EMPLOYERS REINSURANCE CORPORATION

                                  WHOLE ACCOUNT
                      AGGREGATE EXCESS OF LOSS RETROCESSION
                              REINSURANCE AGREEMENT


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

I                 BUSINESS COVERED                                             2
II                TERM                                                         2
III               TERRITORY                                                    3
IV                EXCLUSIONS                                                   3
V                 COVERAGE AND AGGREGATE LIMIT                                 4
VI                DEFINITIONS                                                  5
VII               NET RETAINED LINES                                           9
VIII              REINSURANCE LAYER PREMIUMS, PROPERTY                         9
                  CATASTROPHE PREMIUMS, NON-PROPERTY
                  CATASTROPHE ULTIMATE NET LOSS PREMIUMS,
                  SPECIAL RETURN PREMIUM AND
                   REINSURER'S MARGIN
IX                CEDING COMMISSION                                           13
X                 CURRENCY                                                    13
XI                TAXES                                                       13
XII               ACCOUNTS, REMITTANCES AND LOSS SETTLEMENTS                  14
XIII              FUNDS WITHHELD PROFIT SHARING ACCOUNT                       16
XIV               INTEREST CREDIT                                             16
XV                EXCESS OF POLICY LIMITS                                     17
XVI               EXTRA CONTRACTUAL OBLIGATIONS                               17
XVII              OFFSET                                                      18
XVIII             COMMUTATION                                                 18
XIX               PROFIT SHARING                                              19
XX                CHANGE IN ADMINISTRATIVE PRACTICES/                         19
                     CHANGE IN OWNERSHIP
XXI               ERRORS AND OMISSIONS                                        20
XXII              ACCESS TO RECORDS                                           20
XXIII             INSOLVENCY                                                  20
XXIV              ARBITRATION                                                 21
XXV               LOSS RESERVE FUNDING                                        22
XXVI              GOVERNING LAW                                               23
XXVII             INTERMEDIARY                                                23




<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

                           NATIONAL INDEMNITY COMPANY
                                 Omaha, Nebraska

                  (hereinafter referred to as the "Reinsurer")



                                    ARTICLE I
                                    ---------

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

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,  except for business excluded in Article IV,
Exclusions, all subject to the terms and conditions of this Agreement.


                                   ARTICLE II
                                   ----------

TERM
----

This  Agreement  shall be effective  from  January 1, 2001 through  December 31,
2001, both days inclusive.

Should this Agreement expire while a loss covered hereunder is in progress,  the
Reinsurer  shall be responsible  for the 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.

                                     Page 2
<PAGE>


                                   ARTICLE III
                                   -----------

TERRITORY
---------

This Agreement shall cover the Company's  Business Covered,  wherever losses may
occur.


                                   ARTICLE IV
                                   ----------

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 (Reinsurance)
         Clause (BRMA 56B) attached hereto;

D.       Insolvency and Financial Guaranty;

E.       Pools, Associations and Syndicates.

F.       Credit  default   swaps,   credit  derivatives,   collateralized   debt
         obligations, collateralized  bond  obligations and collateralized  loan
         obligations.  This exclusion  shall not  apply to trade credit business
         routinely underwritten by GE Frankona;

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

H.       Life Insurance and Reinsurance Coverages;

I.       Finite Aggregate Excess of Loss Whole Account Coverages;

J.       Business underwritten by  Luxembourg European  Reinsurance  Company and
         Irish European Reinsurance Company Ltd.

                                     Page 3

<PAGE>



                                    ARTICLE V
                                    ---------

COVERAGE AND AGGREGATE LIMIT
----------------------------

A.       Coverage - The Reinsurer shall indemnify the Company for X% Subject
         Ultimate Net Loss, in excess of X% of Subject Net Earned Premium (the
         "Retention") in accordance with the following Coverage Layers and
         subject to the Aggregate Limit in Section B. below:

         Layer 1 - Coverage  for  Layer  1  shall equal X% of Subject Net Earned
         Premium excess of the Retention.

         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.

B.       Aggregate Limit - In  no  event  shall the Reinsurer be liable for more
         than X% of Subject Net  Earned  Premium, subject to a maximum Aggregate
         Limit  of  $X  million. Should  the  result of multiplying  Subject Net
         Earned Premium by X% exceed $X million, each of the Layers  of Coverage
         in A. above  shall  be  reduced  proportionately  by  multiplying  each
         respective  Layer of Coverage  percentage of Subject Net Earned Premium
         by the lesser of X% or the  result of dividing $X million by the result
         of multiplying Subject Net Earned Premium by X%.

                                     Page 4

<PAGE>





                                   ARTICLE VI
                                   ----------

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

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

B.       "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  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.

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

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

C.       "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.

                                     Page 5

<PAGE>

         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.

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

E.       "Property Catastrophe Loss" - Property Catastrophe Loss as used in this
         Agreement shall  mean  property  loss  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

                                     Page 6

<PAGE>


         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.

F.       "Property  Catastrophe  Ultimate   Net   Loss  Limitation"  -  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% (estimate $X million) of the Net
         Earned Premium of  the combined Company and its Affiliated Companies to
         the extent  the  Non-Property  Catastrophe  Ultimate  Net Losses can be
         ceded to this Agreement.

         Property  Catastrophe  Ultimate Net Loss Limitation shall be limited to
         a  maximum of $X million  Subject  Ultimate Net Loss emanating from the
         Company alone.

         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  $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 six 2001  accident year
         whole  account  aggregate  excess  of  loss   coverages  equal  to  the
         respective  sum of  budgeted  catastrophe  Ultimate  Net  Loss plus the
         underlying  aggregate limit for each  respective  company  (i.e, for GE
         Frankona,  Property  Catastrophe  Ultimate  Net  Loss is  limited to $X
         million,  for GE Re $X  million).  Property  Catastrophe  Ultimate  Net
         Losses are estimated to be $X million.

G.       "Subject Net Earned Premium" shall mean the  net earned premium  of the
         Company only for the Term net of all other reinsurances (excluding this
         whole account coverage). Subject Net  Earned Premium is estimated to be
         $X million. Subject Net Earned Premium shall include all other business
         except for the six 2001 accident year whole account aggregate excess of
         loss  coverages  written  by  the  Company  in respect of 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.

                                     Page 7

<PAGE>


H.       "Subject Ultimate  Net  Loss" shall  mean the  aggregate sum of amounts
         paid or payable by the Company on its net retained liability (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 Company's 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.

         Subject Ultimate Net Loss shall be net of inuring reinsurances, whether
         collectible  or  not, except  as  provided below, and  all salvages and
         recoveries credited to the Company's net  retention; 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 Article
         XXIV, Insolvency. 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.

I.       "Ultimate  Net Loss" shall  mean  the  aggregate sum of amounts paid or
         payable by  each  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  in  respect of the Company's
         Affiliated Companies, in settlement of losses, including Allocated Loss
         Adjustment Expenses, in  respect of  Business  Covered during the Term,
         net of all reinsurances ceded except for this Reinsurance Agreement and
         the six  2001  accident  year  whole  account  aggregate excess of loss
         reinsurances ceded  from the  Affiliated  Companies  and assumed by the
         Company.

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

J.       Underlying  Aggregate  Limit  and Retention for each Affiliated Company
         shall mean the amounts in the table below:

                                                               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%

                                     Page 8
<PAGE>

                                   ARTICLE VII
                                   -----------

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

The  same  above  methodology  as  respects  the  Company  shall  also  apply to
Affiliated Companies.


                                  ARTICLE VIII
                                  ------------

REINSURANCE  LAYER  PREMIUMS,   PROPERTY  CATASTROPHE   PREMIUMS,   NON-PROPERTY
--------------------------------------------------------------------------------
CATASTROHE    SUBJECT    ULTIMATE   NET   LOSS    PREMIUMS,    SPECIAL    RETURN
--------------------------------------------------------------------------------
PREMIUM AND REINSURER'S MARGIN
------------------------------

A.       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 Layer 1  Reinsurance Premium of $X
         million.

         Layer 2 - If the Company  and  all  of its  Affiliated Companies exceed
         Plan, as per the  Determination of Exceeding Plan Definition in Article
         VI, Section C. then Layer 2 Reinsurance Premium shall equal X% of ceded
         Subject Ultimate  Net  Loss, if  any, to  Layer 2, subject to a maximum
         Layer 2 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
         VI, Section C., then  Layer  2  Reinsurance  Premium  shall equal X% of
         ceded  Subject  Ultimate  Net  Loss, if  any, to Layer  2, subject to a
         maximum  Layer  2  Reinsurance  Premium  of  X% of Subject  Net  Earned
         Premium.

         Layer 3 - If the Company and all of  its  Affiliated  Companies  exceed
         Plan, as per the Determination  of Exceeding Plan Definition in Article
         VI,  Section C , then  Layer 3 Reinsurance  Premium  shall  equal X% of
         ceded

                                     Page 9

<PAGE>

         Subject  Ultimate  Net Loss,  if  any, to Layer 3, subject to a maximum
         Layer 3 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
         VI,  Section C., then Layer 3  Reinsurance  Premium  shall equal  X% of
         ceded  Subject  Ultimate  Net Loss,  if any, to Layer 3,  subject  to a
         maximum  Layer  3  Reinsurance  Premium  of X% of  Subject  Net  Earned
         Premium.

         Layer 4 - If  the Company and all of its  Affiliated  Companies  exceed
         Plan, as per  the Determination of Exceeding Plan Definition in Article
         VI,  Section C  Layer 4  Reinsurance  Premium  shall  equal X% of ceded
         Subject  Ultimate  Net Loss,  if  any, to Layer 4, subject to a maximum
         Layer 4 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
         VI,  Section C., then Layer 4  Reinsurance  Premium  shall  equal X% of
         ceded  Subject  Ultimate  Net Loss,  if any, 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
         VI,  Section C., then Layer 5  Reinsurance  Premium  shall equal  X% of
         ceded  Subject  Ultimate  Net Loss,  if any, 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
         VI.,  Section C., then Layer 5  Reinsurance  Premium shall  equal X% of
         ceded  Subject  Ultimate  Net Loss,  if any, 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 ceded Subject
         Ultimate Net Loss,  if any, 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  each   calendar   quarter  end.  All
         Reinsurance  Layer  Premiums  shall be  deemed  credited  to the Funds
         Withheld Account at January 1, 2001.

B.       Property  Catastrophe  Premiums  -  If  the  Company  and  all  of  its
         Affiliated   Companies  exceed  Plan,  as   per  the  Determination  of
         Exceeding Plan  Definition in Article VI, Section C., then  the Company
         shall pay to the Reinsurer a Property  Catastrophe  Premium,  by credit
         to the Funds  Withheld  Profit  Sharing  Account,  at  January 1, 2001.
         Property  Catastrophe  Premium  shall  equal the  sum of the results of
         applying the rates to the values in the following tables:

                                    Page 10

<PAGE>


     1.           ERC Company Only                    Gross        Gross Maximum
              Subject Property Cat. UNL             Additional       Additional
               in excess of $X million               Premium           Premium
                for ERC, in millions                  Rate           In Millions
         ---------------------------------------     -------        ------------
          from               up to and including
         ------              -------------------

         $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
                                                                         --
         Total Maximum                                                   $X
                                                                         ==


         plus


    2.       Affiliated Companies
              Property Cat. UNL                     Gross          Gross Maximum
          in excess of $XXX million               Additional         Additional
         for all Affiliated Companies              Premium             Premium
                in millions                         Rate             In Millions
         ----------------------------             ----------       -------------
         from        up to and including
         ----        -------------------

         $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
                                                                          --
         Total Maximum                                                    $X
                                                                          ==

         The  amounts for 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 Ultimate Net Losses
         that are  not  excluded  from  Ultimate  Net  Losses as a result of the
         Property  Catastrophe  Ultimate  Net  Loss  Limitation  provision,  per
         Article  VI,   Section  E.  For  purposes  of  applying   the  Property
         Catastrophe AP rates, should Property  Catastrophe  Ultimate Net Losses
         in  excess  of $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.

                                    Page 11
<PAGE>


         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.

C.       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
         above the GE Frankona Plan           Gross            Incremental
                 from-to                     Premium          Gross Premium
               In Millions                    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
                                                                   --
            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.

D.       Special Return Premium - If ceded  Subject  Ultimate  Net  Loss is less
         than $X, then the Company is entitled to a Special Return  Premium. 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 be equal to the result of
         subtracting the  product of X% of ceded  Subject Ultimate Net Loss from
         the result of aggregate Reinsurance  Premiums  less Ceding  Commissions
         due hereon less the portion of Reinsurer's Margin due as  of January 1,
         2001. The Special Return Premium may not be less than zero.

E.       Reinsurer's  Margin - The  Company  shall pay the Reinsurer a Reinsurer
         Margin of $X million on January 1, 2001.

                                    Page 12
<PAGE>

         In addition to the above, the Company shall pay the Reinsurer annually,
         a Reinsurer's Margin equal to  the result of multiplying X basis points
         by the amount which the  ceded  outstanding portion of Subject Ultimate
         Net  Loss  exceeds  the Funds  Withheld  Profit Sharing Account at each
         respective  year end. Such  Reinsurer's  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  Reinsurer's  Margins  that  the  Reinsurer  is
         entitled  to. There shall be no interest in respect of such Reinsurer's
         Margin. Such  Reinsurer's  Margin  shall  be  deducted  from  the Funds
         Withheld Profit Sharing Account as of January 1, 2001.


                                   ARTICLE IX
                                   ----------

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 Subject Ultimate Net Loss Premiums.

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


                                    ARTICLE X
                                    ---------

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 rate of exchange at the date such transaction is
entered on the books of the Company.


                                   ARTICLE XI
                                   ----------

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.

                                    Page 13
<PAGE>


                                   ARTICLE XII
                                   -----------

ACCOUNTS, REMITTANCES AND LOSS SETTLEMENTS
------------------------------------------

A.       Within  60  (sixty)  days  following  the end of each calendar quarter,
         beginning with the quarter ending  December 31, 2001, the Company shall
         report to the Reinsurer the amount of:

         1.     Cumulative Subject Net Earned Premium;

         2.     Cumulative Subject Ultimate Net Loss paid;

         3.     Subject Ultimate Net Loss outstanding;

         4.     Ceded  Subject  Ultimate  Net Loss  paid and incurred under this
                Agreement;

         5.     Reinsurance Layer  Premiums, Property  Catastrophe  Premiums and
                Non-Property   Catastrophe   Ultimate    Net    Loss    Premiums
                calculations, in accordance with Article VIII;

         6.     Funds  Withheld Profit Sharing Account calculations and balance,
                in accordance with Article XIII.

         Reports  shall  continue   until  final  settlement of  all  losses  or
         Commutation, in accordance with Article XVIII.

B.       Within  60 (sixty) days  following  the  end  of each calendar quarter,
         beginning with the quarter ending December 31, 2001, the  Company shall
         report to the Reinsurer the amount of the following by  each Affiliated
         Company:

         1.     Net Earned Premium;

         2.     Paid  and  Outstanding, including  Incurred  But  Not  Reported,
                Property Catastrophe Ultimate Net Loss;

         3.     Paid  and  Outstanding,  including  Incurred  But  Not Reported,
                Non-Property Catastrophe Ultimate Net Loss;

         4.     Paid and Outstanding, including Incurred But Not Reported, Total
                Ultimate Net Loss;

         5.     Paid  and  Outstanding,  including  Incurred  But  Not Reported,
                Ultimate Net Loss ceded to the Company.

         Reports  shall  continue  until  final  settlement  of  all  losses  or
         Commutation, in accordance with Article XVIII.

                                    Page 14
<PAGE>


C.       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 paragraph below, 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  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.  The Company shall retain  net the  difference  between X% of
         otherwise   applicable  ceded  Subject  Ultimate  Net  Losses  and  the
         percentage elected for cession.

D.       Remittance  of  premium  amounts shall be due and payable in accordance
         with Article VIII.

E.       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. Subject to
         the  Reinsurer's Aggregate  Limit, settlement  shall be made first from
         the  Funds  Withheld   Profit  Sharing  Account   until  depleted,  and
         thereafter from other funds of the Reinsurer.

F.       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 or more of Reinsurance Layer
         Premiums 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. The  Reinsurer  will 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.

                                    Page 15

<PAGE>





                                  ARTICLE XIII
                                  ------------

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

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

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 paid; less

         6.   Ceded Subject Ultimate Net Loss when due by the Reinsurer; less

         7.   Ceding Commission when due by the Reinsurer; less

         8.   Commutation settlement; plus

         9.   Interest Credit.

Reinsurance  Layer  Premiums,  Property  Catastrophe  Premiums and  Non-Property
Catastrophe Subject Ultimate Net Loss Premiums shall be deemed to be payable and
credited to the Funds Withheld  Profit Sharing Account as of January 1, 2001 for
Interest Credit purposes hereon.

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 XIV
                                   -----------

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
preceding quarter by X% to achieve an effective X% annual yield.

Interest Credit shall continue even in the event of the Company's insolvency.

                                    Page 16
<PAGE>




                                   ARTICLE XV
                                   ----------

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  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.


                                   ARTICLE XVI
                                   -----------

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

                                    Page 17
<PAGE>


         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.


                                  ARTICLE XVII
                                  ------------

OFFSET
------

The Company or the Reinsurer  shall have and may exercise,  at any time and from
time to time, the right to offset any balance or balances  whether on account of
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.


                                  ARTICLE XVIII
                                  -------------

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 subject to the  balance of the  Funds Withheld Profit Sharing
         Account being greater than $X. Should the balance of the Funds Withheld
         Profit Sharing Account be equal to or  below $X, then Commutation shall
         not be available.

         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.

                                    Page 18

<PAGE>


        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.


                                   ARTICLE XIX
                                   -----------

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 or
Commutation.  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 XX
                                   ----------

CHANGE IN ADMINISTRATIVE PRACTICES/CHANGE IN OWNERSHIP
------------------------------------------------------

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  which  materially  affects  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,  or experiences a change in ownership,  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  Subject  Ultimate  Net Loss,
Allocated Loss  Adjustment  Expenses,  and/or Subject Net Earned Premium for the
purposes of this Agreement.

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

                                    Page 19
<PAGE>

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.


                                   ARTICLE XXI
                                   -----------

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 upon discovery.


                                  ARTICLE XXII
                                  ------------

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 XXIII
                                  -------------

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

                                    Page 20

<PAGE>


          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.

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 XXIV
                                  ------------

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

A.       As  a  condition  precedent  to  any  right of action hereunder, if any
         dispute  shall  arise  between  the  Company  and  the  Reinsurer  with
         reference  to  the   formation  or  validity  of  this  Agreement,  the
         interpretation  of  this  Agreement or their rights with respect to any
         transaction  involved, whether  such  dispute  arises  before  or after
         termination of this Agreement, such dispute, upon  the written  request
         of either party, shall  be submitted  to  three  arbitrators, one to be
         chosen by each party, and  the  third  by the two so chosen.  If either
         party refuses or neglects to appoint  an  arbitrator within 30 (thirty)
         days  after  the  receipt  of  written  notice  from  the  other  party
         requesting  it  to  do  so, the  requesting   party  may   appoint  two
         arbitrators.  If the two arbitrators fail to agree on the  selection of
         a third arbitrator  within 30 (thirty) days of their  appointment, each
         of them shall name two, of whom each shall decline one and the decision
         shall be made by the American Arbitration Association.  All arbitrators
         shall  be  active  or  retired   disinterested  executive  officers  of
         insurance or reinsurance companies  not under the management or control
         of either party to this Agreement.

B.       The  arbitrators are  relieved  of  all  judicial formalities  and  may
         abstain from following  the strict rules  of law; they shall make their
         award with a view to effecting the general purpose of this Agreement in
         a   reasonable   manner  rather  than  in  accordance  with  a  literal
         interpretation of the language. Each party shall submit its case to its
         arbitrator  within 30 (thirty) days  of the  appointment  of  the third
         arbitrator. The arbitrators shall render a decision within  30 (thirty)
         days  of  the close of  the  arbitration  hearing. The  arbitrators are
         precluded  from  awarding  any  treble,  punitive or exemplary damages,
         however so denominated.

C.       The decision in  writing of any  two  arbitrators, when  filed with the
         parties  hereto, shall be final and binding on  both parties.  Judgment
         may be entered  upon the final decision of the arbitrators in any court
         having jurisdiction. Each party shall bear the expense of its own

                                    Page 21

<PAGE>


         arbitrator  and shall  jointly  and  equally  bear with the other party
         the expense of  the  third  arbitrator  and of  the  arbitration.  Said
         arbitration shall  take place in  Overland  Park,  Kansas  unless  some
         other place is mutually agreed upon by the Company and the Reinsurer.

                                   ARTICE XXV
                                   ----------

LOSS RESERVE FUNDING
--------------------

(This  Article  applies only to a Reinsurer who does not qualify for full credit
with any insurance  regulatory  authority having jurisdiction over the Company's
reserves.)

It is agreed  that when the  Company  files  with the  Insurance  Department  or
establishes  reserves for claims  covered and  unearned  premium  hereunder,  as
required by law, the Company shall forward to the Reinsurer a statement  showing
the proportion of such loss and unearned premium reserves which is applicable to
the Reinsurer.  The Reinsurer  hereby agrees to apply for and secure delivery to
the Company of a clean,  irrevocable and unconditional  Letter of Credit, with a
minimum  term of one year,  that is issued or  confirmed,  and  presentable  and
payable in the United  States by any bank or trust  company,  and is in a format
acceptable to the governmental  authority having jurisdiction over the Company's
reserves,  in an amount  equal to the  Reinsurer's  proportion  of such loss and
unearned premium and commission  reserves which exceed the Funds Withheld Profit
Sharing Account balance.

The Company and the  Reinsurer  agree that the Letter of Credit  provided by the
Reinsurer  under this  provision may be drawn upon at any time,  notwithstanding
any other  provisions in this  Agreement,  including  without  limitation by any
liquidator,  rehabilitator,  receiver  or  conservator  of such  Company for the
following purposes:

1)     to reimburse  the  Company  for the Reinsurer's share of Subject Ultimate
       Net Loss paid by the  Company  under the Reinsurance Agreements reinsured
       under this Agreement and which have not been otherwise paid;

2)     to  reimburse  the  Company for the Reinsurer's share of premium returned
       under the Reinsurance Agreement reinsured under this Agreement on account
       of cancellation of such Reinsurance Agreements;

3)     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
       amounts ceded under this Agreement.  Such cash deposits shall  be held in
       an interest bearing account separate from the Company's other assets, and
       interest thereon shall accrue to  the  benefit  of  the Reinsurer.   Such
       amount shall  include, but  not  be limited to amounts  for  reserves for
       claims and  losses incurred, including  losses incurred but not reported,
       allocated loss adjustment  expenses, and  unearned  premiums;

4)     to pay any other amounts the Company claims are due under this Agreement;

                                    Page 22

<PAGE>


5)     to  return any amounts drawn down on Letters of Credit in excess of the
       actual amounts  required  for (1), (2) and (3) above, or in case of (4)
       above, any amounts which are subsequently determined not to be due.

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

The designate bank shall have no  responsibility  whatsoever in connection  with
the  proprietary of withdrawals  made by the Company or the disposition of funds
withdrawn,  except  to see that  withdrawals  are made  only  upon the  order of
properly authorized representatives of the Company.

The  Company  agrees to pay the actual  costs of  obtaining  any such  Letter of
Credit for  amounts  up to, but not  exceeding,  X basis  points  times the time
weighted  annual  average  face amount of such Letter of Credit.  The  Reinsurer
shall provide  documentation of the charges from the bank or trust company which
issues  the Letter of Credit  and the  Company  shall have the option to pay the
bank or trust company directly or to reimburse the Reinsurer for such costs.


                                  ARTICLE XXVI
                                  ------------

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


                                  ARTICLE XXVII
                                  -------------

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.

                                    Page 23

<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

                           NATIONAL INDEMNITY COMPANY

            (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   15   day of November, 2001,
For and on behalf of Employers Reinsurance Corporation

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

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


<PAGE>



Signed this   7th   day of  November, 2001,
For and on behalf of National Union Fire Insurance Company of Pittsburgh, PA

By:            Brian Snover
       --------------------------------

Title: Vice President & General Counsel
       --------------------------------