall not apply to any loss or damage suffered by the
Purchaser or other Indemnified Party arising out of, based upon or resulting
from any breach of the representations and warranties contained in the first
sentence of Section 3.01 and Sections 3.07, 3.17, 3.21 and 3.23 (collectively,
the "EXCLUDED CLAIMS"), all of which shall be indemnified on a dollar-for-dollar
basis. No Indemnified Party shall be indemnified pursuant to Section 9.03(a)(i)
with respect to any item of Liability or damage for a breach of a representation
or warranty if the aggregate of all such Liabilities and damages of the
Indemnified Parties for which the Indemnified Parties have received
indemnification pursuant to Section 9.03 (a)(i) shall have exceeded $5 million.
Notwithstanding anything to the contrary contained in this Agreement, with
respect to any Liabilities, costs, damages, losses or expenses arising from a
breach of the representations and warranties contained in Section 3.06 and
Section 3.17, the recourse of the Purchaser shall, in the case of Section 3.17,
be limited to any amounts then available under the Escrow Agreement or, in the
case of Section 3.06, be limited to up to $5,000,000 of the amount then
available under



<PAGE>

the Escrow Agreement.

         (c) Anything in this Agreement to the contrary notwithstanding, RCHI
and the Company, jointly and severally, hereby agree to indemnify the
Indemnified Parties against and hold the Indemnified Parties harmless, dollar
for dollar, from and shall pay any and all claims, losses, damages, expenses,
obligations and Liabilities (including costs of investigation, reasonable
attorney's fees and expenses and other costs of defense) arising out of or
otherwise in respect of (i) any suit or claim of violation brought against any
of the Indemnified Parties for any actions taken or inaction by the Seller or
the Company on or prior to the Closing Date with respect to any Employees
(including the Continuing Employees), (ii) any failure of the Seller to
discharge its obligations under Article VI, (iii) the termination of, or
cessation of participation of any Employee or the Company (as a participating
employer) in the Plans (including, but not limited to, income or excise tax
assessments, Liabilities relating to participant benefit claims or fiduciary
conduct, or Liabilities otherwise arising under ERISA or the Internal Revenue
Code), (iv) any severance, change in control, "pay-to-stay" or similar or other
payments or benefits under the Plans which are triggered by or will be
established or become accelerated, vested or payable by reason of this Agreement
or any transaction contemplated under this Agreement (except and only to the
extent of the Purchaser's reimbursement obligations pursuant to the terms of and
as specifically set forth in Section 6.03(a) or 6.04 hereof), and (v) any
Liabilities or obligations with respect to, or in any manner arising out of, the
Plans.

         (d) Payments by the Seller pursuant to Section 9.03(a) shall be limited
to the amount of any Liability or damage that remains after deducting therefrom
any insurance proceeds and any indemnity, contribution or other similar payment
recoverable by the Indemnified Party from any third party with respect thereto,
and shall be determined on an after-tax basis.

         (e) An Indemnified Party shall give the Seller reasonably prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which such Indemnified Party has knowledge concerning any
liability or damage as to which such Indemnified Party may request
indemnification hereunder. Failure to give such notice shall not waive any right
to indemnification on the part of the Indemnified Party or Parties who fail to
give such notice, except only to the extent of any damage or loss actually
suffered by the Seller by reason of the delay in receiving such notice. The
Seller shall have the right to direct, through counsel of its own choosing,
provided such counsel is reasonably satisfactory to the Indemnified Party, the
defense or settlement of any such claim or proceeding at its own expense,
provided that the Seller vigorously and diligently pursues such defense in good
faith and keeps the Indemnified Party and its attorneys reasonably informed as
to the progress of the defense and any proposed settlement. If the Seller elects
to assume the defense of any such claim or proceeding, the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Seller with access to such Indemnified Party's records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and



<PAGE>

shall otherwise cooperate with the Seller in the defense or settlement thereof,
and the Seller shall reimburse the Indemnified Party for all the reasonable
out-of-pocket expenses of such Indemnified Party in connection therewith. If the
Seller elects to direct the defense of any such claim or proceeding, the
Indemnified Party shall not pay, or permit to be paid, any part of any claim or
demand arising from such asserted liability (i) unless the Seller consents in
writing to such payment, which consent will not be unreasonably withheld, or
(ii) unless the Seller, subject to the last sentence of this Section 9.03(e),
withdraws from the defense of such asserted liability, or (iii) unless a final
judgment from which no appeal may be taken by or on behalf of the Seller is
entered against the Indemnified Party for such liability or (iv) unless there is
a material risk if such asserted liability is not paid that an injunction or
other equitable relief will be granted which will materially adversely affect
the business of the Purchaser or there is a material risk of the seizure of any
material assets of the Purchaser or a material risk that a lien or liens will be
imposed on any such material assets. The Seller shall have the right, in its
discretion exercised in good faith and with the advice of counsel, to settle any
such claim with the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld; PROVIDED that the Indemnified Party
may withhold its consent to any settlement if, in its reasonable judgment, such
settlement would materially adversely affect the conduct of the business of the
Purchaser or does not include a general release to all Indemnified Parties. If
the Seller shall fail to defend, or if after commencing or undertaking any such
defense, the Seller fails to diligently prosecute and defend or withdraws from
such defense, the Indemnified Party shall have the right to undertake the
defense or settlement thereof, at the Seller's expense. If the Indemnified Party
assumes the defense of any such claim or proceeding pursuant to this Section
9.03(e) and proposes to settle such claim or proceeding prior to a final
judgment thereon or to forego any appeal with respect thereto, then the
Indemnified Party shall give the Seller prompt written notice thereof and the
Seller shall have the right to participate in the settlement or assume or
reassume the defense of such claim or proceeding subject to the conditions set
forth above; PROVIDED, HOWEVER, if the Seller does not assume or reassume the
defense within ten (10) Business Days or any earlier time that such offer to
settle expires and post a letter of credit from a bank reasonably satisfactory
to the Purchaser in the amount of the proposed settlement, then the Indemnified
Party can settle such claim in good faith without the consent of the Seller.

         (f) Except as set forth in this Agreement, the Transfer and Assumption
Agreement, the Disclosure Schedule, the Escrow Agreements, the certificates
delivered pursuant to Article VIII or any agreement delivered pursuant to the
provisions hereof, the Seller is not making any representation, warranty,
covenant or agreement with respect to the matters contained herein.

         SECTION 9.04. OTHER PROVISIONS RELATING TO INDEMNIFICATION. Each of the
parties hereby acknowledges and agrees that its sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement,
except any claim for fraud or arising from the obligation of such party to close
the transactions contemplated by this Agreement in accordance with its terms,
shall be pursuant to the indemnification provisions set forth in this Agreement
and the provisions of the Transfer and Assumption Agreement. In



<PAGE>

furtherance of the foregoing, each of the parties hereby waives, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action it may have against the other party arising under or based upon any
federal, state or local statute, law, ordinance, rule or regulation (including,
without limitation, any such rights, claims or causes of action arising under or
based upon common law or otherwise but excluding fraud) other than such rights,
claims or causes of action arising under the indemnification provisions of this
Agreement.

         SECTION 9.05. TAX MATTERS. Sections 9.02 and 9.03 shall exclude all
matters relating to Taxes (which shall be covered by Article VII only).

                                    ARTICLE X

                        TERMINATION, AMENDMENT AND WAIVER

         SECTION 10.01. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:

         (a) by the mutual written consent of the Seller and the Purchaser;

         (b) by written notice by either the Seller or the Purchaser if the
Closing shall not have occurred prior to July 31, 2000; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 10.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date;

         (c) by the Purchaser, if the Seller shall have breached or failed in
any material respect to perform or comply with any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform or comply (A) would give rise to the failure of a
condition set forth in Section 8.02, and (B) is incapable of being cured by the
Seller;

         (d) by the Purchaser, if the Seller or any of its directors or officers
shall take any action in material breach of Section 5.08;

         (e) by the Seller, if the Purchaser shall have breached or failed in
any material respect to perform or comply with any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform or comply (A) would give rise to the failure of a
condition set forth in Section 8.01, and (B) is incapable of being cured by the
Purchaser;

         (f) by the Seller in accordance with Section 5.08(b); PROVIDED that, in
order for the termination of this Agreement pursuant to this paragraph (f) to be
deemed effective, the



<PAGE>

Seller shall have complied with all provisions contained in Section 5.08,
including the notice provisions therein, and with applicable requirements of
Section 5.09, including the payment of the Termination Fee;

         (g) by the Purchaser or the Seller, if the stockholders of RCHI have
voted against approval of this Agreement; or

         (h) by the Purchaser, if the Non-CPIS Subject Liabilities recorded by
the Company on the Reference Date Balance Sheet are more than five percent (5%)
less than the Seller's Actuaries' estimate of such Subject Liabilities as
specified in its Actuarial Opinion as at the Reference Date and the Seller shall
have failed to increase its Reserves so that such Reserves are no longer more
than five percent (5%) less than such estimate within ten (10) Business Days of
the date of such Actuarial Opinion.

         SECTION 10.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
except (a) as set forth in Sections 5.04, 5.09 and 11.02 and (b) nothing herein
shall relieve any party from liability for any breach hereof prior to
termination.

         SECTION 10.03. WAIVER. At any time prior to the Closing, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the parties to be bound thereby.

                                   ARTICLE XI

                               GENERAL PROVISIONS

         SECTION 11.01. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of (i) the date delivered if delivered personally against
written receipt or (ii) five days after mailing if mailed by registered or
certified mail (postage prepaid, return receipt requested) or (iii) the date
telecopied to the parties (if the appropriate answerback or telephonic
confirmation shall have been received) PROVIDED THAT notices after the giving of
which there is a designated period within which to perform an act and notices of
changes of address shall be effective only upon receipt. All such notices and
communications shall be delivered to the following addresses or numbers (or at
such other address or number for a party as shall be specified by like notice):

         (a) if to the Seller:

<PAGE>

             Risk Capital Holdings, Inc.
             20 Horseneck Lane
             Greenwich, CT  06830
             Attention:   Peter Appel
             Telecopier:  203-861-7240

             with a copy under separate cover to:

             Cahill Gordon & Reindel
             80 Pine Street
             New York, N.Y.  10005-1702
             Attention:  Immanuel Kohn
             Telecopier:  212-269-5420

         (b) if to the Purchaser:

             Folksamerica Group
             One Liberty Plaza
             Nineteenth Floor
             New York, N.Y. 10006
             Attention:  President
             Telecopier:  (212) 385-3678

             with a copy under separate cover to:

             Morgan, Lewis & Bockius LLP
             101 Park Avenue
             New York, N.Y. 10178-0060
             Attention:  F. Sedgwick Browne
             Telecopier:  (212) 309-6273

         SECTION 11.02. PUBLIC ANNOUNCEMENT. No party to this Agreement shall
make any public announcements in respect of this Agreement or the transactions
contemplated herein or otherwise communicate with any news media without prior
notification to the other parties, and the parties, subject to the requirements
of applicable law, shall cooperate as to the timing and content of any such
announcement. The parties agree that, except as required by applicable law, in
the event this Agreement is terminated in accordance with Article X hereof, each
party will keep confidential the reasons for such termination and any public
announcement issued by any party following any such termination shall be limited
to a statement that the parties were unable to agree on the principal terms of
the transaction.

         SECTION 11.03. HEADINGS. The headings contained in this Agreement are
for



<PAGE>

reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         SECTION 11.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.

         SECTION 11.05. ENTIRE AGREEMENT. This Agreement (including the Exhibits
and Disclosure Schedule) constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, except as otherwise expressly provided
herein.

         SECTION 11.06. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise; PROVIDED, HOWEVER, that this Agreement may be
assigned, in whole or in part, by the Purchaser to any of its Affiliates,
without releasing the Purchaser from any of its obligations or Liabilities
hereunder.

         SECTION 11.07. NO THIRD-PARTY BENEFICIARIES. Except for the provisions
of this Agreement relating to Indemnified Parties, this Agreement is for the
sole benefit of and is binding upon the parties hereto and their successors and
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

         SECTION 11.08. AMENDMENT; WAIVER. This Agreement may not be amended or
modified except by an instrument in writing signed by the Seller and the
Purchaser. Waiver of any term or condition of this Agreement shall be effective
only if in writing and shall not be construed as a waiver of any subsequent
breach or waiver of the same term or condition, or a waiver of any other term or
condition of this Agreement. Any failure or delay on the part of any party in
exercising any power or right hereunder shall not operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power
hereunder.

         SECTION 11.09. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, other than any
conflict of law rules which might result in the application of the laws of any
other jurisdiction.



<PAGE>

         SECTION 11.10. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.

                              [INTENTIONALLY BLANK]



<PAGE>

         IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

                           RISK CAPITAL HOLDINGS, INC.

                           By
                             ---------------------------------------------------
                              Name:
                              Title:

                           RISK CAPITAL REINSURANCE COMPANY

                           By
                             ---------------------------------------------------
                              Name:
                              Title:

                           FOLKSAMERICA HOLDING COMPANY, INC.

                           By
                             ---------------------------------------------------
                              Name:  Steven E. Fass
                              Title: President & CEO

                           FOLKSAMERICA  REINSURANCE COMPANY

                           By
                             ---------------------------------------------------
                              Name:  Steven E. Fass
                              Title: President & CEO



<PAGE>

                                                                  EXECUTION COPY

--------------------------------------------------------------------------------




                -------------------------------------------------


                            ASSET PURCHASE AGREEMENT

                -------------------------------------------------



                          DATED AS OF JANUARY 10, 1999

                                     BETWEEN

                           RISK CAPITAL HOLDINGS, INC.

                        RISK CAPITAL REINSURANCE COMPANY

                                       AND

                       FOLKSAMERICA HOLDING COMPANY, INC.

                        FOLKSAMERICA REINSURANCE COMPANY

--------------------------------------------------------------------------------



<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               PAGE
<S>      <C>      <C>                                                                                            <C>
ARTICLE I

         DEFINITIONS..............................................................................................1
                  SECTION 1.01.  CERTAIN DEFINED TERMS............................................................1

ARTICLE II

         PURCHASE AND SALE OF THE ASSUMED BUSINESS...............................................................14
                  SECTION 2.01.  PURCHASE OF THE ASSUMED BUSINESS................................................14
                  SECTION 2.02.  PURCHASE PRICE..................................................................15
                  SECTION 2.03.  CLOSING.........................................................................19
                  SECTION 2.04.  CERTAIN POST-CLOSING PAYMENTS...................................................20
                  SECTION 2.05.  NON-CPIS SUBJECT LIABILITY REDUNDANCY ADJUSTMENTS...............................22

ARTICLE III

         REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................................24
                  SECTION 3.01.  INCORPORATION AND AUTHORITY OF THE SELLER.......................................24
                  SECTION 3.02.  NECESSARY PROPERTY HELD BY SUBSIDIARIES OR AFFILIATES...........................25
                  SECTION 3.03.  NO CONFLICT.....................................................................25
                  SECTION 3.04.  CONSENTS AND APPROVALS..........................................................26
                  SECTION 3.05.  SEC DOCUMENTS; FINANCIAL INFORMATION............................................26
                  SECTION 3.06.  ABSENCE OF UNDISCLOSED LIABILITIES..............................................27
                  SECTION 3.07.  INVESTMENTS; INTEGRATED SOLUTIONS...............................................28
                  SECTION 3.08.  CERTAIN EVENTS..................................................................29
                  SECTION 3.09.  INSURANCE RESERVES AND REPORTS..................................................30
                  SECTION 3.10.  PROXY STATEMENT.................................................................30
                  SECTION 3.11.  JUDGMENTS, DECREES AND ORDERS...................................................31
                  SECTION 3.12.  LITIGATION......................................................................31
                  SECTION 3.13.  COMPLIANCE WITH LAWS............................................................31
                  SECTION 3.14.  LICENSES AND PERMITS............................................................31
                  SECTION 3.15.  INTELLECTUAL PROPERTY RIGHTS....................................................32
                  SECTION 3.16.  PROPERTY........................................................................33
                  SECTION 3.17.  ASSUMED AND CEDED REINSURANCE AGREEMENTS........................................33
                  SECTION 3.18.  OTHER CONTRACTS.................................................................35
                  SECTION 3.19.  EMPLOYEE BENEFIT MATTERS........................................................36
                  SECTION 3.20.  TAXES...........................................................................37
                  SECTION 3.21.  AGENTS..........................................................................38
                  SECTION 3.22.  YEAR 2000.......................................................................39
                  SECTION 3.23.  BROKERS.........................................................................39

ARTICLE IV

         REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................................40
                  SECTION 4.01.  INCORPORATION AND AUTHORITY OF THE PURCHASER....................................40
                  SECTION 4.02.  NO CONFLICT.....................................................................40

</TABLE>



<PAGE>

<TABLE>
<S>      <C>      <C>                                                                                            <C>
                  SECTION 4.03.  ABSENCE OF LITIGATION...........................................................41
                  SECTION 4.04.  CONSENTS AND APPROVALS..........................................................41
                  SECTION 4.05.  FINANCIAL INFORMATION...........................................................41
                  SECTION 4.06.  FINANCIAL ABILITY...............................................................42
                  SECTION 4.07.  PROXY STATEMENT.................................................................42
                  SECTION 4.08.  BROKERS.........................................................................42

ARTICLE V

         ADDITIONAL AGREEMENTS...................................................................................42

         SECTION 5.01.  CONDUCT OF BUSINESS PRIOR TO THE CLOSING.................................................42
                  SECTION 5.02.  ACCESS TO INFORMATION...........................................................45
                  SECTION 5.03.  STOCKHOLDER APPROVALS; PROXY STATEMENT..........................................46
                  SECTION 5.04.  CONFIDENTIALITY.................................................................46
                  SECTION 5.05.  REGULATORY AND OTHER CONSENTS AND AUTHORIZATIONS; THIRD PARTY

  CONSENTS.......................................................................................................47
                  SECTION 5.06.  NO SOLICITATION OF EMPLOYEES....................................................49
                  SECTION 5.07.  USE OF NAME.....................................................................49
                  SECTION 5.08.  NO SOLICITATION OF OFFERS, ETC..................................................50
                  SECTION 5.09.  FEES AND EXPENSES...............................................................51
                  SECTION 5.10.  INVESTMENT PORTFOLIO............................................................51
                  SECTION 5.11.  NOTICE OF CERTAIN MATTERS.......................................................52
                  SECTION 5.12.  INTERIM FINANCIAL STATEMENTS....................................................52
                  SECTION 5.13.  AFFILIATE AGREEMENTS; INTERCOMPANY ACCOUNTS.....................................53
                  SECTION 5.14.  RENEWAL RIGHTS..................................................................53
                  SECTION 5.15.  CERTAIN SOFTWARE LICENSES.......................................................54
                  SECTION 5.16.  AVIATION BUSINESS...............................................................54
                  SECTION 5.17.  REINSURANCE.....................................................................55
                  SECTION 5.18.  FURTHER ACTION..................................................................55

ARTICLE VI

         EMPLOYEE MATTERS........................................................................................55
                  SECTION 6.01.  SELLER..........................................................................55
                  SECTION 6.02   PURCHASER.......................................................................56
                  SECTION 6.03.  SELLER'S CONTINUATION OF EMPLOYMENT AND PAYROLL; AMENDMENT OF SEVERANCE AND
                                 "PAY-TO-STAY" ARRANGEMENTS AND OTHER PAYMENTS...................................56
                  SECTION 6.04.  PURCHASER'S PAYMENT WITH RESPECT TO SEVERANCE, CHANGE IN CONTROL AND
                                 "PAY-TO-STAY" COSTS.............................................................57

ARTICLE VII

         TAX MATTERS.............................................................................................58
                  SECTION 7.01.  INDEMNITY.......................................................................58
                  SECTION 7.02.  [RESERVED]......................................................................58
                  SECTION 7.03.  [RESERVED]......................................................................58
                  SECTION 7.04.  CONTESTS........................................................................58
                  SECTION 7.05.  PURCHASE PRICE ALLOCATION.......................................................59
                  SECTION 7.06.  COOPERATION AND EXCHANGE OF INFORMATION.........................................60
</TABLE>



<PAGE>

<TABLE>

<S>      <C>      <C>                                                                                            <C>
                  SECTION 7.07.  CONVEYANCE TAXES................................................................60
                  SECTION 7.08.  MISCELLANEOUS...................................................................61

ARTICLE VIII

         CONDITIONS TO CLOSING...................................................................................61
                  SECTION 8.01.  CONDITIONS TO OBLIGATIONS OF THE SELLER.........................................61
                  SECTION 8.02.  CONDITIONS TO OBLIGATIONS OF THE PURCHASER......................................63

ARTICLE IX

         INDEMNIFICATION.........................................................................................65
                  SECTION 9.01.  SURVIVAL........................................................................65
                  SECTION 9.02.  INDEMNIFICATION BY THE PURCHASER................................................65
                  SECTION 9.03.  INDEMNIFICATION BY THE SELLER...................................................68
                  SECTION 9.04.  OTHER PROVISIONS RELATING TO INDEMNIFICATION....................................71
                  SECTION 9.05.  TAX MATTERS.....................................................................71

ARTICLE X

         TERMINATION, AMENDMENT AND WAIVER.......................................................................71
                  SECTION 10.01.  TERMINATION....................................................................71
                  SECTION 10.02.  EFFECT OF TERMINATION..........................................................72
                  SECTION 10.03.  WAIVER.........................................................................73

ARTICLE XI

         GENERAL PROVISIONS......................................................................................73
                  SECTION 11.01.  NOTICES........................................................................73
                  SECTION 11.02.  PUBLIC ANNOUNCEMENT............................................................74
                  SECTION 11.03.  HEADINGS.......................................................................74
                  SECTION 11.04.  SEVERABILITY...................................................................74
                  SECTION 11.05.  ENTIRE AGREEMENT...............................................................74
                  SECTION 11.06.  ASSIGNMENT.....................................................................75
                  SECTION 11.07.  NO THIRD-PARTY BENEFICIARIES...................................................75
                  SECTION 11.08.  AMENDMENT; WAIVER..............................................................75
                  SECTION 11.09.  GOVERNING LAW..................................................................75
                  SECTION 11.10.  COUNTERPARTS...................................................................76

</TABLE>



<PAGE>

EXHIBITS

  A      Voting Agreements
  B      Transfer and Assumption Agreement
  C      1998 Report
  D      Form of Balance Sheet
  E      Form of Escrow Agreement
  F      Form of Supplemental Escrow Agreement
  G      List of Excluded Securities