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                                                                   EXHIBIT 10.16

                      INVESTMENT ADMINISTRATION AGREEMENT

THIS INVESTMENT ADMINISTRATION AGREEMENT (this "Agreement"), dated as of May 11,
2001 and effective as of October 2, 1998, is made by and between FAIRFAX
FINANCIAL HOLDINGS LIMITED and HUDSON INSURANCE COMPANY. As used in this
Agreement, "we", "us" and "our" shall refer to HUDSON INSURANCE COMPANY, and
"you" and "your" shall refer to FAIRFAX FINANCIAL HOLDINGS LIMITED.

In consideration of the mutual promises contained herein, the parties agree as
follows:

1.   We authorize you to provide, and by signing below you agree to provide, the
     investment administration services set forth in Schedule A attached hereto,
     on our behalf and on the terms and conditions set out in this Agreement,
     subject to such guidelines, procedures and limitations as may be duly
     established and approved by our Board of Directors or a duly authorized
     committee of said Board.

2.   You shall be entitled to such fees, payable quarterly in arrears, for the
     service provided hereunder, as you may specify from time to time. Attached
     hereto as Schedule B is a copy of your current fee schedule and you agree
     to give us thirty (30) days prior written notice of any change in such
     schedule, which change shall require the approval of the Department. Such
     fees shall be the exclusive fees and charges payable (excluding third party
     disbursements reasonably incurred) for the services provided hereunder. As
     regards third party services, you will charge us only the amount of your
     actual disbursements paid to third parties for such services. We will remit
     payment to you not later than 15 days following delivery to us of a report
     showing the amount due hereunder.

3.   Either party hereto may terminate this Agreement without penalty by giving
     the other party at least thirty (30) days advance written notice of its
     desire to terminate the same.

4.   This Agreement shall enure to the benefit of and shall be binding upon the
     parties hereto and their respective successors. This Agreement may not be
     assigned by either party.

5.   You and we each acknowledge that the terms of this Agreement are the
     exclusive and conclusive terms of our mutual agreement with regard to the
     subject matter hereof.

6.   Any dispute or difference arising with reference to the applicable
     interpretation or effect of this Agreement, or any part thereof, shall be
     referred to a Board of Arbitration (the "Board") or two (2) arbitrators and
     an umpire.

     The members of the Board shall be active or retired disinterested officers
     of insurance or reinsurance companies.

     One arbitrator shall be chosen by the party initiating the arbitration and
     designated in the letter requesting arbitration. The other party shall
     respond, within fifteen (15) days, advising of its arbitrator. The umpire
     shall thereafter be chosen by two (2) arbitrators. In the event either
     party fails to designate its arbitrator as indicated above, the other party
     is hereby authorized and empowered to name the second arbitrator, and the
     party which failed to designate its arbitrator shall be deemed to have
     waived its rights to designate an arbitrator and shall not be aggrieved
     thereby. The two (2) arbitrators shall then have thirty days within which
     to choose an umpire. If they are unable to do so within thirty (30) days
     following their appointment, each arbitrator shall nominate three
     candidates within ten (10) days thereafter, two of whom the other shall
     decline, and the decision shall be made drawing lots. In the event of the
     death, disability or incapacity of an arbitrator or the umpire, a
     replacement shall be named pursuant to the process which resulted in the
     selection of the arbitrator or umpire to be replaced.

     Each party shall submit its case to the Board within one (1) month from the
     date of the appointment of the umpire, but this period of time may be
     extended by unanimous written consent to the Board.

     The sittings of the Board shall take place in Stamford, Connecticut. The
     Board shall make its decision with regards to the custom and usage of the
     insurance and reinsurance business. The Board is released

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     from all judicial formalities and may abstain from the strict rules of law.
     The written decision of a majority of the Board shall be rendered within
     sixty (60) days following the termination of the Board's hearings, unless
     the parties consent to an extension. Such majority decision of the Board
     shall be final and binding upon the parties both as to law and fact, and
     may not be appealed to any court of any jurisdiction. Judgment may be
     entered upon the final decision of the Board in any court of proper
     jurisdiction.

7.   The provisions in Schedule A and Schedule B attached hereto are hereby
     incorporated into, and form part of, this Agreement.

8.   This Agreement, including the schedules attached hereto and made a part
     hereof, may only be amended by written agreement signed by the parties and
     approved by the Department.

9.   Unless otherwise specified herein, all notices, instructions, advises or
     other matters covered or contemplated by this Agreement, shall be deemed
     duly given when received in writing (including by fax or other similar form
     of transmission) by you or us, as applicable, at the address or fax number
     first above written or such other address or fax number as shall be
     specified in a notice similarly given:

If to us:

     Hudson Insurance Company
     Attn: General Counsel
     22 Cortlandt Street
     New York, New York 10007
     Fax No. 212-964-3924

If to you:

     FAIRFAX FINANCIAL HOLDINGS LIMITED
     95 Wellington Street West
     Suite 800
     Toronto, Ontario M5J 2N7
     Canada
     Fax No. 416-367-2201

     Any such notice or communication shall be deemed to have been received by
     any such party if delivered, on the date of delivery, or if sent by prepaid
     registered mail on the fourth business day following mailing thereof to the
     party to whom addressed. For such purpose, no day during which there shall
     be a strike or other occurrence interfering with normal mail service shall
     be considered a business day.

10. This Agreement shall be governed and construed in accordance with the laws
    of the State of Delaware, our state of domicile. Each of the parties hereto
    submits to the jurisdiction of the state and federal courts of the State of
    Delaware, in any action or proceeding arising out of or relating to this
    Agreement and all claims in respect of any such action or proceeding may be
    heard or determined in any such court; and service of process, notices and
    demands of such courts may be made upon you by personal service to LeBoeuf,
    Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York
    10019 or by mailing copies of such process, notices and demands by certified
    or registered mail to such address (such address being automatically changed
    to the principal office from time to time of LeBoeuf, Lamb, Greene & MacRae,
    L.L.P. in New York, New York.

11. You and we and the duly authorized representatives of each of us shall, at
    all reasonable times, each be permitted access to all relevant books and
    records of the other pertaining to this Agreement. You and your duly
    authorized representatives shall provide to the Department, within fifteen
    (15) days of any request from the Department therefor, copies of all your
    books and records as they pertain to us (or any portion thereof as may be
    specifically requested).

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IN WITNESS WHEREOF, this Agreement is hereby executed by duly authorized
officers of the parties hereto as of the date first written above.

                                          HUDSON INSURANCE COMPANY

                                          By: /s/ Donald L. Smith
                                          --------------------------------------
                                              Donald L. Smith
                                              Senior Vice President

                                          Dated: May 11, 2001
                                          --------------------------------------

                                          FAIRFAX FINANCIAL HOLDINGS LIMITED

                                          By: /s/ Bradley T. Martin
                                          --------------------------------------
                                              Bradley T. Martin
                                              Vice President

                                          Dated:
                                          --------------------------------------

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                                   SCHEDULE A

                                    SERVICES

Tasks underlying the fees to be performed by Fairfax Financial Holdings Limited
are:

Monthly

-- computation of all regulatory figures

-- analysis and reconciliation of portfolios

-- yield review

-- computation of market decline tests

-- computation of liquidity analysis

-- analysis of book values, e.g. bond amortizations and investment provisions

-- analysis of gross gain and loss positions

-- cash flow obligations

-- investment review meeting

Periodic

-- review and analysis of foreign exchange position

-- placement of foreign exchange contracts, where appropriate

-- discussions with regulators regarding portfolio (positions)

-- reporting to the investment committee

-- reporting to the audit committee

-- general assistance with accounting issues

-- maintaining contact with external auditors

-- such other administrative services as the parties shall mutually agree from
   time to time

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                                   SCHEDULE B

                                  FEE SCHEDULE

Fees will be calculated at the end of each calendar quarter year based upon the
average of the market value of the funds held in the investment account (the
"Account") governed by the terms of the Investment Management Agreement between
us and Hamblin Watsa Investment Counsel, Ltd., dated as of           , at the
close of business for the three (3) preceding months.

<TABLE>
<CAPTION>
MARKET VALUE                                                    CHARGE
------------                                                    ------
<S>                                                             <C>
On Total Market Value.......................................     .10%
</TABLE>

In the event that the day upon which this Agreement is terminated is a day other
than the first day of a calendar quarter, the fees payable for such quarter
shall be pro-rated and shall be determined having regard to the market value of
the Account based upon the most recent financial report which has been delivered
to us by the Custodian for the Account.

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