Exhibit 10.3


                     SECOND WHOLE ACCOUNT AGGREGATE
               EXCESS OF LOSS RETROCESSION AGREEMENT (E2)
                                  for
                   EMPLOYERS REINSURANCE CORPORATION










                       Effective January 1, 1996













                              Prepared by:

                           BATES TURNER, INC.
                      5200 Metcalf, P.O. Box 2959
                      Overland Park, Kansas 66201

                        Toll Free (800) 465-8072
                          Phone (913) 676-5920
                           Fax (913) 676-5940


<PAGE>


                                CONTENTS

                   EMPLOYERS REINSURANCE CORPORATION
             SECOND WHOLE ACCOUNT AGGREGATE EXCESS OF LOSS
                      RETROCESSION AGREEMENT (E2)
                 -------------------------------------

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

        I     APPLICATION OF AGREEMENT...................................1
       II     BUSINESS RETROCEDED........................................1
      III     RETENTION AND RETROCESSION.................................2
       IV     RETROCESSIONAIRE RESERVE DETERMINATION...................2-3
        V     DEFINITIONS..............................................3-5
       VI     RETROCESSION PREMIUM AND ADJUSTMENT......................5-6
      VII     EXPERIENCE ACCOUNT BALANCE.................................6
     VIII     LOSS SETTLEMENTS...........................................7
       IX     COMMUTATION AND EXPERIENCE REFUND........................7-8
        X     COMMUTATION APPROVAL ON CORPORATION'S POLICIES.............8
       XI     EXPIRATION DURING LOSS.....................................8
      XII     STOP LOSS (AGGREGATE) INCLUSION............................9
     XIII     WARRANTY...................................................9
      XIV     CURRENCY...................................................9
       XV     ACCESS TO RECORDS..........................................9
      XVI     ERRORS AND OMISSIONS.......................................9
     XVII     TAXES.....................................................10
    XVIII     OFFSET....................................................10
      XIX     INSOLVENCY.............................................10-11
       XX     ARBITRATION............................................11-12
      XXI     NONWAIVER.................................................12
     XXII     INTERMEDIARY..............................................12
    XXIII     PARTICIPATION AND SIGNATURES..............................13



<PAGE>



                   Employers Reinsurance Corporation

        Second Whole Account Aggregate XOL Retro Agreement (E2)


96573
07/09/96

             SECOND WHOLE ACCOUNT AGGREGATE EXCESS OF LOSS
                      RETROCESSION AGREEMENT (E2)
                      entered into by and between
                   EMPLOYERS REINSURANCE CORPORATION
                         Overland Park, Kansas
                 (hereinafter called the "Corporation")
                                  and
          the Retrocessionaire specifically identified on the
                     signature page attached hereto
              (hereinafter called the "Retrocessionaire")

                       Effective January 1, 1996

             ---------------------------------------------

WITNESSETH

In  consideration  of the mutual  covenants  hereinafter  contained and upon the
terms and conditions hereinafter set forth, the parties hereto agree as follows:


                                    ARTICLE I

APPLICATION OF AGREEMENT

This  Agreement  applies  to  all  in  force,  new  and  renewal  insurance  and
reinsurance  written by the Corporation,  as respects  occurrences  taking place
anywhere in the world at or after January 1, 1996, 12:01 a.m.,  Central Standard
Time, and prior to January 1, 1997, 12:01 a.m., Central Standard Time.


                                   ARTICLE II

BUSINESS RETROCEDED

This Agreement  applies to all insurance and  reinsurance  business  written and
classified by the Corporation as property or business  written and classified by
the  Corporation  as other than  property,  covering  in  respect  of  exposures
worldwide,  including  reinsurance  assumed  from  subsidiary  and/or  affiliate
companies,  excluding  life business  written as such,  but not excluding  death
benefits under accident or health Policies or workers' compensation Policies.




<PAGE>


                                   ARTICLE III

RETENTION AND RETROCESSION

The  Corporation  shall  retain for its own  account  as its own net  retention,
subject  to the  First  Whole  Account  Aggregate  Excess  of Loss  Retrocession
Agreement (E1), all Ultimate Net Loss in the aggregate  incurred during the term
of this  Agreement in respect of its Net Retained  Liability up to and including
an amount equal to 77% of Subject Gross Net Earned Premium  Income  (hereinafter
"SGNEPI").

The  Retrocessionaire  shall  indemnify  the  Corporation  in respect of its Net
Retained  Liability for all Ultimate Net Loss in the aggregate  incurred  during
the term of this Agreement in excess of the Corporation's own net retention,  up
to:

A)       an amount equal to the first 5% of SGNEPI  excess of an amount equal to
         77% of SGNEPI provided that the total Ultimate Net Loss incurred by the
         Corporation  exceeds  an amount  equal to 102% of  SGNEPI  and that the
         First Whole Account  Aggregate  Excess of Loss  Retrocession  Agreement
         (E1) does not provide  protection  for an amount equal to this first 5%
         of SGNEPI, and

B)       an amount equal to 25% of SGNEPI excess of the sum of an amount equal
         to 102% of SGNEPI plus the amount recoverable under Part A of this
         Article III.

The Retrocessionaire's annual limit of liability in respect of Part A and Part B
of this Article III  combined  shall not exceed the lesser of an amount equal to
25% of SGNEPI, or $500,000,000.

Notwithstanding  the above,  the  liability  of the  Retrocessionaire  shall not
exceed the aggregate  amount of ceded Ultimate Net Loss incurred and reported by
the Corporation to the Retrocessionaire as of February 1, 1997.

                                   ARTICLE IV

RETROCESSIONAIRE RESERVE DETERMINATION

A)      The Corporation shall determine the level of total reserves for
        Ultimate Net Loss for the term of this Agreement and shall revise those
        reserves from time to time as subsequent events require.  Should the
        Retrocessionaire disagree with the reserves posted by the Corporation
        for the term of this Agreement, the Retrocessionaire shall select a
        firm, acceptable to the Corporation, to perform an independent reserve
        analysis.  In the event the Retrocessionaire elects to have an
        independent reserve analysis conducted, the loss settlement date on
        which the Corporation seeks payment shall be delayed until completion of
        the analysis, or six months past the loss settlement date, whichever
        first occurs.  The results of the independent reserve analysis shall be
        binding in establishing the reserve amount for this cover until such
        time as a subsequent study is conducted or the Retrocessionaire and the
        Corporation mutually agree to changes in the reserves.  The cost of such
        study shall be borne by the Retrocessionaire.


<PAGE>


RETROCESSIONAIRE RESERVE DETERMINATION
(continued)

B)       If, subsequent to the  Retrocessionaire  making any payments under this
         Agreement,  the reserves for the term of this  Agreement are decreased,
         either by action of the  Corporation or in accordance  with paragraph A
         of  this   Article,   then  the   Corporation   shall   refund  to  the
         Retrocessionaire  the excess  amount  paid by the  Retrocessionaire  as
         determined using the revised reserves, if any, plus the Interest Credit
         calculated in  accordance  with this  Article.  The Interest  Credit is
         payable  immediately  for the number of days beginning with the date(s)
         such excess amounts were paid by the Retrocessionaire and ending at the
         date the  Retrocessionaire  is  reimbursed  for such excess amount paid
         and/or is paid the Interest Credit due.

C)       The Interest Credit shall be the average of the three month
         U.S. Treasury  Bill rate plus 200 basis points  applied  against the
         refund due to the Retrocessionaire.

                                    ARTICLE V

DEFINITIONS

As used in this Agreement:

A)       The term  "Ultimate Net Loss" shall mean the actual loss or losses paid
         or  payable  by  the   Corporation   in  settlement  of  claims  or  in
         satisfaction of awards or judgments (including prejudgment interest and
         plaintiff's  costs included in the judgment)  plus losses  Incurred But
         Not  Reported  (hereinafter  "IBNR") for all lines of business  covered
         under this Agreement,  subject  however to the following  limits within
         such Ultimate Net Loss:

         1)    an aggregate limit for all Catastrophe Losses of
               $1,000,000,000  ($500,000,000  with respect to recoveries due
               under Part A of Article III);

         2)    an aggregate sublimit for Catastrophe Losses occurring outside
               of the United States of America,  its territories and
               possessions and Canada of $750,000,000; and

         3)    a per Occurrence limit of $800,000,000.

         Subject  to the  limits of this  Agreement,  "Ultimate  Net Loss"  also
         includes  Loss  In  Excess  Of  Policy  Limits  and  Extra  Contractual
         Obligations  losses which are incurred as a result of the Corporation's
         participation  in any Original Policy which provides  coverage for such
         losses,  on the condition that the  Corporation  has, in advance of any
         conduct by the Original  Insured in connection with the  investigation,
         trial or  settlement of any claim or failure to pay or delay in payment
         of any benefits under any Original Policy,  counseled with the Original
         Insured and concurred in the Original Insured's course of conduct.


<PAGE>


DEFINITIONS
(continued)

         The amount of loss paid or payable by the Corporation shall include all
         claim expenses covered under the Original Policy, but shall not include
         the  Corporation's   own  claim  expenses.   Salvages  and  recoveries,
         including recoveries under all other reinsurances, whether collected or
         not,  are to be first  deducted  from the  amount  of the loss  paid or
         payable  to  arrive  at the  amount  of  liability,  if any,  attaching
         hereunder.

B)       The term "Extra Contractual Obligations" shall mean:

         1)       Eighty   percent  of  any  amount   paid  or  payable  by  the
                  Corporation in excess of its Policy limits  (limited to within
                  the limit of this Agreement however), but otherwise within the
                  terms of its  Policy  (hereinafter  called  "Loss In Excess Of
                  Policy  Limits"),  as a result of an action  against it by its
                  Insured,  or its Insured's  assignee,  to recover  damages the
                  Corporation  is  legally  obligated  to  pay  because  of  the
                  Corporation's  alleged  or actual  negligence  or bad faith in
                  rejecting  a  settlement  within  its  Policy  limits,  or  in
                  discharging  its duty to defend or prepare  the defense in the
                  trial of any action against its Insured, or in discharging its
                  duty to prepare or prosecute an appeal consequent upon such an
                  action.

         2)       Eighty  percent of any punitive,  exemplary,  compensatory  or
                  consequential  damages  (limited  to within  the limit of this
                  Agreement  however),  other  than  Loss In  Excess  Of  Policy
                  Limits,  paid or payable by the  Corporation as a result of an
                  action against it by its Insured, its Insured's assignee, or a
                  third party claimant,  which action alleges  negligence or bad
                  faith on the part of the Corporation in handling a claim under
                  a Policy subject to this Agreement.

         The term "Extra  Contractual  Obligations" shall not include any amount
         paid or payable by the Corporation  where such amount has been incurred
         by the  Corporation  due to the  fraud  of a  member  of the  board  of
         directors, a corporate officer of the Corporation or any other employee
         with claims settlement  authority,  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.

C)       The term "Net Retained Liability" shall mean that portion of any Policy
         which the Corporation retains net for its own account, however gross of
         recoveries from the underlying First Whole Account  Aggregate Excess of
         Loss  Retrocession  Agreement  (E1), and in  calculating  the amount of
         Ultimate  Net Loss  hereunder,  only loss in respect of that portion of
         any Policy which the Corporation  retains net for its own account shall
         be included.



<PAGE>


DEFINITIONS
(continued)

         The amount of the  Retrocessionaire's  liability  under this  Agreement
         shall not be increased by reason of the inability of the Corporation to
         collect  from  any  other  Retrocessionaire(s),   whether  specific  or
         general,   any   amounts   which   may  have   become   due  from  such
         Retrocessionaire(s),  whether such inability arises from the insolvency
         of such other Retrocessionaire(s) or otherwise.

D)       The term "Subject  Gross Net Earned  Premium  Income" or "SGNEPI" shall
         mean the  Corporation's  subject  gross  premium  income  written  less
         premiums paid for  cancellations  and reductions of rates and for other
         reinsurance carried by the Corporation, recoveries under which inure to
         the  benefit of this  Agreement,  plus the subject  gross net  unearned
         premium  at the  beginning  of the  term,  less the  subject  gross net
         unearned  premium at the end of the term,  said unearned  premium being
         calculated on a monthly pro rata basis.

E)       The term  "Catastrophe  Losses" shall mean property  losses recorded by
         the Corporation  which involve two or more Policies and total more than
         $7,500,000 of incurred loss net of inuring protection(s).

F)       The  unqualified  term  "Policy"  shall  mean  all  binders,  policies,
         certificates,  agreements,  treaties,  bonds or contracts of insurance,
         reinsurance or retrocession  accepted or held covered  provisionally or
         otherwise underwritten by the Corporation.

G)       The term "Original Policy" shall mean the initial binder, policy,
         certificate,  agreement, bond or contract of insurance that
         is subsequently reinsured.

H)       The  unqualified  term  "Insured"  when used as a noun  shall  mean the
         person who obtained or is otherwise  covered by insurance issued by the
         Corporation,  or  the  reinsured  who  obtained  reinsurance  from  the
         Corporation,  or the  retrocedent  who obtained  retrocession  from the
         Corporation, as the context so requires.

I)       The term  "Original  Insured"  shall mean the entity who obtained or is
         otherwise  covered by insurance  that is  subsequently reinsured or
         retroceded under this Agreement.

                                   ARTICLE VI

RETROCESSION PREMIUM AND ADJUSTMENT

A minimum  and deposit  premium of  $25,000,000  is due at January 1, 1996.  The
retrocession  premium  shall be an amount equal to 49% of the amount of Ultimate
Net Loss  ceded  under this  Agreement  as  reported  by the  Corporation  as of
February 1, 1997. The retrocession  premium,  after deduction of the minimum and
deposit premium previously paid, shall be due at February 15, 1997.


<PAGE>


RETROCESSION PREMIUM AND ADJUSTMENT
(continued)

The Corporation shall pay to the Retrocessionaire  $9,500,000 of the minimum and
deposit  premium  at  January 1, 1996.  The  balance of all  premium,  including
retrocession  premium due February 15,  1997,  if any,  shall be withheld by the
Corporation in an Experience Account for the purpose of subsequent loss payments
and profit sharing.


                                   ARTICLE VII

EXPERIENCE ACCOUNT BALANCE

The Corporation shall calculate a notional Experience Account Balance at the end
of  each  quarter  year  until  expiration  of  all  of  the  Retrocessionaire's
obligations  under this  Agreement.  At January 1, 1996 the  Experience  Account
Balance shall be zero. The Experience Account Balance thereafter shall equal:

              The  Experience   Account   Balance  at  the
            inception  of the quarter  plus the minimum and
            deposit premium, if any, due during the quarter
         less $9,500,000 and Federal Excise Tax, if applicable
  plus the retrocession premium due hereon, if any, during the quarter
                 less Federal Excise Tax, if applicable
plus interest credited by applying a rate of 1.875% against the average
 positive Experience Account Balance for the quarter, calculated daily
      less the Spread paid to the Retrocessionaire for the quarter
  less Ultimate Net Loss paid by the Retrocessionaire for the quarter.

"Spread" shall mean the amount equal to the following percentages of the average
positive  Experience  Account  Balance  for the  quarter  during  the  following
calendar years, respectively:

A)       0.00% during calendar year 1996;

B)       0.25% during calendar years 1997, 1998 and 1999;

C)       0.625% during calendar years 2000, 2001 and 2002; and

D)       1.00% during calendar year 2003 and all calendar years thereafter.

At the option of the  Retrocessionaire,  the accrued Spread shall be paid to the
Retrocessionaire at the end of any quarter in cash or withheld in the Experience
Account.




<PAGE>


                                  ARTICLE VIII

LOSS SETTLEMENTS

The Corporation shall report quarterly to the  Retrocessionaire  the development
of the incurred  Ultimate Net Loss ceded by a report  showing in summary  format
the  percentage  and dollar amount of Ultimate Net Loss for the term, as advised
at February 1, 1997, which has been paid by the Corporation. At such time as the
amount of paid Ultimate Net Loss exceeds the retention under this Agreement, the
Retrocessionaire shall reimburse the Corporation for such paid Ultimate Net Loss
by payment  within 30 days of the advice of amounts  becoming due. To the extent
the Experience  Account is sufficient,  the  Retrocessionaire  may reimburse the
Corporation by consenting to the Corporation  retaining for its own account from
the Experience Account the amount of such paid Ultimate Net Loss.

Notwithstanding the above, the Retrocessionaire  shall have no obligation to pay
any part of any loss which  would cause the  Experience  Account to be less than
the product of negative 30% and the total premium ceded. Nothing set forth above
shall be  construed  as  prohibiting  the  Corporation  from  taking  credit for
Ultimate  Net Loss ceded as the above is only  applicable  to cash  transactions
under this Agreement.


                                   ARTICLE IX

COMMUTATION AND EXPERIENCE REFUND

This Agreement may be commuted at the  Corporation's  sole option by giving 90
days advance written notice at any time of its intent to so commute after
expiration of the term.

If at the time of  commutation  the amount of unpaid  Ultimate  Net Loss is less
than or equal to the Experience Account Balance, the Retrocessionaire  agrees to
pay all unpaid Ultimate Net Loss as of the date of commutation.

If at the time of commutation  the amount of unpaid Ultimate Net Loss is greater
than the  Experience  Account  Balance,  the unpaid  Ultimate  Net Loss shall be
commuted at an amount to be mutually agreed. If mutual agreement is not reached,
then no commutation shall be permitted.

In the event that unpaid  Ultimate  Net Loss is commuted,  the  Retrocessionaire
agrees to pay an  experience  refund equal to the positive  difference,  if any,
between the Experience Account Balance after deduction of the accrued Spread due
the  Retrocessionaire,  if any, which shall be paid to the  Retrocessionaire  at
that time, and the commuted value of unpaid  Ultimate Net Loss.  Such payment of
an experience  refund shall be made by the  Corporation's  retention for its own
account from the Experience Account.



<PAGE>


COMMUTATION AND EXPERIENCE REFUND
(continued)

Payment by the Retrocessionaire of the commuted unpaid Ultimate Net Loss and the
experience  refund, if any, shall constitute a complete and final release of the
Retrocessionaire in respect of its obligations under this Agreement.

Any amount due to the  Corporation as calculated  above shall be payable by the
Retrocessionaire  within 30 days following the date of commutation.


                                    ARTICLE X

COMMUTATION APPROVAL ON CORPORATION'S POLICIES

In the event of a commutation of any Policy resulting in the payment of Ultimate
Net  Loss  in  excess  of  $5,000,000  prior  to the  time  required  under  the
Corporation's  Policies for the term of this  Agreement,  then the paid Ultimate
Net Loss under this  Agreement  shall be  determined as if such  commutation  or
other arrangement had not occurred.  The analysis to determine both the ultimate
reserve  amount and the payout  pattern  which would have occurred on a commuted
Policy shall, unless waived in writing by the  Retrocessionaire,  be made on the
basis of an independent  reserve analysis.  The  Retrocessionaire  will select a
firm acceptable to the Corporation to conduct the analysis. The Retrocessionaire
shall bear the cost of such analysis and the results of such  analysis  shall be
binding in  determining  the ultimate  reserve amount and payout pattern for the
commuted reinsurance contract.


                                   ARTICLE XI

EXPIRATION DURING LOSS

(This article applies only to property insurance and reinsurance.)

If this Agreement expires while an occurrence  covered hereunder is in progress,
the Retrocessionaire's liability hereunder shall, subject to the other terms and
conditions of this  Agreement,  be determined  as if the entire  occurrence  had
taken place prior to the expiration of this Agreement,  provided that no part of
such occurrence is claimed against any renewal or replacement of this Agreement.




<PAGE>


                                   ARTICLE XII

STOP LOSS (AGGREGATE) INCLUSION

All  aggregate  Policies  coming  within  the scope of this  Agreement  shall be
covered on a risks  attaching  basis  rather  than on an  occurrence  basis.  An
aggregate  Policy issued for a period of more than 12 months shall be considered
as  attaching  at each  anniversary  date of such Policy while such Policy is in
force.

                                  ARTICLE XIII

WARRANTY

The  Corporation  shall not introduce  any change in its  generally  established
practices,  including  but not limited to  accounting,  claims,  acceptance  and
underwriting  policies,  in respect of the business which is the subject of this
Agreement without the prior approval of the Retrocessionaire,  and such approval
shall not be  unreasonably  withheld by the  Retrocessionaire.  The  Corporation
specifically  warrants  that it will not change its gross line guide nor inuring
protections without prior advice to and approval from the Retrocessionaire,  and
such approval shall not be unreasonably withheld by the Retrocessionaire.

                                   ARTICLE XIV

CURRENCY

All  financial  transactions  contemplated  by this  Agreement  shall  be in the
currency of the United States of America.

                                   ARTICLE XV

ACCESS TO RECORDS

At any reasonable time, the  Retrocessionaire or its designated  representatives
shall have free access to all records of the  Corporation  which pertain to this
Agreement.


                                   ARTICLE XVI

ERRORS AND OMISSIONS

Any inadvertent delays,  omissions or errors shall not be held to relieve either
party  hereto from any  liability  which would  attach to it  hereunder  if such
delay,  omission or error had not been made,  provided  such delay,  omission or
error is rectified  upon  discovery,  and does not impose any greater  liability
upon the other party than would have attached  hereunder if the delay,  omission
or error had not occurred.


<PAGE>


                                  ARTICLE XVII

TAXES

In  consideration  of the terms under which this  Agreement is entered into, the
Corporation  will not claim a deduction  in respect of the  premium  hereon when
making tax returns,  other than income or profits tax  returns,  to any state or
territory of the United  States of America,  the District of Columbia or Canada,
and the  Corporation  will be liable for payment of all premium taxes on premium
ceded under this Agreement.


                                  ARTICLE XVIII

OFFSET

The  Corporation  and the  Retrocessionaire  shall  have the right to offset any
balance(s) due from one to the other under this  Agreement.  The party asserting
the right of offset may exercise such right any time whether the  balance(s) due
are on  account  of  premiums  or  losses  or  otherwise.  In the  event  of the
insolvency  of a party hereto,  offset shall only be allowed in accordance  with
the provision of Section 7427 of the Insurance Law of the State of New York.

                                   ARTICLE XIX

INSOLVENCY

In the event of the insolvency of the Corporation,  the retrocession  under this
Agreement  shall be payable  directly to the  Corporation or to its  liquidator,
receiver,  conservator  or statutory  successor on the basis of the liability of
the Corporation  without diminution because of the insolvency of the Corporation
or because the liquidator,  receiver,  conservator or statutory successor of the
Corporation  has  failed to pay all or a portion  of any  claim.  It is  agreed,
however,  that the liquidator,  receiver,  conservator or statutory successor of
the  Corporation  shall  give  written  notice  to the  Retrocessionaire  of the
pendency of a claim  against the  Corporation  indicating  the Policy  reinsured
which  claim   would   involve  a  possible   liability   on  the  part  of  the
Retrocessionaire  within a  reasonable  time  after  such  claim is filed in the
conservation or liquidation  proceeding or in the receivership,  and that during
the pendency of such claim, the  Retrocessionaire may investigate such claim and
interpose,  at its own  expense,  in the  proceeding  where  such claim is to be
adjudicated,  any  defense  or  defenses  that  it  may  deem  available  to the
Corporation or its liquidator, receiver, conservator or statutory successor. The
expense thus incurred by the  Retrocessionaire  shall be chargeable,  subject to
the approval of the Court,  against the  Corporation  as part of the expenses of
conservation  or  liquidation  to the extent of a pro rata share of the  benefit
which may accrue to the Corporation solely as a result of the defense undertaken
by the Retrocessionaire.



<PAGE>


INSOLVENCY
(continued)

Where  two or more  Retrocessionaires  are  involved  in the  same  claim  and a
majority in interest elect to interpose defense of such claim, the expense shall
be  apportioned  in accordance  with the terms of this  Agreement as though such
expense had been incurred by the Corporation.

It is further  understood and agreed that, in the event of the insolvency of the
Corporation,  the retrocession under this Agreement shall be payable directly by
the  Retrocessionaire  to  the  Corporation  or  to  its  liquidator,  receiver,
conservator or statutory successor, except as provided by Section 4118(a) of the
New York Insurance Law or except (a) where the Agreement  specifically  provides
another  payee  of such  retrocession  in the  event  of the  insolvency  of the
Corporation  and (b) where the  Retrocessionaire  with the consent of the direct
Insured or Insureds has assumed such Policy  obligations  of the  Corporation as
direct obligations of the Retrocessionaire to the payees under such Policies and
in substitution for the obligations of the Corporation to such payees.

                                   ARTICLE XX

ARBITRATION

As a condition  precedent to any right of action hereunder,  any dispute arising
out of  this  Agreement  shall  be  submitted  to the  decision  of a  board  of
arbitration composed of two arbitrators and an umpire, meeting in Overland Park,
Kansas,   unless   otherwise   mutually   agreed  by  the  Corporation  and  the
Retrocessionaire.

The members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance  companies,  or  underwriters  at Lloyd's,
London.  Each party shall appoint its arbitrator and the two  arbitrators  shall
choose an umpire before instituting the hearing.  In the event that either party
should fail to choose an arbitrator  within 30 days following a written  request
by the other party to enter upon  arbitration,  the requesting  party may choose
two  arbitrators  who  shall in turn  choose  an  umpire  before  entering  upon
arbitration.  In the event the two arbitrators fail to agree on an umpire either
party  shall  have the right to submit the  matter to the  American  Arbitration
Association  in effect at that  time to name an  umpire in  accordance  with the
qualifications provided hereinabove.

Each party shall present its case to the  arbitrators  within 60 days  following
the date of their appointment.  The board shall make its decision with regard to
the custom and usage of the insurance and reinsurance business.  The board shall
issue its  decision  in writing  based upon a hearing in which  evidence  may be
introduced  without  following  strict  rules of  evidence  but in  which  cross
examination  and  rebuttal  shall be allowed.  The board shall make its decision
within 60 days  following  the  termination  of the hearings  unless the parties
consent to an extension.  The majority  decision of the board shall be final and
binding upon all parties to the proceeding.  Judgment upon the final decision of
the board may be entered in any court of competent jurisdiction.


<PAGE>


ARBITRATION
(continued)

If more than one  Retrocessionaire  is  involved in the same  dispute,  all such
Retrocessionaires  shall  constitute  and act as one party for  purposes of this
Article  and  communications  shall  be made by the  Corporation  to each of the
Retrocessionaires  constituting the one party,  provided,  however, that nothing
shall impair the rights of such Retrocessionaires to assert several, rather than
joint,  defenses or claims,  nor be construed  as changing the  liability of the
Retrocessionaires under the terms of this Agreement from several to joint.

Each party shall bear the expense of its own  arbitrator  and shall  jointly and
equally  bear with the other party the expense of the umpire.  In the event both
arbitrators  are chosen by one party,  the  expense of the  arbitrators  and the
umpire shall be jointly and equally  borne  between the parties.  The  remaining
costs of the arbitration proceedings shall be allocated by the board.

This Article shall survive the termination of this Agreement.


                                   ARTICLE XXI

NONWAIVER

The failure of the Corporation or the  Retrocessionaire  to insist on compliance
with this  Agreement  or to  exercise  any right or remedy  hereunder  shall not
constitute a waiver of any rights or remedies contained herein, nor estop either
party from thereafter  demanding full and complete compliance nor prevent either
party from exercising such rights or remedies in the future.


                                  ARTICLE XXII

INTERMEDIARY

Bates Turner,  Inc. is hereby  recognized as the  Intermediary  negotiating this
Agreement for business hereunder. All communications (including, but not limited
to, notices, statements,  premiums, return premiums, commissions, taxes, losses,
loss adjustment expenses,  salvages and loss settlements)  relating hereto shall
be transmitted to the Corporation or the Retrocessionaire  through Bates Turner,
Inc., 5200 Metcalf, P.O. Box 2959, Overland Park, Kansas, 66201. Payments by the
Corporation to the Intermediary shall constitute payment to the Retrocessionaire
to  the  extent  of  such  payments.  Payments  by the  Retrocessionaire  to the
Intermediary shall only constitute payment to the Corporation to the extent that
such payments are actually received by the Corporation.



<PAGE>


                                  ARTICLE XXIII

PARTICIPATION AND SIGNATURES

This Agreement  obligates the  Retrocessionaire  specifically  identified  below
("Subscribing  Retrocessionaire")  for 50.00% of the  liability  and amounts set
forth under this Agreement and the Subscribing Retrocessionaire is entitled to a
corresponding part of the premiums set forth under this Agreement.

The share of the Subscribing  Retrocessionaire  in the interests and liabilities
of all  retrocessionaires  in respect of this  Agreement  shall be separate  and
apart from the shares of the other retrocessionaires to this Agreement,  and the
interests and liabilities of the Subscribing  Retrocessionaire  shall be several
and not joint with those of the other  retrocessionaires  and in no event  shall
the Subscribing Retrocessionaire participate in the interests and liabilities of
the other retrocessionaires.


IN WITNESS  WHEREOF,  the parties hereto by their duly authorized  officers have
executed this Agreement in triplicate.

At Overland Park, Kansas, this 19th day of August, 1996.

EMPLOYERS REINSURANCE CORPORATION

By:               /s/ Joseph W. Levin

Attest:           /s/ Hoyt H. Wood, Jr.


At New York, New York, this 23 day of August,1996.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
Per AIG Reinsurance Advisors, Inc.


By:               /s/ Joseph Umansky - Attorney in fact

Attest:           /s/ Robert J. Coords