Exhibit 10.21


OneBeacon
Insurance


2006
Management Incentive Plan


Performance Goals


	
  1.

  	
  Achieve economic combined ratio of 96% or better

  
	
   

  	
   

  
	
  2.

  	
  Be opportunistic on new business / keep our best
  renewal business / price it right

  
	
   

  	
   

  
	
  3.

  	
  Conform to changing demands to maintain Claims Loss
  Triangle at 25.8%

  
	
   

  	
   

  
	
  4.

  	
  Integrate reciprocals and other new business
  opportunities into OneBeacon including: Lawyers Liability, Community Banking,
  Middle Market MGA initiative, AIE conversion and HGIE expansion

  
	
   

  	
   

  
	
  5.

  	
  Continue to manage aggregate catastrophic exposures
  for wind, earthquake, flood, and terrorism

  
	
   

  	
   

  
	
  6.

  	
  Complete transactions that build long term economic
  value for OneBeacon

  












 


ONEBEACON’S
2006 MANAGEMENT INCENTIVE PLAN


Purpose


The Management Incentive Plan (MIP) is an integral
part of the total compensation program for senior Home Office and Field Office
management. Its primary purpose is to focus attention on 2006 profitability
goals and to reward eligible participants for the achievement of those goals.


 


Eligibility


The Plan is limited to home office and field office
senior staff who have a significant impact on OneBeacon’s operating results.


 


Target Awards


Target awards for all participants, expressed as a
percent of salary, will be set and approved by the Board of OneBeacon Insurance
Group LLC.


 


Performance Measure


The Corporate MIP pool will be established based upon
achievement of a 96% economic combined ratio for total OneBeacon operations,
computed on an adjusted calendar year basis. This measurement will be used to
establish a pool of money to be allocated to business units and Home Office
departments. At a corporate combined ratio of 96%, the plan will fund an amount
equal the sum of each of the plan’s participant’s potential award at their
target bonus percentage. The OneBeacon Board of Managers may adjust the size of
the pool based on under or over achievement of the company’s target combined
ratio and other objectives that will be communicated during first quarter,
2006.


 


Individual Awards


Each business unit will be judged against a number of
metrics including, where appropriate, a combined ratio result target, agreed to
in advance with the President of OneBeacon. Generally these targets will relate
to the aggregate financial plan rolled up by branch and line of business, but
the targets will not always match the plan (in many cases, the targets are more
aggressive). If the combined ratio target is achieved, in conjunction with
other business metrics, the business may be awarded 100% of its indicated share
of the corporate pool. Businesses failing to reach target may or may not, at
the discretion of the President, receive a reduced, partial allocation of the
pool. Businesses exceeding objectives may receive greater than 100% of indicated
allocation. In no event will the sum of the performance adjusted business unit
pools be greater than the performance adjusted company pool.


 


Within each business, it will be the prerogative of
the business leader, with guidance from and after consultation with the company
President, to further allocate the business’s pool amount to the constituent
branches, lines of business and individuals, based upon performance against
targets established within the business. It will be the responsibility of the
business leader, with guidance from the President, to establish appropriate
targets for the constituent branches, lines of business, departments, or
individuals at the outset of the MIP year.


 
















 


For
corporate or administrative functions that support all or multiple regions or
businesses, MIP individuals will receive allocations from the corporate pool
based upon attainment of their department and individual MIP goals for 2006.


Review and evaluation of performance will be conducted
during the first quarter following the end of the plan year. Incentive payments
will be paid once plan year results have been produced and evaluated.


The
salary used to determine the amount of the individual awards will be that in
effect at the end of the plan year (12/31/06).


Plan Participation for New Hires


Employees
hired during the plan year are eligible to participate in the MIP. Awards will
be pro-rated specifically based on date of hire.


Special Circumstances


The OneBeacon
Board of Managers may, in its sole discretion, also recognize extraordinary
conditions or circumstances in determining payment levels.


In the
event of termination prior to the payment of awards, no incentive payments will
be made. However, in the event of retirement or reduction in force after the
end of the plan year, but before payment is made, incentive payments may be
made if approved by the senior business leader. These exceptions will be made
on a case by case basis. In the event of death or disability, the plan
participant or beneficiary may be considered for a partial award payment.


Effect on Benefit Plans


Amounts
paid under the terms of this plan will not be counted for purposes of
determining compensation under any employee benefit plan sponsored by
OneBeacon.


Plan Continuation


Notwithstanding any of the aforementioned, the plan
may be amended or terminated, in whole or in part, at any time, by the Board of
Managers.


 



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