<PAGE>
 
EXHIBIT 10.17








                           MERCURY CASUALTY COMPANY
                            LOS ANGELES, CALIFORNIA

                       THIRD AND FOURTH PROPERTY EXCESS
                       CATASTROPHE REINSURANCE CONTRACT

                    Originally Effective: September 1, 1996


<PAGE>
 
                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



                                E. W. Blanch Co.

                              Reinsurance Services

                             3500 West 80th Street

                         Minneapolis, Minnesota  55431
<PAGE>
 
                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



                      Third Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                      REINSURERS                                   PARTICIPATIONS
<S>                                                                 <C>
Allmerica Re, A Division of The Hanover Insurance Company                1.25%
AXA Reinsurance Company                                                  7.50
Cat Limited                                                             10.00
Continental Casualty Company                                             2.00
Everest Reinsurance Company                                             13.00
First Excess and Reinsurance Corporation                                 9.00
Nationwide Mutual Insurance Company                                      3.00
Patriot Re Corporation (for Various Lloyd's Underwriters)                2.00
Renaissance Reinsurance Ltd.                                             4.00
St. Paul Reinsurance Management Corporation
  (for St. Paul Fire and Marine Insurance Company)                       1.75
Security Insurance Company of Hartford                                    .40
Signet Star Reinsurance Company                                          2.00
Sydney Reinsurance Corporation                                           4.25
United Fire & Casualty Company                                           1.00
USF RE Insurance Company                                                 2.00
Vesta Fire Insurance Corporation                                        25.00
Winterthur Reinsurance Corporation of America                            3.25
 
THROUGH SWIRE BLANCH EUROPE
Europa Re                                                                 .75
Sirius International Insurance Corporation                               1.25
</TABLE>
<PAGE>
 
Third Excess Catastrophe Reinsurance (Continued)

<TABLE> 
<CAPTION> 

                 REINSURERS                                        PARTICIPATIONS
<S>                                                                 <C> 
Societe Parisienne de Souscription
 (for La Reunion Francaise)                                              1.50%
THROUGH MILLER REINSURANCE BROKERS NORTH AMERICA LTD.
Lloyd's Underwriters
 Per Signing Schedule                                                    5.10

TOTAL                                                                  100.00%

</TABLE> 


                     Fourth Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                         REINSURERS                                PARTICIPATIONS
<S>                                                                 <C>
 
Allmerica Re, A Division of The Hanover Insurance Company                1.50%
Cat Limited                                                             10.00
Continental Casualty Company                                             1.50
First Excess and Reinsurance Corporation                                10.00
Hartford Re Company
  (for Hartford Fire Insurance Company)                                  3.00
Nationwide Mutual Insurance Company                                      4.00
Renaissance Reinsurance Ltd.                                             4.00
St. Paul Reinsurance Management Corporation
  (for St. Paul Fire and Marine Insurance Company)                       2.00
San Francisco Reinsurance Company                                        5.25
Security Insurance Company of Hartford                                    .44
Signet Star Reinsurance Company                                          2.00
Sydney Reinsurance Corporation                                           3.50
USF RE Insurance Company                                                 3.00
Vesta Fire Insurance Corporation                                        25.00
Winterthur Reinsurance Corporation of America                            2.50
 
THROUGH SWIRE BLANCH EUROPE
Europa Re                                                                2.00
Mapfre Re Compania de Reaseguros, S.A.                                   2.50
Sirius International Insurance Corporation                               1.25
Societe Parisienne de Souscription
  (for La Reunion Francaise)                                             1.50
</TABLE>
<PAGE>
 
Fourth Excess Catastrophe Reinsurance (Continued)

<TABLE> 
<CAPTION> 
                    REINSURERS                                     PARTICIPATIONS
<S>                                                                 <C> 
Through Miller Reinsurance Brokers North America Ltd.
Lloyd's Underwriters and Companies
 Per Signing Schedule(s)                                                15.06%

TOTAL                                                                  100.00%
</TABLE> 



                                E. W. Blanch Co.

                              Reinsurance Services

                             3500 West 80th Street

                         Minneapolis, Minnesota  55431
<PAGE>
 

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>


   Article                                                    PAGE
<S>                                                           <C>
          I    Classes of Business Reinsured                    1
   
         II    Term                                             1   

        III    Territory                                        2   

         IV    Exclusions                                       2   

          V    Retention and Limit                              3   

         VI    Reinstatement                                    3   

        VII    Loss Occurrence (BRMA 27A)                       4   

       VIII    Definitions                                      6   

         IX    Loss Notices and Settlements                     7   

          X    Salvage and Subrogation                          7   

         XI    Reinsurance Premium                              7   

        XII    Offset                                           8   

       XIII    Inspection of Records                            9   

        XIV    Net Retained Lines (BRMA 32B)                    9   

         XV    Errors and Omissions (BRMA 14F)                  9   

        XVI    Currency (BRMA 12A)                              9    

       XVII    Taxes (BRMA 50B)                                10     

      XVIII    Federal Excise Tax (BRMA 17A)                   10         

        XIX    Unauthorized Reinsurers                         10

         XX    Insolvency                                      11    

        XXI    Arbitration (BRMA 6J)                           12  

       XXII    Service of Suit  (BRMA 49C)                     13     

      XXIII    Assignments and Changes of Interest             14         

       XXIV    Agency Agreement                                14         

        XXV    Intermediary (BRMA 23A)                         14         

               Schedule A                                           
</TABLE>


<PAGE>
 

                               THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



ARTICLE I - CLASSES OF BUSINESS REINSURED

By this Contract the Reinsurer agrees to reinsure the excess liability which may
accrue to the Company under its policies, contracts and binders of insurance or
reinsurance (hereinafter called "policies") in force at the effective date
hereof or issued or renewed on or after that date, and classified by the Company
as Homeowners (Section I), Fire, Allied Lines, Commercial Multiple Peril
(Section I), Automobile Physical Damage (Comprehensive only), Earthquake and
Inland Marine, subject to the terms, conditions and limitations set forth herein
and in Schedule A attached to and forming part of this Contract.


ARTICLE II - TERM

A. This Contract shall become effective on September 1, 1996, with respect to
   losses arising out of loss occurrences commencing on or after that date, and
   shall remain in force until August 31, 1997, both days inclusive.  However,
   if the Reinsurer sustains no loss hereunder from loss occurrences commencing
   on or prior to June 30, 1997, this Contract shall, upon notice from the
   Company on June 30, 1997, expire on June 30, 1997.

B. Notwithstanding the provisions of paragraph A above, either party may
   terminate this Contract at any time, provided the Reinsurer has sustained no
   loss hereunder, by giving the other party not less than 90 days prior notice
   by certified mail.

C. If this Contract expires while a loss occurrence covered hereunder is in
   progress, the Reinsurer's liability hereunder shall, subject to the other
   terms and conditions of this 

<PAGE>
 
   Contract, be determined as if the entire loss occurrence had occurred prior
   to the expiration of this Contract, provided that no part of such loss
   occurrence is claimed against any renewal or replacement of this Contract.


ARTICLE III - TERRITORY

This Contract shall apply to the territorial limits set forth in the Company's
policies reinsured hereunder.


ARTICLE IV - EXCLUSIONS

This Contract does not apply to and specifically excludes the following:

    1.  All lines of business not included in Article I.

    2.  All excess of loss reinsurance assumed by the Company.

    3.  Reinsurance assumed by the Company under obligatory reinsurance
        agreements, except agency reinsurance where the policies involved are to
        be reunderwritten in accordance with the underwriting standards of the
        Company and reissued as Company policies at the next anniversary or
        expiration date.

    4.  Financial guarantee and insolvency.

    5.  All Accident and Health, Fidelity and Surety, Boiler and Machinery,
        Ocean Marine, Workers' Compensation and Credit business when written as
        such.

    6.  Flood when written as such.

    7.  Mortgage Impairment insurances and similar kinds of insurances, however
        styled.

    8.  Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
        Physical Damage - Reinsurance" attached to and forming part of this
        Contract.

    9.  Risks excluded under the provisions of the "Total Insured Value
        Exclusion Clause" attached to and forming part of this Contract.

    10. Loss or damage caused by or resulting from war, invasion, hostilities,
        acts of foreign enemies, civil war, rebellion, insurrection, military or
        usurped power, or martial law or confiscation by order of any government
        or public authority, but this exclusion shall not 

<PAGE>
 

        apply to loss or damage covered under a standard policy with a standard
        War Exclusion Clause.

    11. All liability of the Company arising by contract, operation of law, or
        otherwise, from its participation or membership, whether voluntary or
        involuntary, in any insolvency fund. "Insolvency fund" includes any
        guaranty fund, insolvency fund, plan, pool, association, fund or other
        arrangement, however denominated, established or governed, which
        provides for any assessment of or payment or assumption by the Company
        of part or all of any claim, debt, charge, fee or other obligation of an
        insurer, or its successors or assigns, which has been declared by any
        competent authority to be insolvent, or which is otherwise deemed unable
        to meet any claim, debt, charge, fee or other obligation in whole or in
        part.

    12. Loss or liability excluded under the provisions of the "Pools,
        Associations and Syndicates Exclusion Clause" attached to and forming
        part of this Contract.

    13. Pollution and seepage coverages excluded under the provisions of the
        "Pollution and Seepage Exclusion Clause (BRMA 39A)" attached to and
        forming part of this Contract.


ARTICLE V - RETENTION AND LIMIT

A. As respects each excess layer of reinsurance coverage provided by this
   Contract, the Company shall retain and be liable for the first amount of
   ultimate net loss, shown as "Company's Retention" for that excess layer in
   Schedule A attached hereto, arising out of each loss occurrence.  The
   Reinsurer shall then be liable, as respects each excess layer, for 95.0% of
   the amount by which such ultimate net loss exceeds the Company's applicable
   retention, but the liability of the Reinsurer under each excess layer shall
   not exceed 95.0% of the amount, shown as "Reinsurer's Per Occurrence Limit"
   for that excess layer in Schedule A attached hereto, as respects any one loss
   occurrence.

B. The Company shall retain, in addition to its initial retention on each loss
   occurrence, 5.0% of the excess ultimate net loss to which the excess layer
   applies.

C. The Company shall be permitted to carry excess per risk reinsurance,
   recoveries under which shall inure to the benefit of this Contract.


ARTICLE VI - REINSTATEMENT

A. In the event all or any portion of the reinsurance coverage provided by this
   Contract is exhausted by loss, the amount so exhausted shall be reinstated
   immediately from the time 

<PAGE>
 

   the loss occurrence commences hereon. For each amount so reinstated the
   Company agrees to pay additional premium equal to the product of the
   following:

    1. The percentage of the occurrence limit for the excess layer reinstated
       (based on the loss paid by the Reinsurer under that excess layer); times

    2. The earned reinsurance premium for the excess layer reinstated for the
       term of this Contract (exclusive of reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any loss under any
   excess layer hereunder, the Company shall submit a statement to the Reinsurer
   of reinstatement premium due the Reinsurer for that excess layer.  If the
   earned reinsurance premium for any excess layer for the term of this Contract
   has not been finally determined as of the date of any such statement, the
   calculation of reinstatement premium due for that excess layer shall be based
   on the annual deposit premium for that excess layer and shall be readjusted
   when the earned reinsurance premium for that excess layer for the term of
   this Contract has been finally determined.  Any reinstatement premium shown
   to be due the Reinsurer for any excess layer as reflected by any such
   statement (less prior payments, if any, for that excess layer) shall be
   payable by the Company concurrently with payment by the Reinsurer of the
   requested loss for that excess layer.  Any return reinstatement premium shown
   to be due the Company shall be remitted by the Reinsurer within 60 days after
   receipt and verification of the Company's statement.

C. Notwithstanding anything stated herein, the liability of the Reinsurer
   provided by this Contract shall not exceed either of the following:

    1. 95.0% of the amount, shown as "Reinsurer's Per Occurrence Limit" for that
       excess layer in Schedule A attached hereto, as respects loss or losses
       arising out of any one loss occurrence; or

    2. 95.0% of the amount, shown as "Reinsurer's Term Limit" for that excess
       layer in Schedule A attached hereto, in all during the term of this
       Contract.


ARTICLE VII - LOSS OCCURRENCE (BRMA 27A)

A. The term "loss occurrence" shall mean the sum of all individual losses
   directly occasioned by any one disaster, accident or loss or series of
   disasters, accidents or losses arising out of one event which occurs within
   the area of one state of the United States or province of Canada and states
   or provinces contiguous thereto and to one another. However, the duration and
   extent of any one "loss occurrence" shall be limited to all individual losses
   sustained by the Company occurring during any period of 168 consecutive hours
   arising out

<PAGE>

   of and directly occasioned by the same event, except that the term "loss
   occurrence" shall be further defined as follows:

    1. As regards windstorm, hail, tornado, hurricane, cyclone, including
       ensuing collapse and water damage, all individual losses sustained by the
       Company occurring during any period of 72 consecutive hours arising out
       of and directly occasioned by the same event. However, the event need not
       be limited to one state or province or states or provinces contiguous
       thereto.

    2. As regards riot, riot attending a strike, civil commotion, vandalism and
       malicious mischief, all individual losses sustained by the Company
       occurring during any period of 72 consecutive hours within the area of
       one municipality or county and the municipalities or counties contiguous
       thereto arising out of and directly occasioned by the same event. The
       maximum duration of 72 consecutive hours may be extended in respect of
       individual losses which occur beyond such 72 consecutive hours during the
       continued occupation of an assured's premises by strikers, provided such
       occupation commenced during the aforesaid period.

    3. As regards earthquake (the epicentre of which need not necessarily be
       within the territorial confines referred to in paragraph A of this
       Article) and fire following directly occasioned by the earthquake, only
       those individual fire losses which commence during the period of 168
       consecutive hours may be included in the Company's "loss occurrence."

    4. As regards "freeze," only individual losses directly occasioned by
       collapse, breakage of glass and water damage (caused by bursting frozen
       pipes and tanks) may be included in the Company's "loss occurrence."

B. Except for those "loss occurrences" referred to in subparagraphs 1 and 2 of
   paragraph A above, the Company may choose the date and time when any such
   period of consecutive hours commences, provided that it is not earlier than
   the date and time of the occurrence of the first recorded individual loss
   sustained by the Company arising out of that disaster, accident or loss, and
   provided that only one such period of 168 consecutive hours shall apply with
   respect to one event.

C. However, as respects those "loss occurrences" referred to in subparagraphs 1
   and 2 of paragraph A above, if the disaster, accident or loss occasioned by
   the event is of greater duration than 72 consecutive hours, then the Company
   may divide that disaster, accident or loss into two or more "loss
   occurrences," provided that no two periods overlap and no individual loss is
   included in more than one such period, and provided that no period commences
   earlier than the date and time of the occurrence of the first recorded
   individual loss sustained by the Company arising out of that disaster,
   accident or loss.

<PAGE>
 
D. No individual losses occasioned by an event that would be covered by 72 hours
   clauses may be included in any "loss occurrence" claimed under the 168 hours
   provision.


ARTICLE VIII - DEFINITIONS

A. "Ultimate net loss" as used herein is defined as the sum or sums (including
   interest on judgments, extra contractual obligations, loss resulting from the
   reformation or liberalization of policies, litigation expenses and all other
   loss adjustment expense, except office expenses and salaries of the Company's
   regular employees) paid or payable by the Company in settlement of claims and
   in satisfaction of judgments rendered on account of such claims, after
   deduction of all salvage, all recoveries and all claims on inuring insurance
   or reinsurance, whether collectible or not.  Nothing herein shall be
   construed to mean that losses under this Contract are not recoverable until
   the Company's ultimate net loss has been ascertained.

B. "Extra contractual obligations" as used herein shall mean 90.0% of any
   punitive, exemplary, compensatory or consequential damages paid or payable by
   the Company as a result of an action against it by its insured or its
   insured's assignee, which action alleges negligence or bad faith on the part
   of the Company in handling a claim under a policy subject to this Contract.
   An extra contractual obligation shall be deemed to have occurred on the same
   date as the loss covered or alleged to be covered under the policy.
   Notwithstanding anything stated herein, this Contract shall not apply to any
   extra contractual obligation incurred by the Company as a result of any
   fraudulent and/or criminal act by any officer or director 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.

C. As respects amounts paid by the Company subject to this Contract for debris
   removal, including cleanup of pollutants, as respects business classified as
   commercial property, "loss" shall mean an amount not to exceed 30.0% of the
   direct physical loss or damage paid by the Company, for any one loss, any one
   location, any one insured.  "Loss" is further restricted to include only such
   claims for debris removal, including cleanup of pollutants, reported to the
   Company not more than 180 days immediately following the direct physical loss
   or damage.

D. "Pollutant" as used herein shall mean any solid liquid, gaseous, or thermal
   irritant or contaminant, including, but not limited to smoke, vapor, soot,
   fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be
   recycled, reconditioned or reclaimed.

<PAGE>
 
ARTICLE IX - LOSS NOTICES AND SETTLEMENTS

A. Whenever a loss sustained by the Company appears likely to result in a claim
   hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall
   have the right to participate in the adjustment of the loss at its own
   expense.

B. All loss settlements made by the Company, provided they are within the terms
   of this Contract, and either under the strict conditions of the Company's
   policies or by way of compromise, shall be unconditionally binding upon the
   Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be
   liable upon receipt of reasonable evidence of the amount paid (or scheduled
   to be paid) by the Company.

C. All salvage and recoveries received subsequent to a loss settlement under
   this Contract shall be applied as if received prior to said loss settlement,
   and all necessary adjustment shall be made between the Company and the
   Reinsurer immediately following receipt by the Company of such salvage or
   recoveries.


ARTICLE X - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) on account of claims
and settlements involving reinsurance hereunder.  Salvage thereon shall always
be used to reimburse the excess carriers in the reverse order of their priority
according to their participation before being used in any way to reimburse the
Company for its primary loss.  The Company hereby agrees to enforce its rights
to salvage or subrogation relating to any loss, a part of which loss was
sustained by the Reinsurer, and to prosecute all claims arising out of such
rights.


ARTICLE XI - REINSURANCE PREMIUM

A. As premium for each excess layer of reinsurance coverage provided by this
   Contract, the Company shall pay the Reinsurer the greater of the following:

   1. The amount, shown as "Annual Minimum Premium" for that excess layer in
      Schedule A attached hereto; or, in the event the early expiration
      provision outlined in paragraph A of Article II is exercised by the
      Company, the amount shown as "Early Expiration Minimum Premium" for that
      excess layer in Schedule A attached hereto.  In the event that this
      Contract is terminated in accordance with the provisions of paragraph B of
      Article II, the annual minimum premium for each excess layer shall be a

<PAGE>
 

      pro rata portion of the "Annual Minimum Premium" for that excess layer in
      Schedule A attached hereto.

   2. The percentage, shown as "Premium Rate" for that excess layer in Schedule
      A attached hereto, of the Company's net earned premium for the term of
      this Contract.

B. The Company shall pay the Reinsurer an annual deposit premium for each excess
   layer of an amount, shown as "Annual Deposit Premium" for that excess layer
   in Schedule A attached hereto, in four equal installments of an amount, shown
   as "Quarterly Deposit Premium" for that excess layer in Schedule A attached
   hereto, on September 1 and December 1, 1996, and March 1 and June 1, 1997.
   However, in the event that this Contract expires on June 30, 1997 in
   accordance with the provisions of paragraph A of Article II, the Reinsurer
   shall return to the Company a pro rata portion of the deposit premium for
   each excess layer payable on June 1, 1997.  In the event that this Contract
   is terminated at any time, in accordance with the provisions of paragraph B
   of Article II, the Company shall pay a pro rata portion of the amount, shown
   as "Annual Deposit Premium," for that excess layer in Schedule A attached
   hereto.

C. Within 60 days after the expiration or termination of this Contract, the
   Company shall provide a report to the Reinsurer setting forth the premium due
   hereunder for each excess layer, computed in accordance with paragraph A, and
   any additional premium due the Reinsurer or return premium due the Company
   for each such excess layer shall be remitted promptly.

D. "Net earned premium" as used herein is defined as gross earned premium of the
   Company for the classes of business reinsured hereunder, less the earned
   portion of premiums ceded by the Company for reinsurance which inures to the
   benefit of this Contract.  For purposes of calculating net earned premium,
   for multiple peril policies with indivisible premiums, if any, 80.0% of the
   total Homeowners basic policy premium and 70.0% of the total basic Commercial
   Multiple Peril policy premium shall be considered subject premium.


ARTICLE XII - OFFSET

The Company or the Reinsurer may offset any balance, whether on account of
premiums, commissions, loss or claim expenses due from one party to the other
under this Contract or under any other reinsurance contract heretofore or
hereafter entered into between the Company and the Reinsurer, whether acting as
assuming reinsurer or ceding company.


<PAGE>


ARTICLE XIII - INSPECTION OF RECORDS

The Reinsurer may inspect the records of the Company pertaining to the risks
reinsured hereunder.


ARTICLE XIV - NET RETAINED LINES (BRMA 32B)

A. This Contract 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 or amounts in excess of which this
   Contract 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.

B. The amount of the Reinsurer's liability hereunder 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(s), whether specific or general, any amounts
   which may have become due from such reinsurer(s), whether such inability
   arises from the insolvency of such other reinsurer(s) or otherwise.


ARTICLE XV - ERRORS AND OMISSIONS (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or
any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery.


ARTICLE XVI - CURRENCY (BRMA 12A)

A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they
   shall be construed to mean United States Dollars and all transactions under
   this Contract shall be in United States Dollars.

B. 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.


<PAGE>

ARTICLE XVII - TAXES (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.


ARTICLE XVIII - FEDERAL EXCISE TAX (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd's London and
other reinsurers exempt from Federal Excise Tax, who are domiciled outside the
United States of America.)

A. The Reinsurer has agreed to allow for the purpose of paying the Federal
   Excise Tax the applicable percentage of the premium payable hereon as imposed
   under Section 4371 of the Internal Revenue Code to the extent such premium is
   subject to the Federal Excise Tax.

B. In the event of any return premium becoming due hereunder the Reinsurer will
   deduct the applicable percentage from the return premium payable hereon and
   the Company or its agent should take steps to recover the tax from the United
   States Government.


ARTICLE XIX - UNAUTHORIZED REINSURERS

A. If the Reinsurer is unauthorized in any state of the United States of America
   or the District of Columbia, the Reinsurer agrees to fund its share of the
   Company's ceded outstanding loss and loss adjustment expense reserves
   (including incurred but not reported loss reserves) by:

    1. Clean, irrevocable and unconditional letters of credit issued and
       confirmed, if confirmation is required by the insurance regulatory
       authorities involved, by a bank or banks meeting the NAIC Securities
       Valuation Office credit standards for issuers of letters of credit and
       acceptable to said insurance regulatory authorities; and/or

    2. Escrow accounts for the benefit of the Company; and/or

    3. Cash advances;

    if, without such funding, a penalty would accrue to the Company on any
    financial statement it is required to file with the insurance regulatory
    authorities involved. The Reinsurer, at its sole option, may fund in other
    than cash if its method and form of funding are acceptable to the insurance
    regulatory authorities involved.

B.  With regard to funding in whole or in part by letters of credit, it is
    agreed that each letter of credit will be in a form acceptable to insurance
    regulatory authorities involved, will be 


<PAGE>


    issued for a term of at least one year and will include an "evergreen
    clause," which automatically extends the term for at least one additional
    year at each expiration date unless written notice of non-renewal is given
    to the Company not less than 30 days prior to said expiration date. The
    Company and the Reinsurer further agree, notwithstanding anything to the
    contrary in this Contract, that said letters of credit may be drawn upon by
    the Company or its successors in interest at any time, without diminution
    because of the insolvency of the Company or the Reinsurer, but only for one
    or more of the following purposes:

    1. To reimburse itself for the Reinsurer's share of losses and/or loss
       adjustment expense paid under the terms of policies reinsured hereunder,
       unless paid in cash by the Reinsurer;

    2. To reimburse itself for the Reinsurer's share of any other amounts
       claimed to be due hereunder, unless paid in cash by the Reinsurer;

    3. To fund a cash account in an amount equal to the Reinsurer's share of any
       ceded outstanding loss and loss adjustment expense reserves (including
       incurred but not reported loss reserves) funded by means of a letter of
       credit which is under non-renewal notice, if said letter of credit has
       not been renewed or replaced by the Reinsurer 10 days prior to its
       expiration date;

    4. To refund to the Reinsurer any sum in excess of the actual amount
       required to fund the Reinsurer's share of the Company's ceded outstanding
       loss and loss adjustment expense reserves (including incurred but not
       reported loss reserves), if so requested by the Reinsurer.

    In the event the amount drawn by the Company on any letter of credit is in
    excess of the actual amount required for B(1) or B(3), or in the case of
    B(2), the actual amount determined to be due, the Company shall promptly
    return to the Reinsurer the excess amount so drawn.


ARTICLE XX - INSOLVENCY

A. In the event of the insolvency of one or more of the reinsured companies,
   this reinsurance shall be payable directly to the company or to its
   liquidator, receiver, conservator or statutory successor immediately upon
   demand, with reasonable provision for verification, on the basis of the
   liability of the company without diminution because of the insolvency of the
   company or because the liquidator, receiver, conservator or statutory
   successor of the company has failed to pay all or a portion of any claim.  It
   is agreed, however, that the liquidator, receiver, conservator or statutory
   successor of the company shall give written notice to the Reinsurer of the
   pendency of a claim against the company indicating the policy or bond
   reinsured which claim would involve a possible liability on the part of the
   Reinsurer within a reasonable time after such claim is filed in the
   conservation or liquidation proceeding or in 


<PAGE>

   the receivership, 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
   that it may deem available to the company or its liquidator, receiver,
   conservator or statutory successor. The expense thus incurred by the
   Reinsurer shall be chargeable, subject to the approval of the Court, against
   the company as part of the expense of conservation or liquidation to the
   extent of a pro rata share of the benefit which may accrue to the company
   solely as a result of the defense undertaken by the Reinsurer.

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

C. It is further understood and agreed that, in the event of the insolvency of
   one or more of the reinsured companies, the reinsurance under this Contract
   shall be payable directly by the Reinsurer to the company or to its
   liquidator, receiver or statutory successor, except as provided by Section
   4118(a) of the New York Insurance Law or except (1) where this Contract
   specifically provides another payee of such reinsurance in the event of the
   insolvency of the company or (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.


ARTICLE XXI - ARBITRATION (BRMA 6J)

A. As a condition precedent to any right of action hereunder, in the event of
   any dispute or difference of opinion hereafter arising with respect to this
   Contract, it is hereby mutually agreed that such dispute or difference of
   opinion shall be submitted to arbitration.  One Arbiter shall be chosen by
   the Company, the other by the Reinsurer, and an Umpire shall be chosen by the
   two Arbiters before they enter upon arbitration, all of whom shall be active
   or retired disinterested executive officers of insurance or reinsurance
   companies or Lloyd's London Underwriters.  In the event that either party
   should fail to choose an Arbiter within 30 days following a written request
   by the other party to do so, the requesting party may choose two Arbiters who
   shall in turn choose an Umpire before entering upon arbitration.  If the two
   Arbiters fail to agree upon the selection of an Umpire within 30 days
   following their appointment, each Arbiter shall nominate three candidates
   within 10 days thereafter, two of whom the other shall decline, and the
   decision shall be made by drawing lots.

B. Each party shall present its case to the Arbiters within 30 days following
   the date of appointment of the Umpire.  The Arbiters shall consider this
   Contract as an honorable engagement rather than merely as a legal obligation
   and they are relieved of all judicial formalities and may abstain from
   following the strict rules of law.  The decision of the 


<PAGE>

   Arbiters shall be final and binding on both parties; but failing to agree,
   they shall call in the Umpire and the decision of the majority shall be final
   and binding upon both parties. Judgment upon the final decision of the
   Arbiters may be entered in any court of competent jurisdiction.

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

D. Each party shall bear the expense of its own Arbiter, and shall jointly and
   equally bear with the other the expense of the Umpire and of the arbitration.
   In the event that the two Arbiters are chosen by one party, as above
   provided, the expense of the Arbiters, the Umpire and the arbitration shall
   be equally divided between the two parties.

E. Any arbitration proceedings shall take place at a location mutually agreed
   upon by the parties to this Contract, but notwithstanding the location of the
   arbitration, all proceedings pursuant hereto shall be governed by the law of
   the state in which the Company has its principal office.


ARTICLE XXII - SERVICE OF SUIT  (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed
   to be due hereunder, the Reinsurer, at the request of the Company, will
   submit to the jurisdiction of any court of competent jurisdiction within the
   United States.  Nothing in this Article constitutes or should be understood
   to constitute a waiver of the Reinsurer's rights to commence an action in any
   court of competent jurisdiction in the United States, to remove an action to
   a United States District Court, or to seek a transfer of a case to another
   court as permitted by the laws of the United States or of any state in the
   United States.

B. Further, pursuant to any statute of any state, territory or district of the
   United States which makes provision therefor, the Reinsurer hereby designates
   the party named in its Interests and Liabilities Agreement, or if no party is
   named therein, the Superintendent, Commissioner or Director of Insurance or
   other officer specified for that purpose in the statute, or his successor or
   successors in office, as its true and lawful attorney upon whom may be served
   any lawful process in any action, suit or proceeding instituted by or on
   behalf of the Company or any beneficiary hereunder arising out of this
   Contract.


<PAGE>

ARTICLE XXIII - ASSIGNMENTS AND CHANGES OF INTEREST

No assignment or change of the Company's interest hereunder, whether voluntary
or involuntary and whether by merger or reinsurance of its entire business with
another company or otherwise, shall be binding upon the Reinsurer.


ARTICLE XXIV - AGENCY AGREEMENT

If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured companies
for purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.


ARTICLE XXV - INTERMEDIARY (BRMA 23A)

E. W. Blanch Co. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder.  All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through E. W. Blanch Co.,
Reinsurance Services, 3500 West 80th Street, Minneapolis, Minnesota 55431.
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.


IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:

Los Angeles, California,  this _______ day of _________________________199__.

                _____________________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.


<PAGE>



                                   SCHEDULE A

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         all of Los Angeles, California


<TABLE>
<CAPTION>
 
 
                                                            THIRD          FOURTH
                                                            EXCESS         EXCESS
<S>                                                      <C>            <C>
 
Company's Retention                                      $15,000,000    $25,000,000
 
Reinsurer's Per Occurrence Limit (95.0% of)              $10,000,000    $15,000,000
 
Reinsurer's Term Limit (95.0% of)                        $20,000,000    $30,000,000
 
Annual Minimum Premium                                   $   520,000    $   436,000
 
Early Expiration Minimum Premium                         $   432,900    $   362,970
 
Premium Rate
  Class of Business other than Auto Physical Damage           2.8457%        2.5046%
  Auto Physical Damage                                        0.3003%        0.2343%
 
Annual Deposit Premium                                   $   650,000    $   545,000
 
Quarterly Deposit Premium                                $   162,500    $   136,250
</TABLE>


<PAGE>
 
U.S.A.
------

       NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE

     1. This Reinsurance does not cover any loss or liability accruing to the 
Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any 
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or 
Nuclear Energy risks.

     2. Without in any way restricting the operation of paragraph (1) of this 
Clause, this Reinsurance does not cover any loss or liability accruing to the 
Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or 
consequential loss arising out of such Physical Damage) to:

       I. Nuclear reactor power plants including all auxiliary property on the 
          site, or
      II. Any other nuclear reactor installation, including laboratories
          handling radioactive materials in connection with reactor
          installations, and "critical facilities" as such, or
     III. Installations for fabricating complete fuel elements or for processing
          substantial quantities of "special nuclear material," and for
          reprocessing, salvaging, chemically separating, storing or disposing
          of "spent" nuclear fuel or waste materials, or
      IV. Installations other than those listed in paragraph (2) III above using
          substantial quantities of radioactive isotopes or other products of
          nuclear fission.

     3. Without in any way restricting the operations of paragraphs (1) and (2) 
hereof, this Reinsurance does not cover any loss or liability by radioactive 
contamination accruing to the Reassured, directly or indirectly, and whether as 
Insurer or Reinsurer, from any insurance on property which is on the same site 
as a nuclear reactor power plant or other nuclear installation and which 
normally would be insured therewith except that this paragraph (3) shall not 
operate

        (a)  where Reassured does not have knowledge of such nuclear reactor 
             power plant or nuclear installation, or
        (b)  where said insurance contains a provisions excluding coverage for
             damage to property caused by or resulting from radioactive
             contamination, however caused. However on and after 1st January
             1960 this sub-paragraph (b) shall only apply provided the said
             radioactive contamination exclusion provision has been approved by
             the Governmental Authority having jurisdiction thereof.

     4. Without in any way restricting the operations of paragraphs (1), (2) and
(3) hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as 
Insurer or Reinsurer, when such radioactive contamination is a named hazard 
specifically insured against.

     5. It is understood and agreed that this Clause shall not extend to risks 
using radioactive isotopes in any form where the nuclear exposure is not 
considered by the Reassured to be the primary hazard.

     6. The term "special nuclear material" shall have the meaning given it in 
the Atomic Energy Act of 1954 or by any law amendatory thereof.

     7. Reassured to be sole judge of what constitutes:

        (a)  substantial quantities, and
        (b)  the extent of installation, plant or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it 
is understood and agreed that

        (a)  all policies issued by the Reassured on or before 31st December
             1957 shall be free from the application of the other provisions of
             this Clause until expiry date or 31st December 1960 whichever first
             occurs whereupon all the provisions of this Clause shall apply.
        (b)  with respect to any risk located in Canada policies issued by the
             Reassured on or before 31st December 1958 shall be free from the
             application of the other provisions of this Clause until expiry
             date or 31st December 1960 whichever first occurs whereupon all the
             provisions of this Clause shall apply.

<PAGE>
 
                     TOTAL INSURED VALUE EXCLUSION CLAUSE

It is the mutual intention of the parties to exclude risks, other than Offices,
Hotels, Apartments, Hospitals, Educational Establishments and Public Utilities
(except Railroad Schedules), and Builders Risks on the above classes, where at
the time of cession, the Total Insured Value over all interests exceeds
$250,000,000. However, the Company shall be protected hereunder, subject to the
other terms and conditions of this Contract, if subsequent to cession being
made, the Company becomes acquainted with the true facts of the case and
discovers that the mutual intention has been inadvertently breached; on
condition that the Company shall at the first opportunity, and certainly by next
anniversary of the original policy, exclude the risk in question.

It is agreed that this mutual intention does not apply to Contingent Business
Interruption or to interests traditionally underwritten as Inland Marine or to
Stock and/or Contents written on a blanket basis except where the Company is
aware that the Total Insured Value of $250,000,000 is already exceeded for
buildings, machinery, equipment and direct use and occupancy at the key
location.

It is understood and agreed that this Clause shall not apply hereunder where the
Company writes 100% of the risk.

<PAGE>

               POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE
                                        
SECTION A:

Excluding:

    (a) All business derived directly or indirectly from any Pool, Association
        or Syndicate which maintains its own reinsurance facilities.

    (b) Any Pool or Scheme (whether voluntary or mandatory) formed after March
        1, 1968 for the purpose of insuring property whether on a country-wide
        basis or in respect of designated areas. This exclusion shall not apply
        to so-called Automobile Insurance Plans or other Pools formed to provide
        coverage for Automobile Physical Damage.

SECTION B:

    It is agreed that business written by the Company for the same perils, which
is known at the time to be insured by, or in excess of underlying amounts placed
in the following Pools, Associations or Syndicates, whether by way of insurance
or reinsurance, is excluded hereunder:

    Industrial Risk Insurers,
    Associated Factory Mutuals,
    Improved Risk Mutuals,
    Any Pool, Association or Syndicate formed for the purpose of writing
    Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,
    United States Aircraft Insurance Group,
    Canadian Aircraft Insurance Group,
    Associated Aviation Underwriters,
    American Aviation Underwriters.

Section B does not apply:

    (a) Where The Total Insured Value over all interests of the risk in question
        is less than $250,000,000.

    (b) To interests traditionally underwritten as Inland Marine or stock and/or
        contents written on a blanket basis.
 
    (c) To Contingent Business Interruption, except when the Company is aware
        that the key location is known at the time to be insured in any Pool,
        Association or Syndicate named above, other than as provided for under
        Section B(a).

    (d) To risks as follows:

        Offices, Hotels, Apartments, Hospitals, Educational Establishments,
        Public Utilities (other than railroad schedules) and builder's risks on
        the classes of risks specified in this subsection (d) only.


<PAGE>

    Where this clause attaches to Catastrophe Excesses, the following Section C
    is added:

SECTION C:

    Nevertheless the Reinsurer specifically agrees that liability accruing to
the Company from its participation in residual market mechanisms including but
not limited to:

    (1)  The following so-called "Coastal Pools":

         Alabama Insurance Underwriting Association
         Florida Windstorm Underwriting Association ("FWUA")
         Louisiana Insurance Underwriting Association
         Mississippi Windstorm Underwriting Association
         North Carolina Insurance Underwriting Association
         South Carolina Windstorm and Hail Underwriting Association
         Texas Catastrophe Property Insurance Association

                                      AND

    (2)  All "Fair Plan" and "Rural Risk Plan" business

                                      AND

    (3)  The Florida Property and Casualty Joint Underwriting Association
         ("FPCJUA"), the Florida Residential Property and Casualty Joint
         Underwriting Association ("RPCJUA") and the California Earthquake
         Authority (CEA)

for all perils otherwise protected hereunder shall not be excluded, except,
however, that this reinsurance does not include any increase in such liability
resulting from:

    (i)  The inability of any other participant in such "Coastal Pool" and/or
         "Fair Plan" and/or "Rural Risk Plan" and/or Residual Market Mechanisms
         to meet its liability.

    (ii) Any claim against such "Coastal Pool" and/or "Fair Plan" and/or "Rural
         Risk Plan" and/or Residual Market Mechanisms, or any participant
         therein, including the Company, whether by way of subrogation or
         otherwise, brought by or on behalf of any insolvency fund (as defined
         in the Insolvency Fund Exclusion Clause incorporated in this Contract).

SECTION D:

    (1)  Notwithstanding Section C above, in respect of the CEA, where an
         assessment is made against the Company by the CEA, the Company may
         include in its Ultimate Net Loss only that assessment directly
         attributable to each separate loss occurrence covered hereunder. The
         Company's initial capital contribution to the CEA shall not be included
         in the Ultimate Net Loss.


<PAGE>

    (2) Notwithstanding Section C above, in respect of the FWUA, FPCJUA and
        RPCJUA, where an assessment is made against the Company by the FWUA, the
        FPCJUA, the RPCJUA, or any combination thereof, the maximum loss that
        the Company may include in the Ultimate Net Loss in respect of any loss
        occurrence hereunder shall not exceed the lesser of:

        (a) The Company's assessment from the relevant entity (FWUA, FPCJUA
            and/or RPCJUA) for the accounting year in which the loss occurrence
            commenced, or

        (b) The product of the following:

             (i)  The Company's percentage participation in the relevant entity
                  for the accounting year in which the loss occurrence
                  commenced; and

             (ii) The relevant entity's total losses in such loss occurrence.

        Any assessments for accounting years subsequent to that in which the
        loss occurrence commenced may not be included in the Ultimate Net Loss
        hereunder. Moreover, notwithstanding Section C above, in respect of the
        FWUA, the FPCJUA and/or the RPCJUA, the Ultimate Net Loss hereunder
        shall not include any monies expended to purchase or retire bonds as a
        consequence of being a member of the FWUA, the FPCJUA and/or the RPCJUA.
        For the purposes of this Contract, the Company may not include in the
        Ultimate Net Loss any assessment or any percentage assessment levied by
        the FWUA, the FPCJUA and/or the RPCJUA to meet the obligations of an
        insolvent insurer member or other party, or to meet any obligations
        arising from the deferment by the FWUA, the FPCJUA and/or the RPCJUA of
        the collection of monies.


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

NOTES: Wherever used herein the terms:

       "Company"    shall be understood to mean "Company", "Reinsured",
                    "Reassured" or whatever other term is used in the attached
                    reinsurance document to designate the reinsured company or
                    companies.

       "Agreement"  shall be understood to mean "Agreement", "Contract",
                    "Policy", or whatever other term is used to designate the
                    attached reinsurance document.

       "Reinsurers" shall be understood to mean "Reinsurers", "Underwriters" or
                    whatever other term is used in the attached reinsurance
                    document to designate the reinsurer or reinsurers.

<PAGE>
 
                    POLLUTION AND SEEPAGE EXCLUSION CLAUSE



This Contract excludes loss and/or damage and/or costs and/or expenses arising 
from seepage and/or pollution and/or contamination, other than contamination 
from smoke.  Nevertheless, this exclusion does not preclude payment of the cost 
of removing debris of property damaged by a loss otherwise covered hereunder, 
subject always to a limit of 25% of the Company's property loss under the 
applicable original policy.
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                  Allmerica Re
                                 A Division of
                         The Hanover Insurance Company
                             Bedford, New Hampshire
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 1.25%  of the Third Excess Catastrophe Reinsurance
                 1.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Florham Park, New Jersey,  this _______ day of_________________________199___.

                _________________________________________________________
                Allmerica Re, A Division of The Hanover Insurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                            AXA Reinsurance Company
                              Wilmington, Delaware
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

              7.50%  of the Third Excess Catastrophe Reinsurance
                 0%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

New York, New York,  this _______ day of _______________________________199___.

                     _____________________________________________________
                     AXA Reinsurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                  Cat Limited
                               Hamilton, Bermuda
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 10.00%  of the Third Excess Catastrophe Reinsurance
                 10.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Hamilton, Bermuda,  this _______ day of_________________________________199___.

                    _____________________________________________________
                    Cat Limited
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Continental Casualty Company
                               Chicago, Illinois
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 2.00%  of the Third Excess Catastrophe Reinsurance
                 1.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Chicago, Illinois,  this _______ day of_________________________________199___.

                    _____________________________________________________
                    Continental Casualty Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Everest Reinsurance Company
                                Dover, Delaware
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 13.00%  of the Third Excess Catastrophe Reinsurance
                     0%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Newark, New Jersey,  this _______ day of _______________________________199___.

                     _____________________________________________________
                     Everest Reinsurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                    First Excess and Reinsurance Corporation
                             Overland Park, Kansas
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 9.00%  of the Third Excess Catastrophe Reinsurance
                10.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Kansas City, Missouri,  this _______ day of____________________________199___.

                        _____________________________________________________
                        First Excess and Reinsurance Corporation
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Hartford Fire Insurance Company
                             Hartford, Connecticut
                                       by
                              Hartford Re Company
                             Hartford, Connecticut
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                    0%  of the Third Excess Catastrophe Reinsurance
                 3.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                     Security Insurance Company of Hartford
                            Farmington, Connecticut
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 0.40%  of the Third Excess Catastrophe Reinsurance
                 0.44%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Farmington, Connecticut,  this _______ day of ___________________________199___.

                     _____________________________________________________
                     Security Insurance Company of Hartford
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Signet Star Reinsurance Company
                              Wilmington, Delaware
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 2.00%  of the Third Excess Catastrophe Reinsurance
                 2.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Florham Park, New Jersey,  this _______ day of _________________________199___.

                           _____________________________________________________
                           Signet Star Reinsurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                         Sydney Reinsurance Corporation
                           Philadelphia, Pennsylvania
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 4.25%  of the Third Excess Catastrophe Reinsurance
                 3.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

New York, New York,  this _______ day of _______________________________199___.

                     _____________________________________________________
                     Sydney Reinsurance Corporation
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                         United Fire & Casualty Company
                               Cedar Rapids, Iowa
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 1.00%  of the Third Excess Catastrophe Reinsurance
                    0%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Cedar Rapids, Iowa,  this _______ day of________________________________199___.

                _____________________________________________________
                United Fire & Casualty Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                            USF RE Insurance Company
                             Boston, Massachusetts
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 2.00%  of the Third Excess Catastrophe Reinsurance
                 3.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Costa Mesa, California,  this _______ day of_____________________________199___.

                _____________________________________________________
                USF RE Insurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Vesta Fire Insurance Corporation
                              Birmingham, Alabama
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 25.00%  of the Third Excess Catastrophe Reinsurance
                 25.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Birmingham, Alabama,  this _______ day of_______________________________199___.

                _____________________________________________________
                Vesta Fire Insurance Corporation
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                 Winterthur Reinsurance Corporation of America
                               New York, New York
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 3.25%  of the Third Excess Catastrophe Reinsurance
                 2.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

New York, New York,  this _______ day of _______________________________199___.

                _____________________________________________________
                Winterthur Reinsurance Corporation of America
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                   Europa Re
                                Cologne, Germany
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 0.75%  of the Third Excess Catastrophe Reinsurance
                 2.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Cologne, Germany,  this _______ day of ________________________________199___.

                _____________________________________________________
                Europa Re
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                     Mapfre Re Compania de Reaseguros, S.A
                                 Madrid, Spain
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 0%  of the Third Excess Catastrophe Reinsurance
              2.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Madrid, Spain,  this _______ day of ____________________________________199___.

                _____________________________________________________
                Mapfre Re Compania de Reaseguros, S.A.
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                   Sirius International Insurance Corporation
                               Stockholm, Sweden
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 1.25%  of the Third Excess Catastrophe Reinsurance
                 1.25%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Stockholm, Sweden,  this _______ day of________________________________199___.

                _____________________________________________________
                Sirius International Insurance Corporation
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                              La Reunion Francaise
                                 Paris, France
                                       by
                       Societe Parisienne de Souscription
                                 Paris, France
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 1.50%  of the Third Excess Catastrophe Reinsurance
                 1.50%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Paris, France,  this _______ day of ____________________________________199___.

                _____________________________________________________
                Societe Parisienne de Souscription
                (for and on behalf of La Reunion Francaise)
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                    Certain Underwriting Members of Lloyd's
                 shown in the Signing Schedule attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 5.10%  of the Third Excess Catastrophe Reinsurance
                 4.92%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer's
obligations under the attached Contract, service of process may be made upon
Mendes & Mount, 750 Seventh Avenue, New York, New York  10019.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule
attached hereto.
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Certain Insurance Companies
                shown in the Signing Schedule(s) attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                     0%  of the Third Excess Catastrophe Reinsurance
                 10.14%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer's
obligations under the attached Contract, service of process may be made upon
Mendes & Mount, 750 Seventh Avenue, New York, New York  10019.

The following Article shall apply to the Subscribing Reinsurer's share in the
attached Contract, in lieu of the provisions of Article XIX - Unauthorized
Reinsurers - of the Contract:

   "Article XIX - Loss Reserves

     (Applicable only if the Reinsurer cannot qualify for credit by any state or
   any other governmental authority having jurisdiction over the Company's loss
   reserves.)

    A. As regards policies or bonds issued by the Company coming within the
       scope of this Contract, the Company agrees that, when it shall file with
       the Insurance Department or set up on its books reserves for losses
       covered hereunder which it shall be required by law to set up, it will
       forward to the Reinsurer a statement showing the proportion of such loss
       reserves which is applicable to the Reinsurer. The Reinsurer hereby
       agrees that it will apply for and secure delivery to the Company of a
       clean, irrevocable and unconditional Letter of Credit issued and
       confirmed, if confirmation is required by the regulatory authority(ies)
       having jurisdiction over the Company's loss reserves, by a bank or banks
       meeting the NAIC Securities Valuation Office credit standards for issuers
       of Letters of Credit and which is (are) acceptable to said regulatory
       authority(ies), in an amount equal to the Reinsurer's proportion of
       reserves in respect of known outstanding losses that have been reported
       to the Reinsurer and allocated loss expenses relating thereto as shown in
       the statement prepared by the Company. Under no circumstances shall any
       amount relating to reserves in respect of Incurred But Not Reported
       losses be included in the amount of the Letter of Credit.

    B. The Letter of Credit shall be in a form acceptable to insurance
       regulatory authority(ies) having jurisdiction over the Company's loss
       reserves, shall be issued for a period of not less than one year, and
       shall be automatically extended for one year from its date of expiration
       or any future expiration date unless thirty (30) days prior to any
       expiration date the issuing bank shall notify the Company by registered
       mail that the issuing bank elects not to consider the Letter of Credit
       extended for any additional period. An issuing bank, not a member of the
       federal reserve system or not chartered in New York State, shall provide
       sixty (60) days notice to the Company prior to any expiration in the
       event of non-extension.

    C. Notwithstanding any other provision of this Contract, the Company or its
       successors in interest may draw upon such credit at any time, without
       diminution because of the
<PAGE>
 
      insolvency of the Company or of the Reinsurer, for one or more of the
      following purposes only:

       1. To pay the Reinsurer's share or to reimburse the Company for the
          Reinsurer's share of any loss reinsured by this Contract, the payment
          of which has been agreed by the Reinsurer and which has not been
          otherwise paid;

       2. To make refund of any sum which is in excess of the actual amount
          required to pay the Reinsurer's share of any liability reinsured by
          this Contract;

       3. In the event of expiration of the Letter of Credit as provided for
          above, to establish deposit of the Reinsurer's share of known and
          reported outstanding losses and allocated expenses relating thereto
          under this Contract.  Such cash deposit 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.

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

    D. At annual intervals, or more frequently as agreed but never more
       frequently than quarterly, the Company shall prepare a specific
       statement, for the sole purpose of amending the Letter of Credit, of the
       Reinsurer's share of known and reported outstanding losses and allocated
       expenses relating thereto. If the statement shows that the Reinsurer's
       share of such losses and allocated loss expenses exceeds the balance of
       credit as of the statement date, the Reinsurer shall, within thirty (30)
       days after receipt of notice of such excess, secure delivery to the
       Company of an amendment of the Letter of Credit increasing the amount of
       credit by the amount of such difference. If, however, the statement shows
       that the Reinsurer's share of known and reported outstanding losses plus
       allocated loss expenses relating thereto is less than the balance of
       credit as of the statement date, the Company shall, within thirty (30)
       days after receipt of written request from the Reinsurer, release such
       excess credit by agreeing to secure an amendment to the Letter of Credit
       reducing the amount of credit available by the amount of such excess
       credit."

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s)
attached hereto.
<PAGE>
 

                            (Revised:  July 1, 1997)

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         EFFECTIVE:  SEPTEMBER 1, 1966
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



                      Third Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                      REINSURERS                                  PARTICIPATIONS
<S>                                                              <C>
 
Allmerica Re, A Division of The Hanover Insurance Company                1.25%
AXA Reinsurance Company                                                  7.50
Cat Limited                                                             10.00
Continental Casualty Company                                             2.00
Everest Reinsurance Company                                             13.00
First Excess and Reinsurance Corporation                                 9.00
Nationwide Mutual Insurance Company                                      3.00
Patriot Re Corporation (for Various Lloyd's Underwriters)                2.00
Renaissance Reinsurance Ltd.                                             4.00
St. Paul Reinsurance Management Corporation
  (for St. Paul Fire and Marine Insurance Company)                       1.75
Signet Star Reinsurance Company                                          2.00
Sydney Reinsurance Corporation                                           4.25
United Fire & Casualty Company                                           1.00
USF RE Insurance Company                                                 2.00
Vesta Fire Insurance Corporation                                        25.00
Winterthur Reinsurance Corporation of America                            3.25
 
THROUGH SWIRE BLANCH EUROPE
Europa Re                                                                 .75
Sirius International Insurance Corporation                               1.25
</TABLE>
                                                                     Page 1 of 3
<PAGE>
 

Third Excess Catastrophe Reinsurance (Continued)
<TABLE> 
<CAPTION> 

                         REINSURERS                            PARTICIPATIONS
<S>                                                            <C> 
SPS Reasurrance                                                          1.50%

THROUGH MILLER REINSURANCE BROKERS NORTH AMERICA LTD.
Lloyd's Underwriters
 Per Signing Schedule                                                    5.10

TOTAL                                                                   99.60% part of
                                                                        100% share in the
                                                                        interests and liabilities
                                                                        of the "Reinsurer"

</TABLE> 


                     Fourth Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                         REINSURERS                            PARTICIPATIONS
<S>                                                            <C>
 
Allmerica Re, A Division of The Hanover Insurance Company                1.50%
Cat Limited                                                             10.00
Continental Casualty Company                                             1.50
First Excess and Reinsurance Corporation                                10.00
Hartford Re Company
  (for Hartford Fire Insurance Company)                                  3.00
Nationwide Mutual Insurance Company                                      4.00
Renaissance Reinsurance Ltd.                                             4.00
St. Paul Reinsurance Management Corporation
  (for St. Paul Fire and Marine Insurance Company)                       2.00
Signet Star Reinsurance Company                                          2.00
Sydney Reinsurance Corporation                                           3.50
USF RE Insurance Company                                                 3.00
Vesta Fire Insurance Corporation                                        25.00
Winterthur Reinsurance Corporation of America                            2.50
 
THROUGH SWIRE BLANCH EUROPE
Europa Re                                                                2.00
Mapfre Re Compania de Reaseguros, S.A.                                   2.50
Sirius International Insurance Corporation                               1.25
SPS Reasurrance                                                          1.50
</TABLE>

                                                                     Page 2 of 3
<PAGE>
 

Fourth Excess Catastrophe Reinsurance (Continued)

                    REINSURERS                              PARTICIPATIONS

THROUGH MILLER REINSURANCE BROKERS NORTH AMERICA LTD. 
Lloyd's Underwriters and Companies
 Per Signing Schedule(s)                                       15.06%

TOTAL                                                          99.56% part of
                                                               100% share in the
                                                               interests and
                                                               liabilities
                                                               of the
                                                               "Reinsurer"



                                E. W. Blanch Co.

                              Reinsurance Services

                             3500 West 80th Street

                         Minneapolis, Minnesota  55431

                                                                     Page 3 of 3
<PAGE>
 

                         (Revised:  September 1, 1997)

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         EFFECTIVE:  SEPTEMBER 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



                      Third Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                         REINSURERS                            PARTICIPATIONS
<S>                                                            <C>
 
Allmerica Re, A Division of The Hanover Insurance Company                1.25%
AXA Reinsurance Company                                                  7.50
Cat Limited                                                             10.00
Continental Casualty Company                                             2.00
Everest Reinsurance Company                                             13.00
First Excess and Reinsurance Corporation                                 9.00
Nationwide Mutual Insurance Company                                      3.00
Patriot Re Corporation (for Various Lloyd's Underwriters)                2.00
Renaissance Reinsurance Ltd.                                             4.00
St. Paul Reinsurance Management Corporation
  (for St. Paul Fire and Marine Insurance Company)                       1.75
Signet Star Reinsurance Company                                          2.00
Sydney Reinsurance Corporation                                           4.25
United Fire & Casualty Company                                           1.00
USF RE Insurance Company                                                 2.00
Vesta Fire Insurance Corporation                                        25.00
Winterthur Reinsurance Corporation of America                            3.25
 
THROUGH SWIRE BLANCH EUROPE
Europa Re                                                                 .75
Sirius International Insurance Corporation                               1.25
</TABLE>

                                                                     Page 1 of 3
<PAGE>
 

Third Excess Catastrophe Reinsurance (Continued)

                         REINSURERS                            PARTICIPATIONS

SPS Reasurrance                                                     1.50%

THROUGH MILLER REINSURANCE BROKERS NORTH AMERICA LTD.
Lloyd's Underwriters
 Per Signing Schedule                                               5.10

TOTAL                                                              99.60% part
                                                                   of 100%
                                                                   share in the
                                                                   interests and
                                                                   liabilities
                                                                   of the
                                                                   "Reinsurer"


                     Fourth Excess Catastrophe Reinsurance
<TABLE>
<CAPTION>
 
                         REINSURERS                            PARTICIPATIONS
<S>                                                            <C>
 
Allmerica Re, A Division of The Hanover Insurance Company           1.50%
Cat Limited                                                        10.00
Continental Casualty Company                                        1.50
First Excess and Reinsurance Corporation                           10.00
Hartford Re Company                                                
  (for Hartford Fire Insurance Company)                             8.25
Nationwide Mutual Insurance Company                                 4.00
Renaissance Reinsurance Ltd.                                        4.00
St. Paul Reinsurance Management Corporation                        
  (for St. Paul Fire and Marine Insurance Company)                  2.00
Signet Star Reinsurance Company                                     2.00
Sydney Reinsurance Corporation                                      3.50
USF RE Insurance Company                                            3.00
Vesta Fire Insurance Corporation                                   25.00
Winterthur Reinsurance Corporation of America                       2.50
                                                                   
THROUGH SWIRE BLANCH EUROPE                                        
Europa Re                                                           2.00
Mapfre Re Compania de Reaseguros, S.A.                              2.50
Sirius International Insurance Corporation                          1.25
SPS Reasurrance                                                     1.50
</TABLE>
                                                                     Page 2 of 3
<PAGE>
 

Fourth Excess Catastrophe Reinsurance (Continued)

                    REINSURERS                        PARTICIPATIONS

THROUGH MILLER REINSURANCE BROKERS NORTH AMERICA LTD.
Lloyd's Underwriters and Companies
 Per Signing Schedule(s)                              15.06%

TOTAL                                                 99.56% part of
                                                      100% share in the
                                                      interests and liabilities
                                                      of the "Reinsurer"




                                E. W. Blanch Co.

                              Reinsurance Services

                             3500 West 80th Street

                         Minneapolis, Minnesota  55431
                                        
                                                                     Page 3 of 3
<PAGE>
 
     
                                ADDENDUM NO. 1
                                             
                                    to the
    
                               THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                             REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                             
                                   issued to
     
                           Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                        all of Los Angeles, California
     
     
     
IT IS HEREBY AGREED, effective August 31, 1997, that paragraph A of Article II -
Term - shall be deleted and the following substituted therefor:

    "A.  This Contract shall become effective on September 1, 1996, with respect
         to losses arising out of loss occurrences commencing on or after that
         date, and shall remain in force until September 30, 1997, both days
         inclusive.

The provisions of this Contract shall remain otherwise unchanged.

<PAGE>
 


                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                  Allmerica Re
                                 A Division of
                         The Hanover Insurance Company
                             Bedford, New Hampshire

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Florham Park, New Jersey,  this _______ day of ______________________199___.

                _____________________________________________________
                Allmerica Re, A Division of The Hanover Insurance Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                            AXA Reinsurance Company
                              Wilmington, Delaware

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ____________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

New York, New York,  this _______ day of _________________________ 199___.

                _____________________________________________________
                AXA Reinsurance Company

<PAGE>
 
                                                            
                                ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                  Cat Limited
                               Hamilton, Bermuda

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Hamilton, Bermuda,  this _______ day of _______________________199___.

                _____________________________________________________
                Cat Limited

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Continental Casualty Company
                               Chicago, Illinois

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Chicago, Illinois,  this _______ day of _________________________199___.

                _____________________________________________________
                Continental Casualty Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Everest Reinsurance Company
                             A Delaware Corporation

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ____________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Warren, New Jersey,  this _______ day of ________________________ 199___.

                _____________________________________________________
                Everest Reinsurance Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                    First Excess and Reinsurance Corporation
                             Overland Park, Kansas

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Kansas City, Missouri,  this _______ day of _________________________199___.

                _____________________________________________________
                First Excess and Reinsurance Corporation

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Hartford Fire Insurance Company
                             Hartford, Connecticut
                                       by
                              Hartford Re Company
                             Hartford, Connecticut
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IT IS ALSO AGREED, effective September 1, 1997, with respect to losses arising
out of loss occurrences commencing on or after that date, that the Subscribing
Reinsurer's percentage

<PAGE>
 

shares in the interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above shall be increased as follows:

          From  0.0% to  0.0% of the Third Excess Catastrophe Reinsurance
          From 3.00% to 8.25% of the Fourth Excess Catastrophe Reinsurance

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

San Francisco, California,  this _______ day of ________________________ 199___.

                _____________________________________________________
                Hartford Re Company
                (for and on behalf of Hartford Fire Insurance Company)

<PAGE>
 

                                 Addendum No. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                      Nationwide Mutual Insurance Company
                                 Columbus, Ohio

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Columbus, Ohio,  this _______ day of _____________________________199___.

                _____________________________________________________
                Nationwide Mutual Insurance Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                    Certain Underwriting Members of Lloyd's

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _________________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Skillman, New Jersey,  this _______ day of ________________________199___.

                _____________________________________________________
                Patriot Re Corporation
                (for and on behalf of Underwriters at Lloyd's
                per Contract # __________)

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Renaissance Reinsurance Ltd.
                               Hamilton, Bermuda

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _____________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Hamilton, Bermuda,  this _______ day of ___________________________199___.

                _____________________________________________________
                Renaissance Reinsurance Ltd.

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                   St. Paul Fire and Marine Insurance Company
                              St. Paul, Minnesota

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ________________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

New York, New York,  this _______ day of _______________________ 199___.

                _____________________________________________________
                St. Paul Fire and Marine Insurance Company
                by St. Paul Re, Inc.

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Signet Star Reinsurance Company
                              Wilmington, Delaware

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _________________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Florham Park, New Jersey,  this _______ day of _____________________ 199___.

                _____________________________________________________
                Signet Star Reinsurance Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                         Sydney Reinsurance Corporation
                           Philadelphia, Pennsylvania

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _____________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

New York, New York,  this _______ day of _________________________ 199___.

                _____________________________________________________
                Sydney Reinsurance Corporation

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                         United Fire & Casualty Company
                               Cedar Rapids, Iowa

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ______________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Cedar Rapids, Iowa,  this _______ day of ___________________________ 199___.

                _____________________________________________________
                United Fire & Casualty Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                            USF RE Insurance Company
                             Boston, Massachusetts

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Costa Mesa, California,  this _______ day of _______________________199___.

                _____________________________________________________
                USF RE Insurance Company

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                        Vesta Fire Insurance Corporation
                              Birmingham, Alabama

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Birmingham, Alabama,  this _______ day of __________________________199___.

                _____________________________________________________
                Vesta Fire Insurance Corporation

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                 Winterthur Reinsurance Corporation of America
                               New York, New York

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of __________________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

New York, New York,  this _______ day of _________________________ 199___.

                _____________________________________________________
                Winterthur Reinsurance Corporation of America

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                                   Europa Re
                                Cologne, Germany

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ____________________ 199___

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Cologne, Germany,  this _______ day of __________________________ 199___.


                _____________________________________________________
                Europa Re
                Europa Ruckversicherung
                Aktiengesellschaft

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                     Mapfre Re Compania de Reaseguros, S.A
                                 Madrid, Spain

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _______________________199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Madrid, Spain,  this _______ day of ____________________________ 199___.

                _____________________________________________________
                Mapfre Re Compania de Reaseguros, S.A.

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                   Sirius International Insurance Corporation
                               Stockholm, Sweden

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ______________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Stockholm, Sweden,  this _______ day of ___________________________ 199___.

                _____________________________________________________
                Sirius International Insurance Corporation

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                              La Reunion Francaise
                                 Paris, France
                                       by
                       Societe Parisienne de Souscription
                                 Paris, France

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California



IT IS HEREBY AGREED, effective July 1, 1997, that all rights, interests,
liabilities and obligations of the "Subscribing Reinsurer" under this Agreement
shall be transferred from La Reunion Francaise, Paris, France, by Societe
Parisienne de Souscription, Paris, France (hereinafter referred to as the
"Assignor") to SPS Reassurance, Paris, France (hereinafter referred to as the
"Assignee").  In accordance therewith, the Assignor shall assign, and the
Assignee shall assume, all of the rights, interests, liabilities and obligations
of the "Subscribing Reinsurer" under this Agreement.  The Assignee shall then be
subject to all of the terms and conditions hereof, and the term "Subscribing
Reinsurer," wherever it is used herein, shall refer to SPS Reassurance, Paris,
France.

IT IS UNDERSTOOD AND AGREED that the Company consents to the foregoing transfer
of rights, interests, liabilities and obligations from the Assignor to the
Assignee, and further releases the 

<PAGE>
 

Assignor from all unfulfilled liabilities and obligations which have arisen
under this Agreement and all liabilities and obligations which may arise in the
future under this Agreement.

IT IS ALSO AGREED that the "Novation Addendum," a copy of which is attached to
and forms part of this Addendum, shall be recognized as part of this Agreement,
effective July 1, 1997.

IT IS ALSO AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS ALSO AGREED that, in lieu of the provisions of the second paragraph of the
original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ________________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Paris, France,  this _______ day of ___________________________________ 199___.

                _____________________________________________________
                La Reunion Francaise

Paris, France,  this _______ day of ________________________________ 199___.

                _____________________________________________________
                SPS Reassurance

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                    Certain Underwriting Members of Lloyd's
                 shown in the Signing Schedule attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Addendum as of the date undermentioned at:

Los Angeles, California,  this _______ day of __________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule
attached hereto.

<PAGE>
 

                                 ADDENDUM NO. 1
                                        
                                     to the

                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Certain Insurance Companies
                shown in the Signing Schedule(s) attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California


IT IS HEREBY AGREED that Addendum No. 1 to the Contract shall form part of the
Contract, effective August 31, 1997.

IT IS FURTHER AGREED that, in lieu of the provisions of the second paragraph of
the original Interests and Liabilities Agreement, this Agreement shall expire on
September 30, 1997.

IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Addendum as of the date undermentioned at:

Los Angeles, California,  this _______ day of _______________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s)
attached hereto.

<PAGE>
 

                              TERMINATION ADDENDUM

                                     to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         all of Los Angeles, California

                                   and to the

                      INTERESTS AND LIABILITIES AGREEMENT

                                       of

                       San Francisco Reinsurance Company
                               Novato, California
            (hereinafter referred to as the "Subscribing Reinsurer")

                                attached thereto


IT IS HEREBY AGREED that this Contract, the Interests and Liabilities Agreement
and the Subscribing Reinsurer's share(s), as listed below, in the interests and
liabilities of the "Reinsurer" under the respective excess layers of reinsurance
provided in this Contract shall be terminated on August 31, 1997, with respect
to losses arising out of loss occurrences commencing after that date:

                   0.0%  of the Third Excess Catastrophe Reinsurance
                  5.25%  of the Fourth Excess Catastrophe Reinsurance

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of _______________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Novato, California,  this _______ day of __________________________ 199___.

                _____________________________________________________
                San Francisco Reinsurance Company

<PAGE>
 

                              TERMINATION ADDENDUM

                                     to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                                   issued to

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         all of Los Angeles, California

                                   and to the

                      INTERESTS AND LIABILITIES AGREEMENT

                                       of

                     Security Insurance Company of Hartford
                            Farmington, Connecticut
            (hereinafter referred to as the "Subscribing Reinsurer")

                                attached thereto


IT IS HEREBY AGREED that this Contract, the Interests and Liabilities Agreement
and the Subscribing Reinsurer's share(s), as listed below, in the interests and
liabilities of the "Reinsurer" under the respective excess layers of reinsurance
provided in this Contract shall be terminated on August 31, 1997, with respect
to losses arising out of loss occurrences commencing after that date:

                  0.40%  of the Third Excess Catastrophe Reinsurance
                  0.44%  of the Fourth Excess Catastrophe Reinsurance

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates undermentioned at:

Los Angeles, California,  this _______ day of ________________________ 199___.

                _____________________________________________________
                Mercury Casualty Company
                Mercury Insurance Company
                California Automobile Insurance Company
                California General Underwriters Insurance Company, Inc.

Farmington, Connecticut,  this _______ day of ______________________ 199___.


                _____________________________________________________
                Security Insurance Company of Hartford
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Hartford, Connecticut,  this _______ day of _____________________________199___.

                        _____________________________________________________
                        Hartford Re Company
                        (for and on behalf of Hartford Fire Insurance Company)
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                      Nationwide Mutual Insurance Company
                                 Columbus, Ohio
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 3.00%  of the Third Excess Catastrophe Reinsurance
                 4.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Columbus, Ohio,  this _______ day of ____________________________________199___.

                 _____________________________________________________
                 Nationwide Mutual Insurance Company
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                              Certain Underwriting
                               Members of Lloyd's
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 2.00%  of the Third Excess Catastrophe Reinsurance
                    0%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Skillman, New Jersey,  this _______ day of______________________________199___.

                       _____________________________________________________
                       Patriot Re Corporation
                       (for and on behalf of Underwriters at Lloyd's
                       per Contract # ____________)
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                          Renaissance Reinsurance Ltd.
                               Hamilton, Bermuda
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 4.00%  of the Third Excess Catastrophe Reinsurance
                 4.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Hamilton, Bermuda,  this _______ day of________________________199___.

                    _____________________________________________________
                    Renaissance Reinsurance Ltd.
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                   St. Paul Fire and Marine Insurance Company
                              St. Paul, Minnesota
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                 1.75%  of the Third Excess Catastrophe Reinsurance
                 2.00%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

New York, New York,  this _______ day of ___________________________________
199___.

                _____________________________________________________
                St. Paul Fire and Marine Insurance Company
                St. Paul Reinsurance Management Corporation,
                Reinsurance Managers
<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                                        
                                       of

                       San Francisco Reinsurance Company
                               Novato, California
            (hereinafter referred to as the "Subscribing Reinsurer")

                              with respect to the

                                THIRD AND FOURTH
                          PROPERTY EXCESS CATASTROPHE
                              REINSURANCE CONTRACT
                         Effective:  September 1, 1996
                                        
                         issued to and duly executed by

                            Mercury Casualty Company
                           Mercury Insurance Company
                    California Automobile Insurance Company
                                      and
            California General Underwriters Insurance Company, Inc.
                         All of Los Angeles, California
            (hereinafter collectively referred to as the "Company")



The Subscribing Reinsurer hereby accepts the following percentage shares in the
interests and liabilities of the "Reinsurer" as set forth in the attached
Contract captioned above:

                    0%  of the Third Excess Catastrophe Reinsurance
                 5.25%  of the Fourth Excess Catastrophe Reinsurance

This Agreement shall become effective on September 1, 1996, and shall continue
in force until August 31, 1997, both days inclusive.  However, if the
"Reinsurer" under the attached Contract sustains no loss from loss occurrences
commencing on or prior to May 31, 1997, this Agreement shall, upon notice from
the Company prior to June 30, 1997, expire on June 30, 1997.  This Agreement may
also be terminated by the Company in accordance with paragraph B of Article II
of the Contract.
<PAGE>
 
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Novato, California,  this _______ day of ________________________________199___.

                     _____________________________________________________
                     San Francisco Reinsurance Company