<PAGE>

                                                                   Exhibit 10.33

                         MULTIPLE LINE EXCESS OF LOSS
                             REINSURANCE AGREEMENT
                                 NO. TM696A,B

                           EFFECTIVE JANUARY 1, 2000

                                    between

                      AMERICAN MERCURY INSURANCE COMPANY
                            Los Angeles, California

                                      and

                     SWISS REINSURANCE AMERICA CORPORATION
                               Armonk, New York
<PAGE>

        MULTIPLE LINE EXCESS OF LOSS REINSURANCE AGREEMENT NO. TM696A,B

<TABLE>
<CAPTION>
ARTICLE         CONTENTS                                              PAGE
-------         --------                                              ----
<S>             <C>                                                   <C>
                PREAMBLE                                                 1
I               INTENT                                                   1
II              BUSINESS COVERED                                         1
III             EFFECTIVE DATE AND TERMINATION                           2
IV              TERRITORY                                                2
V               ULTIMATE NET LOSS                                        3
VI              LOSS IN EXCESS OF POLICY LIMITS                          3
VII             EXTRA CONTRACTUAL OBLIGATIONS                            4
VIII            DEFINITION OF RISK                                       5
IX              EXCLUSIONS                                               5
X               LOSS OCCURRENCE                                         12
XI              REPORTS AND REMITTANCES                                 14
XII             CLAIMS                                                  15
XIII            SALVAGE AND SUBROGATION                                 15
XIV             ACCESS TO RECORDS                                       16
XV              TAXES                                                   16
XVI             CURRENCY                                                16
XVII            OFFSET                                                  17
XVIII           ERRORS OR OMISSIONS                                     17
XIX             SPECIAL ACCEPTANCE                                      17
XX              DISPUTE RESOLUTION                                      17
XXI             INSOLVENCY                                              19
XXII            SPECIAL TERMINATION                                     20
XXIII           AMENDMENTS                                              21
                SIGNATURES                                              22
</TABLE>

ATTACHMENTS:  EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER
              EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

              INSOLVENCY FUNDS EXCLUSION CLAUSE
              POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
              TOTAL INSURED VALUE EXCLUSION CLAUSE
              POLLUTION AND SEEPAGE EXCLUSION CLAUSE
              NUCLEAR INCIDENT EXCLUSION CLAUSE  - PHYSICAL DAMAGE -
               REINSURANCE - U.S.A.
              NUCLEAR INCIDENT EXCLUSION CLAUSE  - PHYSICAL DAMAGE -
               REINSURANCE - CANADA
              NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO. 4
              POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE
              NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
               REINSURANCE  - U.S.A.
              NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
               REINSURANCE - CANADA
<PAGE>

                         MULTIPLE LINE EXCESS OF LOSS
                             REINSURANCE AGREEMENT
                                 NO. TM696A,B
                 (hereinafter referred to as the "Agreement")

                                    between

                      AMERICAN MERCURY INSURANCE COMPANY
                            Los Angeles, California
                  (hereinafter referred to as the "Company")

                                      and

                     SWISS REINSURANCE AMERICA CORPORATION
                               Armonk, New York
                 (hereinafter referred to as the "Reinsurer")



ARTICLE I - INTENT
------------------

A. The Company will reinsure with the Reinsurer and the Reinsurer will accept
   from the Company such reinsurance in accordance with the terms and conditions
   set forth in Exhibits A and B which are attached hereto and made a part of
   this Agreement, such Exhibits being entitled for the purposes of
   identification as follows:

          EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER
          EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

B. This Agreement is solely between the Company and the Reinsurer, and nothing
   contained in this Agreement shall create any obligations or establish any
   rights against the Reinsurer in favor of any person or entity not a party
   hereto.

C. The performance of obligations by both parties under this Agreement shall be
   in accordance with a fiduciary standard of good faith and fair dealing.


ARTICLE II - BUSINESS COVERED
-----------------------------

A. The Reinsurer shall indemnify the Company on an excess of loss basis in
   respect of the Company's Ultimate Net Loss paid or to be paid by the Company
   as a result of losses occurring during the term of this Agreement, for
   Policies in force as of January 1, 2000, and new and renewal Policies
   becoming effective on or after said date, subject to the terms and conditions
   contained herein.

                                      1.
<PAGE>

B. This Agreement is solely between the Company and the Reinsurer, and nothing
   contained in this Agreement shall create any obligations or establish any
   rights against the Reinsurer in favor of any person or entity not a party
   hereto.

C. The performance of obligations by both parties under this Agreement shall be
   in accordance with a fiduciary standard of good faith and fair dealing.

D. The term "Policies" shall mean each of the Company's binders, policies and
   contracts of insurance or reinsurance on the business covered hereunder.

E. Under this Agreement, the indemnity for reinsured loss applies only to the
   following Property and Casualty Business except as excluded under Article IX
   - Exclusions of this Agreement.


NAIC
CODE:   PROPERTY AND CASUALTY LINE OF BUSINESS:

04      Homeowners Section I and Section II


ARTICLE III - EFFECTIVE DATE AND TERMINATION
--------------------------------------------

A. This Agreement shall become effective with respect to losses occurring on and
   after 12:01 a.m., Pacific Standard Time, January 1, 2000, and shall remain in
   full force until terminated.  This Agreement may be terminated at any time by
   either party giving to the other 90 days prior written notice by certified
   mail of its intention to do so.

B. Upon termination of this Agreement, the Reinsurer shall be liable for losses
   occurring prior to the date of termination; however, the Reinsurer shall have
   no liability for losses occurring subsequent to the termination of this
   Agreement.

C. If this Agreement shall terminate while a Property loss covered under this
   Agreement is in progress, it is agreed that, subject to the other conditions
   of this Agreement, the Reinsurer shall indemnify the Company as if the entire
   loss had occurred during the time this Agreement is in force provided the
   loss covered hereunder started before the date of termination.


ARTICLE IV - TERRITORY
----------------------

This Agreement applies only to risks located and polices issued in the State of
Florida.

                                      2.
<PAGE>

ARTICLE V - ULTIMATE NET LOSS
-----------------------------

A. The term "Ultimate Net Loss" shall mean the actual sum paid or to be paid by
   the Company in settlement of losses or liability after making deductions for
   all recoveries, including subrogation,  salvages, and claims upon other
   reinsurances, whether collectible or not, which inure to the benefit of the
   Reinsurer under this Agreement, and shall include Loss Adjustment Expenses
   incurred by the Company.

B. As respects Casualty Business covered under this Agreement, the term
   "Ultimate Net Loss" shall include 90% of Extra Contractual Obligations, as
   defined herein, but only as respects business covered under this Agreement.

C. The term "Loss Adjustment Expenses" shall mean all expenses incurred by the
   Company in connection with the investigation, settlement, defense or
   litigation of any claim or loss covered by the Policies reinsured under this
   Agreement, but shall exclude the salaries and expenses of Company employees,
   office expenses and other overhead expenses.

D. The term "Declaratory Judgment Expenses" shall mean all legal expenses,
   incurred in the representation of the Company in litigation brought to
   determine the Company's defense and/or indemnification obligations, that are
   allocable to any specific claim or loss applicable to Policies subject to
   this Agreement.  In addition, the Company shall promptly notify the Reinsurer
   of any Declaratory Judgment Expenses subject to this Agreement.

E. All recoveries, salvages or payments recovered or received subsequent to a
   loss settlement under this Agreement shall be applied as if recovered or
   received prior to the aforesaid settlement and all necessary adjustments to
   the loss settlement shall be made by the parties hereto.

F. Nothing in this Article shall be construed to mean that losses are not
   recoverable hereunder until the Ultimate Net Loss of the Company has been
   ascertained.


ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS
--------------------------------------------

A. As respects Casualty Business covered under this Agreement, in the event the
   Company is liable to a policyholder as the result of a settlement or judgment
   rendered against the policyholder which is in excess of the Policy limit, 90%
   of that portion of the award made to the third party claimant which is in
   excess of the Company's Policy limit shall be added to the amount of the
   Company's Policy limit and the sum thereof shall be considered one loss,
   subject to the

                                      3.
<PAGE>

   provision in Paragraph B. below and all other provisions set forth in this
   Agreement.

B. With respect to coverage provided under this Article, recoveries from any
   insurance or reinsurance other than this Agreement, shall inure to the
   benefit of the Reinsurer and shall be deducted to arrive at the amount of the
   Company's Ultimate Net Loss.


ARTICLE VII - EXTRA CONTRACTUAL OBLIGATIONS
-------------------------------------------

This Article shall apply as respects Casualty Business covered under this
Agreement.

A. "Extra Contractual Obligations" are defined as those liabilities not covered
   under any other provision of this Agreement and which arise from the handling
   of any claim on business covered hereunder, such liabilities arising because
   of, but not limited to, the following: failure by the Company to settle
   within the Policy limit, or by reason of alleged or actual negligence, fraud
   or bad faith in rejecting an offer of settlement or in the preparation of the
   defense or in the trial of any action against its insured or reinsured or in
   the preparation or prosecution of an appeal consequent upon such action.

B. The date on which an Extra Contractual Obligation is incurred by the Company
   shall be deemed, in all circumstances, to be the date of the original
   accident, casualty, disaster or loss occurrence.

C. However, coverage hereunder as respects Extra Contractual Obligations shall
   not apply where the loss has been incurred due to the fraud of a member of
   the Board of Directors or a corporate officer of the Company acting
   individually or collectively or in collusion with any individual or
   corporation or any other organization or party involved in the presentation,
   defense or settlement of any claim covered hereunder.

D. Extra Contractual Obligations shall not include loss arising out of
   engineering or other services or any other non-claims related activity
   provided to the insured by the Company.

E. Recoveries, collectibles or retention from any other form of insurance or
   reinsurance including deductibles or self-insured retention which protect the
   Company against Extra Contractual Obligations shall inure to the benefit of
   the Reinsurer and shall be deducted from the total amount of Extra
   Contractual Obligations for purposes of determining the loss hereunder.

                                      4.
<PAGE>

ARTICLE VIII - DEFINITION OF RISK
---------------------------------

The Company shall be the sole judge of what constitutes one risk provided,
however, that:

A. A risk shall never be less than all insurable values within exterior walls
   and under one roof regardless of fire divisions, the number of Policies
   involved, and whether there is a single, multiple or unrelated named insureds
   involved in such risk.

B. When two or more buildings are situated at the same general location, the
   Company shall identify on its records at the time of acceptance by the
   Company, those individual buildings and all insurable values contained
   therein that are considered to constitute each risk.  If such identification
   is not made, each building and all insurable values contained therein shall
   be considered to be a separate risk.

C. A risk shall be determined from the standpoint of the predominant peril and
   such peril shall be noted in the Company's records.

ARTICLE IX - EXCLUSIONS
-----------------------

I. AS RESPECTS PROPERTY BUSINESS COVERED UNDER THIS AGREEMENT
   THIS AGREEMENT DOES NOT COVER:

A. THE FOLLOWING GENERAL CATEGORIES

   1. All Lines of Business not specifically listed in Article II - Business
      Covered.

   2. Policies issued with a deductible of $25,000 or more; provided this
      exclusion shall not apply to Policies which customarily provide a
      percentage deductible on the perils of earthquake or windstorm.

   3. Reinsurance assumed, except pro rata local agency reinsurance on specific
      risks.

   4. Ex-gratia Payments.

   5. Loss or damage occasioned by war, invasion, revolution,   bombardment,
      hostilities, acts of foreign enemies, civil war, rebellion, insurrection,
      military or usurped power, martial law, or confiscation by order of any
      government or public authority, but not excluding loss or damage which
      would be covered under a standard form of Policy containing a standard war
      exclusion clause.

                                      5.
<PAGE>

   6. Insolvency Funds as per the attached Insolvency Funds Exclusion Clause,
      which is made part of this Agreement.

   7. Pool, Syndicate and Association business as per the attached Pools,
      Associations and Syndicates Exclusion Clause, which is made part of this
      Agreement.

   8. Risks where the Total Insured Value, per risk, exceeds the figure
      specified as per the attached Total Insured Value Exclusion Clause, which
      is made part of this Agreement.

   9. System Performance.

B. THE FOLLOWING CLASSES OF BUSINESS AND TYPES OF RISKS

   1. Mortgage Impairment.

   2. Growing and/or standing crops.

   3. Mortality and Health covering birds, animals or fish.

   4. All onshore and offshore gas and oil drilling rigs.

   5. Petrochemical operations engaged in the production, refining or upgrading
      of petroleum or petroleum derivatives or natural gas.

   6. Satellites.

   7. All railroad business.

   8. As respects Inland Marine business:

      a.  Registered Mail and Armored Car Policies.
      b.  Jeweler's Block Policies.
      c.  Furrier's Customers Policies.
      d.  Rolling Stock.
      e.  Parcel Post when written to cover banks and financial institutions.
      f.  Commercial Negative Film Insurance.
      g.  Garment Contractors Policies.
      h.  Mining Equipment while underground.
      i.  Radio and Television Broadcasting Towers.
      j.  Motor Truck Cargo Insurance written for common carriers operating
          beyond a radius of 200 miles.

   9. Any collection of Fine Arts where the insured value is equal to or exceeds
      $1,000,000.

                                      6.
<PAGE>

C.  THE FOLLOWING PERILS

    1. Flood and/or Earthquake when written as such.

    2. Difference in Conditions, however styled.

    3. Pollution and Seepage as per the attached Pollution and Seepage Exclusion
       Clause which is made part of this Agreement.

    4. Nuclear Incident Exclusion Clauses which are attached and made part of
       this Agreement:

       a.  Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
           U.S.A.
       b.  Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
           Canada.
       c.  Nuclear Incident Exclusion Clause - Reinsurance - No. 4.

D.  In the event the Company is inadvertently bound on any risk which is
    excluded under this Agreement and identified below, the reinsurance provided
    under this Agreement shall apply to such risk until discovery by the Company
    within its Home Office of the existence of such risk and for 30 days
    thereafter, and shall then cease unless within the 30 day period, the
    Company has received from the Reinsurer written notice of its approval of
    such risk.

    As respects Classes of Business and Types of Risks:

    Items 1 through 9 of Section B of this Article.

II. AS RESPECTS CASUALTY BUSINESS COVERED UNDER THIS AGREEMENT
    THIS AGREEMENT DOES NOT COVER:

A.  THE FOLLOWING GENERAL CATEGORIES

    1. Ex-gratia payments.

    2. Risks subject to a deductible or a self-insured retention excess of
       $25,000.

    3. Loss or damage caused directly or indirectly by: (a) enemy attack by
       armed forces including action taken by military, naval or air forces in
       resisting an actual or an immediately impending enemy attack; (b)
       invasion; (c) insurrection; (d) rebellion; (e) revolution; (f)
       intervention; (g) civil war; and (h) usurped power.

    4. Reinsurance assumed by the Company.

    5. Business derived from any Pool, Association, including Joint Underwriting
       Association, Syndicate, Exchange, Plan, Fund or

                                      7.
<PAGE>

       other facility directly as a member, subscriber or participant, or
       indirectly by way of reinsurance or assessments; provided this exclusion
       shall not apply to Automobile or Workers Compensation assigned risks
       which may be currently or subsequently covered hereunder.

   6.  Pollution Liability as per the attached Pollution Liability Exclusion
       Clause - Reinsurance.

   7.  Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.

   8.  Nuclear Incident Exclusion Clauses which are attached and made part of
       this Agreement:

       a.  Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.
       b.  Nuclear Incident Exclusion Clause - Liability - Reinsurance - Canada.
       c.  Nuclear Incident Exclusion  Clause - Reinsurance - No. 4.

B. THE FOLLOWING INSURANCE COVERAGES

   1.  Fiduciary Liability.

   2.  Fidelity and Surety.

   3.  Credit and Financial Guarantee.

   4.  Securities and Exchange Liability.

   5.  Retroactive coverage.

   6.  Personal and Commercial Excess or Umbrella  Liability.

   7.  Malpractice or Professional Liability except incidental Malpractice
       Liability.

   8.  Errors and Omissions Liability.

   9.  Directors' and Officers' Liability.

   10. Advertisers', Broadcasters' and Telecasters' Liability as respects
       Personal Injury Liability except as provided under Commercial Package
       Policies or Commercial General Liability Coverage Forms.

   11. Liquor Law Liability except Host Liquor Law Liability.

   12. Kidnap, Extortion and Ransom Liability.

                                      8.
<PAGE>

   13.  Boiler and Machinery Insurance.

   14.  Protection and Indemnity (Ocean Marine).

   15.  Personal Automobile Liability.

   16.  Automobile Collision.

   17.  Workers Compensation and Employers Liability.

C. THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY AND AUTOMOBILE COLLISION

   1.   Vehicles used in or while in practice or preparation for, a prearranged
        racing, speed, exhibition  or demolition contest.

   2.   All vehicles classified as "Public Automobiles" except church buses,
        social service agency automobiles, van pools and vehicles used for the
        transportation of employees.

   3.   Fire, police, emergency  or municipal vehicles.

   4.   Motorcycles.

   5.   The rental or leasing of vehicles to others.

   6.   Logging trucks.

   7.   Vehicles regularly used to haul property of others and operating beyond
        a 200 mile radius.

   8.   Newspaper delivery trucks.

   9.   Vehicles engaged in the transportation or distribution of fireworks,
        fuses, explosives, ammunitions, natural or artificial fuel, gas, or
        liquefied petroleum gases or gasoline.

D. THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

   1.   The manufacturing, mining, refining, processing, distribution,
        installation, removal or encapsulment of asbestos.

   2.   Risks involving known exposure to the following substances:

        a. dioxin.
        b. polychlorinated biphenols.
        c. asbestos.

                                      9.
<PAGE>

   3.   Liability as respects Products and Completed Operations:

        a.  The manufacture, labeling or re-labeling, importation or wholesale
            distribution of:
            (i)    Drugs or pharmaceuticals.
            (ii)   Cosmetics.
            (iii)  Herbicides, insecticides or pesticides.
            (iv)   Petrochemical or electrical equipment used for heating,
                   lighting or cooking.
            (v)    Industrial or toxic chemicals.
            (vi)   Valves, gaskets or seals of a hydraulic, petrochemical or
                   high pressure nature.
            (vii)  Medical supplies.
            (viii) Heavy machinery and equipment.
            (ix)   Power tools.
            (x)    Medical equipment used for diagnostic or life sustaining
                   purposes.
        b.  The manufacture or importing of motorized or self-propelled vehicles
            and equipment.
        c.  The manufacturing, importing, packing, canning, bottling or
            processing of foodstuffs.
        d.  The blending, mixing, processing or importing of animal feed.
        e.  The manufacture, sale, distribution, handling, servicing or
            maintenance of aircraft, aerospacecraft, missiles, satellites or any
            component or components thereof.

   4.   Ownership, operation or use of vessels exceeding 50 feet in length.

   5.   All railway operations except sidetrack agreements.

   6.   Amusement parks, carnivals or circuses.

   7.   Public assembly exposure in excess of 5,000.

   8.   Gas, electric and water utility companies.

   9.   Subaqueous operations.

   10.  Mining.

   11.  Blasting operations.

   12.  Demolition of buildings or structures in excess of two stories.

   13.  Shoring, underpinning or moving of buildings or structures.

   14.  Manufacture, sale, rental, lease, erection or repair of scaffolds.

                                      10.
<PAGE>

   15.  Construction of bridges, tunnels or dams.

   16.  a.  Manufacturers or importers of fireworks, fuses, or any substance, as
            defined and noted below, intended for use as an explosive.
        b.  Loading of fireworks, fuses, or any explosive substance defined
            below into containers for use as explosive objects, propellant
            charges or detonation devices and the storage thereof.
        c.  Manufacturers or importers of any product in which fireworks, fuses,
            or any explosive substance defined below is an ingredient.
        d.  Handling, storage, transportation or use of fireworks, fuses, or any
            explosive substance defined below.

        NOTE: An explosive substance is defined as any substance manufactured
        for the express purpose of exploding as differentiated from commodities
        used industrially and which are only incidentally explosive.

   17.  Manufacture, production, refining, storage, wholesale distribution or
        transportation of natural or artificial fuel, gas, butane, propane or
        liquefied petroleum gases or gasoline.

   18.  Onshore and offshore gas and oil drilling operations.

   19.  Ownership, maintenance or use of any airport or aircraft, including
        fueling, or any device or machine intended for and/or aiding in the
        achievement of atmospheric flight, projection or orbit.

   20.  Municipalities.

E. Those exclusions set forth under Items 6. and 17. of Section D. and Item 2.
   of Section E. shall not apply if the exposure is incidental to the regular
   operations of the insured covered hereunder.

F. In the event the Company is inadvertently bound on any risk which is
   excluded under this Agreement and identified below, the reinsurance
   provided under this Agreement shall apply to such risk until  discovery by
   the Company within its Home Office of the existence of such risk and for 30
   days thereafter, and shall then cease unless within the 30 day period, the
   Company has received from the Reinsurer written notice of its approval of
   such risk:

   1.   As respects Automobile Liability And Collision:

        Items 2. through 9. of Section C. of this Article.

   2.   As respects Liability Other Than  Automobile:

                                      11.
<PAGE>

ARTICLE X - LOSS OCCURRENCE
---------------------------

As respects Property Business covered under this Agreement:

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 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 the opening paragraph 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 of frozen pipes and
      tanks) may be included in the Company's Loss Occurrence.

B. For all Loss Occurrences 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

                                      12.
<PAGE>

   period of 168 consecutive hours shall apply with respect to one event except
   for those Loss Occurrences referred to in 1. and 2. above, where only one
   such period of 72 consecutive hours shall apply with respect to one event,
   regardless of the duration of the event.

C. 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.

As respects Casualty Business covered under this Agreement:

The term "Loss Occurrence" shall mean any accident or occurrence or series of
accidents or occurrences arising out of any one event and happening within the
term and scope of this Agreement. Without limiting the generality of the
foregoing, the term "Loss Occurrence" shall be held to include:

A. As respects Products Bodily Injury and Products Property Damage Liability,
   injuries to all persons and all damage to property of others occurring during
   a Policy Period and proceeding from or traceable to the same causative agency
   shall be deemed to arise out of one Loss Occurrence, and the date of such
   Loss Occurrence shall be deemed to be the commencing date of the Policy
   Period.  For the purpose of this provision, each annual period of a Policy
   which continues in force for more than one year shall be deemed to be a
   separate Policy Period.

B. As respects Bodily Injury Liability (other than Automobile and Products),
   said term shall also be understood to mean, as regards each original assured,
   injuries to one or more than one person resulting from infection, contagion,
   poisoning, or contamination proceeding from or traceable to the same
   causative agency.

C. As respects Property Damage Liability (other than Automobile and Products),
   said term shall also, subject to Provisions 1. and 2. below, be understood to
   mean loss or losses caused by a series of operations, events, or occurrences
   arising out of operations at one specific site and which cannot be attributed
   to any single one of such operations, events or occurrences, but rather to
   the cumulative effect of the same.  In assessing each and every Loss
   Occurrence within the foregoing definition, it is understood and agreed that:

   1. the series of operations, events or occurrences shall not extend over a
      period longer than 12 consecutive months; and

   2. the Company may elect the date on which the period of not exceeding 12
      consecutive months shall be deemed to have commenced.

                                      13.
<PAGE>

      In the event that the series of operations, events or occurrences extend
      over a period longer than 12 consecutive months, then each consecutive
      period of 12 months, the first of which commences on the date elected
      under 2. above, shall form the basis of claim under this Agreement.

D.    As respects those Policies of the Company which provide aggregate limits
      of liability, the total of all individual losses occurring during any one
      Policy year which proceed from or are traceable to the same causative
      agency.


ARTICLE XI - REPORTS AND REMITTANCES
------------------------------------

A.    The Company shall furnish the Reinsurer with all necessary data respecting
      premiums and losses for as long as one of the parties hereto has a claim
      against the other arising from this Agreement.

B.    Within 45 days after the close of each calendar month, the Company shall
      submit an account to the Reinsurer summarizing Subject Earned Premium for
      the Homeowners Portfolio, and the reinsurance premium due as respects this
      portfolio under Exhibits A and B. Such reinsurance premium shall be
      remitted within 45 days after the close of each calendar month.

C.    Payment by the Reinsurer of its portion of loss and Loss Adjustment
      Expenses paid by the Company shall be made by the Reinsurer to the Company
      within 15 days after proof of payment is received by the Reinsurer.

D.    As respects Property Business covered under this Agreement, the Company
      shall furnish the following to the Reinsurer with respect to occurrences
      designated as catastrophes by the Property Claim Services:

      1. Prompt preliminary estimate of amount recoverable from the Reinsurer;

      2. Within 30 days after the close of each quarter the amount of losses and
         Loss Adjustment Expenses paid, less all recoveries, including salvage
         and subrogation, at the end of each quarter segregated by Line of
         Business;

      3. Within 30 days after the close of each quarter the amount of losses and
         Loss Adjustment Expenses outstanding at the end of each quarter
         segregated by Line of Business.

                                      14.
<PAGE>

ARTICLE XII - CLAIMS
--------------------

A. The Company shall promptly notify the Reinsurer of each claim which may
   involve the reinsurance provided hereunder and of all subsequent developments
   relating thereto, stating the amount claimed and estimate of the Company's
   Ultimate Net Loss and Loss Adjustment Expenses.  Notwithstanding the
   provisions set forth in any other Article herein, prompt notification of loss
   shall be considered a condition precedent to liability under this Agreement.

B. As respects Casualty Business covered under this Agreement, the Company shall
   advise the Reinsurer of all claims which:

   1. Are reserved by the Company for an amount in excess of 50% of its
      retention;

   2. Originate from fatal injuries;

   3. Originate from the following kinds of bodily injury:

      a.  Brain injuries resulting in impairment of physical function;

      b.  Spinal injuries resulting in a partial or total paralysis of upper or
          lower extremities;

      c.  Amputation or permanent loss of use of upper or lower extremities;

      d.  Severe burn injuries;

      e.  Loss of sight in one or both eyes;

      f.  All other injuries likely to result in a permanent disability rate of
          50% or more.

C. The Company shall have the responsibility to investigate, defend or negotiate
   settlements of all claims and lawsuits related to Policies written by the
   Company and reinsured under this Agreement.  The Reinsurer, at its own
   expense, may associate with the Company in the defense or control of any
   claim, suit or other proceeding which involves or is likely to involve the
   reinsurance provided under this Agreement, and the Company shall cooperate in
   every respect in the defense of any such claim, suit or proceeding.

ARTICLE XIII - SALVAGE AND SUBROGATION
--------------------------------------

A. In the event of the payment of any indemnity by the Reinsurer under this
   Agreement, the Reinsurer shall be subrogated, to the extent of such payment,
   to all of the rights of the Company against any person or entity legally
   responsible for damages of the loss.  The Company

                                      15.
<PAGE>

   agrees to enforce such rights; but, in case the Company refuses or neglects
   to do so, the Reinsurer is hereby authorized and empowered to bring any
   appropriate action in the name of the Company or their policyholders or
   otherwise to enforce such rights.

B. From any amount recovered by subrogation, salvage or other means, there shall
   first be deducted the expenses incurred in effecting the recovery.  The
   balance shall then be used to reimburse the excess carriers in the inverse
   order to that in which their respective liabilities attached, before being
   used to reimburse the Company for its primary loss.


ARTICLE XIV - ACCESS TO RECORDS
-------------------------------

The Reinsurer or its duly authorized representatives shall have the right to
examine, at the offices of the Company at a reasonable time, during the currency
of this Agreement or anytime thereafter, all books and records of the Company
relating to business which is the subject of this Agreement.


ARTICLE XV - TAXES
------------------

The Company shall be liable for all taxes on premiums paid to the Reinsurer
under this Agreement, except income or profit taxes of the Reinsurer, and shall
indemnify and hold the Reinsurer harmless for any such taxes which the Reinsurer
may become obligated to pay to any local, state or federal taxing authority.


ARTICLE XVI - CURRENCY
----------------------

Wherever the word "dollars" or the "$" symbol is used in this Agreement, it
shall mean dollars of the United States of America, excepting in those cases
where the Policy is issued by the Company in Canadian dollars, in which case it
shall mean dollars of Canada.  In the event the Company is involved in a loss
requiring payment in United States and Canadian currency, the Company's
retention and the limit of liability of the Reinsurer shall be apportioned
between the two currencies in the same proportion as the amount of net loss in
each currency bears to the total amount of net loss paid by the Company.  For
the purposes of this Agreement, where the Company receives premiums or pays
losses in currencies other than United States or Canadian currency, such
premiums and losses shall be converted into United States dollars at the actual
rates of exchange at which the premiums and losses are entered in the Company's
books.

                                      16.
<PAGE>

ARTICLE XVII - OFFSET
---------------------

Each party to this Agreement together with their successors or assigns shall
have and may exercise, at any time, the right to offset any balance or balances
due the other (or, if more than one, any other).  Such offset may include
balances due under this Agreement and any other agreements heretofore or
hereafter entered into between the parties regardless of whether such balances
arise from premiums, losses or otherwise, and regardless of capacity of any
party, whether as assuming insurer and/or ceding insurer, under the various
agreements involved, provided however, that in the event of insolvency of a
party hereto, offsets shall only be allowed in accordance with the provisions of
Section 7427 of the Insurance Law of the State of New York to the extent such
statute or any other applicable law, statute or regulation governing such offset
shall apply.


ARTICLE XVIII - ERRORS OR OMISSIONS
-----------------------------------

Errors or omissions of a ministerial nature on the part of the Company shall not
invalidate the reinsurance under this Agreement, provided such errors or
omissions are corrected promptly after discovery thereof; but the liability of
the Reinsurer under this Agreement or any exhibits, addenda, or endorsements
attached hereto shall in no event exceed the limits specified herein nor be
extended to cover any risks, perils, lines of business or classes of insurance
generally or specifically excluded herein.


ARTICLE XIX - SPECIAL ACCEPTANCE
--------------------------------

Risks which are beyond the terms, conditions or limitations of this Agreement
may be submitted to the Reinsurer for special acceptance hereunder; and such
risks, if accepted in writing by the Reinsurer, shall be subject to all of the
terms, conditions and limitations of this Agreement, except as modified by the
special acceptance.  Premiums and losses derived from any special acceptance
shall be included with other data for rating purposes under this Agreement.


ARTICLE XX - DISPUTE RESOLUTION
-------------------------------

Part I - Choice Of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of New
York, and the laws of the State of New York shall govern the interpretation and
application of this Agreement.

                                      17.
<PAGE>

Part II - Mediation

If a dispute between the Company and the Reinsurer, arising out of the
provisions of this Agreement or concerning its interpretation or validity and
whether arising before or after termination of this Agreement has not been
settled through negotiation, both parties agree to try in good faith to settle
such dispute by nonbinding mediation, before resorting to arbitration.

Part III - Arbitration

A. Resolution of Disputes - As a condition precedent to any right arising
   hereunder, any dispute not resolved by mediation between the Company and the
   Reinsurer arising out of the provisions of this Agreement or concerning its
   interpretation or validity, whether arising before or after termination of
   this Agreement, shall be submitted to arbitration in the manner hereinafter
   set forth.

B. Composition of Panel - Unless the parties agree upon a single arbitrator
   within 15 days after the receipt of a notice of intention to arbitrate, all
   disputes shall be submitted to an arbitration panel composed of two
   arbitrators and an umpire chosen in accordance with Paragraph C hereof.

C. Appointment of Arbitrators - The members of the arbitration panel shall be
   chosen from persons knowledgeable in the insurance and reinsurance business.
   Unless a single arbitrator is agreed upon, the party requesting arbitration
   (hereinafter referred to as the "claimant") shall appoint an arbitrator and
   give written notice thereof by certified mail, to the other party
   (hereinafter referred to as the "respondent") together with its notice of
   intention to arbitrate.  Within 30 days after receiving such notice, the
   respondent shall also appoint an arbitrator and notify the claimant thereof
   by certified mail.  Before instituting a hearing, the two arbitrators so
   appointed shall choose an umpire.  If, within 20 days after the appointment
   of the arbitrator chosen by the respondent, the two arbitrators fail to agree
   upon the appointment of an umpire, each of them shall nominate three
   individuals to serve as umpire, of whom the other shall decline two and the
   umpire shall be chosen from the remaining two by drawing lots.  The name of
   the individual first drawn shall be the umpire.

D. Failure of Party to Appoint an Arbitrator - If the respondent fails to
   appoint an arbitrator within 30 days after receiving a notice of intention to
   arbitrate, the claimant's arbitrator shall appoint an arbitrator on behalf of
   the respondent, such arbitrator shall then, together with the claimant's
   arbitrator, choose an umpire as provided in Paragraph C. of Part III of this
   Article.

E. Involvement of Other Reinsurers - If more than one reinsurer is involved in
   the same dispute, all such reinsurers shall constitute

                                      18.
<PAGE>

   and act as one party for purposes of this Article and communications shall be
   made by the Company to each of the reinsurers constituting the one party;
   provided, however, nothing herein shall impair the right of such reinsurers
   to assert several, rather than joint, defenses or claims, nor be construed as
   changing the liability of the reinsurers under the terms of this Agreement
   from several to joint.

F. If the Company is involved in a dispute under the terms of this Agreement and
   in one or more separate disputes with one or more other reinsurers in which
   common questions of law or fact are in issue, the Company or the Reinsurer,
   at its option, may join with such other reinsurers in a common arbitration
   proceeding under the terms of this Article.  If the Company and such other
   reinsurers have commenced arbitration, the Reinsurer may at its option join
   such proceeding for the determination of the dispute between the Company and
   the Reinsurer.

G. Submission of Dispute to Panel - Unless otherwise extended by the arbitration
   panel or agreed to by the parties, each party shall submit its case to the
   panel within 30 days after the selection of the umpire.

H. Procedure Governing Arbitration - All proceedings before the panel shall be
   informal and the panel shall not be bound by the formal rules of evidence.
   The panel shall have the power to fix all procedural rules relating to the
   arbitration proceeding.  In reaching any decision, the panel shall give due
   consideration to the customs and usages of the insurance and reinsurance
   business.

I. Arbitration Award - The arbitration panel shall render its decision within 60
   days after termination of the proceeding, which decision shall be in writing,
   stating the reasons therefor.  The decision of the majority of the panel
   shall be final and binding on the parties to the proceeding.

J. Cost of Arbitration - Unless otherwise allocated by the panel, each party
   shall bear the expense of its own arbitrator and shall jointly and equally
   bear with the other parties the expense of the umpire and the arbitration.


ARTICLE XXI - INSOLVENCY
------------------------

A. In the event of insolvency of the Company, the reinsurance provided by this
   Agreement shall be payable by the Reinsurer on the basis of the liability of
   the Company as respects Policies covered hereunder, without diminution
   because of such insolvency, directly to the Company or its liquidator,
   receiver, conservator or statutory successor except as provided in Sections
   4118(a)(1)(A) and 1114(c) of the New York Insurance Law.

                                      19.
<PAGE>

B. The Reinsurer shall be given written notice of the pendency of each claim or
   loss which may involve the reinsurance provided by this Agreement within a
   reasonable time after such claim or loss is filed in the insolvency
   proceedings.  The Reinsurer shall have the right to investigate each such
   claim or loss and interpose, at its own expense, in the proceedings where the
   claim or loss is to be adjudicated, any defense which it may deem available
   to the Company, its liquidator, receiver, conservator or statutory successor.
   The expense thus incurred by the Reinsurer shall be chargeable, subject to
   court approval, against the insolvent Company as part of the expense of
   liquidation to the extent of a proportionate share of the benefit which may
   accrue to the Company solely as a result of the defense undertaken by the
   Reinsurer.

C. In addition to the offset provisions set forth in Article XXI - Offset, any
   debts or credits, liquidated or unliquidated, in favor of or against either
   party on the date of the receivership or liquidation order (except where the
   obligation was purchased by or transferred to be used as an offset) are
   deemed mutual debts or credits and shall be set off with the balance only to
   be allowed or paid.  Although such claim on the part of either party against
   the other may be unliquidated or undetermined in amount on the date of the
   entry of the receivership or liquidation order, such claim will be regarded
   as being in existence as of such date and any claims then in existence and
   held by the other party may be offset against it.

D. Nothing contained in this Article is intended to change the relationship or
   status of the parties to this Agreement or to enlarge upon the rights or
   obligations of either party hereunder except as provided herein.


ARTICLE XXII - SPECIAL TERMINATION
----------------------------------

A. Notwithstanding the termination provisions set forth in Article III -
   Effective Date and Termination, this Agreement shall be:

   1. Terminated automatically and simultaneously upon the happening of any of
      the following events:

      a.  Entry of an order of liquidation, rehabilitation, receivership or
          conservatorship with respect to the Company or the Reinsurer by any
          court or regulatory authority;

      b.  Assignment of this Agreement by either party;

      c.  Any transfer of control of either party by change in ownership or
          otherwise;

      d.  General reinsurance of any portion of the Company's business it
          retains net for its own account, as determined under the

                                      20.
<PAGE>

          provisions of this Agreement without prior consent of the Reinsurer.

   2. Terminated in accordance with the provisions set forth in this Paragraph,
      upon the discovery of the following event:

          A reduction  of 50% or more of the Company's policyholders surplus
          during any calendar year.  Such reduction shall be determined by
          calculating the difference between the Company's prior year annual
          statement and each subsequent quarterly statutory statement within
          such current calendar year.

      As respects the event set forth in this Paragraph A.2., the Company shall
      be obligated to notify the Reinsurer in writing within 30 days after the
      filing of its quarterly statement.  Upon receipt of such notification the
      Reinsurer shall have the right to terminate this Agreement, by giving not
      less than 30 days notice of its intention to do so.

B. Any notice of termination pursuant to provisions set forth in Paragraph A.2.
   above shall be sent by certified mail, return receipt requested.  Such notice
   period shall commence upon the other party's receipt of the notice of
   termination.

C. In the event of termination, the Reinsurer shall not be liable for losses
   occurring subsequent to the date of termination.


ARTICLE XXIII - AMENDMENTS
--------------------------

This Agreement may be amended by mutual consent of the parties expressed in an
addendum; and such addendum, when executed by both parties, shall be deemed to
be an integral part of this Agreement and binding on the parties hereto.

                                      21.
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the following dates:

In Los Angeles, California, this          day of                 , 2000.


ATTEST:                                 AMERICAN MERCURY INSURANCE COMPANY


_____________________                   ______________________________________

And in Armonk, New York, this          day of                    , 2000.

ATTEST:                                 SWISS REINSURANCE AMERICA CORPORATION


_____________________                   ______________________________________
Member of Management                          Member of Senior Management

                                      22.
<PAGE>

                                   EXHIBIT A

                   FIRST MULTIPLE LINE EXCESS OF LOSS COVER

                           IS ATTACHED TO AND FORMS

                                    PART OF

                      REINSURANCE AGREEMENT NO. TM696A,B
<PAGE>

             EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER



SECTION            SUBJECT                     PAGE
-------            -------                     ----

   1               BUSINESS COVERED            A-1

   2               LIMIT AND RETENTION         A-1

   3               REINSURANCE PREMIUM         A-2

   4               CONTINGENT COMMISSION       A-3

<PAGE>

             EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER


SECTION 1 - BUSINESS COVERED
----------------------------

Under this Exhibit, the indemnity for reinsured loss applies to those Policies
issued by the Company with respect to the following Property and Casualty
Business except as excluded under Article IX - Exclusions of this Agreement.

PROPERTY BUSINESS
-----------------

NAIC
CODE:   LINE OF BUSINESS:

04      Homeowners (Section I)

CASUALTY BUSINESS
-----------------


NAIC
CODE:   LINE OF BUSINESS:

04      Homeowners (Section II)

SECTION 2 - LIMIT AND RETENTION
-------------------------------

A. As respects Property Business covered under this Exhibit involving one or
   more than one Line of Business, the Company shall retain the first $100,000
   of Ultimate Net Loss as respects each risk in any one Loss Occurrence.  The
   Reinsurer shall then be liable for the amount by which the Company's Ultimate
   Net Loss exceeds the Company's retention of $100,000, but the liability of
   the Reinsurer shall never exceed $200,000 each risk any one Loss Occurrence,
   nor shall the Reinsurer's liability from all risks in each Loss Occurrence
   exceed $600,000.

B. As respects Casualty Business covered under this Exhibit involving one or
   more than one Class of Insurance, the Company shall retain the first $100,000
   of Ultimate Net Loss as respects any one Loss Occurrence. The Reinsurer shall
   then be liable for the amount by which the Company's Ultimate Net Loss
   exceeds the Company's retention of $100,000, but the liability of the
   Reinsurer shall never exceed $200,000 with respect to any one Loss
   Occurrence.

C. In the event both a Property and Casualty loss are involved in the same Loss
   Occurrence, it is understood that the Company shall retain for its own
   account only the first $100,000 of the combined Property and Casualty
   Ultimate Net Loss, provided only one Property risk may

                                      A-1
<PAGE>

   be combined in the same Loss Occurrence. Such loss and the Company's
   retention thereon shall be apportioned to each Property and Casualty loss in
   the same proportion that the Company's Ultimate Net Loss for each such
   Property and Casualty loss bears to the Company's combined Ultimate Net Loss
   from both losses. The Reinsurer shall reimburse the Company for the
   difference between the Company's first $100,000 of Ultimate Net Loss under
   each Property and Casualty loss and the Company's pro rated retention on each
   Property and Casualty loss.

D. As respects Casualty Business covered under this Exhibit the Company warrants
   that the maximum limit of liability, per occurrence set forth under each
   Policy subject to this Exhibit shall not exceed $1,000,000.

SECTION 3 - REINSURANCE PREMIUM
-------------------------------

A. The Company shall pay to the Reinsurer a premium for the reinsurance provided
   for the Homeowners business underwritten and produced through the Company's
   Personal Lines Department, all of which is covered under this Exhibit, at the
   rates set forth below.  The rate shall be applied to the combined total of
   the Company's Subject Earned Premium which shall be defined as the Subject
   Earned Premium as respects Section I and II of Homeowners business
   underwritten and produced through the Company's Personal Lines Department,
   for the monthly period being reported.

   Department                 Business Covered                 Rate
   ----------                 ----------------                 ----

   Personal Lines             Homeowners (Section I & II)      14.0%
   (Florida Only)


B. The term "Subject Earned Premium" as used herein is equal to the sum of the
   Net Premiums Written on the business covered hereunder during the period
   under consideration, plus the unearned premium reserve as respects premiums
   in force at the beginning of such period, less the unearned premium reserve
   as respects premiums in force at the end of the period, said unearned premium
   is to be calculated on a monthly pro rata basis.

C. The term "Net Premiums Written" shall mean gross premiums written less
   returns, allowances and reinsurances which inure to the benefit of the
   Reinsurer.

D. The following percentages of the Company's premium shall be allocated to the
   business covered under this Exhibit:

   Homeowners                 Section I - 90%            Section II -  10%

                                      A-2
<PAGE>

SECTION 4 - CONTINGENT COMMISSION
---------------------------------

A. The Reinsurer shall allow the Company a contingent commission of 25% of the
   profit, if any, accruing to the Reinsurer hereunder, such profit to be
   computed on the following formula:

               CONTINGENT COMMISSION COMPUTATION FOR THE PERIOD
               ------------------------------------------------

                                    INCOME
                                    ------

          1. Earned Premiums received by the Reinsurer during the Period.

                                     OUTGO
                                     -----

          2. Incurred Losses of the Reinsurer during the Period.

          3. Allowance for Reinsurer's management expenses during the Period of
             12.5% of the Earned Premiums received by the Reinsurer during the
             Period.

          4. Deficit, if any, brought forward from the preceding Period.

          The amount by which Income exceeds Outgo is profit.

          The amount by which Outgo exceeds Income is deficit.

B. The term "Incurred Losses" means all losses and Loss Adjustment Expenses paid
   less recoveries, including salvage and subrogation, during the current Period
   for which computation is being made plus all losses and Loss Adjustment
   Expenses outstanding at the end of the current Period less all losses and
   Loss Adjustment Expenses outstanding at the close of the preceding Period.

C. The term "Earned Premiums" means the total of the Net Premiums Written, ceded
   during the current Period plus the unearned premiums at the close of the
   preceding Period less the unearned premiums at the close of the current
   Period, said unearned premiums to be calculated on a monthly pro rata basis.

D. The term "Period" means the actual time covered by each adjustment of
   commission.

E. The first calculation of commission adjustment shall cover the period January
   1, 2000 through December 31, 2002 and thereafter each subsequent calculation
   shall cover a Period of three consecutive calendar years.

                                      A-3
<PAGE>

F. The first provisional computation of profit or loss for the first calendar
   year within the first Period shall be made by the Company as of March 1,
   2002, thereafter, provisional computations of profit or loss shall be made by
   the Company within 60 days after the close of each calendar year within each
   Period. Such provisional calculations shall cover the results from the
   inception date of each Period to the end of the calendar year immediately
   preceding the date of computation.

G. If, for any Period, the Income of the plan exceeds the total of the Items
   shown under Outgo of the plan, the Reinsurer shall pay to the Company, within
   30 days after verification of the Company's calculations, 25% of the
   difference. If, for any Period, the total of the Items shown under Outgo of
   the plan exceeds the Income of the plan, the difference shall be carried
   forward to the next Period's calculation of commission adjustment as a
   deficit.

H. In the event reserves for losses and Loss Adjustment Expenses used in any
   previous calculation of adjusted commission shall have been underestimated or
   overestimated, as proven by subsequent developments, such previous
   calculations shall be revised at the request of either party.  The Company
   shall refund to the Reinsurer, or the Reinsurer shall pay to the Company,
   such amount as will give effect to the revision(s).

I. In case notice of termination has been given, no further adjustments of
   commission shall be made until the expiration of all liability and the
   settlement of all losses covered under this Agreement.

This Exhibit A is attached to and forms part of Reinsurance Agreement No.
TM696A,B issued to AMERICAN MERCURY INSURANCE COMPANY.

                                      A-4
<PAGE>

                                   EXHIBIT B

                   SECOND MULTIPLE LINE EXCESS OF LOSS COVER

                           IS ATTACHED TO AND FORMS

                                    PART OF

                      REINSURANCE AGREEMENT NO. TM696A,B
<PAGE>

             EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER


SECTION          SUBJECT                    PAGE
-------          -------                    ----

  1              BUSINESS COVERED           B-1

  2              LIMIT AND RETENTION        B-1

  3              REINSURANCE PREMIUM        B-2

<PAGE>

             EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER


SECTION 1 - BUSINESS COVERED
----------------------------

Under this Exhibit, the indemnity for reinsured loss applies to those Policies
issued by the Company with respect to the following Property and Casualty
Business except as excluded under Article IX - Exclusions of this Agreement.

PROPERTY BUSINESS
-----------------

NAIC
CODE:   LINE OF BUSINESS:

04      Homeowners (Section I)

CASUALTY BUSINESS
-----------------


NAIC
CODE:   LINE OF BUSINESS:

04      Homeowners (Section II)

SECTION 2 - LIMIT AND RETENTION
-------------------------------

A. As respects Property Business covered under this Exhibit involving one or
   more than one Line of Business, the Company shall retain the first $300,000
   of Ultimate Net Loss as respects each risk in any one Loss Occurrence.  The
   Reinsurer shall then be liable for the amount by which the Company's Ultimate
   Net Loss exceeds the Company's retention of $300,000, but the liability of
   the Reinsurer shall never exceed $1,200,000 each risk any one Loss
   Occurrence, nor shall the Reinsurer's liability from all risks in each Loss
   Occurrence exceed $1,200,000.

B. As respects Casualty Business covered under this Exhibit involving one or
   more than one Class of Insurance, the Company shall retain the first $300,000
   of Ultimate Net Loss as respects any one Loss Occurrence.  The Reinsurer
   shall then be liable for the amount by which the Company's Ultimate Net Loss
   exceeds the Company's retention of $300,000, but the liability of the
   Reinsurer shall never exceed $1,200,000 with respect to any one Loss
   Occurrence.

C. Reinsurance of the Company's retention, set forth in Paragraphs A. and B.
   above, shall not be deducted in arriving at the Company's Ultimate Net Loss
   herein.

                                      B-1
<PAGE>

D. As respects Casualty Business covered under this Exhibit the Company warrants
   that the maximum limit of liability, per occurrence set forth under each
   Policy subject to this Exhibit shall not exceed $1,000,000.

SECTION 3 - REINSURANCE PREMIUM
-------------------------------

A. As respects Homeowners Business underwritten and produced through the
   Company's Personal Lines Department, the Company shall pay to the Reinsurer a
   premium for the reinsurance provided under this Exhibit, at the rate set
   forth below.  The rate shall be applied to the combined total of the
   Company's Subject Earned Premium for both Section I and Section II of the
   Homeowners Business covered under this Exhibit which shall be defined as the
   Subject Earned Premium as respects Homeowners business, underwritten and
   produced through plus the Company's Personal Lines Department, for the
   monthly period being reported.

   Department           Business Covered            Rate
   ----------           ----------------            ----

   Personal Lines       Homeowners                  3.0%
   (Florida Only)

B. The term "Subject Earned Premium" as used herein is equal to the sum of the
   Net Premiums Written on the business covered hereunder during the period
   under consideration, plus the unearned premium reserve as respects premiums
   in force at the beginning of such period, less the unearned premium reserve
   as respects premiums in force at the end of the period, said unearned premium
   is to be calculated on a monthly pro rata basis.

C. The term "Net Premiums Written" shall mean gross premiums written less
   returns, allowances and reinsurances which inure to the benefit of the
   Reinsurer.

D. The following percentages of the Company's premium shall be allocated to the
   business covered under this Exhibit:

   Homeowners           Section I - 90%        Section II - 10%

This Exhibit B is attached to and forms part of Reinsurance Agreement No.
TM696A,B issued to AMERICAN MERCURY INSURANCE COMPANY.

                                      B-2
<PAGE>

                         SUPPLEMENT TO THE ATTACHMENTS


        DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS
        --------------------------------------------------------------

A. Wherever the term "Company" or "Reinsured" or "Reassured" or whatever other
   term is used to designate the reinsured company or companies within the
   various attachments to the reinsurance agreement, the term shall be
   understood to mean Company or Reinsured or Reassured or whatever other term
   is used in the attached reinsurance agreement to designate the reinsured
   company or companies.

B. Wherever the term "Agreement" or "Contract" or "Policy" or whatever other
   term is used to designate the attached reinsurance agreement within the
   various attachments to the reinsurance agreement, the term shall be
   understood to mean Agreement or Contract or Policy or whatever other term is
   used to designate the attached reinsurance agreement.

C. Wherever the term "Reinsurer" or "Reinsurers" or "Underwriters" or whatever
   other term is used to designate the reinsurer or reinsurers in the various
   attachments to the reinsurance agreement, the term shall be understood to
   mean Reinsurer or Reinsurers or Underwriters or whatever other term is used
   to designate the reinsuring company or companies.


________________________________________________________________________________
________________________________________________________________________________


                       INSOLVENCY FUNDS EXCLUSION CLAUSE
                       ---------------------------------


This Agreement excludes 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 or from reimbursement of any
person for any such liability.  "Insolvency fund" includes any guaranty fund,
insolvency fund, plan, pool, association, fund or other arrangement, howsoever
denominated, established or governed, which provides for any assessment of or
payment or assumption by any person 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.
<PAGE>

              POOLS, ASSOCIATIONS AND 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 (successor to Factory Insurance Association and
     Oil Insurance Association); 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.

(d)  To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational
     Establishments, Public Utilities (other than Railroad Schedules) and
     Builders Risks on the classes of risks specified in this subsection (d)
     only.
<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, Public Utilities
(except Railroad schedules) and Builders Risk on the above classes where, at the
time of the 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 Agreement, if subsequently 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, 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 interest 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.

Notwithstanding anything contained herein to the contrary, it is the mutual
intention of the parties in respect of bridges and tunnels to exclude such risks
where the Total Insured Value over all interests exceeds $250,000,000.
<PAGE>

                    POLLUTION AND SEEPAGE EXCLUSION CLAUSE
                    --------------------------------------

This Reinsurance does not apply to:

   1. Pollution, seepage, contamination or environmental impairment insurances
      (hereinafter collectively referred to as "pollution"), however styled;

   2. Loss or damage caused directly or indirectly by pollution, unless said
      loss or damage follows as a result of a loss caused directly by a peril
      covered hereunder;

   3. Expenses resulting from any governmental direction or request that
      material present in or part of or utilized on an insured's property be
      removed or modified, except as provided in 5. below;

   4. Expenses incurred in testing for and/or monitoring pollutants;

   5. Expenses incurred in removing debris, unless (A) the debris results from a
      loss caused directly by a peril covered hereunder, and (B) the debris to
      be removed is itself covered hereunder, and (C) the debris is on the
      insured's premises, subject, however, to a limit of $5,000 plus 25% of (i)
      the property damage loss, any risk, any one location, any one original
      insured, and (ii) any deductible applicable to the loss;

   6. Expenses incurred to extract pollutants from land or water at the
      insured's premises unless (A) the release, discharge, or dispersal of
      pollutants results from a loss caused directly by a peril covered
      hereunder, and (B) such expenses shall not exceed $10,000;

   7. Loss of income due to any increased period of time required to resume
      operations resulting from enforcement of any law regulating the
      prevention, control, repair, clean-up or restoration of environmental
      damage;

   8. Claims under 5. and/or 6. above, unless notice thereof is given to the
      Company within 180 days after the date of the loss occurrence to which
      such claims relate.

"Pollutants" means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

                                      -1-
<PAGE>

Where no pollution exclusion has been accepted or approved by an insurance
regulatory authority for use in a policy that is subject to this Agreement or
where a pollution exclusion that has been used in a policy is overturned, either
in whole or in part, by a court having jurisdiction, there shall be no recovery
for pollution under this Agreement unless said pollution loss or damage follows
as a result of a loss caused directly by a peril covered hereunder.

Nothing herein shall be deemed to extend the coverage afforded by this
reinsurance to property or perils specifically excluded or not covered under the
terms and conditions of the original policy involved.

                                      -2-
<PAGE>

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.
--------------------------------------------------------------------------


N.M.A. 1119

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 operation of paragraphs 1. and 2. of this
   Clause, 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 the Reassured does not have knowledge of such nuclear reactor
            power plant or nuclear installation, or

        (b) where the said insurance contains a provision 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.

                                      -1-
<PAGE>

4. Without in any way restricting the operation of paragraphs 1., 2. and 3. of
   this Clause, 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 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 to it by 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.

                                      -2-
<PAGE>

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - CANADA
--------------------------------------------------------------------------


N.M.A. 1980

1. This Agreement does not cover any loss or liability accruing to the Company
   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 Agreement does not cover any loss or liability accruing to the Company,
   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:

   a. Nuclear reactor power plants including all auxiliary property on the site,
      or

   b. Any other nuclear reactor installation, including laboratories handling
      radioactive materials in connection with reactor installations, and
      critical facilities as such, or

   c. Installations for fabricating complete fuel elements or for processing
      substantial quantities of prescribed substances, and for reprocessing,
      salvaging, chemically separating, storing or disposing of spent nuclear
      fuel or waste materials, or

   d. Installations other than those listed in c. above using substantial
      quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1. and 2. of this
   clause, this Agreement does not cover any loss or liability by radioactive
   contamination accruing to the Company, 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 the Company does not have knowledge of such nuclear reactor power
      plant or nuclear installation, or

   b. where the said insurance contains a provision excluding coverage for
      damage to property caused by or resulting from radioactive contamination,
      however caused.

                                      -1-
<PAGE>

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

5. This clause shall not extend to risks using radioactive isotopes in any form
   where the nuclear exposure is not considered by the Company to be the primary
   hazard.

6. The term "prescribed substances" shall have the meaning given to it by the
   Atomic Energy Control Act R.S.C. 1974 or by any law amendatory thereof.

7. Company to be sole judge of what constitutes:

   a. substantial quantities, and

   b. the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1., 2., 3. and 4.
   of this clause, this Agreement does not cover any loss or liability accruing
   to the Company, directly or indirectly, and whether as Insurer or Reinsurer,
   caused by any nuclear incident as defined in The Nuclear Liability Act,
   nuclear explosion or contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1., 2., 3. and
      4. of this clause, paragraph 8. of this clause shall apply to all original
      contracts of the Company whether new, renewal or replacement which become
      effective on or after December 31, 1984.

                                      -2-
<PAGE>

            NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO. 4
            -------------------------------------------------------

1. This Reinsurance does not cover any loss or liability accruing to the
   Reassured as a member of, or subscriber to, any association of insurers or
   reinsurers formed for the purpose of covering nuclear energy risks or as a
   direct or indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operations of Nuclear Incident Exclusion
   Clauses, - Liability, - Physical Damage, - Boiler and Machinery and paragraph
   1. of this Clause, it is understood and agreed that for all purposes of the
   reinsurance assumed by the Reinsurer from the Reinsured, all original
   insurance policies or contracts of the Reinsured (new, renewal and
   replacement) shall be deemed to include the applicable existing Nuclear
   Clause and/or Nuclear Exclusion Clause(s) in effect at the time and any
   subsequent revisions thereto as agreed upon and approved by the Insurance
   Industry and/or a qualified Advisory or Rating Bureau.
<PAGE>

              POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE
              --------------------------------------------------

   This Reinsurance excludes:

   (1) Any loss occurrence arising out of the actual, alleged or threatened
       discharge, dispersal, release or escape of pollutants:

       a)  At or from premises owned, rented or occupied by an original assured;
           or

       b)  At or from any site or location used for the handling, storage,
           disposal, processing or treatment of waste; or

       c)  Which are at any time transported, handled, stored, treated, disposed
           of, or processed as waste; or

       d)  At or from any site or location on which any original assured is
           performing operations:

           (i)  If the pollutants are brought on or to the site or location in
                connection  with such operations; or

           (ii) If the operations are to test for, monitor, clean up, remove,
                contain, treat, detoxify or neutralize the pollutants.

   (2) Any liability, loss, cost or expense arising out of any governmental
       direction or request to test for, monitor, clean up, remove, contain,
       treat, detoxify or neutralize pollutants.

"Pollutants" means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

Subparagraphs a) and d)(i) of paragraph (1) of this exclusion do not apply to
loss occurrences caused by heat, smoke or fumes from a hostile fire. As used
herein, "hostile fire" means one which becomes uncontrollable or breaks out from
where it was intended to be.

"Original assured" as used herein means all insureds as defined in the policy
issued by the Company.
<PAGE>

   NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.
   --------------------------------------------------------------------

   N.M.A. 1590


1. This reinsurance does not cover any loss or liability accruing to the
   Reassured as a member of, or subscriber to, any association of insurers or
   reinsurers formed for the purpose of covering nuclear energy risks or as a
   direct or indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operation of paragraph 1. of this Clause
   it is understood and agreed that for all purposes of this reinsurance all the
   original policies of the Reassured (new, renewal and replacement) of the
   classes specified in Clause II. in this paragraph 2. from the time specified
   in Clause III. in this paragraph 2. shall be deemed to include the following
   provision (specified as the Limited Exclusion Provision):


   LIMITED EXCLUSION PROVISION*

     I.   It is agreed that the policy does not apply under any liability
          coverage, to injury, sickness, disease, death or destruction, bodily
          injury or property damage with respect to which an insured under the
          policy is also an insured under a nuclear energy liability policy
          issued by Nuclear Energy Liability Insurance Association, Mutual
          Atomic Energy Liability Underwriters or Nuclear Insurance Association
          of Canada, or would be an insured under any such policy but for its
          termination upon exhaustion of its limit of liability.

    II.   Family Automobile Policies (liability only), Special Automobile
          Policies (private passenger automobiles, liability only), Farmers
          Comprehensive Personal Liabilities Policies (liability only),
          Comprehensive Personal Liability Policies (liability only) or policies
          of a similar nature; and the liability portion of combination forms
          related to the four  classes of policies stated above, such as the
          Comprehensive Dwelling Policy and the applicable types of Homeowners
          Policies.

    III.  The inception dates and thereafter of all original policies as
          described in II. above, whether new, renewal or replacement, being
          policies which either

                                      -1-
<PAGE>

        (a)   become effective on or after 1st May, 1960, or

        (b)   become effective before that date and contain the Limited
              Exclusion Provision set out above; provided this paragraph 2.
              shall not be applicable to Family Automobile Policies, Special
              Automobile Policies, or policies or combination policies of a
              similar nature, issued by the Reassured on New York risks, until
              90 days following approval of the Limited Exclusion Provision by
              the Governmental Authority having jurisdiction thereof.

3. Except for those classes of policies specified in Clause II. of paragraph 2.
   and without in any way restricting the operation of paragraph 1. of this
   Clause, it is understood and agreed that for all purposes of this reinsurance
   the original liability policies of the Reassured (new, renewal and
   replacement) affording the following coverages:

   Owners, Landlords and Tenants Liability, Contractual Liability, Elevator
   Liability, Owners or Contractors (including railroad) Protective Liability,
   Manufacturers and Contractors Liability, Product Liability, Professional and
   Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile
   Liability (including Massachusetts Motor Vehicle or Garage Liability)

   shall be deemed to include with respect to such coverages, from the time
   specified in Clause V. of this paragraph 3., the following provision
   (specified as the Broad Exclusion Provision):


   BROAD EXCLUSION PROVISION*

   It is agreed that the policy does not apply:

    I.    Under any Liability Coverage to injury, sickness, disease, death or
          destruction, bodily injury or property damage

          (a)  with respect to which an insured under the policy is also an
               insured under nuclear energy liability policy issued by Nuclear
               Energy Liability Insurance Association, Mutual Atomic Energy
               Liability Underwriters or Nuclear Insurance Association of
               Canada, or would be an insured under any such policy but for its
               termination upon exhaustion of its limit of liability; or

                                      -2-
<PAGE>

          (b)  resulting from the hazardous properties of nuclear material and
               with respect to which (1) any person or organization is required
               to maintain financial protection pursuant to the Atomic Energy
               Act of 1954, or any law amendatory thereof, or (2) the insured
               is, or had this policy not been issued would be, entitled to
               indemnity from the United States of America, or any agency
               thereof, under any agreement entered into by the United States of
               America, or any agency thereof, with any person or organization.

   II.    Under any Medical Payments Coverage, or under any Supplementary
          Payments Provision relating to immediate medical or surgical relief,
          first aid, to expenses incurred with respect to bodily injury,
          sickness, disease or death, bodily injury resulting from the hazardous
          properties of nuclear material and arising out of the operation of a
          nuclear facility by any person or organization.

   III.   Under any Liability Coverage, to injury, sickness, disease, death or
          destruction, bodily injury or property damage resulting from the
          hazardous properties of nuclear material, if

          (a)  the nuclear material (1) is at any nuclear facility owned by, or
               operated by or on behalf of, an insured or (2) has been
               discharged or dispersed therefrom;

          (b)  the nuclear material is contained in spent fuel or waste at any
               time possessed, handled, used, processed, stored, transported or
               disposed of by or on behalf of an insured; or

          (c)  the injury, sickness, disease, death or destruction, bodily
               injury or property damage arises out of the furnishing by an
               insured of services, materials, parts or equipment in connection
               with the planning, construction, maintenance, operation or use of
               any nuclear facility, but if such facility is located within the
               United States of America, its territories, or possessions or
               Canada, this exclusion (c) applies only to injury to or
               destruction of property at such nuclear facility, property damage
               to such nuclear facility and any property thereat.

                                      -3-
<PAGE>

   IV.    As used in this endorsement:

          "hazardous properties" include radioactive, toxic or explosive
          properties; "nuclear material" means source material, special nuclear
          material or byproduct material; "source material," "special nuclear
          material," and "byproduct material" have the meanings given them in
          the Atomic Energy Act of 1954 or in any law amendatory thereof; "spent
          fuel" means any fuel element or fuel component, solid or liquid, which
          has been used or exposed to radiation in a nuclear reactor; "waste"
          means any waste material (1) containing byproduct material other than
          the tailings or wastes produced by the extraction or concentration of
          uranium or thorium from any ore processed for its source material
          content and (2) resulting from the operation by any person or
          organization of any nuclear facility included within the definition of
          nuclear facility under paragraph (a) or (b) thereof; "nuclear
          facility" means

          (a)  any nuclear reactor,

          (b)  any equipment or device designed or used for (1) separating the
               isotopes of uranium or plutonium, (2) processing or utilizing
               spent fuel, or (3) handling, processing or packaging waste,

          (c)  any equipment or device used for the processing, fabricating or
               alloying of special nuclear material if at any time the total
               amount of such material in the custody of the insured at the
               premises where such equipment or device is located consists of or
               contains more than 25 grams of plutonium or uranium 233 or any
               combination thereof, or more than 250 grams of uranium 235,

          (d)  any structure, basin, excavation, premises or place prepared or
               used for the storage or disposal of waste

          and includes the site on which any of the foregoing is located, all
          operations conducted on such site and all premises used for such
          operations; "nuclear reactor" means any apparatus designed or used to
          sustain nuclear fission in a self-supporting chain reaction or to
          contain a critical mass of fissionable material; with respect to
          injury to or destruction of property, the word "injury" or
          "destruction" includes all forms of radioactive contamination of
          property; "property damage" includes all forms of radioactive
          contamination of property.

   V.     The inception dates and thereafter of all original policies affording
          coverages specified in this paragraph 3., whether new, renewal or
          replacement, being policies which become

                                      -5-
<PAGE>

          effective on or after 1st May, 1960, provided this paragraph 3. shall
          not be applicable to

          (i)  Garage and Automobile Policies issued by the Reassured on New
               York risks, or

          (ii) Statutory liability insurance required under Chapter 90, General
               Laws of Massachusetts,

          until 90 days following approval of the Broad Exclusion Provision by
          the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraph 1. of this Clause,
   it is understood and agreed that paragraphs 2. and 3. above are not
   applicable to original liability policies of the Reassured in Canada, and
   that with respect to such policies, this Clause shall be deemed to include
   the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
   Underwriters' Association or the Independent Insurance Conference of Canada.

*NOTE:  The words printed in BOLD TYPE in the Limited Exclusion Provision and in
        the Broad Exclusion Provision shall apply only in relation to original
        liability policies which include a Limited Exclusion Provision or a
        Broad Exclusion Provision containing those words.

                                      -6-
<PAGE>

   NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - CANADA
   --------------------------------------------------------------------

   N.M.A. 1979


1. This Agreement does not cover any loss or liability accruing to the Company
   as a member of, or subscriber to, any association of insurers or reinsurers
   formed for the purpose of covering nuclear energy risks or as a direct or
   indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operation of Paragraph 1. of this Clause,
   it is agreed that for all purposes of this Agreement all the original
   liability contracts of the Company, whether new, renewal or replacement, of
   the following classes, namely,


         Personal Liability
         Farmers' Liability
         Storekeepers' Liability

   which become effective on or after 31st December 1984, shall be deemed to
   include, from their inception dates and thereafter, the following provision:

   Limited Exclusion Provision -

   This Policy does not apply to bodily injury or property damage with respect
   to which the Insured is also insured under a contract of nuclear energy
   liability insurance (whether the Insured is unnamed in such contract and
   whether or not it is legally enforceable by the Insured) issued by the
   Nuclear Insurance Association of Canada or any other group or pool of
   insurers or would be an Insured under any such policy but for its termination
   upon exhaustion of its limits of liability.

   With respect to property, loss of use of such property shall be deemed to be
   property damage.

3. Without in any way restricting the operation of Paragraph 1. of this Clause,
   it is agreed that for all purposes of this Agreement all the original
   liability contracts of the Company, whether new, renewal or replacement, of
   any class whatsoever (other than Personal Liability, Farmers' Liability,
   Storekeepers' Liability or Automobile Liability contracts), which become
   effective on or after 31st December 1984, shall be deemed to include, from
   their inception dates and thereafter, the following provision:

                                      -1-
<PAGE>

   Broad Exclusion Provision -

   It is agreed that this Policy does not apply:

   (a) to liability imposed by or arising under the Nuclear Liability Act; nor

   (b) to bodily injury or property damage with respect to which an Insured
       under this Policy is also insured under a contract of nuclear energy
       liability insurance (whether the Insured is unnamed in such contract and
       whether or not it is legally enforceable by the Insured) issued by the
       Nuclear Association of Canada or any other insurer or group or pool of
       insurers or would be an Insured under any such policy but for its
       termination upon exhaustion of its limit of liability; nor

   (c) to bodily injury or property damage resulting directly or indirectly from
       the nuclear energy hazard arising from:

       (i)    the ownership, maintenance, operation or use of a nuclear facility
              by or on behalf of an Insured;

       (ii)   the furnishing of an Insured of services, materials, parts or
              equipment in connection with the planning, construction,
              maintenance, operation or use of any nuclear facility; and

       (iii)  the possession, consumption, use, handling, disposal or
              transportation of fissionable substances, or of other radioactive
              material (except radioactive isotopes, away from a nuclear
              facility, which have reached the final stage of fabrication so as
              to be usable for any scientific, medical, agricultural, commercial
              or industrial purpose) used, distributed, handled or sold by an
              Insured.

   As used in this Policy:

   (1) The term "nuclear energy hazard" means the radioactive, toxic, explosive,
       or other hazardous properties of radioactive material;

   (2) The term "radioactive material" means uranium, thorium, plutonium,
       neptunium, their respective derivatives and compounds, radioactive
       isotopes of other elements and any other substances that the Atomic
       Energy Control Board may, by regulation, designate as being prescribed
       substances capable of releasing atomic energy, or as being requisite for
       the production, use or application of atomic energy;

                                      -2-
<PAGE>

   (3) The term "nuclear facility" means:

       (a)  any apparatus designed or used to sustain nuclear fission in a self-
            supporting chain reaction or to contain a critical mass of
            plutonium, thorium and uranium or any one or more of them;

       (b)  any equipment or device designed or used for (i) separating the
            isotopes of plutonium, thorium and uranium or any one or more of
            them, (ii) processing or utilizing spent fuel, or (iii) handling,
            processing or packaging waste;

       (c)  any equipment or device used for the processing, fabricating or
            alloying of plutonium, thorium or uranium enriched in the isotope
            uranium 233 or in the isotope uranium 235, or any one or more of
            them if at any time the total amount of such material in the custody
            of the Insured at the premises where such equipment or device is
            located consists of or contains more than 25 grams of plutonium or
            uranium 233 or any combination thereof, or more than 250 grams of
            uranium 235;

       (d)  any structure, basin, excavation, premises or place prepared or used
            for the storage or disposal of waste radioactive material;

       and includes the site on which any of the foregoing is located, together
       with all operations conducted thereon and all premises used for such
       operations.

   (4) The term "fissionable substance" means any prescribed substance that is,
       or from which can be obtained, a substance capable of releasing atomic
       energy by nuclear fission.

   (5) With respect to property, loss of use of such property shall be deemed to
       be property damage.

                                      -3-