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                                                                   EXHIBIT 10.59

                  FIRST EXCESS OF LOSS REINSURANCE AGREEMENT

                 (hereinafter referred to as the "Agreement")

                          entered into by and between

                         SCPIE HOLDINGS, INC., and/or

                      S.C.P.I.E. INDEMNITY COMPANY and/or

                 AMERICAN HEALTHCARE INDEMNITY COMPANY, and/or

                 AMERICAN HEALTHCARE SPECIALTY COMPANY, and/or

                  S.C.P.I.E. INSURANCE SERVICES, INC., and/or

                     S.C.P.I.E. MANAGEMENT SERVICES, INC.
                           Beverly Hills, California

            (hereinafter collectively referred to as the "Company")

                                      and

                  The Subscribing Reinsurer(s) executing the
                     Interests and Liabilities Contract(s)
                        attached to and forming a part
                               of this Agreement

                 (hereinafter referred to as the "Reinsurer")

WITNESSETH:
-----------

The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth. Nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement, except as provided for in the Insolvency
Article of this Agreement.


                                  ARTICLE I.

BUSINESS COVERED

The Reinsurer agrees to reimburse the Company, on an excess of loss basis, for
the amounts of ultimate net loss which the Company may pay as a result of claims
made during the term of this Agreement under binders, policies and contracts of
insurance (hereinafter called "policies"), hereafter issued or entered into by
or on behalf of the Company, covering the types of policy forms set forth below
as written by the Company, except as excluded under the Exclusions Article of
this Agreement, subject to the limitations set forth in the Limit and Retention
Article:
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1. Professional and Business Liability Insurance Policy - Modified Claims Made
   Coverage Hospitals and Medical Centers (Primary and Excess).

2. Professional and Business Liability Insurance Policy - Claims Made Coverage
   Hospitals and Medical Centers (Primary and Excess).

3. Excess Automobile Liability and Excess Employers Liability associated with
   the policy forms outlined above.


                                  ARTICLE II.

TERM

A. This Agreement shall commence October 1, 1998 and shall remain in full force
   and effect for twelve (12) consecutive months to expire September 30, 1999,
   both days inclusive, as respects all risks attaching during said twelve (12)
   months period.

B. It is agreed that Modified Claims Made Policies include an Automatic Pre-Paid
   Extended Reporting Period for a period not exceeding eighty-four (84) months.
   It is understood and agreed that, to preserve the claims made nature of this
   reinsurance, subject to availability of markets to renew this Agreement
   sufficiently at its expiry, the Reinsurers hereon will be relieved of all
   liability for any claims not made in the First Annual Reporting Period of
   each policy. In consideration the Reinsurers hereon will release to renewing
   markets Premium equivalent to 65% of the total Net Ceded Premium (Gross Ceded
   Premium less applicable ceding commission) derived from such Modified Claims
   Made Policies attaching during the term of this Agreement.

C. In the event of non-renewal, and at the option of the Company, the Reinsurers
   agree to run off policies in force until natural expiration; in respect of
   Claims Made Policies, such period not to exceed twelve (12) months plus odd
   time not exceeding twenty-four (24) months in all from the expiration date
   hereon; in respect of Modified Claims Made Policies, such period not to
   exceed ninety-six (96) months from the expiration date hereon.

D. In the event that an Original Insured's policy is canceled or non-renewed, a
   further Extended Reporting Period Endorsement for an unlimited period my be
   purchased by an Original Insured provided the purchase is made within the
   ninety (90) day period prior to the expiration of the eighty-four (84) months
   Extended Reporting Period Endorsement and subject to the payment of an
   Additional Premium of 25% of the last Annual Modified Claims Made Premium
   applicable prior to the date of cancellation or non-renewal of the Original
   Policy. Any such Additional Premium shall be payable on the date that the
   original eighty-four (84) months Extended Reporting Period Endorsement
   expires and shall be deemed fully earned on that day. Any claim reported
   under any further unlimited Extended Reporting Period Endorsement shall be
   deemed to have been made on the date of expiration of the original eighty-
   four (84) months Extended Reporting Period Endorsement.
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E. Further, at the option of the Company, non renewal may be effected on a cut
   off basis as of the expiration date hereon and the Reinsurers shall return to
   the Company their respective share of the unearned premium reserve at that
   time.

F. Notwithstanding the expiration of this Agreement as hereinabove provided, the
   provisions of this Agreement shall continue to apply to all unfinished
   business hereunder to the end that all obligations and liabilities incurred
   by each party hereunder prior to such expiration shall be fully performed and
   discharged.

                                 ARTICLE III.

EXCLUSIONS

This Agreement does not cover and specifically excludes the following:

1. Insolvency Funds, per the attached "Insolvency Fund Exclusion Clause".

2. Nuclear Incidents, per the attached "Nuclear Incident Exclusion Clause -
   Liability -Reinsurance".

3. Assumed Reinsurance other than for Licensing or Financial Rating purposes.

4. Other Exclusions to follow the Company's Original Policies as interpreted by
   Regulatory or Judicial Authorities.

5. Financial Guarantee Business.


                                  ARTICLE IV.

TERRITORY

This Agreement will apply as per the Company's Original Policies.


                                  ARTICLE V.

LIMIT AND RETENTION

A. The Company shall retain for its own account and pay under one or more of the
   Company's policies the first $1,000,000 ultimate net loss, each and every
   claim made for indemnity only during the term of this Agreement and the
   Reinsurer agrees to reimburse the Company for the amount of ultimate net loss
   paid in excess of $1,000,000, each and every claim made for indemnity only
   during the term of this Agreement, but the Reinsurer's maximum liability
   shall not exceed 100% of $9,000,000 resulting from each and every claim made
   for indemnity only during the term of this Agreement.

B. The term "claim made" shall be as defined in the Company's Original Policies.
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C. The Company's retention shall be the difference between $1,000,000 each and
   every claim made for indemnity only and the underlying Self Insured Retention
   (S.I.R.) where applicable but always subject to a minimum retention of
   $500,000 each and every claim made for indemnity only.

D. As respects Medical Staff Members, including any other Associated Individuals
   or Entities, added by Endorsement to the policies subject to this Agreement
   under a Unification Plan, the following shall apply:

   1.  When a Hospital or any of their Insured Medical Staff Members, including
       any other Associated Individuals or Entities, are determined by the
       Company to be jointly involved in any claim or suit, the Total Limits of
       Liability issued to the Hospital shall be shared by the Hospital and by
       all of its Insured Medical Staff Members, including any other Associated
       Individuals or Entities.

   2.  When a Hospital is determined by the Company not to be involved in any
       claim or suit, the Total Limits of Liability available to all Insured
       Medical Staff Members, including any other Associated Individuals or
       Entities, shall be limited to $5,000,0000 each and every loss.

E. The term "Unification Plan" is understood to mean where coverage is provided
   on a shared limit basis to a Hospital or any of their Insured Medical Staff
   Members, including any other Associated Individuals or Entities for the
   purpose of obtaining a common defense.

F. In determining if a Hospital is jointly involved in any claim or suit, the
   Hospital shall be deemed to be jointly involved if the medical incident which
   gave rise to the claim or suit occurring on the Hospital premises, including
   any Insured Affiliated locations, or if members of the Insured Medical Staff
   were acting on behalf of the Hospital. The mere naming of the Hospital as a
   defendant in a claim or suit shall not, in itself, determine if the Hospital
   was involved in the claim or suit.

G. The maximum amount of losses recoverable hereunder during the term of this
   Agreement, including but not limited to indemnity, loss in Excess of Original
   Policy Limits (XPL), and Extra Contractual Obligations (ECO) shall not exceed
   $50,000,000 or 400% of Gross Premium Ceded hereunder, whichever is the
   greater.

H. The Company shall co-participate for 10% of the ultimate net loss hereunder,
   net and unreinsured.


                                  ARTICLE VI.

NOTICE OF LOSS AND LOSS SETTLEMENTS

A. In the event of a claim arising hereunder which either results in or appears
   to be of serious enough nature as probably to result in a loss involving this
   Agreement, the Company shall give notice as soon as reasonably practicable to
   Reinsurers and the
<PAGE>

   Company shall keep the Reinsurer advised of all subsequent developments in
   connection therewith.

B. The Company shall also promptly notify the Reinsurers of all incidents
   involving the following injuries for which the Company has established an
   indemnity reserve of $500,000 or greater and with policy limits to affect
   Reinsurers:

   1.  Death.

   2.  Brain Injury.

   3.  Nerve Injury.

   4.  Paralysis - cord injury.

   5.  Amputations.

   6.  Internal injuries which require continuous treatment (e.g. Dialysis,
       Hyperalimentation, failure to diagnose).

   7.  Loss of Sight of one or both eyes.

C. The Company has the obligation to investigate and, to the extent that may be
   required by the policies reinsured, defend any claim affecting this
   reinsurance and to pursue such claim to final determination.

D. All loss settlements made by the Company, provided they are within the terms
   and conditions of the original policies (or as provided for in Excess of
   Original Policy Limits or Extra Contractual Obligations Articles contained in
   this Agreement) and within the terms of this Agreement shall be
   unconditionally binding upon the Reinsurer, and amounts falling due to the
   share of the Reinsurer shall be payable by the Reinsurer immediately in
   accordance with the provisions set forth in paragraph D. of the Reports and
   Remittances Article.

E. It is understood that when so requested the Company will afford the Reinsurer
   an opportunity to be associated with the Company, at the expense of the
   Reinsurer, in the defense of any claim or suit or proceeding involving this
   reinsurance; and the Company will cooperate in every respect in the defense
   of such claim, suit or proceeding.


                                 ARTICLE VII.

NET RETAINED LINES

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

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


                                 ARTICLE VIII.

ULTIMATE NET LOSS

The term "ultimate net loss" means the actual loss, including 90% of loss in
Excess of Original Policy Limits and 90% of Extra Contractual Obligations in
accordance with the provisions of the respectively titled Articles herein, but
excluding loss adjustment expense, paid or to be paid by the Company on its net
retained lines after making deductions for all recoveries, salvages,
subrogations and all claims on inuring reinsurance, whether collectible or not;
provided, however, that in the event of the insolvency of the Company, payment
by the Reinsurer shall be made in accordance with the provisions of the
Insolvency Article. Nothing herein shall be construed to mean that losses under
this Agreement are not recoverable until the Company's ultimate net loss has
been ascertained.


                                  ARTICLE IX.

EXCESS OF ORIGINAL POLICY LIMITS

A. This Agreement shall protect the Company, within the limits hereof, in
   respect of policies ceded to this Agreement in connection with ultimate net
   loss in excess of the limit of its original policy, such loss in excess of
   the limit having been incurred because of failure by it to settle within the
   policy limit or by reason of alleged or actual negligence, fraud or bad faith
   in rejecting an offer of settlement or in the preparation of the defense or
   in the trial of any action against its insured or reinsured or in the
   preparation or prosecution of an appeal consequent upon such action.

B. However, this Article shall not apply where the loss has been incurred due to
   fraud by a member of the Board of Directors or a corporate officer of the
   Company acting individually or collectively or in collusion with any
   individual or corporation or any other organization or party involved in the
   presentation, defense or settlement of any claim covered hereunder.

C. For the purpose of this Article, the word "loss" shall mean any amounts for
   which the Company would have been contractually liable to pay had it not been
   for the limit of the original policy.
<PAGE>

                                  ARTICLE X.

EXTRA CONTRACTUAL OBLIGATIONS

A. This Agreement shall protect the Company within the limits hereof, in respect
   of policies ceded to this Agreement where the ultimate net loss includes any
   Extra Contractual Obligations. The term "Extra Contractual Obligations" is
   defined as those liabilities not covered under any other provision of this
   Agreement and which arise from the handling of any claim on business covered
   hereunder, such liabilities arising because of, but not limited to, the
   following:  failure by the Company to settle within the policy limit, or by
   reason of alleged or actual negligence, fraud or bad faith in rejecting an
   offer of settlement or in the preparation of the defense or in the trial of
   any action against its insured or reinsured, or in the preparation or
   prosecution of an appeal consequent upon such action.

B. The date on which any Extra Contractual Obligation is incurred by the Company
   shall be deemed, in all circumstances, to be the date of the original
   disaster and/or casualty.

C. However, this Article shall not apply where the loss has been incurred due to
   fraud by a member of the Board of Directors or a corporate officer of the
   Company acting individually or collectively or in collusion with any
   individual or corporation or any other organization or party involved in the
   presentation, defense or settlement of any claim covered hereunder.


                                  ARTICLE XI.

CEDING COMMISSION (BRMA 10A - FLAT COMMISSION) AMENDED TO 15% PLUS ORIGINAL
ACQUISITION COST NOT TO EXCEED 25% IN ALL

A. The Reinsurer shall allow the Company a 15% commission plus original
   acquisition cost not to exceed 25% in all on all premiums ceded to the
   Reinsurer hereunder. The Company shall allow the Reinsurer return commission
   on return premiums at the same rate.

B. It is expressly agreed that the ceding commission allowed the Company
   includes provision for all dividends, commissions, taxes, assessments, and
   all other expenses of whatever nature, except loss adjustment expense.


                                  ARTICLE XII.

REINSURANCE PREMIUM

A. As premium for the reinsurance provided hereunder, the Company shall pay the
   Reinsurer 100% of its Original Gross Excess Limit Premium and Extended
   Reporting Period Endorsement Premium calculated by the Company.
<PAGE>

B. The term "Original Gross Excess Limit Premium" as used herein shall mean
   premiums calculated by the Company for policy limits excess of $1,000,000 up
   to $10,000,000 after application of scheduled rating credits/debits and
   experience credits only.


                                 ARTICLE XIII.

REPORTS AND REMITTANCES

A. The Company will provide the Reinsurer with all necessary data respecting
   premiums, losses and recoveries on forms mutually acceptable to the Company
   and the Reinsurer.

B. Within forty-five (45) days after the close of each fiscal month the Company
   shall pay to the Reinsurer an amount equal to the Ceded Excess Limit Premium
   less Ceding Commission.

C. The Company shall provide to the Reinsurer, as promptly as possible after the
   close of each year the information necessary for Annual Statement purposes.

D. Payment by the Reinsurer of its portion of loss and loss expenses paid by the
   Company will be made by the Reinsurer to the Company immediately upon receipt
   of satisfactory proof of loss being given to it by the Company.


                                  ARTICLE XIV.

FOLLOW THE FORTUNES

The Reinsurer shall follow the fortunes of the Company in respect of all
business hereunder. All loss and expense payments or settlements made by the
Company are unconditionally binding upon the Reinsurer if such payments or
settlements were made within the terms and conditions of the Company's policies
and within the terms and conditions of this Agreement.


                                  ARTICLE XV.

OFFSET (BRMA 36C - OFFSET UNDER THIS AGREEMENT ONLY.)

The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Agreement. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.
<PAGE>

                                 ARTICLE XVI.

COMMUTATION CLAUSE

The Company or the Reinsurer may, at any time express their desire to the other
party to commute all losses which are applicable to any Agreement year and which
are still unsettled. In such event the Company and the Reinsurer shall mutually
determine and evaluate such losses and the payment by the Reinsurer of their
proportion of the amount so ascertained and mutually agreed to be the value of
such losses shall relieve them of all further liability, in respect of that
Agreement year both in respect of known or unknown losses.

                                 ARTICLE XVII.

CONFIDENTIALITY CLAUSE

A. This Agreement and the pre Agreement documentation may contain confidential
   or proprietary information of either party to this Agreement. All parties
   shall maintain the confidentiality of this information and shall not disclose
   such information to any third party without both parties approval.

B. Notwithstanding the above, any party may disclose such information without
   further approval from the other party in answer to interrogations, subpoenas
   or other legal/arbitration process as well as to the Company's reinsurance
   intermediary hereon, the Reinsurer's retrocessionaires or in response to
   requests by governmental and regulatory agencies. In addition the parties may
   disclose such information to their accountants and outside legal counsel as
   may be necessary.

                                ARTICLE XVIII.

ACCESS TO RECORDS

The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect through its designated
representatives, during the term of this Agreement and thereafter, all books,
records and papers of the Company in connection with any reinsurance hereunder,
or the subject matter hereof.

                                 ARTICLE XIX.

ERRORS AND OMISSIONS

Errors and omissions on the part of the Company shall not invalidate the
reinsurance under this Agreement, provided such errors and omissions are
corrected promptly after discovery thereof, but the liability of the Reinsurer
under this Agreement shall in no event exceed the limits specified herein.
<PAGE>

                                  ARTICLE XX.

TAXES

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


                                 ARTICLE XXI.

FEDERAL EXCISE TAX

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

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

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


                                 ARTICLE XXII.

UNAUTHORIZED REINSURANCE (BRMA 55A - COVERS UNEARNED PREMIUM, OUTSTANDING LOSSES
AND IBNR)

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

A. As regards policies or bonds issued by the Company coming within the scope of
   this Agreement, the Company agrees that when it shall file with the insurance
   regulatory authority or set up on its books reserves for unearned premium and
   losses covered hereunder which it shall be required by law to set up, it will
   forward to the Reinsurer a statement showing the proportion of such reserves
   which is applicable to the Reinsurer. The Reinsurer hereby agrees to fund
   such reserves in respect of unearned premium, known outstanding losses that
   have been reported to the Reinsurer and allocated loss adjustment expense
   relating thereto, losses and allocated loss adjustment expense paid by the
   Company but not recovered from the Reinsurer, plus reserves for losses
   incurred but not reported, as shown in the statement prepared by the Company
   (hereinafter referred to as "Reinsurer's
<PAGE>

   Obligations") by funds withheld, cash advances or a Letter of Credit. The
   Reinsurer shall have the option of determining the method of funding provided
   it is acceptable to the insurance regulatory authorities having jurisdiction
   over the Company's reserves.

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

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

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

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

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

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

D. In the event the amount drawn by the Company on any Letter of Credit is in
   excess of the actual amount required for 1. or 3., or in the case of 4., the
   actual amount determined to be due, the Company shall promptly return to the
   Reinsurer the excess amount so drawn. All of the foregoing shall be applied
   without diminution because of insolvency on the part of the Company or the
   Reinsurer.

E. The issuing bank shall have no responsibility whatsoever in connection with
   the propriety of withdrawals made by the Company or the disposition of funds
<PAGE>

   withdrawn, except to ensure that withdrawals are made only upon the order of
   properly authorized representatives of the Company.

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

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

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


                                ARTICLE XXIII.

ARBITRATION

A. As a condition precedent to any right of action hereunder, any dispute
   arising out of the interpretation, performance or breach of this Agreement,
   including the formation or validity thereof, shall be submitted for decision
   to a panel of three arbitrators. Notice requesting arbitration will be in
   writing and sent certified or registered mail, return receipt requested.

B. One arbitrator shall be chosen by each party and the two arbitrators shall,
   before instituting the hearing, choose an impartial third arbitrator who
   shall preside at the hearing. If either party fails to appoint its arbitrator
   within thirty (30) days after being requested to do so by the other party,
   the latter, after ten (10) days notice by certified or registered mail of its
   intention to do so, may appoint the second arbitrator.

C. If the two arbitrators are unable to agree upon the third arbitrator within
   thirty (30) days of their appointment, the deficiency shall be supplied on
   the application of the party requesting arbitration by an appointment made by
   the American Arbitration Association. Notwithstanding the appointment of any
   third Arbitrator by the American Arbitration Association, the arbitration
   proceedings shall not be governed by the American Arbitration Association's
   commercial arbitration rules.

D. All arbitrators shall be disinterested active or former executive officers of
   insurance or reinsurance companies or Underwriters at Lloyd's, London.
<PAGE>

E. Within thirty (30) days after notice of appointment of all arbitrators, the
   panel shall meet and determine timely periods for briefs, discovery
   procedures and schedules for hearings.

F. The panel shall be relieved of all judicial formality and shall not be bound
   by the strict rules of procedure and evidence. Unless the panel agrees
   otherwise, arbitration shall take place in Beverly Hills, California, but the
   venue may be changed when deemed by the panel to be in the best interest of
   the arbitration proceeding. Insofar as the arbitration panel looks to
   substantive law, it shall consider the law of the State of California. The
   decision of any two arbitrators when rendered in writing shall be final and
   binding. The panel is empowered to grant interim relief as it may deem
   appropriate.

G. The panel shall interpret this Agreement as if it were an honorable
   engagement rather than as merely a legal obligation and shall make its
   decision considering the custom and practice of the applicable insurance and
   reinsurance business within sixty (60) days following the termination of the
   hearings. Judgment upon the award may be entered in any court having
   jurisdiction thereof.

H. Each party shall bear the expense of its own arbitrator and shall jointly and
   equally bear with the other party the cost of the third arbitrator. The
   remaining costs of the arbitration shall be allocated by the panel. The panel
   may, at its discretion, award such further costs and expenses as it considers
   appropriate, including but not limited to attorneys fees, to the extent
   permitted by law.

I. If more than one reinsurer is involved in arbitration where there are common
   questions of law or fact and a possibility of conflicting awards or
   inconsistent results, all such reinsurers may constitute and act as one party
   for purposes of this Article and communications shall be made by the Company
   to each of the reinsurers constituting the one party; provided, however, that
   nothing therein shall impair the rights of such reinsurers to assert several,
   rather than joint defenses or claims, nor be construed as changing the
   liability of the reinsurers under the terms of this Agreement from several to
   joint.


                                 ARTICLE XXIV.

SERVICE OF SUIT

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

A. It is agreed that in the event of the failure of the Reinsurer hereon to pay
   any amount claimed to be due hereunder, the Reinsurer hereon, at the request
   of the Company, will submit to the jurisdiction of a court of competent
   jurisdiction within the United States. Nothing in this Article constitutes or
   should be understood to constitute a waiver of the Reinsurer's rights to
   commence an action in any court of
<PAGE>

   competent jurisdiction in the United States, to remove an action to a United
   States District Court, or to seek a transfer of a case to another court as
   permitted by the laws of the United States or of any state in the United
   States. It is further agreed that service of process in such suit may be made
   upon Messrs. Mendes & Mount, 725 South Figueroa, Suite 1990, Los Angeles, CA
   90017, and that in any suit instituted, the Reinsurer will abide by the final
   decision of such court or of any appellate court in the event of an appeal.

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

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


                                 ARTICLE XXV.

INSOLVENCY

A. In the event of the insolvency of one or more than one of the Companies
   reinsured hereunder, this reinsurance shall be payable directly to the
   Company(ies) or to its liquidator, receiver, conservator or statutory
   successor immediately upon demand, with reasonable provision for
   verification, on the basis of the liability of the Company(ies) without
   diminution because of the insolvency of one or more than one of the Companies
   or because the liquidator, receiver, conservator or statutory successor of
   the Company(ies) has failed to pay all or a portion of any claim. It is
   agreed, however, that the liquidator, receiver, conservator or statutory
   successor of the Company(ies) shall give written notice to the Reinsurer of
   the pendency of a claim against the Company(ies) indicating the policy or
   bond reinsured which claim would involve a possible liability on the part of
   the Reinsurer within a reasonable time after such claim is filed in the
   conservation or liquidation proceeding or in the receivership, and that
   during the pendency of such claim, the Reinsurer may investigate such claim
   and interpose, at its own expense, in the proceeding where such claim is to
   be adjudicated, any defense or defenses that it may deem available to the
   Company(ies) or its liquidator, receiver, conservator or statutory successor.
   The expense thus incurred by the Reinsurer shall be chargeable, subject to
   the approval of the Court, against the Company(ies) as part of the expense of
   conservation or liquidation to the extent of a pro rata share of the benefit
   which may
<PAGE>

   accrue to the Company(ies) solely as a result of the defense undertaken by
   the Reinsurer.

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

C. It is further understood and agreed that, in the event of the insolvency of
   one or more than one of the Companies, the reinsurance under this Agreement
   shall be payable directly by the Reinsurer to the Company(ies) or to its
   liquidator, receiver or statutory successor, except where this Agreement
   specifically provides another payee of such reinsurance in the event of the
   insolvency of the Company(ies).


                                 ARTICLE XXVI.

INTERMEDIARY

Guy Carpenter & Company, Inc. is hereby recognized as the Intermediary
negotiating this Agreement for all business hereunder. All communications
(including but not limited to notices, statements, premium, return premium,
commissions, taxes, losses, loss adjustment expense, salvages and loss
settlements) relating thereto shall be transmitted to the Company or the
Reinsurer through Guy Carpenter & Company, Inc., 2 World Trade Center, New York,
New York 10048. Payments by the Company to the Intermediary shall be deemed to
constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary shall be deemed to constitute payment to the Company only to the
extent that such payments are actually received by the Company.


                                 ARTICLE XXVII.

GOVERNING LAW

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, U.S.A.


                                ARTICLE XXVIII.

SEVERAL LIABILITY NOTICE (LSW 1001 REINSURANCE)

The subscribing reinsurer's obligations under contracts of reinsurance to which
they subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing reinsurers are not responsible
for the subscription of any co-subscribing reinsurer who for any reason does not
satisfy all or part of its obligations.
<PAGE>

                                  INFORMATION

The factors to be used in calculating the Earned Premium as respects Modified
Claims Made risks attaching during the term of this Agreement and subsequent
agreements shall be as follows:

     Reporting Period              Earned Premium Factors
     1st 12 months                 35%
     2nd 12 months                 15%
     3rd 12 months                 15%
     4th 12 months                 10%
     5th 12 months                 10%
     6th 12 months                  5%
     7th 12 months                  5%
     8th 12 months                  5%