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                                                                   EXHIBIT 10.40

                         INTER-COMPANY POOLING AGREEMENT
                                  ("Agreement")

        This Agreement is made this 5th day of February 1998, effective as of
12:01 A.M., January 1, 1997, ("Effective Date") by and between SCPIE Indemnity
Company ("SCPIE Indemnity"), and the following companies (collectively, the
"Pool Members"): American Healthcare Indemnity Company ("AHI"), formerly FG
Insurance Corporation and American Healthcare Specialty Insurance Company
("AHSIC"), formerly FG Casualty Company.

        Since the effective date, Southern California Physicians Insurance
Exchange ("SCPIE") has reorganized from a reciprocal insurance company to a
stock insurance company and became a wholly owned subsidiary of SCPIE Holdings
Inc. (the Reorganization). Pursuant to the Reorganization, SCPIE merged with and
into SCPIE Indemnity, a California stock insurance company and a wholly owned
subsidiary of SCPIE Holdings Inc., the surviving corporation of the
Reorganization.

                                   WITNESSETH:

        WHEREAS, SCPIE Indemnity and the Pool Members are direct subsidiaries of
SCPIE Holdings Inc. which owns all their outstanding stock; and

        WHEREAS, the parties hereto, in the interests of economy and efficiency,
desire to pool all their gross in-force, new and renewal business as well as all
their gross reported and incurred but not reported claims and losses, statutory
liabilities and assets held against them, past due balances and underwriting
expenses; and

        WHEREAS, it is the intent of such pooling arrangement that the Annual
Statements of the parties shall, as respects all underwriting items, be in fixed
proportions;

        NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

                             ARTICLE I - DEFINITIONS

        For purposes of this Agreement the following terms have the meanings
indicated:

        A.      "Expenses" shall mean all Underwriting Expenses and unallocated
                loss adjustment expenses.

        B.      "Gross Losses" shall mean gross direct liability and allocated
                loss adjustment expenses on insurance policies, contracts and
                reinsurance assumed, all net of salvage, subrogation, and
                facultative reinsurance, except liability assumed hereunder.

        C.      "Net Expenses" means gross expenses less ceding commission
                allowances under reinsurance contracts that inure to the benefit
                of this Agreement.

        D.      "Net Losses" means gross losses less salvage, subrogation and
                reinsurance that inure to the benefit of this Agreement.

        E.      "Net Unearned Premiums" means gross unearned premiums, less
                unearned reinsurance premiums.
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        F.     "Net Written Premiums" means gross premiums, less reinsurance
               premiums effected by the Pool Members or SCPIE Indemnity, and
               less return premium and cancellations.

        G.     "Ultimate Net Liability" means the sum or sums of each party
               pays, or becomes liable to pay (1) in the settlement of claims or
               suits, or (2) in satisfaction of judgements under policies of
               insurance or reinsurance issued by the parties hereto.

        H.     "Underwriting Expenses" shall mean all expenses incurred by SCPIE
               Indemnity or the Pool Members or both in the underwriting and
               placing of insurance on its or their books and shall include but
               shall not be limited to expenses incurred for commissions, all
               other agency obligations, agency supervision, underwriting,
               engineering, policy audits, advertising, supervision as it
               relates to the production of business, taxes, other than federal
               income taxes and such other expenses as may be mutually agreeable
               to the parties.

                           ARTICLE II- CESSION TO POOL

        Each Pool Member individually shall cede to SCPIE Indemnity and SCPIE
Indemnity shall assume from each Pool Member:

        A.     100% of the Gross Losses of such Pool Member on all classes of in
               force, new and renewal business wherever located which shall be
               assumed by such Pool Member and becoming effective on or after
               12:01 A.M., January 1, 1997, including statutory liabilities and
               assets held against them, and past due balances; and

        B.     100% of the Gross Unearned Premium on each and every risk in
               force as of the 12:01 A.M., January 1, 1997 effective date and
               100% of the Gross Written Premium on each and every risk assumed
               thereafter by way of primary insurance, reinsurance and
               retrocession.

        C.     SCPIE Indemnity shall credit Pool Members with:

               (i) A ceding commission on the Gross Unearned Premium reserve
               transferred in accordance with Article II B above. The ceding
               commission will be an amount equal to the actual cost incurred by
               the respective Pool Member for Underwriting Expenses.

               (ii) 100% of the amount of all Gross Expenses paid by the Pool
               Members while this Agreement is in force, except:

                      (a) United States Federal and any State income tax.

                      (b) Investment Expenses.

        D.     Each Pool Member shall credit SCPIE Indemnity with 100% of the
               reserves on its book for unpaid expenses, excluding the reserves
               for United States Federal and any State income tax and investment
               expenses, outstanding on the Effective Date.

        E.     All reinsurance other than certain facultative reinsurance
               placements in effect on or

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               before January 1, 1997, and that ultimately ceded hereunder to
               Pool Members shall be placed by SCPIE Indemnity on behalf of the
               Pool Members and each Pool Member shall participate in such
               reinsurance in proportion to its respective percentage of
               participation ("Pool Share") as set forth in Article IV.

                         ARTICLE III - CESSION FROM POOL

        Pool Members shall reinsure and SCPIE Indemnity shall cede and transfer
to Pool Members as follows:

        A.     SCPIE Indemnity shall add business ceded to it under Article II
               to its own business thus forming a pool (called the "SCPIE Pool")
               which shall then be redistributed by SCPIE Indemnity in
               accordance with Pool Share.

        B.     Pool Members shall reinsure, and SCPIE Indemnity shall cede and
               transfer to Pool Members, their respective Pool Share of the
               SCPIE Pool's Ultimate Net Liability under all policies and
               contracts of insurance on which the SCPIE Pool is subject to
               liability and which are outstanding and in force at the Effective
               Date of this Agreement.

               SCPIE Indemnity hereby cedes and the Pool Members hereby assume
               their respective Pool Shares of the SCPIE Pool's Ultimate Net
               Liability for Net Losses payable while this agreement is in
               force.

        C.     Premium to the Pool Members for their respective Pool Shares of
               the reinsurance provided in Article III B shall be their
               respective Pool Shares of the Net Unearned Premium on each and
               every risk in force as of the Effective Date and their respective
               Pool Shares of the Net Written Premium on each and every risk
               assumed thereafter by way of primary insurance, reinsurance or
               retrocession.

        D.     The Pool Members shall credit SCPIE Indemnity with:

               (i) A ceding commission on the Net Unearned Premium reserve
               transferred in accordance with Article III C above. The ceding
               commission will be an amount equal to each Pool Member's
               respective Pool Share of the actual cost incurred by SCPIE
               Indemnity for Underwriting Expenses relating to such Net Unearned
               Premium reserve.

               (ii) Their respective Pool Share of the amount of all Net
               Expenses incurred by SCPIE Indemnity while this Agreement is in
               force, except:

                      (a) United States Federal and any State income tax.

                      (b) Investment Expenses.

        E.     SCPIE Indemnity shall credit the Pool Members with their
               respective Pool Shares of the net pooled reserves on its books at
               the Effective Date for unpaid expenses, excluding the reserves
               for United States Federal and any State income tax and investment
               expenses.
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                             ARTICLE IV - POOL SHARE

        The respective percentage of participation applicable to SCPIE Indemnity
and the Pool Members shall be in accordance with the following table:

                      SCPIE Indemnity                          80 percent
                      AHI                                      10 percent
                      AHSIC                                    10 percent

        The Pool Share of SCPIE Indemnity and any individual Pool Member may be
changed at any time to be a different percentage upon mutual consent in writing
by all Pool Members and SCPIE Indemnity subject, however, to all terms and
conditions of this Agreement.

                             ARTICLE V - EMPOWERMENT

        SCPIE Indemnity agrees to fulfill all of the obligations of each Pool
Member under the policies or contracts hereby reinsured and to adjust and pay
all claims thereunder at its own expense, and each Pool Member hereby transfers
to SCPIE Indemnity all its rights, powers and privileges under all such policies
or contracts, so that SCPIE Indemnity may act therein in all respects as if it
had itself issued said policies or contracts.

        SCPIE Indemnity will accept all proofs of loss or notices that insured
may have the right to give the individual Pool Members; it being the intention
of this Agreement that SCPIE Indemnity shall take the place of the individual
Pool Member as to policies or contracts reinsured hereunder in all respects.

        Notwithstanding the delegation of authority contained in this agreement,
the companies have retained the ultimate control of and responsibility for the
performance of all functions, including but not limited to underwriting and
policy cancellation, for which authority has been delegated.

        SCPIE Indemnity agrees to reimburse any Pool Member for all losses, loss
adjustment expenses or underwriting expenses that such Pool Member may expend.

        SCPIE Indemnity may delegate to any Pool Member the authority to perform
on its behalf the rights and powers in this Article provided.

                   ARTICLE VI - MUTUAL RIGHTS AND OBLIGATIONS

        A. This Agreement shall be subject in all respects to the same terms,
rates, conditions, modifications, alterations and cancellations as the
respective policies of insurance or reinsurance of the parties hereto. The true
intent of this Agreement being that the parties hereto shall follow each other's
fortunes.

        B. The parties hereto shall not be prejudiced in any way by inadvertent
errors or omissions, provided that such errors or omissions are corrected
immediately upon discovery.

        C. This Agreement may by canceled at any time by any party giving at
least ninety (90) days written notice to the other parties at their principal
offices of its desire to do so. Any such cancellation shall be effective as of
December 31, or as may be mutually agreed.
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                             ARTICLE VII - PAYMENTS

        A. The pool members shall furnish to SCPIE Indemnity on business covered
by Article II no later than seventy-five (75) days following the end of each
month, an account current which shall set forth Net Written Premiums, less
ceding commission thereon for the month, less Net Expenses paid and less Net
Losses paid during the month in question.

        B. SCPIE Indemnity shall furnish to Pool Members on business covered by
Article III no later than seventy-five (75) days following the end of each
month, an account current which shall set forth the respective Pool Shares of
Net Written Premiums, less ceding commission thereon for the month, less Net
Expenses paid and less Net Losses paid during the month in question.

        C. The net balance in accordance with paragraphs A and B of this Section
shall be paid by the debtor party as soon as possible and no later than
seventy-five days (75) following the applicable month.

        D. This Agreement shall not apply to the investment operations or
liabilities for Federal and any State income taxes of the parties hereto.

        E. The President and Chief Executive Officer of SCPIE Indemnity or any
officer of SCPIE Indemnity designated by the President and Chief Executive
Officer shall determine, in accordance with statutory accounting practices and
generally accepted accounting principles, the methods and procedures including
account transactions by which the terms of this Agreement shall be performed by
and on behalf of the parties hereto.

                            ARTICLE VIII - INSOLVENCY

        Each of the Pool Members and SCPIE Indemnity agree that all reinsurance
made, ceded, renewed or otherwise becoming effective under this Agreement shall
be payable on demand of the assuming reinsurer at the same time as the ceding
insurer shall pay its net retained portion of such risk or obligations, with
reasonable provision for verification before payment, and the reinsurance shall
be payable by the assuming reinsurer, on the basis of the liability of the
ceding insurer under the policy or policies reinsured without diminution because
of the insolvency of the ceding insurer.

        In the event of the insolvency of the ceding insurer, reinsurance under
this Agreement shall be payable immediately on demand, with reasonable provision
for verification, on the basis of claims allowed against the ceding insurer by
any court of competent jurisdiction or by any liquidator, receiver, or statutory
successor of the ceding insurer having authority to allow such claims, without
diminution because of such insolvency or because such liquidator, receiver or
statutory successor has failed to pay all or a portion of any claims. Such
payments by the assuming reinsurer shall be made directly to the ceding insurer
or its liquidator, receiver or statutory successor, except where the contract of
insurance or reinsurance provides another payee of such reinsurance in the event
of insolvency of the ceding insurer.

        It is agreed, however, that the liquidator or receiver or statutory
successor of the ceding insurer will give written notice to the assuming
reinsurer of the pendency of a claim against the insolvent ceding insurer on the
policy or policies reinsured within a reasonable time after such claim is filed
in the insolvency proceeding and that during the pendency of such claim the
assuming reinsurer may investigate such claim and interpose, at its own expense,
in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the ceding insurer
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or its liquidator or receiver or statutory successor. The expense thus incurred
by the assuming reinsurer will be chargeable, subject to court approval, against
the insolvent ceding insurer as part of the expense of liquidation to the extent
of a proportionate share of the benefit which may accrue to the ceding insurer
solely as a result of the defense undertaken by the assuming reinsurer.

        Where two or more assuming reinsurers are involved in the same claim and
a majority in interest elect to interpose defense to such claim, the expense
will be apportioned in accordance with the terms of this Agreement as though
such expense had been incurred by the insolvent ceding insurer.

                           ARTICLE IX - GOVERNING LAW

        The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of California.

        IN WITNESS WHEREOF, the said parties have caused this Agreement to be
signed by their duly authorized representative.

Signed in Beverly Hills, California
this 5th day of February, 1998

SCPIE INDEMNITY COMPANY



BY:     /s/ PATRICK T. LO
        ---------------------------------
        Patrick T. Lo, Vice President and
        Chief Financial Officer

Signed in Beverly Hills, California
this 5th day of February, 1998

AMERICAN HEALTHCARE INDEMNITY COMPANY



BY:     /s/ PATRICK T. LO
        ---------------------------------
        Patrick T. Lo, Vice President and
        Chief Financial Officer

Signed in Beverly Hills, California
this 5th day of February, 1998

AMERICAN HEALTHCARE SPECIALTY INSURANCE COMPANY



BY:     /s/ PATRICK T. LO
        ---------------------------------
        Patrick T. Lo, Vice President and
        Chief Financial Officer