Exhibit 10-19

                            AGREEMENT OF REINSURANCE
                                    NO. 8759

                                     between

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

                                       and

                         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")
   ---------------------------------------------------------------------------

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
                            Other Liability Business

         EXHIBIT B  -  EXCESS OF LOSS REINSURANCE
                                       of
                          Automobile Liability Business



<PAGE>

         EXHIBIT C  -  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.

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:



                                      -2-
<PAGE>

         Client Accounting Unit
         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.


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.



                                      -3-
<PAGE>

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,  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.




                                      -4-
<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               day of                                     , 200___,
     -------------        ------------------------------------

                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY




Attest:
         -----------------------------------

and this           day of                                     , 200___.
         ---------        ------------------------------------

                         GENERAL REINSURANCE CORPORATION



                                                                Vice President
Attest:
         -----------------------------------



                                      -5-
<PAGE>


                                    EXHIBIT A

                         Attached to and made a part of
                        Agreement of Reinsurance No. 8759

                           EXCESS OF LOSS REINSURANCE
                                       of
                            Other Liability Business
  ---------------------------------------------------------------------------


<PAGE>

Section 1  -  BUSINESS SUBJECT TO THIS EXHIBIT



This Exhibit  shall apply to Other  Liability  Business  written by the Company,
which  is  defined  as  insurance   classified  as  other  liability  (including
employers'  liability  stop gap  coverage  but  excluding  hired  and  non-owned
automobile  liability) and section II under commercial multiple peril (including
employers'  liability stop gap coverage and businessowners) 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.


Section 2  -  COMMENCEMENT

This  Exhibit  shall apply to new and renewal  policies of the Company  becoming
effective  at and after 12:01 A.M.,  January 1, 2000,  with respect to claims or
losses  resulting  from  occurrences  insured  under  coverages of such policies
written on an occurrence  basis and with respect to claims received and recorded
by the Company or the insured  under  coverages  of such  policies  written on a
claims made basis.

This Exhibit shall  continue in force until  terminated  in accordance  with the
provisions of the section entitled TERMINATION.


Section 3  -  LIABILITY OF THE REINSURER

The Reinsurer shall pay to the Company, with respect to Other 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.




                                     A - 6
<PAGE>


                                       SCHEDULE OF REINSURANCE
-------------------------------------------------------------------------------
                              Company                   Limit of Liability
Class of Business            Retention                   of the Reinsurer
-------------------------------------------------------------------------------
                                                 First                Second
                                             Excess Cover          Excess Cover

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


Section 4  -  COMBINATION COVER

If an  Occurrence  takes  place  which  involves  the Other  Liability  business
reinsured  hereunder and/or the Automobile  Liability  business  reinsured under
Exhibit B to this Agreement  and/or one Property Risk reinsured  under Exhibit C
to this  Agreement in  combination,  the Reinsurer  shall pay to the Company the
amount of Net Loss in excess of a  Combination  Company  Retention  equal to the
highest  Company  Retention  for the  business  involved  with  respect  to such
Occurrence, but not exceeding a Limit of Liability of the Reinsurer equal to the
difference between the Combination  Company Retention and the sum of the Company
Retentions  for the business  involved.  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 Exhibits B and C.


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)    Other Liability Combined Single Limit      $1,000,000 each occurrence
           (Including Employers' Liability Stop
           Gap Coverage)



                                     A - 7
<PAGE>

    (b)    Section II Liability under Commercial      $1,000,000 each occurrence
           Multiple Peril (Including Employers'
           Liability Stop Gap Coverage and
           Businessowners)


Section 7  -  DEFINITIONS

         (a)    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.

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

                Notwithstanding   the   provisions   of  the  article   entitled
                MANAGEMENT  OF CLAIMS AND LOSSES,  this term shall also  include
                100% of  Losses in  Excess  of  Policy  Limits  and 80% of Extra
                Contractual Obligations.

         (c)    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.

         (d)    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.



                                     A - 8
<PAGE>

        (e)     Losses  in  Excess  of  Policy  Limits  and  Extra   Contractual
                Obligations

                (1)   The term  "Loss in Excess of Policy  Limits"  shall mean a
                      payment  made to a third  party  claimant in excess of the
                      policy limit which the Company is legally obligated to pay
                      resulting  from an action taken by the insured or assignee
                      arising  from a third  party  claimant  being  awarded  an
                      amount in excess of the Company's policy limit 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.

                (2)   The term "Extra Contractual  Obligation" shall mean a loss
                      which the Company is legally  obligated  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 greater than the Company Retention.

                The date on which a Loss in Excess of Policy  Limits or an Extra
                Contractual  Obligation  is  incurred  by the  Company  shall be
                deemed,  in all  circumstances,  to be the date of the  original
                Occurrence.

                There shall be no coverage hereunder where the Loss in Excess of
                the Policy Limit or 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   definition  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.

         (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,  personal injury,  advertising injury or property damage
                arising out of continuous or repeated  exposure to substantially




                                     A - 9
<PAGE>

                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,
                      personal  injury,  advertising  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,
                      personal  injury,  advertising  injury or property  damage
                      occurs, and any related claims reported subsequent to such
                      date  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,  after  deduction of the premium
                paid  for  reinsurance  which  inures  to the  benefit  of  this
                Exhibit.

                For purposes of this Exhibit, subject premium for businessowners
                shall be deemed to be 40% of the total policy premium.


Section 8  -  EXCLUSIONS

This Exhibit does not apply to:

         (a)    Reinsurance  assumed by the Company,  excepting  reinsurance  of
                primary business assumed from affiliated companies and excepting
                reinsurance of business written by another  insurance company at
                the request of the Company and 100% reinsured by the Company;

         (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




                                     A - 10
<PAGE>

                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;

        (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 $25,000 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




                                     A - 11
<PAGE>

                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,  including non owned and hired
                automobile liability when written as part of a general liability
                policy;

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

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

                (2)   Amusement  parks,   amusement  devices  (other  than  coin
                      operated   devices),   fairs,   exhibitions,    carnivals,
                      circuses,  and zoos (other than petting 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 25,000 or more people;

                (4)   Arenas,  grandstands,  stadiums,  theatres,  halls and any
                      other indoor venues with an expected capacity,  at any one
                      time, of 25,000 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,




                                     A - 12
<PAGE>

                      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,

                      (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




                                     A - 13
<PAGE>

                      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,
                      Special Events program, Bar and Tavern program, or Package
                      Store and Grocery Store 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   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;

         (p)    Homeowners Section II and comprehensive personal liability;



                                     A - 14
<PAGE>

         (q)    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 any premises,
operations, products, or completed operations listed in exclusion (o) items (1),
(2), (5), (7), (14), (15), (17), (19),  (26)(ii) and (26)(v),  and (q) 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) items (1), (2), (5), (7),
(14),  (15),  (17),  (19),  (26)(ii) and (26)(v),  and (q), 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)  For the  First  Excess  Cover,  5.417% of the  Company's  Subject
               Premium written.

          (b)  For the Second  Excess  Cover,  2.500% of the  Company's  Subject
               Premium written.

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


Section 10  -  CONTINGENT COMMISSION

In  addition  to  the  fixed  commission  set  forth  in  the  section  entitled
REINSURANCE  PREMIUM AND  COMMISSION,  the Reinsurer  shall pay to the Company a
contingent commis-





                                     A - 15
<PAGE>

sion  of  60% of  the  amount  by  which  the  Reinsurer's  Income  exceeds  the
Reinsurer's Outgo for each Contingent Period.

With respect to the  contingent  commission  and the  calculation  thereof,  the
following definitions and reporting provisions shall apply:

         (a)    Contingent Period

                The initial Contingent Period shall be from May 1, 1996, through
                December 31, 2000 (the period from May 1, 1996 through  December
                31, 1999 under Exhibit A of prior Agreement No. 8206 between the
                Company and the  Reinsurer  and the period from  January 1, 2000
                through  December 31, 2000 under this  Exhibit),  and thereafter
                each  Contingent  Period  shall  consist  of 36  months to begin
                concurrently  with the  expiration  of the  previous  Contingent
                Period; however,

                (1)   Should the date of  termination  of this Exhibit  coincide
                      with  the   completion  of  a  Contingent   Period,   such
                      Contingent   Period  and  the  period  from  the  date  of
                      termination   until   expiration  or  termination  of  the
                      reinsurance,  if any, then in effect shall be combined and
                      shall constitute a single Contingent Period.

                (2)   Should Company terminate this Exhibit after the completion
                      of the initial  Contingent  Period or Reinsurer  terminate
                      this Exhibit at any time and the date of  termination  not
                      coincide with the completion of a Contingent  Period,  the
                      following periods shall be combined and shall constitute a
                      single Contingent Period:

                           (i)      The last Contingent  Period  completed prior
                                    to the date of termination, and

                           (ii)     The   period   from   the   last   completed
                                    Contingent   Period   until   the   date  of
                                    termination, and

                           (iii)    The  period  from  the  date of  termination
                                    until   expiration  or  termination  of  the
                                    reinsurance, if any, then in effect.

                (3)   Should  the  Company  terminate  this  Exhibit  during the
                      initial Contingent Period, the provisions of sub-paragraph
                      (g) of this Section shall apply.

         (b)    Reinsurer's Income

                This term shall mean:

                  (1)      The First Excess reinsurance premium written,  net of
                           fixed commission, during the Contingent Period;



                                     A - 16
<PAGE>

                  (2)      Plus the First Excess  reinsurance  premium unearned,
                           net or fixed commission,  at the end of the preceding
                           Contingent   Period  (or  as  respects   the  initial
                           Contingent Period, as of May 1, 1996) calculated on a
                           monthly pro rata basis;

                  (3)      Less the First Excess  reinsurance  premium unearned,
                           net of fixed commission, at the end of the Contingent
                           Period calculated on a monthly pro rata basis.

         (c)    Reinsurer's Outgo

                This term shall mean:

                  (1)      The sum of the Reinsurer's  payments and reserves for
                           claims,  losses  and  adjustment  expense  (including
                           reserves  for  claims  and  losses  incurred  but not
                           reported,  as set forth in  sub-paragraph  (d) below)
                           less the  Reinsurer's  portion of salvage  recovered,
                           resulting  from  Occurrences  taking place during the
                           Contingent  Period and  allocated to the First Excess
                           Cover;

                  (2)      Plus 20% of the  Reinsurer's  Income as an  allowance
                           for the Reinsurer's management expenses.

         (d)    Reserves for Claims and Losses Incurred but Not Reported

                The  reserves  for claims and losses  incurred  but not reported
                (IBNR)  shall be  determined  separately  for each twelve  month
                period within each Contingent Period. IBNR will be determined by
                multiplying the Reinsurer's  Income for each twelve month period
                by the  appropriate  factor  based on the maturity of the twelve
                month period from its commencement date.

                     Maturity (In Months)                IBNR Factor

                              12                             80%
                              24                             60%
                              36                             40%
                              48                             20%
                       60 and subsequent                      0%

         (e)    Statements of Contingent Commission (Interim Statements)

                As  respects  the  initial   Contingent   Period,   as  soon  as
                practicable  after  December 31, 1998 and December 31, 1999, the
                Reinsurer  shall  render to the Company an interim  statement of
                contingent  commission for the period from the  commencement  of
                the  Contingent  Period  until such  December  31st.  The amount
                thereof shall be balanced against the amount previously paid the




                                     A - 17
<PAGE>

                Company for the Contingent  Period and the difference due either
                party shall be remitted promptly.

                As  respects  each  subsequent  Contingent  Period,  as  soon as
                practicable  after each  anniversary  of the  commencement  of a
                Contingent  Period, the Reinsurer shall render to the Company an
                interim  statement of contingent  commission for the period from
                the   commencement   of  the   Contingent   Period   until  such
                anniversary.  The amount  thereof shall be balanced  against the
                amount previously paid the Company for the Contingent Period and
                the difference due either party shall be remitted promptly.

         (f)    Statements of Contingent Commission (Entire Contingent Period)

                As soon as practicable after the end of a Contingent Period, the
                Reinsurer  shall render to the Company a statement of contingent
                commission for the entire Contingent  Period. The amount thereof
                shall be  balanced  against  the amount  previously  allowed the
                Company  for the  Contingent  Period  and the  amount due either
                party shall be remitted promptly.  Annually thereafter,  revised
                statements shall be rendered to the Company  reflecting  changes
                in the original  statement until all claims and losses resulting
                from Occurrences  taking place during the Contingent  Period are
                fully  discharged,  and the amount due either  party  because of
                such changes shall be remitted promptly.

         (g)    Termination

                If this Exhibit is  terminated by the Company at any time during
                the period from January 1, 2000 through  December 31, 2000,  the
                contingent commission percentage shall be 66 2/3% of 60%.

                If this  Exhibit  is still  in  force at the end of the  initial
                Contingent Period, the contingent  commission percentage for the
                entire Contingent Period shall be 100% of 60%.

                If this Exhibit is  terminated  by the Company  after the end of
                the initial  Contingent  Period or by the Reinsurer at any time,
                the contingent  commission percentage for any Contingent Period,
                or fractional part thereof, shall be 100% of 60%.


Section 11  -  REPORTS AND REMITTANCES

         (a)    Reinsurance Premium

                Within 45 days  after the close of each  calendar  quarter,  the
                Company   shall  render  to  the   Reinsurer  a  report  of  the




                                     A - 18
<PAGE>

                reinsurance   premium  for  the  quarter  with  respect  to  the
                Company's   Subject   Premium   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 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;



                                     A - 19
<PAGE>

                (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.

                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 12  - TERMINATION

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  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 - 20
<PAGE>

                                    EXHIBIT B

                         Attached to and made a part of
                        Agreement of Reinsurance No. 8759

                           EXCESS OF LOSS REINSURANCE
                                       of
                          Automobile Liability Business
  ---------------------------------------------------------------------------



                                     B - 21
<PAGE>

Section 1  -  BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Liability Business written by the Company,  which is
defined as insurance classified as commercial  automobile  liability,  including
non owned and  hired  automobile  liability  when  written  as part of a general
liability  policy,  commercial  automobile  uninsured/  underinsured  motorists,
commercial  automobile personal injury protection,  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.


Section 2  -  COMMENCEMENT

This Exhibit shall apply to claims or losses resulting from Occurrences  insured
under new and renewal  policies of the Company  becoming  effective at and after
12:01 A.M.,  January 1, 2000,  and shall  continue in force until  terminated in
accordance with the provisions of the section entitled TERMINATION.


Section 3  -  LIABILITY OF THE REINSURER

The Reinsurer  shall pay to the Company,  with respect to  Automobile  Liability
business of the Company, the amount of Net Loss each Occurrence in excess of the
Company  Retention but not exceeding the Limits of Liability of the Reinsurer as
set forth in the Schedule of Reinsurance.

<TABLE>
<CAPTION>
                                                  SCHEDULE OF REINSURANCE
---------------------------------------------------------------------------------------------------------
Class of Business                   Company Retention             Limits of Liability of the Reinsurer
---------------------------------------------------------------------------------------------------------
                                                                     First                    Second
                                                                 Excess Cover              Excess Cover
<S>                                     <C>                        <C>                      <C>
Automobile Liability Business           $250,000                   $750,000                 $2,000,000
---------------------------------------------------------------------------------------------------------
</TABLE>




                                     B - 22
<PAGE>

Section 4  -  COMBINATION COVER

If an Occurrence  takes place which involves the Automobile  Liability  business
reinsured  hereunder and/or any Other Liability business reinsured under Exhibit
A to this Agreement  and/or one Property Risk reinsured  under Exhibit C to this
Agreement in  combination,  the provisions of the section  entitled  COMBINATION
COVER of said Exhibit A shall apply.


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)    Commercial Automobile Bodily             $1,000,000 each person*
          Injury Liability                         $1,000,000 each occurrence*

   (b)    Commercial Automobile Property           $ 250,000* each occurrence
          Damage

   (c)    Commercial Automobile Liability          $1,000,000 each occurrence*
          Combined Single Limit

   (d)    Commercial Uninsured and Underinsured    $1,000,000 each person*
          Motorists Coverages                      $1,000,000 each occurrence*

   (e)    Personal Injury Protection Coverage      Statutory Limits

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

   *As respects  policies written in Texas by another insurance carrier at
   the request of the Company and 100%  reinsured  by the  Company,  these
   amounts shall be increased by $51.




                                     B - 23
<PAGE>

Section 7  -  DEFINITIONS

         (a)    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.

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

                Notwithstanding   the   provisions   of  the  article   entitled
                MANAGEMENT  OF CLAIMS AND LOSSES,  this term shall also  include
                100% of  Losses in  Excess  of  Policy  Limits  and 80% of Extra
                Contractual Obligations.

         (c)    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.

         (d)    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.

         (e)    Losses in Excess of Policy Limits and Extra Contractual
                Obligations

                (1)   The term  "Loss in Excess of Policy  Limits"  shall mean a
                      payment  made to a third  party  claimant in excess of the
                      policy limit which the Company is legally obligated to pay
                      resulting  from an action taken by the insured or assignee
                      arising  from a third  party  claimant  being  awarded  an
                      amount in excess of the Company's policy limit 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




                                     B - 24
<PAGE>

                      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.

                (2)   The term "Extra Contractual  Obligation" shall mean a loss
                      which the Company is legally  obligated  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 greater than the Company Retention.

                The date on which a Loss in Excess of Policy  Limits or an Extra
                Contractual  Obligation  is  incurred  by the  Company  shall be
                deemed,  in all  circumstances,  to be the date of the  original
                Occurrence.

                There shall be no coverage hereunder where the Loss in Excess of
                the Policy Limit or 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   definition  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.

         (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.

         (g)    Subject Written Premium

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



                                     B - 25
<PAGE>

Section 8  -  EXCLUSIONS

This Exhibit does not apply to:

         (a)    Reinsurance  assumed by the Company,  excepting  reinsurance  of
                primary business assumed from affiliated companies and excepting
                reinsurance of business written by another  insurance company at
                the request of the Company and 100% reinsured by the Company;

         (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;

         (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 $25,000 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




                                     B - 26
<PAGE>

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

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

         (m)    Garagekeepers legal liability and general liability,  other than
                non owned and hired automobile liability when written as part of
                a general liability policy;

         (n)    Automobile   liability  insurance  relating  to  the  ownership,
                maintenance, or use of:

                (1)   Automobiles used in organized speed contests;

                (2)   Emergency vehicles, including police and fire department
                      vehicles;

                (3)   Automobiles  leased or rented to others  without  drivers;
                      however,  this  exclusion  shall not  apply to  substitute
                      automobiles maintained by new car dealers;

                (4)   Commercial  automobiles  customarily operated beyond a 500
                      mile  radius as  defined in the  manuals of the  Insurance
                      Services  Office,  except  for  accounts  with  up to five
                      vehicles hauling their own goods;

                (5)   Commercial  automobiles  over  45,000 lbs.  gross  vehicle
                      weight  or gross  combination  weight  as  defined  in the
                      manuals  of the  Insurance  Services  Office,  except  for
                      accounts with up to five vehicles hauling their own goods;




                                     B - 27
<PAGE>

                (6)   Public automobiles as defined in the manuals of the
                      Insurance Services Office;

                (7)   Vehicles  used for  transporting  corrosives,  explosives,
                      flammable  gases,  flammable  liquids,  flammable  solids,
                      hazardous waste,  non-flammable gases, oxidizers,  poisons
                      or radioactive materials.

If the Company provides  insurance for an insured with respect to the ownership,
maintenance,  or use of the vehicles listed in exclusions  (n)(1) through (n)(6)
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  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  (n) items (1), (2), (3), (4),
(5), and (6), 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)    For the First Excess Cover:

                  (1)      For  the  commercial  automobile  liability  business
                           (other than courier) reinsured  hereunder,  12.00% of
                           the Company's Subject Written Premium;

                  (2)      For   the   garage   liability   business   reinsured
                           hereunder,  19.59% of the Company's  Subject  Written
                           Premium;

                  (3)      For the courier business reinsured hereunder,  32.33%
                           of the Company's Subject Written Premium.

                The reinsurance  premiums set forth in above are provisional and
                shall be  adjusted at the rates set forth in Appendix A attached
                hereto.

         (b)    For the Second Excess Cover, 1.67% of the Company's Subject
                Written Premium.

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



                                     B - 28
<PAGE>

Section 10  -  REPORTS AND REMITTANCES

         (a)    Reinsurance Premium

                Within 45 days  after the close of each  calendar  quarter,  the
                Company   shall  render  to  the   Reinsurer  a  report  of  the
                provisional  reinsurance  premium set forth in sub-paragraph (a)
                of the section entitled  REINSURANCE  PREMIUM AND COMMISSION for
                the   quarter   and  the   reinsurance   premium  set  forth  in
                sub-paragraph  (b) of said  Section 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 reinsurance premium in force
                by  line  of  insurance,  by  term  and by  month  and  year  of
                expiration.

                Within  45 days  after  the  close of each  calendar  year,  the
                Company  shall render to the Reinsurer a report of the Company's
                Subject  Written  Premium  during the year.  The  Company  shall
                calculate the actual  reinsurance  premium thereon in accordance
                with the provisions of sub-paragraph (a) of the section entitled
                REINSURANCE PREMIUM AND COMMISSION and shall balance such amount
                against the provisional reinsurance premium previously paid. Any
                difference due the Reinsurer shall be remitted with such report.
                Any difference due the Company shall be remitted  promptly,  but
                within no more than 25 days after receipt of such report.

         (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;




                                     B - 29
<PAGE>

                  (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.

                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.






                                     B - 30
<PAGE>

Section 11  - TERMINATION

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 claims and 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 - 31
<PAGE>

                                    EXHIBIT C

                         Attached to and made a part of
                        Agreement of Reinsurance No. 8759

                           EXCESS OF LOSS REINSURANCE
                                       of
                                Property Business
  ---------------------------------------------------------------------------

Section 1  -  BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Property  Business written by the Company,  which is
defined as insurance which is classified in the NAIC form of annual statement as
fire,  allied  lines,   inland  marine,   commercial  multiple  peril  (property
coverages) or automobile  physical  damage  (dealers open lot or garage  keepers
legal  liability  each with a maximum  policy limit of  $500,000),  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.


Section 2  -  COMMENCEMENT

This Exhibit shall apply to losses resulting from Occurrences  insured under new
and renewal policies of the Company becoming  effective at and after 12:01 A.M.,
January 1, 2000, and shall continue in force until terminated in accordance with
the provisions of the section entitled TERMINATION.


Section 3  -  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 the First Excess Cover shall not
exceed a total  payment of Net Loss of  $600,000  on all Risks  involved  in one
Occurrence;  the Limit of Liability  of the  Reinsurer  under the Second  Excess
Cover shall not exceed a total  payment of Net Loss of  $1,500,000  on all Risks
involved in one  Occurrence;  and the Limit of Liability of the Reinsurer  under
the  Third  Excess  Cover  shall  not  exceed  a total  payment  of Net  Loss of
$2,000,000 on all Risks involved in one Occurrence.




                                     C - 32
<PAGE>


<TABLE>
<CAPTION>
                                      SCHEDULE OF REINSURANCE
-------------------------------------------------------------------------------------------------
                         Company
Class of Business       Retention                    Limit of Liability of the Reinsurer
-------------------------------------------------------------------------------------------------
                                                First              Second              Third
                                            Excess Cover        Excess Cover       Excess Cover
<S>                     <C>                   <C>                 <C>               <C>
Property Business       $300,000              $200,000            $500,000          $1,000,000
-------------------------------------------------------------------------------------------------
</TABLE>

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 4  -  COMBINATION COVER

If an Occurrence  takes place which involves one Property Risk  reinsured  under
this Exhibit and the Other Liability  business  reinsured under Exhibit A or the
Automobile  Liability  business  reinsured under Exhibit B in  combination,  the
provisions  of the section  entitled  COMBINATION  COVER of said Exhibit A shall
apply.


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.

When the amount of  insurance  written  by the  Company  on an  individual  Risk
exceeds  $2,000,000,  permission is granted the Company to purchase  facultative
excess of loss or share  reinsurance  for the excess amount on such Risk. If the
Company purchases  facultative  excess of loss  reinsurance,  it shall apply the
Supplemental  Rates set forth in Appendix A attached hereto. 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.




                                     C - 33
<PAGE>

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


Section 6  -  DEFINITIONS

         (a)    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.

         (b)    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 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.

                Notwithstanding   the   provisions   of  the  article   entitled
                MANAGEMENT  OF CLAIMS AND LOSSES,  this term shall also  include
                80% of Extra Contractual Obligations.

         (c)    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.

         (d)    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.




                                     C - 34
<PAGE>

         (e)    Extra Contractual Obligations

                This  term  shall  mean a loss  which  the  Company  is  legally
                obligated 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 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.

                There shall be no coverage hereunder 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   definition  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.

         (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.




                                     C - 35
<PAGE>

         (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.

         (h)    Occurrence

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

         (i)    Subject Written Premium

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

                For  purposes  of this  Exhibit,  Subject  Written  Premium  for
                businessowners  shall be deemed  to be 60% of the  total  policy
                premium.


Section 7  -  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,




                                     C - 36
<PAGE>

                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;

         (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 $25,000 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;



                                     C - 37
<PAGE>

                (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;

                (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)    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 2,000
                                miles;

                        (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";



                                     C - 38
<PAGE>

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

                        (viii)  Mining equipment while underground;

                        (ix)    Radio  and   television   broadcasting   towers,
                                exceeding 500 feet in height;

                        (x)     Registered mail and armored car insurance;

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


Section 8  -  REINSURANCE PREMIUM AND COMMISSION

As a condition precedent to the Reinsurer's  obligations hereunder,  the Company
shall pay to the  Reinsurer a  reinsurance  premium  equal to the product of the
Company's  Subject Written Premium,  and the applicable  reinsurance rate as set
forth in Appendix A attached hereto.

The reinsurance  premiums above shall be subject to a fixed commission allowance
of 40%.


Section 9  -  REPORTS AND REMITTANCES

         (a)    Reinsurance Premium

                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 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.



                                     C - 39
<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





                                     C - 40
<PAGE>

                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
                      Expense paid less salvage  recovered  during each calendar
                      quarter;

                (3)   The  Reinsurer's  portion of reserves for claims,  losses,
                      and  Adjustment  Expense  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.

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


Section 10  - TERMINATION

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.





                                     C - 41
<PAGE>

                                   APPENDIX A

                         Attached to and made a part of
                         Exhibit B of Agreement No. 8759

                         FIRST EXCESS REINSURANCE RATES


                      Commercial Auto (Other than Courier)

                      Policy Limit Gross Reinsurance Rates

    $   300,000 CSL                                                     6.31%
    $   500,000 CSL                                                   16.67%
    $1,000,000 CSL                                                    25.72%
 $100,000/$   300,000                                                   1.47%
 $250,000/$   500,000                                                 10.74%
  $500,000/$1,000,000                                                 22.89%

                                     Garage

  Policy Limit      Gross Reinsurance Rates

    $   300,000 CSL                                                     7.61%
    $   500,000 CSL                                                   18.82%
    $1,000,000 CSL                                                    27.75%

                                     Courier

  Policy Limit      Gross Reinsurance Rates

    $1,000,000 CSL                                                    32.33%






                                       42
<PAGE>

                                                        APPENDIX A

                                              Attached to and made a part of
                                              Exhibit C of Agreement No. 8759

                                                     REINSURANCE RATES

<TABLE>
<CAPTION>
                                                                     Gross Reinsurance Rates

         Amount of Insurance                        First Excess          Second Excess        Third Excess
<S>                                                  <C>                   <C>                  <C>
      $         0 - $   300,000                         - 0 -                 - 0 -                - 0 -

      $   300,001 - $   400,000                          4.13%                - 0 -                - 0 -

      $   400,001 - $   500,000                        12.35%                 - 0 -                - 0 -

      $   500,001 - $1,000,000                         21.30%                  8.10%               - 0 -

       $1,000,001 - $2,000,000                         22.50%                19.94%               11.52%


                                                    Supplemental Rates

       $2,000,001 - $3,000,000                         19.20%                20.72%               25.77%

       $3,000,001 - $5,000,000                         14.97%                17.63%               30.40%
</TABLE>




                                       43
<PAGE>

                                ENDORSEMENT NO. 1

                         Attached to and made a part of
                            AGREEMENT OF REINSURANCE
                                    NO. 8759
                                     between
                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY
                                       and
                         GENERAL REINSURANCE CORPORATION


IT IS MUTUALLY AGREED that, retroactive to the inception date of this Agreement,
Section 11 is hereby added to Exhibit C of this Agreement as follows:

"Section 11  -  MORTGAGEE REINSURANCE ENDORSEMENTS

To induce a mortgagee  named in a policy of the  Company to accept such  policy,
the Company and the Reinsurer may agree to name such  mortgagee as a third party
beneficiary in a Mortgagee Reinsurance  Endorsement made a part of this Exhibit.
For each such Mortgagee  Reinsurance  Endorsement  so issued,  the Company shall
indemnify the Reinsurer for any and all  liability,  loss,  cost, or expense the
Reinsurer may sustain or incur in excess of its  obligations  under this Exhibit
by reason of the issuance of such Mortgagee Reinsurance Endorsement.

If the Reinsurer  becomes liable to a mortgagee under any Mortgagee  Reinsurance
Endorsement, the Reinsurer shall, to the extent of its liability:

        (a)     Benefit pro-rata in reductions of the Company's loss by salvage,
                subrogation, compromise, or otherwise.

        (b)     Be  automatically  subrogated to all of the  mortgagee's  rights
                against the Company under the policy.

        (c)     Be completely discharged from its obligation to make any payment
                to the  Company  under this  Exhibit  and be entitled to set off
                against any amount due from the  Reinsurer to the Company  under
                this or any  other  agreement  for any  amounts  for  which  the
                Reinsurer  would not be liable  except for the existence of such
                Mortgagee Reinsurance Endorsement.

The  Reinsurer  shall  have  the  right  to  cancel  any  Mortgagee  Reinsurance
Endorsement by notice to the mortgagee."



                                       44
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed


in duplicate,

this               day of                                     , 200___,
     -------------        ------------------------------------

                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY




Attest:
         -----------------------------------

and this           day of                                     , 200___.
         ---------        ------------------------------------

                         GENERAL REINSURANCE CORPORATION



                                                                Vice President
Attest:
         -----------------------------------




                                       45