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                                                                    EXHIBIT 10.5
                              EMPLOYMENT AGREEMENT

AGREEMENT made effective as of the 23rd day of March, 1998, among ESG Re
Limited, a Bermuda company (the "Company"), and its various subsidiaries and
Joan H. Dillard ("Executive").

WHEREAS, the Company wishes to retain the services of the Executive and
recognizes that the Executive's contribution to the growth and success of the
Company will be substantial; and

WHEREAS, the Executive is willing to commit herself to serve the Company, on the
terms and conditions herein provided.

NOW, THEREFORE, in order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set forth
below. Accordingly, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:

1.    Employment

      The Company hereby agrees to employ the Executive, and the Executive
      hereby agrees to be employed by the Company, on the terms and conditions
      set forth herein.

2.    Term

      The term of the Executives employment hereunder shall commence as of the
      date hereof and shall continue until the close of business on the third
      anniversary of the date hereof subject to earlier termination in
      accordance with the terms of this Agreement (the "Term"). The Term shall
      be automatically extended for successive one year periods thereafter
      unless any of the parties notifies the other in writing of its intention
      not to so extend the Term at least one year prior to the commencement of
      the next scheduled one year extension.

3.    Position and Duties
      (a) Title and Duties

          The Executive shall serve a Chief Financial Officer of the Company and
          shall have such duties, authority and responsibilities as are normally
          associated with and appropriate for such positions. The Executive
          shall report directly to the Chief Executive Officer of the Company.
          The Executive shall devote substantially all of her working time and
          efforts to the business and affairs of the Company, at such locations,
          including Germany, Bermuda, Ireland and Toronto and/or as mutually
          agreed upon by the Executive and the Company. The Executive shall not
          serve as Director or Officer of any unaffiliated companies, including
          but not limited to, any charitable organization or chamber of commerce
          without the written consent of the Company.

          (b) Office and Facilities

          The Executive shall be provided with appropriate office and
          secretarial facilities at the Company's offices in Hamburg, Germany
          and any other location that the Company reasonably deems necessary to
          have an office and support services in order for the Executive to
          perform her duties to the Company. The Executive shall serve as a
          Director or Officer of the Company and


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          shall agree to serve on other committees of the Company or any other
          affiliated company, without additional compensation, if so requested
          by the Company.

4.    Compensation

      (a) BASE SALARY

          During the Term, the Company shall pay to the Executive an annual base
          salary of US$ 250,000. The Executive's base salary shall be paid in
          substantially equal installments on a basis consistent with the
          Company's payroll practices. The Executive's base salary, as in effect
          at anytime, is hereinafter referred to as the "Base Salary". The
          Compensation Committee of the Board (the "Compensation Committee")
          shall review the Executive's performance on an annual basis and may
          increase the Executive's Base Salary, in its sole discretion, as it
          deems appropriate.

          At the request of the Executive, the Company will pay up to 70% of the
          Base Salary in Deutsche Mark.

      (b) ANNUAL BONUS

          The Compensation Committee may award the Executive an annual bonus, at
          such time and in such amount as the Compensation Committee, in its
          sole discretion, deems appropriate.

5.    Employee Benefits

      (a) BENEFIT PLANS

          The Executive shall be entitled to participate in all employee benefit
          plans, which include worldwide medical, dental and vision coverage,
          perquisite and fringe benefit arrangements of the Company generally
          made available by the Company to its executives, subject to, and on a
          basis consistent with the terms, conditions and administration of such
          plans and arrangements.

      (b) EXPENSES

          The Executive shall be entitled to receive prompt reimbursement for
          all reasonable and customary expenses incurred by the Executive in
          performing services hereunder, including all expenses of travel and
          living expenses while away from home on business at the request of and
          in the service of the Company or any of its affiliates and promoting
          the business of the Company, provided that such expenses are incurred
          and accounted for in accordance with the policies and procedures
          established by the Company.

      (c) Vacation

          The Executive shall be entitled to vacations and holidays on a basis
          consistent with that offered to other senior executive officers of the
          Company.

      (4) TAX EQUALIZATION

          In the event that the Executive will be subject to taxes in excess of
          those that would otherwise have been due under US taxcode as a US
          citizen working in the US, ESG Re will compensate the Executive for
          the difference.


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6. Termination of Employment

       The Company and the Executive may each terminate the Executive's
       employment hereunder and the Term for any reason.

       (a) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD
           REASON

           If the Company shall terminate the Executive's employment without
           "Cause" (as defined in Section 6(f)), or if the Executive resigns for
           Good Reason (as defined in Section 6(f)) then, the Executive shall be
           entitled to her Base Salary for the greater of (l) the remainder of
           the Term, OR (2) one year. subject to and conditioned upon the
           Executive's compliance with Sections 7 and 8 hereof. Options held by
           the Executive will be treated as provided for in the applicable Award
           Agreement. In addition, the Company will reimburse reasonable
           relocation costs for a move back to the United States.

           Except as expressly provided above, the Company will have no further
           obligations to the Executive hereunder following the Executive's
           termination of employment under the circumstances described in this
           Section 6(a).

       (b) TERMINATION DUE TO NON-RENEWAL OF THE TERM OR DEATH OR DISABILITY

           If the Executive's employment is terminated due to the non-renewal of
           the Term or due to the Executive's death or disability (as defined in
           Section 6(f)), the Executive shall be entitled to a lump sum cash
           payment equal to the Executive's Base Salary through the dare of
           termination. Options held by the Executive `will be treated as
           provided for in the applicable Award Agreement In addition, the
           Company will reimburse reasonable relocation costs for a move back to
           the United States for the spouse or named beneficiary.

           Except as expressly provided above, the Company will have no further
           obligations to the Executive hereunder following the Executive's
           termination of employment under the circumstances described in this
           Section 6(b).

       (c) Termination by the Company for Cause or by the Executive other than
           for Good Reason

       If the Executive's employment is terminated by the Company for Cause or
       by the Executive other than for Good Reason, the Executive shall be
       entitled to a lump sum cash payment equal to her Base Salary through the
       date of termination. Options held by the Executive shall be treated as
       provided for in the applicable Award Agreement.

       Except as expressly provided above, the Company will have no further
       obligations to the Executive hereunder following the Executive's
       termination of employment under the circumstances described in this
       Section 6(c).

(d) TERMINATION WITHIN ONE YEAR OF A CHANGE IN CONTROL

       If the Company terminates the Executive's employment without Cause or the
       Executive terminates her employment for Good Reason within one year
       following a Change in Control, the Executive shall be


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       entitled, in addition to the compensation otherwise payable upon her
       termination of employment pursuant to Section 6(a) above, to a lump sum
       payment which, when added to the present value of all other benefits or
       payments to which the Executive is entitled which would constitute
       "Parachute Payments" (as defined in Section 2800 of the U.S. Internal
       Revenue Code of 1986, as amended (the "Code")); equals 2.99 times the
       Executive's "Base Amount" (as defined in Section 280G of the Code).. In
       addition, the Company will reimburse reasonable relocation costs for a
       move back to the United States.

(e) NOTICE OF TERMINATION

       Any termination of the Executive's employment by the Company or by the
       Executive (other than termination pursuant to the Executive's death)
       shall be communicated by written Notice of Termination to the other party
       hereto in accordance with Section 11 hereof If the Company terminates the
       Executive's employment for Cause or if the Executive resigns for Good
       Reason, the "Notice of Termination" shall mean a notice which shall
       indicate the specific termination provision in this Agreement relied upon
       and shall set forth in reasonable detail the facts and circumstances
       claimed to provide a basis for termination of the Executive's employment
       under the provision so indicated. For purposes of this Agreement, the due
       of the Executive's termination of employment shall be deemed to be the
       date of receipt of the Notice of Termination.

(1) DEFINITIONS - For purpose of this Agreement:

       (i)  "Cause" shall mean

            (1)   The Executive's breach of any material term of this Agreement,
                  including, but not limited to, the covenants set forth in
                  Sections 7 and 8 hereto

            (2)   The Executive's failure or refusal to perform her duties
                  hereunder or to perform specific directives of the Company,
                  provided that such directives do not violate any applicable
                  law or industry standards;

            (3)   Dishonesty of the Executive affecting the Company or any
                  affiliates:

                   (4) Any gross or willful conduct of the Executive resulting
in substantial loss to or theft from any of the Company or any affiliate; or
substantial damage to the Company's reputation or theft from the Company; or

                   (5)  Alcoholism or use of drugs or any controlled substances
                        which interfered with the performance of the Executive's
                        duties and responsibilities under this Agreement;

                   (6)  The Executive is charged with a felony or other serious
                        crime, whether or not related to the business of the
                        Company, including but not limited to, any crime related
                        to tax evasion, bribery, theft, political payoff etc.

            (ii)   "Change in Control" shall mean the occurrence of any of the
                   following: (i) the sale, lease, transfer or other
                   disposition, in one or a series of related transactions, of
                   all or substantially all of die assets of the Company other
                   than to any of the Affiliates, or (ii) a merger or sale of
                   the Company pursuant to which the shareholders of the Company
                   immediately prior to such merger or sale do not own a
                   majority of the stock of the Company or the surviving
                   corporation immediately after sick merger or sale.


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            (iii)  "Disability" shall mean the Executive's adjudication as
                   mentally incompetent or mental or physical disability
                   preventing the Executive from performing her duties under
                   this Employment Agreement for a period of 180 consecutive
                   days.

            (iv)   "Good Reason" shall mean (1) a material diminution of the
                   Executive's duties (per Exhibit A as attached) or the
                   assignment to the Executive of a title or duties inconsistent
                   with her position as Chief Financial Officer of the Company,
                   (2) a material reduction amounting to at least 10% of the
                   Executive's base salary, or (3) a failure of the Company to
                   comply with any material provision of this Agreement

 7.    Non-Competition

       (a)  The Executive acknowledges and recognizes the highly competitive
            nature of the businesses of the Company and its affiliates and
            accordingly agrees as follows:

            (i)   During the Employment Term and for a period of 18 months
                   following the Executive's termination of employment (unless
                   such termination of employment occurs within one year
                   following a Change in Control, in which case this paragraph
                   shall not be applicable) (the "Restricted Period"), the
                   Executive will not, unless the Executive is given smitten
                   permission by the Company, directly or indirectly, (i) engage
                   in any business for the Executive's own account that competes
                   with the business of the Company or any of its affiliates
                   that are engaged in the insurance or reinsurance business
                   (the "Company Affiliates"), (ii) enter the employment of; or
                   render any services to, any person engaged in any business
                   that competes with the business of the Company or the Company
                   Affiliates, (iii) acquire a financial interest in, or
                   otherwise become actively involved with, any person engaged
                   in any business that competes with the business of the
                   Company or the Company Affiliates, directly or indirectly, as
                   an individual, partner, shareholder, officer, director,
                   principal, agent, trustee or consultant, or (iv) interfere
                   with business relationships (whether formed before or after
                   the date of this Agreement) of the Company or the Company
                   Affiliates.

(ii)        Notwithstanding anything to the contrary in this Agreement, the
Executive may, directly or indirectly own, solely as a investment, securities of
any person engaged in the business of the Company or the Company Affiliates if
the Executive (i) is not a controlling person of or a member of a group which
controls, such person and (ii) does not, directly or indirectly, own more than
one share lass than 5% of any class of securities of such person.

(iii)       During the Restricted Period, the Executive will not, directly or
indirectly, (i) solicit or encourage any employee of the Company or the Company
Affiliates to leave the employment of the Company or the Company Affiliates, or
(if) hire any such employee who has left the employment of the Company or the
Company Affiliates (other than as a result of the termination of such employment
by the Company or the Company Affiliates) within one year after the termination
of such employee's employment with the Company or the Company Affiliates.

(iv)        During the Restricted Period, the Executive will not, directly or
indirectly, solicit or encourage to cease to work with the Company or the
Company Affiliates any consultant then under contract with the Company or the
Company Affiliates.

         (b)   It is expressly understood and agreed that although the Executive
               and the Company consider the restrictions contained in this
               Section 7 to be reasonable, if a final judicial determination is
               made by a court of competent jurisdiction that the time or
               territory or any other restriction


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               contained in this Agreement is an unenforceable restriction
               against the Executive, the provisions of this Agreement shall not
               be rendered void but shall be deemed amended to apply as to such
               maximum time and territory and to such maximum extent as such
               court may judicially determine or indicate to be enforceable.
               Alternatively, if any court of competent jurisdiction finds that
               any restriction contained in this Agreement is unenforceable, and
               such restriction cannot be amended so as to make it enforceable,
               such finding shall not affect the enforceability of any of the
               other restrictions contained herein..

       8. Confidentiality

       The Executive will not at any time (whether during or after her
       employment with the Company) disclose or use for her own benefit or
       purposes or the benefit or purposes of any other person, firm,
       partnership, joint venture, association, corporation & other business
       organization, entity or enterprise other than the Company and any of
       their subsidiaries or affiliates, any trade secrets, information, data,
       or other confidential information relating to customers, development
       programs, costs, marketing, trading, investment, sales activities,
       promotion, credit and financial data, financing methods, plans, or the
       business and affairs of the Company or of any subsidiary or affiliate of
       the Company, provided that foregoing shall not apply to information which
       is not unique to the Company or any of its subsidiaries or affiliates or
       which is generally known to the industry or the public other than as a
       result of the Executives breach of this covenant. The Executive agrees
       that upon termination of her employment with the Company for any reason,
       she will return to the Company immediately all memoranda, books, papers,
       plans, information, letters and other data, and all copies thereof or
       therefrom, in any way relating to the business of the Company and its
       affiliates, except that she may retain personal notes, notebooks and
       diaries. The Executive further agrees that she will not retain or use for
       her account at any time any trade names, trademarks or other proprietary
       business designations used or owned in connection with the business of
       the Company or their affiliates

       9.   Equitable Relief

       The Executive acknowledges and agrees that the Company's remedies at law
       for a breach or threatened breach of any of the provisions of Section 7
       or Section 3 would be inadequate and, in recognition of this fact, the
       Executive agrees that, in the event of such a breach or threatened
       breach, in addition to any remedies at law, the Company, without posting
       any bond or security, shall be entitled to obtain equitable relief in the
       form of specific performance, temporary restraining order, temporary or
       permanent injunction or any other equitable remedy which may then be
       available.

       10.  Successors; Binding Agreement

         (a)   The Company will require any successor (whether direct or
               indirect, by purchase, merger, consolidation or otherwise) to all
               or substantially all of the business and/or assets of the Company
               to expressly assume and agree to perform this Agreement in the
               same manner and to the same extent that the Company would be
               required to perform as if no such succession had taken place. As
               used in this Agreement, "Company"' shall mean the Company as
               herein defined and any successor to its business and/or assets as
               aforesaid which executes and delivers the agreement provided for
               in this Section 10 or which otherwise becomes bound by all the
               terms and provisions of this Agreement by operation of law.

         (b)   This Agreement and all rights of the Executive hereunder shall
               inure to the benefit of and be enforceable by the Executive's
               personal or legal representatives, executors, administrators
               successors, heirs, distributees, devisees and legatees. If the
               Executive should die while any


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               amounts are payable to her hereunder all such amounts unless
               otherwise provided herein, shall be paid in accordance `with the
               terms of this Agreement to the Executive's devisee, legatee, or
               other designee or, if there be no such designee, to the
               Executive's estate.

 11.  Notice

For the purpose of this Agreement, notices, demands and all other
      communications provided for in this Agreement shall be in writing and
      shall be deemed to have been duly given when personally delivered with
      receipt acknowledged or alter having been received by certified or
      registered mall, return receipt requested, postage prepaid, addressed as
      follows:

                            If to the Executive:

                            Joan H. Dillard
                            Oberstrasse 75
                            D - 20144 Hamburg

                            ESG Re Limited
                            Skandia International House
                            16 Church Street
                            Hamilton, SM 11
                            Bermuda
                            Attention: Chairman

      or to such other address as any party may have finished to the other in
      writing in accordance herewith, except that notices of change of address
      shall be effective only upon receipt.

 12.  Miscellaneous

      No provisions of this Agreement may be modified waived or discharged
      unless such waiver, modification or discharge is agreed to in writing
      signed by the Executive and such officer of the Company as may be
      specifically designated by the Company as the case may be. No waiver by
      any party hereto at any time of any breach by the other party hereto of,
      or compliance with, any condition or provision of this Agreement to be
      performed by such other party shall be deemed a waiver of similar or
      dissimilar provisions or conditions at the same or at any prior or
      subsequent time. The validity, interpretation, construction and
      performance of this Agreement shall be governed by the laws of Bermuda
      without regard to its conflicts of law principles.

      13. Validity

      The invalidity or unenforceability of any provision or provisions of this
      Agreement shall not affect the validity or enforceability of any other
      provision of this Agreement, which shall remain in full force and effect.

      14. Counterparts

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument

      15. Withholding


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      The Company may withhold from any amounts payable under this Agreement
      such Federal, state and local and foreign taxes as may be required to be
      withheld pursuant to applicable law or regulation.

      This Agreement sets forth the entire agreement of the parties hereto in
      respect of the matters contained herein and supersedes all prior
      agreements, promises, covenants, arrangements, communications,
      representations or warranties, whether oral or written, by any officer,
      employee or representative of any party hereto, including any prior
      employment agreements other than those contained in the employment offer
      dated 5th of March, 1998.

                   IN WITNESS WHEREOF, the Company has caused this Agreement to
                     be duly executed and the Executive has hereunto set his
                     hand, effective as of 23rd day of March, 1998.

                            ESG

                            BY: /s/ WOLFGANG M. WAND
                               ----------------------------------
                            Name:  W. M. Wand
                            Title:  CEO

                            Joan H. Dillard

                            /s/ JOAN J. DILLARD
                            -------------------------------------

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                             Chief Financial Officer
                                 ESG Re Limited
                           Duties and Responsibilities
                           ---------------------------

1.    Manage the Company's accounting, SEC and other regulatory reporting
      functions.

2.    Ensure the conformance of an international operation with SEC and
      international accounting and reporting standards.

3.    Establish and maintain a financial/tax analysis, reporting, budgeting and
      planning capability that provides appropriate management information and
      accountability report

4.    Represent the Company in its dealings with shareholders, regulators,
      rating agencies and equity analysts; manage overall investors relations
      activities aid communications.

5.    Play a key role in the development and implementation of the Company's
      strategy; serve on the Company's Executive Committee.

6.    Evaluate and maintain optimal capital structure; lead capital raising
      efforts in public or private markets, as necessary.

7.    Evaluate and recommend investment polity mid strategy consistent with
      Company parameters of credit rating, liquidity and liability
      characteristics; ensure conformance with stated policy and strategy.
      Evaluation, recommendation, policy and strategy will include both the
      invested asset portfolio and strategic investments, mergers or
      acquisitions.

8.    Supervise the Company's systems (IT) operation and development

9.    Manage Treasury operations, including risk management, cash management,
      banking relationships and credit facilities pension and benefit plans.

10.   Evaluate adequacy of loss reserves

11.   Provide personnel functions and support to the Company, including:
      development of incentive compensation plans, human resource planning and
      development, establishing appropriate hiring policies and practices,
      implementing and administering all policies and procedures.

12.   Direct and provide management to the General Counsel of the Company or
      legal staff as required.

13.   Ensure that an overall integrated framework of internal control is
      maintained and that compliance is achieved.

14.   Provide regular communication and information to the Board of Directors
      regarding the financial results of the Company, significant business and
      financial issues, and other items or requests that may arise.