Exhibit 10-14-iv

                       PROPERTY CATASTROPHE EXCESS OF LOSS
                         REINSURANCE PROGRAM N0. 26-000
              REINSURANCE CONTRACT NOS. 36881/36882/36883/36884-000

                   (hereinafter referred to as the "Contract")

                                     between

                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY
                              Hatboro, Pennsylvania

        And any additional company established or acquired by the Company

             (hereinafter collectively referred to as the "Company")

                                       and

                   THE SUBSCRIBING REINSURER(S) EXECUTING THE
                     INTERESTS AND LIABILITIES AGREEMENT(S)
                                 ATTACHED HERETO

                  (hereinafter referred to as the "Reinsurer")


                                    ARTICLE I

BUSINESS COVERED

                  The Reinsurer shall indemnify the Company as provided herein
                  for the amounts specified in Exhibit A, attached to and made
                  part of this Contract, in respect of the net excess liability
                  which may accrue to the Company as a result of any loss or
                  losses which may occur during the term of this Contract under
                  any and all binders, policies and contracts of insurance and
                  reinsurance (hereinafter referred to as "Policies") heretofore
                  or hereafter issued by or on behalf of the Company and
                  classified by the Company as Property Business, including but
                  not limited to:

                           Fire and Allied Lines

                           Inland Marine

                           Commercial Multiple Peril (Property Coverages)




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                           Business Owner's Policies (BOPs) (Property Coverages)

                           Automobile Physical Damage (excluding Collision but
                            including Garage Keepers and Garage Physical Damage)


                                   ARTICLE II

ORIGINAL CONDITIONS

                  The liability of the Reinsurer shall follow that of the
                  Company in every case and be subject in all respects to all
                  the general and specific stipulations, clauses, waivers and
                  modifications of the Company's policies and any endorsements
                  thereon. However, in no event shall this be construed in any
                  way to provide coverage outside the terms and conditions set
                  forth in this Contract.

                  Nothing herein shall in any manner create any obligations or
                  establish any rights against the Reinsurer in favor of any
                  third party or any persons not parties to this Contract.


                                   ARTICLE III

EXCLUSIONS

                  The following shall be excluded from the scope of this
Contract:

                  A.       Assumed Treaty Reinsurance other than:

                           (1)      Reinsurance from affiliates,

                           (2)      Local agency reinsurance on a share basis
                                    accepted in the normal course of business,

                           (3)      Reinsurance assumed from State and County
                                    Mutuals;

                  B.       Pools, Associations and Syndicates pursuant to the
                           "Pools, Associations and Syndicates Exclusion
                           Clause", attached hereto;

                  C.       Insolvency Funds pursuant to the "Insolvency Fund
                           Exclusion Clause", attached hereto;



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                  D.       War Risks pursuant to the "War Exclusion Clause",
                           attached hereto;

                  E.       Nuclear Incident pursuant to the "Nuclear Incident
                           Exclusion Clause - Physical Damage - Reinsurance -
                           U.S.A.", attached hereto;

                  F.       Losses arising out of Extra Contractual Obligations
                           and/or Excess of Original Policy Limits Judgments,
                           which judgment(s) have been finally adjudicated.

                           The term "Extra Contractual Obligations" is defined
                           as those liabilities not covered under any other
                           provision of this Contract and which arise from the
                           handling of any claim on business covered hereunder,
                           such liabilities arising because of, but not limited
                           to, the following: failure by the Company to settle
                           within the Policy limit, or by reason of alleged or
                           actual negligence, fraud 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.

                           The term "Excess of Original Policy Limits" is
                           defined as those liabilities which arise in
                           connection with any judgment in excess of the limit
                           of the original Policy, such loss in excess of the
                           limit having been incurred because of failure by the
                           Company to settle within the Policy limit or by
                           reason of alleged or actual negligence, fraud, 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.

                  G.       Losses in respect of overhead transmission and
                           distribution lines and their supporting structures,
                           other than those on or within 300 meters (or 1,000
                           feet) of the insured premises. It is understood and
                           agreed that public utilities extension and/or
                           suppliers extension and/or contingent business
                           interruption coverages are not subject to this
                           exclusion, provided that these are not part of a
                           transmitters' or distributors' Policy;

                  H.       Pollution to the extent that it is excluded under the
                           Company's original Policies;

                  I.       Rolling stock;

                  J.       Satellite business;

                  K.       Insurance on growing  crops;



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                  L.       Difference In Conditions Insurance, however styled;

                  M.       Boiler and Machinery.


                                   ARTICLE IV

TERM AND CANCELLATION

                  The term of this Contract shall be from 12:01 A.M., January 1,
                  2000 to 12:01 A.M., January 1, 2002 at the location of the
                  Loss Occurrence.

                  The Company shall have the option to cancel and rewrite this
                  Contract at terms to be agreed as of 12:01 A.M., Eastern Time,
                  January 1, 2001.

                  In addition, in the event of a loss to the program during the
                  first Annual Period, the Reinsurer has the option to cancel
                  and rewrite this Contract at terms to be agreed as of 12:01
                  A.M., Eastern Time, January 1, 2001.

                  If the liability of the Reinsurer under this Contract
                  terminates while a Loss Occurrence giving rise to a claim
                  hereunder is in progress, then the Reinsurer shall be liable
                  as if the whole Loss Occurrence had occurred during the term
                  of this Contract, provided that no part of that Loss
                  Occurrence is claimed against any renewal or replacement of
                  this Contract.


                                    ARTICLE V

TERRITORY

                  The territorial limits of this Contract will follow those of
the Company's Policies.


                                   ARTICLE VI

DEFINITION OF ANNUAL PERIOD

                  "Annual Period" shall mean the two separate twelve month
                  periods, 12:01 A.M., January 1, 2000 through 12:01 A.M.,
                  January 1, 2001 and 12:01 A.M., January 1, 2001 through 12:01
                  A.M., January 1, 2002.



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                                   ARTICLE VII

AMOUNT OF COVERAGE AND RETENTION

                  First and Second Excesses

                  For each Loss Occurrence, the Reinsurer shall be liable for
                  each excess layer for the amount of Ultimate Net Loss in
                  excess of the "Company Retention" for such excess layer stated
                  in Item 1 of Exhibit A.

                  The limit of liability of the Reinsurer under each excess
                  layer in respect of any one Loss Occurrence shall not exceed
                  ninety-seven and one-half percent (97.50%) of the "Each Loss
                  Occurrence Limit" as stated in Item 2 of Exhibit A for such
                  excess layer.

                  The limit of liability of the Reinsurer under each excess
                  layer in respect of all Loss Occurrences during each Annual
                  Period of this Contract shall not exceed ninety-seven and
                  one-half percent (97.50%) of the "Limit for all Loss
                  Occurrences" as stated in Item 3 of Exhibit A for such excess
                  layer.

                  The coverage hereunder is subject to at least two risks being
                  involved in the same Loss Occurrence.

                  The Company shall be the sole judge of what constitutes each
                  risk.

                  "Company Retention" shall be satisfied if this amount is
                  retained by the Company or any affiliated company under common
                  management or common ownership.

                  Third and Fourth Excesses

                  For each Loss Occurrence, the Reinsurer shall be liable for
                  each excess layer for the amount of Ultimate Net Loss in
                  excess of the "Company Retention" for such excess layer stated
                  in Item 1 of Exhibit A.

                  The limit of liability of the Reinsurer under each excess
                  layer in respect of any one Loss Occurrence shall not exceed
                  one hundred percent (100.00%) of the "Each Loss Occurrence
                  Limit" as stated in Item 2 of Exhibit A for such excess layer.

                  The limit of liability of the Reinsurer under each excess
                  layer in respect of all Loss Occurrences during each Annual
                  Period of this Contract shall not exceed one hundred percent
                  (100.00%) of the "Limit for all Loss Occurrences" as stated in
                  Item 3 of Exhibit A for such excess layer.



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                  The coverage hereunder is subject to at least two risks being
                  involved in the same Loss Occurrence.

                  The Company shall be the sole judge of what constitutes each
                  risk.

                  "Company Retention" shall be satisfied if this amount is
                  retained by the Company or any affiliated company under common
                  management or common ownership.


                                  ARTICLE VIII

ULTIMATE NET LOSS

                  The term "Ultimate Net Loss" shall mean the amount that the
                  Company pays, or becomes liable to pay, such loss to include
                  all expenses incurred by the Company in connection with the
                  settlement of losses or resistance to or negotiations
                  concerning a loss (including expenses for claim specific
                  Declaratory Judgment Actions whether or not successful) and
                  including salaries and expenses of employees of the Company
                  while diverted from their normal duties to the service of
                  field adjustment, but shall not include office expenses of the
                  Company.

                  All salvages and recoveries and payments (net of the cost of
                  obtaining any salvage, recovery or payment), whether recovered
                  or received prior or subsequent to loss settlement under this
                  Contract, including amounts recoverable under all reinsurances
                  whether collected or not, shall be applied as if recovered or
                  received prior to the aforesaid settlement and shall be
                  deducted from the actual loss incurred to arrive at the amount
                  of Ultimate Net Loss.

                  Nothing in this Article shall be construed to mean losses are
                  not recoverable under this Contract until the Ultimate Net
                  Loss to the Company has been ascertained.


                                   ARTICLE IX

NET RETAINED LINES

                  This Contract applies to only that portion of any Policy which
                  the Company retains net for its own account and, in
                  calculating the amount of any loss hereunder and also in
                  computing the amount or amounts in excess of which this
                  Contract attaches, only loss or losses in respect of that
                  portion of any Policy which the Company retains net for its
                  own account shall be included.




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                  The amount of the Reinsurer's liability hereunder in respect
                  of any loss shall not be increased by reason of the inability
                  of the Company to collect from any other Reinsurer, whether
                  specific or general, any amounts which may have become due
                  whether such inability arises from the insolvency of such
                  other Reinsurer or otherwise.


                                    ARTICLE X

UNDERLYING EXCESS REINSURANCE

                  (Applicable to the Second, Third and Fourth Layers only)

                  The Company has in force underlying catastrophe excess of loss
                  reinsurance and recoveries thereunder shall be disregarded for
                  all purposes of this Contract and shall inure to the sole
                  benefit of the Company.


                                   ARTICLE XI

DEFINITION OF LOSS OCCURRENCE

                  The term "Loss Occurrence" shall mean the sum of all
                  individual losses directly occasioned by any one disaster,
                  accident or loss, or series of disasters, accidents or losses
                  arising out of one event, which occurs anywhere in the world
                  but limited in the United States of America and the Dominion
                  of Canada to within the area of one state of the United States
                  or province of Canada and states or provinces contiguous
                  thereto and to one another. The duration and extent of any one
                  "Loss Occurrence" shall be limited to all individual losses
                  sustained by the Company occurring during any period of 168
                  consecutive hours arising out of and directly occasioned by
                  the same event. The term "Loss Occurrence" shall be further
                  defined as follows:

                           A.       As regards windstorm, hail, tornado,
                                    hurricane, cyclone, including ensuing
                                    collapse and water damage, all individual
                                    losses sustained by the Company occurring
                                    during any period of 72 consecutive hours
                                    arising out of and directly occasioned by
                                    the same event. However, the event need not
                                    be limited to one state or province or
                                    states or provinces contiguous thereto.



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                           B.       As regards riot, riot attending a strike,
                                    civil commotion, vandalism and malicious
                                    mischief, all individual losses sustained by
                                    the Company occurring during any period of
                                    72 consecutive hours within the area of one
                                    municipality or county and the
                                    municipalities or counties contiguous
                                    thereto arising out of and directly
                                    occasioned by the same event. The maximum
                                    duration of 72 consecutive hours may be
                                    extended in respect of individual losses
                                    which occur beyond such 72 consecutive hours
                                    during the continued occupation of an
                                    insured's premises by strikers, provided
                                    such occupation commenced during the
                                    aforesaid period.

                           C.       As regards earthquake (the epicentre of
                                    which need not necessarily be within the
                                    territorial confines referred to in the
                                    opening paragraph of this Article) and fire
                                    following directly occasioned by the
                                    earthquake, only those individual fire
                                    losses which commence during the period of
                                    168 consecutive hours may be included in the
                                    Company's "Loss Occurrence".

                           D.       As regards "Freeze", only individual losses
                                    directly occasioned by collapse, breakage of
                                    glass and water damage (caused by bursting
                                    of frozen pipes and tanks) may be included
                                    in the Company's "Loss Occurrence".

                  For all "Loss Occurrences", except as referred to under
                  sub-paragraph B above, the Company may choose the date and
                  time when any such period of consecutive hours commences,
                  provided that it is not earlier than the date and time of the
                  occurrence of the first recorded individual loss sustained by
                  the Company arising out of that disaster, accident, or loss
                  and provided that only one such period of 168 consecutive
                  hours shall apply with respect to one event, except for those
                  "Loss Occurrences" referred to in sub-paragraph A above, where
                  only one such period of seventy-two (72) consecutive hours
                  shall apply with respect to one event, regardless of the
                  duration of the event.

                  As respect those "Loss Occurrences" referred to in
                  sub-paragraph B above, if the disaster, accident or loss
                  occasioned by the event is of greater duration than 72
                  consecutive hours, then the Company may divide that disaster,
                  accident, or loss into two or more "Loss Occurrences",
                  provided no two periods overlap and no individual loss is
                  included in more than one such period and provided that no
                  period commences earlier than the date and time of the
                  occurrence of the first recorded individual loss sustained by
                  the Company arising out of that disaster, accident or loss.



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                  No individual losses occasioned by an event that would be
                  covered by 72 hours clauses may be included in any "Loss
                  Occurrence" claimed under the 168 hours provision.


                                   ARTICLE XII

NOTICE OF LOSS AND LOSS SETTLEMENT

                  The Company shall adjust, settle, or compromise all claims and
                  losses hereunder.

                  All loss settlements by the Company, including ex-gratia
                  payments, which comply with the terms hereof shall be
                  unconditionally binding upon the Reinsurer.

                  The Company shall advise the Reinsurer promptly of all claims
                  and any subsequent developments pertaining thereto, which may,
                  in the Company's opinion, develop into losses involving
                  reinsurance hereunder. Inadvertent omission or oversight in
                  dispatching such advices shall in no way affect the liability
                  of the Reinsurer under this Contract, provided the Company
                  informs the Reinsurer of such omission or oversight promptly
                  upon its discovery.

                  The Reinsurer shall tender all loss payments as soon as
                  practicable, but in no case longer than forty-five (45) days,
                  after receipt of a satisfactory proof of loss.


                                  ARTICLE XIII

PREMIUM

                  The premium to be paid to the Reinsurer for each layer of
                  Property Catastrophe Excess of Loss Reinsurance provided by
                  this Contract shall be calculated by applying the
                  corresponding premium rate stated in Item 6 of Exhibit A to
                  the Gross Net Written Premium Income accounted for by the
                  Company during each Annual Period of this Contract on all
                  business the subject matter of this Contract.

                  "Gross Net Written Premium Income" is defined as gross written
                  premiums less return premiums and less premiums paid for
                  reinsurances, recoveries under which inure to the benefit of
                  this Contract.



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                  For each layer of Property Catastrophe Excess of Loss
                  Reinsurance provided by this Contract for the first Annual
                  Period, the Company shall pay to the Reinsurer the
                  corresponding annual deposit premium stated in Item 4 of
                  Exhibit A in quarterly installments of the amount stated in
                  Item 5 of Exhibit A, due January 1, 2000, April 1, 2000, July
                  1, 2000 and October 1, 2000.

                  For the second Annual Period, the annual deposit premium shall
                  be calculated at one hundred percent (100%) of the estimated
                  reinsurance premium and shall be payable in quarterly
                  installments of twenty-five percent (25%) of the annual
                  deposit premium, due at January 1, 2001, April 1, 2001, July
                  1, 2001 and October 1, 2001.

                  Within ninety (90) days following the expiration of each
                  Annual Period of this Contract, the Company shall render to
                  the Reinsurer a statement of premium due for each excess layer
                  calculated in accordance with the first paragraph of this
                  Article. An adjustment of premium shall thereupon be made in
                  accordance with the statement submitted by the Company,
                  subject to the corresponding annual minimum premium stated in
                  Item 7 of Exhibit A being due the Reinsurer for the first
                  Annual Period. For the second Annual Period, the annual
                  minimum premium shall be calculated at eighty percent (80%) of
                  the annual deposit premium.


                                   ARTICLE XIV

REINSTATEMENT

                  Each claim under each layer of Property Catastrophe Excess
                  Reinsurance provided by this Contract reduces the amount of
                  indemnity for each Annual Period under such excess layer from
                  the time of occurrence of the loss by the amount of the claim
                  paid, but such amount is hereby reinstated on a pro rated
                  basis from the time of occurrence of the loss in consideration
                  of payment by the Company of an additional premium calculated
                  by applying to the final adjusted premium for each Annual
                  Period under such excess layer the percentage of the Reinsurer
                  limit stated in Item 2 of Exhibit A which is reinstated. Such
                  additional premium shall be paid by the Company when any loss
                  payments are made by the Reinsurer. Nevertheless, the
                  Reinsurer's liability under each excess layer shall never
                  exceed ninety-seven and one half percent (97.50%) for the
                  First and Second Excesses and one-hundred percent (100.00%)
                  for the Third and Fourth Excesses of the limit stated in Item
                  2 of Exhibit A in respect of any one Loss Occurrence and
                  ninety-seven and one half percent (97.50%) for the First and
                  Second Excesses and one-hundred percent (100.00%) for the
                  Third and Fourth Excesses of the limit stated in Item 3 of
                  Exhibit A in respect of all Loss Occurrences during each
                  Annual Period of this Contract.



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                  In the event a reinstatement premium becomes due hereunder
                  before such time as the actual premium has been calculated (as
                  provided for in Article XIII - Premium), the Company shall pay
                  to the Reinsurer a provisional reinstatement premium based on
                  the deposit premium hereunder. The provisional reinstatement
                  premium shall be adjusted as soon as the actual premium has
                  been established.


                                   ARTICLE XV

CURRENCY

                  Whenever the word "Dollars" or the "$" sign appears in this
                  Contract, they shall be construed to mean United States
                  Dollars and all transactions under this Contract shall be in
                  United States Dollars.

                  Amounts paid or received by the Company in any other currency
                  shall be converted to United States Dollars at the rate of
                  exchange at the date such transaction is entered on the books
                  of the Company.


                                   ARTICLE XVI

UNAUTHORIZED REINSURANCE

                  (Applies only to a Reinsurer who does not qualify for full
                  credit with any insurance regulatory authority having
                  jurisdiction over the Company's reserves.)

                  As regards policies or bonds issued by the Company coming
                  within the scope of this Contract, the Company agrees that
                  when it shall file with the insurance regulatory authority or
                  set up on its books reserves for losses covered hereunder
                  which it shall be required by law to set up, it will forward
                  to the Reinsurer a statement showing the proportion of such
                  reserves which is applicable to the Reinsurer. The Reinsurer
                  hereby agrees to fund such reserves in respect of known
                  outstanding losses that have been reported to the Reinsurer
                  and allocated loss adjustment expense relating thereto, losses
                  and allocated loss adjustment expense paid by the Company but
                  not recovered from the Reinsurer, plus reserves for losses
                  incurred but not reported, as shown in the statement prepared
                  by the Company (hereinafter referred to as "Reinsurer's
                  Obligations") by funds withheld, cash advances or a Letter of
                  Credit. The Reinsurer shall have the option of determining the
                  method of funding provided it is acceptable to the insurance
                  regulatory authorities having jurisdiction over the Company's
                  reserves.



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                  When funding by a Letter of Credit, the Reinsurer agrees to
                  apply for and secure for timely delivery to the Company (in
                  accordance with the Company's reporting requirements) a clean,
                  irrevocable and unconditional Letter of Credit issued by a
                  bank and containing provisions acceptable to the insurance
                  regulatory authorities having jurisdiction over the Company's
                  reserves in an amount equal to the Reinsurer's proportion of
                  said reserves. Such Letter of Credit shall be issued for a
                  period of not less than one year, and shall be automatically
                  extended for one year from its date of expiration or any
                  future expiration date unless thirty (30) days (sixty (60)
                  days where required by insurance regulatory authorities) prior
                  to any expiration date the issuing bank shall notify the
                  Company by certified or registered mail that the issuing bank
                  elects not to consider the Letter of Credit extended for any
                  additional period.

                  The Reinsurer and Company agree that the Letters of Credit
                  provided by the Reinsurer pursuant to the provisions of this
                  Contract may be drawn upon at any time, notwithstanding any
                  other provision of this Contract, and be utilized by the
                  Company or any successor, by operation of law, of the Company
                  including, without limitation, any liquidator, rehabilitator,
                  receiver or conservator of the Company for the following
                  purposes, unless otherwise provided for in a separate Trust
                  Agreement:

                  A.       to reimburse the Company for the Reinsurer's
                           Obligations, the payment of which is due under the
                           terms of this Contract and which has not been
                           otherwise paid;

                  B.       to make refund of any sum which is in excess of the
                           actual amount required to pay the Reinsurer's
                           Obligations under this Contract;

                  C.       to fund an account with the Company for the
                           Reinsurer's Obligations. Such cash deposit shall be
                           held in an interest bearing account separate from the
                           Company's other assets, and interest thereon not in
                           excess of the prime rate shall accrue to the benefit
                           of the Reinsurer;

                  D.       to pay the Reinsurer's share of any other amounts the
                           Company claims are due under this Contract.

                  In the event the amount drawn by the Company on any Letter of
                  Credit is in excess of the actual amount required for A. or
                  C., or in the case of D., the actual amount determined to be
                  due, the Company shall promptly return to the Reinsurer the
                  excess amount so drawn. All of the foregoing shall be applied
                  without diminution because of insolvency on the part of the
                  Company or the Reinsurer.



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                  The issuing bank shall have no responsibility whatsoever in
                  connection with the propriety of withdrawals made by the
                  Company or the disposition of funds withdrawn, except to
                  ensure that withdrawals are made only upon the order of
                  properly authorized representatives of the Company.

                  At annual intervals, or more frequently as agreed but never
                  more frequently than quarterly, the Company shall prepare a
                  specific statement of the Reinsurer's Obligations, for the
                  sole purpose of amending the Letter of Credit, in the
                  following manner.

                  A.       If the statement shows that the Reinsurer's
                           Obligations exceed the balance of credit as of the
                           statement date, the Reinsurer shall, within thirty
                           (30) days after receipt of notice of such excess,
                           secure delivery to the Company of an amendment to the
                           Letter of Credit increasing the amount of credit by
                           the amount of such difference.

                  B.       If, however, the statement shows that the Reinsurer's
                           Obligations are less than the balance of credit as of
                           the statement date, the Company shall, within thirty
                           (30) days after receipt of written request from the
                           Reinsurer, release such excess credit by agreeing to
                           secure an amendment to the Letter of Credit reducing
                           the amount of credit available by the amount of such
                           excess credit.


                                  ARTICLE XVII

ACCESS TO RECORDS

                  The Company shall place at the disposal of the Reinsurer and
                  the Reinsurer shall have the right to inspect through its
                  authorized representative, at all reasonable times during the
                  term of this Contract and thereafter, the books, records and
                  papers of the Company pertaining to the reinsurance provided
                  hereunder and all claims made in connection therewith.


                                  ARTICLE XVIII

OFFSET

                  The Company and the Reinsurer, each at its option, may offset
                  any balance or balances, whether on account of premiums,
                  claims and losses, loss expenses or salvages due from one
                  party to the other under this Contract; provided, however,
                  that in the event of the insolvency of a party hereto, offsets
                  shall only be allowed in accordance with applicable statutes
                  and regulations.



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                                   ARTICLE XIX

ERRORS AND OMISSIONS

                  Any inadvertent delay, omission or error shall not be held to
                  relieve either party hereto from any liability which would
                  attach to either party if such delay, omission or error had
                  not been made, provided such delay, omission or error is
                  rectified as soon as practicable after discovery.


                                   ARTICLE XX

BINDING ARBITRATION

                  If any dispute shall arise between the parties to this
                  Contract, either before or after its termination, with
                  reference to the interpretation of this Contract, including
                  the formation or validity thereof, or the rights of either
                  party with respect to any transactions under this Contract,
                  the dispute shall be referred to three (3) arbitrators. One
                  arbitrator is to be chosen by each party and the third by the
                  two so chosen. If either party refuses or neglects to appoint
                  an arbitrator within thirty (30) days after the receipt of
                  written notice from the other party requesting it to do so,
                  the requesting party may nominate two (2) arbitrators who
                  shall choose the third.

                  In the event the arbitrators do not agree on the selection of
                  the third arbitrator within thirty (30) days, each arbitrator
                  shall name three (3), of whom the other arbitrator shall
                  decline two (2) and the decision shall be made by drawing
                  lots. All arbitrators shall be executive or retired officers
                  of insurance or reinsurance companies or underwriters at
                  Lloyd's of London, not under the control of either party to
                  this Contract.

                  If more than one Reinsurer is involved in the same dispute,
                  all such Reinsurers shall constitute and act as one party for
                  the purposes of this Article, provided, however, that nothing
                  herein shall impair the rights of such Reinsurers to assert
                  several, rather than joint, defenses or claims, nor be
                  construed as changing the liability of the Reinsurer under the
                  terms of this Contract from several to joint.

                  Each party shall submit its case to the arbitrators within
                  thirty (30) days of the appointment of the arbitrators. The
                  arbitrators shall consider this Contract an honorable
                  engagement rather than merely a legal obligation; they are
                  relieved of all judicial formalities and may abstain from
                  following the strict rules of law. The decision of a majority
                  of the arbitrators shall be final and binding on both the
                  Company and the Reinsurer. Judgment may be entered upon the
                  award of the arbitrators in any court having jurisdiction.




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                  Each party shall bear the fee and expenses of its own
                  arbitrator, one half of the fees and the expenses of the third
                  arbitrator and one half of the other expenses of the
                  arbitration. In the event both arbitrators are chosen by one
                  party, the fees of the arbitrators shall be equally divided
                  between parties.

                  Any such arbitration shall take place in Hatboro,
                  Pennsylvania, unless some other location is mutually agreed
                  upon by the parties.


                                   ARTICLE XXI

INSOLVENCY

                  The reinsurance under this Contract shall be payable by the
                  Reinsurer on the basis of the liability of one or more of the
                  Companies under the Policy or Policies reinsured without
                  diminution because of the insolvency of one or more of the
                  Companies reinsured or because the liquidator, receiver,
                  conservator or statutory successor of the Company(ies) has
                  failed to pay all or a portion of any claim.

                  In the event of the insolvency of one or more of the Companies
                  reinsured, the liquidator, receiver, conservator or statutory
                  successor of the Company(ies) shall give written notice to the
                  Reinsurer of the pendency of a claim against the insolvent
                  Company(ies) on the Policy or Policies reinsured within a
                  reasonable time after such claim is filed in the insolvency
                  proceeding and during the pendency of such claim the Reinsurer
                  may investigate such claim and interpose, at its own expense,
                  in the proceeding where such claim is to be adjudicated any
                  defense or defenses which it may deem available to the Company
                  (ies) or its liquidator, receiver, conservator or statutory
                  successor. The expense thus incurred by the Reinsurer shall be
                  chargeable, subject to court approval, against the insolvent
                  Company(ies) as part of the expense of liquidation to the
                  extent of a proportionate share of the benefit which may
                  accrue to the Company(ies) solely as a result of the defense
                  undertaken by the Reinsurer.

                  Where two or more Reinsurers are involved in the same claim
                  and a majority in interest elect to interpose defense to such
                  claim, the expense shall be apportioned in accordance with the
                  terms of this Contract as though such expense had been
                  incurred by the Company(ies).


                                 PAGE 15 of 19
<PAGE>


                  In the event of the insolvency of one or more of the Companies
                  reinsured, the reinsurance under this Contract shall be
                  payable by the Reinsurer directly to the Company(ies) or to
                  the liquidator, receiver, conservator or statutory successor,
                  except as provided by Subsection (A) of Section 4118 of the
                  Insurance Law of New York or except where (I) the Contract
                  specifies another payee of such reinsurance in the event of
                  the insolvency of the Company(ies) and (II) the Reinsurer with
                  the consent of the direct insureds and, with the prior
                  approval of the Superintendent of Insurance of New York to the
                  certificate of assumption issued to New York direct insureds,
                  has assumed such Policy obligations of the Company(ies) as its
                  direct obligations to the payees under such Policies, in
                  substitution for the obligations of the Company(ies) to such
                  payees.


                                  ARTICLE XXII

SERVICE OF SUIT

                  (This Article only applies to reinsurers domiciled outside of
                  the United States and/or unauthorized in any state, territory,
                  or district of the United States having jurisdiction over the
                  Company).

                  It is agreed that in the event of the failure of the Reinsurer
                  hereon to pay any amount claimed to be due hereunder, the
                  Reinsurer hereon, at the request of the Company, will submit
                  to the jurisdiction of a court of competent jurisdiction
                  within the United States. Nothing in this clause constitutes
                  or should be understood to constitute a waiver of the
                  Reinsurer's rights to commence an action in any court of
                  competent jurisdiction in the United States, to remove an
                  action to a United States District Court, or to seek a
                  transfer of a case to another court as permitted by the laws
                  of the United States or of any state in the United States. It
                  is further agreed that service of process in such suit may be
                  made upon Mendes & Mount, 750 Seventh Avenue, New York, New
                  York 10019, and that in any suit instituted against the
                  Reinsurer upon this Contract, the Reinsurer will abide by the
                  final decision of such court or of any appellate court in the
                  event of an appeal.

                  The above-named are authorized and directed to accept service
                  of process on behalf of the Reinsurer in any such suit and/or
                  upon the request of the Company to give a written undertaking
                  to the Company, that they will enter a general appearance upon
                  the Reinsurer's behalf in the event such a suit shall be
                  instituted.



                                 PAGE 16 of 19
<PAGE>



                  Further, pursuant to any statute of any state, territory or
                  district of the United States which makes provision therefor,
                  the Reinsurer hereon hereby designates the Superintendent,
                  Commissioner or Director of Insurance or other officer
                  specified for that purpose in the statute, or his successor or
                  successors in office, as its true and lawful attorney upon
                  whom may be served any lawful process in any action, suit or
                  proceeding instituted by or on behalf of the Company or any
                  beneficiary hereunder arising out of this Contract of
                  reinsurance, and hereby designates the above-named as the
                  person to whom the said officer is authorized to mail such
                  process or a true copy thereof.


                                  ARTICLE XXIII

TAXES

                  In consideration of the terms under which this Contract is
                  issued, the Company will not claim a deduction in respect of
                  the premium hereon when making tax returns, other than income
                  or profits tax returns, to any state or territory of the
                  United States of America or the District of Columbia.


                                  ARTICLE XXIV

FEDERAL EXCISE TAX

                  (Applicable to those Reinsurers, excepting underwriters at
                  Lloyd's London and other Reinsurers exempt from Federal Excise
                  Tax, who are domiciled outside the United States of America.)

                  The Reinsurer has agreed to allow for the purpose of paying
                  the Federal Excise Tax the applicable percentage of the
                  premium payable hereon (as imposed under Section 4371 of the
                  Internal Revenue Code) to the extent such premium is subject
                  to the Federal Excise Tax.

                  In the event of any return of premium becoming due hereunder
                  the Reinsurer will deduct the applicable percentage from the
                  return premium payable hereon and the Company or its agent
                  should take steps to recover the tax from the United States
                  Government.




                                 PAGE 17 of 19
<PAGE>



                                   ARTICLE XXV

GOVERNING LAW

                  This Contract shall be governed as to performance,
                  administration and interpretation by the laws of the State of
                  Pennsylvania, exclusive of the rules with respect to conflicts
                  of law, except as to rules with respect to credit for
                  reinsurance in which case the applicable rules of all states
                  shall apply.


                                  ARTICLE XXVI

CONFIDENTIALITY

                  The Reinsurer, except with the express prior written consent
                  of the Company, shall not directly or indirectly, communicate,
                  disclose or divulge to any third party, any knowledge or
                  information that may be acquired either directly or indirectly
                  as a result of the inspection of the Company's books, records
                  and papers. The restrictions as outlined in this Article shall
                  not apply to communication or disclosures that the Reinsurer
                  is required to make to its statutory auditors,
                  retrocessionaires, legal counsel, arbitrators involved in any
                  arbitration procedures under this Contract or disclosures
                  required upon subpoena or other duly-issued order of a court
                  or other governmental agency or regulatory authority so long
                  as the Reinsurer shall have given the Company sufficient
                  advance written notice (to the President of the Company) of
                  required disclosures pursuant to a subpoena or other duly
                  issued order of a court or other governmental agency or
                  regulatory authority.


                                  ARTICLE XXVII

SEVERABILITY

                  If any provision of this Contract should be invalid under
                  applicable laws, the latter shall control but only to the
                  extent of the conflict without affecting the remaining
                  provisions of this Contract.




                                 PAGE 18 of 19
<PAGE>



                                 ARTICLE XXVIII

INTERMEDIARY

                  Willis Re Inc., 11 Penn Center, Suite 2700, 1835 Market
                  Street, Philadelphia, Pennsylvania 19103 is hereby recognized
                  as the intermediary negotiating this Contract and through whom
                  all communications relating thereto shall be transmitted to
                  the Company or the Reinsurer. However, all communications
                  concerning accounts, claim information, funds and inquiries
                  related thereto shall be transmitted to the Company or the
                  Reinsurer through Willis Re Inc., 940 Golf House Road West,
                  P.O. Box 2500, Stoney Creek, North Carolina, 27377-2500.
                  Payments by the Company to Willis Re Inc. shall be deemed to
                  constitute payment to the Reinsurer and payments by the
                  Reinsurer to Willis Re Inc. shall be deemed to constitute
                  payment to the Company only to the extent that such payments
                  are actually received by the Company.









MKB/JAF - 2/9/00



                                 PAGE 19 of 19