<PAGE>   1
                                                                Exhibit 10.05

                              EMPLOYMENT AGREEMENT
                  (amended and restated as of August 19, 1996)


                  AGREEMENT, made and entered into as of the 19th day of August,
1996 by and between Mid Ocean Reinsurance Company Ltd., a Bermuda corporation
(the "COMPANY"), Mid Ocean Limited, a Cayman Islands Corporation (the "PARENT")
and Michael A. Butt (the "EXECUTIVE").

                  WHEREAS, on May 1, 1993, the Company and the Executive entered
into an employment agreement (the "MAY 1 AGREEMENT") pursuant to which the
Company agreed to employ the Executive, and the Executive agreed to serve, as
Vice Chairman, subject to the terms and conditions of the May 1 Agreement; and

                  WHEREAS, on May 21, 1993, the Company, Parent and Executive
agreed to amend the May 1 Agreement (as amended, the "MAY 21 AGREEMENT") to
provide, among other things, that the Parent would employ, and Executive would
serve, as President and Chief Executive Officer of Parent, subject to the terms
and conditions of the May 21 Agreement; and

                  WHEREAS, the Company and the Parent desire to amend and
restate the May 21 Agreement as set forth herein; and

                  WHEREAS, the Executive wishes to continue such employment with
the Company and Parent under the terms and conditions of this Agreement;
<PAGE>   2
                                      -2-


                  NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
Company, the Parent and the Executive (the "PARTIES") agree as follows:

                  1.       EMPLOYMENT.

                  The Company and Parent hereby employ the Executive, and the
Executive hereby accepts employment with the Company and Parent, for the term of
this Agreement as set forth in Section 2, below, in the position and with duties
and responsibilities set forth in Section 3, below, and upon such other terms
and conditions as are hereinafter stated.

                  2.       TERM OF EMPLOYMENT.
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                                      -3-


                  The term of employment under this Agreement shall commence on
August 19, 1996 (the "DATE OF THE AGREEMENT") and shall continue through the
close of business on the third anniversary of the Date of the Agreement, subject
to earlier termination as provided in Section 9, below. Thereafter such term
shall automatically be renewed for successive one-year periods unless the
Company and Parent give notice in writing to the Executive or the Executive
gives notice in writing to the Company and Parent at least six months prior to
the then scheduled expiration date that the term is not to so renew.

                  3.       POSITIONS, DUTIES AND RESPONSIBILITIES.
<PAGE>   4
                                      -4-


                  (a) GENERAL. The Executive shall be employed as President and
Chief Executive Officer of the Company and Parent, with such duties and
responsibilities, including but not limited to general management
responsibilities over the business and operations of the Company and the Parent,
as may be assigned to him by the Chairman of the Board of Directors of the
Company (the "BOARD") or the Chairman of the Board of Directors of the Parent
(the "PARENT BOARD"), as the case may be. In carrying out his duties and
responsibilities, the Executive shall report to the Chairman of the Board or to
the Chairman of the Parent Board, as the case may be. During the term of this
Agreement, the Executive shall devote his full business time to the business and
affairs of the Company and Parent, including any corporation, partnership or
other venture in which the Company or Parent owns, directly or indirectly, 50
percent or more of the stock or, in the case of any entity or venture other than
a corporation, 50 percent or more of the equity interest (an "AFFILIATE"), and
shall use his best efforts, skills and abilities to promote the Company's and
Parent's interests.

                  (b) MEMBERSHIPS. It is the intention of the Parties that the
Executive shall be nominated and elected and shall thereafter serve as a member
of the Board, as member of the Parent Board and as a member of the Executive
Committee of the Board and as a member of the Executive Committee of the Parent
Board.

                  (c) PERFORMANCE OF SERVICES. The Executive's services under
this Agreement shall be performed outside the United States and generally in
Bermuda unless the Executive and the Board and the Parent Board mutually agree
in writing to the performance of such services in 
<PAGE>   5
                                      -5-


another location outside the United States.

                  (d) PERMITTED ACTIVITIES. Anything herein to the contrary
notwithstanding, nothing shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations or the boards
of a reasonable number of trade associations and/or charitable organizations,
(ii) engaging in charitable activities and community affairs and (iii) managing
his personal investments and affairs, provided such activities do not materially
interfere with the proper performance of his duties and responsibilities as the
Company's Vice Chairman and the Parent's President and Chief Executive Officer.

                  4.       BASE SALARY.
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                                      -6-


                  The Executive shall be paid a Base Salary by the Company at an
annual rate of US $460,000, payable in accordance with the Company's regular pay
practices. Such Base Salary shall be subject to annual review and may be
increased at the discretion of the Executive Committee of the Parent Board (the
"EXECUTIVE COMMITTEE").

                  5.       BONUSES.

                  In addition to the Base Salary provided for in Section 4,
above, the Executive may be awarded such annual bonuses as may be determined by
the Executive Committee pursuant to the Annual Short Term Bonus Plan approved by
the Executive Committee, with a minimum guaranteed bonus of US $75,000. Any
annual bonus shall be paid in cash in a lump sum promptly following
determination thereof. The Executive shall also be eligible to participate in
the Long Term Incentive Plan to be adopted by the Company.

                  6.       SHARE PURCHASE OPTION.

                  Concurrently with the execution of the May 21 Agreement, the
Company and the Executive entered into a Share Purchase Option, granting to the
Executive the right to purchase Outstanding Stock (as defined in Exhibit A
thereto) as described therein. The Parties agreed that the Option shall be
amended to read as set forth in the form attached hereto as Exhibit A thereto
(the "OPTION"). The Option shall be 100% exercisable upon a "CHANGE IN CONTROL"
(as defined in Exhibit A hereto).
<PAGE>   7
                                      -7-


                  7.       EMPLOYEE BENEFIT PROGRAMS.

                  During the term of the Executive's employment under this
Agreement, the Executive shall be entitled to participate in all employee
benefit programs of the Company and Parent as are in effect from time to time
and in which senior executives of the Company and Parent are eligible to
participate, including medical, hospitalization, life, travel and accident
insurance, disability protection and retirement benefits.

                  8.       BUSINESS EXPENSE REIMBURSEMENT AND FRINGE BENEFITS.

                  (a) EXPENSE REIMBURSEMENT. During the term of the Executive's
employment under this Agreement, the Executive shall be entitled to receive
reimbursement by the Company and Parent for all reasonable out-of-pocket travel
expenses, entertainment expenses and other expenses incurred by him in
performing his duties under this Agreement, provided that the Executive submits
reasonable documentation with respect to such expenses. This shall include,
without limitation, reimbursements of any such costs for air fare (which the
Executive shall be entitled to on a first-class basis), hotel accommodations and
meals.

                  (b) FRINGE BENEFITS. During the term of the Executive's
employment under this Agreement, the Executive shall be entitled to participate
in any of the Company's and Parent's executive fringe benefits in accordance
with the terms and conditions of such arrangements as are in effect from time to
time for the Company's and Parent's senior executives. In all events, the
Executive shall be entitled during the period he is employed to the 
<PAGE>   8
                                      -8-


following:

                  (i) a living allowance of up to US $10,000 per month (to be
         prorated for partial months) while his services are performed in
         Bermuda,

                  (ii) use of an automobile in Bermuda,

                  (iii) reimbursement of the cost (including initiation fees and
         annual dues) of membership in three clubs in Bermuda,

                  (iv) reimbursement by the Company for the reasonable cost of
         financial and tax planning, such reimbursement not to exceed US $10,000
         per year; and

                    (v) air fare for up to four round-trip first-class
         non-business trips per year by the Executive or members of his family
         between London and Bermuda (the benefit under this Section 8(b)(iv)
         being in addition to any reimbursement of air fare described in Section
         8(a)), above.

                  9.       TERMINATION OF EMPLOYMENT.

                  (a) TERMINATION DUE TO DEATH. In the event the Executive dies
during the term of employment, the Executive's spouse, if she survives him,
shall be entitled to receive the Executive's Base Salary as provided in Section
4, above, at the rate in effect immediately prior to termination, through the
end of the month in which the Executive dies. In the event that the 
<PAGE>   9
                                      -9-


Executive's spouse does not survive him, the estate or other legal
representative of the Executive shall be entitled to receive the Base Salary as
provided in Section 4, above, at the rate in effect at the time of his death,
through the end of the month in which the Executive dies. In addition to the
above, the estate or other legal representative of the Executive shall be
entitled to:

                  (i) any annual bonus awarded but not yet paid under Section 5,
         above,

                  (ii) a pro rata bonus for the year of death, if the Executive
         Committee so determines,

                  (iii) the rights under the Option and any other options held
         by the Executive to purchase equity securities of the Company or Parent
         as provided in Section 6, above, or otherwise, determined in accordance
         with the terms thereof, and

                  (iv) any other rights and benefits available under employee
         compensation or benefit programs of the Company and Parent, or their
         equivalent, as provided in Section 7, above, and under business expense
         reimbursement and fringe benefit programs as described in Section 8,
         above, determined in accordance with the applicable terms and
         provisions of such programs.

                    (b) TERMINATION DUE TO DISABILITY. In the event the
Executive's employment with the Company or Parent is terminated due to his
disability, as determined under the Company's or Parent's long-term disability
plan, the Executive shall be entitled to:
<PAGE>   10
                                      -10-


                  (i) the Base Salary as provided in Section 4, above, through
         the end of the month in which the Executive's employment terminates due
         to disability,

                  (ii) any annual bonus awarded but not yet paid under Section
         5, above,

                  (iii) the rights under the Option and any other options held
         by the Executive to purchase equity securities of the Company or Parent
         as provided in Section 6, above, or otherwise, determined in accordance
         with the terms thereof, and

                   (iv) any other rights and benefits available under employee
         benefit programs of the Company and Parent, or their equivalent, as
         provided in Section 7, above, including, without limitation, the terms
         of any Long-Term Disability Plan, and under the business expense
         reimbursement and fringe benefits programs as described in Section 8,
         above, determined in accordance with the applicable terms and
         provisions of such programs.

                  (c)      TERMINATION FOR CAUSE.

                  (i) The employment of the Executive under this Agreement may
         be terminated by the Parent or the Company for Cause. For this purpose,
         "CAUSE" shall mean:

                           (A) conviction of the Executive of a felony involving
                  moral turpitude, or

                           (B) the Executive, in carrying out his duties for the
                  Company or Parent under this Agreement, has been guilty of (1)
                  gross neglect or (II) gross 
<PAGE>   11
                                      -11-


                   misconduct.

                  (ii) In the event of a termination for Cause under Section
         9(c)(i), above, the Executive shall be entitled only to:

                           (A) Base Salary as provided in Section 4, above, at
                  the rate in effect at the time of his termination of
                  employment for Cause, through the date on which termination
                  for Cause occurs,

                           (B) the rights, if any, under the Option or any other
                  option to purchase equity securities of the Company and Parent
                  as provided in Section 6, above, or otherwise determined in
                  accordance with the terms thereof, and

                           (C) any other rights and benefits, if any, available
                  under employee benefit programs of the Company and Parent, or
                  their equivalent, as provided in Section 7, above, and under
                  the business expense reimbursement and fringe benefits
                  programs as described in Section 8, above, determined in
                  accordance with the applicable terms and provisions of such
                  programs.

                  (d)      TERMINATION WITHOUT CAUSE.

                  (i) Anything in this Agreement to the contrary
         notwithstanding, the Executive's employment may be terminated without
         Cause as provided in this Section 9(d). A termination due to
         disability, as described in Section 9(b), above, or a 
<PAGE>   12
                                      -12-


         termination for Cause, as described in Section 9(c), above, shall not
         be deemed a termination without Cause under this Section 9(d).

                  (ii) In the event the Executive's employment is terminated
         without Cause (x) prior to a Change in Control or (y) following the
         first anniversary of a Change in Control, the Executive shall be
         entitled to:

                           (A) Base Salary as provided in Section 4, above, at
                  the rate in effect in accordance with Section 4, above,
                  immediately prior to such termination, payable in equal
                  monthly installments for a period of 12 months following the
                  date of such termination,

                           (B) any annual bonus awarded but not yet paid under
                  Section 5, above,

                           (C) the rights under the Option as provided in
                  Section 6, above, in accordance with the terms thereof,

                           (D) continued coverage under the employee benefit
                  programs of the Company and Parent, or their equivalent, as
                  provided in Section 7, above, in which the Executive was
                  participating at the time of his termination of employment for
                  the period of salary continuation; provided, however, that any
                  such continued coverage shall be offset by comparable coverage
                  provided to the Executive in connection with subsequent
                  full-time employment and, to the extent 
<PAGE>   13
                                      -13-


                  the Company or Parent is unable to continue such coverage, the
                  Company or Parent shall provide the Executive with
                  economically equivalent benefits determined on an after-tax
                  basis, and

                           (E) any other rights and benefits available under
                  employee benefit programs of the Company and Parent, or their
                  equivalent, as provided in Section 7, above, and under the
                  business expense reimbursement and fringe benefits programs as
                  described in Section 8, above, determined in accordance with
                  the applicable terms and provisions of such programs.

                  (iii) In the event the Executive's employment is terminated by
         the Company or Parent without Cause within the 12 month period
         following a Change in Control (the "POST-CHANGE PERIOD") or the
         Executive terminates his employment for "GOOD REASON" (as defined in
         Exhibit B hereto) during the Post-Change Period, the Executive shall be
         entitled to:

                           (A) Base Salary as provided in Section 4, above, at
                  the rate in effect in accordance with Section 4, above,
                  immediately prior to such termination, payable in equal
                  monthly installments for a period of 36 months following the
                  date of such termination,

                           (B) an amount equal to three times the largest annual
                  bonus awarded to the Executive in the three year period prior
                  to the year in which a Change in 
<PAGE>   14
                                      -14-


                  Control occurs, paid in equal monthly installments for the
                  period of Base Salary continuation,

                           (C) an amount equal to the annual bonus that would
                  have been awarded to Executive in respect of the year in which
                  the Change in Control occurs, multiplied by a fraction, the
                  numerator of which is the number of months or fraction thereof
                  in which the Executive was employed by the Company or Parent
                  in such year, and the denominator of which is 12,

                           (D) the rights under the Option, and any other
                  options held by the Executive to purchase equity securities of
                  the Company or Parent as provided in Section 6, above, or
                  otherwise, determined in accordance with the terms thereof,

                           (E) continued coverage under the employee benefit
                  programs on the Company and Parent, or their equivalent, as
                  provided in Section 7, above, in which the Executive was
                  participating at the time of his termination of employment for
                  the period of Base Salary continuation; provided, however,
                  that any such continued coverage shall be offset by comparable
                  coverage provided to the Executive in connection with
                  subsequent full-time employment and, to the extent the Company
                  and Parent is unable to continue such coverage, the Company
                  and Parent shall provide the Executive with economically
                  equivalent benefits determined on an after-tax basis and,
<PAGE>   15
                                      -15-


                           (F) any other rights and benefits available under
                  employee benefit programs of the Company and Parent, or their
                  equivalent, as provided in Section 7, above, and under the
                  business expense reimbursement and fringe benefits programs as
                  described in Section 8, above, determined in accordance with
                  the applicable terms and provisions of such programs.

                           (G) full and immediate vesting under the Company's
                  pension plans as of the date of termination, to the extent
                  permitted by applicable law.

                  (iv) If, at any time during the term of the Executive's
         employment hereunder, the Executive fails to be elected (or re-elected,
         as appropriate) to the Board or the Parent Board, or is otherwise
         removed from the Board or the Parent Board, or fails to be appointed
         (or re-appointed, as appropriate) to the Executive Committee of the
         Board or the Parent Board involuntarily, the Executive shall have the
         right to terminate his employment and such termination, if prior to a
         Change in Control, shall be deemed a termination by the Company and
         Parent without Cause under Section 9(d)(ii), above, or, if following a
         Change in Control, shall be deemed a termination without Cause under
         Section 9(d)(iii), above, provided the Executive, in either case, shall
         have given the Company and Parent written notice of his decision and
         shall not within 10 business days thereafter have been reinstated to
         the relevant positions.

                  (e) VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
<PAGE>   16
                                      -16-


voluntarily terminate his employment prior to the expiration of the term of this
Agreement. Such termination shall constitute a voluntary termination and, except
as provided in Section 9(d)(iii), above, in such event the Executive shall be
limited to the same rights and benefits as applicable to a termination by the
Company or Parent for Cause as provided in Section 9(c), above. A voluntary
termination under this Section 9(e) shaH not be deemed a breach of this
Agreement. A termination of the Executive's employment due to disability as
described in Section 9(b), above, a termination by the Executive which the
Executive is entitled to treat as a termination by the Company or Parent
pursuant to Section 9(d), above, or a termination by the Executive under Section
9(d)(iii), above, shall not be deemed a voluntary termination within the meaning
of this Section 9(e).

                  10.      NO MITIGATION; NO OFFSET.
<PAGE>   17
                                      -17-


                  In the event of any termination of employment under Section 9,
above, the Executive shall be under no obligation to seek other employment, and
there shall be no offset against amounts due the Executive under this Agreement
on account of any remuneration attributable to any subsequent employment that he
may obtain.

                   11.     NONCOMPETITION AND NONSOLICITATION.

                  (a) NONCOMPETITION. During the term of his employment and for
a period of 24 months thereafter, the Executive shall not, directly or
indirectly, whether as an employee, consultant, partner, principal, agent,
distributor, representative or stockholder (except as a less than one percent
stockholder of a publicly traded company or a less than five percent stockholder
of a privately held company), engage in any activities in Bermuda if such
activities are competitive with the businesses that (i) are then being conducted
by the Company or Parent and (ii) during the period of the Executive's
employment were either being conducted by the Company or Parent or actively
being developed by the Company or Parent. For purposes of this Section 11, the
Company or Parent shall be deemed to include any entity that was an Affiliate of
the Company or Parent during the period of the Executive's employment as well as
the time in question.

                  (b) NONSOLICITATION. During the term of the Executive's
employment under this Agreement, and for a period of 24 months following
termination of employment, the Executive shall not (i) encourage any other
employee of the Company or Parent to leave the 
<PAGE>   18
                                      -18-


employ of the Company or Parent except as may be in the interests of the Company
or Parent during the course of carrying out his duties under Section 3 above or
(ii) seek to obtain or solicit business from any person, firm or company which
is (so long as the Executive is employed by the Company or Parent) or at the
time of the termination of the Executive's employment was a customer of or in
the habit of dealing with the Company or Parent.

                  12.      CONFIDENTIAL INFORMATION.
<PAGE>   19
                                      -19-


                  The Executive covenants that he shall not, without the prior
written consent of the Board or Parent Board or a person authorized by the Board
or Parent Board, disclose to any person, other than an employee of the Company
or Parent or other person to whom disclosure is necessary to the performance by
the Executive of his duties in the employ of the Company or Parent, any
confidential proprietary information about the Company or Parent or their
business, unless and until such information has become known to the public
generally (other than as a result of unauthorized disclosure by the Executive)
or unless he is required to disclose such information by a court or by a
governmental body with apparent authority to require such disclosure. The
foregoing covenant by the Executive shall be without limitation as to time and
geographic application.

                  13.      WITHHOLDING.

                  Anything in this Agreement to the contrary notwithstanding,
all payments required to be made by the Company or Parent hereunder to the
Executive shall be subject to withholding of such amounts relating to taxes as
the Company or Parent may reasonably determine either should withhold pursuant
to any applicable law or regulation. In lieu of withholding such amounts, in
whole or in part, the Company or Parent may, in its sole discretion, accept
other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.

                  14.      PARENT SERVICES.
<PAGE>   20
                                      -20-


                  (a) LIABILITY. The Parent, hereby agrees to be jointly and
severally liable together with the Company, for the payment to the Executive of
his Base Salary, bonus, business expense reimbursement and termination of
employment provisions of this Agreement.
<PAGE>   21
                                      -21-


                  (b) RESPONSIBILITY. All of the other terms and provisions of
this Agreement relating to the Executive's employment by the Company shall
likewise apply mutatis mutandis to the Executive's employment by the Parent
including, without limitation, Sections 1, 2, 7, 8, 9, 10, 11, 12, 13 and 18, it
being understood that if the Executive terminates his employment, he shall be
required to do so with respect to both the Company and the Parent and that a
termination of the employment of the Executive by both the Company or the Parent
shall be deemed a termination by both.

                  15.      ENTIRE AGREEMENT.

                  This Agreement, together with the Exhibits, contains the
entire agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Company, Parent and the
Executive with respect thereto.

                  16.      ASSIGNABILITY; BINDING NATURE.
<PAGE>   22
                                      -22-


                  This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors, heirs and assigns. No rights or
obligations of the Executive under this Agreement may be assigned or transferred
by the Executive other than his right to compensation and benefits hereunder,
which may be transferred by will or operation of law subject to the limitations
of this Agreement. No rights or obligations of the Company or Parent under this
Agreement may be assigned or transferred by the Company or Parent except that
such rights or obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company or Parent is not the continuing entity, or
the sale or liquidation of all or substantially all of the assets of the Company
or Parent, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company or Parent and such assignee or
transferee assumes the liabilities, obligations and duties of the Company or
Parent, as contained in this Agreement, either contractually or as a matter of
law.

                  17.      INDEMNIFICATION.

                  The Executive shall be provided indemnification by each of
Parent and the Company to maximum extent permitted under the laws of their
respective jurisdictions of incorporation and their respective charter
documents. In addition, he shall be covered by a directors' and officers'
liability policy with coverage for him to the extent of US $50,000,000.

                  18.      SETTLEMENT OF DISPUTES.
<PAGE>   23
                                      -23-


                  Any dispute between the Parties arising from or relating to
the terms of this Agreement or the Executive's employment with the Company or
Parent shall be resolved by arbitration held in New York City in accordance with
the rules of the American Arbitration Association. All costs associated with any
arbitration, including all legal expenses, for both Parties shall be borne by
the Company and Parent.

                  19.      AMENDMENT OR WAIVER.

                  No provision in this Agreement may be amended unless such
amendment is agreed to in writing, signed by the Executive and by a duly
authorized officer of the Company and Parent. No waiver by any Party of any
breach by the other Party of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by the Executive or a duly authorized
officer of the Company and Parent, as the case may be.

                  20.      NOTICES.

                  Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or sent by courier, or by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as such Party may
subsequently by similar process give notice of:
<PAGE>   24
                                      -24-


If to the Company:                Mid Ocean Reinsurance Company Ltd.
                                  Richmond House
                                  12 Par-la-Ville Road
                                  Hamilton HM EX Bermuda


If to the Parent:                 Mid Ocean Limited
                                  Richmond House
                                  12 Par-la-Ville Road
                                  Hamilton HM EX, Bermuda


If to the Executive:              Michael A. Butt
                                  "Chan Mar"
                                  41 Tucker's Town Road
                                  Bermuda


                  21.      SEVERABILITY.

                  In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.

                  22.      SURVIVORSHIP.

                  The respective rights and obligations of the Parties shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
<PAGE>   25
                                      -25-


                  23.      REFERENCE.

                  In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his estate or other legal
representative.

                  24.      GOVERNING LAW.

                  This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York without
reference to the principles of conflict of laws.

                  25.      HEADINGS.

                  The heading of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

                  26.      COUNTERPARTS.

                  This Agreement may be executed in one or more counterparts.
<PAGE>   26
                                      -26-


                  IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.



                                    MID OCEAN REINSURANCE COMPANY LTD.


                                    By: /s/ R. J. Newhouse Jr.
                                       ------------------------------------


                                    MID OCEAN LIMITED


                                    By: /s/ Michael A. Butt
                                       ------------------------------------

                                       ------------------------------------
                                         Michael A. Butt
<PAGE>   27



                                                                       EXHIBIT A



                                CHANGE IN CONTROL


         A "Change in Control" shall be deemed to have occurred if:


(i)      on or after the date hereof, any person (which, for all purposes
         hereof, shall include, without limitation, an individual, sole
         proprietorship, partnership, unincorporated association, unincorporated
         syndicate, unincorporated organization, trust, body corporate and a
         trustee, executor, administrator or other legal representative), or any
         group (within the meaning of Section 13(d)(3) of the United States
         Securities Exchange Act of 1934, as amended), becomes the beneficial
         owner, directly or indirectly, of securities of the Parent
         representing, or acquires the right to control or direct, or to acquire
         through the conversion or exchange of securities or the exercise of
         warrants or other rights to acquire securities ("Beneficial Owner'),
         20% or more of the combined voting power of the Parent's then
         outstanding securities ("Significant Owner') (excluding any person who
         or group which, together with all affiliates and associates of such
         person or group, would on the date of this Agreement but for this
         clause be a Significant Owner as long as such person or group does not
         subsequently become the Beneficial Owner of any additional securities
         of the Parent in any manner other than a change in the aggregate number
         of the outstanding securities of the 


                                      A-1
<PAGE>   28
         Parent, and other than pursuant to any purchase or acquisition
         permitted by the first full paragraph of the second page of that
         Standstill Agreement dated June 2, 1995 between Parent and EXEL
         Limited) and, for the purposes hereof, "voting power" means the right
         to vote for the election of directors; or


(ii)     at any time subsequent to the execution of this contract there shall be
         elected or appointed to the Parent Board any director or directors
         whose appointment or election by the Parent's shareholders was not
         approved by a vote of at least a majority of the directors then still
         in office who were either directors at the date hereof or whose
         election or appointment or nomination for election was previously so
         approved.

The determination to be made pursuant to clause (i) above shall be made on the
basis that (x) all securities beneficially owned by the person or group or over
which control or direction is exercised by the person or group which are
convertible or exchangeable into securities carrying voting rights have been
converted or exchanged and all options, warrants, exchange rights or other
rights which may be exercised to acquire securities beneficially owned by the
person or group or over which control or direction is exercised by the person or
group have been exercised, and (y) no such convertible or exchangeable
securities have been converted or exchanged by any other person and no such
options, warrants, exchange rights or other rights have been exercised by any
other person.


                                      A-2
<PAGE>   29
                                                                       EXHIBIT B

                                   GOOD REASON

                  For purposes of this Agreement, 'Good Reason' shall mean any
of the following (without Executive's express prior written consent):

         (i)      (A) The assignment to Executive of duties materially
                  inconsistent with Executive's position (including duties,
                  responsibilities, status, titles or offices as set forth in
                  Section 2 hereof); or (B) any elimination or reduction of
                  Executive's duties or responsibilities except in connection
                  with the termination of Executive's employment for Cause,
                  disability or as a result of Executive's death or by Executive
                  other than for Good Reason;

         (ii)     The (A) reduction in Executive's Base Salary from the level in
                  effect immediately prior to, or (B) payment of an annual bonus
                  in an amount less than the most recent annual bonus paid prior
                  to the Change in Control;

         (iii)    The failure by the Company or Parent to obtain the specific
                  assumption of this Agreement by any successor or assign of
                  Parent or the Company or any person acquiring substantially
                  all of the Company's or Parent's assets;

         (iv)     Any material breach by the Company or Parent of any provision
                  of this Agreement or any agreements entered into pursuant
                  thereto;

         (v)      Requiring Executive to be based at any office or location
                  other than those described in Section 2(a) hereof, except for
                  travel reasonably required in the performance of the
                  Executive's responsibilities; or

         (vi)     During the twelve month period following a Change in Control,
                  (A) the failure to continue in effect any compensation plan in
                  which Executive participates at the time of the Change in
                  Control unless an equitable arrangement (embodied in an
                  ongoing substitute or alternative plan providing Executive
                  with substantially similar benefits) has been made with
                  respect to such plan in connection with the Change in Control,
                  or the failure to continue Executive's participation therein
                  on substantially the same basis, both in terms of the amount
                  of benefits provided and the level of his participation
                  relative to other participants, as existed at the time of the
                  Change in Control; or (B) the failure to continue to provide
                  Executive with benefits at least as favorable in the aggregate
                  as those enjoyed by him under any of 




                                      B-1
<PAGE>   30
                  the Company's or Parent's pension, life insurance, medical,
                  health and accident, disability, deferred compensation or
                  savings plans in which he was participating at the time of the
                  Change of Control, the taking of any action which would
                  directly or indirectly materially reduce any of such benefits
                  or deprive Executive of any fringe benefit enjoyed by him at
                  the time of the Change of Control, or the failure to provide
                  him with the number of paid vacation days to which he was
                  entitled on the basis of the Company's practice with respect
                  to him as in effect at the time of the Change of Control.


                                      B-2