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                                                                   EXHIBIT 10.12

                        INVESTMENT MANAGEMENT AGREEMENT

THIS INVESTMENT MANAGEMENT AGREEMENT (this "Agreement"), dated as of May 11,
2001, is made by and between HAMBLIN WATSA INVESTMENT COUNSEL LTD. and ODYSSEY
REINSURANCE CORPORATION. As used in this Agreement, "we", "us" and "our" shall
refer to ODYSSEY REINSURANCE CORPORATION, and "you" and "your" shall refer to
HAMBLIN WATSA INVESTMENT COUNSEL LTD.

This Agreement supercedes and replaces the Investment Management Agreement
between the parties dated May 31, 1996, including any and all amendments
thereto.

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

1.   We authorize you to manage on a continuous basis an investment account (the
     "Account") on our behalf on the terms and conditions set out in this
     Agreement.

2.   You shall manage the Account in accordance with the investment objectives
     from time to time communicated in writing by us to you. Until mutually
     agreed otherwise, the investment guidelines shall be as set out in the
     investment guidelines attached hereto as Schedule A. The investment
     guidelines shall at all times be in compliance with the legal investment
     statutes of the State of Delaware.

3.   Subject to Section 2 above, you shall manage the Account in our name and
     you are hereby authorized to take such action for the Account as you, in
     your sole discretion, may consider appropriate for the operation of the
     Account including, without limitation, the power to buy, sell and exchange
     and otherwise deal in all securities which may at any time form part of the
     Account and to invest, in securities selected by you, all funds contained
     in, paid to or derived from the operation of, the Account, except to the
     extent that you are otherwise instructed in writing by us.

4.   The securities and funds of the Account have been deposited with and shall
     be held by The Bank of New York (the "Custodian") at its principal
     custodian office in New York, New York (or with such other custodian as is
     chosen by you from time to time and is acceptable to the Insurance
     Department of the State of Delaware ("Department") pursuant to an agreement
     which we have entered into with the Custodian. We have instructed the
     Custodian to promptly follow your directions at all times and to provide
     you with all such information concerning the Account as you may from time
     to time require in connection with your management of the Account,
     including without limitation, copies of relevant monthly statements.

5.   Provided you have used reasonable care and diligence you shall not be
     responsible for any damage, loss, cost or other expense sustained in the
     operation of the Account or relating in any manner to the carrying out of
     your duties under this Agreement. We agree that you shall be entitled to
     assume that any information communication by us or the Custodian to you is
     accurate and complete, and that in making investment decisions you shall be
     entitled to rely on publicly available information or on information which
     you believe to have been provided to you in good faith, in both cases
     barring actual knowledge by you to the contrary.

6.   You shall be entitled to such fees, payable quarterly in arrears, for your
     management of the Account 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 your management of the Account. As
     regards third party services, you will charge us only the amount of your
     actual disbursements paid to third parties for such services.

7.   You shall deliver in writing to us, as soon as practicable after
     implementation of an investment decision, your confirmation of such
     implementation to enable us to ascertain that such implementation has been
     effected pursuant to the guidelines and procedures of our Board of
     Directors or a duly authorized

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     committee thereof. Otherwise, the nature and timing of your reporting to us
     on the status of the Account shall be at least quarterly, within 45 days
     after the end of each quarter.

8.   We acknowledge receipt of a copy of policies that you have established to
     ensure that investment opportunities are allocated fairly among your
     discretionary investments accounts, and we confirm that these policies,
     until revised by you, will apply to the account.

9.   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. In the event that the day upon which this
     Agreement is so terminated is a day other than the first day of a calendar
     quarter, the fees payable in accordance with paragraph 6 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 you by the Custodian.

10. 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.

11. We acknowledge that we have read and understood this Agreement and that we
    have received a copy of the same. 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.

12. 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") of 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 the 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 (30) 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 by 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 of the Board.

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

     Each party shall bear the fees and expenses of the arbitrator selected by
     or on its behalf, and the parties shall bear the fees and expenses of the
     umpire as determined by the party as above provided, the expenses of the
     arbitrators, the umpire and the arbitration shall be equally divided
     between the two parties. The arbitrators may allocate any and all of the
     costs and fees against the losing party upon a

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     determination that the position of the losing party was, in whole or in
     part, groundless, specious or otherwise without merit or asserted primarily
     for the purposes of obfuscation or delay.

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

14. 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; provided, however, that any amendment to the
    investment guidelines attached hereto as Schedule A may become effective
    without the prior approval of the Department, provided that such amendment
    shall be filed with the Department not later than its effective date.

15. 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:

    ODYSSEY REINSURANCE CORPORATION
    300 First Stamford Place
    Stamford, Connecticut 06902
    Fax No. 203-965-7995

    If to you:

    HAMBLIN WATSA INVESTMENT COUNSEL LTD.
    95 Wellington Street West
    Suite 802
    Toronto, Ontario M5J N7
    Canada
    Fax No. 416-366-3993

     Any such notice of 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.

16. 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.

17. 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.

                                          ODYSSEY REINSURANCE CORPORATION

                                          By: /s/ Donald L. Smith
                                          --------------------------------------
                                              Donald L. Smith
                                              Senior Vice President and General
                                          Counsel
                                          Dated:
                                          --------------------------------------

                                          HAMBLIN WATSA INVESTMENT COUNSEL LTD.

                                          By: /s/ Brian Bradstreet
                                          --------------------------------------
                                              Brian Bradstreet
                                          Dated:
                                          --------------------------------------

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                                   SCHEDULE A

INVESTMENT OBJECTIVES

1.   Investment for the long term always providing sufficient liquidity for the
     payment of claims and other policy obligations.

2.   Ensure preservation of invested capital for policyholder protection.

3.   Invest in accordance with insurance regulatory guidelines.

INVESTMENT GUIDELINES

1.   Approach

     All investments are to be made using the value approach by investing in
     companies at prices below their underlying long term values to protect
     capital from loss and earn income over time and provide operating income as
     needed.

     With regard to equities, no attempt is made to forecast the economy or the
     stock market. The manager will attempt to identify financially sound
     companies with good potential profitability which are selling at large
     discounts to their intrinsic value. Appropriate measures of low prices may
     consist of some or all of the following characteristics: low price earnings
     ratios, high dividend yields, significant discounts to book value, and free
     cash flow. Downside protection is obtained by seeking a margin of safety in
     terms of a sound financial position and a low price in relation to
     intrinsic value. Appropriate measures of financial integrity which are
     regularly monitored, include debt/equity ratios, financial leverage, asset
     turnover, profit margin, return on equity, and interest coverage.

     As a result of this bargain hunting approach, it is anticipated that
     purchases will be made when economic and issue-specific conditions are less
     than ideal and sentiment is uncertain or negative. Conversely, it is
     expected that gains will be realized when issue-specific factors are
     positive and sentiment is buoyant. The investment time horizon is one
     business cycle (approximately 3-5 years).

     As regards bonds, the approach is similar. No attempt is made to forecast
     the economy or interest rates. The manager will attempt to purchase
     attractively priced bonds offering yields better than Treasury bonds with
     maturities of 10 years or less that are of sound quality i.e. whose
     obligations are expected to be fully met as they come due. We do not regard
     rating services as being an unimpeachable source for assessing credit
     quality any more than we would regard a broker's recommendation on a stock
     as being necessarily correct. In any form of investment research and
     evaluation, there is no substitute for the reasoned judgment of the
     investment committee and its managers.

2.   Liquidity

     An adequate cash flow should be maintained to ensure that claims and
     operating Expenses are paid on a timely basis. An operating cash position
     is to be Maintained at appropriate levels and will be managed by the
     insurance operating Company in accordance with the approved list for
     investments as determined from time to time by the Investment Committee.
     These securities will be managed by The Insurance Company as part of the
     Treasury function and currently are Restricted primarily to Treasury and
     Agency securities of the U.S. government.

3.   Regulatory

     Insurance regulations will be complied with, specifically Chapter 13 --
     Investments, sections 1301 through 1332 inclusive, of the Delaware
     Insurance Laws.

4.   Diversification

     The portfolio is to be invested in a wide range of securities of different
     issuers operating in different industries and jurisdictions in order to
     minimize risk.

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5.   Prudent Person Rule

     Prudent investment standards are considered in the overall context of an
     Investment portfolio and how a prudent person would invest another person's
     money without undue risk of loss or impairment and with a reasonable
     expectation of fair return.

     STRATEGY

1.   Maintain Adequate Liquidity

     A review of portfolio liquidity is under taken on a monthly basis. The
     liquidity analysis determines how much of each portfolio can be converted
     to cash in a given time period. Each company determines its liquidity
     requirements and the liquidity of the portfolio must match the requirement.

2.   Asset Allocation

     The asset allocation will be determined by the Portfolio Manager and will
     include short term investments that will generate appropriate cash flows
     and long term investments in stocks, bonds, debentures and money market
     investments, both domestic and foreign. The allocation will be in
     compliance with regulatory guidelines and should meet policy liabilities.

3.   Foreign Exchange Risk

     Any foreign currency investments and exposures would normally be hedged via
     the use of forward foreign exchange contracts and/or currency options or
     preferably by a natural hedge with foreign pay liabilities of the Insurance
     Company. Unhedged foreign investments will be limited to 10% of invested
     assets at cost if judged appropriate. Unhedged exposure above this amount
     must be approved by the Investment Committee.

4.   Interest Rate Risk

     Interest rate risk will be minimized primarily through investment in fixed
     income securities with maturities less than ten years. While there are no
     specific duration/maturity limits for convertible securities, these issues
     are included in the total fixed income duration/term measure. Maximum fixed
     income portfolio duration is limited to the equivalent of a ten year terns
     to maturity Treasury Security,

INVESTMENT POLICY MIX

The Investment Committee has established the following exposure ranges for
various asset mix classes:

<TABLE>
<CAPTION>
                                                                 RANGE
                                                                --------
<S>                                                             <C>
Equities....................................................       0-25%
Fixed Income................................................      0-100%
Cash........................................................    Residual
Total.......................................................        100%
</TABLE>

Within the Fixed Income portfolio, the Taxable/Tax Exempt mix will be determined
relative to the consolidated tax position of the Insurance Company and the
relative investment attractiveness of available tax exempt securities.

The Investment Committee will control the total asset mix and will give
performance objectives to the Investment Manager regarding the assets managed.

RETURN EXPECTATIONS

Total asset mix policy is expected on an annual basis to result in returns
better than the Consumer Price Index plus 3% over a ten year period before the
disbursement of investment management fees. However, in any one year the annual
return may be significantly above or below this expectation.

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INVESTMENT OBJECTIVE OF THE FUND MANAGER

The Manager, subject to regulatory and company imposed constraints mentioned
elsewhere, expects to provide additional returns to those returns that would be
earned by the alternative of passively managing a surrogate market index.

Performance of the Fund Manager is expected to result in the following returns:

<TABLE>
<S>                                                   <C>
All Equities                                                  S&P 500 + 1% point

Fixed Income

Taxable Bonds                                         Merrill Lynch Intermediate Treasury
                                                                 Index + 0.25%

Tax-Advantaged Bonds                                    Lehman Brothers 3&5 Year State
                                                                  GO Indexes
</TABLE>

Measured over four (4) year moving periods.

AGGREGATE INVESTMENT LIMITS, PERMITTED INVESTMENT CATEGORIES AND
INDIVIDUAL INVESTMENT LIMITS

PERMITTED INVESTMENT CATEGORIES WITHIN ASSET CLASSES

<TABLE>
<S>                                <C>
Cash:                              Cash on hand, demand deposits, treasury bills, short-term
                                   notes and bankers' acceptances, term deposits and guaranteed
                                   investment certificates.
Equity:                            Common shares, rights and warrants.
Fixed Income:                      Bonds, debentures, preferred shares, including those
                                   convertible into common shares.
</TABLE>

All of the above may be either U.S. domestic, Canadian, or other foreign
investments.

Convertible preferred securities will be classified as equities if the preferred
dividend is not being paid.

Private placement issues in public companies are allowed.

INVESTMENT CONSTRAINTS

All investments will be made in accordance with all applicable legislation.

INDIVIDUAL INVESTMENT LIMITS

Any combination of investments in any one corporate issuer will be limited to a
maximum of 5% of admitted assets. Exposure beyond 5% will require approval of
the Investment Committee.

QUALITY CONSTRAINTS

The Investment Manager may invest in the permitted investment categories subject
to the following quality constraints:

     Investments in money market instruments (less than or equal to 1 year term)
     will be limited to the approved list. This list will include money market
     instruments of the U.S. Treasury, agencies of the U.S. government, and as a
     minimum commercial paper rated Al or higher by Moody's and rated P1 or
     higher by Standard & Poor's.

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Investments in bonds and preferreds will be limited by quality tier as follows:

LIMITS AS A % OF THE FIXED INCOME PORTFOLIO

<TABLE>
<CAPTION>
BOND RATING                                      % OF TOTAL    MIN./MAX.
-----------                                      ----------    ---------
<S>                                              <C>           <C>
A or better..................................       65%          Min.
BBB..........................................       35%          Max.
BB, B........................................       10%          Max.
C, D.........................................        0%
</TABLE>

     The above limits are subject to adjustment to conform with the regulatory
     requirements of Connecticut State Insurance Law.

     Limits are determined on a cost basis and include convertible securities.

     Downgrades will be taken into account when making new investments but will
     not necessarily result in the sale of existing positions.

     Securities un-rated by the public rating agencies must be rated by the
     Investment Manager and included as part of the categories above for the
     purposes of determining overall exposure by quality tier.

     Any exceptions to the above must be approved by the Investment Committee.

PROHIBITED INVESTMENTS

No loans will be made in any of the investment portfolios.

No Real Estate will be purchased without Investment Committee approval.

No Mortgages on real estate will be purchased without Investment Committee
approval. The exceptions to this are obligations issued by an agency of the U.S.
Government, or by U.S. domiciled corporations that are issued as part of a
registered public offering that also meet the minimum quality tier requirements.

FOREIGN INVESTMENT LIMITS

Foreign Securities may be purchased in compliance with established regulatory
guidelines and with the policy on foreign exchange risk outlined herein.

Foreign investments must be in the same kinds of securities and investments as
the Insurance Company is normally allowed.

OTHER

Derivative securities may be purchased up to 2% of the portfolios cost at book.
Use of derivative investments is infrequent and for hedging purposes. Derivative
investments will be justified to the Investment Committee prior to use.

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                                   SCHEDULE B

                             INVESTMENT MANAGEMENT
                                  FEE SCHEDULE

Investment management fees are comprised of two parts:

                            (A) The Base Fee Amount
                                      and
                          (B) The Incentive Fee Amount

(A) The Base Fee Amount

     1)    As described in Part 6 on the Investment Management Agreement, fees
           will be payable quarterly in arrears.

     2.    After the end of each calendar quarter year, Hamblin Watsa Investment
           Counsel Ltd. shall submit its investment management charges in
           accordance with the schedule below.

     3.    The charges are on a calendar year basis. They will be calculated at
           the end of each calendar quarter year based upon the average of the
           market value of the funds at the close of business for the three (3)
           preceding months.

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

(B) The Incentive Fee Amount

     The incentive fee amount relates to the investment management of equity
     securities only.

<TABLE>
    <S>                                <C>

    Annual Base Fee:

                                       a)   If performance equals or exceeds benchmark, base fee is
                                            unchanged front current fee.

                                       b)  If performance is less than benchmark, base fee is 90%
                                            of current fee.

    Maximum Fee:                       1.75% (including base).

    Benchmark:                         S&P 500 + 200 basis points.

    Incentive Fee:                     Continuous rate of 10 basis points for every 100 basis
                                       points of outperforming the benchmark. (Incentive fee is in
                                       addition to base fee).

    Basis of Calculation:              Payable annually based on calendar year results. Not earned
                                       or paid unless results since inception exceed benchmark
                                       return.
</TABLE>

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