Exhibit 10.14(iii)


                            AGREEMENT OF REINSURANCE
                                    NO. 8206

                                     between

                         GENERAL REINSURANCE CORPORATION
                             a Delaware corporation
                         having its principal offices at
                                Financial Centre
                       695 East Main Street P.O. Box 10350
                        Stamford, Connecticut 06904-2350
                     (herein referred to as the "Reinsurer")

                                       and

                         PENN-AMERICA INSURANCE COMPANY
                               420 South York Road
                           Hatboro, Pennsylvania 19040
                      (herein referred to as the "Company")
   ---------------------------------------------------------------------------

In consideration of the promises set forth in this Agreement, the parties agree
as follows:

Article I  -  SCOPE OF AGREEMENT

     As a condition precedent to the Reinsurer's obligations under this
Agreement, the Company shall cede to the Reinsurer the business described in
this Agreement, and the Reinsurer shall accept such business as reinsurance from
the Company.

     This Agreement is comprised of General Articles I through XII and the
Exhibit(s) listed below and each Exhibit which may be made a part of this
Agreement. The terms of the General Articles and of the Exhibit(s) shall
determine the rights and obligations of the parties. The terms of the General
Articles shall apply to each Exhibit unless specifically amended therein. In the
event of termination of all the Exhibits made a part of this Agreement, the
General Articles shall automatically terminate when the liability of the
Reinsurer under said Exhibits ceases.

     EXHIBIT A - EXCESS OF LOSS REINSURANCE of Liability Business
<PAGE>

     EXHIBIT B - EXCESS OF LOSS REINSURANCE of Property Business

Article II  -  PARTIES TO THE AGREEMENT

     This Agreement is solely between the Company and the Reinsurer. When more
than one Company is named as a party to this Agreement, the first Company named
shall be the agent of the other companies as to all matters pertaining to this
Agreement. Performance of the obligations of each party under this Agreement
shall be rendered solely to the other party. However, if the Company becomes
insolvent, the liability of the Reinsurer shall be modified to the extent set
forth in the article entitled INSOLVENCY OF THE COMPANY. In no instance shall
any insured of the Company or any claimant against an insured of the Company
have any rights under this Agreement.

Article III  -  MANAGEMENT OF CLAIMS AND LOSSES

     The Company shall investigate and settle or defend all claims and losses.
When requested by the Reinsurer, the Company shall permit the Reinsurer, at the
expense of the Reinsurer, to be associated with the Company in the defense or
control of any claim, loss, or legal proceeding which involves or is likely to
involve the Reinsurer. All payments of claims or losses by the Company within
the terms and limits of its policies which are within the limits set forth in
the applicable Exhibit shall be binding on the Reinsurer, subject to the terms
of this Agreement.

Article IV  -  RECOVERIES

     The Company shall pay to or credit the Reinsurer with the Reinsurer's
portion of any recovery obtained from salvage, subrogation, or other insurance.
Adjustment expenses for recoveries shall be deducted from the amount recovered.

                                      -2-

<PAGE>

     The Reinsurer shall be subrogated to the rights of the Company to the
extent of its loss payments to the Company. The Company agrees to enforce its
rights of salvage, subrogation, and its rights against insurers or to assign
these rights to the Reinsurer.

     If the reinsurance under an Exhibit is on a share basis, the recoveries
shall be apportioned between the parties in the same ratio as the amounts of
their liabilities bear to the loss. If the reinsurance under an Exhibit is on an
excess basis, recoveries shall be distributed to the parties in an order inverse
to that in which their liabilities accrued.

Article V  -  PREMIUM REPORTS AND REMITTANCES

     All reinsurance premium reports required by the Exhibit(s) attached hereto
may be sent to:

         ASD Treaty Accounting Department
         General Reinsurance Corporation
         Financial Centre
         P.O. Box 10353
         Stamford, CT  06904-2353

     All reinsurance premiums and any other amounts due the Reinsurer may be
remitted to the following lockbox address:

         General Reinsurance Corporation
         P.O. Box 92555
         Chicago, IL  60675-2555

Article VI  -  ERRORS AND OMISSIONS

     The Reinsurer shall not be relieved of liability because of an error or
accidental omission of the Company in reporting any claim or loss or any
business reinsured under this Agreement, provided that the error or omission is
rectified promptly after discovery. The Reinsurer shall be obligated only for
the return of the premium paid for business reported but not reinsured under
this Agreement.

                                      -3-

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Article VII  -  SPECIAL ACCEPTANCES

     Business not within the terms of this Agreement may be submitted to the
Reinsurer for special acceptance and, if accepted by the Reinsurer, shall be
subject to all of the terms of this Agreement except as modified by the special
acceptance.

Article VIII  -  RESERVES AND TAXES

     The Reinsurer shall maintain the required reserves as to the Reinsurer's
portion of unearned premium, claims, losses, and adjustment expense.

     The Company shall be liable for all premium taxes on premium ceded to the
Reinsurer under this Agreement. If the Reinsurer is obligated to pay any premium
taxes on this premium, the Company shall reimburse the Reinsurer; however, the
Company shall not be required to pay taxes twice on the same premium.

Article IX  -  OFFSET

     The Company or the Reinsurer may offset any balance, whether on account of
premium, commission, claims or losses, adjustment expense, salvage, or
otherwise, due from one party to the other under this Agreement or under any
other agreement heretofore or hereafter entered into between the Company and the
Reinsurer.

Article X  -  INSPECTION OF RECORDS

     The Company shall allow the Reinsurer to inspect, at reasonable times, the
records of the Company relevant to the business reinsured under this Agreement,
including Company files concerning claims, losses, or legal proceedings which
involve or are likely to involve the Reinsurer.

Article XI  -  ARBITRATION

         Any unresolved difference of opinion between the Reinsurer and the
Company shall be submitted to arbitration by three arbitrators. One arbitrator
shall be chosen by the Reinsurer, 

                                      -4-

<PAGE>

and one shall be chosen by the Company. The third arbitrator shall be chosen by
the other two arbitrators within ten (10) days after they have been appointed.
If the two arbitrators cannot agree upon a third arbitrator, each arbitrator
shall nominate three persons of whom the other shall reject two. The third
arbitrator shall then be chosen by drawing lots. If either party fails to choose
an arbitrator within thirty (30) days after receiving the written request of the
other party to do so, the latter shall choose both arbitrators, who shall choose
the third arbitrator. The arbitrators shall be impartial and shall be active or
retired persons whose principal occupation is or was as an officer of property
and casualty insurance or reinsurance companies.

     The party requesting arbitration (the "Petitioner") shall submit its brief
to the arbitrators within thirty (30) days after notice of the selection of the
third arbitrator. Upon receipt of the Petitioner's brief, the other party (the
"Respondent") shall have thirty (30) days to file a reply brief. On receipt of
the Respondent's brief, the Petitioner shall have twenty (20) days to file a
rebuttal brief. Respondent shall have twenty (20) days from the receipt of
Petitioner's rebuttal brief to file its rebuttal brief. The arbitrators may
extend the time for filing of briefs at the request of either party.

     The arbitrators are relieved from judicial formalities and, in addition to
considering the rules of law and the customs and practices of the insurance and
reinsurance business, shall make their award with a view to effecting the intent
of this Agreement. The decision of the majority shall be final and binding upon
the parties. The costs of arbitration, including the fees of the arbitrators,
shall be shared equally unless the arbitrators decide otherwise. The arbitration
shall be held at the times and places agreed upon by the arbitrators.

Article XII  -  INSOLVENCY OF THE COMPANY

     In the event of the insolvency of the Company, the reinsurance proceeds
will be paid to the Company or the liquidator on the basis of the amount of the
claim allowed in the insolvency proceeding without diminution by reason of the
inability of the Company to pay all or part of the claim.

                                      -5-
<PAGE>


     The Reinsurer shall be given written notice of the pendency of each claim
against the Company on the policy(ies) reinsured hereunder within a reasonable
time after such claim is filed in the insolvency proceedings. The Reinsurer
shall have the right to investigate each such claim and to interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any defenses
which it may deem available to the Company or its liquidator. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate, this 7th day of May, 1996,

                                        GENERAL REINSURANCE CORPORATION

                                        /s/ Joan LaFrance
                                        Vice President
Attest: /s/ Marc P. Dahling

and this 7th day of May, 1996.

                                        PENN-AMERICA INSURANCE COMPANY

Attest: /s/ John DiBiasi                /s/ Jon S. Saltzman
                                        President



<PAGE>

                                    EXHIBIT A

                         Attached to and made a part of
                        Agreement of Reinsurance No. 8206

                           EXCESS OF LOSS REINSURANCE
                                       of
                               Liability Business
--------------------------------------------------------------------------------
Section 1  -  LIABILITY OF THE REINSURER

     The Reinsurer shall pay to the Company, with respect to liability business
of the Company, the amount of net loss each occurrence in excess of the Company
Retention but not exceeding the Limit of Liability of the Reinsurer as set forth
in the Schedule of Reinsurance.

                             SCHEDULE OF REINSURANCE
--------------------------------------------------------------------------------
                          Company
Class of Business         Retention       Limit of Liability of the Reinsurer
--------------------------------------------------------------------------------

Liability Business        $500,000                    $2,500,000
--------------------------------------------------------------------------------

Section 2  -  COMBINATION COVER

     If an occurrence takes place which involves the liability business
reinsured hereunder and one property risk reinsured under Exhibit B to this
Agreement in combination, the Reinsurer shall pay to the Company the amount of
net loss in excess of a Company Retention of $500,000 with respect to such
occurrence, but not exceeding a Limit of Liability of the Reinsurer of $200,000.
The Limit of Liability of the Reinsurer specified in this Section shall be in
addition to the Limits of Liability of the Reinsurer set forth in the sections
entitled LIABILITY OF THE REINSURER of this Exhibit and said Exhibit B.

Section 3  -  LOSS IN EXCESS OF POLICY LIMITS

         Notwithstanding the provisions of the article entitled MANAGEMENT OF
CLAIMS AND LOSSES, if a third party claimant is awarded an amount in excess of
the Company's 

<PAGE>

policy limit and, as a result of the Company's failure to settle within the
policy limit or of the Company's alleged or actual negligence or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or in the preparation or prosecution of
an appeal consequent upon such action, an action is taken by the insured or
assignee which could impose legal liability on the Company for an amount in
excess of the Company's policy limit, 100% of that portion of the award made to
the third party claimant which is in excess of the Company's policy limit shall
be added to the Company's net loss from the occurrence and the total shall be
allocated in accordance with the section entitled LIABILITY OF THE REINSURER.

     However, this Section shall not apply where the loss has been incurred due
to the fraud or criminal conduct of a member of the Board of Directors, a
corporate officer of the Company, or any other employee of the Company, acting
individually or collectively or in collusion with any individual or corporation
or any other organization or party involved in the presentation, defense, or
settlement of any claim covered hereunder.

     Any insurance or reinsurance, whether collectible or not, which indemnifies
or protects the Company against claims which are the subject matter of this
Section and any contribution, subrogation or recovery shall inure to the benefit
of the Reinsurer and shall be deducted to arrive at the amount of the Company's
net loss.

Section 4  -  EXTRA CONTRACTUAL OBLIGATIONS

     Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, if the Company incurs an extra contractual obligation, 80% of the
extra contractual obligation shall be added to the Company's net loss from the
occurrence and the total shall be allocated in accordance with the section
entitled LIABILITY OF THE REINSURER.

     For purposes of this Section, the term "extra contractual obligation" shall
mean a loss which the Company may be legally liable to pay, which is not covered
under any other provision of this Exhibit and which arises from the Company's
handling of any claim on the policies 

                                      A-2

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reinsured hereunder which have limits of liability or amounts of insurance
greater than the Company Retention.

     The date on which an extra contractual obligation is incurred by the
Company shall be deemed, in all circumstances, to be the date of the original
occurrence.

     This Section shall not apply where the extra contractual obligation has
been incurred due to the fraud or criminal conduct of a member of the Board of
Directors, a corporate officer of the Company, or any other employee of the
Company, acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the investigation,
defense or settlement of any claim covered hereunder.

     Any insurance or reinsurance, whether collectible or not, which indemnifies
or protects the Company against claims which are the subject matter of this
Section and any contribution, subrogation, or recovery shall inure to the
benefit of the Reinsurer and shall be deducted to arrive at the amount of the
Company's net loss.

Section 5  -  OTHER REINSURANCE

     The obligations of the Company to reinsure business falling within the
scope of this Exhibit and of the Reinsurer to accept such reinsurance are
mandatory and no other reinsurance (either facultative or treaty) is permitted,
except as provided for below.

     The Company may purchase facultative excess of loss reinsurance or
facultative share reinsurance within the liability of the Reinsurer, if, in the
underwriting judgment of the Company, the Reinsurer will be benefited thereby.
In no event, however, shall the amount required with respect to the Company
Retention be reduced.

Section 6  -  COMPANY POLICY AMOUNTS

     For the purpose of determining the Company Retention and the Limits of
Liability of the Reinsurer, the limits of liability of the Company with respect
to any one policy shall be deemed not to exceed:

                                      A-3

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     (a) Personal Automobile Liability                Minimum Statutory Limits
         Combined Single Limit

     (b) Uninsured and Underinsured Motorists         Minimum Statutory Limits
         Coverages

     (c) Personal Injury Protection Coverage          Statutory Limits

     (d) Other Liability Combined Single Limit        $1,000,000 each occurrence
         (Including Non-Owned and Hired Autos)

     (e) Section II Liability under Commercial        $1,000,000 each occurrence
         Multiple Peril

     (f) Garage Liability                             $1,000,000 each occurrence

Section 7  -  DEFINITIONS

     (a)  Liability Business

          This term shall mean insurance classified as personal automobile
          liability, personal automobile uninsured motorists, personal
          automobile personal injury protection, other liability (including
          hired and non-owned automobile liability), section II under commercial
          multiple peril, and garage liability (not to include garage keepers
          legal liability) and described in the manuals of the Insurance
          Services Office, as respects insureds domiciled in the United States
          of America, its territories and possessions, or in Canada.

     (b)  Company Retention

          This term shall mean the amount the Company shall retain for its own
          account; however, this requirement shall be satisfied if this amount
          is retained by the Company or its affiliated companies under common
          management or common ownership.

     (c)  Net Loss

          This term shall mean all payments by the Company within the terms and
          limits of its policies in settlement of claims or losses, payment of
          benefits, or satisfaction of judgments or awards, including adjustment
          expense, after deduction of subrogation and other recoveries and after
          deduction of amounts due from all other reinsurance, whether
          collectible or not. If the Company becomes insolvent, this definition
          shall be modified to the 

                                      A-4
<PAGE>

          extent set forth in the article entitled INSOLVENCY OF THE COMPANY.

     (d)  Adjustment Expense

          This term shall mean expenditures by the Company within the terms of
          its policies in the direct defense of claims and as allocated to an
          individual claim or loss (other than for office expenses and for the
          salaries and expenses of employees of the Company or of any subsidiary
          or related or wholly owned company of the Company) made in connection
          with the disposition of a claim, loss, or legal proceeding including
          investigation, negotiation, and legal expenses, court costs;
          prejudgment interest or delayed damages; and interest on any judgment
          or award.

     (e)  Prejudgment Interest or Delayed Damages

          This term shall mean interest or damages added to a settlement,
          verdict, award, or judgment based on the amount of time prior to the
          settlement, verdict, award, or judgment whether or not made part of
          the settlement, verdict, award, or judgment.

     (f)  Occurrence

          This term shall mean each accident or occurrence or series of
          accidents or occurrences arising out of one event, whether involving
          one or several of the Company's policies. All bodily injury or
          property damage arising out of continuous or repeated exposure to
          substantially the same general conditions shall be considered as
          arising out of one occurrence. The date of occurrence shall be deemed
          to be the following:

          (1)  As respects a loss involving one or more policies written on an
               occurrence basis, the date on which bodily injury or property
               damage occurs.

          (2)  As respects a loss involving one or more policies written on a
               claims-made basis, the date when notice of claim is received and
               recorded by the Company or the insured, whichever comes first,
               and any related claims reported subsequent to such date shall be
               included in such loss. However, if notice of claim is received
               and recorded by the Company or the insured during an Extended
               Reporting Period, the date of occurrence shall be deemed to be
               the last day of the policy period.

          (3)  As respects a loss involving one or more policies written on an
               occurrence basis and one or more policies written on a
               claims-made basis, the date on which bodily injury or property
               damage occurs, and any related claims reported subsequent to such
               date 

                                      A-5
<PAGE>

               shall be included in such loss whether they are covered under
               occurrence or claims-made policies.

     (g)  Subject Premium

          This term shall mean the Company's premium for the business reinsured
          under this Exhibit, other than the Company's premium for personal
          automobile liability, personal automobile uninsured motorists,
          personal automobile personal injury protection, after deduction of the
          premium paid for reinsurance which inures to the benefit of this
          Exhibit.

Section  8 - EXCLUSIONS This Exhibit does not apply to:

     (a)  Reinsurance assumed by the Company, excepting reinsurance of primary
          business assumed from affiliated companies;

     (b)  Any loss or damage which is occasioned by war, invasion, hostilities,
          acts of foreign enemies, civil war, rebellion, insurrection, military
          or usurped power, or martial law, or confiscation by order of any
          government or public authority, but not excluding loss or damage which
          would be covered under a standard form of policy containing a standard
          war exclusion clause;

     (c)  Any loss or liability accruing to the Company directly or indirectly
          from any insurance written by or through any pool, association, or
          syndicate, including pools, associations, or syndicates in which
          membership by the Company is required under any statute or regulation;

     (d)  Any liability of the Company arising by contract, operation of law, or
          otherwise, from its participation or membership, whether voluntary or
          involuntary in any insolvency fund. "Insolvency Fund" includes any
          guaranty fund, insolvency fund, plan, pool, association, fund, or
          other arrangement, howsoever denominated, established, or governed,
          which provides for any assessment of, payment, or assumption by the
          Company of part or all of any claim, debt, charge, fee, or other
          obligation of an insurer, or its successors or assigns, which has been
          declared by any competent authority to be insolvent, or which is
          otherwise deemed unable to meet any claim, debt, charge, fee, or other
          obligation in whole or in part;

     (e)  Nuclear Incident as provided in the Nuclear Incident Exclusion Clause
          - Liability - Reinsurance, which is attached to and made a part of
          this Exhibit;

     (f)  Policies written on a co-indemnity basis not controlled by the
          Company; 

                                      A-6
<PAGE>

     (g)  Fidelity, surety, aviation, ocean marine, system performance, boiler
          and machinery, political risk, kidnap, ransom and extortion, credit,
          retroactive liability, financial guarantee and insolvency business, or
          strike insurance;

     (h)  Policies written to apply in excess of a deductible or self insured
          amount of more than $10,000 or policies written to apply specifically
          in excess over underlying insurance;

     (i)  Pollution liability or environmental impairment liability with respect
          to new and renewal policies written on and after January 1, 1986, but
          this exclusion does not preclude liability for loss, damage, costs, or
          expenses which are covered under Insurance Services Office wordings
          promulgated on or after January 1, 1986. However, if the insured
          elects to purchase any "buy back" or additional coverage options, such
          options shall not be covered under this Exhibit even if such options
          are provided by or covered under such Insurance Services Office
          wordings;

     (j)  "Self-insurance" or "self-insured obligations", howsoever styled, of
          the Company, its affiliates or subsidiaries, or any insurance wherein
          the Company, its affiliates or subsidiaries, are named as the insured
          party, either alone or jointly with some other party, notwithstanding
          that no legal liability may arise in respect thereof by reason of the
          fact that the Company, its affiliates or subsidiaries, may not be
          obligated by law to pay a claim to itself, its affiliates or
          subsidiaries;

     (k)  Policies written on a claims made basis where the retroactive date of
          such policies precedes the effective date of the original insured's
          first claims made policy;

     (l)  Liability arising out of the manufacturing, mining, transportation,
          distribution, use, removal, encapsulation, or exposure to asbestos,
          asbestos products, asbestos fibers, or asbestos dust;

     (m)  Policies covering liability of any original insured whose annual gross
          sales, receipts, or revenues exceed $250,000,000;

     (n)  Automobile liability insurance, except for the following classes:
          personal automobile liability, non owned and hired automobile
          liability when written as part of a general liability policy, and
          garage liability (however, garagekeepers legal liability is excluded);

     (o)  Automobile liability insurance relating to the ownership, maintenance,
          or use of automobiles used in organized speed contests;

     (p)  Liability other than automobile insurance relating to risks involving:

                                      A-7

<PAGE>

          (1)  Wrecking of buildings or structures, except when three stories or
               less in height;

          (2)  Amusement parks, amusement devices, fairs, exhibitions,
               carnivals, circuses, and zoos, except when written within the
               guidelines of the Company's Special Events Program;

          (3)  Sports or other entertainment events with an expected capacity,
               at any one time, of 10,000 or more people;

          (4)  Arenas, grandstands, stadiums, theatres, halls and any other
               indoor venues with an expected capacity, at any one time, of
               5,000 or more people;

          (5)  Blasting operations;

          (6)  Motion picture production;

          (7)  All mining or quarrying operations;

          (8)  Subway construction or tunnelling, other than sewer construction;

          (9)  Navigation, towing, construction, repair, conversion, cleaning,
               work on, stevedoring, demolition, wrecking, uprighting, or
               salvage of any commercial vessel, barge, dry dock, oil rig, and
               any other commercial vessel;

          (10) Offshore or subaqueous operations;

          (11) Railroads, including street railways, except sidetrack
               agreements;

          (12) Aircraft, helicopters, airports, or flight operations;

          (13) Governmental subdivisions, bodies, authorities, or agencies over
               10,000 in population, except OL&T related exposures;

          (14) Storage, production, marketing, handling, refinement,
               distribution, or transmission of natural or artificial fuels,
               except with respect to:

               (i)  Wholesale distribution of gasoline, kerosene, or fuel oils;

               (ii) Storage of gasoline, kerosene, or fuel oils with a combined
                    total capacity of less than 75,000 gallons at any one
                    location; and, 

                                      A-8

<PAGE>
               (iii) Retail sales of gasoline or diesel fuel or fuel oil;

          (15) Manufacture, transportation, marketing, handling, storage, or use
               of explosives (Note: An explosive substance is defined as any
               substance manufactured for the express purpose of exploding as
               differentiated from other commodities used industrially which are
               fortuitously explosive such as gasoline, celluloid, fuel gases,
               and dyestuffs), caps, primers, or detonators and other similar
               materials, fireworks, ammunition, or ammonium nitrate;

          (16) Gas, electric, and water utility companies;

          (17) Shoring, underpinning, or moving of buildings or structures;

          (18) Manufacture, marketing, blending, mixing, repackaging or
               relabeling of agricultural and industrial chemicals;

          (19) Steeple or chimney shaft work (other than residential chimney
               sweep operations) and tower construction;

          (20) Construction or maintenance of cofferdams;

          (21) Malpractice or professional liability and/or errors and omissions
               insurance including liability of any insurer or reinsurer for
               alleged misconduct in the handling of claims or in any of its
               dealings with policyholders, except for beauticians, barbers,
               morticians, opticians, optometrists, hearing aid specialists
               clergymen counseling, animal grooming, exercise studios, day care
               centers and those classes mutually agreed upon in writing;

          (22) Directors and officers, public officials, Security Exchange
               Commission, and ERISA liability;

          (23) Broadcasters, telecasters, and publishers liability;

          (24) Liquor law liability other than the following: host liquor, and
               liquor law liability when written in conjunction with the
               Company's Restaurant Pak program;

          (25) Products recall, products integrity, or products impairment
               insurance;

          (26) Products and completed operations as respects:

               (i)  The manufacture, sale, handling, or distribution of
                    aircraft, aerospacecraft, satellites, and missiles and parts
                    for or 

                                      A-9

<PAGE>

                    components of, aircraft, aerospacecraft, satellites, and
                    missiles;

               (ii) The manufacture, blending, mixing, repackaging, relabeling,
                    or importing of ethical and non-ethical drugs, and
                    cosmetics;

               (iii) The manufacture, or wholesale distribution of tobacco based
                    products;

               (iv) The manufacture of all motorized vehicles, mobile equipment,
                    heavy equipment or machinery, home power tools, and oil
                    drilling equipment;

               (v)  The manufacture, blending, mixing, repackaging, or
                    relabeling of farm animal feed.

          (27) Oil or gas pipelines, wells, or drilling operations;

          (28) Ship building, ship repair yards, dry docks, and marinas;

     (q)  Homeowners Section II and comprehensive personal liability;

     (r)  Liability insurance afforded for watercraft; however, this exclusion
          shall not apply to coverage afforded by ISO Commercial General
          Liability Coverage Form CG 00 01 (Ed. 11/85) or as subsequently
          amended.

     If the Company provides insurance for an insured with respect to the
ownership, maintenance, or use of the vehicles listed in exclusion (o) and if
such ownership, maintenance, or use constitutes only a minor and incidental part
of the ownership, maintenance, or use of all vehicles of the insured, such
exclusion(s) shall not apply.

     If the Company provides insurance for an insured with respect to any
premises, operations, products, or completed operations listed in exclusion (p)
items (1), (2), (5), (7), (14), (15), (17), (19), (26)(ii) and (26)(v), and (r)
above and if such premises, operations, products, or completed operations
constitute only a minor and incidental part of the total premises, operations,
products, or completed operations of the insured, such exclusion(s) shall not
apply.

     If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business falling within the scope of exclusions (o), (p) items (1), (2), (5),
(7), (14), (15), (17), (19), (26)(ii) and (26)(v), and (r), 

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<PAGE>

these exclusions be suspended with respect to such business until 30 days after
an underwriting supervisor of the Company acquires knowledge of such business.

Section 9  -  REINSURANCE PREMIUM AND COMMISSION

     As a condition precedent to the Reinsurer's obligations hereunder, the
Company shall pay to the Reinsurer:

     (a)  With respect to business in force at the effective time and date of
          this Exhibit, 7.917% of the Company's subject unearned premium,
          calculated on the monthly pro rata basis as of the effective time and
          date of this Exhibit;

     (b)  With respect to business becoming effective at and after the effective
          time and date of this Exhibit, 7.917% of the Company's subject written
          premium.

     The reinsurance premiums in (a) and (b) above are subject to a fixed
commission of 40%.

Section 10  -  REPORTS AND REMITTANCES

     (a)  Reinsurance Premium

          Within 45 days after the commencement of this Exhibit, the Company
          shall render to the Reinsurer a report of the reinsurance premium with
          respect to the business of the Company in force at the effective time
          and date of this Exhibit, summarizing the reinsurance premium by line
          of insurance, by term, and by month and year of expiration; and the
          amount due the Reinsurer shall be remitted within 45 days after the
          commencement of this Exhibit.

          Within 45 days after the close of each calendar quarter, the Company
          shall render to the Reinsurer a report of the reinsurance premium for
          the quarter with respect to business of the Company written during the
          quarter, summarizing the reinsurance premium by line of insurance; and
          the amount due the Reinsurer shall be remitted within 45 days after
          the close of the quarter.

          Within 45 days after the close of each calendar quarter, the Company
          shall also render to the Reinsurer a report of the reinsurance premium
          unearned by line of insurance and the contribution for the quarter to
          the 

                                      A-11
<PAGE>

          reinsurance premium in force by line of insurance, by term and by
          month and year of expiration.

     (b)  Claims and Losses

          The Company shall report promptly to the Reinsurer each claim or loss
          for which the Company's estimated amount of net loss is 50% or more of
          the amount of the Company Retention and shall also report all cases of
          serious injury which, regardless of considerations of liability or
          coverage, might involve this reinsurance, including but not limited to
          the following:

          (1)  Cord injury - paraplegia, quadriplegia;

          (2)  Amputations - requiring a prosthesis;

          (3)  Brain damage affecting mentality or central nervous system - such
               as permanent disorientation, behavior disorder, personality
               change, seizures, motor deficit, inability to speak (aphasia),
               hemiplegia or unconsciousness (comatose);

          (4)  Blindness;

          (5)  Burns - involving over 10% of body with third degree or 30% of
               body with second degree;

          (6)  Multiple fractures - involving more than one member or non-union;

          (7)  Fracture of both heel bones (fractured bilateral os calcis);

          (8)  Nerve damage causing paralysis and loss of sensation in arm and
               hand (brachial plexus nerve damage);

          (9)  Massive internal injuries affecting body organs;

          (10) Injury to nerves at base of spinal canal (Cauda Equina) or any
               other back injury resulting in incontinence of bowel and/or
               bladder;

          (11) Fatalities;

          (12) Any other serious injury which, in the judgment of the Company,
               might involve the Reinsurer.

          The Company shall advise the Reinsurer of the estimated amount of net
          loss in connection with each such claim or loss and of any subsequent
          changes in such estimates. 

                                      A-12

<PAGE>

          Promptly upon receipt of a definitive statement of net loss from the
          Company, but within no more than 25 days, the Reinsurer shall pay to
          the Company the Reinsurer's portion of net loss. The Company shall
          report to the Reinsurer any subsequent changes in the amount of net
          loss, and the amount due either party shall be remitted promptly, but
          within no more than 25 days.

     (c)  General

          In addition to the reports required in (a) and (b) above, the Company
          shall furnish such other information as may be required by the
          Reinsurer for the completion of the Reinsurer's quarterly and annual
          statements and internal records.

          All reports shall be rendered on forms or in format acceptable to the
          Company and the Reinsurer.

Section 11  -  COMMENCEMENT AND TERMINATION

     This Exhibit shall apply to new and renewal policies of the Company
becoming effective at and after 12:01 A.M., May 1, 1996, and to policies of the
Company in force at 12:01 A.M., May 1,1996, with respect to claims or losses
resulting from occurrences taking place at and after the aforesaid time and date
insured under coverages written on an occurrence basis and with respect to
claims received and recorded by the Company or the insured at and after the
aforesaid time and date under coverages written on a claims made basis. However,
this Exhibit shall not apply to claims received and recorded by the Company or
the insured during any extended reporting period in force at such time and date.

     Either party may terminate this Exhibit by sending to the other, by
registered mail to its principal office, notice stating the time and date when,
not less than 90 days after the date of mailing of such notice, termination
shall be effective. As respects coverages written on an occurrence basis, the
Reinsurer shall not be liable for claims and losses resulting from occurrences
taking place at and after the effective time and date of termination. As
respects coverages written on a claims-made basis, the Reinsurer shall not be
liable for claims received and

                                      A-13
<PAGE>


recorded by the Company or the insured at and after the effective time and date
of termination, unless such claim is received and recorded by the Company or the
insured during an extended reporting period in force at the time and date of
termination.

     The Reinsurer shall return to the Company the reinsurance premium unearned
calculated on the monthly pro rata basis as of the effective time and date of
termination, less the commission previously allowed thereon.

                                      A-14
<PAGE>

                                    EXHIBIT B

                         Attached to and made a part of
                        Agreement of Reinsurance No. 8206

                           EXCESS OF LOSS REINSURANCE
                                       of
                                Property Business
-------------------------------------------------------------------------------
Section 1  -  LIABILITY OF THE REINSURER

     The Reinsurer shall pay to the Company, with respect to each risk of the
Company, the amount of net loss sustained by the Company in excess of the
Company Retention but not exceeding the Limits of Liability of the Reinsurer as
set forth in the Schedule of Reinsurance.

     The Limit of Liability of the Reinsurer under this Exhibit shall not exceed
a total payment of net loss of $2,400,000 on all risks involved in one
occurrence.

                             SCHEDULE OF REINSURANCE
-------------------------------------------------------------------------------
Class of Business      Company Retention     Limit of Liability of the Reinsurer
-------------------------------------------------------------------------------

Property Business           $200,000                      $800,000
-------------------------------------------------------------------------------

     All insurance written under one or more policies of the Company against the
same peril on the same risk shall be combined, and the Company Retention and the
Limit of Liability of the Reinsurer shall be determined on the basis of the sum
of all insurance against the same peril and on the same risk which is in force
at the time of a claim or loss.

Section 2  -  COMBINATION COVER

     If an occurrence takes place which involves one property risk reinsured
under this Exhibit and the liability business reinsured under Exhibit A in
combination, the provisions of the section entitled COMBINATION COVER of said
Exhibit A shall apply.

<PAGE>

Section 3  -  EXTRA CONTRACTUAL OBLIGATIONS

     Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, if the Company incurs an extra contractual obligation, 80% of the
extra contractual obligation shall be added to the Company's net loss from the
occurrence and the total shall be allocated in accordance with the section
entitled LIABILITY OF THE REINSURER.

     For purposes of this Section, the term "extra contractual obligation" shall
mean a loss which the Company may be legally liable to pay, which is not covered
under any other provision of this Exhibit and which arises from the Company's
handling of any claim on the policies reinsured hereunder which have limits of
liability or amounts of insurance greater than the Company Retention.

     The date on which an extra contractual obligation is incurred by the
Company shall be deemed, in all circumstances, to be the date of the original
occurrence.

     This Section shall not apply where the extra contractual obligation has
been incurred due to the fraud or criminal conduct of a member of the Board of
Directors, a corporate officer of the Company, or any other employee of the
Company, acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the investigation,
defense or settlement of any claim covered hereunder.

     Any insurance or reinsurance, whether collectible or not, which indemnifies
or protects the Company against claims which are the subject matter of this
Section and any contribution, subrogation, or recovery shall inure to the
benefit of the Reinsurer and shall be deducted to arrive at the amount of the
Company's net loss.

Section 4  -  OTHER REINSURANCE

         The obligations of the Company to reinsure business falling within the
scope of this Exhibit and of the Reinsurer to accept such reinsurance are
mandatory and no other reinsurance (either facultative or treaty) is permitted,
except as provided for below.

                                      B-2
<PAGE>

     When the amount of insurance written by the Company on an individual risk
exceeds $1,000,000, permission is granted the Company to purchase facultative
excess of loss or share reinsurance for the excess amount on such risk. If the
Company does not purchase either facultative excess of loss or share reinsurance
for the excess amount on such risk, the net loss for the purpose of computing
the Company Retention and the Limit of Liability of the Reinsurer shall be
reduced as if facultative share reinsurance had been in force at the time of the
loss for the excess amount on such risk.

     The Company may also purchase facultative excess of loss reinsurance or
facultative share reinsurance within the liability of the Reinsurer, if, in the
underwriting judgment of the Company, the Reinsurer will be benefited thereby.
In no event, however, shall the amount required with respect to the Company
Retention be reduced.

     Recoveries from catastrophe reinsurance shall be deemed not to reduce the
amount required with respect to the Company Retention.

Section 5  -  DEFINITIONS

     (a)  Property Business

          This term shall mean insurance which is classified in the NAIC form of
          annual statement as fire, allied lines, inland marine, or commercial
          multiple peril (property coverages), except those lines specifically
          excluded in the section entitled EXCLUSIONS, on risks wherever located
          in the United States of America, its territories and possessions, or
          in Canada.

     (b)  Company Retention

          This term shall mean the amount the Company shall retain for its own
          account; however, this requirement shall be satisfied if this amount
          is retained by the Company or its affiliated companies under common
          management or common ownership.

     (c)  Net Loss

          This term shall mean all payments by the Company within the terms and
          limits of its policies in settlement of claims or losses, including
          adjustment 

                                      B-3

<PAGE>

          expense, after deduction of salvage and other recoveries and after
          deduction of amounts due from all other reinsurance, except
          catastrophe reinsurance, whether collectible or not. If the Company
          becomes insolvent, this definition shall be modified to the extent set
          forth in the article entitled INSOLVENCY OF THE COMPANY.

     (d)  Adjustment Expense

          This term shall mean expenditures by the Company within the terms of
          its policies in the direct defense of claims and as allocated to an
          individual claim or loss (other than for office expenses and for the
          salaries and expenses of employees of the Company or of any subsidiary
          or related or wholly owned company of the Company) made in connection
          with the disposition of a claim, loss, or legal proceeding including
          investigation, negotiation, and legal expenses; court costs;
          prejudgment interest or delayed damages; and interest on any judgment
          or award.

     (e)  Prejudgment Interest or Delayed Damages

          This term shall mean interest or damages added to a settlement,
          verdict, award, or judgment based on the amount of time prior to the
          settlement, verdict, award, or judgment whether or not made part of
          the settlement, verdict, award, or judgment.

     (f)  Risk

          The Company shall establish what constitutes one risk, provided:

          (1)  a building and its contents, including time element coverages,
               shall never be considered more than one risk;

          (2)  when two or more buildings and their contents are situated at the
               same general location, the Company shall identify on its records
               at the time of acceptance by the Company those individual
               buildings and their contents that are considered to constitute
               each risk; if such identification is not made, each building and
               its contents shall be considered to be a separate risk.

     (g)  Building

          This term shall mean each structure that is considered by the local
          fire insurance rating organization to be a separate building for rate
          making purposes. With reference to structures not rated specifically
          by the local fire insurance rating organization, the term building
          shall mean each separately roofed structure enclosed within exterior
          walls.

                                      B-4

<PAGE>

     (h)  Occurrence

          This term shall mean each occurrence or series of occurrences arising
          out of one event.

     (i)  Subject Premium

          This term shall mean the Company's premium for the business reinsured
          under this Exhibit, after deduction of the premium paid for
          reinsurance which inures to the benefit of this Exhibit.

Section  6 - EXCLUSIONS 

     This Agreement does not apply to:

     (a)  Reinsurance assumed by the Company, excepting reinsurance of primary
          business assumed from affiliated companies;

     (b)  Any loss or damage which is occasioned by war, invasion, hostilities,
          acts of foreign enemies, civil war, rebellion, insurrection, military
          or usurped power, or martial law, or confiscation by order of any
          government or public authority, but not excluding loss or damage which
          would be covered under a standard form of policy containing a standard
          war exclusion clause;

     (c)  Any loss or liability accruing to the Company directly or indirectly
          from any insurance written by or through any pool, association, or
          syndicate, including pools, associations, or syndicates in which
          membership by the Company is required under any statute or regulation;

     (d)  Any liability of the Company arising by contract, operation of law, or
          otherwise, from its participation or membership, whether voluntary or
          involuntary in any insolvency fund. "Insolvency Fund" includes any
          guaranty fund, insolvency fund, plan, pool, association, fund, or
          other arrangement, howsoever denominated, established, or governed,
          which provides for any assessment of, payment, or assumption by the
          Company of part or all of any claim, debt, charge, fee, or other
          obligation of an insurer, or its successors or assigns, which has been
          declared by any competent authority to be insolvent, or which is
          otherwise deemed unable to meet any claim, debt, charge, fee, or other
          obligation in whole or in part;

     (e)  Nuclear Incident as provided in the Nuclear Incident Exclusion Clause
          - Physical Damage - Reinsurance, which are attached to and made a part
          of this Exhibit;

                                      B-5

<PAGE>

     (f)  Policies written on a co-indemnity basis not controlled by the
          Company;

     (g)  Fidelity, surety, aviation, ocean marine, system performance, boiler
          and machinery, political risk, kidnap, ransom and extortion, credit,
          retroactive liability, financial guarantee and insolvency business, or
          strike insurance;

     (h)  Policies written to apply in excess of a deductible or self insured
          amount of more than $10,000 or policies written to apply specifically
          in excess over underlying insurance;

     (i)  Loss, damage costs, or expenses arising out of: the release,
          discharge, dispersal, or escape of pollutants; the extraction,
          removal, clean up, containment, monitoring, or detoxification of
          pollutants; or, the removal, restoration, or replacement of polluted
          land or water. However, this exclusion does not preclude liability for
          loss, damage, costs, or expenses which are covered under Insurance
          Services Office wordings promulgated on or after April 1, 1986.
          Nevertheless, if the insured elects to purchase any "buy-back" or
          additional coverage options, such options shall not be covered under
          this Exhibit even if such options are provided by or covered under
          such Insurance Services Office wordings;

     (j)  "Self-insurance" or "self-insured obligations", howsoever styled, of
          the Company, its affiliates or subsidiaries, or any insurance wherein
          the Company, its affiliates or subsidiaries, are named as the insured
          party, either alone or jointly with some other party, notwithstanding
          that no legal liability may arise in respect thereof by reason of the
          fact that the Company, its affiliates or subsidiaries, may not be
          obligated by law to pay a claim to itself, its affiliates or
          subsidiaries;

     (k)  The following kinds of insurance and risks classified by the Company
          as property business:

          (1)  The perils of flood, surface water, waves, tidal water or tidal
               wave, overflow of streams, or other bodies of water or spray from
               any of the foregoing, all whether driven by wind or not, when
               written as such;

          (2)  The peril of earthquake, when written as such;

          (3)  Difference in conditions insurance or similar kinds of insurance,
               howsoever styled;

          (4)  Insurance on growing or standing crops, or timber;

                                      B-6

<PAGE>

          (5)  Mortgage impairment insurance and similar kinds of insurance,
               howsoever styled;

          (6)  Risks having a total insurable value of more than $50,000,000;

          (7)  Any collection of fine arts with an insurable value of $5,000,000
               or more;

          (8)  All bridges, tunnels, and dams;

          (9)  Mobile homes, when written on a personal lines policy;

          (10) All offshore property risks;

          (11) Railroad property;

          (12) Automobile physical damage business;

          (13) Inland marine business with respect to the following:

               (i)  Cargo insurance with respect to ocean, lake, or inland
                    waterway vessels;

               (ii) Motor-truck cargo insurance written for common carriers
                    operating beyond a radius of 1,000 miles, or that require an
                    ICC, PUC or similar filing;

               (iii) Commercial negative film insurance and cast and/or
                    non-appearance insurance;

               (iv) Drilling and/or production rigs and all machinery and
                    equipment used in the exploration of natural fuels;

               (v)  Furriers' customers and garment contractors policies;

               (vi) Insurance on livestock birds, or other animals under
                    so-called "mortality policies";

               (vii) Jewelers' block policies and furriers' block policies;

               (viii) Mining equipment while underground;

               (ix) Radio and television broadcasting towers, exceeding 100 feet
                    in height;

                                      B-7

<PAGE>

               (x)  Registered mail and armored car insurance;

               (xi) Watercraft, other than watercraft insured under personal
                    property floaters, yacht, or outboard policies.

Section 7  -  REINSURANCE PREMIUM AND COMMISSION

     As a condition precedent to the Reinsurer's obligations hereunder, the
Company shall pay to the Reinsurer:

     (a)  With respect to business in force at the effective time and date of
          this Exhibit, 10.833% of the Company's subject unearned premium,
          calculated on the monthly pro rata basis as of the effective time and
          date of this Exhibit; and

     (b)  With respect to business becoming effective at and after the effective
          time and date of this Exhibit, 10.833% of the Company's subject
          written premium.

     The reinsurance premiums in (a) and (b) above shall be subject to a fixed
commission allowance of 40%.

Section 8  -  REPORTS AND REMITTANCES

     (a)  Reinsurance Premium

          Within 45 days after the commencement of this Exhibit, the Company
          shall render to the Reinsurer a report of the reinsurance premium with
          respect to the business of the Company in force at the effective time
          and date of this Exhibit, summarizing the reinsurance premium by line
          of insurance, by term, and by month and year of expiration; and the
          amount due the Reinsurer shall be remitted within 45 days after the
          commencement of this Exhibit.

          Within 45 days after the close of each calendar quarter, the Company
          shall render to the Reinsurer a report of the reinsurance premium for
          the quarter with respect to business of the Company written during the
          quarter, summarizing the reinsurance premium by line of insurance; and
          the amount due the Reinsurer shall be remitted within 45 days after
          the close of the quarter.

                                      B-8

<PAGE>

          Within 45 days after the close of each calendar quarter, the Company
          shall also render to the Reinsurer a report of the reinsurance premium
          unearned by line of insurance and the contribution for the quarter to
          the reinsurance premium in force by line of insurance, by term and by
          month and year of expiration.

     (b)  Claims and Losses

          The Company shall report promptly to the Reinsurer each claim or loss
          which, in the Company's opinion, may involve the reinsurance afforded
          by this Exhibit. The Company shall advise the Reinsurer of the
          estimated amount of net loss in connection with each such claim or
          loss and of any subsequent changes in such estimates.

          Promptly upon receipt of a definitive statement of net loss from the
          Company, but within no more than 25 days, the Reinsurer shall pay to
          the Company the Reinsurer's portion of net loss. The Company shall
          report to the Reinsurer any subsequent changes in the amount of net
          loss, and the amount due either party shall be remitted promptly, but
          within no more than 25 days.

     (c)  P.C.S. Catastrophe Bulletins

          The Company shall furnish to the Reinsurer, upon request, the
          following information with respect to each catastrophe set forth in
          the Catastrophe Bulletins published by the Property Claim Services:

          (1)  The preliminary estimates of the amount recoverable from the
               Reinsurer;

          (2)  The Reinsurer's portion of claims, losses, and adjustment
               expenses paid less salvage recovered during each calendar
               quarter;

          (3)  The Reinsurer's portion of reserves for claims, losses, and
               adjustment expenses at the end of each calendar quarter.

     (d)  General

          In addition to the reports required by (a), (b), and (c) above, the
          Company shall furnish such other information as may be required by the
          Reinsurer for the completion of the Reinsurer's quarterly and annual
          statements and internal records.

                                      B-9
<PAGE>


          All reports shall be rendered on forms or in format acceptable to the
          Company and the Reinsurer.

Section 9  -  COMMENCEMENT AND TERMINATION

     This Exhibit shall apply to new and renewal policies of the Company
becoming effective at and after 12:01 A.M., May 1, 1996, and to policies of the
Company in force at 12:01 A.M., May 1, 1996, with respect to losses resulting
from occurrences taking place at and after the aforesaid time and date.

     Either party may terminate this Exhibit by sending to the other, by
registered mail to its principal office, notice stating the time and date when,
not less than 90 days after the date of mailing of such notice, termination
shall be effective. The Reinsurer shall not be liable for any claims or losses
resulting from occurrences taking place at and after the effective time and date
of termination.

     The Reinsurer shall return to the Company the reinsurance premium unearned
calculated on the monthly pro rata basis as of the effective time and date of
termination, less the commission previously allowed thereon.


                                      B-10
<PAGE>

       NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - USA

      (1) This Agreement does not cover any loss or liability accruing to the
Company as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.

      (2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this Agreement all
the original policies of the Company (new, renewal and placement) of the classes
specified in Clause (ii) of this paragraph (2) from the time specified in Clause
(iii) in this paragraph (2) shall be deemed to include the following provision
(specified as the Limited Exclusion Provision):

      Limited Exclusion Provision*

      (i)   It is agreed that the policy does not apply under any liability
            coverage, to injury, sickness, disease, death or destruction bodily
            injury or property damage with respect to which an insured under the
            policy is also an insured under a nuclear energy liability policy
            issued by Nuclear Energy Liability Insurance Association, Mutual
            Atomic Energy Liability Underwriters or Nuclear Insurance
            Association of Canada, or would be an insured under any such policy
            but for its termination upon exhaustion of its limit of liability.

      (ii)  Family Automobile Policies (liability only), Special Automobile
            Policies (private passenger automobiles, liability only) Farmers
            Comprehensive Personal Liability Policies (liability only),
            Comprehensive Personal Liability Policies (liability only) or
            policies of a similar nature; and the liability portion of
            combination forms related to the four classes of policies stated
            above, such as the Comprehensive Dwelling Policy and the applicable
            types of Homeowners Policies.

      (iii) The inception dates and thereafter of all original policies as
            described in (ii) above, whether new, renewal or replacement, being
            policies which either

            (a)   become effective on or after 1st May, 1960, or

            (b)   become effective before that date and contain the Limited
                  Exclusion Provision set out above;

            provided this paragraph (2) shall not be applicable to Family
            Automobile Policies, Special Automobile Policies, or policies or
            combination policies of a similar nature, issued by the Company on
            New York risks, until 90 days following approval of the Limited
            Exclusion Provision by the Governmental Authority having
            jurisdiction thereof.

      (3) Except for those classes of policies specified in Clause (ii) of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
Agreement the original liability policies of the Company (new, renewal and
replacement) affording the following coverages:

            Owners, Landlords and Tenants Liability, Contractual Liability,
            Elevator Liability, Owners or Contractors (including railroad)
            Protective Liability, Manufacturers and Contractors Liability,
            Product Liability, Professional and Malpractice Liability,
            Storekeepers Liability, Garage Liability, Automobile Liability
            (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause (v) of this paragraph (3), the following provision
(specified as the Broad Exclusion Provision):

      Broad Exclusion Provision*

      It is agreed that the policy does not apply:

      (i)   Under any Liability Coverage, to injury, sickness, disease, death or
            destruction bodily injury or property damage:

            (a)   with respect to which an insured under the policy is also an
                  insured under a nuclear energy liability policy issued by
                  Nuclear Energy Liability Insurance Association, Mutual Atomic
                  Energy Liability Underwriters or Nuclear Insurance Association
                  of Canada, or would be an insured under any such policy but
                  for its termination upon exhaustion of its limit of liability;
                  or

            (b)   resulting from the hazardous properties of nuclear material
                  and with respect to which (1) any person or organization is
                  required to maintain financial protection pursuant to the
                  Atomic Energy Act of 1954, or any law amendatory thereof, or
                  (2) the insured is, or had this policy not been issued would
                  be, entitled to indemnity from the United States of America,
                  or any agency thereof, under any agreement entered into by the
                  United States of America, or any agency thereof, with any
                  person or organization.

      (ii)  Under any Medical Payments Coverage, or under any Supplementary
            Payments Provision relating to immediate medical or surgical relief
            first aid to expenses incurred with respect to bodily injury,
            sickness, disease or death bodily injury resulting from the
            hazardous properties of nuclear material and arising out of the
            operation of a nuclear facility by any person or organization.

      (iii) Under any Liability Coverage, to injury, sickness, disease, death or
            destruction bodily injury or property damage resulting from the
            hazardous properties of nuclear material if


<PAGE>

            (a)   the nuclear material (1) is at any nuclear facility owned by,
                  or operated by or on behalf of, an insured or (2) has been
                  discharged or dispersed therefrom;

            (b)   the nuclear material is contained in spent fuel or waste at
                  any time possessed, handled, used, processed, stored,
                  transported, or disposed of by or on behalf of an insured; or

            (c)   the injury, sickness, disease, death or destruction bodily
                  injury or property damage arises out of the furnishing by an
                  insured of services, materials, parts or equipment in
                  connection with the planning, construction, maintenance,
                  operation or use of any nuclear facility, but if such facility
                  is located within the United States of America, its
                  territories, or possessions or Canada, this exclusion (c)
                  applies only to injury to or destruction of property at such
                  nuclear facility property damage to such nuclear facility and
                  any property thereat.

      (iv)  As used in this endorsement:
            "hazardous properties" include radioactive, toxic or explosive
            properties; "nuclear material" means source material, special
            nuclear material or byproduct material; "source material", "special
            nuclear material", and "byproduct material" have the meanings given
            them in the Atomic Energy Act of 1954 or in any law amendatory
            thereof; "spent fuel" means any fuel element or fuel component,
            solid or liquid, which has been used or exposed to radiation in a
            nuclear reactor; "waste" means any waste material (1) containing
            byproduct material and (2) resulting from the operation by any
            person or organization of any nuclear facility included within the
            definition of nuclear facility under paragraph (a) or (b) thereof;
            "nuclear facility" means

            (a)   any nuclear reactor,

            (b)   any equipment or device designed or used for (1) separating
                  the isotopes of uranium or plutonium, (2) processing or
                  utilizing spent fuel, or (3) handling, processing or packaging
                  waste,

            (c)   any equipment or devised used for the processing, fabricating
                  or alloying of special nuclear material if at any time the
                  total amount of such material in the custody of the insured at
                  the premises where such equipment or device is located
                  consists of or contains more than 25 grams of plutonium or
                  uranium 233 or any combination thereof, or more than 250 grams
                  of uranium 235,

            (d)   any structure, basin, excavation, premises or place prepared
                  or used for the storage or disposal of waste

            and includes the site on which any of the foregoing is located, all
            operations conducted on such site and all premises used for such
            operations; "nuclear reactor" means any apparatus designed or used
            to sustain nuclear fission in a self-supporting chain reaction or to
            contain a critical mass of fissionable material;

            With respect to injury to or destruction or property the word
            "injury" or "destruction" includes all forms of radioactive
            contamination of property.

            "Property damage" includes all forms of radioactive contamination of
            property.

      (v)   The inception dates and thereafter of all original policies
            affording coverages specified in this paragraph (3), whether new,
            renewal or replacement, being policies which become effective on or
            after 1st May, 1960, provided this paragraph (3) shall not be
            applicable to

            1.    Garage and Automobile Policies issued by the Company on New
                  York risks, or

            2.    statutory liability insurance required under Chapter 90,
                  General Laws of Massachusetts, until 90 days following
                  approval of the Broad Exclusion Provision by the Governmental
                  Authority having jurisdiction thereof.

      (4) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above are not
applicable to original liability policies of the Company in Canada and that with
respect to such policies this Clause shall be deemed to include the Nuclear
Energy Liability Exclusion Provisions adopted by the Canadian Underwriters'
Association or the Independent Insurance Conference of Canada.

         *NOTE: The words underlined in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.


                                   Page 2 of 2


<PAGE>

     NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - USA

      (1) This Agreement does not cover any loss or liability accruing to the
Company directly or indirectly and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.

      (2) Without in any way restricting the operation of paragraph (1) of this
Clause, this Agreement does not cover any loss or liability accruing to the
Company, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:

      (i)   Nuclear reactor power plants including all auxiliary property on the
            site, or

      (ii)  Any other nuclear reactor installation, including laboratories
            handling radioactive materials in connection with reactor
            installations, and "critical facilities" as such, or

      (iii) Installations for fabricating complete fuel elements or for
            processing substantial quantities of "special nuclear material", and
            for reprocessing, salvaging, chemically separating, storing or
            disposing of "spent" nuclear fuel or waste materials, or

      (iv)  Installations other than those listed in paragraph (2)(iii) above
            using substantial quantities of radioactive isotopes or other
            products of nuclear fission.

      (3) Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Company, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate:

      (a)   where the Company does not have knowledge of such nuclear reactor
            power plant or nuclear installation, or

      (b)   where said insurance contains a provision excluding coverage for
            damage to property caused by or resulting from radioactive
            contamination, however caused. However on and after 1st January 1960
            this sub-paragraph (b) shall only apply provided the said
            radioactive contamination exclusion provision has been approved by
            the Governmental Authority having jurisdiction thereof.

      (4) Without in any way restricting the operations of paragraphs (1), (2),
and (3) hereof, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Company, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.

      (5) It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is not
considered by the Company to be the primary hazard.

      (6) The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.

      (7) The Company to be sole judge of what constitutes:

            (a)   substantial quantities, and

            (b)   the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that:

            (a)   all policies issued by the Company on or before 31st December
                  1957 shall be free from the application of the other
                  provisions of this Clause until expiry date or 31st December
                  1960 whichever first occurs whereupon all the provisions of
                  this Clause shall apply.

            (b)   with respect to any risk located in Canada policies issued by
                  the Company on or before 31st December 1958 shall be free from
                  the application of the other provisions of this Clause until
                  expiry date or 31st December 1960 whichever first occurs
                  whereupon all the provisions of this Clause shall apply.