THIRD AMENDMENT TO
                   FIRST AMENDED AND RESTATED CREDIT AGREEMENT
                               AND ACKNOWLEDGEMENT


         THIS THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT AND
ACKNOWLEDGEMENT,  dated as of December 1, 1998 (this "Third Amendment"), is made
in respect of the First Amended and Restated Credit Agreement dated November 14,
1996 (as twice  amended by  amendments  dated  January  24, 1997 and October 30,
1997, the "Credit Agreement"), by and between CHARTWELL RE HOLDINGS CORPORATION,
a Delaware  corporation (the "Borrower"),  the financial  institutions listed on
the  signature  pages  thereof or that  become  parties  thereto  after the date
thereof (collectively the "Lenders"),  FIRST UNION NATIONAL BANK (formerly known
as First Union  National Bank of North  Carolina),  as agent for the Lenders (in
such  capacity,  the "Agent") and as an Issuing Bank,  and FIRST UNION  NATIONAL
BANK (LONDON BRANCH), as an Issuing Bank. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Credit Agreement.


                                    RECITALS

         A. The Borrower has requested  that the Credit  Agreement be amended to
change the  Revolving  Credit  Maturity  Date from January 7, 2003 to January 7,
2004.  Subject to the terms and  conditions  set forth  herein,  the Agent,  the
Lenders and the Issuing Bank are willing to so amend the Credit Agreement.

         B. The Parent and Beechwood  each join this Third  Amendment to approve
the  transactions  contemplated  hereby and reaffirm its  obligations  under the
Guaranty and the Beechwood Escrow and Security Agreement, respectively.


                             STATEMENT OF AGREEMENT

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for themselves
and their successors and assigns, agree as follows:


                                    ARTICLE I

                          AMENDMENT TO CREDIT AGREEMENT

         1.1 Amendments to Section 1.1. (a) The definition of "Revolving  Credit
Maturity  Date" in Section 1.1 of the Credit  Agreement  shall be deleted in its
entirety and the following shall be substituted therefor:

                  "Revolving Credit Maturity Date" shall mean January 7, 2004.

         (b) The  matrix  set  forth in the  definition  of  "Applicable  Margin
Percentage"  in  Section  1.1 of the  Credit  Agreement  shall be deleted in its
entirety and the following shall be substituted therefor:

                                                       Applicable Margin
       Rating Status                               Percentage for LIBOR Loans

       Level I Status                                           0.750%

       Level II Status                                          0.875%

       Level III Status                                         1.000%

       Level IV Status                                          1.125%

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         The Borrower  hereby  certifies and warrants to the Agent,  the Issuing
Bank  and the  Lenders  that  (a)  each of the  representations  and  warranties
contained  in  Article  VI of the  Credit  Agreement  and in  the  other  Credit
Documents are true and correct in all material  respects on the date hereof with
the same effect as though made on the date hereof,  both immediately  before and
after  giving  effect  to  this  Amendment   (except  to  the  extent  any  such
representation  or  warranty  is  expressly  stated  to have  been  made as of a
specific date, in which case such  representation  or warranty shall be true and
correct as of such specified date), and (b) no Default or Event of Default shall
have occurred and be continuing on the date hereof.


                                   ARTICLE III

                                 ACKNOWLEDGEMENT

         The Parent and Beechwood  hereby  acknowledge  that the  Borrower,  the
Agent,  the Issuing  Bank and the Lenders have agreed,  as provided  herein,  to
amend the Credit  Agreement to extend the Revolving  Credit  Maturity Date until
January 7, 2004.  Each of the Parent and Beechwood  hereby approves and consents
to the  transactions  contemplated  by this Third  Amendment and agrees that its
obligations under the Guaranty and the Beechwood Escrow and Security  Agreement,
respectively, and the other Credit Documents to which it is a party shall not be
diminished  as  a  result  of  the  execution  of  the  Third  Amendment.   This
acknowledgement  by the Parent and Beechwood is made and delivered to induce the
Agent, the Issuing Bank, and the Lenders to enter into this Third Amendment, and
the Parent and Beechwood  acknowledge  that the Agent, the Issuing Bank, and the
Lenders  would not  enter  into  this  Third  Amendment  in the  absence  of the
acknowledgements contained herein.


                                   ARTICLE IV

                                     GENERAL

         4.1 Full Force and Effect.  Except as  expressly  amended  hereby,  the
Credit  Agreement shall continue in full force and effect in accordance with the
provisions  thereof  on the  date  hereof.  As  used  in the  Credit  Agreement,
"hereinafter," "hereto," "hereof," and words of similar import shall, unless the
context  otherwise  requires,  mean the Credit Agreement after amendment by this
Third  Amendment.  Any  reference  to the Credit  Agreement  or any of the other
Credit  Documents  herein or in any such  documents  shall  refer to the  Credit
Agreement and Credit Documents as amended hereby.

         4.2  Applicable  Law.  This Third  Amendment  shall be  governed by and
construed in  accordance  with the internal  laws and judicial  decisions of the
State of North Carolina.

         4.3  Counterparts.  This Third Amendment may be executed in two or more
counterparts,  each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.

         4.4 Headings. The headings of this Third Amendment are for the purposes
of reference only and shall not affect the construction of this Third Amendment.

         4.5      Effectiveness.  This  Third  Amendment shall be  deemed fully
effective when executed by each of the parties hereto.
                                  -------------

                    [Signatures Appear on the Following Page]



<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be  executed  by their duly  authorized  officers  all as of the day and year
first above written.


                                    CHARTWELL RE HOLDINGS CORPORATION


                                    By:________________________________
                                        
                                    Name:______________________________

                                    Title:_____________________________ 
                                   

                                    CHARTWELL REINSURANCE COMPANY, for purposes
                                    of Article IV of the Credit Agreement only


                                    By:_______________________________

                                    Name:_____________________________
                                    
                                    Title:____________________________



<PAGE>


                                    CHARTWELL RE CORPORATION, for purposes of
                                    Article III of this Third Amendment only


                                    By: ______________________________

                                    Name:_____________________________

                                    Title:____________________________


                                    CHARTWELL HOLDINGS LIMITED, for purposes of
                                    Article III of this Third Amendment only


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________



<PAGE>


                                    FIRST UNION NATIONAL BANK, as Agent, as 
                                    Issuing Bank and as a Lender (formerly
                                    known First Union National of North Carolina
                                    and First Union National Bank
                                    (London Branch))


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________



                                    CIBC, INC.


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________



                                    CREDIT LYONNAIS NEW YORK BRANCH


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________




<PAGE>


                                    FLEET NATIONAL BANK


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________



                                    THE ROYAL BANK OF SCOTLAND


                                    By:_______________________________

                                    Name:_____________________________

                                    Title:____________________________