<PAGE>

                                                                    EXHIBIT 10.2


                              SETTLEMENT AGREEMENT

         This SETTLEMENT AGREEMENT, dated as of July 7, 1999, is entered into by
and  among  Zenith  Insurance  Company,  a  California  Corporation  ("Zenith"),
RISCORP,  Inc., a Florida  corporation  ("RISCORP,  Inc."),  RISCORP  Management
Services,  Inc., a Florida corporation ("RMS"), 1390 Main Street Services, Inc.,
a Florida  corporation  ("1390 Main  Street"),  RISCORP of  Illinois,  Inc.,  an
Illinois   corporation   ("RI"),    Independent    Association    Administrators
Incorporated,  an Alabama corporation ("IAA"), RISCORP Insurance Services, Inc.,
a Florida corporation ("RIS"),  RISCORP Managed Care Services,  Inc. ("RMCS"), a
Florida   corporation,   CompSource,   Inc.,   a  North   Carolina   corporation
("CompSource"),  RISCORP  Real  Estate  Holdings,  Inc.,  a Florida  corporation
("RRE"), RISCORP Acquisition,  Inc., a Florida corporation ("RA"), RISCORP West,
Inc.,  an  Oklahoma  corporation  ("RW"),  RISCORP of Florida,  Inc.,  a Florida
corporation ("RF"),  RISCORP Insurance Company, a Florida  corporation  ("RIC"),
RISCORP Property & Casualty Insurance Company, a Florida  corporation  ("RP&C"),
RISCORP National  Insurance Company, a Missouri  corporation  ("RNIC"),  RISCORP
Services, Inc., a Florida corporation ("RS"), RISCORP Staffing Solutions Holding
Company, a Florida corporation ("RSS Holding"), RISCORP Staffing Solutions, Inc.
I, a Florida  corporation  ("RSSI") and RISCORP Staffing  Solutions,  Inc. II, a
Florida corporation  ("RSSII").  RISCORP,  Inc., RMS, 1390 Main Street, RI, IAA,
RIS, RMCS,  CompSource,  RRE, RA, RW, RF, RIC, RP&C, RNIC, RS, RSS Holding, RSSI
and  RSSII  are  from  time to time  hereinafter  referred  to  collectively  as
"RISCORP" or the "RISCORP Companies."



<PAGE>


                                   WITNESSETH:
WHEREAS:

         A. Zenith and RISCORP are parties to (a) an Asset  Purchase  Agreement,
dated as of June 17, 1997, as  subsequently  amended on June 26, 1997,  July 11,
1997,  and  March 30,  1998  (the  "Asset  Purchase  Agreement");  (b) an Escrow
Agreement  with First Union  National  Bank as Escrow  Agent dated April 1, 1998
(the  "Escrow  Agreement");  (c) a letter  agreement  dated  April 1,  1998 (the
"Letter Agreement"); and (d) those documents and instruments listed on Exhibit A
hereto  (together  with the  Escrow  Agreement  and the  Letter  Agreement,  the
"Transaction  Documents").  Capitalized  terms  used  herein  and not  otherwise
defined  shall  have  the  meanings  ascribed  to  them  in the  Asset  Purchase
Agreement;

         B. Pursuant to the Asset Purchase  Agreement,  on April 1, 1998, Zenith
acquired  substantially all of RISCORP's assets and assumed certain of RISCORP's
liabilities (the "Asset Sale") for a purchase price equal to the amount by which
the  book  value  of the  Transferred  Assets  exceeded  the  book  value of the
Transferred  Liabilities  as set forth on a Final  Business  Balance Sheet to be
determined in accordance  with the  procedures  set forth in the Asset  Purchase
Agreement;

         C. On April 1, 1998, in connection  with the closing of the Asset Sale,
Zenith paid RISCORP $35 million to be applied  toward the final  Purchase  Price
payable  pursuant  to the Asset  Purchase  Agreement,  $10  million of which was
deposited with the Escrow Agent to be  distributed  pursuant to the terms of the
Asset Purchase Agreement and the Escrow Agreement;



<PAGE>

         D. The Letter Agreement  contained certain provisions pursuant to which
certain of  RISCORP's  Assets would be deemed not to be  Transferred  Assets for
purposes of determining the Final Business  Balance Sheet and the Purchase Price
payable pursuant to the Asset Purchase Agreement.

         E. On October 16, 1998,  RISCORP  commenced an action against Zenith in
the United  States  District  Court for the Middle  District of  Florida,  Tampa
Division,  captioned  RISCORP,  Inc., et al. v. Zenith  Insurance  Co., Case No.
98-2122-CIV-T-25E  (the  "Florida  Action"),  in which RISCORP  alleged  various
claims against Zenith, including claims relating to Zenith's alleged breaches of
the Asset Purchase Agreement and the Letter Agreement;

         F. On January 8, 1999,  Zenith commenced an action in the United States
District Court for the Southern District of New York, captioned Zenith Insurance
Co. v.  RISCORP,  Inc.,  et al.,  Case No.  99 Civ.  0171  (WHP)  (the "New York
Action"),  in which Zenith asserted  various claims against  RISCORP,  including
claims relating to RISCORP's alleged breaches of the Asset Purchase Agreement;

         G. On March 19, 1999, Arthur Andersen LLP ("Arthur  Andersen"),  acting
as Neutral Auditor and Neutral Actuary pursuant to the Asset Purchase Agreement,
issued (i) a report containing its  determinations of certain issues that Arthur
Andersen  found to be in dispute  between  the parties  regarding  the manner in
which certain items should be treated in the  preparation  of the Final Business
Balance Sheet; and (ii) its determination of the Final Business Balance Sheet;

         H.       As a result of the issuance of the Final Business Balance
Sheet, (i) on or about March 26, 1999, Zenith wire transferred to RISCORP, Inc.
the sum of $50,853,182, and wire



<PAGE>

transferred to the Escrow Agent the sum of $2,835,723; and (ii) on April 14,
1999, Zenith wire transferred to RISCORP, Inc. the sum of $619,173.32;

         I. The parties agree that in determining the final Purchase Price to be
paid by Zenith in  connection  with the Asset Sale  certain  adjustments  to the
Final Business Balance Sheet are required based on (i) certain provisions of the
Letter  Agreement;  (ii) the value of certain  assets  identified on Exhibit F-1
included among the Transferred  Assets on the Final Business  Balance Sheet that
in fact were not  transferred to Zenith,  and (iii) the value of a treasury note
acquired by Zenith that was not  included  among the  Transferred  Assets on the
Final Business  Balance  Sheet.  In addition,  certain  adjustments to the Final
Balance Sheet may be required  based on certain  errors that were allegedly made
by Arthur Anderson in determining the Final Business Balance Sheet; and

         J. Zenith and RISCORP  desire to  compromise  and settle the claims and
all pending and potential litigation between them (except as otherwise expressly
provided  herein),  and they have therefore agreed to enter into this Settlement
Agreement to settle and resolve,  on the terms specified herein, all such claims
and disputes.

         NOW,  THEREFORE,  in consideration of the premises and mutual covenants
hereinafter set forth, it is hereby agreed as follows:

         1. The Final Business  Balance  Sheet.  Zenith and RISCORP agree not to
commence or prosecute  any action or  proceeding,  or to take any other  action,
that seeks to confirm,  modify, vacate,  challenge or otherwise review the Final
Business  Balance Sheet or the Revised Final Business  Balance Sheet (as defined
herein) except as provided below in this paragraph 1.


<PAGE>

                  (a) The parties  agree that  RISCORP  may request  that Arthur
Andersen review and/or correct any alleged errors made in its  determination  of
the Final Business Balance Sheet with respect to its failure to make appropriate
adjustment for certain reinsurance treaties in effect during accident years 1991
through 1993, inclusive,  including, without limitation, whether issues relating
to Arthur  Andersen's  adjustment  to  reinsurance  recoverable  were in dispute
between the parties (the "RISCORP Reinsurance Claims").

                  (b)  Within  five   business  days  after  the  date  of  this
Settlement Agreement,  Zenith may make a submission to Arthur Andersen regarding
the RISCORP  Reinsurance  Claims in respect of (i)  correspondence  from Buttner
Hammock & Company to Arthur  Andersen  dated May 17, 1999;  (ii)  correspondence
from  Alston & Bird  LLP to  Arthur  Andersen  dated  May 24,  1999;  and  (iii)
correspondence  from  Alston & Bird LLP to Arthur  Andersen  dated June 4, 1999.
Zenith's  submission to Arthur  Andersen shall be to the effect that the RISCORP
Reinsurance  Claims were not "in  dispute"  under  Section  2.02(b) of the Asset
Purchase  Agreement and that Arthur  Andersen did not make an error with respect
to this issue in the Final Business  Balance Sheet.  On or before July 27, 1999,
RISCORP may make an additional  submission  to Arthur  Andersen  addressing  the
RISCORP Reinsurance Claims or any issues raised in Zenith's submission to Arthur
Andersen pursuant to this paragraph 1(b).

                  (c) Zenith and RISCORP  agree that,  in reviewing  the RISCORP
Reinsurance Claims,  Arthur Andersen may: (i) determine whether such claims were
"in dispute" under Section 2.02(b) of the Asset Purchase Agreement; (ii) resolve
such claims on the merits by applying  the  standards  for review by the Neutral
Auditors and Neutral Actuary under Section 2.02(b) of the Asset


<PAGE>

Purchase Agreement; and (iii) if appropriate, issue a revised or corrected Final
Business  Balance Sheet  reflecting  any resolution of such claims (the "Revised
Final Business Balance Sheet").

                  (d) If Arthur  Andersen  issues  the  Revised  Final  Business
Balance  Sheet,  then (i)  RISCORP  shall  pay to Zenith  the  amount of the net
reduction,  if any, in the Net Assets Transferred reflected on the Revised Final
Business  Balance  Sheet;  or (ii) Zenith  shall pay to RISCORP on behalf of the
Sellers the amount of the net  increase,  if any, in the Net Assets  Transferred
reflected on the Revised Final Business Balance Sheet. RISCORP or Zenith, as the
case may be, shall pay interest on any amounts due under this paragraph 1 at the
rate of 6.25% per annum from (and  including)  April 1, 1998 to (but  excluding)
the date of payment.  Any such payment  shall be made within five  business days
after  receipt of the Revised Final  Business  Balance Sheet by wire transfer of
immediately  available  funds to an account  designated by the party entitled to
receive such payment.

                  (e)   Notwithstanding   anything  to  the   contrary  in  this
Settlement Agreement, including, without limitation, the foregoing provisions of
this  paragraph 1,  neither  Zenith nor RISCORP has waived any right to commence
legal action in any court of competent  jurisdiction:  (i) to seek correction of
alleged  errors  with  respect to the RISCORP  Reinsurance  Claims that were not
corrected by Arthur Andersen in a Revised Final Business  Balance Sheet pursuant
to this  paragraph  1; or (ii) to  correct,  modify,  vacate  or set  aside  any
revision of the Final Business  Balance Sheet made in the Revised Final Business
Balance Sheet.

         2. Disbursements from Escrow. (a) Zenith and RlSCORP agree to cause all
funds  currently on deposit with the Escrow Agent to be  distributed  as soon as
reasonably  practicable,  but in no event  later  than 20  business  days  after
execution of this Settlement Agreement, as follows:

<PAGE>

                           (i)      Six million dollars ($6,000,000) to Zenith;
                                    and

                           (ii)     the balance of all principal and interest to
                                    RISCORP, Inc.

                  (b) Following the foregoing  disbursement of funds, the Escrow
Agreement  shall be terminated  and the parties shall execute such  documents or
instruments as may be reasonably necessary to evidence such termination.

                  (c)  RISCORP  acknowledges  that  Zenith  intends to treat the
amounts received under this paragraph 2 as reimbursement for unexpected expenses
incurred by Zenith in  connection  with  carrying on the Business  acquired from
RISCORP.

         3. Claims for  Refunds.  The parties  agree that  RISCORP's  claims for
refunds  made to the  Florida  Department  of  Labor  and  Employment  Security,
Division of Workers' Compensation  Administrative and Field Support Unit will be
divided between them as follows:

                  (a) RISCORP,  Inc.  shall be the sole owner of and is entitled
to any  refund  granted in  connection  with its  request  for a refund for Five
Million Two  Hundred  Ninety Two  Thousand,  One  Hundred  Eighty-Three  Dollars
($5,292,183)  related to deductions for commissions  against gross premiums (the
"Commission Refund"); and

                  (b) Of the approximate balance of Twenty-Seven Million Dollars
($27,000,000) of potential  additional refunds related to deduction for premiums
ceded to others (the  "Reinsurance  Refunds"),  RISCORP,  Inc. shall receive the
first Ten Million Dollars  ($10,000,000) of any Reinsurance  Refunds  recovered,
and  should  the  Reinsurance   Refunds  recovery  exceed  Ten  Million  Dollars
($10,000,000), RISCORP and Zenith will share equally in any excess proceeds.


<PAGE>

                  (c)  The  fees  and  expenses   incurred  in  connection  with
RISCORP's efforts to seek recovery of the Reinsurance Refunds shall be shared by
Zenith  and  RISCORP  in the same ratio as the  amounts  which  each  ultimately
recovers.  All such fees and expenses shall initially be borne by RISCORP, which
shall be entitled to reimbursement  for Zenith's share of such fees and expenses
only if Zenith shares in any Reinsurance  Refunds.  RISCORP shall have the right
to direct and control the prosecution of any attempts to recover the Reinsurance
Refunds.  RISCORP shall not  compromise or settle such claims  without the prior
written approval of Zenith,  which approval shall not be unreasonably  withheld.
At RISCORP's  request,  Zenith shall jointly prosecute the claims to recovery of
the  Reinsurance  Refunds,  but  RISCORP  shall  retain  the right to direct and
control the prosecution in such event. RISCORP may cease prosecuting such claims
at any time in its sole discretion, provided, however, that RISCORP first offers
in writing to assign such  claims to Zenith  without  consideration,  and Zenith
does not accept  such  assignment  within ten  business  days of receipt of such
offer.  If Zenith does accept such  Assignment,  RISCORP shall be dismissed as a
party, and Zenith,  as assignee of RISCORP,  shall be substituted.  Zenith shall
thereafter  bear  all  fees  and  expenses   incurred  in  connection  with  its
prosecution of such claim.

         4. Release by Zenith.  Effective with the execution of this  Settlement
Agreement,  Zenith  and its  affiliates,  subsidiaries,  parents,  shareholders,
agents,  employees,  attorneys,  accountants,  representatives,  directors,  and
officers (the "Zenith  Releasors") hereby release,  acquit and forever discharge
RISCORP  and  its  affiliates,   subsidiaries,  parents,  shareholders,  agents,
employees, attorneys, accountants, representatives,  directors and officers (the
"RISCORP Releasees") from any and all claims, causes of action, debts, accounts,
contracts, torts, demands, judgments, whether at law

<PAGE>

or  in  equity,  accrued  or  contingent,   known  or  unknown,   discovered  or
undiscovered,  in the past or in the  future,  which the Zenith  Releasors  had,
have,  or may in the future have,  of any form or nature,  from the beginning of
time through and including the date of this Settlement Agreement  (collectively,
"Zenith  Claims"),  except for any Zenith Claims that arise from,  relate to, or
are  based  on (i)  any of the  obligations  contained  within  this  Settlement
Agreement;  (ii) the surviving  provisions of the Asset Purchase Agreement;  and
(iii) the surviving provisions of the Transaction Documents.

         5. Release by RISCORP.  Effective with the execution of this Settlement
Agreement,  the RISCORP  Releasees hereby release,  acquit and forever discharge
the Zenith Releasors from any and all claims, causes of action, debts, accounts,
contracts,  torts, demands,  judgments,  whether at law or in equity, accrued or
contingent, known or unknown, discovered or undiscovered,  in the past or in the
future, which the RISCORP Releasees had, have, or may in the future have, of any
form or nature,  from the  beginning of time through and  including  the date of
this  Settlement  Agreement  (collectively,  "RISCORP  Claims"),  except for any
RISCORP  Claims  that  arise  from,  relate  to,  or are based on (i) any of the
obligations  contained  within  this  Settlement  Agreement  including,  without
limitation,  any claims  arising out of or related to any alleged errors made by
Arthur Andersen as provided in paragraph 1 hereof; (ii) the surviving provisions
of  the  Asset  Purchase  Agreement;  (iii)  the  surviving  provisions  of  the
Transaction  Documents;  and (iv) RISCORP's right to seek  indemnification  from
Zenith with respect to Bristol  Hotel  Management  Corporation,  et al. v. Aetna
Casualty & Surety  Company,  a/k/a  Aetna  Group,  et al.  (the  "Bristol  Hotel
Action").

         6.       Covenant Not to Sue or Arbitrate by Zenith. Except as
contemplated by paragraphs 1 and 14 hereof, effective with the execution of this
Settlement Agreement Zenith and its affiliates,


<PAGE>

subsidiaries,  parents, shareholders, agents, employees, attorneys, accountants,
representatives,  directors,  and officers  (the "Zenith  Convenantors")  hereby
covenant  not to sue and  covenant  not to  arbitrate  against  RISCORP  and its
affiliates,  subsidiaries,  parents, shareholders, agents, employees, attorneys,
accountants, representatives, directors and officers (the "RISCORP Covenantees")
as to any and all claims, causes of action, debts, accounts,  contracts,  torts,
demands,  and  judgments,  whether  at  law  or  in  equity,  which  the  Zenith
Covenantors had, have, or may have in the future,  of any form or nature,  based
in whole or in  substantial  part on facts  actually  known to the  officers  or
former  officers of Zenith  identified  on Exhibit B attached  hereto,  or which
should have been known to such officers of Zenith after reasonable inquiry, from
the beginning of time up to the date of this Settlement Agreement.

         7. Covenant Not to Sue or Arbitrate by RISCORP.  Except as contemplated
by paragraphs 1 and 14 hereof and as to the Bristol Hotel Action, effective with
the  execution  of this  Settlement  Agreement  the RISCORP  Covenantees  hereby
covenant not to sue and covenant not to arbitrate against the Zenith Covenantors
as to any and all claims, causes of action, debts, accounts,  contracts,  torts,
demands,  and  judgments,  whether  at  law  or in  equity,  which  the  RISCORP
Covenantees had, have, or may have in the future,  of any form or nature,  based
in whole or in  substantial  part on facts  actually  known to the  officers  of
RISCORP,  or which  should  have been known to the  officers  of  RISCORP  after
reasonable inquiry, from the beginning of time up to the date of this Settlement
Agreement.

         8.       Dismissal of Florida Action. Within five business days of the
execution of this Settlement Agreement, Zenith and RISCORP agree to submit a
Stipulation in the form annexed


<PAGE>

hereto as Exhibit C to the United States District Court for the Middle District
of Florida, Tampa Division, for filing in the action captioned RISCORP. Inc., et
al. v. Zenith Insurance Co., Case No. 98-2122-CIV-T-25E.

         9.  Dismissal  of New York  Action.  Within five  business  days of the
execution of this  Settlement  Agreement,  Zenith and RISCORP  agree to submit a
Stipulation  in the form  annexed  hereto  as  Exhibit  D to the  United  States
District  Court for the  Southern  District of New York for filing in the action
captioned Zenith  Insurance Co. v. RISCORP,  Inc., et al., Case No. 99 Civ. 0171
(WHP).

         10.  Release of  Securities.  Zenith  agrees  promptly to execute  upon
RISCORP's  request  letters  in  substantially  the form  attached  as Exhibit E
evidencing Zenith's acknowledgment that it has no right, title or interest in or
to certain  funds on deposit  with  various  state  regulatory  agencies and its
consent to the release of such funds or  securities to RISCORP.  Zenith  further
covenants  and  agrees  that  it  shall  execute  any  additional  documents  or
instruments as may be reasonably  necessary to assist RISCORP in the recovery of
such funds.  The funds or  securities  currently on deposit  with various  state
agencies to which Zenith  acknowledges  RISCORP's full entitlement are set forth
on Exhibit F.

         11.  Assessments.   Responsibility  for  satisfaction  of  assessments,
including  those  assessments  at issue in the  Florida  Action and the New York
Action and those arising in the future,  from state  insurance  departments  and
other  state and  federal  regulatory  agencies  will be borne by the parties as
follows:

                  (a) The parties have set forth on Exhibit G those  assessments
currently  known to the  parties  and have  identified  whether or the extent to
which each such assessment is the


<PAGE>

responsibility of RISCORP or Zenith.  Unless otherwise  specifically provided on
Exhibit  G, the  parties  will each  satisfy  their  respective  obligations  as
reflected  on  Exhibit  G within  15 days of the  execution  of this  Settlement
Agreement and shall provide to the other party evidence of such satisfaction.

                  (b) Any other  assessment or Tax  attributable to the Business
for a period prior to April 1, 1998 will be the responsibility of RISCORP.

                  (c) Any other  assessment or Tax  attributable to the Business
for a period on or after  April 1, 1998 will be the  responsibility  of  Zenith,
regardless  of whether the  premiums or other  amounts  used to  calculate  such
assessment or Tax relate to a period before or after April 1, 1998.

                  (d) Any other  assessment or Tax  attributable to the Business
for a period both prior to and following April 1, 1998 shall be prorated between
RISCORP and Zenith,  respectively,  by following  the  methodology  described in
paragraphs (b) and (c) above based on the ratio of (i) the number of days in the
period  prior to April 1, 1998,  to (ii) the number of days in the period on and
after April 1, 1998 in the period being assessed.

         12.      Amendment to Asset Purchase Agreement. The parties hereto
agree that the Asset Purchase Agreement is hereby amended as follows:

                  (a) The following  Sections or Articles of the Asset  Purchase
Agreement  shall have no further force or effect:  Sections  3.03,  3.04,  3.05,
3.06,  3.07, 3.09, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.15 A, 3.18, 3.19, 3.20,
3.21, 3.22, 4.03, 4.04; Article V; Article VI; Article VII; and Article X.

                  (b) The following Sections of the Asset Purchase Agreement are
amended as set forth below:

<PAGE>

                           (i)      Section 8.01. Section 8.01 of the Asset
                                    Purchase  Agreement is amended to provide as
                                    follows:

                           Section  8.01:   Survival  of   Representations   and
                           Warranties.   All   representations   and  warranties
                           contained in Sections 3.01,  3.02,  3.08, 3.16, 3.17,
                           4.01, and 4.02 of the Asset Purchase  Agreement shall
                           survive the Closing and shall terminate and expire at
                           the close of business on April 1, 2000.

                           (ii)     Section 11.06. Section 11.06 of the Asset
                                    Purchase Agreement is hereby amended by
                                    deleting subpart (b) thereof in its
                                    entirety.


                  (c)      To the extent that any provisions of this  Settlement
                           Agreement may conflict with any surviving  provisions
                           of the Asset  Purchase  Agreement or the  Transaction
                           Documents,   the   provisions   of  this   Settlement
                           Agreement shall control.

         13. Pending Litigation.  Attached as Exhibit H is a schedule of pending
litigation,  along with a designation as to which party shall be responsible for
the defense of, and  satisfaction  of any judgment or  settlement  arising from,
each suit.

         14. Voided  Checks/Stop  Payment  Orders.  (a) Zenith and RISCORP agree
that Zenith  shall have 60 days from the date of this  Settlement  Agreement  to
submit to RISCORP the following:  (i) a Schedule of Unpaid Checks listing checks
that were issued by any RISCORP  company  prior to April 1, 1998 that either (A)
were  voided by Zenith,  or (B) are  subject to stop  payment  orders  issued by
Zenith;  and (ii) copies of canceled  checks,  reasonable proof of reissuance or
other  documentation  demonstrating  Zenith's right to reimbursement  for checks
listed on the Schedule of Unpaid Checks


<PAGE>

(collectively, the "Check Documentation");  provided, however, Zenith's right to
reimbursement  shall be limited to the lesser of (A) the amount actually paid by
Zenith in  connection  with the  reissuance of a check listed on the Schedule of
Unpaid Checks,  or (B) the amount RISCORP carried on its outstanding  check list
for such check as of April 1, 1998.

                  (b) Within ten business  days after  RISCORP's  receipt of the
Check Documentation, RISCORP shall (i) provide Zenith a written schedule listing
its objections,  if any, to reimbursing Zenith for checks listed on the Schedule
of Unpaid  Checks,  and (ii)  reimburse  Zenith,  by wire transfer to an account
designated by Zenith,  in an aggregate  amount equal to the amount of all checks
as to which RISCORP is not objecting to reimbursement.

                  (c) Except for checks for which Check  Documentation  has been
provided  to RISCORP  within 60 days of the date of this  Settlement  Agreement,
Zenith  agrees that it has no right to assert any claim  against  RISCORP or any
RISCORP  company for  reimbursement  of any check that was issued by any RISCORP
company  prior to April 1, 1998  whether or not such check was  included  on the
Schedule of Unpaid Checks.

                  (d) Any disputes between the parties concerning Zenith's right
to  reimbursement  for unpaid  checks that are the subject of this  paragraph 14
shall be resolved by arbitration pursuant to paragraph 15 hereof.

         15.  Submission of Matters to  Arbitration.  (a) The parties  expressly
agree that,  except as  otherwise  set forth in  paragraph 1 hereof or as to any
claim or controversy that is subject to the agreement not to sue or arbitrate as
provided in paragraphs 6 or 7 hereof, any claim or controversy arising out of or
in connection with (i) the surviving provisions of the Asset Purchase Agreement,
(ii)


<PAGE>

the surviving provisions of the Transaction Documents,  (iii) the enforcement or
interpretation  of this  Settlement  Agreement,  or (iv) any of the  obligations
contained  within  this  Settlement  Agreement,  shall be  resolved  by  binding
arbitration before the Honorable Clinton A. Curtis,  unless he is unavailable or
unwilling to serve. In the event the Honorable  Clinton A. Curtis is unavailable
or unwilling to serve,  an arbitrator  shall be selected in accordance  with the
Commercial  Arbitration  Rules  of the  American  Arbitration  Association.  Any
arbitration  pursuant  to  this  Settlement  Agreement  shall  be  conducted  in
accordance  with the Commercial  Arbitration  Rules of the American  Arbitration
Association  except as modified by this paragraph 15. The arbitration shall take
place in Tampa,  Florida.  The Honorable  Clinton A. Curtis or other  arbitrator
selected in accordance with this paragraph  shall be hereinafter  referred to as
the  "Arbitrator."  The  decision  or award of the  Arbitrator  shall be  final,
binding  and  conclusive.  Either  party may seek  confirmation  of any award or
decision  entered  pursuant  to this  paragraph  15 by any  court  of  competent
jurisdiction.

                  (b) The  parties  expressly  waive  any  right to file a civil
action  and any  right to a jury  trial as to any claim or  controversy  between
them, except as to the potential claims described in paragraph 1 above.

                  (c)  Except  as  expressly   authorized  in  this   Settlement
Agreement,  the  parties  agree  that it shall be a  breach  of this  Settlement
Agreement  for any party hereto to file against any other party any civil action
or  arbitration  proceeding  relating to (i) any of the Zenith Claims or RISCORP
Claims that are  released  pursuant  to  paragraphs  4 and 5 of this  Settlement
Agreement,  (ii) the claims in respect of which the  parties  have agreed not to
sue or arbitrate  pursuant to paragraphs 6 and 7 of this  Settlement  Agreement,
(iii) the enforcement or interpretation of this Settlement Agreement, or


<PAGE>

(iv) any  dispute  that may arise  between  the  parties  relating  to the Asset
Purchase Agreement, the Transaction Documents, or the transactions  contemplated
by  the  Asset  Purchase  Agreement.   In  the  event  of  such  a  breach,  the
non-breaching  party or parties  shall be entitled to recover any  consequential
damages  as well  as its  reasonable  attorneys'  fees  and  expenses  from  the
breaching party or parties.

                  (d) As a condition  precedent to the submission of any dispute
for determination by the Arbitrator, a party shall serve upon the other party to
this  Settlement  Agreement,  in the manner  provided  for  notices  pursuant to
Section 11.03 of the Asset Purchase Agreement, a written statement of the matter
in dispute,  and thereafter the parties shaft negotiate in good faith to attempt
to resolve  the matter in dispute  for a time period not to exceed ten (10) days
(unless the parties mutually agree in writing to extend this time period).

                  (e) Within twenty (20) days following the end of the period of
good faith negotiations set forth in the immediately  preceding  paragraph,  any
party to this Settlement Agreement who desires to arbitrate a claim shall submit
to the other party and to the Arbitrator a demand for arbitration  setting forth
with reasonable  specificity the nature and amount of the claim, and the parties
shall follow the following procedures:

                           (i)      The   party   receiving   the   demand   for
                                    arbitration  shall  have ten  business  days
                                    from receipt of the other party's  demand to
                                    dispute the claim in  writing.  If the claim
                                    is not disputed,  the amount  claimed in the
                                    arbitration  demand will be the award of the
                                    Arbitrator.

<PAGE>

                           (ii)     Should the party receiving the claim dispute
                                    it, the party asserting the claim shall
                                    submit, no later than ten business days
                                    after receipt of its adversary's notice of
                                    dispute, a position paper, setting forth its
                                    position as to why it should prevail on its
                                    claim, including any appropriate evidentiary
                                    material.

                           (iii)    The   party   disputing   the   demand   for
                                    arbitration  will  have  ten  business  days
                                    after  its   receipt   of  its   adversary's
                                    position   paper  to   submit  a   response,
                                    including any appropriate evidentiary
                                    material.

                           (iv)     The Arbitrator  shall issue his award within
                                    thirty days of his  receipt of the  response
                                    of the party opposing the claim.

                           (v)      For purposes of this paragraph 15, all
                                    claims, responses, notices, position papers
                                    or other papers of any kind shall be served
                                    by facsimile and overnight delivery (next
                                    business day) to the persons identified in
                                    paragraph 11.03 of the Asset Purchase
                                    Agreement and upon the Arbitrator, except
                                    that exhibits, appendices, and other lengthy
                                    documents need only be served by overnight
                                    delivery service. The time for any party to
                                    take any action pursuant to this paragraph
                                    after receipt of notice or written material
                                    shall commence to run from receipt of such
                                    notice or written material by overnight
                                    delivery service.

<PAGE>

         16. Termination of Letter Agreement and Power of Attorney.  The parties
expressly agree that the Letter Agreement and the Power of Attorney  executed by
RISCORP in connection  with the closing of the Asset Sale are hereby  terminated
and shall be of no further force or effect.

         17.  Further  Assurances.  On and after  execution  of this  Settlement
Agreement,  Zenith and RISCORP shall take all reasonably  appropriate action and
execute any additional  documents,  instruments or conveyances of any kind which
may  be  reasonably  necessary  to  carry  out  any of the  provisions  of  this
Settlement Agreement or the surviving provisions of the Asset Purchase Agreement
and the Transaction Documents.

         18. Entire  Agreement.  This Settlement  Agreement  contains the entire
agreement  among the  parties  with  respect to the  subject  matter  hereof and
supersedes  all prior  agreements  and  understandings,  written  or oral,  with
respect thereto.

         19. Amendments and Waivers. This Agreement may be amended,  superseded,
cancelled,  renewed or extended,  and the terms hereof may be waived,  only by a
written instrument signed by each of the parties or, in the case of a waiver, by
the party  waiving  compliance.  No delay on the part of any party in exercising
any right, power or privilege  hereunder shall operate as a waiver thereof,  nor
shall any waiver on the part of any party of any right, power or privilege,  nor
any single or partial exercise of any such right,  power or privilege,  preclude
any further exercise  thereof or the exercise of any other such right,  power or
privilege.

         20.      Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors, permitted assigns
and legal representatives.


<PAGE>

         21.  Governing Law. This settlement  agreement shall be governed by and
construed in accordance  with the laws of the State of Florida,  without  giving
effect to the principles of conflicts of laws thereof.

         22. No  Admission  of  Liability.  Zenith  and  RISCORP  agree (a) that
neither this Settlement Agreement nor the fact of settlement are an admission of
any  liability  or  wrongdoing  whatsoever;  (b) that  neither  this  Settlement
Agreement nor the fact of settlement  shall be used or construed as an admission
of any fault,  liability or wrongdoing by any person;  and (c) that neither this
Settlement Agreement, the fact of settlement,  the settlement negotiations,  nor
any related  document  shall be offered or received in evidence as an admission,
concession,  presumption  or  inference  against  any  party  in any  action  or
proceeding  other  than an action  or  proceeding  to  enforce  this  Settlement
Agreement.

         23.  Representations of RISCORP.  RISCORP, Inc., RMS, 1390 Main Street,
RI, IAA,  RIS,  RMCS,  CompSource,  RRE, RA, RW, RF, RIC,  RP&C,  RNIC,  RS, RSS
Holding, RSSI and RSSII each represent and warrant that (a) each such entity has
the requisite corporate power and authority to execute,  deliver and perform its
obligations under this Settlement  Agreement;  (b) the execution and delivery of
this Settlement Agreement and the performance of the obligations thereunder have
been duly  authorized by all necessary  corporate  action;  (c) this  Settlement
Agreement  constitutes  the legal,  valid and  binding  obligation  of each such
entity,  enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy,  insolvency, fraudulent transfer,  reorganization,
moratorium or other similar laws affecting the enforcement of creditors'  rights
generally and by general equitable principles (regardless of whether such


<PAGE>

enforceability is considered in a proceeding in equity or in law); and (d) after
giving effect to the transactions contemplated by this Settlement Agreement, the
RISCORP  Companies,  individually and on a consolidated  basis, will be solvent,
able to pay their debts as they  mature,  have  capital  sufficient  to carry on
their businesses and all businesses in which they are about to engage, and:

                           (i)      the   assets  of  the   RISCORP   Companies,
                                    individually and on a consolidated basis, at
                                    a  fair   evaluation,   exceed   the   total
                                    liabilities      (including      contingent,
                                    subordinated,   unmatured  and  unliquidated
                                    liabilities) of the RISCORP Companies;

                           (ii)     current projections which are based on
                                    underlying assumptions which provide a
                                    reasonable basis for the projections and
                                    which reflect the RISCORP Companies'
                                    judgment based on present circumstances, the
                                    most likely set of conditions and the
                                    RISCORP Companies' most likely course of
                                    action for the period projected, demonstrate
                                    that the RISCORP Companies, individually and
                                    on a consolidated basis, will have
                                    sufficient cash flow to enable them to pay
                                    their debts as they mature or the RISCORP
                                    Companies are reasonably satisfied that they
                                    will be able to refinance such debt at or
                                    prior to maturity on commercial reasonable
                                    terms; and

                           (iii)    the RISCORP Companies, individually and on a
                                    consolidated basis, do not have unreasonably
                                    small  capital  base with which to engage in
                                    their anticipated businesses.


<PAGE>

         24.  Representations of Zenith. Zenith represents and warrants that (a)
it has the  requisite  corporate  power and  authority  to execute,  deliver and
perform its obligations  under this  Settlement  Agreement (b) the execution and
delivery of this  Settlement  Agreement and the  performance of its  obligations
thereunder have been duly authorized by all necessary  corporate action, and (c)
this Settlement Agreement constitutes the legal, valid and binding obligation of
Zenith,  enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy,  insolvency, fraudulent transfer,  reorganization,
moratorium or other similar laws affecting the enforcement of creditors'  rights
generally  and by general  equitable  principles  (regardless  of  whether  such
enforceability is considered in a proceeding in equity or in law).

         25.  Counterparts.  This Settlement Agreement may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.


<PAGE>



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

                                      ZENITH INSURANCE COMPANY


                                      By:  /s/ Stanley R. Zax
                                          -------------------------------------
                                          Name:  Stanley R. Zax
                          Title: Chairman and President


                                      RISCORP, INC.
                        RISCORP MANAGEMENT SERVICES, INC.
                         1390 MAIN STREET SERVICES, INC.
                            RISCORP OF ILLINOIS, INC.
                             INDEPENDENT ASSOCIATION
                                               ADMINISTRATORS INCORPORATED
                                      RISCORP INSURANCE SERVICES, INC.
                                      RISCORP MANAGED CARE SERVICES, INC.
                                      COMPSOURCE, INC.
                                      RISCORP REAL ESTATE HOLDINGS, INC.
                                      RISCORP ACQUISITION, INC,
                                      RISCORP WEST, INC.
                                      RISCORP OF FLORIDA, INC.
                                      RISCORP INSURANCE COMPANY
                                      RISCORP PROPERTY & CASUALTY
                                INSURANCE COMPANY
                       RISCORP NATIONAL INSURANCE COMPANY
                             RISCORP SERVICES, INC.
                           RISCORP STAFFING SOLUTIONS
                                 HOLDING COMPANY
                       RISCORP STAFFING SOLUTIONS, INC. I
                       RISCORP STAFFING SOLUTIONS, INC. II


                                      By:  /s/ Walter E. Riehemann
                                          -------------------------------------
                                          Name:     Walter E. Riehemann
                                          Title:    Vice President