<PAGE>


                                                                   EXHIBIT 10.38


                       INTER-COMPANY REINSURANCE AGREEMENT


         THIS INTER-COMPANY REINSURANCE AGREEMENT ("Agreement") is made and
effective January 1, 2006, by and between Star Insurance Company ("Star"), and
Ameritrust Insurance Corporation, Savers Property and Casualty Insurance Company
and Williamsburg National Insurance Company, (hereinafter collectively referred
to as "Affiliated Companies").

                                    RECITALS

         WHEREAS, the parties hereto are engaged in the transaction of various
forms of property, casualty, medical malpractice, commercial auto and workers'
compensation insurance business in the United States and are a member of the
Insurance Company Holding System of Meadowbrook Insurance Group, Inc.;

         WHEREAS, Star shall be considered the lead company for the purposes of
this Agreement;

         WHEREAS, the parties wish to enter into an Inter-Company Reinsurance
Agreement to conform with state legal requirement;

         NOW, THEREFORE, the parties agree as follows:


                                    ARTICLE I
                            APPLICATION OF AGREEMENT

         This Agreement is effective as of 12:01 a.m. on January 1, 2006, (the
"Effective Date") and applies to all insurance risks of the Affiliated Companies
located in the United States as of the Effective Date, as well as to all such
risks written and assumed thereafter.

                                   ARTICLE II
                              REINSURANCE AGREEMENT


(a)      The Affiliated Companies hereby agree to cede to Star and Star agrees
         to reinsure 100% of the liabilities and expenses of the Affiliated
         Companies existing as of January 1, 2005 including any development on
         loss reserves relating to these liabilities and expenses occurring on
         or after January 1, 2006, as well as 100% of the liabilities and
         expenses of the Affiliated Companies during the term of this Agreement,
         each relating to all insurance and reinsurance policies assumed,
         written or issued by of on behalf of the Affiliated Companies.

         (b) Star hereby agrees to cede and the Affiliated Companies hereby
         agree to reinsure Star, their Respective Percentages (as set forth in
         Appendix A) of the liabilities and expenses of the Affiliated Companies
         existing as of January 1, 2005 including any development on loss
         reserves relating to these liabilities and expenses occurring on or
         after January 1, 2005, as well as 100% of the liabilities and expenses
         of the Affiliated Companies during the term of the Agreement, each
         relating to all insurance and


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         reinsurance policies assumed, written or issued by or on behalf of the
         Affiliated Companies.

         The liabilities ceded under this Article II(b) shall be net of
reinsurance ceded to excess of loss and/or quota share reinsurers, excluding the
parties hereto and shall not include liabilities for federal income taxes,
liabilities incurred in connection with investment transactions, liabilities for
dividends and other liabilities not incurred in connection with underwriting and
claim operations.

                                   ARTICLE III
                              PREMIUMS AND RESERVES

(a)      The Affiliated Companies agree to transfer to Star, and Star agrees to
         accept, all premium and reserves related to the business ceded to Star
         under Article II.

(b)      Star agrees to transfer to the Affiliated Companies their Respective
         Percentages of the premium received and reserves maintained by Star for
         its own account and for business reinsured by it under Article II.

         The premium ceded under this Article II(b) shall be net of reinsurance
premium placed with unaffiliated quota share or excess of loss reinsurers. Until
Williamsburg National Insurance Company receives authority to write disability
insurance in California and Michigan, disability insurance will be excluded from
this Agreement.

                                   ARTICLE IV
                               INVESTMENT EXPENSES

         Notwithstanding anything to the contrary in this Agreement, no
investment expenses of any party (including costs of personnel) shall be
allocated based on premium volume, but such expenses shall be allocated on a
cost basis among the parties.

                                    ARTICLE V
                              RESPECTIVE PERCENTAGE

         The term "Respective Percentage" as used in this Agreement shall be as
stated in Appendix A hereto.

                                   ARTICLE VI
                          OTHER REINSURANCE AGREEMENTS

         Star and Affiliated Companies agree that all reinsurance to be ceded to
excess of loss and quota share reinsurers, excluding the parties hereto shall be
ceded by and in the name of Star.

         Star assumes all premium responsibilities associated with any and all
unaffiliated reinsurance agreements in effect on January 1, 2005 with
Ameritrust, Savers and/or Williamsburg named separately or collectively
inclusive of Star. In return for the payment of such premiums Ameritrust,
Williamsburg and Savers agree to assign all reinsurance recoverables under said
unaffiliated reinsurance agreements to Star.

                                   ARTICLE VII


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                                   ACCOUNTING

         Accounts, including reports for premiums and losses, and payment of
losses shall be made no less frequently than on a quarterly basis, unless there
is no activity during the period. The report of premiums and losses shall set
forth the ceding Company's total loss and loss expense reserves on the policy
obligations subject to this agreement. A ceding company may make a request at
any time for immediate payment of a recovery and the funds will be made
available without delay.

                                  ARTICLE VIII
                           POLICY AND CLAIMS HANDLING

         As of the Effective Date of this Agreement, the Affiliated Companies
hereby authorize and empower Star to collect and receive all premium and other
recoverable amounts, and to take charge of, adjust and pay all losses with
respect to any and all contracts and policies of insurance issued by the
Affiliated Companies and to reinsure, administer or terminate all such contracts
and policies as appropriate.

                                   ARTICLE IX
                                   ASSIGNMENT

         Each of the Affiliated Companies assign to Star all right and interest
of such Affiliated Company in its agents' balances and uncollected premium
whether due or overdue underwriting expenses, as well as all right, title and
interest in regulatory pools, associations or assessments, and any other
underwriting assets and related liabilities. In turn, Star hereby transfers and
assigns to each Affiliated Company their Respective Percentage of all premium,
underwriting expenses and all title and interest in regulatory pools,
associations or assessments and other underwriting assets and liabilities.

         Each of the Affiliated Companies assign to Star all right and interest
of such Affiliated Company in reinsurance agreements entered into by it, and
authorizes Star to take such actions as may be necessary to execute transactions
pursuant to such reinsurance agreements.

                                    ARTICLE X
                                 RIGHT TO OFFSET

         The obligation of each party under this Agreement to transfer
underwriting assets and liabilities to another party may be offset by the
reciprocal obligations of such other party so that only the net amount of such
underwriting assets and liabilities shall be required to be transferred.

                                   ARTICLE XI
                             CREDIT FOR REINSURNACE

         Each participant to this Agreement shall take full credit for all
liabilities ceded to the other participants. To the extent that any participant
is not identically licensed in the other participants' states of domicile, the
ceding company will either retain sufficient funds withheld trusts or will
obtain adequate letters of credit from the assuming party to secure reinsurance
recoveries.


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                                   ARTICLE XII
                                 ORIGINAL TERMS

         The terms and conditions of the reinsurance hereunder shall in all
cases be identical with the terms and conditions of the original insurance.

                                  ARTICLE XIII
                              INDEPENDENT OPERATION

         Notwithstanding any other provision of this Agreement, Star and the
Affiliated Companies agree: (a) that each company owns, has custody of and keeps
its own general corporate accounts; (b) that each company owns all the records
of its business; (c) that each company has the ultimate veto right on its
underwriting; (d) that each company has the ultimate right to cancel its risks;
(e) that each company has the ultimate responsibility for and control of claims
adjustment and claims payment and investment management; (f) that premium
collected by Star as provided for in the Agreement shall be held and paid by
Star in a fiduciary capacity under this Agreement; (g) that each company retains
the right to cancel this Agreement at any time as stated in Article XIV; and (h)
this Agreement may not be assigned by any party without the written consent of
all other parties and applicable regulatory agencies.

                                   ARTICLE XIV
                                   INSOLVENCY

         In the event of the insolvency of any company that is a party to this
Agreement, this reinsurance shall be payable directly to the company, or to its
liquidator, receiver or conservator or statutory successor on the basis of the
liability of the company without diminution because of the insolvency of the
company or because the liquidator, receiver, conservator or statutory successor
of the company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the reinsurers of the pendency of a
claim against the company indicating the policy or bond reinsurance which claim
would involve a possible liability on the part of the reinsurers within a
reasonable time after that claim is filed in the conservation or liquidation
proceeding or in the receivership, and that during the pendency of that claim
the reinsurers may investigate that claim and interpose, at their own expense,
in the proceeding where that claim is to be adjudicated any defense (s) they may
deem available to the company or its liquidator, receiver, conservator or
statutory successor. This expense incurred by the reinsurers shall be
chargeable, subject to the approval of the court, against the company as part of
the expense conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the company solely as a result of the defense
undertaken by the reinsurers.

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

         This insolvency clause shall not preclude the reinsurer from asserting
any excuse of defense to payment of this reinsurance other than the excuses or
defenses of the insolvency of the company and the failure of the company's
liquidator, receiver, conservator or statutory successor to pay all or a portion
of the claim.


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                                   ARTICLE XV
                            AMENDMENT OR CANCELLATION

         This Agreement may be amended by mutual agreement expressed in writing
by the parties hereto. If this Agreement is amended, the parties shall provide
the applicable regulatory agency thirty (30) days advance notice of such
amendment.

         This Agreement shall remain in force until canceled by written notice
given by any party to the others, at least ninety (90) days in advance of the
effective date of cancellation. In addition, written notice shall be provided by
the parties to the applicable regulatory agency thirty (30) days in advance of
the cancellation date. In the event of such cancellation, all rights and
obligations of the parties hereto with respect to policies which are then
reinsured hereunder shall continue to be governed by this Agreement, until such
liabilities are fully satisfied.

                                   ARTICLE XVI
                                  SOLE BENEFIT

         This Agreement is solely between and for the benefit of the parties
hereto, and the acceptance of reinsurance hereunder shall not create any right
or legal relation whatsoever between any third-party, such as, policyholder,
unaffiliated quota share reinsurer or excess of loss reinsurer.

                                  ARTICLE XVII
                                  GOVERNING LAW

         This Agreement is made in the State of Michigan and shall be construed
according to the laws of the State of Michigan.

                                  ARTICLE XVIII
                                 PERIODIC REVIEW

         This Agreement shall be reviewed by the parties annually and its terms
renegotiated as the parties may mutually agree.

                                   ARTICLE XIX
                   PRIOR INTERCOMPANY REINSURANCE AGREEMENTS

         The Inter-Company Reinsurance Agreement dated January 1, 2005 shall be
terminated on a "run-off" basis.

                                   ARTICLE XX
                                  JURISDICTION

         If a party fails to perform its obligations under the terms of this
Agreement, the party may be sued in a court of competent jurisdiction located in
any state in which the party is domiciled to enforce an arbitration award issued
pursuant to Article XXIV.


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                                   ARTICLE XXI
                                 ENTIRE CONTRACT

         This Agreement represents the entire agreement and understanding among
the parties. No other oral or written agreements or contracts relating to the
risks reinsured hereunder currently exist and/or contemplated between parties.

                                  ARTICLE XXII
                              ERRORS AND OMISSIONS

         The position of either party to this Agreement shall not be prejudiced
by any error or omission in reporting cessions or cancellations of premiums,
commissions, losses, loss adjustment expenses or other underwriting expenses
under this Agreement, or in claiming payments collectible hereunder for whatever
cause.

                                  ARTICLE XXIII
                                ACCESS TO RECORDS

         Each party shall have the right, at any reasonable time, to examine all
records and documents in the possession of the other party which relate to
insurance business ceded under this Agreement.

                                  ARTICLE XXIV
                                   ARBITRATION

         Should a dispute arise between the parties relating to this Agreement,
it is hereby mutually agreed that, as a condition precedent to any right of
action hereunder, such difference shall be submitted to arbitration. Each party
shall name their arbitrator within twenty (20) days of receiving a notice of
appointment of arbitrator. The two (2) appointed arbitrators shall appoint the
umpire. If they cannot agree, the umpire shall be selected by the Circuit Court
for the County of Oakland. If either side fails to appoint its arbitrator, the
other party may appoint the other arbitrator. Thereafter, the two (2) appointed
arbitrators will appoint a neutral within ten (10) days of the appointment of
the second arbitrator. The decision of the arbiters shall be final and binding
upon the parties and enforceable in a court of competent jurisdiction. The
parties shall bear the expense of its arbitrator and jointly and equally bear
the expense of the umpire.

         In witness whereof, the parties hereto have caused this Agreement to be
executed this 1st day of January, 2006.


STAR INSURANCE COMPANY


By: /s/ Gregory L. Wilde
    ------------------------
    Gregory L. Wilde
    President


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AMERITRUST INSURANCE CORPORATION


By: /s/ Gregory L. Wilde
    ------------------------
    Gregory L. Wilde
    President


SAVERS PROPERTY AND CASUALTY INSURANCE COMPANY


By: /s/ Gregory L. Wilde
    ------------------------
    Gregory L. Wilde
    President


WILLIAMSBURG NATIONAL INSURANCE COMPANY


By: /s/ Gregory L. Wilde
    ------------------------
    Gregory L. Wilde
    President


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                                   APPENDIX A
                       INTERCOMPANY REINSURANCE AGREEMENT

         Appendix A to the Inter-Company Reinsurance Agreement (the "Agreement")
is made and effective January 1, 2006 by and between Star Insurance Company
(Star), and Ameritrust Insurance Corporation, Savers Property and Casualty
Insurance Company and Williamsburg National Insurance Company, (hereinafter
collectively referred to as "Affiliated Companies"). The Affiliated Companies'
share in the attached Agreement shall be joint and several.


1.       Effective January 1, 2006, the Respective Percentage(s) shall be as
         follows:

<Table>
<Caption>
         Company                                           Respective Percentage
         -------                                           ---------------------
<S>                                                        <C>
         Star Insurance Company                                        56.6%

         Ameritrust Insurance Corporation                              10.0%

         Savers Property and Casualty Insurance Company                22.0%

         Williamsburg National Insurance Company                       11.4%
</Table>

2.       The initial participation percentages listed above may be adjusted from
         time to time by mutual agreement of the Parties. Any changes to the
         Parties' participation percentages will only be made after receipt of
         appropriate regulatory approval.


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