<PAGE>   1
                                  Exhibit "A"

                                                                   Exhibit 10.16

                                 VARIABLE SHARE
                       QUOTA SHARE REINSURANCE AGREEMENT

Reinsured:             Commonwealth Mortgage Assurance Company (and Affiliates)

Reinsurer:             Capital Mortgage Reinsurance Company

Effective Date:        January 1, 1994

Term:                  Continuous from the Effective Date until terminated as
                       provided below.

Definitions:           When used in this Agreement, the following terms shall
                       have the specific meanings shown unless the context of
                       any provision hereof clearly indicates otherwise. Any
                       definitions set forth herein shall (i) include the
                       singular as well as plural, and (ii) all accounting terms
                       involving premium and loss calculations shall have the
                       meanings ascribed to them under statutory accounting
                       principles prescribed or permitted under the laws and
                       regulations of the Commonwealth of Pennsylvania.

                       "Affiliate" means any insurance company controlled by,
                       controlling or under common control with the Reinsured or
                       Reinsurer, as applicable.

                       "Losses" means losses paid plus allocated loss adjustment
                       expenses paid by the Reinsured during the Term of this
                       Agreement arising from Covered Business and reported by
                       the Reinsured within its statutory financial statements,
                       net of any salvage in connection therewith. Reinsured's
                       determination of Losses shall be binding on the
                       Reinsurer.

                       "Calendar Year" means each whole calendar year, i.e. each
                       January 1 through December 31.

                       "Calendar Year's Earned Premium" means for any Calendar
                       Year, the amount of gross earned premium allocable to
                       Covered Business and reported by the Reinsured within its
                       statutory financial statement for the particular Calendar
                       Year.

                       "Calendar Year's Losses" means, for any Calendar Year,
                       the amount of Losses allocable to Covered Business and
                       reported by the Reinsured within its year-end statutory


<PAGE>   2
                       financial statement for the particular Calendar Year.

                       "Calendar Year's Ever to Date Written Premium" means for
                       any particular Calendar Year, the aggregate amount of all
                       gross written premium allocable to Covered Business
                       reported by the Reinsured within its year-end financial
                       statements for the period from the Calendar Year in which
                       the underlying primary mortgage guaranty insurance
                       policies were issued through the end of the particular
                       Calendar Year.

                       "Calendar Year's Ever to Date Covered Losses" means, for
                       any particular Calendar Year, the aggregate amount of all
                       Losses reimbursed, or reimbursable by the Reinsurer
                       hereunder, whether under the Calendar Year Variable Quota
                       Share Coverage or the Underwriting Year Excess Coverage,
                       from the Effective Date through the end of the
                       particular Calendar Year.


                       "Underwriting Year" means the Calendar Year beginning
                       January 1, 1994 and ending December 31, 1994.

                       "Underwriting Year's Written Premium" means the gross
                       written premium allocable to Covered Business written by
                       the Reinsured during the Underwriting Year.

                       "Underwriting Year's Net Losses" means the aggregate of
                       all Losses allocable to Covered Business minus the amount
                       of such Losses reimbursed, or reimbursable by the
                       Reinsurer pursuant to this Agreement from the Effective
                       Date through the end of the particular Calendar Year.

                       "Gross Risk in Force" means the aggregate amount of
                       exposure arising from Covered Business calculated by
                       multiplying the unpaid principal balance of each mortgage
                       loan insured by Reinsured by the coverage percentage for
                       each such loan.

Covered Business:      All primary mortgage guaranty insurance policies issued
                       by the Reinsured during the Underwriting Year.

Exclusions:            Pool Insurance


                                       2




<PAGE>   3
               Reinsurance Assumed

Coverages:     Calendar Year Variable Quota Share Coverage: The Reinsurer will
               assume as reinsurance and be liable for:

               (i)    7.5% of the amount of each Calendar Year's Losses that do
                      not exceed 60% of such Calendar Year's Earned Premium.

               (ii)   11.25% of the amount of each Calendar Year's Losses that
                      exceed 60% but are less than or equal to 180% of such
                      Calendar Year's Earned Premium. Provided, however, that
                      for any Calendar Year in which such Calendar Year's Losses
                      exceed 60% of such Calendar Year's Earned Premium,
                      Reinsurer shall assume and be liable for an additional
                      3.75% of such Calendar Year's Losses up to 60% of such
                      Calendar Year's Earned Premium.

               (iii)  15% of the amount of each Calendar Year's Losses that
                      exceed 180% of such Calendar Year's Earned Premium.

               (iv)   100% of the amount of each Calendar Year's Losses that
                      exceed 85% of the Reinsured's Gross Risk in Force at the
                      end of such Calendar Year and are not covered pursuant to
                      provisions (i) through (iii) above.

               Underwriting Year Excess Coverage: The Reinsurer will assume as
               reinsurance and be liable for:

               (i)    100% of the Underwriting Year's Net Losses incurred by the
                      Reinsured during Calendar Years one through four, to the
                      extent that 8% of the Underwriting Year's Written Premium,
                      plus any unpaid ceding commission, exceeds the Calendar
                      Year's Ever to Date Covered Losses at the end of the
                      fourth Calendar Year of this Agreement.

               (ii)   100% of the Underwriting Year's Net Losses incurred by the
                      Reinsured

                                       3

<PAGE>   4
                         during Calendar Years five through seven, to the extent
                         that 8% of the premium allocable to the Underwriting
                         Year and collected during the first and second Calendar
                         Years of this Agreement plus any unpaid ceding
                         commission, exceeds the Calendar Year's Ever to Date
                         Covered Losses at the end of the seventh Calendar Year
                         of this Agreement.

               (iii)     100% of the Underwriting Year's Net Losses incurred by
                         the Reinsured through the end of the tenth Calendar
                         Year of this Agreement, to the extent that 8% of the
                         premium allocable to the Underwriting Year, plus any
                         unpaid ceding commission, exceeds the Calendar Year's
                         Ever to Date Covered Losses, at the end of the tenth
                         Calendar Year of this Agreement.

Premium:       The Reinsured shall pay to the Reinsurer a premium (the
               "Premium") during the Term of this Agreement equal to 15% of the
               Reinsured's gross written premium allocable to Covered Business
               during each calendar quarter. The Premium, net of any ceding
               commission due hereunder, shall be due and payable within thirty
               (30) days after the end of such calendar quarter and shall be
               remitted as set forth below.

Ceding
Commission:    The Reinsurer shall pay to the Reinsured a ceding commission of
               thirty (30%) of the Premium paid hereunder, provided, however,
               that for any Calendar Year for which such Calendar Year's Losses
               exceed sixty percent (60%) of such Calendar Year's Earned
               Premium, no ceding commission shall be paid.

Loss
Payments:      Calendar Year Variable Quota Share Coverage

               The Reinsurer shall pay to the Reinsured a provisional payment
               for Losses reinsured under the Calendar Year Variable Quota Share
               Coverage equal to 7.5% of the amount of Reinsured's Losses during
               each calendar quarter during the Term of this Agreement no later
               than the later of (i) thirty


                                       4
<PAGE>   5
          (30) days after the end of such calendar quarter, and (ii) ten (10)
          business days following the receipt by Reinsurer of a schedule setting
          forth the amount of Reinsured's Losses during such quarter. Sixty (60)
          days after the end of each Calendar Year (or any shorter period in the
          event of a termination) the Reinsured shall prepare and forward to
          Reinsurer a loss account showing for such Calendar Year (or shorter
          period) and the Underwriting Year, all Losses, Written Premium, Earned
          Premium and Gross Risk in Force. Within ten (10) days after
          Reinsurer's receipt of the loss account for a particular Calendar Year
          (or shorter period), the Reinsurer and the Reinsured shall transfer
          funds between them so as to reconcile the difference between (i) the
          Reinsured's Calendar Year's Losses reimbursed and reimbursable
          hereunder, and (ii) the sum of the provisional payments for Losses and
          payments of ceding commissions made by Reinsurer with respect to the
          calendar quarters during such Calendar Year (or shorter period).

          Underwriting Year Excess Coverage

          The Reinsurer shall remit to the Reinsured a provisional payment of
          any amounts due Reinsured under the Underwriting Year Excess Coverage
          on or before the last business day of the fourth, seventh and tenth
          Calendar Years of this Agreement. Reinsured shall provide Reinsurer
          with a provisional loss account no later than thirty (30) days prior
          to the end of any such Calendar Year.

          Sixty (60) days after the end of the fourth, seventh and tenth
          Calendar Years of this Agreement, the Reinsured shall prepare and
          forward to Reinsurer a loss account showing for such Calendar Year and
          the Underwriting Year, all Losses, Written Premium, Earned Premium and
          Gross Risk in Force. Within ten (10) business days after Reinsurer's
          receipt of the loss account for the fourth, seventh and tenth Calendar
          Years, the Reinsurer and the Reinsured shall transfer funds
          between them so as to reconcile the difference between (i) the
          Reinsured's Underwriting Year's Net Losses, and (ii) the sum of the
          provisional payments made by Reinsurer under the Underwriting Year
          Excess Coverage with respect to such Calendar Year.

                                       5
<PAGE>   6
Cancellation,
Termination:   A. This Agreement is non-cancelable by either party hereto for a
               period of ten years from the effective date hereof, except as
               provided in Section (B) below.

               B. Upon the occurrence of one or more of the following events,
               the Reinsured, upon providing ninety (90) days prior written
               notice to Reinsurer, shall have the right to terminate this
               Agreement on a cut-off basis, providing that such event or events
               have not been corrected prior to the expiration of such ninety
               (90) day period:

               1. Notice from Standard & Poor's Corporation ("S&P"), Moody's
               Investor Services, Inc. ("Moody's"), or any other nationally
               recognized rating agency that rates the Reinsured, confirmation
               of which shall be provided to the Reinsurer, that the Reinsured's
               then-current financial strength or claims-paying rating cannot be
               maintained because of the reinsurance coverage provided
               hereunder.

               2. Receipt by the Reinsured of written notice from the
               Pennsylvania Department of Insurance, or any other regulatory
               authority, a copy of which notice shall be provided to the
               Reinsurer, denying to Reinsured full financial statement credit
               according to the statutory requirements of the Commonwealth of
               Pennsylvania or any other jurisdiction in which the failure of
               Reinsured to obtain such full financial statement credit would
               have a material adverse impact on the Reinsured.

               3. Each party shall have the right to terminate this Agreement in
               the event of any actual or alleged breach or non-performance of a
               material provision of this Agreement by the other party which is
               not corrected or cured within thirty (30) days of the receipt by
               such other party of a written notice specifying the nature of the
               claimed breach or non-performance.

               4. Each party shall have the right to terminate this Agreement on
               December 31, 2003 (or any subsequent December 31) by providing at
               least ninety (90) days prior written notice of its intention to
               terminate this Agreement.

               After a termination cut-off pursuant to this Section, the
               Reinsurer shall pay to the Reinsured a

                                       6

<PAGE>   7
               profit commission equal to (i) 8% of the current Calendar Year's
               Ever to Date Written Premium, plus (ii) any unpaid ceding
               commission not paid in any Calendar Year when the Underwriting
               Year's Ever to Date Covered Losses exceeded sixty percent (60%)
               of such Calendar Year's Earned Premium, minus (iii) such Calendar
               Year's Ever to Date Covered Losses.

               At any termination of this Agreement, the Reinsurer shall refund
               to the Reinsured, in addition to any other sums due to the
               Reinsured hereunder, 16.67% of the Reinsured's ceded unearned
               premium with respect to Covered Business as of the date of such
               termination.

Financial
Statement
Credit:        The Reinsurer shall take all steps necessary for the Reinsured
               to obtain full financial statement credit according to the
               statutory requirements of the Commonwealth of Pennsylvania, the
               State of New York, and any other jurisdiction in which the
               failure of Reinsured to obtain such full financial statement
               credit would have a material adverse impact on the Reinsured.

Trust
Agreement:     Upon the execution of this Agreement by the parties, the
               Reinsurer shall establish a trust account (the "Trust") for the
               benefit of the Reinsured at a financial institution and under a
               trust agreement acceptable to Reinsured. The Reinsured shall
               promptly reimburse the Reinsurer for the reasonable and customary
               fees and expenses of the administration of the Trust.

               The payments of Premium (net of any ceding commissions due) by
               the Reinsured hereunder shall be made in two parts: (i) an amount
               equal to (16.67%) of any Premium shall be remitted directly to
               the Reinsurer; and (ii) any remaining Premium due, net of any
               ceding commission, shall be deposited directly into the Trust.

               Deposits of Premium into the Trust shall be invested at the
               discretion of the Reinsurer, provided, however, that at each
               quarter-end (i) at least ninety-five percent (95%) of the assets
               of the Trust shall consist of instruments or securities
               determined, as of the date of each quarter-end, to be of
               investment grade as defined

                                       7
<PAGE>   8
               from time to time by S&P and/or Moody's, (ii) at least fifty
               percent (50%) of the investments and cash assets of the Trust
               shall consist of cash or cash equivalents, or securities
               determined, as of the date of purchase, to be of the highest
               investment grade as determined from time to time by S&P and/or
               Moody's, and (iii) none of the assets of the Trust may be
               invested in instruments or securities with any real
               estate-related risk, and (iv) none of the assets of the Trust may
               be invested in instruments or securities of the Reinsurer,
               Reinsured or any Affiliate of either. Reinsurer shall be entitled
               to the investment income generated by the Trust.

               The Reinsured has the right and the obligation to withdraw assets
               from the Trust at any time and from time to time, as the
               Reinsured shall elect, in satisfaction of Reinsurer's obligations
               hereunder, provided that such obligations have not been
               previously reimbursed by to the Reinsured by the Reinsurer. In
               the event that, at any time, the assets of the Trust are
               insufficient to satisfy fully the obligations of the Reinsurer
               hereunder, the Reinsurer shall satisfy such shortfall directly as
               provided hereinabove.

               The Reinsurer may withdraw, and retain for its own account, all
               investment income earned on the Trust's assets at any time and
               from time to time as the Reinsurer shall elect. The trustee shall
               allow no other withdrawals or substitutions of assets from or to
               the Trust except as permitted hereunder.

               The trustee shall immediately honor all withdrawal requests made
               in accordance herewith and take all steps necessary to transfer
               the applicable assets held under the Trust to the appropriate
               party.

               Any disputes arising from the Trust may not be the subject of an
               arbitration proceeding between the parties unless both Reinsured
               and Reinsurer agree in writing to such an arbitration proceeding.

Other
Provisions:    This Agreement is subject to the negotiation and execution of a
               formal reinsurance treaty and a trust agreement both acceptable
               to the parties containing in addition to the terms and conditions
               set forth herein, ordinary and customary clauses

                                       8
<PAGE>   9
          set forth in reinsurance transactions generally, including, but not
          limited to the following:

          Follow the Fortunes Clause
          Offset Clause
          Errors and Omissions Clause
          Inspections Clause
          Taxes Clause
          Service of Suit Clause
          Insolvency Clause
          Arbitration Clause
          Assignment Clause
          Notices Clause
          Waiver Clause
          Negotiated Agreement Clause
          Governing Law Clause (PA)
          Salvage Clause
          Subrogation Clause
          Access to Records Clause
          Reports Clause
          Parental Wrap of Reinsurer Clause
          Penalty Interest for Late Payments


Agreed to and accepted by:

Commonwealth Mortgage Assurance Company

By: /s/ James C. Miller
   -------------------------------------
    James C. Miller, President

Date: 5/24/94
     -------------


Capital Mortgage Reinsurance Company

By:
   -------------------------------------

Date:
     -----------------

                                       9
<PAGE>   10
          set forth in reinsurance transactions generally, including, but not
          limited to the following:

          Follow the Fortunes Clause
          Offset Clause
          Errors and Omissions Clause
          Inspections Clause
          Taxes Clause
          Service of Suit Clause
          Insolvency Clause
          Arbitration Clause
          Assignment Clause
          Notices Clause
          Waiver Clause
          Negotiated Agreement Clause
          Governing Law Clause (PA)
          Salvage Clause
          Subrogation Clause
          Access to Records Clause
          Reports Clause
          Parental Wrap of Reinsurer Clause
          Penalty Interest for Late Payments

Agreed to and accepted by:

Commonwealth Mortgage Assurance Company

By: /s/ James C. Miller
    -----------------------------------
    James C. Miller, President

Date:
     ---------------

Capital Mortgage Reinsurance Company

By: /s/ [ILLEGIBLE SIGNATURE]
    -----------------------------------

Date: 5/24/94
     ---------------


                                       9