EMPLOYMENT AGREEMENT

      THIS AGREEMENT,  dated as of this 10th day of March,  1999, by and between
NYMAGIC,  INC., a New York corporation (the "Company") whose principal executive
offices are located at 330 Madison Avenue, New York, New York 10017, and VINCENT
T. PAPA, an individual  residing at 12 Thicket Drive,  Cold Spring  Harbor,  New
York 11724 (the "Executive").

                             W I T N E S S E T H:

      WHEREAS, the Company seeks to employ the Executive and the Executive seeks
to be employed by the Company; and

      WHEREAS,  both  parties  desire  that  the  terms  and  conditions  of the
Executive's  employment with the Company be governed by the terms and conditions
hereinafter set forth.

      NOW, THEREFORE,  in consideration of the promises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:

      1. Employment and Duties.

      (a) General.  The Company hereby  employs the  Executive,  effective as of
March 19, 1999 ( the "Effective Date"), and the Executive agrees, upon the terms
and conditions  herein set forth, to serve,  effective as of the Effective Date,
as President and Chief Executive Officer of the Company. In such capacities, the
Executive  shall  report  directly  and only to the  Board of  Directors  of the
Company (the "Board").  The Executive's  principal place of business shall be in
the  Company's  New  York  offices  and he  shall  perform  all  of  the  duties
commensurate to the positions of President and Chief Executive Officer.

      (b)  Services  and  Duties.  For so  long  as the  Executive  is  employed
hereunder,  he shall devote his full  business  time to the  performance  of his
duties  hereunder;  shall  faithfully  serve the Company;  shall in all respects
conform to and comply with the lawful and good faith directions and instructions
given to him by the Board as the same are  consistent  with his  status  and the
terms hereof;  and shall use his best efforts to promote and serve the interests
of the Company.

      (c) Board  Membership.  The Company  agrees to nominate the  Executive for
membership  on the Board at the next meeting of  shareholders  and shall use all
reasonable  efforts  to cause the  Executive  to be elected to the Board at such
meeting.

      (d) No Other  Employment.  For so long as the Executive is employed by the
Company,  he shall not,  directly or  indirectly,  render  services to any other
person or  organization  for which he  receives  compensation  without the prior
approval of the Board. No such approval


<PAGE>



will be  required if the  Executive  seeks to perform  inconsequential  services
without  direct  compensation  therefor in  connection  with the  management  of
personal  investments  or in connection  with the  performance of charitable and
civic activities, provided that such activities do not contravene the provisions
of Section 6 hereof.

      2. Term of Employment.  The term of the Executive's  employment under this
Agreement  (the "Term") shall  commence on the Effective Date and continue until
the third  anniversary date of the Effective Date. On the third anniversary date
of the Effective Date (and on each subsequent anniversary date thereafter),  the
Term shall automatically renew for an additional one-year period unless,  within
six months prior to the  applicable  anniversary  date,  either party shall have
given the other party hereto  written  notice of its intention not to extend the
Term.

      3.  Compensation  and Other  Benefits.  Subject to the  provisions of this
Agreement,  the Company  shall pay and provide the  following  compensation  and
other benefits to the Executive during the Term as compensation for all services
rendered hereunder:

            (a) Salary.  The Company shall pay to the Executive an annual salary
      (the  "Salary") at the initial rate of $425,000,  payable to the Executive
      in  accordance  with the normal  payroll  practices of the Company for its
      executive  officers as are in effect from time to time.  The amount of the
      Executive's  Salary  shall be  reviewed  annually  by the Board and may be
      increased,  but not  decreased  below  such  amount,  on the basis of such
      review.

            (b) Signing  Bonus.  The Company  shall pay the Executive a one time
      sign-on bonus of $225,000,  less applicable withholding taxes. The sign-on
      bonus will be paid within one week of the Effective Date.

            (c) Annual Bonus.  During the Term, the Executive shall be eligible,
      for each calendar year that begins within the Term, to  participate  in an
      annual  incentive  bonus program  established by the Company in accordance
      with  the  terms  and  conditions  as  may  be  approved  annually  by the
      Compensation Committee of the Board (the "Compensation Committee").  Under
      the terms of the annual  incentive  bonus  program,  the Executive will be
      afforded the  opportunity  to earn a bonus (the  "Bonus") of up to 100% of
      his  Salary  in  effect  for the  applicable  calendar  year  based on the
      Company's  achievement  of  the  performance  targets  established  by the
      Compensation  Committee for that year.  For each year during the Term, the
      Executive's  target  Bonus  will be set at 50% of his  Salary  and will be
      earned based upon the ratio that the return on capital (the "ROC") for the
      relevant  year bears to the  average  ROC  achieved by the Company for the
      five  preceding  years (the  "Five-Year  ROC").  The target  Bonus will be
      adjusted  in  proportion  to the  Company's  level of  achievement  of the
      Five-Year  ROC.  For  the  purpose  of  this  Agreement,  the  ROC and the
      Five-Year ROC will be  calculated by dividing net operating  income by the
      average  shareholders' equity for the relevant period as determined by the
      Company's  auditors  in  accordance  with  Generally  Accepted  Accounting
      Principals.  Attached  hereto as Exhibit A is a chart  depicting the Bonus
      amount payable to the Executive based on the


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<PAGE>



      Company's  achievement  of various ROC rates.  For calendar year 1999, the
      Executive will be entitled to a minimum bonus of $212,500.

            (d) Stock Options.  Effective as of the Effective  Date, the Company
      shall grant the  Executive  an option (the  "Option")  to purchase  80,000
      shares of the common  stock of the  Company  pursuant  to the terms of the
      Company's  1991  Stock  Option  Plan (the  "Option  Plan").  The per share
      exercise price of the Option shall equal 95% of the fair market value of a
      share of the Company's  common stock on the first trading day  immediately
      preceding the Effective  Date, as determined in accordance  with the terms
      of the Option  Plan.  The Option  shall vest and become  exercisable  with
      respect to 25% of the shares of common  stock  subject  thereto on each of
      the first through fourth anniversaries of the Effective Date provided that
      the Executive has remained in the continuous  full-time  employment of the
      Company  through the  applicable  anniversary  date.  The Option  shall be
      subject  to the  terms of the  Option  Plan and to such  other  terms  and
      conditions as may be specified by the  Compensation  Committee in the form
      of a standard  option  agreement  between the  Company and the  Executive,
      which is attached hereto as Exhibit B.

            (e) Welfare,  Benefit and Retirement Programs. The Executive will be
      included in the Company's Profit Sharing Plan and Money Purchase Plan, and
      will  vest in 100%  of the  contributions  to  such  plans  on the  second
      anniversary of each such contribution. In addition, the Executive shall be
      eligible to participate  in the Company's  benefit plans for executives as
      in effect from time to time,  which  currently  provide life insurance for
      the  Executive  and medical and dental  coverage for the Executive and his
      eligible dependents.

            (f)  Expenses.  The Company shall pay or reimburse the Executive for
      all  reasonable  out-of-pocket  expenses  incurred  by  the  Executive  in
      connection with his employment hereunder. Such expenses shall be paid upon
      the periodic  submission of invoices and shall be paid reasonably promptly
      after the date of such invoice.  The  reimbursement of expenses under this
      Section  3(f) shall be subject to the  Executive's  providing  the Company
      with such  documentation  of the  expenses as the Company may from time to
      time reasonably request.

            (g) Vacation. In addition to the usual public and bank holidays, the
      Executive shall be entitled to twenty days' paid vacation annually,  which
      shall be taken at such times as are approved by the Board.  The  Executive
      shall also be entitled to personal  and sick days in  accordance  with the
      Company's policies for executives as in effect from time to time.

            (h) Parking Space.  The Company shall pay or reimburse the Executive
      for the  cost of a  parking  space  in a  garage  located  in or near  the
      Executive's primary place of employment.

      4.  Termination of Employment.  Subject to the notice and other provisions
of this Section 4, the Company shall have the right to terminate the Executive's
employment hereunder, and he shall have the right to resign, at any time for any
reason or for no stated reason.



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<PAGE>



            (a) Termination for Cause;  Resignation Without Good Reason. (i) If,
      prior  to the  expiration  of the  Term,  the  Executive's  employment  is
      terminated by the Company for Cause or if the  Executive  resigns from his
      employment  hereunder other than for Good Reason,  he shall be entitled to
      payment of the pro rata  portion of his  Salary  and  Bonus,  through  and
      including  the  date  of   termination  or  resignation  as  well  as  any
      unreimbursed  expenses.  Except to the extent required by the terms of any
      applicable  compensation  or  benefit  plan  or  program  or as  otherwise
      required by applicable  law, the Executive shall have no rights under this
      Agreement or otherwise to receive any other compensation or to participate
      in any other  plan,  program  or  arrangement  after such  termination  or
      resignation of employment with respect to the year of such  termination or
      resignation and later years.

                  (ii)  Termination  for "Cause" shall mean  termination  of the
            Executive's  employment  with the Company because of (A) the willful
            or persistently  repeated material  non-performance of duties to the
            Company (other than by reason of the incapacity of the Executive due
            to physical or mental  illness) and, after 30 days written notice by
            the  Board of such  failure,  the  Executive's  non-performance  and
            continued, willful or persistently repeated material non-performance
            of such duties,  (B) the  conviction  of the  Executive for a felony
            offense,  (C) the  commission by the  Executive of a material  fraud
            against  the  Company  or any  willful  misconduct  that  brings the
            reputation  of the  Company  into  serious  disrepute  or causes the
            Executive  to cease to be able to  perform  his  duties,  or (D) any
            other material  breach by the Executive of any material term of this
            Agreement.

                  (iii)  Termination  of the  Executive's  employment  for Cause
            shall be  communicated  by  delivery to the  Executive  of a written
            notice  from  the  Company  stating  that  the  Executive  has  been
            terminated  for Cause,  specifying the  particulars  thereof and the
            effective date of such termination. The date of a resignation by the
            Executive  without  Good  Reason  shall be the date  specified  in a
            written notice of resignation from the Executive to the Company. The
            Executive  shall provide at least 90 days' advance written notice of
            resignation without Good Reason.

            (b) Involuntary Termination.  (i) If, prior to the expiration of the
      Term,  the Company  terminates the  Executive's  employment for any reason
      other  than  Disability  or  Cause  or  the  Executive  resigns  from  his
      employment hereunder for Good Reason (collectively hereinafter referred to
      as an "Involuntary  Termination"),  the Company shall pay to the Executive
      his  Salary  and  Bonus  accrued  up to and  including  the  date  of such
      Involuntary   Termination,   as  well  as  any  unreimbursed  expenses  in
      accordance  with  Section  3(f).  In addition,  the Company  shall pay the
      Executive as severance,  periodic  payments at a rate equal to 150% of his
      Salary  (at the rate in  effect on the date of such  termination)  for the
      longer of (i) the remainder of the Term and (ii) one year  following  such
      termination (the later being the "Severance Period"), at such intervals as
      the same would have been paid had the Executive  remained  employed by the
      Company during the Severance Period.

                  (ii) Resignation for "Good Reason". For the purpose of this
            Agreement,



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<PAGE>



            resignation for Good Reason shall mean  resignation by the Executive
            because of (A) a  demonstrably  adverse and  material  change in the
            Executive's  duties,  titles or  reporting  responsibilities,  (B) a
            material  breach  by  the  Company  of any  material  term  of  this
            Agreement,  (C) a  reduction  in the  Executive's  Salary  or  Bonus
            opportunity  or the failure of the Company to pay the  Executive any
            material  amount of  compensation  when due, (D) a relocation of the
            Executive's principal place of business to a location outside of New
            York City  without  his prior  written  consent,  or (E) a Change in
            Control of the Company  (as  defined  below).  The  Executive  shall
            provide the Company with written  notice of his  intention to resign
            for Good  Reason  within 90 days  after the  Executive  knows of the
            occurrence  of an event that  constitutes  Good Reason.  The Company
            shall have 30 business  days from the date of receipt of such notice
            to effect a cure of the material breach described  therein and, upon
            cure thereof by the Company to the  reasonable  satisfaction  of the
            Executive,  such  material  breach shall no longer  constitute  Good
            Reason for purposes of this Agreement.

                  (iii) The date of  termination  of  employment  without  Cause
            shall be the date  specified in a written  notice of  termination to
            the Executive.  The date of resignation for Good Reason shall be the
            date specified in a written notice of resignation from the Executive
            to the Company; provided, however, that no such written notice shall
            be effective  unless the cure period  specified in Section  4(b)(ii)
            above has  expired  without  the Company  having  corrected,  to the
            reasonable  satisfaction  of the  Executive,  the  event  or  events
            subject to cure.

            (c) Termination  Due to Disability.  In the event of the Executive's
      Disability  (as  hereinafter  defined),  the Company  shall be entitled to
      terminate his  employment  upon  providing the Executive  with six months'
      prior written notice. If the Company terminates the Executive's employment
      due to  Disability,  the Executive  shall be entitled to receive,  for the
      remainder of the Term, his Salary at the rate in effect  immediately prior
      to the  Disability,  plus his maximum  Bonus as described in Section 3(c),
      less any amounts paid to the Executive  under any  disability  plan of the
      Company.  As used in this Section 4(c), the term "Disability" shall mean a
      physical or mental  incapacity that  substantially  prevents the Executive
      from  performing his duties  hereunder and that has continued for at least
      six of the last  twelve  months and that can  reasonably  be  expected  to
      continue  indefinitely.  Any dispute as to whether or not the Executive is
      disabled within the meaning of the preceding sentence shall be resolved by
      a physician reasonably  satisfactory to the Executive and the Company, and
      the  determination  of such physician shall be final and binding upon both
      the Executive and the Company.

            (d) Termination Due to Death. In the event of the Executive's death,
      the Executive's  Beneficiary shall be entitled to receive within 30 days a
      lump sum payment in an amount equal to the Executive's Salary, at the rate
      in  effect  immediately  prior to his  death,  plus his  maximum  Bonus as
      described  in Section  3(c),  in each case for the  remainder of the Term,
      less any death benefits which are provided to the Executive's  Beneficiary
      under the terms of any plan, program or arrangement for the benefit of the
      Executive at the time of death.

            (e) Beneficiary. For purposes of this Agreement, "Beneficiary" shall
      mean



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<PAGE>



      the person or persons  designated  in writing by the  Executive to receive
      benefits under a plan, program or arrangement or to receive the balance of
      the Severance Payments, if any, in the event of the Executive's death, or,
      if no  such  person  or  persons  are  designated  by the  Executive,  the
      Executive's  estate. No Beneficiary  designation shall be effective unless
      it is in writing  and  received  by the  Company  prior to the date of the
      Executive's death.

            (f) Change in Control.  For purposes of this  Agreement,  "Change in
      Control" shall mean the occurrence of any of the following events:

                  (i) any "person"  (within the meaning of Section  13(d) of the
            Securities and Exchange Act of 1934, as amended (the "Exchange Act")
            is or becomes the beneficial  owner within the meaning of Rule 13d-3
            under  the  Exchange  Act  (a  "Beneficial   Owner"),   directly  or
            indirectly,  of  securities  of the Company  (not  including  in the
            securities beneficially owned by such person any securities acquired
            from the Company or its affiliates)  representing 25% or more of the
            combined voting power of the Company's then outstanding  securities,
            excluding  any  person  who  becomes  such  a  Beneficial  Owner  in
            connection  with a transaction  described in clause (A) of paragraph
            (iii) below; provided,  however, that with respect to the beneficial
            ownership of securities by John N.  Blackman,  Jr., Mark W. Blackman
            and Louise B. Tollefson and their respective heirs,  executors,  and
            assigns and any trust formed by any of the Blackman Shareholders for
            the purpose of estate and/or tax planning  (including  the Louise B.
            Tollefson Florida Intangible Tax Trust) (collectively, the "Blackman
            Shareholders"),  the reference to 25% in this Section  4(f)(i) shall
            be changed to 45%;

                  (ii)  the  following  individuals  cease  for  any  reason  to
            constitute  a majority  of the  number of  directors  then  serving:
            individuals  who, on the date hereof,  constitute  the Board and any
            new director  (other than a director  whose  initial  assumption  of
            office  is in  connection  with an  actual  or  threatened  election
            contest,  including  but  not  limited  to a  consent  solicitation,
            relating  to  the  election  of  directors  of  the  Company)  whose
            appointment  or election by the Board or nomination  for election by
            the Company's  stockholders was approved or recommended by a vote of
            at least a two thirds  (2/3) of the  directors  then still in office
            who either were  directors on the date hereof or whose  appointment,
            election or  nomination  for election was  previously so approved or
            recommended; or

                  (iii) there is  consummated a merger or  consolidation  of the
            Company or any direct or  indirect  wholly-owned  subsidiary  of the
            Company  with any  other  corporation,  other  than (A) a merger  or
            consolidation  which would  result in the voting  securities  of the
            Company   outstanding   immediately   prior   to  such   merger   or
            consolidation   continuing   to   represent   (either  by  remaining
            outstanding  or by being  converted  into voting  securities  of the
            surviving  entity or any parent  thereof),  in combination  with the
            ownership of any trustee or other fiduciary holding securities under
            an employee  benefit  plan of the Company or any  subsidiary  of the
            Company, at least 50% of the combined voting power



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<PAGE>



            of the  securities  of the Company or such  surviving  entity or any
            parent  thereof   outstanding   immediately  after  such  merger  or
            consolidation,   or  (B)  a  merger  or  consolidation  effected  to
            implement a recapitalization of the Company (or similar transaction)
            in which no person is or becomes the Beneficial  Owner,  directly or
            indirectly, of securities of the Company representing 25% or more of
            the  combined  voting  power  of  the  Company's  then   outstanding
            securities;  provided,  however, that with respect to the beneficial
            ownership of securities by the Blackman Shareholders,  the reference
            to 25% in this Section 4(f)(iii)(B) shall be changed to 45%; or

                  (iv)  the  stockholders  of the  Company  approve  a  plan  of
            complete  liquidation  or  dissolution  of the  Company  or there is
            consummated  an agreement for the sale or disposition by the Company
            of all or substantially  all of the Company's  assets,  other than a
            sale or  disposition by the Company of all or  substantially  all of
            the  Company's  assets to an  entity,  at least 50% of the  combined
            voting  power  of the  voting  securities  of  which  are  owned  by
            stockholders of the Company in substantially the same proportions as
            their ownership of the Company immediately prior to such sale.

      Notwithstanding  the foregoing,  a "Change in Control" shall not be deemed
      to have  occurred  by virtue of the  consummation  of any  transaction  or
      series of integrated  transactions  immediately following which the record
      holders  of the  common  stock of the  Company  immediately  prior to such
      transaction or series of transactions  continue to have  substantially the
      same proportionate  ownership in an entity which owns all or substantially
      all of the assets of the Company immediately following such transaction or
      series of transactions.

      5. Additional Payment.

      (a) Gross-Up Payment.  Notwithstanding anything herein to the contrary, if
it is  determined  that any Payment (as defined  herein) would be subject to the
excise tax imposed by Section  4999 of the  Internal  Revenue  Code of 1986,  as
amended,  or any  interest or  penalties  with  respect to such excise tax (such
excise tax, together with any interest or penalties thereon,  is herein referred
to as an "Excise  Tax"),  then the Executive  shall be entitled to an additional
cash payment (a "Gross-Up  Payment") in an amount that will place the  Executive
in the same after-tax economic position that the Executive would have enjoyed if
the  Excise  Tax had not  applied to the  Payment.  The  amount of the  Gross-Up
Payment  shall be  determined  by the  Accounting  Firm (as  defined  herein) in
accordance  with such  formula  as the  Accounting  Firm deems  appropriate.  No
Gross-Up  Payments shall be payable  hereunder if the Accounting Firm determines
that the Payments are not subject to an Excise Tax. The Accounting Firm shall be
paid by the Company for services performed hereunder.

      (b)  Determination  of  Gross-Up  Payment.  Subject to the  provisions  of
Section  5(c),  all  determinations  required  under this  Section 5,  including
whether a Gross-Up Payment is required,  the amount of the Payments constituting
excess parachute payments, and the amount of the Gross-Up Payment, shall be made
by the Accounting Firm, which shall



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<PAGE>



provide detailed  supporting  calculations both to the Executive and the Company
within  fifteen days of any date  reasonably  requested by the  Executive or the
Company on which a determination under this Section 5 is necessary or advisable.
The Company shall pay the Executive in cash the initial  Gross-Up Payment within
five days of the  receipt by the  Executive  and the  Company of the  Accounting
Firm's  determination.  If the Accounting  Firm determines that no Excise Tax is
payable by the Executive, the Company shall cause the Accounting Firm to provide
the Executive with an opinion that the Accounting Firm has substantial authority
under  the  Code  and  the  Regulations  not  to  report  an  Excise  Tax on the
Executive's  federal income tax return. Any determination by the Accounting Firm
shall be binding upon the  Executive  and the Company.  If the initial  Gross-Up
Payment is insufficient to completely  place the Executive in the same after-tax
economic  position that the  Executive  would have enjoyed if the Excise Tax had
not applied to the Payments (hereinafter an "Underpayment"),  the Company, after
exhausting  its  remedies  under  Section  5(c) below,  shall  promptly  pay the
Executive in cash an additional Gross-Up Payment in respect of the Underpayment.

      (c)  Procedures.  The Executive shall notify the Company in writing of any
claim by the Internal  Revenue  Service (the "IRS") that, if  successful,  would
require the payment by the Company of a Gross-Up  Payment.  Such notice shall be
given as soon as practicable  after the Executive  knows of such claim and shall
apprise  the  Company of the nature of the claim and the date on which the claim
is requested  to be paid.  The  Executive  agrees not to pay the claim until the
expiration of the  thirty-day  period  following the date on which the Executive
notifies the Company,  or such shorter  period ending on the date the Taxes with
respect to such claim are due (the "Notice Period"). If the Company notifies the
Executive  in  writing  prior to the  expiration  of the Notice  Period  that it
desires to contest  the claim,  the  Executive  shall:  (i) give the Company any
information reasonably requested by the Company relating to the claim; (ii) take
such action in connection with the claim as the Company may reasonably  request,
including,  without limitation,  accepting legal  representation with respect to
such claim by an attorney  reasonably  selected  by the  Company and  reasonably
acceptable to the Executive;  (iii)  cooperate with the Company in good faith in
contesting  the  claim;  and (iv)  permit  the  Company  to  participate  in any
proceedings  relating to the claim.  The  Executive  shall permit the Company to
control all  proceedings  related to the claim and,  at its  option,  permit the
Company  to  pursue or forgo any and all  administrative  appeals,  proceedings,
hearings, and conferences with the taxing authority in respect of such claim. If
requested by the Company, the Executive agrees either to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner and to prosecute
such contest to a determination before any administrative  tribunal,  in a court
of initial jurisdiction and in one or more appellate courts as the Company shall
determine;  provided, however, that, if the Company directs the Executive to pay
such claim and pursue a refund (or if the IRS or other taxing authority requires
the  Executive to make any  payments),  the Company  shall advance the amount of
such  payment to the  Executive  on an after-tax  and  interest-free  basis (the
"Advance").  The Company's  control of the contest related to the claim shall be
limited to the issues related to the Gross-Up Payment and the Executive shall be
entitled to settle or contest,  as the case may be, any other  issues  raised by
the IRS or other taxing authority.  If the Company does not notify the Executive
in writing  prior to the end of the Notice  Period of its desire to contest  the
claim,  the  Company  shall pay the  Executive  in cash an  additional  Gross-Up
Payment



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<PAGE>



in respect of the excess  parachute  payments that are the subject of the claim,
and the Executive agrees to pay the amount of the Excise Tax that is the subject
of the claim to the applicable  taxing  authority in accordance  with applicable
law.

      (d)  Repayments.  If, after  receipt by the  Executive of an Advance,  the
Executive  becomes  entitled to a refund with respect to the claim to which such
Advance  relates,  the Executive  shall pay the Company the amount of the refund
(together  with any interest  paid or credited  thereon  after Taxes  applicable
thereto).  If, after receipt by the Executive of an Advance,  a determination is
made that the Executive  shall not be entitled to any refund with respect to the
claim and the Company  does not promptly  notify the  Executive of its intent to
contest  the  denial of  refund,  then the  amount of the  Advance  shall not be
required to be repaid by the Executive  and the amount  thereof shall offset the
amount of the additional Gross-Up Payment then owing to the Executive.

      (e) Further Assurances. The Company shall indemnify the Executive and hold
the  Executive  harmless,  on an  after-tax  basis,  from any  costs,  expenses,
penalties,  fines,  interest  or other  liabilities  ("Losses")  incurred by the
Executive with respect to the exercise by the Company of any of its rights under
this  Section  3,  including,  without  limitation,  any  Losses  related to the
Company's  decision  to contest a claim or any imputed  income to the  Executive
resulting  from any  Advance or action  taken on the  Executive's  behalf by the
Company  hereunder.  The Company shall pay all legal fees and expenses  incurred
under  this  Section  5, and shall  promptly  reimburse  the  Executive  for the
reasonable  expenses  incurred by the Executive in  connection  with any actions
taken by the  Company or required to be taken by the  Executive  hereunder.  The
Company  shall also pay all of the fees and  expenses  of the  Accounting  Firm,
including,  without  limitation,  the fees and  expenses  related to the opinion
referred to in Section 5(b).

      (f)  Definitions.  For the purpose of this Section 5, the following  terms
shall have the following meanings:

            (i)  "Accounting  Firm" shall mean  Deloitte  and Touche or, if such
      firm is unable or  unwilling  to  perform  such  calculations,  such other
      national  accounting firm as shall be designated by agreement  between the
      Executive and the Company.

            (ii)  "Payment"  means (i) any amount  due or paid to the  Executive
      under this Agreement, (ii) any amount that is due or paid to the Executive
      under  any  plan,   program  or   arrangement   of  the  Company  and  its
      subsidiaries,  and (iii) any amount or  benefit  that is due or payable to
      the  Executive  under  this  Agreement  or  under  any  plan,  program  or
      arrangement  of the Company and its  subsidiaries  not  otherwise  covered
      under  clause  (i) or (ii)  hereof  which  must  reasonably  be taken into
      account under Section 280G of the Code and the  Regulations in determining
      the  amount  of  the  "parachute  payments"  received  by  the  Executive,
      including,  without  limitation,  any  amounts  which  must be taken  into
      account under the Code and Regulations as a result of (x) the acceleration
      of the vesting of options,  restricted  stock or other equity awards,  (y)
      the acceleration of the



                                       9
<PAGE>



      time at which any payment or benefit is receivable by the Executive or (z)
      any  contingent  severance  or  other  amounts  that  are  payable  to the
      Executive.

            (iii)  "Regulations"   means  the  proposed,   temporary  and  final
      regulations  under  Section  280G of the Code or any  successor  provision
      thereto.

            (iv)  "Taxes"  means the  federal,  state and local  income taxes to
      which the Executive is subject at the time of determination, calculated on
      the  basis  of the  highest  marginal  rates  then  in  effect,  plus  any
      additional  payroll or  withholding  taxes to which the  Executive is then
      subject.


      6. Protection of the Company's Interests.

      (a) No Competing  Employment.  For so long as the Executive is employed by
the Company and, in circumstances where the Executive's employment is terminated
pursuant  to  Sections  4(a) or  4(c),  continuing  until  the  later of (i) the
remainder of the Term or (ii) one year following  termination (such period being
referred to hereinafter as the  "Restricted  Period"),  the Executive shall not,
without the prior written consent of the Board,  directly or indirectly,  own an
interest in, manage,  operate,  join, control, lend money or render financial or
other  assistance  to or  participate  in or be connected  with,  as an officer,
employee,  partner,  stockholder,   consultant  or  otherwise,  any  individual,
partnership,  firm,  corporation or other business  organization  or entity that
competes with the Company by providing  any goods or services  provided or under
development by the Company at the effective date of the Executive's  termination
of employment under this Agreement;  provided,  however,  that this Section 6(a)
shall not proscribe the Executive's ownership, either directly or indirectly, of
either less than five percent of any class of  securities  which are listed on a
national  securities exchange or quoted on the automated quotation system of the
National  Association  of Securities  Dealers,  Inc. or any limited  partnership
investment over which the Executive has no control.

      (b) No  Interference.  If, during the Restricted  Period,  the Executive's
employment is terminated  pursuant to Sections 4(a), 4(b) or 4(c), the Executive
shall  not,  whether  for  his  own  account  or for the  account  of any  other
individual, partnership, firm, corporation or other business organization (other
than the Company),  intentionally  endeavor to entice away from the Company,  or
otherwise interfere with the relationship of the Company with, any senior person
who is employed by or otherwise  engaged to perform  services for the Company or
any  senior  person  or  entity  who is,  or was  within  the then  most  recent
twelve-month period, a customer, client or supplier of the Company.

      (c) Secrecy. The Executive recognizes that the services to be performed by
him hereunder are special,  unique and  extraordinary  in that, by reason of his
employment hereunder, he may acquire confidential  information and trade secrets
concerning the operation of the Company or its affiliates or  subsidiaries,  the
use or disclosure of which could cause the



                                       10
<PAGE>



Company or its affiliates or subsidiaries  substantial  losses and damages which
could  not be  readily  calculated  and for  which  no  remedy  at law  would be
adequate.  Accordingly, the Executive covenants and agrees with the Company that
he will not at any time, except in performance of the Executive's obligations to
the Company  hereunder or with the prior written consent of the Board,  directly
or indirectly disclose to any person any secret or confidential information that
he may learn or has learned by reason of his association with the Company or its
affiliates  or  subsidiaries.  The term  "confidential  information"  means  any
material  information not previously  disclosed to the public or to the trade by
the  Company  with  respect  to  the   Company's  or  any  of   affiliates'   or
subsidiaries',  products,  facilities  and  methods,  trade  secrets  and  other
intellectual  property,  systems,  procedures,  manuals,  confidential  reports,
product  price lists,  customer  lists,  financial  information  (including  the
revenues,  costs or  profits  associated  with any of the  Company's  products),
business plans, prospects or opportunities.

      (d)  Exclusive  Property.  The Executive  confirms  that all  confidential
information  is and shall  remain the  exclusive  property of the  Company.  All
business records, papers and documents kept or made by the Executive relating to
the  business of the Company  shall be and remain the  property of the  Company.
Upon the  termination of his employment  with the Company or upon the request of
the Company at any time, the Executive  shall  promptly  deliver to the Company,
and shall not  without the  consent of the Board  retain  copies of, any written
materials not previously made available to the public,  or records and documents
made by the Executive or coming into his  possession  concerning the business or
affairs of the  Company or any of its  affiliates  and  subsidiaries;  provided,
however, that subsequent to any such termination,  the Company shall provide the
Executive with copies (the cost of which shall be borne by the Executive) of any
documents  which are  requested by the  Executive  and which the  Executive  has
determined in good faith are (i) required to establish a defense to a claim that
the Executive has not complied  with his duties  hereunder or (ii)  necessary to
the Executive in order to comply with applicable law.

      (e) Injunctive  Relief.  Without intending to limit the remedies available
to the Company, the Executive acknowledges that a breach of any of the covenants
contained  in this  Section 6 may result in material  irreparable  injury to the
Company or its  subsidiaries or affiliates for which there is no adequate remedy
at law,  that it will not be  possible  to  measure  damages  for such  injuries
precisely and that, in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary  restraining  order and/or a preliminary
or permanent  injunction  restraining  the Executive from engaging in activities
prohibited  by this  Section  6 or  such  other  relief  as may be  required  to
specifically  enforce any of the covenants in this Section 6. Without  intending
to limit  the  remedies  available  to the  Executive,  the  Executive  shall be
entitled to seek specific  performance of the Company's  obligations  under this
Agreement.

      (g) The Executive  shall comply,  during the continuance of his employment
(and  shall  procure  that his spouse or partner  and his minor  children  shall
comply),  with all applicable rules of law, stock exchange regulations and codes
of conduct  applicable  to  employees,  officers and directors of the Company in
relation  to  dealings in the shares,  debentures  and other  securities  of the
Company or any member of the Company or any unpublished



                                       11
<PAGE>



share price sensitive  information affecting the securities of any other company
with which the  Company  has  dealings  (provided  that the  Executive  shall be
entitled to exercise any options  granted to him under any share  option  scheme
established by the Company or any member of the Company, subject to the rules of
such scheme).

      7. General Provisions.

      (a) Source of Payments. All payments provided under this Agreement,  other
than payments made pursuant to a plan which provides otherwise, shall be paid in
cash from the general  funds of the  Company,  and no special or  separate  fund
shall be  established,  and no other  segregation  of  assets  made,  to  assure
payment.  The Executive shall have no right, title or interest whatever in or to
any  investments  which the  Company  may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to receive
payments  from the Company  hereunder,  such right shall be no greater  than the
right of an unsecured  creditor of the  Company;  provided,  however,  that this
provision  shall not be deemed to waive or abrogate  any  preferential  or other
rights to payment accruing to the Executive under applicable  bankruptcy laws by
virtue of the Executive's status as an employee of the Company.

      (b) No Other Severance Benefits.  Except as specifically set forth in this
Agreement,  the Executive  covenants and agrees that he shall not be entitled to
any other  form of  severance  benefits  from the  Company,  including,  without
limitation,  benefits  otherwise  payable  under  any of the  Company's  regular
severance  policies,  in the event his employment  hereunder ends for any reason
and,  except with respect to obligations of the Company  expressly  provided for
herein, the Executive  unconditionally releases the Company and its subsidiaries
and  affiliates,  and  their  respective  directors,   officers,  employees  and
stockholders,  or  any  of  them,  from  any  and  all  claims,  liabilities  or
obligations   under  this  Agreement  or  under  any  severance  or  termination
arrangements  of  the  Company  or any of its  subsidiaries  or  affiliates  for
compensation  or benefits in connection  with his employment or the  termination
thereof.

      (c)  Tax  Withholding.  Payments  to the  Executive  of  all  compensation
contemplated  under  this  Agreement  shall be  subject  to all  applicable  tax
withholding.

      (d)  Notices.  Any notice  hereunder by either party to the other shall be
given in writing  by  personal  delivery,  or  certified  mail,  return  receipt
requested,  or (if to the Company) by telex or facsimile,  in any case delivered
to the applicable address set forth below:

            (i)   To the Company:         NYMAGIC, Inc.
                                          330 Madison Avenue
                                          New York, New York 10017
                                          Attn: General Counsel

                  With a copy to:         Shearman & Sterling
                                          599 Lexington Avenue
                                          New York, New York 10022



                                       12
<PAGE>



                                          Attn.: John J. Cannon, III, Esq.

            (ii)  To the Executive:       Vincent T. Papa
                                          12 Thicket Drive
                                          Cold Spring Harbor, NY 11724


                  With a copy to:         Reilly & Reilly
                                          146 Old Country Road
                                          Suite 106
                                          Mineola, New York 11501
                                          Attn: John Reilly

or to such other  persons or other  addresses as either party may specify to the
other in writing.

      (e) Representation by the Executive. The Executive represents and warrants
that his entering into this Agreement does not, and that his  performance  under
this Agreement and  consummation of the  transactions  contemplated  hereby will
not, violate the provisions of any noncompetition  agreement or other agreement,
policy, or instrument to which the Executive is a party, or any decree, judgment
or order to which the Executive is subject, and that this Agreement  constitutes
a valid and binding  obligation of the  Executive in accordance  with its terms.
Breach of this representation will render all of the Company's obligations under
this Agreement void ab initio.

      (f)  Limited  Waiver.  The  waiver by the  Company or the  Executive  of a
violation  of any of the  provisions  of  this  Agreement,  whether  express  or
implied,  shall  not  operate  or be  construed  as a waiver  of any  subsequent
violation of any such provision.

      (g)  Assignment;  Assumption of Agreement.  No right,  benefit or interest
hereunder  shall  be  subject  to  assignment,   encumbrance,   charge,  pledge,
hypothecation  or  setoff  by the  Executive  in  respect  of any  claim,  debt,
obligation or similar  process;  provided,  however,  that upon the  Executive's
death,  the  Beneficiary  or the  Executive's  estate is entitled to enforce the
provisions of this  Agreement.  The Company will require any successor  (whether
direct or indirect, by purchase,  merger,  consolidation or otherwise) to all or
substantially  all of the business or assets of the Company to assume  expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.

      (h) Amendment;  Actions by the Company. This Agreement may not be amended,
modified,  canceled or discharged  except by written  agreement of the Executive
and the Company. Any and all determinations,  judgments, reviews, verifications,
adjustments,  approvals,  consents,  waivers  or other  actions  of the  Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; provided, however, that by resolution duly adopted in



                                       13
<PAGE>



accordance  with this Section 7(h), the Board may delegate its  responsibilities
hereunder to one or more of its members other than the Executive.

      (i)  Severability.  If any term or provision  hereof is  determined  to be
invalid or  unenforceable  in a final court or arbitration  proceeding,  (i) the
remaining  terms and provisions  hereof shall be unimpaired and (ii) the invalid
or  unenforceable  term or  provision  shall  be  deemed  replaced  by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.

      (j) Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the state of New York (determined  without regard to
the choice of law provisions thereof).

      (k) Entire  Agreement.  This Agreement sets forth the entire agreement and
understanding  of the parties hereto with respect to the matters  covered hereby
and supersedes  all prior  agreements and  understandings  of the parties,  with
respect to the subject matter hereof.

      (l) Headings.  The headings and captions of the sections of this Agreement
are  included  solely for  convenience  of  reference  and shall not control the
meaning or interpretation of any provisions of this Agreement.

      (m) Counterparts.  This Agreement may be executed by the parties hereto in
counterparts,  each  of  which  shall  be  deemed  an  original,  but  all  such
counterparts shall together constitute one and the same document.



                                       14
<PAGE>



      IN WITNESS WHEREOF,  the parties have executed this Agreement effective as
of the day and year first written above.

                                    NYMAGIC, INC.


                                    By: /s/ Sergio Tobia
                                       ----------------------------
                                         Sergio Tobia
                                         Chief Executive Officer


                                    EXECUTIVE

                                    /s/ Vincent T. Papa
                                    -------------------------------
                                    Vincent T. Papa






                                       15
<PAGE>


                                                                     EXHIBIT A

                          Sample Annual Bonus Amounts



--------------------------------------------------------------------------------
        Annual Return on Capital(1)                   Bonus Amount
     (as a percentage of 5 year ROC)         (as a percentage of Salary)
--------------------------------------------------------------------------------
                  0%                                     0%
--------------------------------------------------------------------------------
                  25%                                  12.5%
--------------------------------------------------------------------------------
                  50%                                   25%
--------------------------------------------------------------------------------
                  75%                                  37.5%
--------------------------------------------------------------------------------
                 100%                                   50%
--------------------------------------------------------------------------------
                 125%                                  62.5%
--------------------------------------------------------------------------------
                 150%                                   75%
--------------------------------------------------------------------------------
                 175%                                  87.5%
--------------------------------------------------------------------------------
             200% or more                               100%
--------------------------------------------------------------------------------

(1)   This column refers to the return on capital for the most current year, the
      year for which the Bonus is to be paid.





                                      A-1
<PAGE>


                                                                     EXHIBIT B




                           Form of Option Agreement
                           ------------------------











                                      B-1