PENN-AMERICA GROUP, INC.
                         Penn-America Insurance Company
                           Penn-Star Insurance Company

                                                       Direct Dial: 215-443-3623
                                                       Direct Fax: 215-443-3602








                                                                November 7, 2000



        Ms. Sandra Kuchma
        Custody Services Officer
        PNC Bank
        Two PNC Plaza, P2-PTPP-09-8
        620 Liberty Plaza 1 0th Floor
        Pittsburgh, Pennsylvania 15222

        Re:     Madison Monroe - Change in Account Manager

        Dear Ms. Kuchma,

        Per our conversation  Monday,  November 6, 2000, Madison Monroe, Inc. is
        no longer an  authorized  Account  Manager  for Penn  America  Insurance
        Company.  New England Asset  Management  will  immediately  assume asset
        management  responsibility for the portfolio formerly managed by Madison
        Monroe.  Accordingly,  please close this account and transfer all assets
        held in the  account  entitled  "Penn-America  Ins.  Co.-Madison  Monroe
        Acct.",  account # 32-32-300-4030  168 to "Penn-America  Ins.  Co.-Fixes
        Maturities",  account  #32-32-300-4030011.  Please effect this change in
        accounts as soon as practicable and inform us when the transfer has been
        completed.

        I  appreciate  your  attention  to this  matter.  Should  you  have  any
        questions, please call me at (215) 443-3623.


                                        /s/ James J. Mack

                                        Very truly yours,
                                        James J. Mack
                                        Vice President & Treasurer

        JMJah
CC: Geny Lynch, New England Asset Management Ted C. Ginsberg,
    Madison Monroe
    Garland P. Pezzuolo, Penn-America Ins. Co.

420 S. York Road o Hatboro, PA 19040 o Tel: (215) 443-3600 o Fax: (215) 443-3603

<PAGE>




FAX:   215-443-3603

Garland Pezzuolo, Esquire
Penn America Group
420 S. York Road
Hatboro, PA 19040

                                                                November 2, 2000

         RE: Madison Monroe, Inc. Liquidation


Dear Garland:

         The  Board  of  Directors  and  all of  the  voting  shareholders  have
 unanimously  agreed that it is in the best  interests of all parties  concerned
 that  Madison  Monroe,  Inc.  be  liquidated  in an orderly  fashion as soon as
 possible.

         Inasmuch as Madison  Monroe,  Inc. is acting as an Account Manager with
 regard to certain  assets  held by PNC Bank for the  benefit  of Penn  America,
 please prepare a letter  notifying them of the termination of our  relationship
 and proper documentation to PNC indicating that termination.

         I will await your reply.

                                   Sincerely,

                                   /s/ Ted C. Ginsberg
                                   Ted C. Ginsberg
                                   President

 sm










Madison Monroe, Inc.

1250 Germantown - Suite 105
Plymouth Meeting, PA 19462
Teiephone: 6l0.292.9fi7
Fax 610-292-9872




420 S. York Road o Hatboro, PA 19040 o Tel: (215) 443-3600 o Fax: (215) 443-3603