Exhibit 10.11


                         NOVATION AND TRANSFER AGREEMENT
                          (hereinafter the "Agreement")


         THIS AGREEMENT is effective June 28, 2006 (the  "Effective  Date"),  in
accordance  with the terms and conditions  hereon,  by and among Tower Insurance
Company  of  New  York  and/or  their  subsidiaries,  affiliated  or  controlled
companies  (hereinafter  referred to collectively as "TOWER"),  PXRE Reinsurance
Company (hereinafter  referred to as "PXRE"), and Virginia Surety Company,  Inc.
and/or  its  subsidiaries,   affiliated  or  controlled  companies  (hereinafter
referred to collectively as "VIRGINIA SURETY").

         WHEREAS,  VIRGINIA  SURETY (as the  cedant)  and PXRE (as a  reinsurer)
entered into the  Reinsurance  Agreement and addenda thereto listed in Exhibit A
and incorporated herein by reference (hereinafter the "Contract").

         WHEREAS, the parties hereto now desire to effect a full novation of the
captioned Contract by which TOWER shall be substituted as the reinsurer in place
of PXRE for  100%  (one  hundred  percent)  of  PXRE's  share  of the  captioned
Contract, in respect of the subject business of the Contract.

         WHEREAS,  VIRGINIA  SURETY agrees to the  substitution  of TOWER as the
reinsurer  in place and  instead  of PXRE  with  respect  to 100%  (one  hundred
percent) of PXRE's share of the Contract and VIRGINIA  SURETY  agrees to perform
all duties and obligations undertaken by the cedant pursuant to the Contract.

          WHEREAS,  VIRGINIA  SURETY  agrees to the  payment by PXRE to TOWER of
three million fifty thousand three hundred fifty one dollars ($3,050,351) and in
consideration  for such payment  VIRGINIA  SURETY and TOWER agree to irrevocably
and  unconditionally  release  PXRE  from any and all  duties,  obligations  and
liabilities  of any nature  whatsoever,  whether  known or unknown,  reported or
unreported,  vested or  contingent,  arising  pursuant to the Contract as though
PXRE had never been a party to the Contract.

         NOW,  THEREFORE,  in  consideration  of  the  covenants,   assumptions,
payments and releases set forth herein,  the receipt and sufficiency of which is
hereby specifically acknowledged, the parties agree as follows:

                         ARTICLE I. ASSUMPTION BY TOWER

         Effective  as of the  Effective  Date:  (i) this  Agreement  effects  a
novation of all existing and future rights, duties,  obligations and liabilities
of PXRE of any  nature  whatsoever  to TOWER in  respect  of 100%  (one  hundred
percent) of PXRE's share of the Contract;  (ii) VIRGINIA SURETY hereby agrees to
enforce any duties,  obligations and liabilities of PXRE in respect of 100% (one
hundred percent) of PXRE's share of the Contract solely against TOWER; and (iii)
VIRGINIA SURETY and TOWER hereby  irrevocably and  unconditionally  release PXRE
from any and all duties,  obligations and liabilities of any nature  whatsoever,
whether known or unknown, reported or unreported, vested or contingent,  arising
pursuant to the Contract as though PXRE had never been a party to the Contract.




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Subject to  receipt by TOWER of the  payment  set forth in  Article  III,  TOWER
hereby:

(a)    absolutely  and  unconditionally  assumes all existing and future rights,
       duties and  obligations of PXRE to VIRGINIA  SURETY for 100% (one hundred
       percent) of PXRE's share under the Contract; and

(b)    agrees to perform and satisfy as the  assuming  reinsurer  all duties and
       obligations  owing to  VIRGINIA  SURETY in respect  of 100% (one  hundred
       percent) of PXRE's share of the Contract.

Notwithstanding  anything  else to the contrary in this  Agreement,  TOWER shall
reinsure  VIRGINIA  SURETY for 100% (one hundred  percent) of PXRE's share under
the Contract and on the basis of the terms and conditions of the Contract.


                               ARTICLE II. RELEASE

         In  consideration  of the  payment to be made by PXRE to TOWER of three
million fifty thousand three hundred fifty one dollars ($3,050,351),  receipt of
which will be acknowledged upon satisfaction of the payment set forth in Article
III by TOWER and VIRGINIA  SURETY,  VIRGINIA SURETY consents to the novation and
assumption  by TOWER,  as described in Article I hereof,  of any and all rights,
duties,  obligations and liabilities of any nature whatsoever of PXRE in respect
of 100% (one hundred percent) of PXRE's share under the Contract.

VIRGINIA SURETY for itself, its successors and assigns hereby:

(a)    absolutely  and  unconditionally  covenants  and agrees  with  PXRE,  its
       successors and assigns, that VIRGINIA SURETY, its successors and assigns,
       will not hereafter for any reason whatsoever demand,  claim,  initiate or
       cause to be  initiated  any  proceeding  or file suit against  PXRE,  its
       successors  or assigns  (other than TOWER),  in respect of any and/or all
       liabilities, obligations, costs or damages, known or unknown, reported or
       unreported, existing or which arise in the future in respect of 100% (one
       hundred percent) of PXRE's share of the Contract; and

(b)    agrees that TOWER will be solely  responsible to VIRGINIA  SURETY for the
       performance of the duties and obligations of PXRE in respect of 100% (one
       hundred percent) of PXRE's share of the Contract; and

(c)    agrees that PXRE by signing this  Agreement does not assume any liability
       either  to  VIRGINIA   SURETY  or  TOWER,   other  than  the  payment  of
       consideration required by Article III.


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Subject to receipt by TOWER of the payment set forth in Article  III,  TOWER for
itself, its successors and assigns hereby:

(a)    absolutely  and  unconditionally  covenants  and agrees  with  PXRE,  its
       successors and assigns,  that TOWER,  their successors and assigns,  will
       not hereafter for any reason whatsoever demand,  claim, initiate or cause
       to be initiated any  proceeding or file suit against PXRE, its successors
       or assigns, in respect of any and/or all liabilities,  obligations, costs
       or damages, known or unknown,  reported or unreported,  existing or which
       arise in the future in respect of the Contract; and

(b)    agrees that TOWER will be solely  responsible to VIRGINIA  SURETY for the
       performance of the duties and obligations in respect of 100% (one hundred
       percent) of PXRE's share of the Contract; and

(c)    agrees that PXRE by signing this  Agreement does not assume any liability
       either  to  VIRGINIA   SURETY  or  TOWER,   other  than  the  payment  of
       consideration required by Article III.

PXRE  for  itself,   its   successors   and  assigns   hereby   absolutely   and
unconditionally  covenants  and agrees  with  VIRGINIA  SURETY and TOWER,  their
respective  successors and assigns,  that PXRE, its successors and assigns, will
not hereafter for any reason whatsoever demand,  claim,  initiate or cause to be
initiated any proceeding or file suit against  VIRGINIA SURETY and TOWER,  their
respective  successors  or  assigns,  in respect of any and/or all  liabilities,
obligations,  costs  or  damages,  known or  unknown,  reported  or  unreported,
existing or which arise in the future in respect of the Contract.

                         ARTICLE III. PAYMENTS TO TOWER

         As a condition  precedent to the obligations of TOWER  hereunder,  PXRE
will pay to TOWER three million fifty  thousand  three hundred fifty one dollars
($3,050,351)  as soon as  practicable  but no  later  than  June  30,  2006.  In
consideration   of  the  payment   described  in  this  Article  III  and  other
considerations  as  recited  in this  Agreement,  all  premium  paid to TOWER in
respect of 100% (one hundred  percent) of PXRE's share under the Contract hereto
shall be deemed fully earned and non-refundable.


                            ARTICLE IV. UNDERTAKINGS

         Each party agrees that it shall, from time to time, upon the reasonable
request of any other party,  execute and deliver any further documents which may
be required to fully implement the intent of this Agreement.


                               ARTICLE V. GENERAL

A.       The rights, duties and obligations set forth in this Agreement shall be
         binding  upon and shall inure to the benefit of the parties  hereto and
         their  respective  predecessors,   successors,   parents,   affiliates,
         subsidiaries,  agents,  past,  present and future officers,  directors,
         employees,  consultants,  shareholders,  attorneys,  agents,  trustees,
         administrators, liquidators, receivers and assigns.

B.       This  Agreement  shall be governed by and construed in accordance  with
         the  substantive  laws of the State of New York,  without regard to and
         exclusive of the rules with respect to conflicts of law.

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C.       The  parties  hereto  expressly  warrant  and  represent  that they are
         corporations or insurance  companies in good standing;  that the person
         or persons  executing  this  Novation and Transfer  Agreement  have the
         necessary and appropriate authority to do so; that to the best of their
         knowledge   there  are  no   pending   agreements,   transactions,   or
         negotiations  to which any of them are a party that would  render  this
         Agreement or any part thereof void,  voidable,  or  unenforceable;  and
         that to the  best of  their  knowledge  no  authorization,  consent  or
         approval of any  government  entity is required to make this  Agreement
         valid and binding upon them.

D.       Except as  otherwise  provided in this  Agreement,  each party shall be
         responsible  for  its  own  costs  and  expenses   arising  under  this
         Agreement.

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

F.       This  Agreement  and  any of its  rights  and  obligations  may  not be
         assigned  in whole  or in part  without  the  written  approval  of all
         parties hereto.

G.       The parties agree to cooperate  and undertake  such further acts in the
         future as may be reasonably  necessary or proper to carry out the terms
         and purpose of this Agreement.

H.       In  consideration  of the mutual  covenants  and  agreements  contained
         herein,  each party  hereto  agrees that this  Agreement,  and each and
         every provision hereof, is and shall be enforceable by and between them
         according to its terms  subject to applicable  bankruptcy,  insolvency,
         reorganization,   fraudulent  transfer,  moratorium  and  similar  laws
         relating to or affecting  creditors'  rights  generally  and to general
         principles  of equity,  and each party does hereby  agree that it shall
         not,  directly or  indirectly,  contest the validity or  enforceability
         hereof.

I.       This Agreement may be executed and delivered in  counterparts,  each of
         which, when so executed and delivered,  shall be an original,  but such
         counterparts  shall  together  be  one  and  the  same  instrument  and
         agreement.  The parties hereto agree that this  Agreement  shall become
         effective as of the  Effective  Date upon the exchange by telecopier of
         such counterparts duly signed by each party.

J.       It is mutually  understood and agreed that VIRGINIA  SURETY,  PXRE, and
         TOWER  shall  keep  all  terms  and   provisions   of  this   Agreement
         confidential  and shall not disclose  such terms or  provisions  to any
         third  party,  other than their  financial  or legal  advisers,  rating
         agencies and/or auditors  without the prior written consent of VIRGINIA
         SURETY,  except  where  otherwise  required by  operation of law or the
         requirements  of any  regulatory  authority and upon  reasonable  prior
         written notice to the other parties.

K.       If  any   provision   in  this   Agreement   is  illegal,   invalid  or
         unenforceable, the remaining provisions shall not be impaired.

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

All other terms and conditions of the Contract remain unchanged.


         IN WITNESS  WHEREOF,  the parties have executed this Agreement by their
duly authorized representatives.

For and on behalf of Virginia Surety Company Inc., this 28th day of June , 2006,

By: Oriana Bakka

Title: Senior Vice President

For and on behalf of PXRE Reinsurance Company, this 28th day of June , 2006

By: Robert P. Myron

Title: Executive Vice President and Chief Financial Officer


For and on  behalf  of Tower  Insurance  Company  of New  York,  its  authorized
representative, this 28th day of June , 2006,

By: Marina Contiero

Title: Vice President



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                                    EXHIBIT A


     1)   Quota Share  Reinsurance  Agreement AR 15439 between  Virginia  Surety
          Company, Inc. and PXRE Reinsurance Company,  Effective August 1, 2003,
          for its respective 100% (one hundred percent) share (the  "Reinsurance
          Agreement").

     2)   Addendum No. 1 to the Reinsurance Agreement.


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