Exhibit 10.3
                        COMMUTATION AND RELEASE AGREEMENT


This Commutation and Release Agreement (hereinafter  "Commutation Agreement") is
entered into by and between  Tower  Insurance  Company of New York, an insurance
company  organized  under the laws of New York  (hereinafter  referred to as the
"Company"),  and PXRE Reinsurance  Company, an insurance company organized under
the laws of Connecticut (hereinafter referred to as the "Reinsurer").

WHEREAS,  the  Company  and  the  Reinsurer  have  entered  into a  Quota  Share
Reinsurance  Agreement,  effective  January 1, 2001,  including Addenda No.1 and
Notification  letter dated May 20, 2002 thereto  (hereinafter  the  "Reinsurance
Agreement", a copy attached hereto as Exhibit "A") under which the Company ceded
reinsurance business;

WHEREAS,  the Company and the Reinsurer have agreed to terminate and commute the
Reinsurance Agreement, effective June 28, 2006;

WHEREAS,  the Company and the Reinsurer  desire to fully and finally  settle and
commute all rights,  obligations  and  liabilities,  known and unknown,  of each
other under the Reinsurance Agreement;

NOW, THEREFORE, in order to effect a commutation and mutual release, the parties
hereto agree to the following terms and conditions:

1.       As consideration for the commutation of the Reinsurance Agreement,  the
         Reinsurer shall pay to the Company $9,279,442 (nine million two hundred
         seventy nine thousand four hundred forty two dollars) as of the date of
         Commutation (such payment  hereinafter  referred to as the "Commutation
         Amount").

2.       The  Company  shall  accept  the  Commutation  Amount as full and final
         settlement  of any and all  amounts  due or  claimed to be due from the
         Reinsurer to the Company and arising under,  in respect of, or relating
         to the Reinsurance Agreement.

3.       In  consideration  of and  effective  upon  payment of the  Commutation
         Amount, the Company, on behalf of itself, its affiliated companies, and
         its  successors  and assigns,  shall release and forever  discharge the
         Reinsurer and its affiliated companies, its successors and assigns, and
         its  officers,  directors,  shareholders,  employees  and attorneys and
         their heirs,  executors  and assigns from any and all  liabilities  and
         obligations   arising  under,   in  respect  of,  or  relating  to  the
         Reinsurance  Agreement,  including  but  not  limited  to any  and  all
         premiums, claims,  commissions,  liabilities,  demands, damages, costs,
         offsets,  attorney's fees, and other causes of action, whether known or
         unknown, vested or contingent,  liquidated or unliquidated,  matured or
         unmatured,  reported or unreported,  and whether currently  existing or
         arising in the future it being the  intention  of the Parties that this
         release  operates as a full and final  settlement of any and all of the
         Parties'  respective  obligations and liabilities under the Reinsurance
         Agreement.
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4.       The rights, duties, and obligations set forth herein shall inure to the
         benefit  of and be  binding  upon  any  and  all  officers,  directors,
         employees,   affiliates,   stockholders,    predecessors,   successors,
         liquidators,  receivers  or assigns of the parties  hereto.  Nothing in
         this Commutation Agreement is intended to benefit any third party.

5.       The  parties  hereto  expressly  warrant  and  represent  that they are
         corporations in good standing in their  respective  places of domicile;
         that the execution of this Commutation Agreement is fully authorized by
         each of them;  that the person or persons  executing  this  Commutation
         Agreement have the necessary and  appropriate  authority to do so; that
         there are no pending agreements, transactions, or negotiations to which
         any of them are a party that would render this  Commutation or any part
         thereof void,  voidable,  or  unenforceable,  except as provided for in
         section 1.  above;  that no  authorization,  consent or approval of any
         government  entity  (including,  without  limitation,  the  consent  or
         approval of the Company's  commutation by the New York State  Insurance
         Department) is required to make this  Commutation  Agreement  valid and
         binding  upon  them;  and that no claim or loss  being  paid or settled
         under this Commutation Agreement has been previously assigned,  sold or
         transferred to any other person or entity.

6.       The parties, as between and among themselves,  understand that they may
         have  sustained  damages or  incurred  obligations  that may not yet be
         manifest and that are presently unknown, but nevertheless,  the parties
         deliberately  intend and do hereby  release  one  another to the extent
         that this Commutation Agreement so provides.  Furthermore,  the parties
         expressly  accept  and  assume  the  risk  that  the  factual  or legal
         assumptions  made by either party in connection  with this  Commutation
         Agreement may be found hereafter to be different from the true facts or
         law, and the parties agree that this Commutation Agreement shall be and
         remain in full force and effect  notwithstanding  such  differences  in
         facts or law.

7.       The parties  specifically  agree and  acknowledge  that the Commutation
         Amount is being paid in good faith and constitutes  fair  consideration
         for the discharge of amounts  allegedly owing now or potentially  owing
         in the  future  by the  Reinsurer  to the  Company  in  respect  of the
         Reinsurance Agreement.

8.       Each party hereto has had the  opportunity  to negotiate  the terms and
         modify the draftsmanship of this Commutation Agreement.  Therefore, the
         terms of this Commutation Agreement shall be considered and interpreted
         without any  presumption,  inference or rule requiring  construction or
         interpretation  of any provision of this Commutation  Agreement against
         the interest of the drafter of the Commutation Agreement.

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9.       This Commutation  Agreement shall be interpreted  under and governed by
         the laws of the State of New York.

10.      The failure of the parties to enforce any provision of this Commutation
         Agreement  shall not be construed as a waiver of such  provision or any
         other  provision  of  this  Commutation  Agreement.  No  waiver  of any
         provision of this Commutation Agreement shall be deemed a waiver of any
         of its other  terms,  nor shall such  waiver  constitute  a  continuing
         waiver.

11.      In the event that any part of this Commutation Agreement should for any
         reason  become  or be found  to be null,  void,  illegal  or  otherwise
         unenforceable, it shall be struck out to the extent that it is so null,
         void,  illegal or unenforceable,  and the remaining  provisions of this
         Commutation  Agreement shall remain in full force and effect, except as
         provided  for in  section  1.  above.  In the  event  that any court of
         competent  jurisdiction renders a final,  nonappealable order or ruling
         declaring this Agreement null and void in its entirety,  it is mutually
         agreed by the Company and the Reinsurer that this Commutation Agreement
         shall be  immediately  rescinded  and that each of the parties shall be
         restored  to the  position  it was in just  prior to the making of this
         Commutation Agreement.

12.      This Commutation  Agreement  contains the entire agreement  between the
         parties as respects the subject matter.  All discussions and agreements
         previously  entertained  between  the  parties  concerning  the subject
         matter of the commutation are merged into this  Commutation  Agreement.
         This Commutation  Agreement may not be modified or amended,  nor any of
         its provisions  waived,  except by an instrument in writing,  signed by
         duly authorized officers of the parties hereto.

13.      This  Commutation  may be executed in  multiple  counterparts,  each of
         which when so executed and  delivered  shall be considered an original,
         but  such  counterparts  shall  together  constitute  one and the  same
         instrument and agreement.


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IN WITNESS  WHEREOF,  on this 28th day of June , 2006,  the parties  hereto have
caused this  Commutation  and Release  Agreement  to be executed in duplicate by
their duly authorized representatives.



For and on behalf of Tower Insurance Company of New York:

By:      Marina Contiero

Title:   Vice President




For and on behalf of PXRE Reinsurance Company

By:      Robert P. Myron

Title:   Executive Vice President and Chief Financial Officer



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                                    EXHIBIT A

                                    CONTRACTS


1.       Quota Share Reinsurance Agreement between Tower Insurance Company of
         New York and PXRE Reinsurance Company, Effective January 1, 2001


a.       Addendum No. 1, Effective January 1, 2001

b.       Notification letter dated May 20, 2002 regarding termination and/or
         cut-off


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