<PAGE>


                       BEFORE THE INSURANCE COMMISSIONER
                                     OF THE
                          COMMONWEALTH OF PENNSYLVANIA

IN RE:                           :   ORDER OF SUPERVISION
                                 :
RELIANCE INSURANCE COMPANY       :   Pursuant to Sections 510 and 511 of the
Three Parkway                    :   Insurance Department Act of 1921, P.L. 789,
Philadelphia, PA 19102           :   as amended, 40 P.S. ss.ss.221.10, 221.11.
                                 :
                                 :   Confidential Docket No. SP 81-01-031


                  -------------------------------------------
                              ORDER OF SUPERVISION
                  -------------------------------------------


                  AND NOW this 29th day of January 2001, pursuant to and in
accordance with Section 511 of the Insurance Department Act of 1921, Act of May
17, 1921, P.L. 789, as amended, 40 P.S. ss.221.11, and pursuant to the Consent
to Order of Supervision executed by Reliance Insurance Company ("Reliance")
under 40 P.S. ss.221.11(a), the Insurance Commissioner of the Commonwealth,
("Commissioner") issues this Order of Supervision, hereby placing Reliance under
the supervision of the Commissioner and/or her designated Supervisor upon the
following terms and conditions:

         1. Reliance has consented to the entry of this Order of Supervision and
has provided proper documentation of its consent.

         2. Reliance has acknowledged that it has received proper service of the
filing of this Order of Supervision and with respect to the entry of this Order
of Supervision, has waived its


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rights to hearing before the Commissioner or the Commonwealth Court of
Pennsylvania as provided in Section 510 of the Insurance Department Act of 1921
(40 P.S. ss.221.10) or any other applicable laws.

         3. This Order of Supervision is in addition to and in conjunction with
the Amended Letter of Agreement, dated January 23, 2001.

         4. Stephen J. Johnson, Deputy Insurance Commissioner, Office of
Regulation of Companies, or his successor, is hereby designated and appointed
Supervisor of Reliance ("Supervisor") with full authority under law with respect
to this Order of Supervision and as otherwise set forth in this Order of
Supervision.

         5. Reliance acknowledges the appointment by the Commissioner of an
on-site representative of the Commissioner and the Supervisor ("Representative")
to act as the agent of the Commissioner and the Supervisor to review and monitor
the business and operations of Reliance as follows:

                  a.       Reliance shall provide such facilities within the
                           executive offices of Reliance in both New York and
                           Pennsylvania and shall provide access to any
                           additional Reliance personnel as shall be reasonably
                           necessary for the conduct of the day-to-day duties
                           and responsibilities of the Representative.

                  b.       Reliance shall provide the Representative access to
                           all its directors, officers, and employees and shall
                           direct all such directors, officers and employees to
                           cooperate with the Representative in carrying out its
                           duties hereunder.



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                  c.       Reliance shall provide notice and access to the
                           Representative or his designee to attend, audit, and
                           observe in their entirety, all meetings of the Board
                           of Directors of Reliance and all meetings of any
                           committee of such Board of Directors.

                  d.       The Representative shall have the authority to retain
                           such personnel and consultants as are reasonably
                           necessary to carry out its duties and
                           responsibilities. The remuneration for the
                           Representative and the reasonable expenses of the
                           Representative in retaining any such personnel and
                           consultants shall be paid by Reliance. The Department
                           will not enter into any arrangement for remuneration
                           of the Representative, and the Representative will
                           not enter into any arrangement for personnel and
                           consultants without reasonable prior notice to
                           Reliance.

         6. If Reliance shall have breached any requirement of this Order of
Supervision and has not cured such breach after written notice of 10 days'
opportunity to cure such breach, the Department may take any action authorized
by law or equity, including, but not limited to, application to the Pennsylvania
Commonwealth Court for the appointment of a rehabilitator or liquidator of
Reliance.

         7. This Order of Supervision and its provisions shall remain
confidential pursuant to Sections 510 and 511 of the Insurance Department Act of
1921 (40 P.S. ss.ss.221.10 and 221.11) and shall not be disclosed by the
Department to any third party except for information which is generally
available to the public.



                                       -3-
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         8. The authority of the Commissioner and her designated Supervisor to
enforce the provisions of this Order of Supervision is in addition to any and
all other authority under applicable laws including statutes and regulations and
including, but not limited to, the Examination Law (40 P.S. ss.ss.323.1, et
seq.)

         9. This Order of Supervision shall remain in effect until: This Order
of Supervision is superseded by a subsequent regulatory order; or after review
on an annual basis, the Commissioner determines that this Order of Supervision
is no longer necessary; or the Commissioner and Reliance both agree that this
Order of Supervision is no longer necessary.

         NOW, THEREFORE, based upon the Consent to Order of Supervision executed
by Reliance, the Commissioner issues this Order of Supervision pursuant to the
authority specifically granted by Section 511 of the Insurance Department Act of
1921 (40 P.S. ss.221.11.)



                                                /s/ M. Diane Koken
                                                -----------------------------
                                                M. Diane Koken
                                                Insurance Commissioner
                                                Commonwealth of Pennsylvania

DATED: January 29, 2001



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                             CERTIFICATE OF SERVICE
         -------------------------------------------------------------


         I hereby certify that I am this day serving the foregoing document upon
all parties of record in this proceeding in accordance with the requirements of
1 Pa. Code Chapter 33 in the following manner:


                Service by first-class mail, addressed as follows:
                --------------------------------------------------

                Reliance Insurance Company
                Three Parkway
                Philadelphia, PA 19102





                                          /s/ Lynne E. Fitzwater
                                          -------------------------
                                          LYNNE E. FITZWATER
                                          Department Counsel
                                          I.D. # 31951
                                          Pennsylvania Insurance Department
                                          1341 Strawberry Square
                                          Harristown State Office Building No. 1
                                          Harrisburg, PA 17120
                                          (717) 787-2567

                                          Counsel for the Insurance Department,
                                          Commonwealth of Pennsylvania



DATED: January 29, 2001