EMPLOYERS REINSURANCE CORPORATION

                                  WHOLE ACCOUNT
                      AGGREGATE EXCESS OF LOSS RETROCESSION
                              REINSURANCE AGREEMENT



ARTICLE                                                                     PAGE
-------                                                                     ----

 1        BUSINESS COVERED                                                     2
 2        TERM                                                                 2
 3        EXTENDED EXPIRATION                                                  3
 4        TERRITORIAL SCOPE                                                    3
 5        EXCLUSIONS                                                           3
 6        AGGREGATE RETENTION                                                  4
 7        COVERAGE LAYERS                                                      4
 8        AGGREGATE LIMIT                                                      4
 9        CO-PARTICIPATION                                                     5
10        DEFINITIONS                                                          5
11        NET RETAINED LINES                                                  10
12        REINSURANCE PREMIUMS                                                10
13        INITIAL REINSURANCE MARGIN                                          13
14        ADDITIONAL REINSURANCE MARGIN                                       14
15        CEDING COMMISSION                                                   14
16        CURRENCY                                                            15
17        TAXES                                                               15
18        ACCOUNTS AND REPORTS                                                15
19        LOSS CESSIONS AND SETTLEMENTS                                       16
20        FUNDS WITHHELD PROFIT SHARING ACCOUNT                               17
21        INTEREST CREDIT                                                     17
22        EXCESS OF POLICY LIMITS                                             18
23        EXTRA CONTRACTUAL OBLIGATIONS                                       18
24        OFFSET                                                              19
25        COMMUTATION                                                         19
26        PROFIT SHARING                                                      20
27        CHANGE IN ADMINISTRATIVE PRACTICES                                  20
28        ERRORS AND OMISSIONS                                                21
29        ACCESS TO RECORDS                                                   21
30        INSOLVENCY                                                          21
31        ARBITRATION                                                         22
32        SECURITY                                                            23
33        GOVERNING LAW                                                       27
34        INTERMEDIARY                                                        27
35        ALTERATIONS                                                         27
36        INTERESTS AND LIABILITIES                                           27
37        PARTIES TO THIS AGREEMENT                                           28

                                     Page 1

<PAGE>



                                  WHOLE ACCOUNT
                      AGGREGATE EXCESS OF LOSS RETROCESSION
                              REINSURANCE AGREEMENT

                  (hereinafter referred to as the "Agreement")


                                    issued to

                        EMPLOYERS REINSURANCE CORPORATION
                              Overland Park, Kansas

                   (hereinafter referred to as the "Company")

                                       by

                      SCANDINAVIAN REINSURANCE COMPANY LTD.
                                Hamilton, Bermuda

                  (hereinafter referred to as the "Reinsurer")



                                    ARTICLE 1
                                    ---------

BUSINESS COVERED
----------------

In consideration of the payment of premium and subject to the terms, conditions,
and  limitations of this  Agreement,  This Agreement is to indemnify the Company
with respect to the Subject  Ultimate Net Losses which may accrue to the Company
as a result of losses  occurring  and claims  made  during the Term,  all as per
underlying  policies  and binders of  insurance,  facultative  certificates  and
programs  of  Reinsurance  Agreements   (hereinafter  referred  to  as  "Subject
Business")  as respects  all classes of business  underwritten  by the  Company,
including  the six 2001 accident  year whole  account  aggregate  excess of loss
coverages  written  by  the  Company  in  respect  of the  Company's  Affiliated
Companies,  all  subject  to the  terms,  conditions,  and  exclusions  of  this
Agreement.


                                    ARTICLE 2
                                    ---------

TERM
----

This Agreement shall apply to losses occurring and claims made during the period
commencing  on January 1, 2001 and  expiring on  December  31,  2001,  both days
inclusive,  Local  Standard Time at the place where the loss occurs or the claim
is made.

                                     Page 2

<PAGE>


                                    ARTICLE 3
                                    ---------

EXTENDED EXPIRATION
-------------------

Should this Agreement expire while a Property Catastrophe Loss covered hereunder
is in progress,  the Reinsurer shall be responsible for the Property Catastrophe
Loss in  progress  in the same  manner and to the same extent it would have been
responsible  had the Agreement  expired the day following the  conclusion of the
loss in  progress,  provided  that no part of the Property  Catastrophe  Loss is
claimed against any renewal of this Agreement.


                                    ARTICLE 4
                                    ---------

TERRITORIAL SCOPE
-----------------

The  territorial  limits of this Agreement  shall be identical with those of the
Subject Business.


                                    ARTICLE 5
                                    ---------

EXCLUSIONS
----------

This Agreement shall not apply to and specifically excludes:

A.       Nuclear Incident, in accordance with the following clauses:

         1.     Nuclear  Incident  Exclusion  Clause - Liability - Reinsurance -
                U.S.A. (BRMA 35A), attached hereto;

         2.     Nuclear  Incident  Exclusion   Clause   -   Physical   Damage  -
                Reinsurance - U.S.A. (BRMA 35B), attached hereto;

B.       Nuclear  Energy  Risks,  in  accordance  with  the Nuclear Energy Risks
         Exclusion Clause (BRMA 34B) attached hereto;

C.       War  Risks,  in  accordance  with  the   War  Risks   Exclusion  Clause
         (Reinsurance) (BRMA 56B) attached hereto;

D.       Insolvency

E.       Financial Guaranty;

F.       Pools, Associations and Syndicates.

G.       All  Credit  Business  with  the  exception  of  trade  credit business
         routinely underwritten by GE Frankona.

                                     Page 3

<PAGE>

H.       The G.E. Re  reinsurance  assumption  from  the  Farmers Group shall be
         excluded from all Company and Affiliated Company calculations hereon.


                                    ARTICLE 6
                                    ---------

AGGREGATE RETENTION
-------------------

The Aggregate  Retention shall be X% of the Subject Net Earned Premium  ("SNEP")
for the Term of this Agreement.


                                    ARTICLE 7
                                    ---------

COVERAGE LAYERS
---------------

Layer 1 -  Coverage  for Layer 1 shall  equal X% of Subject  Net Earned  Premium
excess of the Aggregate Retention as per Article 6.

Layer 2 -  Coverage  for Layer 2 shall  equal X% of Subject  Net Earned  Premium
excess of X% of Subject Net Earned Premium.

Layer 3 -  Coverage  for Layer 3 shall  equal X% of Subject  Net Earned  Premium
excess of X% of Subject Net Earned Premium.

Layer 4 -  Coverage  for Layer 4 shall  equal X% of Subject  Net Earned  Premium
excess of X% of Subject Net Earned Premium.

Layer 5 -  Coverage  for Layer 5 shall  equal X% of Subject  Net Earned  Premium
excess of X% of Subject Net Earned Premium

Layer 6 -  Coverage  for Layer 6 shall  equal X% of Subject  Net Earned  Premium
excess of X% of Subject Net Earned Premium.


                                    ARTICLE 8
                                    ---------

AGGREGATE LIMIT
---------------

The  Aggregate  Limit  for this  Agreement  shall be X% of  Subject  Net  Earned
Premium, subject to a maximum dollar Aggregate Limit of $X million.


                                     Page 4

<PAGE>



                                    ARTICLE 9
                                    ---------

CO-PARTICIPATION
----------------

Should the  Subject Net Earned  Premium  exceed $X  million,  the Company  shall
retain a  co-participation  for all amounts calculated in Article 7, and Article
8.

The co-participation shall equal:

1.00 minus (X million divided by actual Subject Net Earned Premium)


                                   ARTICLE 10
                                   ----------

DEFINITIONS
-----------

Affiliated  Companies - Affiliated  Companies  shall mean Coregis,  GE Frankona,
First Specialty, GE Re, Medical Protective and Westport.

Allocated Loss Adjustment Expense - Allocated Loss Adjustment Expense as used in
this  Agreement  shall mean all  expenditures  by the Company made in connection
with the  disposition  of a claim,  loss or legal  proceeding  including but not
limited to expenses of salvage and subrogation and legal expenses of litigation,
investigation,  negotiation,  cost of bonds, court costs,  Statutory  Penalties,
Prejudgment  Interest or Delayed Damages and post-judgment  interest.  Allocated
Loss  Adjustment  Expenses  shall also include the  Company's  defense costs and
legal expenses incurred in direct  connection with legal actions,  including but
not limited to declaratory  judgment actions,  brought by any party to determine
the Company's defense and/or indemnification obligations that are allocable only
to policies  and claims  subject to this  Agreement.  Any  declaratory  judgment
action  expenses shall be deemed to have been fully incurred on the same date as
the original claim (if any) giving rise to the action. Allocated Loss Adjustment
Expense(s) shall also include legal expenses, including such expenses related to
declaratory  judgment  actions,  incurred in connection  with Extra  Contractual
Obligations and Loss In Excess Of Original Policy Limits.

Allocated  Loss  Adjustment  Expenses  shall not  include the  Company's  office
expenses  and  salaries of  employees  of the  Company,  except:  1) payments to
attorneys  on  the  Company's  staff  who  are  engaged  in  the  investigation,
litigation or settlement of claims, suits, legal proceedings or losses reinsured
under this  Agreement;  2) when the Company uses its own employees or officials,
including claims personnel and engineers to settle losses,  the Company shall be
permitted  to  include a pro rata share of  expenses  incurred  by and  salaries
related  to  such  employees  and  officials,   including  claim  personnel  and
engineers.

The Company  warrants that  Allocation of Loss  Adjustment  Expenses will remain
consistent while the Agreement is in force and/or the Reinsurer is at risk.


                                     Page 5


<PAGE>


Determination of Exceeding Plan - Determination of Exceeding Plan shall mean the
following:  The Company and all of its  Affiliated  Companies  will be deemed to
exceed Plan when the sum of the "Excess  Non-Property  Catastrophe  Ultimate Net
Loss" for the combined  Company and all of its Affiliated  Companies  exceeds $X
million in the aggregate.

The Company and all of its Affiliated Companies will be deemed to be at or below
Plan when the sum of the "Excess Non-Property Catastrophe Ultimate Net Loss" for
the  combined  Company and all of its  Affiliated  Companies is equal to or less
than $X million in the aggregate.

Excess  Non-Property   Catastrophe  Ultimate  Net  Loss  -  Excess  Non-Property
Catastrophe Ultimate Net Loss for each individual company shall be determined by
subtracting the lesser of a) or b), from c).

a)       the actual Non-Property Catastrophe Ultimate Net Loss, or
b)       the Plan Non-Property Catastrophe Ultimate Net Loss
c)       the   actual  Non-Property  Catastrophe  Ultimate  Net  Loss  for  each
         individual company.

The actual  Non-Property  Catastrophe  Ultimate Net Loss for each company  shall
equal the actual Non-Property  Catastrophe Ultimate Net Loss Ratio multiplied by
the actual Net Earned Premium for that Company.

Plan Non-Property Catastrophe Ultimate Net Loss for each company shall equal the
Non-Property  Catastrophe  Plan  Ultimate  Net Loss  ratios in the  table  below
multiplied by the actual Net Earned Premium for that company.

                                                  Non-Property
           Company and                          Catastrophe Plan
         Affiliated Companies               Ultimate Net Loss Ratios
         --------------------               ------------------------

         ERC                                         X%
         GE Re                                       X%
         GE Frankona                                 X%
         Medical Protective                          X%
         Westport                                    X%
         Coregis                                     X%
         First Specialty                             X%

If there are individual  companies that comprise the above table listings,  then
such  individual  company  breakdown shall be used in lieu of the table listings
and consolidated figures above.

Net Earned  Premium - Net Earned  Premium  shall  mean the  combined  net earned
premium  for  both  the  Company  and its  Affiliated  Companies  for the  Term,
estimated to be $X million. Net Earned Premium shall be net of premiums paid for
all inuring reinsurances except for the premiums paid to the Company for the six
2001 accident year whole account  aggregate excess of loss  reinsurances for the
Affiliated  Companies.  Both  assumed  and ceded  reinstatement  premiums of the
Company and its Affiliated Companies shall be included in the calculation of Net
Earned Premium.

                                     Page 6

<PAGE>


Prejudgment  Interest  or Delayed  Damages - The term  Prejudgment  Interest  or
Delayed  Damages shall mean interest or damages added to a settlement,  verdict,
award, or judgment based on the amount of time prior to the settlement, verdict,
award or judgment whether or not made part of the settlement, verdict, award, or
judgment.

Property  Catastrophe Loss - Property Catastrophe Loss as used in this Agreement
shall mean property losses recorded by the Company and/or  Affiliated  Companies
which  involve two or more  original  policies  as issued by the Company  and/or
Affiliated  Companies  and that,  in respect of USA events,  are assigned a "PCS
Number" by Property Claims Services, or in respect of events other than USA, are
designated by Sigma as property catastrophes.

Property  Catastrophe  Ultimate Net Loss  Limitation - The Property  Catastrophe
Ultimate Net Loss Limitation shall equal:

         X% of the Net Earned Premium of the combined Company and its Affiliated
         Companies, subject to a maximum of $X million, less;

         all  Non-Property  Catastrophe  Ultimate  Net Losses  in respect of the
         combined  Company and its Affiliated  Companies in  excess of X% of the
         Net  Earned  Premium  of   the  combined  Company  and  its  Affiliated
         Companies  (such  product  estimated at $X million) to  the extent such
         Non-Property  Catastrophe  Ultimate  Net  Losses  can  be ceded to this
         Agreement.

This  limitation  operates as a Subject  Ultimate Net Loss priority for coverage
whereby  Non-Property  Catastrophe  Subject  Ultimate  Net Loss has  priority of
coverage over Property Catastrophe Ultimate Net Loss. This limitation shall only
apply when the sum of Property Catastrophe Ultimate Net Losses plus Non-Property
Catastrophe  Ultimate  Net  Loss for the  combined  Company  and its  Affiliated
Companies  results in Subject  Ultimate  Net Losses for the Company in excess of
the sum of the Retention and Aggregate Limit hereon.

Should Property Catastrophe Ultimate Net Losses in excess of the $X million plan
for  the  combined  Company  and  its  Affiliated   Companies,   when  added  to
Non-Property  Catastrophe  Ultimate Net Losses for the combined  Company and its
Affiliated  Companies,  result in Subject Ultimate Net Losses for the Company in
excess of the sum of the  Retention  and the  Aggregate  Limit,  the ERC Company
Property  Catastrophe  Ultimate  Net Losses  shall be  eliminated  first  giving
priority to the Affiliated  Companies Property  Catastrophe  Ultimate Net Losses
for Property Catastrophe Ultimate Net Losses.

Property  Catastrophe  Ultimate Net Loss for  Underlying  Six 2001 Accident Year
Whole  Account  Aggregate  Excess of Loss  Coverages - The Company shall include
Property  Catastrophe  Ultimate Net Loss Limitations within each of the property
exposed 2001  accident  year whole account  aggregate  excess of loss  coverages
written by the Company for the Affiliated Companies, with such limitations equal
to the respective sum of:


a)       budgeted  catastrophe  Ultimate  Net Loss for the Affiliated Company in
         question, plus

                                     Page 7

<PAGE>

b)       the aggregate limit of the Stop Loss Coverage  written  by  the Company
         for the Affiliated Company in question (e.g., for GE Frankona, Property
         Catastrophe Ultimate  Net Loss is limited  to $X  million, for GE Re $X
         million).

The sum of Plan  Property  Catastrophe  Ultimate  Net Losses for all  Affiliated
Companies is equal to $X million.

Affiliated         Stop Loss Limit      Plan Property           Property Cat UNL
Company           ($000's)              Cat UNL                 Loss Limitation
-------           --------              -------                 ---------------

GE Re              $X                        $X                         $X
Frankona           $X                        $X                         $X
Med Pro            $X                        $X                         $X
Westport           $X                        $X                         $X
Coregis            $X                        $X                         $X
First Specialty    $X                        $X                         $X

Affiliated Company Total                     $X


Statutory Penalties - The term "Statutory Penalties" shall mean fines imposed by
statutes or laws.

Subject Net Earned  Premium - "Subject  Net Earned  Premium"  shall mean the net
earned  premium of the  Company  during the Term of this  Agreement,  net of the
premium  paid for all other  reinsurances  which  inure to the  benefit  of this
Agreement  (but not net of the  premium  payable  to the  Reinsurer  under  this
Agreement).

Subject Net Earned Premium is estimated to be $X million.

Subject Net Earned Premium shall include all premium except for the premium from
the six 2001  accident  year whole account  aggregate  excess of loss  coverages
written by the Company for the Company's Affiliated Companies.

Both assumed and ceded  reinstatement  premiums of the Company shall be included
in the calculation of Subject Net Earned Premium.

Subject Ultimate Net Loss - "Subject Ultimate Net Loss" shall mean the aggregate
sum of  amounts  paid or  payable  by the  Company  on its  Ultimate  Net Losses
(including  ultimate net loss in respect of the six assumed 2001  accident  year
aggregate  excess of loss  coverages  written  by the  Company in respect of the
Affiliated  Companies)  in  settlement  of  losses,   including  Allocated  Loss
Adjustment  Expenses,  in  respect of  Business  Covered  during the Term,  plus
reserves  for  outstanding  losses  and  Allocated  Loss  Adjustment   Expenses,
including  reserves for incurred but not reported  claims,  X% of liability  for
Loss  in  excess  of  Original  Policy  Limits  and X% of  liability  for  Extra
Contractual  Obligations  emanating from  underlying  contracts of the Company's
clients.

                                     Page 8

<PAGE>


Subject  Ultimate  Net  Loss  shall  be net  of  inuring  reinsurances,  whether
collectible  or not, and also net of all salvages and  recoveries to be credited
to the Company's Subject Ultimate Net Loss; provided, however, that in the event
of the  insolvency  of the Company,  payment by the  Reinsurer  shall be made in
accordance with the provisions of the Insolvency Article.

Nothing  herein shall be construed to mean that losses under this  Agreement are
not  recoverable  until  the  Company's  Subject  Ultimate  Net  Loss  has  been
ascertained.

Expected Subject Ultimate Net Loss is estimated to be $X million.

Ultimate Net Loss - "Ultimate  Net Loss" shall mean the aggregate sum of amounts
paid or  payable  in the  settlement  of losses and  Allocated  Loss  Adjustment
Expenses by the  Company  and its  Affiliated  Companies  on their net  retained
liability,  excluding,  for the Company, the Ultimate Net Loss in respect of the
2001 accident year whole account  aggregate excess of loss coverages  written by
the Company for the Affiliated Companies.

The combined  Ultimate Net Loss of the Company and its  Affiliated  Companies is
estimated to be $X million.

2001 Accident Year Whole Account Excess of Loss Coverages Written by the Company
for the Affiliated Companies:

The  Underlying  Aggregate  Limit and Retention (to be calculated by multiplying
the Ultimate Loss Ratio Aggregate Retention times the actual Net Earned Premium)
for the excess of loss coverage for each Affiliated Company shall be as follows:

                                                                Ultimate Net
                                    Amounts in ($000's)         Loss Ratio
Affiliated Company                  Aggregate Limit          Aggregate Retention
------------------                  ---------------          -------------------

GE Re                                     X                          X%
GE Frankona                               X                          X%
Medical Protective                        X                          X%
Westport                                  X                          X%
Coregis                                   X                          X%
First Specialty                           X                          X%


                                   ARTICLE 11
                                   ----------

NET RETAINED LINES
------------------

This  Agreement  applies  only to that  portion of any policy  which the Company
retains  net for its own  account,  and in  calculating  the  amount of any loss
hereunder  and also in  computing  the amount or amounts in excess of which this
Agreement attaches, only loss or losses in respect of that portion of any policy
which the Company retains net for its own account shall be included.

The amount of the  Reinsurer's  liability under this Agreement in respect of any
loss or losses shall not be increased by reason of the  inability of the Company
to collect from any other

                                     Page 9

<PAGE>

reinsurer(s), whether specific or general, any amounts which may have become due
from such other reinsurer(s),  whether such inability arises from the insolvency
of such other reinsurer(s) or otherwise.


                                   ARTICLE 12
                                   ----------

REINSURANCE PREMIUMS
--------------------

Reinsurance Layer Premiums - The Company shall pay to the Reinsurer,  via credit
to the Funds Withheld Profit Sharing Account,  at January 1, 2001, the following
Reinsurance Layer Premiums:

Layer 1 - Layer 1  Reinsurance  Premium  shall  equal X% of  Subject  Net Earned
Premium, subject to a maximum amount of $X million.

Layer 2 - Layer 2  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net
Loss ceded to Layer 2, subject to a maximum Layer 2 Reinsurance Premium of X% of
Subject Net Earned Premium.

Layer 3 - Layer 3  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net
Loss ceded to Layer 3, subject to a maximum Layer 3 Reinsurance Premium of X% (X
point X percent) of Subject Net Earned Premium.

Layer 4 - Layer 4  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net
Loss ceded to Layer 4, subject to a maximum Layer 4 Reinsurance Premium of X% of
Subject Net Earned Premium.

Layer 5 - If the Company and all of its Affiliated Companies exceed Plan, as per
the  Determination of Exceeding Plan definition in Article 10 of this Agreement,
then Layer 5  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net Loss
ceded to Layer 5,  subject  to a maximum  Layer 5  Reinsurance  Premium of X% of
Subject Net Earned Premium.

If the Company and all of its Affiliated  Companies are at or below Plan, as per
the  Determination of Exceeding Plan definition in Article 10 of this Agreement,
then Layer 5  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net Loss
ceded to Layer 5,  subject  to a maximum  Layer 5  Reinsurance  Premium of X% of
Subject Net Earned Premium.

Layer 6 - Layer 6  Reinsurance  Premium  shall equal X% of Subject  Ultimate Net
Loss ceded to Layer 6, subject to a maximum Layer 6 Reinsurance Premium of X% of
Subject Net Earned Premium.

All Reinsurance Layer Premiums shall be calculated quarterly, 60 (sixty) days in
arrears from the end of each calendar  quarter.  All Reinsurance  Layer Premiums
shall be deemed  credited  to the Funds  Withheld  Account  at  January 1, 2001.
Interest  due on such amounts will be  calculated  at the rate  specified in the
Interest  Credit  clause,  from January 1, 2001 until and  including the date on
which such Reinsurance Layer Premiums are actually credited.  Such interest will
then be added to the Funds Withheld Profit Sharing Account.

                                    Page 10
<PAGE>

Property Catastrophe  Additional Premiums - The Property Catastrophe  Additional
Premiums  only  apply  if Plan is  exceeded  as per this  Agreement.  If Plan is
exceeded,  as per  the  Definition  of  Exceeding  Plan  in  Article  10 of this
Agreement,  then the Company shall pay to the  Reinsurer a Property  Catastrophe
Additional  Premium,  by credit to the Funds Withheld Profit Sharing Account, at
January 1, 2001.  Interest due on such amounts  will be  calculated  at the rate
specified in the Interest Credit clause,  from January 1, 2001 until the date on
which such premiums are actually  credited.  Such interest will then be added to
the Funds Withheld Profit Sharing Account.

Property  Catastrophe  Additional  Premium shall equal the sum of the results of
applying the rates to the values in the following tables:

1.  ERC Company Only

         Subject Property Cat.UNL
         in excess of $X million
          for ERC, in millions                Property Cat         Gross Maximum
                                                Additional           Additional
                           Up to and             Premium               Premium
          From             Including               Rate             In $Millions
         -----             ---------           -----------          ------------

         $X       to          $X                    X%                    $X
         $X       to          $X                    X%                    $X
         $X       to          $X                    X%                    $X
         $X       to          $X                    X%                    $X
         $X       to          $X                    X%                    $X
         $X       to          $X                    X%                    $X

         Maximum Premium                                                  $X



plus

2.         Affiliated Companies

              Property Cat. UNL
            in excess of $X million
          for all Affiliated Companies        Property Cat
                in $ millions                    Maximum
                                               Additional           Additional
                             Up to and          Premium              Premium
           From              Including            Rate             In $ Millions
          -----              ---------          --------           -------------


          $X       to          $X                  X%                   $X
          $X       to          $X                  X%                   $X

                                    Page 11

<PAGE>

          $X       to          $X                  X%                   $X
          $X       to          $X                  X%                   $X
          $X       to          $X                  X%                   $X
          $X       to          $X                  X%                   $X

         Maximum Premium                                                $X

The amounts of Property  Catastrophe  Ultimate Net Losses shall, for purposes of
the above tables, only include such Property  Catastrophe Ultimate Net Losses in
excess of respective plan Property  Catastrophe Ultimate Net Losses that are not
excluded  from  Ultimate  Net  Losses  as a result of the  Property  Catastrophe
Ultimate Net Loss Limitation provision of this Agreement.

For the purposes of applying the Property Catastrophe  Additional Premium rates,
should Property Catastrophe Ultimate Net Losses in excess of the $X million plan
for  the  combined  Company  and  its  Affiliated   Companies,   when  added  to
Non-Property  Catastrophe  Subject  Ultimate  Net Losses,  exceed the  Aggregate
Limit,  the ERC  Company  Property  Catastrophe  Ultimate  Net  Losses  shall be
eliminated   first  giving  priority  to  the  Affiliated   Companies   Property
Catastrophe Ultimate Net Losses for Property Catastrophe Ultimate Net Losses and
the Property Catastrophe Premium table.

Property Catastrophe Premiums shall be calculated quarterly,  60 (sixty) days in
arrears from each calendar quarter end. Property  Catastrophe  Premiums shall be
deemed credited to the Funds Withheld  Account at January 1, 2001.  Interest due
on such amounts will be calculated at the rate specified in the Interest  Credit
clause,  from January 1, 2001 until the date on which such premiums are actually
credited.  Such interest will then be added to the Funds Withheld Profit Sharing
Account.

Non-Property  Catastrophe  Ultimate Net Loss Premiums - The Company shall pay to
the Reinsurer,  via credit to the Funds  Withheld  Profit  Sharing  Account,  at
January 1, 2001, a Non-Property  Catastrophe  Ultimate Net Loss Premium equal to
the result of applying actual  Non-Property  Catastrophe  Ultimate Net Losses in
excess of the plan Non-Property Catastrophe Ultimate Net Losses in respect of GE
Frankona only, against the rates in the table below.

Plan Non-Property  Catastrophe Ultimate Net Loss shall equal X% of GE Frankona's
underlying  Net Earned  Premium  (which is estimated  to equal $X  million).  GE
Frankona's  Net Earned  Premium  shall be gross of  premiums in respect of their
2001  accident  year whole  account  aggregate  excess of loss coverage with the
Company, but net of all other inuring reinsurances.

      Extra Non-Property Cat
        Ultimate Net Loss                   Gross
    above the GE Frankona Plan           Incremental
          from-to                          Premium                 Gross Premium


         In Millions                             Rate               In Millions

     $X       to       $X                         X%                    $X

                                    Page 12
<PAGE>


     $X       to       $X                         X%                    $X
     $X       to       $X                         X%                    $X
     $X       to       $X                         X%                    $X
     $X       to       $X                         X%                    $X
     $X       to       $X                         X%                    $X

                  Total Maximum                                         $X

Non-Property   Catastrophe  Ultimate  Net  Loss  Premiums  shall  be  calculated
quarterly,   60  (sixty)  days  in  arrears  from  each  calendar  quarter  end.
Non-Property  Catastrophe  Ultimate Net Loss  Premiums,  if any, shall be deemed
credited to the Funds Withheld Account at January 1, 2001.  Interest due on such
amounts will be calculated at the rate specified in the Interest  Credit clause,
from  January  1,  2001  until  the date on which  such  premiums  are  actually
credited.  Such interest will then be added to the Funds Withheld Profit Sharing
Account.

Special Return Premium - If ceded Subject Ultimate Net Loss is less than $X then
the Company is entitled to request  and receive a Special  Return  Premium.  The
Special Return Premium may not be less than X.

The Special Return Premium is payable upon the final settlement of ceded Subject
Ultimate Net Loss or Commutation,  whichever occurs earlier.  The Special Return
Premium is payable from the Funds Withheld Profit Sharing Account until depleted
and thereafter from other funds of the Reinsurer.

The Special Return Premium shall equal the result of subtracting: a) the product
of X% of ceded  Subject  Ultimate  Net Loss,  from b) the  result  of  aggregate
Reinsurance  Premiums  less  Ceding  Commissions  due  hereon  less the  Initial
Reinsurance Margin, less the Additional Reinsurance Margin.




                                   ARTICLE 13
                                   ----------

INITIAL REINSURANCE MARGIN
--------------------------

The Company shall pay the Reinsurer an Initial Margin equal to the greater of X%
of Layer 1 Reinsurance Premium or $X on January 1, 2001.

Additional  Reinsurance  Margin shall be deducted from the Funds Withheld Profit
Sharing Account as of January 1, 2001, and paid to the Reinsurer.

Interest due on Initial  Margin will be calculated at the rate  specified in the
Interest  Credit  clause,  from  January  1, 2001  until the date on which  such
Initial  Margin  is  actually  paid.  Such  interest  will  then  be paid to the
Reinsurer.

                                    Page 13


<PAGE>

                                   ARTICLE 14
                                   ----------

ADDITIONAL REINSURANCE MARGIN
-----------------------------

The Company  shall pay the  Reinsurer an annual  Additional  Reinsurance  Margin
equal to the result of  multiplying  X basis points times the amount which ceded
outstanding  Subject Ultimate Net Loss exceeds the Funds Withheld Profit Sharing
Account at each  respective  calendar year end, for each calendar year end until
this Agreement is Commuted.  Such Additional Reinsurance Margin shall be paid by
March 31st of each succeeding year.

All Subject  Ultimate Net Loss ceded under this Agreement  shall be deemed ceded
in the 2001 calendar  year for purposes of  calculating  Additional  Reinsurance
Margin.

Additional  Reinsurance  Margin shall be deducted from the Funds Withheld Profit
Sharing  Account as of January 1, 2001,  and paid to the  Reinsurer  at the time
such Additional Reinsurance Margin is determined.

Interest due on  Additional  Reinsurance  Margin will be  calculated at the rate
specified in the Interest Credit clause,  from January 1, 2001 until the date on
which such  Additional  Reinsurance  Margin is actually paid. Such interest will
then be paid to the Reinsurer.



                                   ARTICLE 15
                                   ----------

CEDING COMMISSION
-----------------

The  Reinsurer  shall  allow  the  Company  a Ceding  Commission  equal to X% of
Reinsurance  Layer  Premiums,  X% of  Property  Catastrophe  Premiums  and X% of
Non-Property Catastrophe Ultimate Net Loss Premiums. The Company shall allow the
Reinsurer return commission on return premiums at the same rate of X%.

Ceding  Commission shall be debited to the Funds Withheld Profit Sharing Account
as respective Premiums are credited.



                                   ARTICLE 16
                                   ----------

CURRENCY
--------

Whenever  the word  "Dollars"  or the sign "$" appears in this  Agreement,  they
shall be construed to mean United States Dollars and all transactions under this
Agreement shall be in United States Dollars.

Amounts paid or received by the Company in any other currency shall be converted
to  United  States  Dollars  at the  actual  rate of  exchange  on the date such
transaction is entered into the books of the Company.

Page 14

<PAGE>



                                   ARTICLE 17
                                   ----------

TAXES
-----

A.       In  consideration  of  the  terms under which this Agreement is issued,
         the  Company  undertakes  not  to claim any  deduction  of the  premium
         hereon when  making  Canadian  tax returns or when making tax  returns,
         other than  income or profit tax returns,  to any state or territory of
         the United States of America or to the District of Columbia.

B.       The Company shall  be  responsible  for  any and all Federal Excise Tax
         arising  out of this  Agreement.  Such Federal  Excise Tax shall not be
         considered  premium or impact the Funds Withheld Profit Sharing Account
         hereon.


                                   ARTICLE 18
                                   ----------
ACCOUNTS AND REPORTS
--------------------

Starting with the calendar  quarter ending December 31, 2001,  within 60 (sixty)
days following the end of each calendar quarter, the Company shall report to the
Reinsurer the actual amount of the following items. Reports shall continue until
final settlement of all losses or Commutation, in accordance with Article XVIII.

A.       Loss and Subject Premium

         1.     Ultimate Net  Loss, for  the Company and each Affiliated Company
         2.     Subject Ultimate Net Loss for the Company
         3.     Non-Property  Catastrophe Ultimate Net Loss, for the Company and
                each Affiliated Company
         4.     Property Catastrophe Ultimate Net Loss, for the Company and each
                Affiliated Company
         5.     Net Earned Premium for the Company and each Affiliated Company
         6.     Subject Net Earned Premium for the Company.

         For each of 1 through 6  above dealing with  Ultimate Net Losses,  both
         paid amounts and total incurred amounts are to be reported.

B.       Reinsurance Premiums

         1.     Reinsurance Layer Premiums
         2.     Property Catastrophe Premiums
         3.     Non-Property Catastrophe Subject Ultimate Net Loss Premiums

                                    Page 15
<PAGE>




                                   ARTICLE 19
                                   ----------

LOSS CESSIONS AND SETTLEMENTS
-----------------------------

Loss  Cessions - The Company has the right to not cede any Subject  Ultimate Net
Loss under this  Agreement.  However,  should the Company choose to cede Subject
Ultimate  Net Loss herein,  it must fully cede all Subject  Ultimate Net Loss or
cede Subject  Ultimate Net Loss in accordance  with the  following  paragraph in
respect of Business Covered.

The Company shall have the  unilateral  right to elect partial  cession of ceded
Subject  Ultimate Net Loss under this  Agreement,  up to a cumulative  amount of
partial  cession  equal to X% of ceded Subject  Ultimate Net Loss.  Such cession
shall be on pro rata basis in respect of Subject  Ultimate Net Loss in excess of
the Retention. Any cession or cumulative cession of Subject Ultimate Net Loss in
excess of X% of Subject  Ultimate  Net Loss shall  require  the cession of X% of
Subject Ultimate Net Loss.

Loss Settlements - Settlement of Subject Ultimate Net Loss paid in excess of the
Retention  shall be made by the  Reinsurer  to the Company  quarterly  within 30
(thirty)  days of receipt of the report by the  Reinsurer  or 90  (ninety)  days
after the end of the quarter,  whichever occurs later.  Settlement shall be made
first  from the Funds  Withheld  Profit  Sharing  Account  until  depleted,  and
thereafter from other funds of the Reinsurer, subject to the Aggregate Limit.

In the event of a material  commutation or lump sum or structured  settlement of
any  agreement  by the Company  which  results in the  payment of ceded  Subject
Ultimate Net Loss prior to the time required had such event not  occurred,  then
the Subject  Ultimate Net Loss,  Retention and ceded  Subject  Ultimate Net Loss
shall be determined as if such event had not occurred.

For purposes of this  provision,  any one  commutation or lump sum or structured
settlement  event or  aggregate  of these  events  which  accumulate  to  actual
payments totaling $X million or greater shall be deemed to be material.

The  analysis to  determine  the Subject  Ultimate  Net Loss,  Retention,  ceded
Subject  Ultimate Net Loss and payout  pattern which would have occurred will be
calculated by the Company and be subject to the  Reinsurer's  agreement.  If the
Reinsurer does not agree with the Company's calculations, then the analysis will
be performed by an independent  actuarial  firm which is mutually  acceptable to
both parties.  Both parties will equally bear the costs of such analysis and the
results of such analysis  shall be binding in determining  the Subject  Ultimate
Net Loss, Retention, ceded Subject Ultimate Net Loss and payout pattern.


                                   ARTICLE 20
                                   ----------

FUNDS WITHHELD PROFIT SHARING ACCOUNT
-------------------------------------

The Company shall maintain a Funds Withheld Profit Sharing Account  comprised of
following cumulative amounts:

                                    Page 16
<PAGE>


1.       Reinsurance Layer Premiums; plus

2.       Property Catastrophe Premiums; plus

3.       Non-Property Catastrophe Ultimate Net Loss Premiums; less

4.       Special Return Premiums; less

5.       Reinsurer's Margin; less

6.       Additional Reinsurance Margin, less

7.       Ceded Subject Ultimate Net Loss when due from the Reinsurer; less

8.       Ceding Commission when due from the Reinsurer; less

9.       Commutation settlement; plus

10.      Interest Credit.

The Company shall  calculate and report the balance of the Funds Withheld Profit
Sharing  Account to the  Reinsurer  within 60 (sixty)  days from the end of each
calendar quarter.


                                   ARTICLE 21
                                   ----------
INTEREST CREDIT
---------------

At the end of each calendar quarter, the Company shall credit the Funds Withheld
Profit Sharing  Account with an Interest  Credit  determined by multiplying  the
average daily balance of the Funds Withheld  Profit  Sharing  Account during the
calendar quarter by X% to achieve an effective X% annual yield.

The  Interest  Credit  shall  continue  even  in  the  event  of  the  Company's
rehabilitation, liquidation, insolvency, or any combination of these events.

                                   ARTICLE 22
                                   ----------

EXCESS OF POLICY LIMITS
-----------------------

A.       This  Agreement  shall  protect  the Company, within the limits hereof,
         for X% of loss in  excess  of  the  limit of its  original  Reinsurance
         Agreements  and insurance  policies,  such  loss in excess of the limit
         having  been  incurred  because of failure  by it to settle  within the
         Reinsurance  Agreement  or  insurance  policy  limit or  by  reason  of
         alleged or actual  negligence  or bad faith in  rejecting  an  offer of
         settlement or in the preparation of the defense or in the trial  of any
         action  against  its insured or  reinsured  or in  the  preparation  or
         prosecution of an appeal consequent upon such action.

         However, this  Article shall not apply where the loss has been incurred
         due to fraud  by a member  of the  board of  directors  or a  corporate
         officer of  the  Company  acting

                                    Page 17
<PAGE>

         individually  or  collectively  or in collusion  with any individual or
         corporation  or  any  other  organization  or  party  involved  in  the
         presentation,  defense,  or settlement of any claim covered hereunder.

         For  the  purposes  of this  Article,  the word  "loss"  shall mean any
         amounts  for which the Company would have been contractually  liable to
         pay  had  it not  been  for  the  limit  of  the  original  Reinsurance
         Agreement or insurance policy.

B.       This Agreement shall protect the Company for X% of its share of loss in
         excess  of policy  limits  emanating  from the  underlying  policies or
         contracts  attaching  to   the  Company's  Reinsurance   Agreements  or
         insurance policies,  subject  to the terms, conditions, and limitations
         of this Agreement.


                                   ARTICLE 23
                                   ----------

EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------

A.       This Agreement shall protect the Company, within the limits hereof, for
         X% of  any Extra Contractual  Obligations.  The term "Extra Contractual
         Obligations"  is  defined as those  liabilities  not covered  under any
         other provision  of the Company's original  Reinsurance  Agreements and
         insurance  policies  and  which arise from the handling of any claim on
         Business Covered  hereunder,  such liabilities  arising because of, but
         not limited to, the following: failure  by the Company to settle within
         the Reinsurance  Agreement or insurance  policy  limit, or by reason of
         alleged or actual  negligence  or bad faith in  rejecting  an  offer of
         settlement or in the preparation of the defense or in the trial  of any
         action  against  its insured or  reinsured  or in  the  preparation  or
         prosecution of an appeal consequent upon such action.

         The date on which any Extra Contractual  Obligation  is incurred by the
         Company shall be deemed, in all  circumstances,  to  be the date of the
         original loss event.

         However, this Article shall not apply where the loss  has been incurred
         due to fraud by a member  of the  board  of  directors  or a  corporate
         officer of  the  Company  acting  individually  or  collectively  or in
         collusion with  any individual or corporation or any other organization
         or party  involved  in the  presentation,  defense or settlement of any
         claim covered hereunder.

B.       This  Agreement shall protect  the Company for X% of its share of Extra
         Contractual  Obligations  emanating  from  the  underlying  policies or
         contracts  attaching  to  the  Company's  Reinsurance   Agreements   or
         insurance policies,  subject to the terms, conditions, and  limitations
         of this Agreement.

                                    Page 18


<PAGE>


                                   ARTICLE 24
                                   ----------

OFFSET
------

The Company or the  Reinsurer  may offset any  balance or balances  due from one
party to another under the terms of this Agreement  only.  Balances due include,
but are  not  limited  to,  Reinsurance  Layer  Premiums,  Property  Catastrophe
Premiums,  Non-Property  Catastrophe  Ultimate Net Loss Premium,  Special Return
Premiums,  Ceding  Commissions,  Interest  Credit or on account of ceded Subject
Ultimate  Net Losses paid,  or  otherwise  any amounts due from one party to the
other party hereto under the terms of this  Agreement.  This provision shall not
be affected by the insolvency of either party to this Agreement.


                                   ARTICLE 25
                                   ----------

COMMUTATION
-----------

A.       The Company shall have the sole  option to fully commute this Agreement
         at any calendar quarter end after the expiration of  the Term  of  this
         Agreement.  Upon the Company's election to commute, the Reinsurer shall
         pay to the Company the lesser of:

         1.     The existing value of the Funds  Withheld Profit Sharing Account
                as of the Commutation date; or

         2.     The present value of ceded Subject Ultimate Net Loss outstanding
                as of the Commutation date, as determined by the Company.

         Such  payment,   together  with  any  Profit  Sharing   payment,  shall
         constitute a full and final  settlement  of  all  liability  under this
         Agreement, and the Reinsurer will thereby  be released from all current
         and future liability under this Agreement.

B.       The Company shall  also  have the right to elect Partial Commutation at
         any  calendar  quarter  end  after the  expiration  of the Term of this
         Agreement,  up to  a  cumulative  Commutation  of X% of  ceded  Subject
         Ultimate Net Loss. Upon  the Company's election of Partial Commutation,
         the Reinsurer shall pay the lesser of:

         1.     The existing value of the Funds Withheld Profit Sharing Account,
                calculated on a pro rated basis, as of the  Partial  Commutation
                date; or

         2.     The  present  value  of   ceded   Subject   Ultimate   Net  Loss
                outstanding, calculated  on a  pro rated basis, as determined by
                the Company.

         Cumulative  Partial  Commutation  in  excess  of  X% of  ceded  Subject
         Ultimate Net Loss shall require the Commutation of  X% of ceded Subject
         Ultimate Net Loss.

C.       Commutation payments in accordance with this Article shall be  deducted
         from the Funds Withheld Profit Sharing Account.

                                    Page 19
<PAGE>


                                   ARTICLE 26
                                   ----------

PROFIT SHARING
--------------

The Reinsurer  shall pay to the Company,  by debit to the Funds Withheld  Profit
Sharing  Account,  X% of the  residual  balance,  if any, of the Funds  Withheld
Profit  Sharing  Account upon final payment of ceded  Subject  Ultimate Net Loss
and/or payment of amounts as calculated under the Commutation  article.  Payment
of Profit Sharing shall  constitute a full and final settlement of any liability
under this  Agreement and the  Reinsurer  shall be released from all current and
future liability under this Agreement.


                                   ARTICLE 27
                                   ----------

CHANGE IN ADMINISTRATIVE PRACTICES
----------------------------------

The Company agrees not to materially change its claims handling  procedures,  or
procedures  for  payment  of claims,  in any  manner  from that in effect at the
inception of this Agreement, such changes which materially affect this Agreement
or the obligations of the parties hereunder, unless the Company has received the
prior  written  approval  of the  Reinsurer  to  such  changes  pursuant  to the
provisions of this Article, such approval not to be unreasonably withheld.

In the event the Company changes its claims handling  procedures,  or procedures
for payment of claims, the Company shall notify the Reinsurer in writing of such
changes  and give the  Reinsurer  the  opportunity  to review  such  changes and
determine whether any revisions are required to this Agreement. In the event the
Reinsurer determines that this Agreement needs to be revised and the Company and
the Reinsurer fail to agree on acceptable changes within 60 (sixty) days of such
determination,  an  independent  actuarial  firm shall be hired to determine the
impact of such changes and required  revisions to this Agreement to maintain the
economics had such changes not occurred.

Furthermore,  in the event of an  administrative  or claims handling practice of
any insurance  contract or other  arrangement by the Company with one or more of
its  insureds or  reinsureds  which will have the effect,  in the opinion of the
Reinsurer,  of a material change in the anticipated settlement pattern of losses
hereunder,  then for purposes of settlement  hereunder,  losses  related to such
policies  shall be  reported  as  though  such  change  or  arrangement  had not
occurred.  Such determination shall be made with the concurrence of both parties
hereto,  subject to an  independent  actuarial  analysis if agreement  cannot be
reached.  The cost of any such actuarial work as hereinabove  specified shall be
shared equally by both parties.


                                    Page 20


<PAGE>



                                   ARTICLE 28
                                   ----------

ERRORS AND OMISSIONS
--------------------

Any  inadvertent  delay,  omission or error shall not be held to reliever either
party  hereto from any  liability  which would  attach to it  hereunder  if such
delay,  omission or error had not been made,  providing such delay,  omission or
error is rectified promptly upon discovery.


                                   ARTICLE 29
                                   ----------

ACCESS TO RECORDS
-----------------

The Company  shall  place at the  disposal of the  Reinsurer  at all  reasonable
times, and the Reinsurer shall have the right to inspect, through its authorized
representatives,  all books,  records,  and papers of the Company in  connection
with any reinsurance hereunder, or claims in connection herewith.


                                   ARTICLE 30
                                   ----------

INSOLVENCY
----------

A.       In  the  event  of  the  insolvency of the Company,  reinsurance  under
         this  Agreement  shall be payable by the Reinsurer (on the basis of the
         liability  of  the  Company  under  the  policy or  policies  reinsured
         without  diminution  because of the insolvency of the Reinsurer) to the
         Company  or to its liquidator, receiver, or statutory successor, except
         as provided by section 4118A of the New York insurance law or except:

         1)     Where the Agreement specifically  provides another payee of such
                reinsurance in the event of the insolvency of the Company; and

         2)     Where  the  Reinsurer, with the consent of the direct insured or
                insureds, has  assumed such policy obligations of the Company as
                direct  obligations  of  the  Reinsurer to the payees under such
                policies and in substitution for the obligations of the  Company
                to such payees.

B.       It  is  agreed,  however, that  the liquidator or receiver or statutory
         successor of the insolvent  Company  shall  give written  notice to the
         Reinsurer of the pendency of a claim  against the insolvent  Company on
         the policy or policies  reinsured  within  a reasonable time after such
         claim is filed  in the  insolvency  proceeding  and  that,  during  the
         pendency of  such claim,  the Reinsurer may investigate  such claim and
         interpose,  at  its own expense,  in the proceeding where such claim is
         to be  adjudicated, any defense or defenses which it may deem available
         to the  Company or its  liquidator or receiver or statutory  successor.
         The  expense  thus  incurred  by  the  Reinsurer  shall be  chargeable,
         subject to court  approval,  against  the insolvent  Company as part of
         the expense of liquidation to the  extent of a  proportionate  share of
         the benefit which may accrue to  the Company  solely as a result of the
         defense undertaken by the Reinsurer.

                                    Page 21

<PAGE>

C.       Should  the  Company  go  into  liquidation  or  should  a  receiver be
         appointed,  the  Reinsurer  shall  be entitled to deduct from any sums,
         which may be or  may become due to the  Company  under this  Agreement,
         any  sums  which are due to the  Reinsurer  by the  Company  under this
         Agreement  and  which are payable at a fixed or stated date, as well as
         any other  sums  due the  Reinsurer  which are  permitted  to be offset
         under applicable law.


                                   ARTICLE 31
                                   ----------


ARBITRATION
-----------

A.       All  disputes  between the parties arising out of or in connection with
         this  agreement  including  formation and validity and whether  arising
         during  or after the period of this  agreement  shall be referred to an
         arbitration tribunal ( the tribunal ) in the manner set out below.

B.       The  tribunal  shall, unless  the  parties  agree otherwise, consist of
         persons (  including  those  who have  retired ) with  not less than 10
         years experience of international insurance or  reinsurance business as
         persons  engaged in  such  business  or  advising  such  business  in a
         professional capacity.

C.       Unless the parties agree upon a single arbitrator within 30 days of one
         receiving  a  written  request  from  the other  for  arbitration,  the
         claimant ( the party  requesting  arbitration  ) shall   appoint  their
         arbitrator  ( the first  arbitrator  ) and  shall give  written  notice
         thereof  to the  other  party ( the  respondent  ).  Within  30 days of
         receiving such notice, the respondent shall appoint their  arbitrator (
         the  second  arbitrator  ) and give  written  notice  to  the  claimant
         failing which the claimant may apply to the  appointor  named  below to
         appoint the second arbitrator.

D.       Once appointed the first and second arbitrators shall within 30 days of
         the appointment of the second  arbitrator  appoint a third  arbitrator.
         Should  they fail to do so then  either of them or of the  parties  may
         apply to the appointor for the  appointment  of the  third  arbitrator.
         However appointed the third arbitrator shall be chairman.

E.       Upon acceptance of the appointment by the third arbitrator the tribunal
         shall be constituted. The three arbitrators shall decide by majority.

F.       If  an  arbitrator, subsequent to  their  appointment  is  unwilling or
         unable  to  act a new arbitrator  shall be appointed to replace them by
         the procedure set out in this Article.

G.       Unless  otherwise extended or ordered by the tribunal within 15 days of
         the  appointment  of  the  third arbitrator each party shall submit its
         case to the  tribunal  within  45  days of the appointment of the third
         arbitrator.

H.       The  tribunal  shall  not be bound by the formal rules of evidence. The
         tribunal shall have  power  to fix all procedural rules relating to the
         conduct of the arbitration.

                                    Page 22


<PAGE>

I.       The  tribunal shall  reach its decision by reference to the customs and
         usages  of the  international  insurance and  reinsurance  business and
         shall  apply  the proper law as stated in the  schedule,  as the proper
         law of this  agreement. In the event of conflict or dispute between the
         customs  and  usages and the proper law,  the customs and usages  shall
         prevail.

J.       The  tribunal shall  within  60  days  of  reaching its decision of the
         arbitration  issue  to the parties its written and reasoned award.  The
         award shall be final and binding on the  parties who  covenant to carry
         out the same.  If either of the  parties  should  fail to carry out the
         award the other may apply for its  enforcement to  a court of competent
         jurisdiction  in any  territory  in  which  the  party in  default  are
         domiciled or have assets or carries on business.

K.       All costs of the arbitration shall be at the discretion of the tribunal
         who may direct to and by whom and in what manner they shall be paid.

L.       The seat of the  arbitration shall  be  New York City, USA, unless some
         other place is mutually agreed upon by the Company and Reinsurer.

M.       This  article shall be construed as a separate and independent contract
         between the parties hereto.


                                    ARTICE 32
                                    ---------


SECURITY
--------

Security:  Upon the  Company's  written  request,  the  Reinsurer  shall provide
security  to the  Company  for its  obligations  to the Company in excess of the
balance of the Funds Withheld Account by providing access to funds held in Trust
or Letters of Credit for the  benefit of the  Company,  in  accordance  with the
provisions set forth in this Article, or by providing any other form of security
that  would  permit  the  Company  to  take  credit  for the  reinsurance  ceded
hereunder.

1.       Letter of Credit:
         -----------------

        (a)    Upon  the  written  request  of the Company, the Reinsurer agrees
               that it will be the  applicant for and provide the Company with a
               Letter or Letters of Credit,  in a form acceptable to the Company
               and in conformity  with  Regulation  133 (11 NYCRR 79) of the New
               York  Insurance  Department,  in  an  amount  no  less  than  the
               Reinsurer's  remaining liability to the Company, as determined by
               the Company,  to secure the  obligations  of the Reinsurer to the
               Company under this  Agreement.  The actual cost of such Letter(s)
               of Credit,  if any,  shall be borne by the Company,  subject to a
               maximum amount of X basis points per annum.

         (b)   The Reinsurer and the  Company agree that the Letter(s) of Credit
               provided  by the  Reinsurer  pursuant to the  provisions  of this
               Agreement  may be drawn  upon at any  time,  notwithstanding  any
               other provisions in this Agreement,  and shall be

                                    Page 23

<PAGE>

               utilized by the Company or any  successor  by operation of law of
               the  Company  including,   without  limitation,  any  liquidator,
               rehabilitator,  receiver,  or conservator of the Company only for
               one or more of the following purposes:

               (i)     to  reimburse  the Company  for  the Reinsurer's share of
                       premiums returned  to  the owners of  policies  reinsured
                       under this Agreement, on account of cancellations of such
                       policies;

               (ii)    to reimburse  the  Company for  the  Reinsurer's share of
                       surrenders  and  benefits or  losses paid  by the Company
                       pursuant  to  the  provisions of  the  policies reinsured
                       under this Agreement;

               (iii)   to  fund  an  account  with  the  Company in an amount at
                       least equal to the deduction, for reinsurance ceded, from
                       the  Company's liabilities  for  reinsurance  ceded under
                       this  Agreement.  Such amount shall  include,  but not be
                       limited to, amounts for  policy  reserves,  reserves  for
                       claims and  losses  incurred  (including losses  incurred
                       but not reported),  reserves for loss adjustment expenses
                       and reserves for unearned premiums; and

               (iv)    to pay any other amounts the Company claims are due under
                       this Agreement.

               All of the foregoing shall be  applied without diminution because
               of insolvency on the part of the Company or the Reinsurer.

        (c)    Should amounts  be  held  pursuant  to (b)(iii) above,  then  the
               Company shall pay interest at the Prime Rate on such funds as may
               be held from time to time.

        (d)    Should  any  amounts  drawn  down  on the Letters of Credit be in
               excess of the actual amounts required for (b)(i), (b)(ii), or (b)
               (iii) above, or should any amounts subsequently be determined not
               to be due  under (b)(iv)  above, then  such  excess  amounts  and
               amounts  not due shall be returned to the Reinsurer forthwith and
               the Company  shall  pay  interest at the Prime Rate on such funds
               from the date they were drawn down to the date they are returned.

        (e)    Any  interest calculated pursuant to the provisions of paragraphs
               (c)  and (d)  above shall be offset against any other obligations
               of the Reinsurer.

2.       Trust Funds:
         ------------

         (a)   Upon  the  written  request of  the  Company  for  Security,  the
               Reinsurer may at its  option  provide  funds  in  Trust  for  the
               benefit of  the  Company  as  an  alternative  or  supplement  to
               Letter(s) of Credit.  Any such  Trust  Funds  shall  be  held  in
               accordance with New  York  Insurance  Department  Regulation  114
               (11 NYCRR 126), as amended. The actual cost of such Trust  Funds,
               if any, shall be borne by the Company, subject to a  maximum cost
               of X basis points per annum.

                                    Page 24

<PAGE>

         (b)   The assets deposited  in  the  trust  account  shall  be  valued,
               according  to  their current fair market value, and shall consist
               only of  cash  (United  States  legal  tender),  certificates  of
               deposit (issued by a United  States  bank  and  payable in United
               States legal  tender), and  investments of the types specified in
               paragraphs  (1),  (2), (3),  (8)  and  (10) of  subsection (a) of
               Section 1404 of the New York Insurance  Law,  provided  that such
               investments are issued by an institution that is not the  parent,
               subsidiary, or affiliate of either the Reinsurer or the Company.

         (c)   Prior to depositing assets into the Trust account, the  Reinsurer
               shall  execute  assignments,  endorsements  in blank, or transfer
               legal title to the  trustee of  all  shares, obligations  or  any
               other assets requiring assignments, in order that the Company, or
               the trustee  upon  the  direction  of  the  Company, may whenever
               necessary negotiate any such assets without  consent or signature
               from the Reinsurer or any other entity.

         (d)   All settlements of account between  the Company and the Reinsurer
               shall be made in cash or its equivalent.

         (e)   The Reinsurer and the Company agree that  the assets in the Trust
               account, established by the Reinsurer  pursuant to the provisions
               of this Agreement, may be withdrawn  by  the Company at any time,
               notwithstanding any other provisions in this Agreement, and shall
               be  utilized  and  applied  by  the  Company  or any successor by
               operation  of law  of  the Company including, without limitation,
               any  liquidator,  rehabilitator,  receiver  or conservator of the
               Company only for one or more of the following purposes:

               (i)     to  reimburse  the  Company  for the Reinsurer's share of
                       premiums  returned to  the  owners  of policies reinsured
                       under this Agreement, on account of cancellations of such
                       policies;

               (ii)    to reimburse  the  Company  for  the Reinsurer's share of
                       surrenders and  benefits or losses  paid  by  the Company
                       pursuant to the  provisions  of  the  policies  reinsured
                       under this Agreement;

               (iii)   to fund an account with the Company in an amount at least
                       equal to  the  deduction, for reinsurance ceded, from the
                       Company's liabilities for  reinsurance  ceded  under this
                       Agreement.  Such amount shall include, but not be limited
                       to, amounts for policy  reserves, reserves for claims and
                       losses  incurred  ( including  losses  incurred  but  not
                       reported), reserves  for  loss  adjustment  expenses  and
                       reserves for unearned premiums; and

               (iv)    to pay any other amounts the Company claims are due under
                       this Agreement.

               All of the foregoing shall be  applied without diminution because
               of insolvency on the part of the Company or the Reinsurer.

                                    Page 25
<PAGE>

         (f)    The  Company shall give the Reinsurer the right to seek approval
                from the  Company  to  withdraw  from  the  aforementioned Trust
                account all or any  part of  the  assets contained  therein  and
                transfer such assets to the Reinsurer, provided:

                (i)    the  Reinsurer  shall  at  the  time  of such withdrawal,
                       replace the withdrawn assets with  other qualified assets
                       having a  market value  equal  to the market value of the
                       assets  withdrawn  so  as  to  maintain  at all times the
                       deposit in the required amount, or

               (ii)    after  such  withdrawal and transfer, the market value of
                       the Trust  account  is  no  less  than  X  percent of the
                       required amount.

         (g)    Should  amounts  be  held  pursuant  to (e)(iii) above, then the
                Company shall pay interest at  the Prime  Rate  on such funds as
                may be held from time to time.

         (h)    Should any amounts withdrawn from the Trust account be in excess
                of  the actual amounts required for (e)(i), (e)(ii), or (e)(iii)
                above, or should  any  amounts subsequently be determined not to
                be due under (e)(iv) above, then such excess amounts and amounts
                not due shall  be  returned to the  Reinsurer  forthwith and the
                Company shall pay interest at the Prime Rate on  such funds from
                the date they were withdrawn to the date they are returned.

                (i)    Any  interest  calculated  pursuant to  the provisions of
                       paragraphs (g) and (h) above shall be  offset against any
                       other obligations of the Reinsurer.

3.       Other  Forms of  Security:  The  Reinsurer  may,  at its  option, as an
         alternative  or  supplement  to  Letter(s) of  Credit  and Trust Funds,
         provide security in any other form that  would  permit  the  Company to
         take credit for the reinsurance  ceded  hereunder.  Any such other form
         of security shall be in accordance with  New York Insurance  Department
         regulations.  The actual cost of such  other  form(s) of security shall
         be  borne by the  Company, subject to a  maximum cost of X basis points
         per annum.

4.       Prime Rates:  Prime Rates shall be  determined for each business day in
         New York City, and for non-business days shall equal the Prime  Rate as
         determined for the most recent preceding business day.  The PRIME RATES
         as published in The Wall Street Journal (Eastern Edition) shall  be the
         primary source for the Prime Rates. If The Wall Street Journal does not
         publish  such  a  rate  for a business day, the Prime Rate shall be the
         maximum of the rates publicly announced by major banks in New York City
         as their "Prime Rates" applicable to such day.

                                   ARTICLE 33
                                   ----------

GOVERNING LAW
-------------

This  Agreement  shall  be  governed  as  to  performance,  administration,  and
interpretation by the laws of the State of New York, exclusive of the rules with
respect to  conflicts  of law, and except as to rules with respect to credit for
reinsurance  in which  case the  rules of all  applicable  states  shall  apply.
Notwithstanding the foregoing,  however,  this Article does not govern or affect
in


                                    Page 26

<PAGE>

any way the basis for any  decision or award of an  arbitration  panel acting
pursuant to the Article XXIII.

                                   ARTICLE 34
                                   ----------

INTERMEDIARY
------------

Pegasus  Advisors  - Towers  Perrin  Reinsurance  is  hereby  recognized  as the
Intermediary   negotiating   this  Treaty  for  all  business   hereunder.   All
communications  (including  but not  limited to  notices,  statements,  premium,
return premium,  commissions,  taxes, losses, allocated loss adjustment expense,
salvages  and loss  settlements)  relating  hereto shall be  transmitted  to the
Company or the Reinsurer  through Pegasus Advisors - Towers Perrin  Reinsurance,
Forestal Centre, 175 Powder Forest Drive,  Weatogue,  CT 06089.  Payments by the
Company  to the  Intermediary  shall be  deemed  to  constitute  payment  to the
Reinsurer.  Payments by the  Reinsurer  to the  Intermediary  shall be deemed to
constitute  payment to the  Company  only to the extent that such  payments  are
actually received by the Company.


                                   ARTICLE 35
                                   ----------

ALTERATIONS
-----------

This  Agreement may be altered in any of its terms and conditions by an addendum
signed by the  parties  which  shall be  regarded  as an  integral  part of this
Agreement.


                                   ARTICLE 36
                                   ----------

INTERESTS & LIABILITIES
-----------------------

The interests and  liabilities of the Company and the  Affiliated  Companies are
joint and not several.




                                   ARTICLE 37
                                   ----------

PARTIES TO THIS AGREEMENT
-------------------------

This Agreement shall be binding upon all  successors,  assignees and transferees
of the parties to this Agreement, provided, however, that neither this Agreement
nor any rights or obligations


under this  Agreement may be assigned or transferred to by any party without the
prior written consent of the other party.


                                    Page 27

<PAGE>



                       INTERESTS AND LIABILITIES AGREEMENT

                                     To the

                                  WHOLE ACCOUNT
                      AGGREGATE EXCESS OF LOSS RETROCESSION
                              REINSURANCE AGREEMENT
                            Effective January 1, 2001

            (hereinafter referred to as the "Reinsurance Agreement")

                                     between

                        EMPLOYERS REINSURANCE CORPORATION

                   (hereinafter referred to as the "Company")

                                       and

                      SCANDINAVIAN REINSURANCE COMPANY LTD.

            (hereinafter referred to as the "Subscribing Reinsurer")





It is hereby  mutually  agreed that the  Subscribing  Reinsurer  shall have a X%
share in the interests and liabilities as set forth in the captioned Reinsurance
Agreement.  The share of the  Subscribing  Reinsurer shall be separate and apart
from the shares of the other reinsurers and shall not be joint with those of the
other reinsurers and the Subscribing  Reinsurer shall in no event participate in
the interests and liabilities of the other reinsurers.


In  Witness  Whereof,   the  parties  hereto  have  caused  this  Interests  and
Liabilities  Agreement  to be  signed in  triplicate  by their  duly  authorized
representatives.


Signed this   27   day of  September, 2001,
For and on behalf of Employers Reinsurance Corporation

By:           Jeffrey J. Cooper
         ------------------------

Title:            Vice President
         ------------------------

                                    Page 28
<PAGE>





Signed this   24th   day of  September, 2001,
For and on behalf of Scandinavian Reinsurance Company Ltd.

By:                Bart Hedges
          -----------------------

Title:                COO
          -----------------------


                                    Page 29