<PAGE>

                                                                  Exhibit 10.23

                                   TICNY Q.S.
                                 SMALL BUSINESS
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                                 PLACEMENT SLIP

                       TOWER INSURANCE COMPANY OF NEW YORK

                     2004 QUOTA SHARE REINSURANCE AGREEMENT


COMPANY                    Tower Insurance Company of New York.

REINSURER                  Tokio Millennium Re Ltd.

BUSINESS COVERED           This Agreement shall indemnify the Company in respect
                           of the net excess liability as herein provided and
                           specified which may accrue to the Company as a result
                           of Ultimate Net Loss and Loss Adjustment Expenses
                           subject to this Agreement, under policies written by
                           the Company and classified as Property or Liability,
                           following the Company's original policies, including:
                           Fire and Allied Lines, Commercial Multiple Peril,
                           Homeowners Multiple Peril and Liability, Workers'
                           Compensation, Inland Marine and Automobile Liability
                           and Physical Damage, all subject to the terms,
                           conditions and exclusions of this Agreement.

FOLLOW THE FORTUNES        The Reinsurer's liability shall attach simultaneously
                           with that of the Company and shall be subject in all
                           respects to the same risks, terms, conditions,
                           interpretations, waivers and to the same
                           modifications, alterations, and cancellations as the
                           respective policies issued by the Company, the true
                           intent of this Agreement being that the Reinsurer
                           shall, in every case to which this Agreement applies,
                           follow the fortunes of the Company, subject in all
                           cases to the limits, exclusions, terms and conditions
                           set forth in this Agreement.

TERRITORY                  In respect of primary business written by the
                           Company, this Agreement shall apply to policies
                           issued in New York, New Jersey, Pennsylvania and
                           Connecticut. To the extent that the Company becomes
                           authorized to transact insurance in any jurisdiction
                           in addition to those set forth above, the Company may
                           request that the Reinsurer amend this Agreement to
                           include policies issued in such jurisdictions. With
                           respect to policies issued in New Jersey,
                           Pennsylvania and Connecticut, the maximum overall New
                           Written Premium that may be ceded by the Company to
                           this Agreement shall be 10% of Net Written Premium in
                           the aggregate for these states (the "Premium Cap").
                           To the extent that the Company's overall Net Written
                           Premium for these states collectively exceeds the
                           Premium Cap in any such jurisdiction, the Cession
                           Percentage for these states shall be reduced by
                           dividing 10% (ten percent) of Net Written Premium by
                           the actual percentage of Net Written Premium and
                           multiplying that result by the Cession Percentage
                           elected in the Coverage section.


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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TERM                       A.  This Agreement shall take effect 12:01 a.m.,
                               Eastern Standard Time, January 1, 2004 and shall
                               apply to all losses occurring on or after 12:01
                               a.m., Eastern Standard Time, January 1, 2004 in
                               respect of all new and renewal Business written
                               on and after 12:01 a.m., Eastern Standard Time,
                               January 1, 2004 up to 12:01 a.m., Eastern
                               Standard Time, January 1, 2005.

                               At 12:01 a.m., Eastern Standard Time, January 1,
                               2005, the Reinsurer shall be liable for the in
                               force Business Covered until the earlier of the
                               expiration or the anniversary date of the
                               Company's policies, but not to exceed 12 (twelve)
                               months plus odd time. In the event that any
                               policy is required by statute or regulation or
                               order to be continued in force, the Reinsurer
                               will continue to remain liable with respect to
                               each such policy until the Company may legally
                               cancel, non-renew or otherwise eliminate
                               liability under the policy.

                           B.  The Company and the Reinsurer may agree to
                               terminate this Agreement or some portion of the
                               Business Covered on a cut-off basis. Upon such
                               termination, the Reinsurer shall incur no
                               liability for losses occurring subsequent to the
                               effective date of termination and the Reinsurer
                               shall return to the Company their respective
                               unearned premium reserve less previously paid
                               Ceding Commissions on such unearned premium
                               reserve.

                           C.  Notwithstanding the above, this Agreement is
                               subject to each Reinsurer reaching an agreement
                               with State National Insurance Company and
                               Virginia Surety Company, Inc., effective on or
                               around January 1, 2004, for the same capacity for
                               Small Market, Middle Market and Large Lines
                               combined business segments at economic terms
                               outlined in previous correspondence.



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                               If agreement is not reached by January 31, 2004,
                               the Company may rescind this Agreement back to
                               inception and all amounts paid shall be returned
                               to each respective party and the funds withheld
                               in the Funds Withheld Account/Profit Sharing
                               Account shall be released by the Reinsurer.

COVERAGE BASIS             Quota Share covering losses occurring, claims made
                           and losses discovered attaching to policies issued on
                           Business Covered incepting or renewing during the
                           Term.

EXCLUSIONS                 A.  Nuclear Incident, in accordance with the
                               following clauses attached hereto:

                               1.  Nuclear Incident Exclusion Clause - Physical
                                   Damage - Reinsurance - U.S.A. - NMA 1119;

                               2.  Nuclear Incident Exclusion Clause - Liability
                                   - Reinsurance - U.S.A. - NMA 1590;

                           B.  War Risks, in accordance with the War Risks
                               Exclusion Clause attached hereto;

                           C.  Insolvency, in accordance with the Insolvency
                               Funds Exclusion Clause attached hereto;

                           D.  Liability assumed by the Company as a member of
                               any pool, association or syndicate, in accordance
                               with the Pools, Associations and Syndicates
                               Exclusion Clause attached hereto;

                           E.  Earthquake, when written as such;

                           F.  Liability arising out of ownership, maintenance
                               or use of any aircraft or flight operations;



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           G.  Professional Liability, when written as such,
                               however not to exclude when written as part of a
                               package policy or when written in conjunction
                               with other policies issued by the Company;

                           H.  Insolvency and Financial Guarantee.

                           I.  Any acquisitions of companies or books of
                               business outside of the normal course of business
                               ("agent rollovers") without the prior written
                               consent of the Reinsurer hereon.

                           J.  Asbestos liabilities of any nature


                           K.  Pollution liabilities of any nature

                           L.  Assumed reinsurance with the exception of
                               inter-affiliate reinsurance

                           M.  Ex gratia payments in excess of $3,000 (three
                               thousand dollars)

COVERAGE                   The Reinsurer shall indemnify the Company for the
                           Cession Percentage of the net retained liability of
                           all Ultimate Net Loss and Loss Adjustment Expenses
                           billed by Towers Claim Service for the Term of this
                           Agreement, subject to the Retention, Per Risk - Per
                           Loss Occurrence Limits and the Aggregate Limit
                           hereon. The Reinsurer shall only be obligated to
                           indemnify the Company for underlying policies where
                           the Reinsurer has been paid respective premiums for
                           such underlying policies by the Company.

                           The Cession Percentage shall be 60% (sixty percent)
                           for the new and renewal Business Covered written
                           during the period January 1, 2004 through December
                           31, 2004, both days inclusive. However, the Cession
                           Percentage may be reduced to a minimum cession
                           percentage of 25% (twenty five percent) for each
                           quarter starting with the calendar quarter beginning
                           July 1, 2004 and only if the Company has increased
                           its December 31, 2003 Statutory Surplus Level by more
                           than 20% (twenty percent) on or before June 30, 2004.
                           The Company must advise the Reinsurer, with 30 days
                           advance written notice, of its election to reduce the
                           Cession Percentage for the forthcoming quarter



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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NET RETAINED LINES         This Agreement applies only to that portion of
                           Business Covered which the Company retains net for
                           its own account, and in calculating the amount of any
                           Ultimate Net Loss and Loss Adjustment Expenses
                           hereunder and also in computing the amounts in
                           Coverage, Retention, Per Risk-Per Loss Occurrence
                           Limits and Aggregate Limit section to which this
                           Agreement applies, only Ultimate Net Loss and Loss
                           Adjustment Expenses in respect of that portion of
                           Business Covered which the Company retains net for
                           its own account shall be included. The Company
                           warrants that it will have a maximum net retained
                           line in accordance with the Per Risk-Per Loss
                           Occurrence section below for any one risk.

                           The amount of the Reinsurer's liability hereunder in
                           respect of any Ultimate Net Loss and Loss Adjustment
                           Expenses shall not be increased by reason of the
                           inability of the Company to collect from any other
                           reinsurer, whether specific or general, any amounts
                           which may have become due from such reinsurer,
                           whether such inability arises from the insolvency of
                           such reinsurer or otherwise.

RETENTION                  The Company shall retain net and unreinsured the
                           result of 100% (one hundred percent) minus the
                           Coverage Cession Percentage of all Ultimate Net Loss
                           in respect of the first 95.0% (ninety five point zero
                           percent) of Ultimate Net Loss Ratio and 100% (one
                           hundred percent) of Ultimate Net Loss in excess of
                           the first 95.0% (ninety five point zero percent) of
                           Ultimate Net Loss Ratio.

PER RISK-PER LOSS
OCCURRENCE LIMITS          In no event shall the Reinsurer's limit of liability
                           exceed their pro rata share of $1,000,000 (one
                           million dollars) per risk, per Loss Occurrence in
                           respect of property business and $1,000,000 (one
                           million dollars) per Loss Occurrence for liability
                           business. In addition, in no event shall the
                           Reinsurer's aggregate limit of liability exceed 10%
                           (ten percent) of Reinsurance Premium earned per Loss
                           Occurrence in respect of ceded property catastrophe
                           Ultimate Net Loss plus associated Loss Adjustment
                           Expense. Furthermore, in no event shall the
                           Reinsurer's aggregate limit of liability exceed 10%
                           (ten percent) of Reinsurance Premium in respect of
                           the combined amounts of property and casualty
                           Ultimate Net Loss plus associated Loss Adjustment
                           Expense emanating from Terrorist Acts, whether one or
                           multiple Terrorist Acts.



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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AGGREGATE LIMIT            The Reinsurer's maximum overall aggregate Ultimate
                           Net Loss and Loss Adjustment Expense liability under
                           this Agreement shall be 95.0% (ninety five point zero
                           percent) of ultimate Reinsurance Premium earned by
                           the Reinsurer.

REINSURANCE PREMIUM        The Company shall pay to the Reinsurer the Cession
                           Percentage of the Net Written Premium as collected
                           for the Term of this Agreement (the "Reinsurance
                           Premium"). The Company shall retain any and all
                           Reinsurance Premium on a funds withheld basis. A
                           notional Funds Withheld Account/Profit Sharing
                           Account shall be calculated by the Company and
                           maintained until there is a complete and final
                           release of all the Reinsurer's past, present and
                           future obligations and liabilities to the Company of
                           any nature whatsoever arising under or related to
                           this Agreement. The Company shall credit Net Written
                           Premium to the Funds Withheld Account/Profit Sharing
                           Account on a monthly basis, and settlements shall be
                           made in accordance with Accounts, Remittances and
                           Settlements sections.

                           The Company shall have the option, subject to the
                           Reinsurer's consent, to terminate this Agreement on a
                           cut-off basis. If the Company elects, and the
                           Reinsurer consent, to terminate this Agreement on a
                           cut-off basis, in accordance with Term section, then
                           the Reinsurer shall return to the Company the
                           respective unearned premium less previously paid
                           Reinsurer's Margin and Ceding Commissions on such
                           unearned premium.

                           The maximum overall Net Written Premium for this
                           Agreement shall be $200,000,000 (two hundred million
                           dollars). The maximum overall ceded Net Written
                           Premium shall be $120,000,000 (one hundred twenty
                           million dollars) (the "Aggregate Premium Cap"). To
                           the extent that the Company's overall ceded Net
                           Written Premium exceeds the Aggregate Premium Cap,
                           the Cession Percentage shall be reduced by dividing
                           $200,000,000 (two hundred million dollars) by the
                           actual Net Written Premium and multiplying that
                           result by the Cession Percentage elected in the
                           Coverage section.



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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REINSURER'S MARGIN         Reinsurer's Margin shall equal 8.0% (eight point zero
                           percent) of ultimate Reinsurance Premium. The Company
                           shall pay the Reinsurer the full amount of the
                           Reinsurer's Margin due each month on the date when
                           the time Reinsurance Premium is reported each month.
                           The Company shall effect payment of the Reinsurer's
                           Margin due each month by direct wire transfer to the
                           Intermediary to pay the Reinsurer.

CEDING COMMISSION          The Reinsurer shall allow the Company a provisional
                           Ceding Commission equal to 39.1% (thirty nine point
                           one percent) of the Reinsurance Premium hereon. The
                           provisional Ceding Commission shall be debited or
                           credited, as applicable, to the Funds Withheld
                           Account/Profit Sharing Account as Reinsurance
                           Premiums are settled monthly and adjusted as the
                           Ultimate Net Loss Ratio is re-determined quarterly.
                           The first adjustment of Actual Ceding Commission for
                           purposes of crediting the interest due and owing to
                           the Funds Withheld Account/Profit Sharing Account
                           shall be calculated no later than [February 29, 2005]
                           for the quarter ended December 31, 2004. Thereafter
                           Actual Ceding Commission shall be recalculated each
                           quarter and based upon the Ultimate Net Loss Ratio
                           re-determined each quarter, in accordance with the
                           following table:

                       Ceding Commission Rate           Ultimate Net Loss Ratio
                       ----------------------           -----------------------
Maximum                    48.1%                        47.0% or Lower
                                           .9 for 1
Provisional                39.1%                        57.0%
                                           .9 for 1
Minimum                    29.2%                        68.0% or Higher



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           If the Ultimate Net Loss Ratio exceeds 47.0% (forty
                           seven point zero percent), the Ceding Commission
                           shall be reduced .9% (point nine percent) and any
                           portion thereof for each 1% (one percent) and any
                           portion thereof that the Ultimate Net Loss Ratio
                           exceeds 47.0% (forty seven point zero percent), down
                           to a Ceding Commission of 39.1% (thirty nine point
                           one percent) at a 57.0% (fifty seven point zero
                           percent) Ultimate Net Loss Ratio. If the Ultimate Net
                           Loss Ratio exceeds 57.0% (fifty seven point zero
                           percent), the Ceding Commission shall be reduced .9%
                           (point nine percent) and any portion thereof for each
                           1% (one percent) and any portion thereof that the
                           Ultimate Net Loss Ratio exceeds 57.0% (fifty seven
                           point zero percent), subject to a minimum Ceding
                           Commission of 29.2% (twenty nine point two percent)
                           at a 68.0% (sixty eight point zero percent) or higher
                           Ultimate Net Loss Ratio. Adjustments to actual Ceding
                           Commission shall be paid at the respective quarterly
                           Ultimate Net Loss settlement by means of a credit or
                           debit to the Funds Withheld Account/Profit Sharing
                           Account.

                           Beginning with the calendar quarter ending March 31,
                           2005, any adjustment of Ceding Commission shall
                           result in a special interest credit calculation from
                           the time of adjustment back to December 31, 2004 at
                           the annual Interest Credit rate of 2.5% (two point
                           five percent). Such special interest credit shall be
                           credited/debited to the Funds Withheld Account/Profit
                           Sharing Account at the time of calculation.

                           The Reinsurer shall remain liable for payment of
                           Ceding Commission whether or not the Funds Withheld
                           Account/Profit Sharing Account becomes depleted.

REPORTS                    Within 45 (forty five) days following the end of each
                           month, the Company shall report to the Reinsurer the
                           amount of:

                           1.  Net Written Premium and ceded Net Written Premium
                               by line of business;

                           2.  Net Earned Premium and ceded Net Earned Premium
                               by line of business;

                           3.  Ceding Commissions paid and unpaid;


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           4.  Ceded Ultimate Net Loss and Loss Adjustment
                               Expenses paid by line of business;

                           5.  Ceded Ultimate Net Loss and Loss Adjustment
                               Expenses outstanding by line of business;

                           6.  Salvage recovered and ceded Salvage recovered by
                               line of business;

                           7.  Premium amounts calculated in accordance with
                               Reinsurance Premium and Reinsurer's Margin
                               sections, including applicable Reinsurer's
                               Margin;

                           8.  The balance of the Funds Withheld Account/Profit
                               Sharing Account as of that month end and activity
                               in the Funds Withheld Account/Profit Sharing
                               Account during the month.

                           Reports shall continue until final settlement of all
                           Ultimate Net Loss hereunder, or upon Commutation.


                           In the event the Company fails to furnish the
                           Reinsurer with materially accurate and complete
                           reports, pursuant to the above terms within 45 days
                           after the end of the month, the Company shall have an
                           additional 75 days in which to furnish such reports
                           to the Reinsurer (the "Cure Period"). Such Cure
                           Period shall commence on the mailing date of the
                           written notification. Upon failure by the Company to
                           provide such reports to the Reinsurer by the end of
                           the Cure Period, the Company shall be liable to pay
                           late interest penalty on any payments/credits to the
                           Funds Withheld Account/Profit Sharing Account at 100
                           (one hundred) basis points from the date
                           contractually due until time of payment/credit to the
                           Funds Withheld Account/Profit Sharing Account.

REMITTANCES                The Company shall credit or debit the Funds Withheld
                           Account/Profit Sharing Account by the amount of the
                           balance of the monthly account. Such monthly account
                           shall equal the Cession Percentage of Net Written
                           Premiums collected for new and renewal business for
                           the month, less Reinsurer's Margin due for the month,
                           less applicable Ceding Commission due for the month,
                           less all reinsurance premiums due from the Company in
                           respect of the inuring reinsurances less the Cession
                           Percentage of Ultimate Net Loss and Loss Adjustment
                           Expenses paid for the month less the Cession
                           Percentage of Salvage Recovered for the month. Such
                           remittances shall be settled by the debtor party to
                           the creditor party within 60 (sixty) days in arrears
                           from the month end, except that amounts owed by the
                           Reinsurer to the Company in excess of the Funds
                           Withheld Account/Profit Sharing Account shall be paid
                           the later of 60 (sixty) days in arrears from the
                           month end or 15 (fifteen) days following the
                           Reinsurer's receipt of the monthly report.



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                                   TICNY Q.S.
                                 SMALL BUSINESS
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LOSS PAYMENTS              Notwithstanding the above, the Company shall advise
                           the Reinsurer promptly of all Ultimate Net Losses,
                           which, in the opinion of the Company, may result in a
                           claim hereunder and of all subsequent developments
                           thereto which, in the opinion of the Company, may
                           materially affect the position of the Reinsurer.
                           Inadvertent omission or oversight in dispatching such
                           advises shall in no way affect the liability of the
                           Reinsurer. However, the Company shall notify the
                           Reinsurer of such omission or oversight promptly upon
                           its discovery.

                           All Ultimate Net Loss settlements made by the Company
                           on Business Covered, with the exception of ex gratia
                           payments, whether under policy terms and conditions
                           or by way of compromise, shall be in the sole
                           discretion of the Company and shall be
                           unconditionally binding on the Reinsurer. Upon
                           satisfactory proof of loss, the Reinsurer shall pay
                           or allow, as applicable, their proportional share of
                           each such settlement in accordance with this
                           Agreement. All Ultimate Net Loss and Loss Adjustment
                           Expense amounts due to the Company from the Reinsurer
                           under this Agreement shall first be paid by way of
                           offset against the Funds Withheld Account/Profit
                           Sharing Account consistent with the Remittances
                           Section and such offset shall constitute payment
                           under this Agreement. Only upon the exhaustion of the
                           Funds Withheld Account/Profit Sharing Account shall
                           the Company be entitled to receive cash payment from
                           the Reinsurer.


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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FUNDS WITHHELD ACCOUNT/
PROFIT SHARING ACCOUNT     For purposes of this Agreement, the Reinsurer shall
                           allow the Company to establish and maintain a
                           cumulative Funds Withheld Account/Profit Sharing
                           Account comprised of the following:

                           A.  The Funds Withheld Account/Profit Sharing Account
                               at December 31, 2003 shall be equal to $0 (zero
                               dollars);

                           B.  The Funds Withheld Account/Profit Sharing Account
                               at each subsequent month end shall be comprised
                               of the following cumulative amounts:

                               1.  The Funds Withheld Account/Profit Sharing
                                   Account at the end of the prior month; plus

                               2.  Reinsurance Premium paid by the Company; less

                               3.  Ceding Commission when paid by the Reinsurer,
                                   excluding the Return Ceding Commission as per
                                   the Trust Account Clause; plus

                               4.  Special interest credit adjustments on ceding
                                   commission adjustments; less

                               5.  Reinsurer's Margin; less

                               6.  Ceded Ultimate Net Losses and Loss Adjustment
                                   Expenses paid by the Reinsurer for the
                                   respective month; plus

                               7.  Interest Credit.

                           The Company shall determine and report the balance
                           and activity of the Funds Withheld Account/Profit
                           Sharing Account monthly within 45 (forty five) days
                           of the month end.

INTEREST CREDIT            The Funds Withheld Account/Profit Sharing Account
                           shall be credited monthly, as of the end of the
                           respective month, by the Company with an Interest
                           Credit rate of .206% (point two zero six percent)
                           multiplied by the average monthly balance of the
                           Funds Withheld Account/Profit Sharing Account for
                           each respective month resulting in an effective
                           annual rate of 2.50% (two point five zero percent)
                           for the Funds Withheld Account/Profit Sharing
                           Account. In calculating the average monthly balance,
                           all amounts due to either party shall be deemed
                           settled, effective as of the actual date when such
                           items were due pursuant to the terms of this
                           Agreement.


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           Interest Credit shall continue even in the event of
                           the Company's insolvency.

TRUST ACCOUNT
Confidential &
Proprietary
Pegasus Feature            The Company shall establish a segregated Trust
                           Account for the benefit of the Reinsurer to secure
                           100% of its obligations and liabilities to the
                           Reinsurer for the Funds Withheld Account/Profit
                           Sharing Account. The Company agrees to establish such
                           Trust Account by executing the Trust Agreement
                           attached hereto as Exhibit A and incorporated herein
                           by reference. The Trust Agreement, including the
                           nature of the assets to be deposited in such Trust
                           Account, shall be compliant at all times with the
                           provisions of Section 114 of the New York Insurance
                           Regulations. The Company shall deposit Reinsurance
                           Premium less provisional Ceding Commission, plus
                           downward adjustments of the provisional ceding
                           commission, less Reinsurer's Margin, all as
                           contractually due hereunder. The Reinsurer shall
                           direct the Trustee to withdraw additional Ceding
                           Commission adjustments and ceded paid portion of
                           Ultimate Net Loss amounts from the Trust Account and
                           remit such sums to the Company when such are
                           contractually due. The Company shall invest such
                           amounts to both (i) achieve a minimum effective
                           annual yield of 2.5% (two point five percent) per
                           annum and (ii) enable investments to be admitted
                           assets for statutory reporting on the Company's
                           financial statements. The Company shall appoint
                           Hyperion Capital Management Inc. ("Hyperion") as its
                           investment manager and shall direct Hyperion on the
                           investment of such amounts.

                           If the market value of the assets in the Trust
                           Account at any calendar quarter end is less than the
                           Funds Withheld Account/Profit Sharing Account balance
                           at such calendar quarter end, the Company shall
                           deposit assets that are compliant with Section 114 of
                           the New York Insurance Regulations to achieve the
                           required Funds Withheld Account/Profit Sharing
                           Account balance at such quarter end. If the market
                           value of assets in the Trust Account at any calendar
                           quarter end exceeds the balance of the Funds Withheld
                           Account/Profit Sharing Account at such calendar
                           quarter end, such excess assets shall remain in the
                           Trust Account to pay Ultimate Net Loss and Loss
                           Adjustment Expenses or Profit Sharing under this
                           Agreement.


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           Within 60 (sixty) days of each calendar quarter end,
                           beginning with the quarter ending December 31, 2004,
                           if the Company fails to maintain the Trust Account
                           equal to the Funds Withheld Account/Profit Sharing
                           Account required level, then the cumulative amount of
                           the shortfall shall be deemed "Return Ceding
                           Commission" due the Reinsurer. Such actual amount
                           shall be paid in cash by the Company to the Reinsurer
                           within 60 (sixty) days of the respective calendar
                           quarter end to reduce the Ceding Commission that
                           otherwise would have been due at the respective
                           Ultimate Net Loss Ratio as per the Ceding Commission
                           table. The Company shall calculate the cumulative
                           shortfall, if any, and re-determine the Return Ceding
                           Commission due, within 60 (sixty) days of each
                           subsequent calendar quarter end until all liability
                           under this Agreement is finalized. The Company shall
                           pay to the Reinsurer any additional Return Ceding
                           Commission due in excess of any previously paid
                           Return Ceding Commission and the Reinsurer shall pay
                           to the Company any reduction of Return Ceding
                           Commission due over the previously paid Return Ceding
                           Commission within 60 (sixty) days of the calendar
                           quarter end.


                           Upon the occurrence of a Triggering Event, the
                           Reinsurer shall have the sole option of drawing any
                           and all assets from the segregated Trust Account. If
                           this option is exercised, the terms of this Agreement
                           will be changed to a funds transferred basis. The
                           Reinsurer will continue to calculate the Profit Share
                           Account and will credit the average monthly balance
                           of the Profit Share Account with the lesser of the
                           equivalent of the 2.5% annual interest rate or the 2
                           year annual t-bill rate plus 25 basis points. Except
                           for the fact that this Agreement shall be transacted
                           on a funds transferred basis if the Reinsurer
                           exercises their option (as described above), all
                           settlements between the parties will continue to be
                           governed by the terms set forth in this Agreement
                           (including, but not limited to, the settlement dates
                           of the items to be credited or debited).


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                                   TICNY Q.S.
                                 SMALL BUSINESS
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                           A "Triggering Event" is any of the following:

                           1.  A.M. Best Rating of the Company falls below B++;
                               or

                           2.  a reduction of more than 20% (twenty percent) of
                               the Company's statutory surplus from the
                               Company's Statutory Surplus Level at December 31,
                               2003; or

                           3.  Insolvency, Rehabilitation, or Regulatory
                               Supervision of the Company; or

                           4.  Company ceases underwriting new property and
                               casualty business;

                           5.  Company fails to maintain the Trust Account at
                               the minimum balance required by this Agreement
                               for a period of seventy-five (75) days;

                           6.  Company sells 50% or more of its assets or
                               reinsures 50% or more of its Net Written Premium
                               or net liabilities, both net of this Agreement,
                               (each as stated in its statutory annual statement
                               as of the preceding December 31st) to an
                               unaffiliated third party; or

                           7.  An insurance regulatory authority or governmental
                               entity in any United States jurisdiction revokes,
                               suspends or forces the Company to withdraw its
                               certificate of authority in such jurisdiction.

COMMUTATION                The Company shall have the option, only with the
                           consent of the Reinsurer, effective at any calendar
                           quarter end on or after the calendar quarter of
                           termination of this Agreement, to commute all ceded
                           Ultimate Net Loss outstanding hereunder. The date
                           that the Company and the Reinsurer mutually elect to
                           commute shall be deemed the commutation date.


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                           Upon Commutation, the Reinsurer shall pay 100% (one
                           hundred percent) of the residual Funds Withheld
                           Account/Profit Sharing Account to the Company. Upon
                           payment of the Funds Withheld Account/Profit Sharing
                           Account by release of the Trust Account, the
                           Reinsurer shall be released from all past, current
                           and future liability under this Agreement.

                           In addition to the above, the Reinsurer shall have
                           the option of drawing assets from the segregated
                           Trust Account for the purposes of collecting amounts
                           due them under any and all other reinsurance
                           agreements for which Tower Insurance Company of New
                           York has failed to pay within 30 (thirty) days of
                           their respective due dates. In the event of
                           commutation, the segregated Trust Account must retain
                           an amount that is equal to the Company's potential
                           aggregate liability under all reinsurance agreements
                           that the Company has entered into with the Reinsurer
                           in the event amounts must be drawn upon to satisfy
                           Towers Obligations under the other reinsurance
                           agreements.

SPECIAL TERMINATION        Either party may terminate this Agreement on a
CLAUSE                     cut-off basis upon the happening of any one of the
                           following circumstances at any time by the giving of
                           60 (sixty) days prior written notice to the other
                           party:

                           1.  The Company's A.M. Best rating drops below a
                               "B+"; or

                           2.  The Reinsurer A.M. Best ratings drops below an
                               "A-"; or

                           3.  a reduction of more than 20% (twenty percent) of
                               the Company's statutory surplus from the
                               Company's Statutory Surplus Level at December 31,
                               2003; or


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                           4.  There is a change in the office of President and
                               CEO of the Company; or

                           5.  Insolvency, Rehabilitation, or Regulatory
                               Supervision of the Company; or

                           6.  Company ceases underwriting new property and
                               casualty business;

                           7.  Company fails to maintain the Trust Account at
                               the minimum balance required by this Agreement
                               for a period of seventy-five (75) days;

                           8.  Company sells 50% or more of its assets or
                               reinsures 50% or more of its Net Written Premium
                               or net liabilities, both net of this Agreement,
                               (each as stated in its statutory annual statement
                               as of the preceding December 31st) to an
                               unaffiliated third party; or

                           9.  An insurance regulatory authority or governmental
                               entity in any United States jurisdiction revokes,
                               suspends or forces the Company to withdraw its
                               certificate of authority in such jurisdiction.

                           Upon election of Special Termination, the Reinsurer
                           shall return to the Company the respective unearned
                           premium less previously paid Reinsurer's Margin and
                           Ceding Commissions on such unearned premium and the
                           Reinsurer shall incur no liability for losses
                           occurring subsequent to the effective date of
                           termination.

GENERAL CLAUSES
ATTACHED                   - Currency
                           - Errors and Omissions
                           - Access to Records
                           - Arbitration
                           - Offset
                           - Confidentiality
                           - Definitions
                           - Taxes and FET
                           - Excess of Policy Limits
                           - Excess of Contractual Obligations
                           - Insolvency
                           - Service of Suit
                           - Reserves


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INTERMEDIARY CLAUSE        Pegasus Advisors - Towers Perrin Reinsurance
ATTACHED




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PEGASUS ADVISORS - TOWERS PERRIN REINSURANCE
By:
    --------------------------------------------------------

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

Accepted on behalf of Tower Insurance Company of New York, in confirmation of
the terms, conditions and Reinsurer hereon.

By: /s/ Steven G. Fauth
    --------------------------------------------------------

Title: Secretary and General Counsel
       -----------------------------------------------------

Accepted on behalf of Tokio Millennium Re Ltd. for a 33.333% (thirty three point
three three three percent) participation of the terms and conditions herein.

By: /s/ Tatsuhiko Hoshina
    --------------------------------------------------------

Title: Director & CUO
       -----------------------------------------------------



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                                 GENERAL CLAUSES

DEFINITIONS

A.       "Declaratory Judgment Expenses" as used in this Agreement shall mean
         legal expenses paid by the Company in the investigation, analysis,
         evaluation or litigation of a coverage action between the Company and
         any other party to determine if there is coverage under a policy or
         policies issued by the Company for a specific claim or specific claims
         reinsured under this Agreement or which would be reinsured under this
         Agreement had the Company not been successful in the coverage action.

         Recoveries from any form of insurance or reinsurance that protects the
         Company against claims which are the subject matter of this clause will
         inure to the benefit of the Reinsurer and shall be deducted to arrive
         at the amount of the Company's Ultimate Net Loss.

B.       "Loss Adjustment Expenses" as used in this Agreement shall mean all
         costs and expenses allocable to a specific claim that are incurred by
         the Company in the investigation, appraisal, adjustment, settlement,
         litigation, defense or appeal of a specific claim, including court
         costs and costs of supersedeas and appeal bonds and including a)
         prejudgment interest, unless included as part of the award or judgment;
         b) post judgment interest and c) legal expenses and costs incurred in
         connection with coverage questions and legal actions connected thereto,
         including pro rata Declaratory Judgment Expenses.

         Loss Adjustment Expenses shall include in-house adjusters, defense
         attorneys, and other claims personnel of Tower Insurance Company of New
         York/Tower Risk Management who bill the Company for their services on
         an hourly basis.

C.       "Loss Occurrence" shall have the following meanings:

         1.       As respects property losses, "Loss Occurrence" shall mean
                  shall mean the sum of all individual losses directly
                  occasioned by any one disaster, accident or loss or series of
                  disasters, accidents or losses arising out of one event which
                  occurs within the area of one state of the United States or
                  province of Canada and states or provinces contiguous thereto
                  and to one another. However, the duration and extent of any
                  one "Loss Occurrence" shall be limited to all individual
                  losses sustained by the Company occurring during any period of
                  168 (one hundred sixty eight) consecutive hours arising out of
                  and directly occasioned by the same event except that the term
                  "Loss Occurrence" shall be further defined as follows:

                  a.       As regards windstorm, hail, tornado, hurricane,
                           cyclone, including ensuing collapse and water damage,
                           all individual losses sustained by the Company
                           occurring during any period of 72 (seventy two)
                           consecutive hours arising out of and directly
                           occasioned by the same event. However, the event need
                           not be limited to one state or province or states or
                           provinces contiguous thereto.



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                  b.       As regards riot, riot attending a strike, civil
                           commotion, vandalism and malicious mischief, all
                           individual losses sustained by the Company occurring
                           during any period of 72 (seventy two) consecutive
                           hours within the area of one municipality or county
                           and the municipalities or counties contiguous thereto
                           arising out of and directly occasioned by the same
                           event. The maximum duration of 72 (seventy two)
                           consecutive hours may be extended in respect of
                           individual losses which occur beyond such 72 (seventy
                           two) consecutive hours during the continued
                           occupation of an assured's premises by strikers,
                           provided such occupation commenced during the
                           aforesaid period.

                  c.       As regards earthquake (the epicenter of which need
                           not necessarily be within the territorial confines
                           referred to in the opening paragraph of this clause)
                           and fire following directly occasioned by the
                           earthquake, only those individual fire losses which
                           commence during the period of 168 (one hundred sixty
                           eight) consecutive hours may be included in the
                           Company's "Loss Occurrence".

                  d.       As regards "Freeze", only individual losses directly
                           occasioned by collapse, breakage of glass and water
                           damage (caused by bursting of frozen pipes and tanks)
                           may be included in the Company's "Loss Occurrence".

                           For all "Loss Occurrences" the Company may choose the
                           date and time when any such period of consecutive
                           hours commences provided that it is not earlier than
                           the date and time of the occurrence of the first
                           recorded individual loss sustained by the Company
                           arising out of that disaster, accident or loss and
                           provided that only one such period of 168 (one
                           hundred sixty eight) consecutive hours shall apply
                           with respect to one event except for those "Loss
                           Occurrences" referred to in sub-paragraphs 1 and 2 of
                           this Clause where only one such period of 72 (seventy
                           two) consecutive hours shall apply with respect to
                           one event.

                           No individual losses occasioned by an event that
                           would be covered by 72 (seventy two) hours clauses
                           may be included in any "Loss Occurrence" claimed
                           under the 168 (one hundred sixty eight) hours
                           provision.

         2.       As respects casualty losses, "Loss Occurrence" shall mean any
                  one accident, disaster, casualty or happening, or series of
                  accidents, disasters, casualties or happenings arising out of
                  or following on one event, regardless of the number of
                  interests insured or the number of policies responding.

                  Except where specifically provided otherwise in this
                  Agreement, each Loss Occurrence shall be deemed to take place
                  as of the earliest date of loss as determined by any original
                  policy responding to the Loss Occurrence.



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         3.       As respects liability losses (bodily injury and property
                  damage) other than Automobile and Products, and at the option
                  of the Company, "Loss Occurrence" shall mean the sum of all
                  damages sustained by each insured during a period of twelve
                  consecutive months arising out of a continuous or repeated
                  injurious exposure to substantially the same general
                  conditions. For purposes of this definition, the date of loss
                  shall be deemed to be the inception or renewal date of the
                  original policy of insurance to which payment is charged.

                  As respects occupational disease and cumulative trauma:

                  A.       In case the Company shall, within one original policy
                           year, sustain several losses arising out of such and
                           occupational or other disease or cumulative trauma of
                           a specific kind or class, suffered by several
                           employees of one original insured, all such losses
                           shall be deemed to arise out of one 'occurrence' and
                           the date of the occurrence for reinsurance purposes
                           shall be deemed to be the inception, anniversary or
                           renewal date of the Company's original policy.

                  B.       With respect to an occupational disease or other
                           disease suffered by more than one employee of one or
                           more employers, such occupational disease or other
                           disease shall be covered under this Agreement if
                           resulting from a sudden and accidental event not
                           exceeding 48 (forty eight) hours in duration. For
                           purposes of this Agreement, a 48 (forty eight) hour
                           event will be deemed as one Loss Occurrence. All such
                           losses subsequently arising out of such event and not
                           otherwise classified except as occupational disease
                           or other disease shall be considered as one Loss
                           Occurrence or may be combined with losses classified
                           as other than occupational disease or other disease
                           which arise out of the same event, and the
                           combination of such losses shall be considered as one
                           Loss Occurrence within the meaning hereof.

D.       "Net Earned Premium" shall mean the Net Written Premium of the
         Company's Business Covered less the unearned premium reserve at the
         respective date of calculation.

E.       "Net Written Premium" shall mean gross premium of the Company's
         Business Covered less cancellations and returns and less premium paid
         for specific excess of loss reinsurance above $1,000,000 (one million
         dollars), and facultative reinsurances, if any.

F.       "Terrorist Acts," shall mean any act, or preparation in respect of
         action, or threat of action designed to influence the government de
         jure or de facto of any nation or any political division thereof, or in
         pursuit of political, religious, ideological, or similar purposes to
         intimidate the public or a section of the public of any nation by any
         person or group(s) of persons whether acting alone or on behalf of or
         in connection with any organization(s) or government(s) de jure or de
         facto, and which:

         (i)      involves violence against one or more persons; or
         (ii)     involves damage to property; or



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         (iii)    endangers life other than that of the person committing the
                  action; or
         (iv)     creates a risk to health or safety of the public or a section
                  of the public; or
         (v)      is designed to interfere with or to disrupt an electronic
                  system.

         Loss, damage, cost or expense arising out of or in connection with any
         action in controlling, preventing, suppressing, retaliating against, or
         responding to any act of terrorism shall be considered part of
         terrorism Ultimate Net Loss.

G.       "Ultimate Net Loss" shall mean, subject to all limitations in this
         Agreement including the Per Risk - Per Loss Occurrence Limits, actual
         loss or losses arising out of Business Covered hereunder sustained by
         the Company in respect of losses occurring during the Term, including
         100% (one hundred percent) of Extra Contractual Obligations and 100%
         (one hundred percent) of Excess Policy Limits, subject to the
         limitations in Excess Policy Limits and Extra Contractual Obligations
         clauses below, after making deductions for all recoveries and salvages
         and inuring specific and facultative reinsurance, whether collectible
         or not. The Reinsurer shall not be liable for more than $1,000,000 (one
         million dollars) additional subject Ultimate Net Loss for any one risk,
         one Loss Occurrence in respect of Excess of Policy Limits/Extra
         Contractual Obligations liability and $5,000,000 (five million dollars)
         in the aggregate for all Excess of Policy Limits/Extra Contractual
         Obligations liability.

H.       "Ultimate Net Loss Ratio" shall mean the ratio of aggregate Ultimate
         Net Losses incurred plus aggregate Loss Adjustment Expense divided by
         Net Earned Premium as of the date of calculation.

CURRENCY

A.       Whenever the word "dollars" or the "$" appears in this Agreement, they
         shall be construed to mean United States Dollars and all transactions
         under this Agreement shall be in United States Dollars.

B.       Amounts paid or received by the Company in any other currency shall be
         converted to United States Dollars at the rate of exchange at the date
         such transaction is entered on the books of the Company.

TAXES AND FEDERAL EXCISE TAX

A.       Taxes - In consideration of the terms under which this Agreement is
         issued, the Company undertakes not to claim any deduction of the
         Premium hereon when making Canadian tax returns or when making tax
         returns other than Income or Profits Tax returns, to any State or
         Territory of the United States of America or to the District of
         Columbia.

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



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         The Reinsurer have 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.

         In the event of any return of Premium becoming due hereunder, the
         Reinsurer shall 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.

RESERVES

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

A.       If a jurisdiction of the United States shall not permit the Company, in
         the statements required to be filed with its regulatory authority(ies),
         to receive full credit as admitted reinsurance for any Reinsurer's
         share of obligations, the Company shall forward to such Reinsurer a
         statement of the Reinsurer's share of such obligations. Upon receipt of
         such statement, the Reinsurer shall promptly apply for and provide the
         Company with a "clean", unconditional and irrevocable Letter of Credit
         in the amount specified in the statement submitted, with terms and bank
         acceptable to the regulatory authority(ies) having jurisdiction over
         the Company.

B.       "Obligations" as used in this Clause, shall mean the sum of losses paid
         and Loss Adjustment Expenses paid by the Company but not yet recovered
         from the Reinsurer, plus reserves for reported losses, Loss Adjustment
         Expenses, losses incurred but not reported and premiums unearned, if
         any.

C.       The Reinsurer hereby agree that the Letter of Credit shall provide for
         automatic extension of the Letter of Credit without amendment for one
         year from the date of expiration of said Letter or any future
         expiration date unless 30 (thirty) days prior to any expiration the
         issuing bank shall notify the Company by registered mail that the
         issuing bank elects not to consider the Letter of Credit renewed for
         any additional period. An issuing bank, not a "qualified bank" as
         defined by Regulation 133 promulgated by the Insurance Department of
         the State of New York, shall provide 60 (sixty) days notice to the
         Company prior to any expiration.

D.       Notwithstanding any other provision of this Agreement, the Company or
         any successor by operation of law of the Company including, without
         limitation, any liquidator, rehabilitator, receiver or conservator of
         the Company may draw upon such credit, without diminution because of
         the insolvency of any party hereto, at any time and undertakes to use
         and apply such credit for one or more of the following purposes only:

         1.       to pay the Reinsurer's share or to reimburse the Company for
                  the Reinsurer's share of any obligations, as stipulated in the
                  statement submitted by the Company to the Reinsurer, which is
                  due to the Company and not otherwise paid by the Reinsurer,



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         2.       in the event the Company has received effective notice of
                  non-renewal of the Letter of Credit and the Reinsurer's
                  liability remains unliquidated and undischarged 30 (thirty)
                  days prior to the expiry date of the Letter of Credit to
                  withdraw the balance of the Letter of Credit and place such
                  sums in an interest bearing trust account to secure the
                  continuing liabilities of the Reinsurer under this Agreement
                  until a renewal Letter of Credit acceptable to the regulatory
                  authority(ies) having jurisdiction over the Company, or a
                  substitute in lieu thereof acceptable to the regulatory
                  authority(ies) having jurisdiction over the Company, has been
                  received by the Company. The Company shall provide to the
                  Reinsurer payment of any interest thereon accruing from such
                  account.

         3.       to make refund of any sum which is in excess of the actual
                  amount required for Sections 1 and 2 of this paragraph.

E.       At annual intervals or more frequently as determined by the Company,
         but never more frequently than quarterly, the Company shall prepare a
         specific statement, for the sole purpose of amending the Letter of
         Credit, of the Reinsurer's share of any obligations. If the statement
         shows that the Reinsurer's share of obligations exceeds the balance of
         credit as of the statement date, the Reinsurer shall, within 30
         (thirty) days after receipt of notice of such excess, secure delivery
         to the Company of an amendment of the Letter of Credit increasing the
         amount of credit by the amount of such difference. If the statement
         shows, however, that the Reinsurer's share of obligations is less than
         the balance of credit as of the statement date, the Company shall,
         within 30 (thirty) 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.

F.       The bank shall have no responsibility whatsoever in connection with the
         propriety of withdrawals made by the Company or the disposition of
         funds withdrawn, except to assure that withdrawals are made only upon
         the order of properly authorized representatives of the Company. The
         Company shall incur no obligation to the bank in acting upon the
         credit, other than as appears in the express terms thereof.

EXCESS OF POLICY LIMITS

This Agreement shall protect the Company, subject to one additional Per Risk per
claim and Aggregate Limit, for 100% (one hundred percent) of loss in excess of
the limit of its original policies of insurance or Reinsurance Agreements, such
loss in excess of the limit having been incurred because of failure by the
Company or Tower Risk Management to settle within the policies of insurance or
Reinsurance Agreement limit or by reason of alleged or actual negligence or bad
faith in rejecting an offer of settlement or in the preparation of the defense
or in the trial of any action against its insured or reinsured or in the
preparation or prosecution of an appeal consequent upon such action.

However, this Clause shall not apply where the loss has been incurred due to a
fraud by a member of the board of directors or a corporate officer of the
Company or Tower Risk Management 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.



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For the purpose of this Clause, 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 Reinsurance Agreement.

EXTRA CONTRACTUAL OBLIGATIONS

This Agreement shall protect the Company for 100% (one hundred percent) of any
Extra Contractual Obligations, subject to one additional Per Risk per claim and
Aggregate Limit. The term "Extra Contractual Obligations" is defined as those
liabilities not covered under any other provision of the Company's original
policies of insurance or Reinsurance Agreements 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 or Tower
Risk Management to settle within the policies of insurance or Reinsurance
Agreement limit, or by reason of alleged or actual negligence or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action.

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 loss
event. However, this Clause 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 or Tower Risk Management 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.

OFFSET

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 or any
other agreement between the Company and the Reinsurer. The party asserting the
right of offset may exercise such right any time whether the balances due are on
account of Reinsurance Premiums, Ceding Commissions, Ultimate Net Losses or
otherwise. However, in the event of insolvency of any party hereto, offset shall
only be allowed to the extent permitted by the provisions of New York Insurance
Law Section 7427.

ERRORS AND OMISSIONS

Inadvertent delays, errors or omissions made by the Company in connection with
this Agreement shall not relieve the Reinsurer from any liability which would
have attached had such delay, error or omission not occurred, provided always
that such delay, error or omission shall be rectified as soon as possible after
discovery by the Company's home office.

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 their
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.



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INSOLVENCY

A.       In the event of the insolvency of the Company, this reinsurance shall
         be payable directly to the Company, or to its liquidator, receiver,
         conservator, or statutory successor on the basis of the liability of
         the Company without diminution because of the insolvency of the Company
         or because the liquidator, receiver, conservator or statutory successor
         of the Company 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 shall give written notice to the
         Reinsurer of the pendency of a claim against the Company indicating the
         policy insured which claim would involve a possible liability on the
         part of the Reinsurer with a reasonable time after such claims 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 they may deem available to the Company 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 as part of the expense of conservation or
         liquidation to the extent of a pro rata share of the benefit which may
         accrue to the Company solely as a result of the defense undertaken by
         the Reinsurer.

B.       Where two or more Reinsurer 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 insolvent
         Company.

CONFIDENTIALITY

The parties acknowledge there may be portions of this Agreement, the Reinsurance
Agreement submission or the marketing package that may contain confidential,
proprietary information of the Company. The Reinsurer shall maintain the
confidentiality of such information concerning the Company and its business and
shall not disclose it to any third person without prior approval; provided,
however, that the Reinsurer may be required and are permitted under this
Agreement to disclose such information in answers to interrogatories, subpoenas
or other legal/arbitration processes as well as to the Company's Intermediaries,
to the Reinsurer's retrocessionaires and affiliated companies, its applicable
intermediaries, or in response to requests by governmental and regulatory
agencies. In addition, the Reinsurer may disclose such information to their
accountants and to their outside legal counsel as may be necessary.

ARBITRATION

A.       Any dispute or other matter in question between the Company and the
         Reinsurer arising out of, or relating to, the formation,
         interpretation, performance or breach of this Agreement, whether such
         dispute arises before or after termination of this Agreement, shall be
         settled by arbitration. Arbitration shall be initiated by the delivery
         of a written notice of demand for arbitration by one party to the other
         within a reasonable time after the dispute has arisen.



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B.       If more than one reinsurer is involved in the same dispute, all such
         Reinsurer shall constitute and act as one party, provided, however,
         that nothing herein shall impair the rights of such Reinsurer to assert
         several, rather than joint, defenses or claims, nor be construed as
         changing the liability of the Reinsurer under the terms of this
         Agreement from several to joint.

C.       Each party shall appoint an individual as arbitrator and the two so
         appointed shall then appoint a third arbitrator. If either party
         refuses or neglects to appoint an arbitrator within 60 (sixty) days,
         the other party may appoint the second arbitrator. If the two
         arbitrators do not agree on a third arbitrator within 60 (sixty) days
         of their appointment, each of the arbitrators shall nominate 3 (three)
         individuals. Each arbitrator shall then decline two of the nominations
         presented by the other arbitrator. The third arbitrator shall then be
         chosen form the remaining two nominations by drawing lots. The
         arbitrators shall be active or former officers of insurance or
         reinsurance companies or Lloyd's Underwriters; the arbitrators shall
         not have a personal or financial interest in the result of the
         arbitration.

D.       The arbitration hearings shall be held in New York, New York or such
         other place as may be mutually agreed. Each party shall submit its case
         to the arbitrators within 60 (sixty) days of the selection of the third
         arbitrator or within such longer period as may be agreed by the
         arbitrators. The arbitrators shall not be obliged to follow judicial
         formalities or the rules of evidence except to the extent required by
         governing law, that is, the state law of the situs of the arbitration
         as herein agreed; they shall make their decisions according to the
         practice of the reinsurance business. The decision rendered by a
         majority of the arbitrators shall be final and binding on both parties.
         Such decision shall be a condition precedent to any right of legal
         action arising out of the arbitrated dispute which either party may
         have against the other. Judgment upon the award rendered may be entered
         in any court having jurisdiction thereof.

E.       Each party shall pay the fee and expenses of its own arbitrator and
         one-half of the fee and expenses of the third arbitrator. All other
         expenses of the arbitration shall be equally divided between the
         parties.

F.       Except as provided above, arbitration shall be based, insofar as
         applicable, upon the procedures of the American Arbitration
         Association.

SERVICE OF SUIT

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


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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, shall submit to the jurisdiction of a court
         of competent jurisdiction within the United States. Nothing in this
         Clause constitutes or should be understood to constitute a waiver of
         the Reinsurer's right to commence an action in any court of 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 Morgan, Lewis & Bockius LLP, 101 Park Avenue New
         York, New York 10178, and that in any suit instituted, the Reinsurer
         shall 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 shall 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 designate 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 their 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.

INTERMEDIARY

Tower Risk Management Corporation and Pegasus Advisors - Towers Perrin
Reinsurance are hereby recognized as the Intermediaries negotiating this
Agreement for all business hereunder and through whom all communications
relating hereto (including but not limited to notices, statements and reports)
shall be transmitted to both parties. It is understood, as regards remittances
due either party hereunder, that payment by the Company to the Intermediaries,
shall constitute payment to the Reinsurer but payment by the Reinsurer to the
Intermediaries shall only constitute payment to the Company to the extend such
payments are actually received by the Company.




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                        NUCLEAR INCIDENT EXCLUSION CLAUSE
                       PHYSICAL DAMAGE - REINSURANCE - USA
                                    NMA 1119

         1. This Contract does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurer formed for the purpose of covering Atomic or
Nuclear Energy risks.

         2. Without in any way restricting the operation of paragraph (1) of
this Clause, this Contract does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:

         I.       Nuclear reactor power plants including all auxiliary property
                  on the site, or

         II.      Any other nuclear reactor installation, including laboratories
                  handling radioactive materials in connection with reactor
                  installations, and "critical facilities" as such, or

         III.     Installations for fabricating complete fuel elements or for
                  processing substantial quantities of "special nuclear
                  material", and for reprocessing, salvaging, chemically
                  separating, storing or disposing of "spent" nuclear fuel or
                  waste materials, or

         IV.      Installations other than those 1isted i n p aragraph ( 2) I II
                  a bove u sing s ubstantial quantities of radioactive isotopes
                  or other products of nuclear fission.

         3. Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Contract does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate

                  (a)      where the Reassured does not have knowledge of such
                           nuclear reactor power plant or nuclear installation,
                           or

                  (b)      where said insurance contains a provision excluding
                           coverage for damage to property caused by or
                           resulting from radioactive contamination, however
                           caused. However on and after 1st January 1960, this
                           sub-paragraph (b) shall only apply provided the said
                           radioactive contamination exclusion provision has
                           been approved by the Governmental Authority having
                           jurisdiction thereof.

         4. Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Contract does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.



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         5. It is understood and agreed that this Clause shall not extend to
risks using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.

         6. The term "special nuclear material" shall have the meaning given it
in the Atomic Energy Act of 1954 or by any law amendatory thereof.

         7. The Reassured to be sole judge of what constitutes:

                  (a) substantial quantities, and

                  (b) the extent of installation, plant or site

NOTE: - Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that

                  (a)      all policies issued by the Reassured on or before
                           31st December 1957 shall be free from the application
                           of the other provisions of this Clause until expiry
                           date or 31st December 1960 whichever first occurs
                           whereupon all the provisions of this Clause shall
                           apply.

                  (b)      with respect to any risk located in Canada policies
                           issued by the Reassured on or before 31st December
                           1958 shall be free from the application of the other
                           provisions of this Clause until expiry date or 31st
                           December 1960 whichever first occurs whereupon all
                           the provisions of this Clause shall apply.




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                        NUCLEAR INCIDENT EXCLUSION CLAUSE
                        LIABILITY - REINSURANCE - U.S.A.
                                    NMA 1590

1.       This Agreement does not cover any loss or liability accruing to the
         Cedent as a member of, or subscriber to, any association of insurers or
         Reinsurer formed for the purpose of covering nuclear energy risks or as
         a direct or indirect reinsurer of any such member, subscriber or
         association.

2.       Without in any way restricting the operation of paragraph (1) of this
         Clause it is understood and agreed that for all purposes of this
         Agreement all the original policies of the Cedent (new, renewal and
         replacement) of the classes specified in Clause II of this paragraph
         (2) from the time specified in Clause III of this paragraph (2) shall
         be deemed to include the following provision (specified as the Limited
         Exclusion Provision):

         Limited Exclusion Provision*

         I.       It is agreed that the policy does not apply under any
                  liability coverage, to (injury, sickness, disease, death or
                  destruction (bodily injury or property damage with respect to
                  which an insured under the policy is also an insured under a
                  nuclear energy liability policy issued by Nuclear Energy
                  Liability Insurance Association, Mutual Atomic Energy
                  Liability Underwriters or Nuclear Insurance Association of
                  Canada, or would be an insured under any such policy but for
                  its termination upon exhaustion of its limits of liability.

         II.      Family Automobile Policies (liability only), Special
                  Automobile Policies (private passenger automobiles, liability
                  only), Farmers Comprehensive Personal Liability Policies
                  (liability only), Comprehensive Personal Liability Policies
                  (liability only) or policies of a similar nature; and the
                  liability portion of combination forms related to the four
                  classes of policies stated above, such as the Comprehensive
                  Dwelling Policy and the applicable types of Homeowners
                  Policies.

         III.     The inception dates and thereafter of all original policies as
                  described in II above, whether new, renewal or replacement,
                  being policies which either

                  (a) become effective on or after 1st May, 1960, or

                  (b)      become effective before that date and contain the
                           Limited Exclusion Provision set out above; provided
                           this paragraph (2) shall not be applicable to Family
                           Automobile Policies, Special Automobile Policies or
                           policies or combination policies of a similar nature,
                           issued by the Cedent on New York risks, until 90 days
                           following approval of the Limited Exclusion Provision
                           by the Governmental Authority having jurisdiction
                           thereof.



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3.       Except for those classes of policies specified in Clause II of
         paragraph (2) and without in any way restricting the operation of
         paragraph (1) of this Clause, it is understood and agreed that for all
         purposes of this Agreement the original liability policies of the
         Cedent (new, renewal and replacement) affording the following
         coverages:

         Owners, Landlords and Tenants Liability, Contractual Liability,
         Elevator Liability, Owners or Contractors (including railroad),
         Protective Liability, Manufacturers and Contractors Liability, Product
         Liability, Professional and Malpractice Liability, Storekeepers
         Liability, Garage Liability, Automobile Liability (including
         Massachusetts Motor Vehicle or Garage Liability)

         shall be deemed to include, with respect to such coverages, from the
         time specified in Clause V of this paragraph (3), the following
         provision (specified as the Broad Exclusion Provision):

         I.       Under any Liability Coverage, to
                        (injury, sickness, disease, death or destruction
                        (bodily injury or property damage

                  (a)      with respect to which an insured under the policy is
                           also an insured under a nuclear energy liability
                           policy issued by Nuclear Energy Liability Insurance
                           Association, Mutual Atomic Energy Liability
                           Underwriters or Nuclear Insurance Association of
                           Canada, or would be an insured under any such policy
                           but for its termination upon exhaustion of its limit
                           of liability; or

                  (b)      resulting from the hazardous properties of nuclear
                           material and with respect to which (1) any person or
                           organization is required to maintain financial
                           protection pursuant to the Atomic Energy Act of 1954,
                           or any law amendatory thereof, or (2) the insured is,
                           or had this policy not been issued would be, entitled
                           to indemnity from the United States of America, or
                           any agency thereof, under any agreement entered into
                           by the United States of America, or any agency
                           thereof, with any person or organization.

         II.      Under any Medical Payments Coverage, or under any
                  Supplementary Payments Provision relating to
                      (immediate medical or surgical relief,
                      (first aid, to expenses incurred with respect to
                      (bodily injury, sickness, disease or death (bodily injury

                  resulting from the hazardous properties of nuclear material
                  and arising out of the operation of a nuclear facility by any
                  person or organization.



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         III.     Under any Liability Coverage, to (injury, sickness, disease,
                  death or destruction (bodily injury or property damage
                  resulting from the hazardous properties of nuclear material if

                  (a)      the nuclear material (1) is at any nuclear facility
                           owned by, or operated by or on behalf of, an insured
                           or (2) has been discharged or dispersed therefrom;

                  (b)      the nuclear material is contained in spent fuel or
                           waste at any time possessed, handled, used,
                           processed, stored, transported or disposed or by or
                           on behalf of an insured; or

                  (c)      (the injury, sickness, disease, death or destruction
                           (the bodily injury or property damage
                           arises out of the furnishing by an insured of
                           services, materials, parts or equipment in connection
                           with the planning, construction, maintenance,
                           operation or use of any nuclear facility, but if such
                           facility is located within the United States of
                           America, its territories, or possessions or Canada,
                           this exclusion (c) applies only to (injury to or
                           destruction of property at such nuclear facility
                           (property damage to such nuclear facility and any
                           property thereat.

         IV. As used in this endorsement:

                  "hazardous properties" include radioactive, toxic or explosive
                  properties; "nuclear material" means source material, special
                  nuclear material or by-product material; "source material",
                  "special nuclear material" and "by-product material" have the
                  meanings given to them in the Atomic Energy Act of 1954 or in
                  any law amendatory thereof; "spent fuel" means any fuel
                  element or fuel component, solid or liquid, which has been
                  used or exposed to radiation in a nuclear reactor; "waste"
                  means any waste material (1) containing by-product material
                  and (2) resulting from the operation by any person or
                  organization of any nuclear facility included within the
                  definition of nuclear facility under paragraph (a) or (b)
                  thereof; "nuclear facility" means

                  (a)      any nuclear reactor,

                  (b)      any equipment or device designed or used for (1)
                           separating the isotopes of uranium or plutonium, (2)
                           processing or utilizing spent fuel, or (3) handling,
                           processing or packaging waste,

                  (c)      any equipment or device used for the processing,
                           fabricating or alloying of special nuclear material
                           if at any time the total amount of such material in
                           the custody of the Insured at the premises where such
                           equipment or device is located consists of or
                           contains more than 25 grams of plutonium or uranium
                           233 or any combination thereof, or more than 250
                           grams of uranium 235,



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                  (d)      any structure, basin, excavation, premises or place
                           prepared or used for the storage or disposal of
                           waste,

                           and includes the site on which any of the foregoing
                           is located, all operations conducted on such site and
                           all premises used for such operations; "nuclear
                           reactor" means any apparatus designed or used to
                           sustain nuclear fission in a self-supporting chain
                           reaction or to contain a critical mass of fissionable
                           material; (with respect to injury to or destruction
                           of property, the word "injury" or "destruction"
                           ("property damage" includes all forms of radioactive
                           contamination of property. (includes all forms of
                           radioactive contamination of property.

         V.       The inception dates and thereafter of all original policies
                  affording coverages specified in this paragraph (3), whether
                  new, renewal or replacement, being policies which become
                  effective on or after 1st May, 1960, provided this paragraph
                  (3) shall not be applicable to

                  (i)      Garage and Automobile Policies issued by the Cedent
                           on New York risks, or

                  (ii)     Statutory liability insurance required under Chapter
                           90, General Laws of Massachusetts, until 90 days
                           following approval of the Board Exclusion Provision
                           by the Governmental Authority having jurisdiction
                           thereof.

4.       Without in any way restricting the operation of paragraph (1) of this
         Clause, it is understood and agreed that paragraphs (2) and (3) above
         are not applicable to original liability policies of the Cedent in
         Canada and that with respect of such policies this Clause shall be
         deemed to include the Nuclear Energy Liability Exclusion Provisions
         adopted by the Canadian Underwriters' Association or the Independent
         Insurance Conference of Canada.

                          -----------------------------

*Note    The words printed in italics in the Limited Exclusion Provision and in
         the Broad Exclusion Provision shall apply only in relation to original
         liability policies which include a Limited Exclusion Provision or a
         Broad Exclusion Provision containing those words.





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                     WAR RISK EXCLUSION CLAUSE (REINSURANCE)


         As regards interests which at time of loss or damage are on shore, no
liability shall attach hereto in respect of any loss or damage which is
occasioned by war, invasion, hostilities, acts of foreign enemies, civil war,
rebellion, insurrection, military or usurped power, or martial law or
confiscation by order of any government or public authority.

         This War Exclusion Clause shall not, however, apply to interest which
at time of loss or damage are within the territorial limits of the United States
of America (comprising the fifty States of the Union and the District of
Columbia, its territories and possessions, including the Panama Canal Zone and
the Commonwealth of Puerto Rico and including Bridges between the United States
of America and Mexico provided they are under United States ownership), Canada,
St. Pierre and Miquelon, provided such interests are insured under original
policies, endorsements or binders containing a standard war or hostilities or
warlike operations exclusion clause.

         Nevertheless, this clause shall not be construed to apply to loss or
damage occasioned by riots, strikes, civil commotion, vandalism, malicious
damage, including acts committed by agents of any government, party or faction
engaged in war, hostilities or other warlike operation, provided such agents are
acting secretly and not in connection with any operations of military or naval
armed forces in the country where the interests insured are situated.






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                        INSOLVENCY FUND EXCLUSION CLAUSE


This Agreement excludes all liability of the Ceding Company arising by contract,
operation of law or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency Fund" includes any
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the Ceding Company of part or all
of any claim, debt, charge, fee or other obligation of an insurer or its
successors or assigns which has been declared by any competent authority to be
insolvent or which is otherwise deemed unable to meet any claim, debt, charge,
fee or other obligation in whole or in part.





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               POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE


Section A:

Excluding:

         (a)      All business derived directly or indirectly from any Pool,
                  Association, or Syndicate which maintains its own reinsurance
                  facilities.

         (b)      Any Pool or Scheme (whether voluntary or mandatory) formed
                  after March 1, 1968 for the purpose of insurance property
                  whether on a country-wide basis or in respect of designated
                  areas. This exclusion shall not apply to so-called Automobile
                  Insurance Plans or other Pools formed to provide coverage for
                  Automobile Physical Damage.

Section B:

It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:

         Industrial Risk Insurers,
         Associated Factory Mutuals Improved Risk Mutuals Any Pool, Association
         or Syndicate formed for the purpose of writing Oil, Gas or
         Petro-Chemical Plants and/or Oil or Gas Drilling Rigs, United States
         Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated
         Aviation Underwriters, American Aviation Underwriters

Section B does not apply:

         (a)      Where the Total Insured Value over all interests of the risk
                  in question is less than $250,000,000.

         (b)      To interests traditionally underwritten as Inland Marine or
                  stock and/or contents written on a blanket basis.

         (c)      To Contingent Business Interruption, except when the Company
                  is aware that the key location is known at the time to be
                  insured in any Pool, Association, or Syndicate named above
                  other than as provided for under Section B(a).

         (d)      To risks as follows:

                  Offices, Hotels, Apartments, Hospitals, Educational
                  Establishments, Public Utilities, (other than railroad
                  schedules) and builder's risks on the classes of risks
                  specified in this subsection (d) only. Where this clause
                  attaches to Catastrophe Excesses, the following Section C is
                  added:

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Section C:

Nevertheless the Reinsurer specifically agrees that liability accruing to the
Company from its participation in:

         (1)      The following so-called "Coastal Pools":

                  Alabama Insurance Underwriting Association Florida Windstorm
                  Underwriting Association Louisiana Insurance Underwriting
                  Association Mississippi Windstorm Underwriting Association
                  North Carolina Insurance Underwriting Association South
                  Carolina Windstorm and Hail Underwriting Association Texas
                  Catastrophe Property Insurance Association

                                       AND

         (2)      All "Fair Plan" and "Rural Risk Plan" business for all perils
                  otherwise protected hereunder shall not be excluded, except,
                  however, that this reinsurance does not include any increase
                  in such liability resulting from:

                  (i)      The inability of any other participant in such
                           "Coastal Pool" and/or "Fair Plan" and/or "Rural Risk
                           Plan" to meet its liability.

                  (ii)     Any claim against such "Coastal Pool" and/or "Fair
                           Plan" and/or "Rural Risk Plan" or any participant
                           therein, including the Company, whether by way of
                           subrogation or otherwise, brought by or on behalf of
                           any insolvency fund (as defined in the Insolvency
                           Fund Exclusion Clause incorporated in this Contract).



                                       38