SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT


         THIS SECOND  AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT  AGREEMENT,
dated as of October 30, 1997 (this  "Second  Amendment"),  is made in respect of
the First  Amended and Restated  Credit  Agreement  dated  November 14, 1996 (as
amended hereby and by the First  Amendment to First Amended and Restated  Credit
Agreement dated as of January 24, 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  reimbursement  obligations  with
respect to  certain  Letters of Credit  issued in favor of Lloyd's  pursuant  to
Article IV be  excluded  from  Consolidated  Indebtedness  for  purposes  of the
Capitalization  Ratio to the extent of cash,  Cash  Equivalents and Approved L/C
Collateral provided by the Borrower or any of its Subsidiaries to the issuers of
such  Letters of Credit as  security  for such  reimbursement  obligations.  The
Borrower also has requested that the limitations on letters of credit, including
Letters  of Credit  under  Article  IV,  issued in favor of  Lloyd's  imposed by
Sections 4.1(e) and 9.2(iv) be eliminated. The Agent, Issuing Banks, and Lenders
agree to grant such requests.

         B. The Borrower desires, and the Agent,  Lenders, and Issuing Banks are
willing,  to increase the Total Revolving  Credit  Commitments  from Thirty-Five
Million Dollars ($35,000,000) to Sixty Million Dollars ($60,000,000), subject to
the terms and conditions of this Amendment and the Credit Agreement.

         C. The Borrower,  Agent, Lenders, and Issuing Banks agree to change the
maximum permitted  Capitalization Ratio to 0.40 to 1.0 as of the last day of any
fiscal quarter ending on or before September 30, 1999, and to 0.375 to 1.0 as of
the last day of any fiscal quarter ending thereafter.

         D. The Borrower has  requested  an  extension of the  Revolving  Credit
Maturity  Date from the current date of December  31, 2001,  to January 7, 2003,
and the Agent, Lenders and Issuing Banks are willing to grant such extension.


                             STATEMENT OF AGREEMENT

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  the  Borrower,  the Agent,  the
Issuing Banks and the Lenders,  for themselves and their successors and assigns,
agree as follows:

                                    ARTICLE I

                         AMENDMENTS TO CREDIT AGREEMENT

         1.1      Amendments to Section 1.1.

         (a) The definition of "Consolidated Indebtedness" in Section 1.1 of the
Credit Agreement shall be deleted in its entirety and the following  substituted
therefor:

                  "Consolidated  Indebtedness" shall mean, as of the last day of
         any  fiscal  quarter,  the  aggregate  (without   duplication)  of  all
         Indebtedness  of the  Parent  and its  Subsidiaries  as of  such  date,
         determined  on  a  consolidated  basis  in  accordance  with  Generally
         Accepted  Accounting  Principles,  excluding  (y)  the  amount  of  the
         Contingent  Interest  Notes as  reported  on the  Parent's  most recent
         balance  sheet and (z)  reimbursement  obligations  with respect to (i)
         letters of credit issued to secure the  reinsurance  obligations of one
         or more Insurance  Subsidiaries  under reinsurance  agreements  entered
         into in the ordinary  course of such Insurance  Subsidiaries'  business
         and (ii) the Specially  Designated  Letters of Credit but, in each case
         described in the foregoing  clauses (i) and (ii), only to the extent of
         cash and Cash  Equivalents  provided  to the  issuer of such  letter of
         credit  by the  Borrower  or any  Subsidiary  as  collateral  for  such
         reimbursement obligations, and, in the case of Letters of Credit issued
         by either Issuing Bank, the amount of Approved L/C Collateral available
         to be drawn upon to satisfy such reimbursement obligations.
<PAGE>

         (b) Clause (y) of the definition of "Consolidated Net Worth" in Section
1.1 of the Credit  Agreement  shall be amended by deleting the words  "Tranche A
Maturity Date" and substituting  therefor the words  "Revolving  Credit Maturity
Date."

         (c) Clause (vii) in the definition of  "Indebtedness" in Section 1.1 of
the Credit  Agreement shall be amended by deleting the words "Tranche A Maturity
Date" and substituting therefor the words "Revolving Credit Maturity Date."

         (d) The definition of "Revolving  Credit  Commitment" in Section 1.1 of
the Credit Agreement shall be deleted and the following substituted therefor:

                  "Revolving Credit  Commitment" shall mean, with respect to any
         Lender at any time, the amount set forth opposite such Lender's name on
         Schedule 2.2 to the Second  Amendment to the Credit  Agreement dated as
         of October __, 1997 under the caption "Revolving Credit Commitment" or,
         if such Lender has entered into one or more  Assignment and Acceptances
         after such date,  the amount set forth for such  Lender at such time in
         the Register  maintained  by the Agent  pursuant to Section  12.7(b) as
         such  Lender's  "Revolving  Credit  Commitment,"  as such amount may be
         reduced at or prior to such time pursuant to the terms hereof.

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

                  "Revolving Credit Maturity Date" shall mean January 7, 2003.

         (f) The  following  definition  shall be added  to  Section  1.1 of the
Credit Agreement:

                  "Specially  Designated  Letters  of  Credit"  shall mean those
         specific  Letters of Credit issued pursuant to Article IV enumerated LC
         S230745   and  LC   S230429   and   having   the   Stated   Amounts  of
         (pound)3,275,000 and (pound)1,000,000,  respectively, in each case made
         in favor of Lloyd's to support the relationship between a Subsidiary of
         Archer and Lloyd's.

         (g) The definition of "Total Revolving  Credit  Commitments" in Section
1.1 of the Credit  Agreement  shall be  deleted  and the  following  substituted
therefor:

                  "Total  Revolving Credit  Commitments"  shall mean at any time
         the aggregate amount of Revolving  Credit  Commitments of all Revolving
         Lenders at such time,  being on the date of the Second Amendment to the
         Credit Agreement Sixty Million Dollars ($60,000,000).

     1.2 Amendment to Section  4.1(e).  Section  4.1(e) of the Credit  Agreement
shall be deleted in its entirety.

         1.3 Amendment to Section 8.1. Section 8.1 of the Credit Agreement shall
be deleted in its entirety and the following substituted therefor:

                  8.1  Capitalization  Ratio.  The Borrower  will not permit the
         Capitalization  Ratio to be greater than (y) 0.40 to 1.0 as of the last
         day of any fiscal quarter  ending on or before  September 30, 1999, and
         (z) 0.375 to 1.0 as of the last day of any fiscal  quarter ending after
         September 30, 1999.

         1.4  Amendment  to  Section  9.2(iv).  Section  9.2(iv)  of the  Credit
Agreement  shall  be  deleted  in its  entirety  and the  following  substituted
therefor:

                  (iv) Indebtedness under  reimbursement  obligations in respect
         of (x)  letters  of  credit  issued  for  the  benefit  of one or  more
         Insurance  Subsidiaries  in the  ordinary  course of their  business to
         support  the  payment by such  Insurance  Subsidiaries  of  obligations
         arising  under  insurance  and  reinsurance  contracts,  (y) Letters of
         Credit issued for the account of Reinsurance in favor of the Society of
         Lloyd's or the Council of Lloyd's in  accordance  with  Article IV, and
         (z) other  letters of credit issued for the account of  Reinsurance  in
         favor of the Society of Lloyd's or the Council of Lloyd's;
<PAGE>

                                   ARTICLE II

                   REPRESENTATIONS AND WARRANTIES; CONDITIONS

         2.1 Representations  and Warranties.  The Borrower hereby certifies and
warrants  to  the  Agent,  Issuing  Banks  and  Lenders  (a)  that  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,  after giving
effect to this Amendment.

         2.2  Conditions to  Amendments.  The  amendments set forth in Article I
hereof  shall not be  effective  and in force  and  effect  until the  following
conditions  have been satisfied to the reasonable  satisfaction of the Agent and
the Issuing Banks:

         (a) the Agent shall have received the  following,  each dated as of the
date hereof (unless otherwise specified):

                 (i)  Revolving  Credit  Notes,  in  substantially  the  form of
         Exhibit  A-4 to the  Credit  Agreement,  payable  to the  order  of the
         Lenders and in the amounts set forth on Schedule 2.2  attached  hereto,
         duly  completed in accordance  with the relevant  provisions of Section
         2.4 of the Credit Agreement and executed by the Borrower;

                  (ii) an  acknowledgment  and confirmation duly executed by the
         Parent,  as  guarantor  under  the  Guaranty,  in  form  and  substance
         satisfactory  to the  Agent,  reflecting  the  increase  in  the  Total
         Revolving  Credit  Commitments and the other  amendments  herein to the
         Credit  Agreement and  confirming  the Parent's  obligations  under the
         Guaranty in respect of the Credit Agreement,  as amended by this Second
         Amendment;

                  (iii)  the  favorable  opinions  of  LeBoeuf,  Lamb,  Greene &
         MacRae,  L.L.P.,  special  counsel  to the  Parent,  the  Borrower  and
         Reinsurance,  and of  Kathleen  M.  Carroll,  Vice  President,  General
         Counsel  and  Secretary  of  Borrower,   Reinsurance  and  Parent,   in
         substantially  the form of the  respective  opinions  provided  by such
         counsel in connection with the First Amendment to the Credit  Agreement
         dated as of January 24, 1997, addressed to the Agent, the Issuing Banks
         and the Lenders; and

                  (iv)  certificates of the secretary or an assistant  secretary
         of the Borrower,  the Parent,  and  Reinsurance,  in form and substance
         satisfactory  to the  Agent,  certifying  (i) that the  certificate  of
         incorporation and bylaws of each such corporation have not been amended
         since  January  24,  1997,  (ii) that  attached  thereto  is a true and
         complete copy of resolutions  adopted by the boards of directors of the
         Borrower,  the  Parent  and  Reinsurance   authorizing  the  execution,
         delivery and performance of this Second  Amendment and the other Credit
         Documents  required to be executed in connection  herewith and to which
         it is a party,  and (iii) as to the incumbency  and  genuineness of the
         signature of each officer of the Borrower,  the Parent and  Reinsurance
         executing  this Second  Amendment or any of the other Credit  Documents
         required to be executed in connection herewith.

         (b) the Borrower  shall have paid to each of the Lenders an upfront fee
equal to 0.10% of such Lender's Revolving Commitment Percentage of $25,000,000.
<PAGE>

                                   ARTICLE III

                                     GENERAL

         3.1 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
Second  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.

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

         3.3 Counterparts.  This Second 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.

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

         3.5 Effectiveness. This Second Amendment shall be deemed fully executed
when executed by the Borrower,  First Union, as Agent, each of the Lenders,  and
the  Issuing  Banks.  The  amendments  set forth in  Article  I hereof  shall be
effective  upon full  execution  hereof and  satisfaction  of the  conditions of
Section 2.2 hereof.


<PAGE>


         IN WITNESS WHEREOF, the Borrower, the Agent, the Issuing Banks, and the
Lenders  have  caused  this  Second  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

                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________


                                      FIRST UNION NATIONAL BANK, as Agent, as an
                                      Issuing Bank, and as a Lender

                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________


                                      FIRST UNION NATIONAL BANK (LONDON
                                      BRANCH), as an Issuing Bank

                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________


                                      CIBC, INC.

                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________



                                      CREDIT LYONNAIS

                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________



                                      FLEET NATIONAL BANK


                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________



                                      THE ROYAL BANK OF SCOTLAND


                                      By: ______________________________________

                                      Name: ____________________________________

                                      Title: ___________________________________



<PAGE>


                Schedule 2.2 to Second Amendment to First Amended
                          and Restated Credit Agreement

                          Revolving Credit Commitments

                                                   Revolving Credit Commitments

First Union National Bank                          $

CIBC, Inc.                                         $

Credit Lyonnais                                    $

Fleet National Bank                                $

The Royal Bank of Scotland                         $

<PAGE>

                                                               Exhibit F-2
                           FIRST AMENDED AND RESTATED
                     BORROWER ESCROW AND SECURITY AGREEMENT


         THIS FIRST AMENDED AND RESTATED BORROWER ESCROW AND SECURITY AGREEMENT,
dated as of the 27th day of February,  1997 (this "Agreement"),  is made between
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association,  as
Agent (in such  capacity,  the "Agent") under the Credit  Agreement  referred to
below,   CHARTWELL  RE  HOLDINGS   CORPORATION,   a  Delaware  corporation  (the
"Borrower"),    CHARTWELL   REINSURANCE   COMPANY,   a   Minnesota   corporation
("Reinsurance"),  and FIRST UNION  NATIONAL BANK OF NORTH  CAROLINA,  a national
banking  association,  as escrow agent hereunder (in such capacity,  the "Escrow
Agent").  Capitalized  terms used herein and not defined  elsewhere herein shall
have the meanings given to them in the Credit Agreement referred to below.

                                    RECITALS

         A. The Borrower,  Reinsurance,  the Agent,  certain  Issuing Banks (the
"Issuing  Banks") and certain  lenders  (the  "Lenders")  are parties to a First
Amended and  Restated  Credit  Agreement,  dated as of November  14, 1996 and as
amended by that First Amendment to First Amended and Restated  Credit  Agreement
dated as of January 24,  1997 (as further  amended,  modified,  supplemented  or
restated  from time to time,  the  "Credit  Agreement"),  pursuant  to which the
Lenders have agreed to make Term Loans and Revolving Loans to the Borrower,  and
the Issuing  Banks have agreed to issue Letters of Credit for the benefit of the
Borrower, upon the terms and conditions set forth therein.

     B. The Credit Agreement provides that under certain circumstances  payments
relating to the Letters of Credit may be deposited in cash  collateral  accounts
(collectively the "L/C Cash Collateral  Accounts").  Such payments made into the
L/C Cash Collateral Accounts to secure  Reimbursement  Obligations under Letters
of  Credit  issued  for  the  account  of  Reinsurance  or for  the  account  of
Reinsurance and the Borrower jointly shall be maintained in accounts referencing
Reinsurance and the Borrower jointly, and all other deposits shall be maintained
in accounts referencing solely the Borrower. Payments in Dollars relating to the
Letters of Credit issued in Dollar face amounts may be deposited, as applicable,
in cash  collateral  accounts  (the  "Borrower  Dollars  Account" and the "Joint
Dollars  Account" and,  collectively,  the "Dollars  Collateral  Accounts")  and
payments in Pounds  Sterling  relating to the Letters of Credit issued in Pounds
Sterling  face  amounts may be  deposited,  as  applicable,  in cash  collateral
accounts (the "Borrower  Sterling Account" and the "Joint Sterling Account" and,
collectively,  the  "Sterling  Collateral  Accounts");  in each  case to  secure
payment of the Reimbursement Obligations and the other Letter of Credit Exposure
under the Credit  Agreement.  The  Borrower  Dollars  Account  and the  Borrower
Sterling  Account  shall be  collectively  referred  to herein as the  "Borrower
Collateral  Accounts  " and the Joint  Dollars  Account  and the Joint  Sterling
Account  shall be  collectively  referred  to  herein as the  "Joint  Collateral
Accounts."

         C. It is a condition to the making of the Loans and the issuance of the
Letters  of Credit  under the  Credit  Agreement  that the  Borrower  shall have
agreed,  by executing and delivering this  Agreement,  to establish the L/C Cash
Collateral  Accounts and to grant and assign to the Agent a security interest in
such  accounts and in the funds at any time held  therein  pursuant to the terms
hereof.

                             STATEMENT OF AGREEMENT

         NOW, THEREFORE,  in consideration of the foregoing,  the payment by the
Borrower  and  Reinsurance  to the  Escrow  Agent of $1.00  and  other  good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  and to induce  the Agent,  the  Issuing  Banks and the  Revolving
Lenders to enter into the Credit Agreement and to issue the Letters of Credit or
make the Revolving Loans to the Borrower and Reinsurance thereunder, the parties
hereby agree as follows:

         1. Appointment of Escrow Agent. The Borrower, Reinsurance and the Agent
hereby appoint the Escrow Agent to serve as escrow agent  hereunder.  The Escrow
Agent accepts such appointment and agrees to hold, invest and disburse the funds
maintained  in the L/C  Cash  Collateral  Accounts  (collectively,  the  "Escrow
Funds") in  accordance  with this  Agreement and as agent for the benefit of the
Agent and the  Revolving  Lenders  so that the Agent  shall  have,  pursuant  to
Section 4, a valid and perfected  first priority  security  interest in and Lien
upon all funds maintained and held in the L/C Cash Collateral Accounts.
<PAGE>

     2. Creation of L/C Cash Collateral  Accounts;  Withdrawals;  Disbursements.
The Borrower and the Agent hereby establish the Borrower  Dollars  Account,  the
Joint Dollars Account,  the Borrower  Sterling  Account,  and the Joint Sterling
Account,  in each case to be maintained from and after the date hereof by and in
the name of the Escrow Agent.  With respect to (i) the Borrower Dollars Account,
such account  shall be  designated  the  "Chartwell Re Holdings L/C Dollars Cash
Collateral Account",  Account #1072636956,  (ii) the Joint Dollars Account, such
account shall be designated the "Chartwell Re Holdings and Chartwell Reinsurance
L/C Dollars Cash Collateral Account", Account #____________,  (iii) the Borrower
Sterling  Account,  such account shall be designated  the "Chartwell Re Holdings
L/C Pounds Sterling Cash Collateral Account", Account # 1072636965, and (iv) the
Joint  Sterling  Account,  such account  shall be designated  the  "Chartwell Re
Holdings and Chartwell Reinsurance L/C Pounds Sterling Cash Collateral Account",
Account # ___________ . All deposits of funds into, investment of funds held in,
and  disbursements of funds from each L/C Cash Collateral  Account shall be made
on the terms and conditions set forth herein.

         (a) Except for distributions and disbursements by Escrow Agent pursuant
to Section 3 or as directed by joint direction of the Borrower and the Agent, or
joint direction of the Borrower,  Reinsurance and the Agent, pursuant to Section
2(g), or as directed by the Agent pursuant to Section 2(c) or 2(d),  neither the
Borrower nor  Reinsurance  shall be permitted to withdraw any funds from any L/C
Cash Collateral Account for any purpose.

         (b) In the event of a drawing on any  Letter of Credit  and  subsequent
payment by either  Issuing Bank at any time during which any amounts are held in
the  applicable  L/C Cash  Collateral  Account,  the Agent  shall have the right
immediately  to instruct  the Escrow  Agent to  disburse  to the Agent,  and the
Escrow Agent will disburse to the Agent upon receipt of such instructions, funds
held in the applicable L/C Cash  Collateral  Account  (including any undisbursed
interest  and income) in an amount  sufficient  to pay in full the amount of any
Reimbursement  Obligation arising therefrom (it being understood that,  pursuant
to Sections 4.4 and 4.8 of the Credit Agreement,  (i) disbursements to the Agent
for Reimbursement Obligations for the account of the Borrower in Dollars will be
made from the Borrower  Dollars  Account,  (ii)  disbursements  to the Agent for
Reimbursement  Obligations  under  Letters of Credit  issued for the  account of
Reinsurance or the Borrower and Reinsurance jointly in Dollars will be made from
the Joint Dollars Account,  (iii)  disbursements to the Agent for  Reimbursement
Obligations  under  Letters of Credit  issued for the account of the Borrower in
Pounds  Sterling  will be made  from the  Borrower  Sterling  Account,  and (iv)
disbursements to the Agent for Reimbursement Obligations under Letters of Credit
issued for the account of Reinsurance or the Borrower and Reinsurance jointly in
Pounds Sterling will be made from the Joint Sterling Account); provided that, in
the event such funds in the  applicable  L/C Cash  Collateral  Account  shall be
insufficient to pay in full the Reimbursement Obligation then due and owing, the
Agent may  instruct  the Escrow  Agent to disburse to the Agent,  and the Escrow
Agent  will  so  disburse  to the  Agent,  all of the  funds  then  held  in the
applicable L/C Cash Collateral Account,  provided further, however, that each of
the Agent and Escrow  Agent shall give notice to the Borrower  promptly,  and in
any event not more than two (2) Business  Days) after,  the delivery of any such
instruction.

         (c) If either the Borrower or Reinsurance  has made a deposit to any of
the L/C Cash  Collateral  Accounts  pursuant  to  Section  4.8(b) of the  Credit
Agreement,  the Agent shall,  upon request of the Borrower  (with respect to any
deposit made by Borrower) or the Borrower and Reinsurance  jointly (with respect
to any deposit  made by  Reinsurance),  instruct the Escrow Agent to disburse to
the  Borrower  or  Reinsurance,  as  applicable,  and the  Escrow  Agent will so
disburse to the Borrower or  Reinsurance,  as  applicable,  all or a part of the
amount of funds so deposited  (it being  understood  that  neither  Borrower nor
Reinsurance  shall be  entitled  to make such  request  if a Default  shall have
occurred and be continuing).

     (d) If the Borrower has made a deposit to either of the L/C Cash Collateral
Accounts pursuant to Section 4.8(a) of the Credit Agreement,  and if the amounts
deposited  pursuant to Section 4.8(a) are at any time thereafter not required to
be maintained in the L/C Cash Collateral Accounts,  the Agent shall instruct the
Escrow Agent to disburse to the Borrower,  and the Escrow Agent will so disburse
to the Borrower, the appropriate amount of such funds.

     (e) Until disbursed in accordance with Section 3, all undisbursed  interest
and income on the Escrow Funds shall be deemed part of, as and when accrued, the
principal  balance of such funds whereupon the same shall be deemed  temporarily
part of such principal  balance and shall  constitute  Collateral  secured under
Section 4 hereof until so disbursed.

         (f) Funds held in the applicable L/C Cash  Collateral  Account shall be
disbursed  in same day  available  funds by the Escrow  Agent in the  Applicable
Currency on the Business Day next following its receipt of instructions therefor
as provided herein; provided, however, that if such instructions are received by
the  Escrow  Agent  on a day that is not a  Business  Day or  after  1:00  p.m.,
Charlotte  time,  on a Business Day, such funds shall be disbursed on the second
Business Day following receipt of such notice.
<PAGE>
         (g)  In  addition  to   disbursements   permitted  or  required   under
subsections  (b),  (c),  (d) and (e) above and Section 3, the Escrow  Agent will
disburse  funds  held in each L/C Cash  Collateral  Account at any time and from
time to time in accordance with the joint written directions of the Borrower and
the Agent; provided,  however, that such joint written direction with respect to
either of the Joint Dollars Collateral Accounts shall also include Reinsurance.

         3.  Interest  and Income.  All interest  and income  earned  during any
calendar quarter on funds  maintained in each L/C Cash Collateral  Account shall
be disbursed by the Escrow Agent to or at the written  direction of the Borrower
within ten (10) days after the end of such quarter,  beginning  with the quarter
ending December 31, 1996.

         4. L/C Cash Collateral Account Security  Interest.  As security for the
payment and performance of the Reimbursement Obligations and the other Letter of
Credit  Exposure  of the  Revolving  Lenders  under the  Credit  Agreement,  the
Borrower, with respect to the Borrower Collateral Accounts, and the Borrower and
Reinsurance  jointly,  with  respect to the Joint  Collateral  Accounts,  hereby
pledge,  grant and assign to the Agent, for the benefit of the Issuing Banks and
the Revolving Lenders, a security interest in, and all right, title and interest
in,  to and  under,  each L/C Cash  Collateral  Account  and in the funds now or
hereafter existing in each L/C Cash Collateral Account (the "Collateral").

         5. Investment of Funds.  (a) The Escrow Agent shall invest and reinvest
the funds held in the Dollars  Collateral  Accounts as the Borrower shall direct
in writing or pursuant to telephone  instruction  confirmed promptly in writing;
provided,  however, that no investment or reinvestment may be made except in the
following:

     (i) securities issued or unconditionally guaranteed by the United States of
America or any agency or instrumentality  thereof,  backed by the full faith and
credit of the United States of America and maturing within 90 days from the date
of acquisition;

     (ii) commercial  paper issued by any Person organized under the laws of the
United States of America,  maturing  within 90 days from the date of acquisition
and,  at the  time of  acquisition,  having  a  rating  of at  least  A-1 or the
equivalent  thereof  by  Standard  & Poor's  or at least  P-1 or the  equivalent
thereof by Moody's;

     (iii) time deposits and  certificates  of deposit  maturing  within 90 days
from the date of issuance and issued by a bank or trust company  organized under
the laws of the United  States of America or any state thereof that has combined
capital and surplus of at least $500,000,000 and that has (or is a subsidiary of
a bank holding company that has) a long-term unsecured debt rating of at least A
or the equivalent  thereof by Standard & Poor's or at least A2 or the equivalent
thereof by Moody's;

     (iv) repurchase  obligations  with a term not exceeding seven (7) days with
respect to  underlying  securities  of the types  described  in clause (i) above
entered into with any bank or trust company meeting the qualifications specified
in clause (iii) above; or

     (v) money market funds  substantially  all of whose assets are comprised of
securities of the types described in clauses (i) through (iv) above.

(b) The Escrow  Agent shall  invest and  reinvest the funds held in the Sterling
Collateral  Accounts  as the  Borrower  shall  direct in writing or  pursuant to
telephone instruction confirmed promptly in writing; provided,  however, that no
investment or reinvestment may be made except in the following:

     (i) time deposits and  certificates of deposit maturing within 90 days from
the date of issuance and issued by a bank or trust company  organized  under the
laws of England and Wales that has (or is a subsidiary of a bank holding company
that has) a  long-term  unsecured  debt  rating of at least A or the  equivalent
thereof by Standard & Poor's or at least A2 or the equivalent thereof by Moody's
or equivalent ratings from an English rating agency; or

     (ii) money market funds  substantially all of whose assets are comprised of
securities  of the types  described  in clause  (i) above or the  equivalent  in
Pounds to securities of the types described in (a)(i) through (iv) above.
<PAGE>
(c) Each of the  foregoing  investments  shall be made in the name of the Escrow
Agent.  If the  Escrow  Agent has not  received  investment  direction  from the
Borrower at any time at which an investment  decision  must be made,  the Escrow
Agent shall invest the funds held in the Dollars  Collateral  Accounts,  or such
portion  thereof as to which no  direction  has been  received,  in  investments
described in clause (a)(v) above, and the funds held in the Sterling  Collateral
Accounts, or such portion thereof as to which no direction has been received, in
investments described in clause (b)(ii) above.  Notwithstanding  anything to the
contrary  contained herein, the Escrow Agent may, without notice to the Borrower
or Reinsurance,  sell or liquidate any of the foregoing investments at any time,
in accordance with standard commercial practices,  endeavoring to mitigate costs
to the extent reasonably possible,  if the proceeds thereof are required for any
release of funds permitted or required hereunder, and the Escrow Agent shall not
be liable or  responsible  for any loss,  expense or penalty  resulting from any
such sale or liquidation.

         6. Escrow Agent to Maintain  Records.  The Escrow  Agent will  maintain
adequate  records  of all  deposits  to the L/C  Cash  Collateral  Accounts  and
investments  of Escrow  Funds and will make such  records  available to Borrower
upon reasonable notice.

         7.  Resignation  of Escrow Agent.  The Escrow Agent may resign from the
performance  of its duties  hereunder  at any time by giving  thirty  (30) days'
prior  written  notice  to  the  Borrower,   Reinsurance  and  the  Agent.  Such
resignation  shall take effect upon the appointment of a successor  Escrow Agent
as provided hereinbelow.  Upon any such notice of resignation,  the Agent shall,
with the  consent  of the  Borrower  (which  consent  shall not be  unreasonably
withheld),  appoint  a  successor  Escrow  Agent  hereunder,  which  shall  be a
commercial  bank,  trust company or other financial  institution with a combined
capital  and  surplus  in excess of  $100,000,000.  Upon the  acceptance  of any
appointment  as  Escrow  Agent  hereunder  by a  successor  Escrow  Agent,  such
successor Escrow Agent shall thereupon succeed to and become vested with all the
rights,  powers,  privileges  and duties of the retiring  Escrow Agent,  and the
retiring Escrow Agent shall be discharged from its duties and obligations  under
this  Agreement.  After any retiring  Escrow  Agent's  resignation  hereunder as
Escrow Agent,  the provisions of this Agreement shall inure to its benefit as to
any actions  taken or omitted to be taken by it while it was Escrow  Agent under
this Agreement.

         8. Liability of Escrow Agent.  The Escrow Agent shall have no liability
or obligation  with respect to any L/C Cash  Collateral  Account  except for the
Escrow Agent's willful  misconduct or gross negligence.  The Escrow Agent's sole
responsibility shall be for the safekeeping,  investment and disbursement of the
funds maintained in any L/C Cash Collateral Account in accordance with the terms
of this  Agreement.  The Escrow Agent shall treat the Escrow Funds with the same
care as it treats  its own  property.  The  Escrow  Agent  shall have no implied
duties or  obligations  and shall not be charged with knowledge or notice of any
fact or circumstance  not  specifically  set forth herein.  The Escrow Agent may
rely  upon  any  instrument,  not  only as to its due  execution,  validity  and
effectiveness,  but  also  as to the  truth  and  accuracy  of  any  information
contained  therein,  that the Escrow  Agent  shall in good  faith  believe to be
genuine, to have been signed or presented by the person or parties purporting to
sign the same and to conform to the  provisions  of this  Agreement.  The Escrow
Agent  shall be  responsible  for actual  losses  (defined as and limited to any
decline in  principal  value of an  investment  between the time of purchase and
time of sale) from investments in other than investments permitted under Section
5 hereof. In no event shall the Escrow Agent be liable for incidental, indirect,
special,  consequential  or  punitive  damages.  The Escrow  Agent  shall not be
obligated to take any legal action or commence any proceeding in connection with
any L/C Cash  Collateral  Account or the funds  therein,  this  Agreement or any
other  Credit  Document,  or to appear  in,  prosecute  or defend any such legal
action or proceeding.  The Escrow Agent may consult legal counsel selected by it
in the event of any  dispute or question  as to the  construction  of any of the
provisions  hereof or of any other  agreement  or of its duties  hereunder,  and
shall incur no liability  and shall be fully  protected in acting in  accordance
with the opinion or instruction of such counsel.
<PAGE>
     9. Indemnification. From and at all times after the date of this Agreement,
and in addition to the fees,  costs and expenses  payable  under  Section 9, the
Borrower  agrees and,  with  respect to any of the  following  arising out of or
related to either of the Joint Collateral Accounts, the Borrower and Reinsurance
jointly and severally  agree to indemnify and hold harmless the Escrow Agent and
each of its directors,  officers,  employees,  agents and Affiliates  (each,  an
"Indemnified Person") against any and all claims, losses, damages,  liabilities,
costs  and  expenses  of any  kind  or  nature  whatsoever,  including,  without
limitation, reasonable attorneys' fees and expenses (collectively,  "Indemnified
Costs"),  incurred by or asserted against any such  Indemnified  Person from and
after the date hereof, whether direct, indirect or consequential, as a result of
or  arising  from or in any  way  relating  to any  action,  suit or  proceeding
(including any inquiry or  investigation) by any Person,  whether  threatened or
initiated,  arising from or in  connection  with the  negotiation,  preparation,
execution,   performance  or  enforcement  of  this  Agreement  or  any  of  the
transactions   contemplated  herein,  in  any  case  whether  or  not  any  such
Indemnified  Person  is a party  to any such  action,  suit or  proceeding  or a
subject  of any  such  inquiry  or  investigation  if  such  Indemnified  Person
reasonably  determines that it may become a party to any such action;  provided,
however,  that no  Indemnified  Person  shall  have the right to be  indemnified
hereunder  for any  Indemnified  Costs to the  extent  resulting  from the gross
negligence  or  willful   misconduct  of  such  Indemnified  Person  as  finally
determined by a court of competent  jurisdiction  and not subject to any appeal.
If any such action or claim shall be brought or asserted against any Indemnified
Party, such Indemnified Party shall promptly notify the Borrower in writing, and
the Borrower  shall assume the defense  thereof,  including  the  employment  of
counsel and the payment of all expenses.  Such  Indemnified  Party shall, in its
sole discretion,  have the right to employ separate counsel (who may be selected
by such  Indemnified  Party in its sole  discretion)  in any such  action and to
participate  in the defense  thereof,  and the fees and expenses of such counsel
shall be paid by such  Indemnified  Party unless (a) the Borrower  agrees to pay
such fees and  expenses,  (b) the  Borrower  shall fail to assume the defense of
such action or proceeding or shall fail,  in the  reasonable  discretion of such
Indemnified  Party, to employ counsel  satisfactory to the Indemnified  Party in
any such action or  proceeding,  or (c) the named  parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified Party
and  the  Borrower,  Reinsurance  or  any  other  Indemnified  Party,  and  such
Indemnified  Party shall have been  advised by counsel  that there may be one or
more  non-frivolous  legal  defenses  available to it that are different from or
additional  to  those  available  to the  Borrower,  Reinsurance  or such  other
Indemnified  Party.  All of the foregoing  Indemnified  Costs of any Indemnified
Person  shall  be  paid  or  reimbursed  by the  Borrower  and,  as  applicable,
Reinsurance as and when incurred and upon demand.

         10. Fees and Expenses of Escrow  Agent.  The  Borrower  will pay to the
Escrow Agent an annual  escrow fee of $2,000,  payable in advance on the Closing
Date and on each  anniversary  of the Closing Date,  will pay the Escrow Agent a
handling fee of $50 per  transaction  associated  with  investments  and $25 per
transaction associated with deposits and disbursements,  for which handling fees
the  Borrower  shall be billed  monthly with payment due within ten (10) days of
such invoice,  and will promptly  reimburse the Escrow Agent upon demand for all
reasonable out-of-pocket costs and expenses incurred by the Escrow Agent.

         11. Termination of Escrow. Upon the indefeasible payment in full of the
Obligations  and receipt by the Escrow  Agent of notice  thereof  from the Agent
(which notice the Agent agrees to give promptly thereupon), this Agreement shall
terminate,  and the Escrow Agent shall forthwith disburse all funds held in each
L/C Cash  Collateral  Account to or at the written  direction  of the  Borrower;
provided, however, that the provisions of Sections 7, 8 and 9 shall survive such
termination.

         12.  Disbursement  Into Court.  If, at any time,  there shall exist any
dispute between the Borrower or Reinsurance,  on the one hand, and the Agent, on
the other hand, with respect to the holding or disposition of any portion of the
funds held in the L/C Cash Collateral  Accounts or any other  obligations of the
Escrow  Agent  hereunder,  or if at any  time the  Escrow  Agent  is  unable  to
determine,  to its sole  satisfaction,  the proper disposition of any portion of
such funds or Escrow  Agent's  proper  actions with  respect to its  obligations
hereunder, or if the Agent has not, within thirty (30) days of the furnishing by
the Escrow Agent of a notice of  resignation  pursuant to Section 6, appointed a
successor Escrow Agent to act hereunder,  then the Escrow Agent may, in its sole
discretion, take either or both of the following actions:
<PAGE>

   (i) suspend the  performance of any of its  obligations  under this Agreement
until such dispute or uncertainty  shall be resolved to the sole satisfaction of
the Escrow Agent or until a successor Escrow Agent shall have been appointed (as
the case may be);  provided,  however,  that the Escrow Agent shall  continue to
invest the Escrow Funds in accordance with Section 5; and

     (ii) petition (by means of an interpleader  action or any other appropriate
method) any court of competent  jurisdiction in Charlotte,  North Carolina,  for
instructions  with  respect to such  dispute or  uncertainty,  and pay into such
court all or part of the Escrow Funds for holding and  disposition in accordance
with the instructions of such court.

The Escrow  Agent shall have no liability to the  Borrower,  Reinsurance  or any
other Person with respect to any such  suspension of performance or disbursement
into court,  specifically  including any liability or claimed liability that may
arise,  or be alleged to have arisen,  out of or as a result of any delay in the
disbursement of funds held in any L/C Cash Collateral Account or any delay in or
with respect to any other action required or requested of the Escrow Agent.

         13. Tax  Reporting.  The Escrow  Agent will provide to the Borrower and
Reinsurance  a statement of  investment  income and such other  statements  with
respect to each L/C Cash  Collateral  Account as the Borrower or Reinsurance may
reasonably  request from time to time.  The Borrower  and  Reinsurance  shall be
responsible  for all tax  reporting  with  respect  to the L/C  Cash  Collateral
Accounts and the income therefrom.

         14.  Notices.  All  notices  and  other  communications   provided  for
hereunder  shall  be  in  writing  (including   telegraphic,   telex,  facsimile
transmission  or  cable   communication)  and  mailed,   telegraphed,   telexed,
telecopied,  cabled or  delivered  to the party to be notified at the  following
addresses:

If to the Borrower:      Chartwell  Re  Holdings Corporation
                         4 Stamford Plaza
                         107 Elm Street
                         Stamford, Connecticut 06912-0043
                         Attention: Mr. Charles E. Meyers
                         Telephone: (203) 705-2655
                         Telecopy:  (203) 705-2718

If to Reinsurance:       Chartwell Reinsurance Company
                         4 Stamford Plaza
                         107 Elm Street
                         Stamford, Connecticut  06912-0043
                         Attention:  Mr. Charles E. Meyers
                         Telephone: (203) 705-2655
                         Telecopy:  (203) 705-2718

If to the Agent:         First Union National Bank of North Carolina
                         301 South College Street
                         Charlotte,  North Carolina 28288-0608
                         Attention:  Syndication Agency Services
                         Telephone:  (704) 383-3789
                         Telecopy:   (704) 383-0288

If to the Escrow Agent:  First Union National Bank of North Carolina
                         230 South Tryon Street, 9th Floor
                         Charlotte,  North Carolina 28288-1179
                         Attention:  Bond Administration
                         Telephone:  (704) 374-6242
                         Telecopy:   (704) 383-7316

or to such other address as any party may designate for itself by like notice to
all other parties hereto. All such notices and communications shall be deemed to
have been  given  (i) if  mailed as  provided  above by any  method  other  than
overnight  delivery  service,  on the fifth  Business  Day after  deposit in the
mails,  (ii) if mailed by overnight  delivery service,  telegraphed,  telexed or
telecopied,  when delivered for overnight  delivery,  delivered to the telegraph
company,   confirmed  by  telex   answerback  or   transmitted   by  telecopier,
respectively, or (iii) if delivered by hand, upon delivery.
<PAGE>
         15.  Amendments,  Waivers,  etc. No  amendment,  modification,  waiver,
discharge  or  termination  of, or consent to any  departure by any party hereto
from, any provision of this  Agreement,  shall be effective  unless in a writing
signed by the Agent  (and,  in the event the same  shall  affect  the  rights or
obligations  of the Escrow Agent under Sections 7, 8, 9 or 10, the Escrow Agent)
and the  Borrower,  and then the same shall be  effective  only in the  specific
instance and for the specific purpose for which given.

         16.  Governing Law. This  Agreement  shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).

         17.  Severability  To the extent any  provision  of this  Agreement  is
prohibited  by or invalid under the  applicable  law of any  jurisdiction,  such
provision  shall  be  ineffective  only to the  extent  of such  prohibition  or
invalidity  and  only  in  any  such   jurisdiction,   without   prohibiting  or
invalidating  such  provision  in  any  other   jurisdiction  or  the  remaining
provisions of this Agreement in any jurisdiction.

         18. Construction.  The headings of the various sections and subsections
of this Agreement have been inserted for  convenience  only and shall not in any
way affect the meaning or construction of any of the provisions  hereof.  Unless
the context  otherwise  requires,  words in the singular  include the plural and
words in the plural include the singular.

         19.  Counterparts. This Agreement may be  executed  in  any  number  of
counterparts and by different parties hereto on separate  counterparts,  each of
which when so executed  and  delivered  shall be an  original,  but all of which
shall together constitute one and the same instrument.

         20.  Entire Agreement. This  Agreement  and  the  other  documents  and
instruments executed  contemporaneously herewith constitute the entire agreement
between the parties hereto relating to the subject matter hereof.

         21.  Successors and Assigns. The  provisions of this Agreement shall be
binding  upon,  inure to the  benefit of and be  enforceable  by the  respective
successors  and assigns of the Borrower,  Reinsurance,  the Escrow Agent and the
Agent.
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their duly authorized  corporate officers as of the date first above
written.


                                     CHARTWELL RE HOLDINGS CORPORATION

                                     By:
                                          --------------------------------------

                                     Name:
                                          --------------------------------------

                                     Title:
                                          --------------------------------------


                                     CHARTWELL REINSURANCE COMPANY

                                     By:
                                          --------------------------------------
                                     Name:
                                          --------------------------------------
                                     Title:
                                          --------------------------------------


                                     FIRST UNION NATIONAL BANK OF
                                     NORTH CAROLINA, as Agent

                                     By:
                                          --------------------------------------
                                     Name:
                                          --------------------------------------
                                     Title:
                                          --------------------------------------


                                     FIRST UNION NATIONAL BANK OF
                                     NORTH  CAROLINA, as Escrow Agent

                                     By:
                                          --------------------------------------
                                     Name:
                                          --------------------------------------
                                     Title:
                                          --------------------------------------