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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



(Mark One)



|x | Annual report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | -------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2010



or



| ̈ | Transition report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | -----------------------------------------------------------------------------------------



For the transition period from
 to .



000-28249

(Commission file number)



AMERINST
INSURANCE GROUP, LTD.

(Exact Name of Registrant as Specified in its Charter)





|                                                                                                        |  |                                     
|------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|BERMUDA                                                                                                 |  | 98-0207447                          
|(State or other jurisdiction of
Incorporation or Organization)                                          |  | (I.R.S. Employer Identification No.)
|                                                                                                        | 
|c/o Cedar Management Limited 25 Church Street, Continental Building P.O. Box HM 1601, Hamilton,
Bermuda |  | HMGX                                
|(Address of Principal Executive Offices)                                                                |  | (Zip Code)                          



(441) 295-6015

(Registrants telephone number)



Securities registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to Section 12(g) of the Act:



COMMON SHARES, PAR VALUE $1.00 PER SHARE

(Title of class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    YES   ̈    NO  x



Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15 (d) of the
Act.    YES   ̈    NO  x



Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.    YES  x    NO   ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.     ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈                      |  | Smaller reporting company  x
|(Do not check is a smaller reporting company) |  |                             



Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ̈    NO  x



As
of March 1, 2011, the registrant had 995,253 common shares, $1.00 par value per share outstanding. The aggregate market value of the common stock held by non-affiliates of the Registrant as of the last business day of the Registrants most
recently completed second fiscal quarter was $26,597,014 based on book value as of June 30, 2010.



Documents Incorporated by Reference

|                                                                                                                                   |  |                                     |     | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | --- | 
|                                                                                                                                   |  | IncorporatedBy ReferenceIn Part No. |    
|Portions of the Companys Proxy Statement in connection with the Annual General Meeting of Shareholders to be held on
June 2, 2011 |  |                                     | III | 









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AMERINST INSURANCE GROUP, LTD.



Annual Report on Form 10-K

For the year ended December 31, 2010



TABLE OF CONTENTS



|           |  |          |    |                                                                                                              |  |      |    | 
|---------- |  | -------- | -- | ------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|           |  |          |    |                                                                                                              |  | Page |   
|PART I     |  |          |    |                                                                                                              |  |     
|           |  |          |   
|           |  | Item 1.  |    | Business                                                                                                     |  |      | 4  | 
|           |  | Item 1A. |    | Risk Factors                                                                                                 |  |      | 9  | 
|           |  | Item 1B. |    | Unresolved Staff Comments                                                                                    |  |      | 14 | 
|           |  | Item 2.  |    | Properties                                                                                                   |  |      | 15 | 
|           |  | Item 3.  |    | Legal Proceedings                                                                                            |  |      | 15 | 
|           |  | Item 4.  |    | (Removed and Reserved)                                                                                       |  |      | 15 | 
|           |  |         
|PART II    |  |          |    |                                                                                                              |  |     
|           |  |          |   
|           |  | Item 5.  |    | Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |  |      | 15 | 
|           |  | Item 6.  |    | Selected Financial Data                                                                                      |  |      | 16 | 
|           |  | Item 7.  |    | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |  |      | 17 | 
|           |  | Item 7A. |    | Quantitative and Qualitative Disclosures about Market Risk                                                   |  |      | 29 | 
|           |  | Item 8.  |    | Financial Statements and Supplementary Data                                                                  |  |      | 30 | 
|           |  | Item 9.  |    | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure                         |  |      | 52 | 
|           |  | Item 9A. |    | Controls and Procedures                                                                                      |  |      | 52 | 
|           |  | Item 9B. |    | Other Information                                                                                            |  |      | 52 | 
|           |  |         
|PART III   |  |          |    |                                                                                                              |  |     
|           |  |          |   
|           |  | Item 10. |    | Directors, Executive Officers and Corporate Governance                                                       |  |      | 53 | 
|           |  | Item 11. |    | Executive Compensation                                                                                       |  |      | 53 | 
|           |  | Item 12. |    | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters               |  |      | 53 | 
|           |  | Item 13. |    | Certain Relationships and Related Transactions, and Director Independence                                    |  |      | 53 | 
|           |  | Item 14. |    | Principal Accountant Fees and Services                                                                       |  |      | 53 | 
|           |  |         
|PART IV    |  |          |    |                                                                                                              |  |     
|           |  |          |   
|           |  | Item 15. |    | Exhibits and Financial Statement Schedules                                                                   |  |      | 54 | 
|           | 
|Signatures |  |          | 55 |                                                                                                             



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Introductory Note



Caution Concerning Forward-Looking Statements



Certain statements contained in this Form 10-K, or otherwise
made by our officers, including statements related to our future performance, ability to successfully implement our business plan, and our outlook for our businesses and respective markets, projections, statements of our managements plans or
objectives, forecasts of market trends and other matters, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of
our management as well as assumptions made by, and information currently available to, our management. The words expect, believe, may and similar expressions as they relate to us or our management are intended to
identify forward-looking statements. Such statements reflect our managements current views with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from
those reflected in any forward-looking statements. Our actual future results may differ materially from those set forth in our forward-looking statements. Factors that might cause such actual results to differ materially from those reflected in any
forward-looking statements include, but are not limited to, the factors discussed in detail in Part I, Item 1A. Risk Factors and Part II, Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations in this form 10-K, as well as:



| |  |  | the occurrence of catastrophic events with a frequency or severity exceeding our expectations;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | a decrease in the level of demand for reinsurance or an increase in the supply of reinsurance capacity;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the successful implementation of our business plan, without a significant depletion of our cash resources and the retention of our current A.M. Best
rating;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a worsening of the current global economic market conditions and global credit crisis and changing rates of inflation and other economic conditions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | actual losses and loss expenses exceeding our loss reserves, which are necessarily based on the actuarial and statistical projections of ultimate
losses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased rate pressure on premiums;
| | - |  | ------------------------------------



| |  |  | adequacy of our risk management and loss limitations methods;
| | - |  | -------------------------------------------------------------



| |  |  | the integration of businesses we may acquire or new business ventures we may start;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | acts of terrorism, political unrest, outbreak of war and other hostilities or other non-forecasted and unpredictable events;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the legal or regulatory environments in which we operate; and
| | - |  | ------------------------------------------------------------------------



| |  |  | other risks, including those risks identified in any of our other filings with the Securities and Exchange Commission.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our managements analysis
only as of the date they are made. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.



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PART I



Item 1. Business



General



Unless otherwise indicated by the context, in this annual
report we refer to AmerInst Insurance Group, Ltd. and its subsidiaries as the Company,, AmerInst, we or us. AMIC Ltd. means AmerInsts wholly-owned subsidiary, AmerInst Insurance
Company, Ltd. APSL means AmerInst Professional Services, Limited, a Delaware corporation and wholly-owned subsidiary of AmerInst Mezco, Ltd. (Mezco) which is a wholly-owned subsidiary of AmerInst. Investco means
AmerInst Investment Company, Ltd., a subsidiary of AMIC Ltd. AMIG means our predecessor entity, AmerInst Insurance Group, Inc., a Delaware corporation. Our principal offices are c/o Cedar Management Limited, 25 Church Street, Continental
Building, P.O. Box HM 1601, Hamilton, Bermuda, HM GX.



AmerInst, a Bermuda holding company, was formed in 1998. Our mission is to be a company that provides insurance protection for professional service firms and engages in investment activities.



Entry into Agency Agreement



Effective September 25, 2009, APSL entered into an
agency agreement (the Agency Agreement) with The North River Insurance Company, United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty
Insurance Company (collectively, C&F) pursuant to which C&F appointed APSL as its exclusive agent for the purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants
professional liability and lawyers professional liability insurance coverage within the 50 states of the United States and the District of Columbia. The initial term of the Agency Agreement is for four years with automatic one year renewals.



Entry into Reinsurance Agreement



We conduct our reinsurance business
through AMIC Ltd., our subsidiary, which is a registered insurer in Bermuda. On September 25, 2009, AMIC Ltd. entered into a professional liability quota share agreement with C&F (the Reinsurance Agreement) pursuant to which
C&F agrees to cede, and AMIC Ltd. agrees to accept as reinsurance, a fifty percent (50%) quota share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as accountants
professional liability and lawyers professional liability, subject to AMIC Ltd. surplus limitations. The initial term of the Reinsurance Agreement is for four years with automatic one year renewals.



Historical Relationship with CNA



Historically, the primary business activity of our wholly
owned insurance subsidiary, AMIC Ltd., had been to act as a reinsurer of professional liability insurance policies that were issued under the Professional Liability Insurance Plan sponsored by the American Institute of Certified Public Accountants
(AICPA). The AICPA plan offers professional liability coverage to accounting firms and individual CPAs in all 50 states.



Our reinsurance activity depends upon agreements with outside parties. AMIG, our predecessor entity, began our reinsurance relationship
with CNA Financial Corporation (CNA) in 1993.



On January 5, 2009, AMIC Ltd. received written notice from CNA that CNA did not intend to renew the reinsurance program encompassed by the AmerInst Insurance Company Limited Accountants Professional
Liability Treaty and the Value Plan Policies Accountants Professional Liability Quota Share Treaty (the Reinsurance Treaties). In 2008, the business relationship with CNA accounted for approximately 95% of AmerInsts net premiums
earned.



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On May 15, 2009, AMIC Ltd. and CNA entered into a Commutation and Release Agreement
(the Commutation Agreement) whereby, effective January 1, 2009, in exchange for a payment of a portion of the reserves which we had previously set aside, CNA assumed responsibility for prior years undetermined and unpaid
liabilities.



Historical Relationship with
CAMICO



From June 1, 2005 through
May 31, 2009, we were a party to a reinsurance contract with CAMICO Mutual Insurance Company (CAMICO) a California-based writer of accountants professionally liability business.



Effective June 1, 2009, we decided not to renew the
CAMICO contract and permitted the contract to expire pursuant to its terms. We remain potentially liable for claims related to coverage through May 31, 2009.



VSC Payment



On July 22, 2009, the Company received a payment of
$500,891 from Virginia Surety Company (VSC) in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between the Company and VSC for the years 1989-1993. The $500,891 payment was recorded as a
decrease in losses and loss adjustment expenses in the year ended December 31, 2009. The Company and VSC are in dispute with respect to over $500,000 in additional recoveries, fees and interest, which is currently in arbitration.



Attorneys Professional Liability Coverage



Effective January 1, 2003, we
entered into a 15% quota share participation of the attorneys professional liability coverage provided by Professionals Direct Insurance Company (PDIC). This participation terminated on December 31, 2003. We remain potentially
liable for claims related to this period of coverage.



Third-party Managers and Service Providers



Cedar Management Limited provides the day-to-day services necessary for the administration of our business. Our agreement with Cedar
Management Limited renewed for one year beginning January 1, 2011 and ending December 31, 2011. Mr. Stuart Grayston, our President, was formally a director and officer of Cedar Management Limited, and Mr. Thomas R. McMahon,
our Vice President and Treasurer, is an officer, director and employee of Cedar Management Limited.



Mowery & Schoenfeld, LLC, an accounting firm affiliated with a former director and chairman emeritus, provides accounting functions to APSL. Our agreement with Mowery & Schoenfeld, LLC
renewed for one year beginning January 1, 2011 and ending December 31, 2011, pursuant to a letter of understanding dated February 3, 2011. While the letter of understanding has no termination notice clause, it can be terminated by
either party.



The Country Club Bank of Kansas
City, Missouri, provides portfolio management of fixed-income securities and directs our investments pursuant to guidelines approved by us. Harris Associates L.P. and Aurora Investment Management, LLC provide discretionary investment advice with
respect to our equity investments. We have retained Milliman USA, an independent casualty actuarial consulting firm, to render advice regarding actuarial matters.



Competition



Our main competition comes from brokers and agents that
service accountants and attorneys; primarily AON Corporation, a large international corporation with 36,000 employees in over 120 countries which has a relationship with CNA, and CAMICO Mutual Insurance Company, a California-based writer of
accountants professional liability business.



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Licensing and Regulation



The rates and terms of reinsurance agreements generally are
not subject to regulation by any governmental authority. This is in contrast to direct insurance policies, the rates and terms of which are subject to regulation by state insurance departments. As a practical matter, however, the rates charged by
primary insurers place a limit upon the rates that can be charged by reinsurers.



AmerInst, through its wholly-owned subsidiary, AMIC Ltd., is subject to regulation under the insurance laws of Bermuda, where AMIC Ltd. and AmerInst are domiciled.



APSL, a Delaware corporation, subsidiary of Mezco and a
managing general underwriter responsible for offering professional liability solutions to professional service firms, continues to work closely with C&F to secure regulatory approval from various state insurance departments. As of
December 31, 2010, APSL has received regulatory approval to act as an insurance agent in 50 states and the District of Columbia.



Bermuda Regulation



AMIC Ltd., as a licensed Bermuda insurance company, is subject to regulation under The Insurance Act of 1978, as amended, and Related
Regulations (collectively, the Insurance Act), which provide that no person shall conduct insurance business, including reinsurance, in or from Bermuda unless registered as an insurer under the Insurance Act by the Bermuda Monetary
Authority (BMA). In deciding whether to grant registration, the BMA has discretion to act as it thinks fit in the public interest. The BMA is required by the Insurance Act to determine whether an applicant for registration is a fit and
proper body to be engaged in insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise. In connection with registration, the BMA may impose conditions relating to the writing of certain types of
insurance.



The Insurance Act requires, among
other things, that Bermuda insurance companies meet and maintain certain standards of liquidity and solvency, file periodic reports in accordance with the Bermuda Statutory Accounting Rules, produce annual audited statutory financial statements and
maintain a minimum level of statutory capital and surplus. In general, the regulation of insurers in Bermuda relies heavily upon the directors and managers of a Bermuda insurer, each of which must certify each year that the insurer meets the
solvency, liquidity and capital requirements of the Insurance Act. Furthermore, the BMA is granted powers to supervise, investigate and intervene in the affairs of insurance companies. Significant aspects of the Bermuda insurance regulatory
framework are described below.



An insurers
registration may be canceled by the BMA on grounds specified in the Insurance Act, including the failure of the insurer to comply with the obligations of the Insurance Act or if, in the opinion of the BMA, the insurer has not been carrying on
business in accordance with sound insurance principles.



Every registered insurer must appoint an independent auditor approved by the BMA. That auditor must annually audit and report on the statutory financial statements and the statutory financial return of
the insurer, both of which are required to be filed annually with the BMA. The approved auditor may be the same person or firm that audits the insurers financial statements and reports for presentation to its shareholders.



The Insurance Act provides that the statutory assets of an
insurer must exceed its statutory liabilities by an amount greater than the prescribed minimum solvency margin. Pursuant to the Insurance Act, AMIC Ltd. is registered as a Class 3A insurer and, as such: (i) is required to maintain a minimum
solvency margin equal to the greatest of: (x) $1,000,000, (y) 20% of net premiums written in its current financial year up to $6,000,000 plus 15% of net premiums written in its current financial year over $6,000,000, or (z) 15% of
loss reserves; (ii) is required to file annually with the BMA a statutory financial return together with a copy of its statutory financial statements which includes a report of the independent auditor concerning its statutory financial
statements, a declaration of the statutory ratios, and the related solvency certificate, and an opinion of a loss reserve specialist in respect of its loss and loss expense provisions, all within four months following the end of the relevant
financial year; (iii) is prohibited from declaring or paying any dividends during any financial year if it is in



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breach of its minimum solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio (if it fails to meet its
minimum solvency margin or minimum liquidity ratio on the last day of any financial year, it will be prohibited, without the approval of the BMA, from declaring or paying any dividends during the next financial year); (iv) is prohibited,
without the approval of the BMA, from reducing by 15% or more its total statutory capital, as set out in its previous years financial statements; and (v) if it appears to the BMA that there is a risk of an insurance company becoming
insolvent or that it is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, in addition to the restrictions specified above, direct it not to declare or pay any dividends or any other distributions or may
restrict it from making such payments to such extent as the BMA may think fit.



The Insurance Act also provides a minimum liquidity ratio for general business. An insurer engaged in general business is required to maintain the value of its relevant assets at not less than 75% of the
amount of its relevant liabilities. Relevant assets include cash and time deposits, quoted investments, unquoted bonds and debentures, first liens on real estate, investment income due and accrued, accounts and premiums receivable and reinsurance
balances receivable. There are certain categories of assets which, unless specifically permitted by the BMA, do not automatically qualify such as advances to affiliates, real estate and collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less deferred income tax and sundry liabilities (by interpretation, those not specifically defined). Based upon the foregoing, the investment by AMIC Ltd. in an investment subsidiary, AmerInst
Investment Company, Ltd. (Investco), requires the specific approval of the BMA for classification as a relevant asset, which we have received up to an amount sufficient to meet the minimum liquidity ratio.



The BMA may appoint an inspector with extensive powers to
investigate the affairs of an insurer if the BMA believes that an investigation is required in the interest of the insurers policyholders or persons who may become policyholders. In order to verify or supplement information otherwise provided
to him, the BMA may direct an insurer to produce documents or information in relation to matters connected with the insurers business.



If it appears to the BMA that there is a risk of an insurer becoming insolvent, or if the insurer is in breach of the Insurance Act or the
regulations or of any condition imposed on its registration as an insurer, the BMA may direct the insurer in certain respects, including not to take on any new insurance business; not to vary any insurance contract if the effect would be to increase
the insurers liabilities; not to make certain investments; to realize certain investments; to maintain in, or transfer to and to keep in the custody of, a specified bank, certain assets; not to declare or pay any dividends or other
distributions or to restrict the making of such payments; and/or to limit its premiums.



As a Bermuda insurer, we are required to maintain a principal office in Bermuda and to appoint and maintain a Principal Representative in Bermuda. For the purpose of the Insurance Act, our principal
office is c/o Cedar Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601, Hamilton HMGX, Bermuda, which is our Principal Representative in Bermuda. An insurer may only terminate the appointment of its Principal Representative
with a reason acceptable to the BMA, and the Principal Representative may not cease to act as such, unless the BMA is given 21 days notice in writing of the intention to do so. It is the duty of the Principal Representative, upon reaching the
view that there is a likelihood of the insurer for which he acts becoming insolvent or it coming to his knowledge, or his having reason to believe, that an event has occurred, to provide verbal notification immediately, and make a report
in writing to the BMA setting out all the particulars of the case that are available to him within 14 days. Examples of such an event include failure by the insurer to comply substantially with a condition imposed upon the insurer
by the BMA relating to a solvency margin or liquidity or other ratio.



Except for business related to APSL, our business is conducted from offices in Hamilton, Bermuda. We manage our investments, directly and through AMIC Ltd., through independent investment advisors in the
U.S. or other investment markets as needed and appropriate. We do not operate as an investment manager or as a broker dealer requiring registration under investment advisory or securities broker regulations in the U.S.,



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Bermuda or otherwise. The directors and officers of AMIC Ltd. negotiate reinsurance treaties for acceptance in Bermuda. Among other matters, the following business functions are conducted from
our Bermuda offices: (i) communications with our shareholders, including financial reports; (ii) communications with the general public of a nature other than advertising; (iii) solicitation of the sale by us or any of our
subsidiaries of shares in any of such entities; (iv) accepting subscriptions of new shareholders of the Company; (v) maintenance of principal corporate records and original books of account; (vi) audit of original books of account;
(vii) disbursement of funds in payment of dividends, claims, legal fees, accounting fees, and officers and directors fees; (viii) arrangement for and conduct of meetings of our shareholders and directors and shareholders and
directors of our subsidiaries; and (ix) execution of repurchases of our shares and shares of our subsidiaries. Except for our APSL office, we do not maintain an office or place of business in the United States.



AMIC Ltd.s ability to pay dividends to AmerInst is
subject to the provisions of the Bermuda insurance and companies laws and the requirement to provide the ceding companies with collateral. Under the Companies Act, AMIC Ltd. would be prohibited from declaring or paying a dividend at December 31,
2010 if such payment would reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities, issued share capital, and share premium accounts. As of December 31, 2010, approximately $31 million was available
for the declaration of dividends to shareholders. However, due to the requirement to provide the ceding companies with collateral, approximately $21 million was available for the payment of dividends to the shareholders. In addition, AMIC Ltd. must
be able to pay its liabilities as they fall due after the payment of a dividend. Our ability to pay dividends to common shareholders and to pay our operating expenses is dependent on cash dividends from our subsidiaries. The payment of such
dividends by AMIC Ltd., including its subsidiary Investco, to us is also limited under Bermuda law by the Insurance Act and Related Regulations which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended
December 31, 2010 and 2009 these requirements have been met as follows:



|                  |  |                            |           |  |                 |   |            |         |  |   |           |  |  |   |            | 
|----------------- |  | -------------------------- | --------- |  | --------------- | - | ---------- | ------- |  | - | --------- |  |  | - | ---------- | 
|                  |  | StatutoryCapital & Surplus |           |  | Relevant Assets |  
|                  |  | Minimum                    |           |  | Actual          |   |            | Minimum |  |   | Actual    | 
|December 31, 2010 |  | $                          | 1,000,000 |  |                 | $ | 32,209,291 |         |  | $ | 9,231,848 |  |  | $ | 10,869,403 | 
|December 31, 2009 |  | $                          | 1,000,000 |  |                 | $ | 31,177,595 |         |  | $ | 9,445,328 |  |  | $ | 9,445,328  | 



AMIC Ltd. writes more than 50% unrelated business and consequently, in accordance with the requirements of the Insurance Amendment Act
2008, is registered as a Class 3A insurer.



Customers



Our only sources of income, other than our investment portfolio, are our Agency Agreement and Reinsurance Agreement. Without such
agreements, we believe current levels of investment income would provide enough revenue to continue operations while the Company evaluated other reinsurance and insurance opportunities.



Employees



At December 31, 2010, APSL had fifteen employees,
eleven full-time salaried and four temporary employees.



Loss Reserves



Our loss reserves, changes in aggregate reserves for the last two years, and loss reserve development as of the end of each of the last ten years, are discussed in Item 7 of this Report,
Managements Discussion and Analysis of Financial Condition and Results of Operations, Note 2 to our Consolidated Financial Statements included in Item 8 of this Report, and Note 5 to our Consolidated Financial Statements.



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Developing Business



AmerInst has filed an application for a U.S. patent on a unique financing concept called RINITS that it
has developed to securitize insurance and reinsurance risk, involving property, casualty, life and health. Such securitization would be by equity and debt financing of Bermuda special purpose companies licensed as reinsurers. It is AmerInsts
intention to grant patent licenses to the special purpose companies and investment banking organizations which will market the securities. In addition to the license royalties, AmerInst would manage the special purpose companies for a fee and at its
option could invest in them as well. However, AmerInst may not be issued a patent, and, even if so, may not be able to license such patent.



AmerInst has entered into confidentiality agreements with several investment banking organizations.



In addition to the patent application, AmerInst has obtained
a trademark under which the concept will be marketed.



AmerInst has two operating segments: 1) reinsurance activity, which includes investments and other activities, and 2) insurance activity, which offers professional liability solutions to professional
service firms under the Agency Agreement with C&F.



The disclosure of RINITS as a separate operating segment was discontinued in the fourth quarter of 2010 for it no longer met the quantitative thresholds as prescribed by Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 280, Segment Reporting.



Available Information



We file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission
(SEC or the Commission). You may read any document we file with the Commission at the Commissions public reference room at 100 F Street, NE, Washington, DC 20549. Please call the Commission at 1-800-SEC-0330 for
information on the public reference room. The Commission maintains an internet site that contains annual, quarterly, and current reports, proxy and information statements and other information that issuers (including AmerInst) file electronically
with the Commission. The Commissions internet site is www.sec.gov.



Our internet site is www.amerinst.bm. We make available free of charge through our internet site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Commission. You will need to have on your
computer the Adobe Acrobat Reader® software to view these documents, which are in PDF format. If you do not have
Adobe Acrobat Reader, a link to Adobes internet site, from which you can download the software, is provided. We also make available, through our internet site, via links to the Commissions internet site, statements of beneficial
ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Securities Exchange Act. In addition, we post on www.amerinst.bm our Memorandum of Association, our
Bye-Laws, our Statement of Share Ownership Policy, Charters for our Audit Committee and Governance and Nominations Committee, as well as our Code of Business Conduct and Ethics. You can request a copy of these documents, excluding exhibits, at no
cost, by writing or telephoning us c/o Cedar Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601 Hamilton, Bermuda HMGX, Attention: Investor Relations (441) 295-6015. The information on our internet site is not
incorporated by reference into this report.



Item 1A. Risk Factors



You should consider carefully the following risk factors
before deciding whether to invest in our common stock. Our business, including our operating results and financial condition, could be harmed by any of these risks. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial



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also may materially and adversely affect our business. The value of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these
risks you should also refer to the other information contained in our filings with the SEC, including our financial statements and related notes.



We may not be able to generate material revenue or profit under our new agency and reinsurance agreements.



On January 5, 2009, AMIC Ltd., our wholly-owned
subsidiary, received written notice from CNA that CNA did not intend to renew its reinsurance agreement with us regarding the AICPA Plan. In 2008, our business relationship with CNA accounted for over 95% of our net premiums earned. On May 15,
2009, AMIC Ltd. and CNA entered into a Commutation and Release Agreement whereby, effective January 1, 2009, in exchange for a payment of a portion of the reserves which we had previously set aside, CNA assumed responsibility for prior
years undetermined and unpaid liabilities.



Effective September 25, 2009, APSL, a wholly-owned subsidiary of AmerInst Mezco, Ltd. which is a wholly-owned subsidiary of AmerInst,
entered into the Agency Agreement with C&F pursuant to which C&F appointed APSL as its exclusive agent for the purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants
professional liability and lawyers professional liability insurance coverage within the 50 states of the United States and the District of Columbia. Also on September 25, 2009, AMIC Ltd. entered into the reinsurance agreement with C&F
pursuant to which C&F agrees to cede and AMIC Ltd. agrees to accept as reinsurance a fifty percent (50%) quota share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as
accountants professional liability and lawyers professional liability.



Because we have only recently entered into the Agency Agreement and Reinsurance Agreement and our ability to generate revenue under either agreement is unproven, neither agreement may result in material
revenue or profit. Even if we are able to generate material revenue and/or profit from these agreements, we may not be able to do so for a significant period of time.



If our agreements with C&F are terminated or C&F chooses not to
renew them, our ability to generate revenue would be adversely affected.



We anticipate that the great majority of our revenue in the near future will be derived from (i) the commissions earned by APSL, a wholly-owned subsidiary of Mezco which is a wholly-owned subsidiary
of AmerInst, through the Agency Agreement with C&F and (ii) the reinsurance activity under the Reinsurance Agreement between AMIC Ltd., our wholly-owned subsidiary, and C&F. Therefore if C&F should terminate or choose not to renew
one or both of those agreements or should renew them on terms less favorable to us, our ability to generate revenue may be adversely affected.



We participate in a potentially unprofitable, unstable market.



Professional liability insurance is a volatile risk with
fluctuations both in the frequency and severity of claims, particularly severity. This is aggravated by the casualty insurance cycle, which over a period of years varies from a hard market with high or increasing premiums charged for risk, to a soft
market with low or decreasing premiums being charged. The interaction of volatility and insurance cycle variation results in a high degree of unpredictability of underwriting results from year to year. Because as a reinsurer, we will be directly
influenced by the premium competition in the primary market, and as a quota share reinsurer, we will be directly dependent on the underwriting results of our cedants, therefore our revenue could be adversely affected by factors beyond our control.



Our industry is highly competitive and we may not be able
to compete successfully in the future.



Our industry is highly competitive and subject to pricing cycles that can be pronounced. We compete solely in the United States
reinsurance and insurance markets. Most of our competitors have greater financial resources



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than we do and have established long term and continuing business relationships throughout the industry, which can be a significant competitive advantage. If we are unable to successfully compete
against these companies our profitability could be adversely affected.



Our investment return may not be sufficient to offset underwriting losses.



Our investment income is subject to variation due to fluctuations of market interest rates on our fixed income portfolio, and fluctuations
of stock prices in our equity portfolio. If such investment income is not sufficient to offset potential underwriting losses or our capital is not sufficient to absorb adverse underwriting and/or investment results, our profitability would be
adversely affected.



Our inability to retain senior
executives and other key personal could adversely affect our business.



The successful implementation of our new business plan is dependent upon our ability to retain APSL senior executives and other qualified employees. In November 2009, we entered into an employment
agreement with Mr. Kyle Nieman, President and CEO of APSL. Mr. Nieman has more than 25 years of insurance industry experience. In addition, a number of AmerInsts operating activities as well as certain management functions are
performed by outside parties. If such outside parties and our key employees were not to renew their relationship with us, or only upon terms that were not acceptable to us, then our business could be harmed.



Your ownership of our shares does not guarantee insurance coverage.



The ownership of our common shares by an
accounting firm or individual practitioner will not guarantee that such firm or individual will thereafter be able to obtain professional liability insurance under other policies reinsured by AMIC Ltd., or that such insurance will be competitively
priced.



There is no market for our shares, which may be
subject to restrictions on transfer.



There is currently no market for our common shares and it is unlikely that a market will develop. Our common shares are not listed on any
stock exchange or automated quotation system. Under our Bye-Laws, our Board of Directors has the authority to prohibit all transfers of shares. Further, because an integral part of the value of our common shares is our commitment to utilize the
insurance capacity of AMIC Ltd. for the benefit of our shareholders it is unlikely that any individual or entity other than sole practitioners and accounting firms would be interested in purchasing our common shares.



Reinsurance may not be available to us.



In order to limit the effect of large and multiple losses on
our financial condition, AMIC Ltd. may, in the future, seek reinsurance for its own account. From time to time, market conditions have limited the availability of reinsurance, and in some cases have prevented insurers and reinsurers from obtaining
the types and amounts of reinsurance which they consider adequate for their business needs. If AMIC Ltd. is unable to obtain the desired amounts of reinsurance, or, if it is able to obtain such reinsurance only on terms not sufficiently favorable to
operate profitably, we could be adversely affected.



Difficult conditions in the economy generally may materially adversely affect our business and results of operations, and these conditions may not
improve in the near future.



Current
market conditions and the instability in the global credit markets present additional risks and uncertainties for our business. Depending on market conditions going forward, we could incur substantial additional realized and unrealized losses in
future periods, which could have an adverse impact on our results of operations and financial condition. The recent market volatility may also make it more difficult to value certain of our securities if trading becomes less frequent. As such,
valuations may include assumptions or estimates that may have significant period-to-period changes that could have a material adverse effect on our results of operations or financial condition.



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We may be impacted by claims relating to the recent financial market turmoil.



We reinsure professional liability
insurance for certified public accountants and attorneys. The financial institutions and financial services segment has been particularly impacted by the recent financial market turmoil. As a result, accountants and lawyers that service this
industry may be subject to additional claims. This may give rise to increased litigation, including class action suits, which may involve clients of parties for which we provide reinsurance. To the extent we have claims relating to these events, it
could cause substantial volatility in our financial results and could have a material adverse effect on our financial condition and results of operations.



Actual claims may exceed our reserves for losses and loss expenses.



Our success depends on our ability to accurately assess the
risks associated with the businesses that we reinsure. We establish loss reserves to cover our estimated liability for the payment of all losses and loss expenses incurred with respect to the policies we write. Loss reserves do not represent an
exact calculation of liability. Rather, loss reserves are estimates of what we expect the ultimate resolution and administration of claims will cost. These estimates are based on actuarial and statistical projections and on our assessment of
currently available data, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors. Loss reserve estimates are refined as experience develops and claims are reported and resolved.
Establishing an appropriate level of loss reserves is an inherently uncertain process. It is therefore possible that our reserves at any given time will prove to be inadequate.



We have estimated our net losses based on actuarial analysis
of claims information. Actual losses may vary from those estimated and will be adjusted in the period in which further information becomes available. To the extent we determine that actual losses or loss expenses exceed our expectations and
reserves reflected in our financial statements, we will be required to increase our reserves to reflect our changed expectations. This could cause a material increase in our liabilities and a reduction in our profitability, including operating
losses and a reduction of capital.



Legislative and
regulatory requirements could have a material adverse effect on our business.



We and our subsidiaries are required to comply with a wide variety of laws and regulations applicable to insurance or reinsurance companies. The insurance and regulatory environment, in particular for
offshore insurance and reinsurance companies, has become subject to increased scrutiny in many jurisdictions, including in the United States. In the past, there have been Congressional and other initiatives in the United States regarding increased
supervision and regulation of the insurance industry. It is not possible to predict the future impact of changes in laws and regulations on our operations. The cost of complying with any new legal requirements could have a material adverse effect on
our business.



Our Bermuda insurance subsidiary,
AMIC Ltd., is registered as a Class 3A insurer and is subject to regulation and supervision in Bermuda. The applicable Bermuda statutes and regulations generally are designed to protect insureds and ceding insurance companies rather than
shareholders or noteholders. Among other things, those statutes and regulations require AMIC Ltd. to:



| |  |  | meet and maintain certain standards of liquidity and solvency,
| | - |  | --------------------------------------------------------------



| |  |  | file periodic reports in accordance with the Bermuda Statutory Accounting Rules,
| | - |  | --------------------------------------------------------------------------------



| |  |  | produce annual audited statutory financial statements, and
| | - |  | ----------------------------------------------------------



| |  |  | comply with restrictions on payments of dividends and reductions of capital.
| | - |  | ----------------------------------------------------------------------------



Our Bermuda entities could become subject to regulation or taxation in the United States.



None of our Bermuda entities are licensed or admitted as an
insurer, nor accredited as a reinsurer, in any jurisdiction in the United States. However, we anticipate that in the near future the majority of our revenue will be derived from (i) commissions earned by APSL, our Delaware subsidiary, through
the Agency Agreement with



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C&F and (ii) the Reinsurance Agreement by AMIC Ltd. with C&F which represent a group of companies domiciled primarily in the United States. We conduct our insurance business through
offices in Bermuda and do not maintain an office, nor do our personnel solicit insurance business, resolve claims or conduct other insurance business, in the United States. While we do not believe we are in violation of insurance laws of any
jurisdiction in the United States, we cannot be certain that inquiries or challenges to our insurance and reinsurance activities will not be raised in the future. It is possible that, if we were to become subject to any laws of this type at any time
in the future, we would not be in compliance with the requirements of those laws.



We believe that our non-U.S. companies have operated and will continue to operate their respective businesses in a manner that will not cause them to be subject to U.S. tax (other than
U.S. federal excise tax on insurance and reinsurance premiums and withholding tax on specified investment income from U.S. sources) on the basis that none of them are engaged in a U.S. trade or business. However, there are no
definitive standards under current law as to those activities that constitute a U.S. trade or business and the determination of whether a non-U.S. company is engaged in a U.S. trade or business is inherently factual. Therefore, it is
possible that the U.S. Internal Revenue Service might contend that one or more of our non-U.S. companies is engaged in a U.S. trade or business. If AMIC, Ltd. or any of our other non-U.S. companies is engaged in a U.S. trade
or business and does not qualify for benefits under the applicable income tax treaty, such company may be subject to (i) U.S. federal income taxation at regular corporate rates on its premium income from U.S. sources and investment
income that is effectively connected with its U.S. trade or business, and (ii) a U.S. federal branch profits tax at the rate of 30% on the earnings and profits attributable to such income. All of the premium income from
U.S. sources and a significant portion of such companys investment income may be subject to U.S. federal income and branch profits taxes.



If AMIC Ltd. or any of our other non-U.S. companies is engaged in a U.S. trade or business and qualifies for benefits under the
United States-Bermuda tax treaty, U.S. federal income taxation of such subsidiary will depend on whether (i) it maintains a U.S. permanent establishment and (ii) the relief from taxation under the treaty generally applies to
non-premium income. We believe that AMIC, Ltd. has operated and will continue to operate its business in a manner that will not cause it to maintain a U.S. permanent establishment. However, the determination of whether an insurance company
maintains a U.S. permanent establishment is inherently factual. Therefore, it is possible that the U.S. Internal Revenue Service might successfully assert that any of our Bermuda entities maintains a U.S. permanent establishment. In such
case, such Bermuda entity may be subject to U.S. federal income tax at regular corporate rates and branch profit tax. Furthermore, although the provisions of the treaty clearly apply to premium income, it is uncertain whether they generally
apply to other income of a Bermuda insurance company as well.



We believe U.S. federal income tax, if imposed, would be based on effectively connected or attributable income of a non-U.S. company computed in a manner generally analogous to that applied to
the income of a U.S. corporation, except that all deductions and credits claimed by a non-U.S. company in a taxable year can be disallowed if the company does not file a U.S. federal income tax return for such year. Penalties may be
assessed for failure to file such return. If any of our non-U.S. companies is subject to such U.S. federal taxation, our financial condition and results of operations could be materially adversely affected.



As a shareholder of our company, you may have greater difficulties in
protecting your interests than as a shareholder of a U.S. corporation.



The Companies Act, which applies to us and our Bermuda subsidiaries, differs in material respects from laws generally applicable to U.S. corporations and their shareholders. These differences may
result in your having greater difficulties in protecting your interests as a shareholder of our company than you would have as a shareholder of a U.S. corporation. This affects, among other things, the circumstances under which transactions
involving an interested director are voidable, whether an interested director can be held accountable for any benefit realized in a transaction with the Company, what approvals are required for business combinations by the Company with a large
shareholder or a wholly-owned subsidiary, what rights you may have as a shareholder to enforce specified provisions of the Companies Act or our Bye-laws, and the circumstances under which we may indemnify our directors and officers.



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A downgrade in our A.M. Best rating or that of C&F could impair our ability to sell insurance
policies or those of C&F.



Our new
business plan met A. M. Bests higher capitalization requirements, which mandate a more conservative level of risk based capital. A. M. Best is the most widely recognized insurance company rating agency. In December 2010, A. M. Best affirmed
AmerInsts financial strength rating of A- (Excellent) and issuer credit rating of A-. A. M. Best also affirmed that the outlook assigned to both ratings is stable.



Some policyholders are required to obtain insurance coverage from insurance companies that have an
A- (Excellent) rating or higher from A.M. Best. Additionally, many producers are prohibited from placing insurance or reinsurance with companies that are rated below A- (Excellent) by A.M. Best. A.M. Best assigns
ratings that represent an independent opinion of a companys ability to meet its obligations to policyholders that is of concern primarily to policyholders, brokers and agents, and its rating and outlook should not be considered an investment
recommendation. Because A.M. Best continually monitors companies with regard to their ratings, our ratings could change at any time, and any downgrade of our current rating may impair our ability to sell insurance policies and, ultimately, our
financial condition and operating results.



If
A.M. Best requires us to increase our capital in order to maintain our rating and we are unable to raise the required amount of capital to be contributed to our subsidiaries, A.M. Best may downgrade our rating.



Similarly, if C&Fs A. M. Bests rating should
ever be downgraded, this could adversely affect our ability to solicit, underwrite, quote, bind, issue or endorse accountants professional liability and lawyers professional liability insurance coverage under our Agency Agreement with
C&F or to reinsure under the Reinsurance Agreement a 50% quota share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as accountants professional liability and lawyers
professional liability.



Anti-takeover provisions could make
it more difficult for a third party to acquire us.



Investco, our subsidiary, currently owns approximately 29.7% of our outstanding shares of common stock and has the ability to purchase additional shares. Shares owned by Investco remain outstanding and
can be voted by Investco at our direction, which may hinder or prohibit a change in control transaction not approved by us.



In addition, because our Statement of Share Ownership Policy limits each shareholder other than Investco to owning no more than 20,000
shares of our common stock, and our Bye-laws permit our board of directors to implement provisions requiring board approval of all transfers of common stock, it may be difficult for any individual or entity to obtain voting control of AmerInst.



Finally, our Bye-laws provide for a classified
board of directors which could have the effect of delaying or preventing a change of control or management.



Item 1B. Unresolved Staff Comments



None.



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Item 2. Properties



Lease commitments



APSL leases office space in Lisle, Illinois under a non
cancellable lease agreement. The lease is renewable at the option of the lessee under certain conditions. Minimum lease payments, subsequent to December 31, 2010, are as follows:



|     |  |   |         | 
|---- |  | - | ------- | 
|2011 |  | $ | 54,043  | 
|2012 |  |   | 55,801  | 
|2013 |  |   | 57,646  | 
|2014 |  |   | 59,568  | 
|2015 |  |   | 15,013  | 
|     |  |   |         | 
|     |  | $ | 242,071 | 
|     |  |   |         | 



Item 3. Legal
Proceedings.



The Company is not a party to
any material legal proceedings.



Item 4. (Removed and Reserved)



PART II



|Item 5. | Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



AmerInst currently does not have a public market for its
common stock, but the Company has historically caused Investco to purchase shares from the Companys shareholders upon their death, disability or retirement from the practice of public accounting. The repurchase price has been equal to the
year-end net book value per share for the most recently completed fiscal year reduced by the amount of any dividends already paid on the repurchased shares during the calendar year of the repurchase and any dividends the shareholder would be
entitled to receive on the repurchased shares that have not been paid. In addition, the BMA has authorized Investco to purchase shares on a negotiated case-by-case basis, and Investco has typically negotiated share repurchases when requested by
Company shareholders.



On February 25, 2011,
the Board of Directors amended and restated AmerInsts Statement of Share Ownership Policy to better manage the Companys expenditures from year to year. Under the new policy that became effective immediately, the Company will limit
Investcos repurchase of Company stock to $500,000 per calendar year. In addition, Investco will only be authorized to repurchase shares, without Board approval, from shareholders upon their death, disability or retirement from the
practice of public accounting. Except as approved by the Board, negotiated purchases that do not satisfy these criteria will be discontinued for the foreseeable future. At the Board meeting, the Board approved all outstanding requests for
repurchase of shares amounting to $300,359, and for the remainder of 2011, Investco will still be authorized to repurchase shares up to $500,000.



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The Bermuda Monetary Authority has authorized Investco to purchase the Companys common
shares from shareholders who have died or retired from the practice of public accounting and also on a negotiated basis. Through December 31, 2010, Investco had purchased 123,913 common shares from shareholders who had died or retired for a total
purchase price of $3,214,353. The following table shows information relating to the purchase of shares from shareholders who have died or retired from the practice of accounting as described above during the three month period ended
December 31, 2010.



|              |  |                                |        |  |                            |   |       |                                                                            |  |  |                                                                           |  |  |  |     | 
|------------- |  | ------------------------------ | ------ |  | -------------------------- | - | ----- | -------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------- |  |  |  | --- | 
|              |  | Total Numberof SharesPurchased |        |  | AveragePrice PaidPer Share |   |       | Total Numberof SharesPurchased
asPart of PubliclyAnnouncedPlans or Program |  |  | MaximumNumberof SharesThat May Yet BePurchased Underthe 
Plans or Program | 
|October 2010  |  |                                | 2,577  |  |                            | $ | 39.99 |                                                                            |  |  | 2,577                                                                     |  |  |  | N/A | 
|November 2010 |  |                                |       |  |                            |   |      |                                                                            |  |  |                                                                          |  |  |  | N/A | 
|December 2010 |  |                                | 13,754 |  |                            | $ | 39.52 |                                                                            |  |  | 13,754                                                                    |  |  |  | N/A | 
|Total         |  |                                | 16,331 |  |                            | $ | 39.59 |                                                                            |  |  | 16,331                                                                    |  |  |  | N/A | 



From time to time, Investco has also purchased common shares in privately negotiated transactions. Through that date, Investco had
purchased an additional 75,040 common shares in such privately negotiated transactions for a total purchase price of $1,108,228. The following table shows information relating to the purchase of shares from these shareholders during the three month
period ended December 31, 2010.



|              |  |                                |       |  |                            |   |       |                                                                            |  |  |                                                                           |  |  |  |     | 
|------------- |  | ------------------------------ | ----- |  | -------------------------- | - | ----- | -------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------- |  |  |  | --- | 
|              |  | Total Numberof SharesPurchased |       |  | AveragePrice PaidPer Share |   |       | Total Numberof SharesPurchased
asPart of PubliclyAnnouncedPlans or Program |  |  | MaximumNumberof SharesThat May Yet BePurchased Underthe 
Plans or Program | 
|October 2010  |  |                                |      |  |                            |   |      |                                                                            |  |  |                                                                          |  |  |  | N/A | 
|November 2010 |  |                                | 2,400 |  |                            | $ | 28.00 |                                                                            |  |  | 2,400                                                                     |  |  |  | N/A | 
|December 2010 |  |                                | 5,566 |  |                            | $ | 27.50 |                                                                            |  |  | 5,566                                                                     |  |  |  | N/A | 
|Total         |  |                                | 7,966 |  |                            | $ | 27.65 |                                                                            |  |  | 7,966                                                                     |  |  |  | N/A | 



As of December 31, 2010, there were 1,853 holders of record of our common shares. Our Board of Directors had adopted a dividend policy to
pay quarterly dividends subject to legally available funds and Board approval. Beginning in September 2005, our Board of Directors amended the dividend policy to pay semi-annual dividends of $0.47 per share with payments in March and September.
During 2010, the dividend amount paid was reduced by $38,611, which represented a write back of uncashed dividends issued 2004 and prior to shareholders that we have been unable to locate. During 2009, the dividend amount paid was reduced by
$33,862, which represented a write back of uncashed dividends issued prior to 2003 to shareholders that we were unable to locate. During 2010 and 2009, we paid ordinary cash dividends of $647,913 and $662,249, respectively, net of the write back,
representing two semi-annual payments of $0.47 per share. The declaration of dividends by our Board of Directors is dependent upon our capacity to insure or reinsure business, profitability, financial condition, and other factors which the Board of
Directors may deem appropriate. Under Bermuda law, AMIC Ltd. is prohibited from declaring or paying any dividend to AmerInst if such payment would reduce the net realizable value of its assets to an amount less than the aggregate value of its
liabilities, issued share capital and share premium accounts. In addition, AMIC Ltd. must be able to pay its liabilities as they fall due after the payment of a dividend.



Item 6. Selected Financial Data



Not applicable.



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Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations



Managements
discussion and analysis (MD&A) provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operation and should be read in conjunction with our consolidated
financial statements and notes thereto included in this Form 10-K. The MD&A is divided into subsections entitled Business Overview, Critical Accounting Policies, Results of Operations, Liquidity and
Capital Resources and Losses and Loss Adjustment Expenses.



Certain statements contained in this Form 10-K, including this MD&A section, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and
contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words anticipate, expect, believe and
similar expressions as they relate to us or our management are intended to identify forward-looking statements.



All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially
from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A Risk Factors of this Form 10-K for a discussion of factors that could cause our actual results to differ materially from those in
the forward-looking statements. However, the risk factors listed in Item 1A Risk Factors or discussed in this Form 10-K should not be construed as exhaustive and should be read in conjunction with other cautionary statements that
are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our managements analysis only as of the date they are made. We undertake no obligation to release publicly the results of
any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



The following discussion addresses our financial condition
and results of operations for the periods and as of the dates indicated.



Business Overview



We are an insurance holding company based in Bermuda owned primarily by accounting firms, persons associated with accounting firms, and individual CPA practitioners. We were formed in response to
concerns about the pricing and availability of accountants professional liability insurance in a difficult or hard market. Our mission is to be a company that provides insurance protection for professional service firms and engages
in investment activities. Through APSL, a Delaware corporation and a wholly-owned subsidiary of Mezco which is a wholly-owned subsidiary of AmerInst, we act as the exclusive agent for C&F for the purposes of soliciting, underwriting, quoting,
binding, issuing, cancelling, non-renewing and endorsing accountants professional liability and lawyers professional liability insurance coverage within the 50 states of the United States and the District of Columbia. We conduct our
reinsurance business through AMIC Ltd., our wholly-owned subsidiary, which is a registered insurer in Bermuda. We are prepared, subject to obtaining the required licenses and registrations, to act as a direct issuer of accountants professional
liability insurance policies. Our investment portfolio is held in and managed by Investco, which is a subsidiary of AMIC Ltd.



AmerInst has two operating segments: 1) reinsurance activity, which includes investments and other activities, and 2) insurance activity,
which offers professional liability solutions to professional service firms under the Agency Agreement with C&F. See Note 12, Segment Information, of the notes to the consolidated financial statements contained in Item 12 of this annual
report on Form 10-K for financial information concerning these segments.



The reinsurance segment had revenues of $2,918,696 for the year ended December 31, 2010 and $6,439,547 for the year ended December 31, 2009. Total losses and expenses for this segment were
$1,452,800 for the year ended December 31, 2010 and $(83,078) for the year ended December 31, 2009. This resulted in segment income of $1,465,896 of $6,522,625 for the years ended December 31, 2010 and 2009, respectively.



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The insurance segment had revenues of $85,249 for the year ended December 31, 2010 and
generated no revenues for the year ended December 31, 2009. Operating and management expenses were $2,652,938 for the year ended December 31, 2010 and $771,088 for the year ended December 31, 2009. This resulted in segment losses of
$2,567,689 and $771,088 for the years ended December 31, 2010 and 2009, respectively.



AmerInst has filed an application for a U.S. patent on a unique financing concept called RINITS that it has developed to securitize insurance and reinsurance risk, involving property, casualty, life
and health. Such securitization would be by equity and debt financing of Bermuda special purpose companies licensed as reinsurers. It is AmerInsts intention to grant patent licenses to the special purpose companies and investment banking
organizations which will market the securities. In addition to the license royalties, AmerInst would manage the special purpose companies for a fee, and at its option could invest in them as well. However, AmerInst may not be issued a patent, and
even if so, may not be able to license such patent.



AmerInst has entered into confidentiality agreements with several investment banking organizations.



In addition to the patent application, AmerInst has obtained
a trademark under which the concept will be marketed.



The disclosure of RINITS as a separate operating segment was discontinued in the fourth quarter of 2010 as it no longer met the quantitative thresholds prescribed by ASC 280, Segment
Reporting.



Our results of operations for
the years ended December 31, 2010 and December 31, 2009 are discussed below.



We operate our business with no long-term debt, no capital lease obligations, no purchase obligations, and no off-balance sheet arrangements required to be disclosed under applicable rules of the SEC.
AmerInsts access to operating cash flows is from the payment of dividends from its subsidiaries.



Critical Accounting Policies



Basis of Presentation



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The major
estimates reflected in the Companys financial statements include but are not limited to the liability for loss and loss adjustment expenses and other than temporary impairment of investments.



Unpaid Losses and Loss Adjustment Expense Reserves



The amount that we record as our liability
for loss and loss adjustment expenses is a major determinant of net income each year. As discussed in more detail below under the heading Losses and Loss Adjustment Expenses, the amount that we have reserved is based on actuarial
estimates which were prepared as of December 31, 2010. Based on data received from the ceding companies (the insurance companies whose policies we reinsure) our independent actuary produces a range of estimates with a low,
central and high estimate of the loss and loss adjustment expenses. As of December 31, 2010, the range of actuarially determined liability for loss and loss adjustment expense reserves was as follows: the low estimate
was $1.0 million, the high estimate was $1.3 million, and the central estimate was $1.1 million. We selected reserves of $1,203,016 as of December 31, 2010, which is between the central and high end of the range. Due to our concerns about the
severity and volatility of the type of business we reinsure and the length of time that it takes for claims to be reported and ultimately settled, our managements policy has been to reserve conservatively at the higher end of the actuarial
estimates.



18



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##### Table of Contents

Other than Temporary Impairment of Investments



Declines in the fair value of investments below cost are
evaluated for other than temporary impairment losses. The evaluation for other than temporary impairment losses is a quantitative and qualitative process which is subject to risks and uncertainties in the determination of whether declines in the
fair value of investments are other than temporary. The risks and uncertainties include the Companys intent and ability to hold the security, changes in general economic conditions, the issuers financial condition or near term recovery
prospects, and the effects of changes in interest rates. AmerInsts accounting policy requires that a decline in the value of a security below its cost basis be assessed to determine if the decline is other than temporary. If so, the security
is deemed to be impaired and a charge is recorded in net realized losses equal to the difference between the fair value and the cost basis of the security. The fair value of the impaired investment becomes its new cost basis.



Results of Operations



We recorded a net loss of $1,101,793 in 2010, compared to
net income of $5,751,537 in 2009.



The net loss
recorded for the year ended December 31, 2010 was attributable to the following; (1) the increased expenses incurred by APSL which commenced operations in late 2009 following the execution of its Agency Agreement with C&F effective
September 25, 2009; (2) the reduction in net premiums earned from $3,235,446 in 2009 to $157,140 following the commutation and termination of the CNA relationship and non-renewal of the CAMICO policies in 2009 and (3) the reduced net
investment income from $766,512 in 2009 to $405,210 in 2010 due to the reduction in the investment portfolio following the liquidation of fixed maturity investments in May 2009 to settle the payment of $20.55 million due to CNA as a result of the
Commutation Agreement entered into between the Company and CNA in 2009. The net income recorded for the year ended December 31, 2009 was mainly attributable to the reduction of approximately $5,400,000 in loss and loss adjustment expenses in
recognition of the positive development recorded as a result of updating the estimated liability for unpaid losses and loss adjustment expenses on the finalization of the Commutation Agreement with CNA.



Our net premiums earned were $157,140 for the year ended
December 31, 2010 compared to $3,235,446 for the year ended December 31, 2009, a decrease of $3,078,306 or 95.1%. The decrease is due to i) the Commutation Agreement entered into with CNA in 2009 and ii) the non-renewal of the CAMICO
contract effective June 1, 2009. The net premiums earned for the year ended December 31, 2010 were attributable to premiums written under the Reinsurance Agreement and to revisions to CAMCO premium estimates for prior years.



For the years ended December 31, 2010 and
December 31, 2009, we recorded commission income of $85,051 and $0, respectively, under the Agency Agreement.



We recorded realized gains, net of impairment, of $2,356,544 for the year ended December 31, 2010 compared to $2,437,589 for
the year ended December 31, 2009. The decrease in realized gains recorded in 2010 is due to the reduced sales of fixed maturity securities and equity securities in an unrealized gain position during the year ended December 31, 2010. Net
investment income earned for the year ended December 31, 2010 was $405,210 compared to $766,512 for the year ended December 31, 2009. The decline in net investment income is due to the reduction in the investment portfolio following the
liquidation of certain fixed maturity investments in May 2009 to settle the payment of $20.55 million due to CNA as a result of the Commutation Agreement entered into between the Company and CNA in 2009. Additionally, in 2010 we disposed of certain
fixed maturity and equity investments to fund the operations of APSL, further reducing the total investment portfolio and the net investment income earned. Annualized investment yield, calculated as total interest and dividend income divided by the
net average amount of total investments, was 1.4% in 2010 and 2.0% in 2009.



Unrealized gain on investments was $6,477,553 at December 31, 2010 compared to $6,611,053 at December 31, 2009. We consider our entire investment portfolio to be available for sale and
accordingly all investments are reported at fair value, with changes in net unrealized gains and losses reflected as an adjustment



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to accumulated other comprehensive income. The decrease in unrealized gain on investments was due primarily to the reduction in the value of the Companys equity portfolio. Declines in the
fair value of investments below cost are evaluated for other than temporary impairment losses. The evaluation for other than temporary impairment losses is a quantitative and qualitative process which is subject to risks and uncertainties in the
determination of whether declines in the fair value of investments are other than temporary. The risks and uncertainties include changes in general economic conditions, the issuers financial condition or near term recovery prospects, and the
effects of changes in interest rates. Our accounting policy requires that a decline in the fair value of a security below its cost basis be assessed to determine if the decline is other than temporary. If so, the security is deemed to be impaired,
and a charge is recorded in net realized losses equal to the difference between the fair value and the cost basis of the security. The fair value of the impaired investment becomes its new cost basis.



The composition of the investment portfolio at
December 31, 2010 and 2009 is as follows:



|                                                |  |      |     |   |      |  |     |  
|----------------------------------------------- |  | ---- | --- | - | ---- |  | --- | -
|                                                |  | 2010 |     |   | 2009 | 
|U.S. government agency securities               |  |      | 7   | % |      |  | 12  | %
|Obligations of state and political subdivisions |  |      | 32  |   |      |  | 23  |  
|Corporate debt securities                       |  |      | 2   |   |      |  | 2   |  
|Equity securities (including the hedge fund)    |  |      | 59  |   |      |  | 63  |  
|                                                |  |      |     |   |      |  |     |  
|                                                |  |      | 100 | % |      |  | 100 | %
|                                                |  |      |     |   |      |  |     |  



We recorded loss and loss
adjustment expenses of $26,869 for the year ended December 31, 2010, compared to loss and loss adjustment recoveries of $2,924,184 in 2009. The 2010 recorded expenses resulted from reserves of $32,000 established pursuant to the Reinsurance
Agreement offset by favorable development on CAMICO and PDIC. The 2009 recorded recoveries resulted from (1) the reduction in loss reserves related to the CNA treaty following the determination of the ultimate settlement amount after the
finalization of the Commutation Agreement, and (2) the recognition of the payment of $500,891 received from VSC in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between AMIC Ltd. and VSC for the
years 1989-1993. Our loss ratio, calculated as the ratio of losses and loss adjustment expenses to net premium earned was 17.1% in 2010 and (90.4%) in 2009.



We will continue to monitor our reserve for losses and loss
expenses for any new claims information and adjust our reserve for losses and loss expenses accordingly.



We recorded policy acquisition recoveries of $12,209 for the year ended December 31, 2010 compared to acquisition costs of $868,155
for year ended December 31, 2009. The policy acquisition recoveries recorded for the year ended December 31, 2010 were attributable to the revisions to the CAMICO premium estimates for prior years, net of policy acquisition costs recorded
at 37% of premium earned under the Reinsurance Agreement. For the year ended December 31, 2009, policy acquisition costs were 26.8% of net premiums earned. Policy acquisition costs are the sum of ceding commissions paid to ceding companies
determined contractually pursuant to reinsurance agreements and federal excise taxes paid on premiums written.



We expensed operating and management expenses of $4,091,078 for the year ended December 31, 2010 compared to $2,744,039 for the year
ended December 31, 2009, an increase of $1,347,039 or 49.1%. The primary reason for this increase is the increased expenses incurred by APSL, which commenced operations in late 2009 following the execution of its Agency Agreement with C&F
effective September 25, 2009.



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##### Table of Contents

Fair Value of Investments



The following tables show the fair value of the
Companys investments in accordance with ASC 820, Fair Value Measurements and Disclosures as of December 31, 2010 and 2009.



|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|----------------------------------------------- | --------------- | -------------- | ---------- | ---------------- | --------------- | - | ----------------------------------------------------------- | ---------------------------------------------------------- |  | -------------------------------------------- | ------------------------------------------- |  | --------------------------------------- | --------------------------------------- | ---------- |  |  | - | --------- | 
|                                                |                 |                |            |                  |                 |   |                                                             | Fair value measurement using:                              | 
|                                                |                 | Carryingamount |            |                  | Total fairvalue |   |                                                             | Quoted pricesin activemarkets foridentical assets(Level 1) |  |                                              | Significant otherobservable inputs(Level 2) |  |                                         | Significantunobservable inputs(Level 3) |           
|December 31, 2010                               |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|U.S. government agency securities               |                 | $              | 1,959,588  |                  |                 | $ | 1,959,588                                                   |                                                            |  | $                                            |                                            |  |                                         | $                                       | 1,959,588  |  |  | $ |          | 
|Obligations of state and political subdivisions |                 |                | 8,465,737  |                  |                 |   | 8,465,737                                                   |                                                            |  |                                              |                                             |  |                                         |                                         | 8,465,737  |  |  |   |           | 
|Corporate debt securities                       |                 |                | 504,156    |                  |                 |   | 504,156                                                     |                                                            |  |                                              |                                             |  |                                         |                                         | 504,156    |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total fixed maturity investments                |                 |                | 10,929,481 |                  |                 |   | 10,929,481                                                  |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Equity securities (excluding the hedge fund)    |                 |                | 14,145,124 |                  |                 |   | 14,145,124                                                  |                                                            |  |                                              | 14,145,124                                  |  |                                         |                                         |            |  |  |   |           | 
|Hedge fund                                      |                 |                | 1,484,884  |                  |                 |   | 1,484,884                                                   |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   | 1,484,884 | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total equity securities                         |                 |                | 15,630,008 |                  |                 |   | 15,630,008                                                  |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total investments                               |                 | $              | 26,559,489 |                  |                 | $ | 26,559,489                                                  |                                                            |  | $                                            | 14,145,124                                  |  |                                         | $                                       | 10,929,481 |  |  | $ | 1,484,884 | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|                                                |                 |                |           
|                                                |                 |                |            |                  |                 |   |                                                             | Fair value measurement using:                              | 
|                                                | Carrying amount |                |            | Total fair value |                 |   | Quoted pricesin activemarkets foridentical assets (Level 1) |                                                            |  | Significant otherobservable inputs (Level 2) |                                             |  | Significantunobservable inputs(Level 3) |                                        
|December 31, 2009                               |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|U.S. government agency securities               |                 | $              | 3,033,905  |                  |                 | $ | 3,033,905                                                   |                                                            |  | $                                            |                                            |  |                                         | $                                       | 3,033,905  |  |  | $ |          | 
|Obligations of state and political subdivisions |                 |                | 5,986,075  |                  |                 |   | 5,986,075                                                   |                                                            |  |                                              |                                             |  |                                         |                                         | 5,986,075  |  |  |   |           | 
|Corporate debt securities                       |                 |                | 528,461    |                  |                 |   | 528,461                                                     |                                                            |  |                                              |                                             |  |                                         |                                         | 528,461    |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total fixed maturity investments                |                 |                | 9,548,441  |                  |                 |   | 9,548,441                                                   |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Equity securities (excluding the hedge fund)    |                 |                | 16,210,811 |                  |                 |   | 16,210,811                                                  |                                                            |  |                                              | 16,210,811                                  |  |                                         |                                         |            |  |  |   |           | 
|Hedge fund                                      |                 |                | 1,389,737  |                  |                 |   | 1,389,737                                                   |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   | 1,389,737 | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total equity securities                         |                 |                | 17,600,548 |                  |                 |   | 17,600,548                                                  |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 
|Total investments                               |                 | $              | 27,148,989 |                  |                 | $ | 27,148,989                                                  |                                                            |  | $                                            | 16,210,811                                  |  |                                         | $                                       | 9,548,441  |  |  | $ | 1,389,737 | 
|                                                |                 |                |            |                  |                 |   |                                                             |                                                            |  |                                              |                                             |  |                                         |                                         |            |  |  |   |           | 



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The following is a reconciliation of the beginning and ending balance of investments using
significant unobservable inputs (Level 3) for the year ended December 31, 2010 and 2009.



|                                                 |  |      |           |  |      |   |           | 
|------------------------------------------------ |  | ---- | --------- |  | ---- | - | --------- | 
|                                                 |  | 2010 |           |  | 2009 |  
|Balance classified as Level 3, beginning of year |  | $    | 1,389,737 |  |      | $ | 1,152,548 | 
|Total gains or losses included in earnings:      |  |      |          |  |      |   |          | 
|Net realized gains                               |  |      |          |  |      |   |          | 
|Change in fair value of hedge fund investments   |  |      | 95,147    |  |      |   | 237,189   | 
|Purchases or sales                               |  |      |          |  |      |   |          | 
|Transfers in and/or out of Level 3               |  |      |          |  |      |   |          | 
|                                                 |  |      |           |  |      |   |           | 
|Ending balance                                   |  | $    | 1,484,884 |  |      | $ | 1,389,737 | 
|                                                 |  |      |           |  |      |   |           | 



Upon the adoption of ASC 320,
InvestmentsDebt and Equity Securities effective April 1, 2009, the Company changed its process for assessing whether declines in the fair value of its fixed maturity investments represented impairments that are other-than-temporary. The
process now includes reviewing each fixed maturity investment that is impaired and determining: (1) if the Company has the intent to sell the fixed maturity investment or (2) if it is more likely than not that the Company will be required
to sell the fixed maturity investment before its anticipated recovery; and (3) assessing whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the fixed maturity
investment are less than the amortized cost basis of the investment.



The Company had no planned sales of its fixed maturity investments classified as available-for-sale as of December 31, 2010. In assessing whether it is more likely than not that the Company will be
required to sell a fixed maturity investment before its anticipated recovery, the Company considers various factors including its future cash flow requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term
investments and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the year ended December 31, 2010, the Company did not recognize any other-than-temporary impairments due to required
sales.



In evaluating credit losses, the Company
considers a variety of factors in the assessment of a fixed maturity investment including: (1) the time period during which there has been a significant decline below cost; (2) the extent of the decline below cost and par; (3) the
potential for the fixed maturity investment to recover in value; (4) an analysis of the financial condition of the issuer; (5) the rating of the issuer; and (6) failure of the issuer of the fixed maturity investment to make scheduled
interest or principal payments.



If we conclude a
security is other-than-temporarily impaired, we write down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the
investment portfolio as of December 31, 2010 amounted to $84,406 compared to $42,142 as of December 31, 2009. This increased loss was mainly attributable to fixed income securities which we determined were not other than temporarily
impaired. The Company has the intent and ability to hold these securities either to maturity or until the fair value recovers above the adjusted cost. The unrealized losses on these securities were not as a result of credit, collateral or structural
issues. As a result of the decline in fair value below cost, the Company recorded a total other-than-temporary impairment charge of $123,310 and $847,889 on two and twenty-eight equity securities during the years ended December 31, 2010 and
2009, respectively.



Our fixed income, equity and
hedge fund portfolios are invested in accordance with a written Investment Policy Statement adopted by our Board of Directors. We engage professional advisors to manage day to day investment matters under the oversight of our Investment Committee.



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Our fixed income portfolio is managed with the target objectives of achieving an annualized
rate of return for the trailing 5-year period of 250 basis points over the Consumer Price Index, and total returns commensurate with Merrill Lynchs U.S. Domestic Index. Our overall fixed income portfolio is required to have at least an
A S&P rating, an A2 Moodys rating or an equivalent rating from comparable rating agencies.



Our equity portfolios are managed with the target objectives of achieving an annualized rate of return over a trailing 3-year to 5-year
period of 400 basis points over the Consumer Price Index, total returns at least equal to representative benchmarks such as the various S&P indices, and a ranking in the top half of the universe of other actively managed equity funds with
similar objectives and risk profiles.



Our hedge
fund portfolio is managed to reduce overall portfolio risk. It is required to invest over all major strategies and is limited to 10% of the total equity portfolio.



Under existing accounting principles generally accepted in
the United States, we are required to recognize certain assets at their fair value in our consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures
Topic of the FASB ASC, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair Value Measurements and Disclosures
Topic of the ASC, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the
market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the hierarchy based on the input that is
significant to determining such measurement. The three levels are defined as follows:



| |  |  | Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active
markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in
active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets in markets that are not active and inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.
| | - |  | ----------------------------------------------------------------------------------------------



At each measurement date, we estimate the fair value of the
financial instruments using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or
observable market inputs are not available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of
investments held as of December 31, 2010 and what level within the fair value hierarchy the valuation technique resides.



| |  |  | U.S. government agency securities: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S.
Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker
quotes are not used for fair value pricing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Obligations of state and political subdivisions: Comprised of fixed income obligations of state and local governmental municipalities. The fair
values of these securities are based on quotes and current market spread relationships, and are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not
used for fair value pricing.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Corporate debt securities: Comprised of bonds issued by corporations. The fair values of these securities are based on quotes and current market
spread relationships, and are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not used for fair value pricing.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity securities, at fair value: Comprised primarily of investments in the common stock of publicly traded companies. All of the Companys
equities are included in the Level 1 fair value hierarchy. The Company receives prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hedge fund: Comprised of a hedge fund whose objective is to seek attractive long-term returns with lower volatility by investing in a range of
diversified investment strategies. The fund invests in a diversified pool of hedge fund managers, generally across six different strategies: long/short equities, long/short credit, macro, multi-strategy opportunistic, activist, and portfolio hedge.
The fair value of the hedge fund is based on the net asset value of the fund as reported by the fund manager. The fair value of our hedge fund is included in the Level 3 fair value hierarchy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To validate prices, we complete quantitative analyses to
compare the performance of the overall investment portfolio to the performance of an appropriate benchmark, with significant differences identified and investigated.



There have been no material changes to any of our valuation
techniques from what was used as of December 31, 2009. Since the fair value of a financial instrument is an estimate of what a willing buyer would pay for our asset if we sold it, we will not know the ultimate value of our financial instruments
until they are sold. We believe the valuation techniques utilized provide us with the best estimate of the price that would be received to sell our assets or transfer our liabilities in an orderly transaction between participants at the measurement
date.



Though current market conditions appear to
have improved recently, there is still the potential for further instability. This could present additional risks and uncertainties for our business and make it more difficult to value certain of our securities if trading becomes less frequent. As
such, valuations may include assumptions and estimates that may have significant period-to-period changes that could have a material adverse effect on our results of operations or financial condition.



As of December 31, 2010, our total investments were
$26,559,489, a decrease of $589,500, or 2.17%, from $27,148,989 at December 31, 2009. The cash and cash equivalents balance decreased from $3,472,529 at December 31, 2009 to $970,697 at December 31, 2010, a decrease of $2,501,832, or
72.1%. The amount of cash and cash equivalents varies depending on the maturities of fixed term investments and on the level of funds invested in money market mutual funds. The restricted cash and cash equivalents balance decreased from $734,020 at
December 31, 2009 to $84,256 at December 31, 2010, a decrease of $649,764 or 88.5%. The ratio of cash and total investments to total liabilities at December 31, 2010 was 11.04:1, compared to a ratio of 13.14:1 at December 31,
2009.



The decrease in the ratio at
December 31, 2010, as well as the decrease in cash and total investments at December 31, 2010, compared to December 31, 2009 results primarily from i) net cash outflows relating to APSL, which is still in the development stage, ii)
dividends of $647,913 paid during 2010 and iii) $1,440,558 incurred in share repurchases during 2010, partially offset by positive cash inflows from investment operations.



Liquidity and Capital Resources



Our cash needs consist of settlement of losses and expenses
under our reinsurance treaties and funding day-to-day operations. During the implementation of our business plan, our management expects to meet these cash needs from cash flows arising from our investment portfolio. Because substantially all of our
assets are marketable securities, we expect that we will have sufficient flexibility to provide for unbudgeted cash needs which may arise without resorting to borrowing, subject to regulatory limitations.



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Assumed reinsurance premiums receivable represent current assumed premiums receivable less
commissions payable to the fronting carriers. This balance was $45,909 at December 31, 2010 and $0 at December 31, 2009. The December 31, 2010 balance is attributable to net premiums due under the Reinsurance Agreement.



Assumed reinsurance payable represents current reinsurance
losses payable to the fronting carriers. This balance was $76,918 at December 31, 2010 and $148,850 at December 31, 2009.



The funds deposited with a reinsurer at December 31, 2009 represented cash placed with the ceding company as collateral for
obligations assumed under the attorneys liability program written in 2003. The funds were released by the ceding company in 2010.



Deferred policy acquisition costs, which represent the deferral of ceding commission expense related to premiums not yet earned, increased
from $0 at December 31, 2009 to $35,060 at December 31, 2010. The deferred policy acquisition costs at December 31, 2010 were attributable to the Reinsurance Agreement.



Prepaid expenses and other assets were $170,606 at December 31, 2010, a decrease of 20.7% from
December 31, 2009. These expenses primarily relate to prepaid directors and officers liability insurance costs and directors retainer.



AmerInst paid two semi-annual dividends of $0.47 per share during 2010 and 2009. During 2010, the dividend amount was reduced by $38,611,
which represents a write back of uncashed dividends issued in 2004 and prior to shareholders that we have been unable to locate. During 2009, the dividend amount was reduced by $33,862, which represents a write back of uncashed dividends issued
prior to 2003 to shareholders that we were unable to locate. Since AmerInst began paying consecutive dividends in 1995, our original shareholders have received approximately $17.93 in cumulative dividends per share, which when measured by a total
rate of return calculation has resulted in an effective annual rate of return of approximately 10.38% from the inception of the Company, based on a per share purchase price of $8.33 paid by the original shareholders, and using a book value of $37.46
per share as of December 31, 2010.



Total
dividends declared were $647,913 and $662,249 in 2010 and 2009, respectively, net of the recorded write backs. Continuation of dividend payments is subject to the Board of Directors continuing evaluation of our level of surplus compared to our
capacity to accept more business. One of our objectives is to retain sufficient surplus to enable the successful implementation of our new business plan.



AMIC Ltd.s ability to pay dividends to AmerInst is subject to the provisions of the Bermuda insurance and companies laws and the
requirement to provide the ceding companies with collateral. Under the Companies Act, AMIC Ltd. would be prohibited from declaring or paying a dividend at December 31, 2010 if such payment would reduce the realizable value of its assets to an amount
less than the aggregate value of its liabilities, issued share capital, and share premium accounts. As of December 31, 2010, approximately $31 million was available for the declaration of dividends to shareholders. However, due to the requirement to
provide the ceding companies with collateral, approximately $21 million was available for the payment of dividends to the shareholders. In addition, AMIC Ltd. must be able to pay its liabilities as they fall due after the payment of a dividend. Our
ability to pay dividends to common shareholders and to pay our operating expenses is dependent on cash dividends from our subsidiaries. The payment of such dividends by AMIC Ltd., including its subsidiary Investco, to us is also limited under
Bermuda law by the Insurance Act and Related Regulations which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended December 31, 2010 and 2009 these requirements have been met as follows:



|                  |  |                            |           |  |                 |   |            |         |  |   |           |  |  |   |            | 
|----------------- |  | -------------------------- | --------- |  | --------------- | - | ---------- | ------- |  | - | --------- |  |  | - | ---------- | 
|                  |  | StatutoryCapital & Surplus |           |  | Relevant Assets |  
|                  |  | Minimum                    |           |  | Actual          |   |            | Minimum |  |   | Actual    | 
|December 31, 2010 |  | $                          | 1,000,000 |  |                 | $ | 32,209,291 |         |  | $ | 9,231,848 |  |  | $ | 10,869,403 | 
|December 31, 2009 |  | $                          | 1,000,000 |  |                 | $ | 31,177,595 |         |  | $ | 9,445,328 |  |  | $ | 9,445,328  | 



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The Bermuda Monetary Authority has authorized Investco to purchase the Companys common
shares from shareholders who have died or retired from the practice of public accounting and on a negotiated basis. Through March 1, 2011, Investco had purchased 123,913 common shares from shareholders who had died or retired for a total
purchase price of $3,214,353. From time to time, Investco has also purchased shares in privately negotiated transactions. Through that date, Investco had purchased an additional 75,040 common shares in such privately negotiated transactions for a
total purchase price of $1,108,228.



Losses and Loss Adjustment
Expenses



The consolidated financial
statements include our estimated liability for unpaid losses and loss adjustment expenses (LAE) for our insurance operations. LAE is determined utilizing both case-basis evaluations and actuarial projections, which together represent an
estimate of the ultimate net cost of all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effect of trends in future claim severity and frequency. The estimates are continually reviewed and, as
experience develops and new information becomes known, the liability is adjusted as appropriate, and reflected in current financial reports. The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE.
Future average severity is projected based on historical trends adjusted for anticipated changes in underwriting standards, policy provisions and general economic trends. These anticipated trends are monitored based on actual developments and are
modified as necessary.



An actuarial review and
projection was performed for us by our independent actuary as of December 31, 2010. We review the actuarial estimates throughout the year for the possible impact on our financial position. As noted in our discussion of our results of operations
for the year ended December 31, 2009, we recorded a reduction of approximately $5,400,000 in recognition of positive development realized as a result of updating the estimated liability for unpaid loss and loss adjustment expenses on the
finalization of the Commutation Agreement with CNA, and the recovery from VSC.



As a result of the commutation, the Company does not carry any loss reserves relating to the CNA program. Loss reserves relate only to the attorneys professional liability coverage
(PDIC), CAMICO Mutual Insurance Company (CAMICO) and Crum & Forster (C&F) programs and were calculated under the methodologies described below.



PDIC was a new program for the Company in 2003. The relationship with the carrier of that insurance ended on
December 31, 2003. Therefore, policies written during 2003 are the only ones we have reinsured. To calculate the policy year ultimate losses and allocated loss adjustment expenses for PDIC the actuary applied incurred loss development, incurred
Bornhuetter-Ferguson (BF), and expected loss methods to the actual PDIC experience. In the calculations, the actuary used industry incurred loss and allocated loss adjustment expenses development patterns and an a prioriloss and
allocated loss adjustment expenses ratio for use in the BF and expected loss and allocated loss adjustment expenses method calculations. The a prioriloss and allocated loss adjustment expenses ratio was selected judgmentally based on the
Companys unpaid claim liability review as of December 31, 2009. The actuary judgmentally selected low and high scenario loss ratio estimates around the central loss ratio estimates. The low and high scenario ultimate loss and allocated
loss adjustment expenses estimates were calculated by multiplying net earned premium through December 31, 2010 by the low and high scenario loss ratio selections.



CAMICO was a new program for the Company in 2005. To
calculate the policy year ultimate losses and allocated loss adjustment expenses for CAMICO the actuary applied paid and incurred loss development, paid and incurred BF, and expected loss and allocated loss adjustment expenses ratio methods to the
actual CAMICO experience as of December 31, 2010. In the calculations, the actuary used industry benchmark paid and incurred loss and allocated loss adjustment expenses development patterns. The a prioriloss and allocated loss
adjustment expenses ratios used in the BF and expected loss and allocated loss adjustment expenses method calculations



26



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were selected judgmentally based on the Companys unpaid claim liability review of CAMICO experience as of December 31, 2009. Low and high scenario ultimate loss and allocated loss
adjustment expense estimates were calculated by applying faster and slower loss development patterns in the actuarial method calculations.



C&F was a new program for the Company in 2010. To calculate the policy year ultimate losses and allocated loss adjustment expenses for
C&F, the actuary applied incurred loss development, incurred BF, and expected loss and allocated loss adjustment expense ratio methods to the actual C&F experience as of December 31, 2010. In the calculations, the actuary used an
industry benchmark incurred loss and allocated loss adjustment expense development pattern. The "a priori" loss and allocated loss adjustment expenses ratio used in the BF and expected loss and allocated loss adjustment expense method calculations
was selected based on previous work performed for AmerInst related to the pricing of accountants' professional liability insurance. The actuary judgmentally selected low and high scenario loss ratio estimates around the central loss ratio estimate.
The low and high scenario ultimate loss and allocated loss adjustment expense estimates were calculated by multiplying net earned premium through December 31, 2010 by the low and high scenario loss ratio selections.



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##### Table of Contents

The following table shows the development of the estimated liability for the previous ten
years of the Companys operations:



ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES DEVELOPMENT

(Thousands of US Dollars)



|                                                         |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |   |       | 
|-------------------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ----- |  |  | - | ----- | 
|                                                         |  | Year Ended December 31, |       
|                                                         |  | 2000                    |        |  | 2001 |   |        | 2002 |  |   | 2003   |  |  | 2004 |        |  | 2005 |   |        | 2006 |  |   | 2007   |  |  | 2008 |        |  | 2009 |   |        | 2010 | 
|Gross Liability for Loss and LAE Reserves                |  | $                       | 27,703 |  |      | $ | 29,243 |      |  | $ | 30,479 |  |  | $    | 28,724 |  |      | $ | 29,702 |      |  | $ | 28,885 |  |  | $    | 28,161 |  |      | $ | 27,411 |      |  | $ | 24,416 |  |  | $ | 1,510 |  |  | $ | 1,203 | 
|Reinsurance Recoverable for Unpaid Loss and LAE Reserves |  |                         | 674    |  |      |   | 674    |      |  |   | 674    |  |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |      |  |   |       |  |  |   |      |  |  |   |      | 
|                                                         |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |   |       | 
|Net Liability for Unpaid Losses and LAE Reserves         |  | $                       | 27,029 |  |      | $ | 28,569 |      |  | $ | 29,805 |  |  | $    | 28,724 |  |      | $ | 29,702 |      |  | $ | 28,885 |  |  | $    | 28,161 |  |      | $ | 27,411 |      |  | $ | 24,416 |  |  | $ | 1,510 |  |  | $ | 1,203 | 



|                                   |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|---------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ----- |  |  |  | - | 
|                                   |  | Year Ended December 31, |       
|                                   |  | 2000                    |        |  | 2001 |   |        | 2002 |  |   | 2003   |  |  | 2004 |        |  | 2005 |   |        | 2006 |  |   | 2007   |  |  | 2008 |        |  | 2009 |   |        | 2010 | 
|Losses Re-estimated as of:         |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|One Year Later                     |  | $                       | 24,873 |  |      | $ | 27,993 |      |  | $ | 25,193 |  |  | $    | 27,210 |  |      | $ | 27,454 |      |  | $ | 26,323 |  |  | $    | 25,521 |  |      | $ | 22,139 |      |  | $ | 21,104 |  |  | $ | 1,490 |  |  |  |  | 
|Two Years Later                    |  |                         | 24,297 |  |      |   | 23,514 |      |  |   | 23,676 |  |  |      | 24,962 |  |      |   | 24,893 |      |  |   | 23,493 |  |  |      | 19,780 |  |      |   | 18,006 |      |  |   | 20,957 |  |  |   |       |  |  |  |   | 
|Three Years Later                  |  |                         | 21,008 |  |      |   | 21,997 |      |  |   | 21,429 |  |  |      | 22,400 |  |      |   | 22,062 |      |  |   | 17,752 |  |  |      | 15,143 |  |      |   | 17,803 |      |  |   |        |  |  |   |       |  |  |  |   | 
|Four Years Later                   |  |                         | 19,491 |  |      |   | 19,750 |      |  |   | 18,867 |  |  |      | 19,570 |  |      |   | 16,321 |      |  |   | 13,916 |  |  |      | 14,993 |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Five Years Later                   |  |                         | 17,244 |  |      |   | 17,188 |      |  |   | 16,037 |  |  |      | 13,836 |  |      |   | 14,115 |      |  |   | 13,835 |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Six Years Later                    |  |                         | 15,215 |  |      |   | 14,688 |      |  |   | 11,783 |  |  |      | 12,976 |  |      |   | 14,076 |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Seven Years Later                  |  |                         | 13,430 |  |      |   | 11,221 |      |  |   | 11,120 |  |  |      | 12,953 |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Eight Years Later                  |  |                         | 11,639 |  |      |   | 10,707 |      |  |   | 11,120 |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Nine Years Later                   |  |                         | 11,160 |  |      |   | 10,707 |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Ten Years Later                    |  |                         | 11,160 |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Cumulative Redundancy (Deficiency) |  |                         | 15,869 |  |      |   | 17,862 |      |  |   | 18,685 |  |  |      | 15,771 |  |      |   | 15,626 |      |  |   | 15,050 |  |  |      | 13,168 |  |      |   | 9,608  |      |  |   | 3,459  |  |  |   | 20    |  |  |  |  | 
|Cumulative Amount Paid Through:    |  |                         |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|One Year Later                     |  |                         | 4,340  |  |      |   | 3,851  |      |  |   | 3,697  |  |  |      | 3,557  |  |      |   | 4,678  |      |  |   | 3,820  |  |  |      | 3,314  |  |      |   | 3,970  |      |  |   | 19,902 |  |  |   | 334   |  |  |  |  | 
|Two Years Later                    |  |                         | 7,073  |  |      |   | 6,600  |      |  |   | 6,165  |  |  |      | 6,943  |  |      |   | 7,729  |      |  |   | 6,166  |  |  |      | 6,310  |  |      |   | 17,208 |      |  |   | 20,195 |  |  |   |       |  |  |  |   | 
|Three Years Later                  |  |                         | 8,904  |  |      |   | 8,145  |      |  |   | 7,915  |  |  |      | 8,995  |  |      |   | 9,049  |      |  |   | 8,176  |  |  |      | 14,653 |  |      |   | 17,406 |      |  |   |        |  |  |   |       |  |  |  |   | 
|Four Years Later                   |  |                         | 9,781  |  |      |   | 8,736  |      |  |   | 8,954  |  |  |      | 9,690  |  |      |   | 10,225 |      |  |   | 13,675 |  |  |      | 14,759 |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Five Years Later                   |  |                         | 9,906  |  |      |   | 9,174  |      |  |   | 9,079  |  |  |      | 10,149 |  |      |   | 13,957 |      |  |   | 13,687 |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Six Years Later                    |  |                         | 10,142 |  |      |   | 9,240  |      |  |   | 9,205  |  |  |      | 12,885 |  |      |   | 13,969 |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Seven Years Later                  |  |                         | 10,173 |  |      |   | 9,299  |      |  |   | 11,120 |  |  |      | 12,892 |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Eight Years Later                  |  |                         | 10,196 |  |      |   | 10,707 |      |  |   | 11,120 |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Nine Years Later                   |  |                         | 11,159 |  |      |   | 10,707 |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 
|Ten Years Later                    |  |                         | 11,159 |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |      |  |   |        |  |  |   |       |  |  |  |   | 



The above table of
losses re-estimated has been prepared on a net basisi.e., loss and loss adjustment expenses and reinsurance recoveries receivable have not been grossed-up. The table has been prepared on a net basis due to the relative immateriality of
reinsurance balances when considered in relation to total loss and loss adjustment expense reserves, and due to the costs of providing such information relative to any benefits of providing it.



The above table presents the development of balance sheet
liabilities for 2000 through 2010 as of year-end 2010, and includes the CNA program liabilities through 2008. The top line of the table shows the original recorded unpaid liability for losses and LAE recorded at the balance sheet date for each of
the indicated years.



28



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##### Table of Contents

This liability represents the estimated amount of losses and LAE for claims arising in all prior years, both
paid and unpaid at the balance sheet date, including losses that had been incurred, but not yet reported, to the Company. The upper portion of the table shows the experience as of the end of each succeeding year. The estimate is increased or
decreased as more information becomes known about the frequency and severity of claims.



The cumulative redundancy (deficiency) represents the aggregate change in the estimates over all prior years. For example, the 2005 liability has developed a $15,050,000 redundancy which has
been reflected in income in subsequent years as the reserves were re-estimated.



The lower section of the table shows the cumulative amount paid in respect of the previously recorded liability as of the end of each succeeding year. For example, the 2005 year end liability was
originally $28,885,000. As of December 31, 2010, we had paid $13,687,000 of the currently estimated $13,835,000 of losses and LAE that had been incurred for 2005 and prior years through the end of 2010; thus an estimated $148,000 in losses
incurred through 2005 remain unpaid as of the current financial statement date.



In evaluating this information, it should be understood that each amount includes the effects of all changes in amounts for prior periods. This table does not present accident or policy year development
data, which readers may be more accustomed to analyzing. Conditions and trends that have affected development of liabilities in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future
redundancies or deficiencies based on this table.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements required to be disclosed under Item 303(a)(4) of Regulation S-K promulgated by the
Securities and Exchange Commission.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk



Not applicable.



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##### Table of Contents

Item 8. Financial Statements and Supplementary Data



The financial statements required by this Item are listed
below:



INDEX TO FINANCIAL
STATEMENTS AND SCHEDULES



|                                                                            |  |      |    | 
|--------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                            |  | Page |   
|Financial Statements:                                                       |  |      |    | 
|                                                                            | 
|Report of Independent Registered Public Accounting Firm                     |  |      | 31 | 
|Consolidated Balance Sheets                                                 |  |      | 32 | 
|Consolidated Statements of Operations and Other Comprehensive (Loss) Income |  |      | 33 | 
|Consolidated Statements of Changes in Shareholders Equity                  |  |      | 34 | 
|Consolidated Statements of Cash Flows                                       |  |      | 35 | 
|Notes to the Consolidated Financial Statements                              |  |      | 36 | 
|                                                                            | 
|Financial Statement Schedules:                                              |  |      |    | 
|                                                                            | 
|Schedule I, Consolidated Summary of Investments                             |  |      | 54 | 



Schedules II, III, IV, V, and VI are omitted as they are inapplicable, immaterial, or because the required information may be found in the
audited consolidated financial statements and notes thereto.



30



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Shareholders

of AmerInst Insurance Group, Ltd.



We have audited the accompanying consolidated balance sheets of AmerInst Insurance Group, Ltd. and subsidiaries (the Company)
as of December 31, 2010 and 2009, and the related consolidated statements of operations and other comprehensive (loss) income, changes in shareholders equity and cash flows for the years then ended. Our audits also included the financial
statement schedule listed in the Index and included in Item 15. These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of AmerInst
Insurance Group, Ltd. and subsidiaries as of December 31, 2010 and 2009 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2010 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.



/s/    Deloitte & Touche



Hamilton, Bermuda

March 25, 2011



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



CONSOLIDATED BALANCE SHEETS

December 31, 2010 and 2009

(expressed in U.S. dollars)



|                                                                                                        |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                        |  | 2010 |            |   | 2009 |  
|ASSETS                                                                                                  |  |      |            |   |      |   |            |  
|Investments (Notes 3 and 4):                                                                            |  |      |            |   |      |   |            |  
|Fixed maturity investments, at fair value (amortized cost $10,739,265 and $9,394,968)                   |  | $    | 10,929,481 |   |      | $ | 9,548,441  |  
|Equity securities, at fair value (cost $9,342,671 and $11,142,968)                                      |  |      | 15,630,008 |   |      |   | 17,600,548 |  
|                                                                                                        |  |      |            |   |      |   |            |  
|TOTAL INVESTMENTS                                                                                       |  |      | 26,559,489 |   |      |   | 27,148,989 |  
|Cash and cash equivalents                                                                               |  |      | 970,697    |   |      |   | 3,472,529  |  
|Restricted cash and cash equivalents                                                                    |  |      | 84,256     |   |      |   | 734,020    |  
|Assumed reinsurance premiums receivable                                                                 |  |      | 45,909     |   |      |   |           |  
|Funds deposited with a reinsurer (Note 3)                                                               |  |      |           |   |      |   | 113,382    |  
|Accrued investment income                                                                               |  |      | 117,226    |   |      |   | 90,851     |  
|Property and equipment                                                                                  |  |      | 716,230    |   |      |   | 100,157    |  
|Deferred policy acquisition costs                                                                       |  |      | 35,060     |   |      |   |           |  
|Prepaid expenses and other assets                                                                       |  |      | 170,606    |   |      |   | 215,098    |  
|                                                                                                        |  |      |            |   |      |   |            |  
|TOTAL ASSETS                                                                                            |  | $    | 28,699,473 |   |      | $ | 31,875,026 |  
|                                                                                                        |  |      |            |   |      |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                    |  |      |            |   |      |   |            |  
|LIABILITIES                                                                                             |  |      |            |   |      |   |            |  
|Unpaid losses and loss adjustment expenses (Note 5)                                                     |  | $    | 1,203,016  |   |      | $ | 1,510,478  |  
|Unearned premiums                                                                                       |  |      | 94,756     |   |      |   |           |  
|Assumed reinsurance payable                                                                             |  |      | 76,918     |   |      |   | 148,850    |  
|Accrued expenses and other liabilities                                                                  |  |      | 1,126,409  |   |      |   | 727,319    |  
|                                                                                                        |  |      |            |   |      |   |            |  
|TOTAL LIABILITIES                                                                                       |  | $    | 2,501,099  |   |      | $ | 2,386,647  |  
|                                                                                                        |  |      |            |   |      |   |            |  
|COMMITMENTS AND CONTINGENCIES                                                                           |  |      |            |   |      |   |            |  
|SHAREHOLDERS EQUITY                                                                                    |  |      |            |   |      |   |            |  
|Common shares, $1 par value, 2010 and 2009: 2,000,000 shares authorized, 995,253 issued and outstanding |  | $    | 995,253    |   |      | $ | 995,253    |  
|Additional paid-in-capital                                                                              |  |      | 6,287,293  |   |      |   | 6,287,293  |  
|Retained earnings                                                                                       |  |      | 19,096,686 |   |      |   | 20,846,392 |  
|Accumulated other comprehensive income                                                                  |  |      | 6,477,553  |   |      |   | 6,611,053  |  
|Shares held by Subsidiary (295,881 and 257,820 shares) at cost                                          |  |      | (6,658,411 | ) |      |   | (5,251,612 | )
|                                                                                                        |  |      |            |   |      |   |            |  
|TOTAL SHAREHOLDERS EQUITY                                                                              |  |      | 26,198,374 |   |      |   | 29,488,379 |  
|                                                                                                        |  |      |            |   |      |   |            |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                              |  | $    | 28,699,473 |   |      | $ | 31,875,026 |  
|                                                                                                        |  |      |            |   |      |   |            |  



See accompanying notes to the
consolidated financial statements.



32



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE (LOSS) INCOME

years ended December 31, 2010 and 2009

(expressed in U.S. dollars)



|                                                                      |  |      |            |   |      |   |            |  
|--------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                      |  | 2010 |            |   | 2009 |  
|REVENUES                                                              |  |      |            |   |      |   |            |  
|Net premiums earned (Note 1)                                          |  | $    | 157,140    |   |      | $ | 3,235,446  |  
|Commission income                                                     |  |      | 85,051     |   |      |   |           |  
|Net investment income (Note 4)                                        |  |      | 405,210    |   |      |   | 766,512    |  
|Net realized gain on investments (Note 4)                             |  |      | 2,356,544  |   |      |   | 2,437,589  |  
|                                                                      |  |      |            |   |      |   |            |  
|TOTAL REVENUES                                                        |  |      | 3,003,945  |   |      |   | 6,439,547  |  
|                                                                      |  |      |            |   |      |   |            |  
|LOSSES AND EXPENSES                                                   |  |      |            |   |      |   |            |  
|Losses and loss adjustment expenses (recoveries) (Note 5)             |  |      | 26,869     |   |      |   | (2,924,184 | )
|Policy acquisition (recoveries) costs                                 |  |      | (12,209    | ) |      |   | 868,155    |  
|Operating and management expenses (Note 8)                            |  |      | 4,091,078  |   |      |   | 2,744,039  |  
|                                                                      |  |      |            |   |      |   |            |  
|TOTAL LOSSES AND EXPENSES                                             |  |      | 4,105,738  |   |      |   | 688,010    |  
|                                                                      |  |      |            |   |      |   |            |  
|NET (LOSS) INCOME BEFORE TAX                                          |  |      | (1,101,793 | ) |      |   | 5,751,537  |  
|                                                                      |  |      |            |   |      |   |            |  
|Income tax expense (Note 9)                                           |  |      |           |   |      |   |           |  
|NET (LOSS) INCOME AFTER TAX                                           |  |      | (1,101,793 | ) |      |   | 5,751,537  |  
|OTHER COMPREHENSIVE (LOSS) INCOME                                     |  |      |            |   |      |   |            |  
|Net unrealized holding gains arising during the period                |  |      | 2,223,044  |   |      |   | 6,317,280  |  
|Reclassification adjustment for (gains) included in net (loss) income |  |      | (2,356,544 | ) |      |   | (2,437,589 | )
|                                                                      |  |      |            |   |      |   |            |  
|OTHER COMPREHENSIVE (LOSS) INCOME                                     |  |      | (133,500   | ) |      |   | 3,879,691  |  
|                                                                      |  |      |            |   |      |   |            |  
|COMPREHENSIVE (LOSS) INCOME                                           |  | $    | (1,235,293 | ) |      | $ | 9,631,228  |  
|                                                                      |  |      |            |   |      |   |            |  
|BASIC AND DILUTED (LOSS) EARNINGS PER SHARE                           |  | $    | (1.52      | ) |      | $ | 7.77       |  
|                                                                      |  |      |            |   |      |   |            |  
|Weighted average number of common shares outstanding for the year     |  |      | 723,690    |   |      |   | 739,932    |  
|                                                                      |  |      |            |   |      |   |            |  



See accompanying notes to the
consolidated financial statements.



33



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY

years ended December 31, 2010 and 2009

(expressed in U.S. dollars)



|                                                                    |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|------------------------------------------------------------------- |  | ------------ | ------- |  | ------------------------ | - | --------- | ---------------- |  | - | -------------------------------------------- | - |  | ----------------------- | --------- | - | ------------------------ | - | ---------- | - |  | - | ---------- | -
|                                                                    |  | CommonShares |         |  | AdditionalPaid-inCapital |   |           | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Losses) |   |  | SharesHeld bySubsidiary |           |   | TotalShareholdersEquity |  
|BALANCE AT JANUARY 1, 2009                                          |  | $            | 995,253 |  |                          | $ | 6,287,293 |                  |  | $ | 15,757,104                                   |   |  | $                       | 2,731,362 |   |                          | $ | (5,014,768 | ) |  | $ | 20,756,244 |  
|Net income                                                          |  |              |        |  |                          |   |          |                  |  |   | 5,751,537                                    |   |  |                         |          |   |                          |   |           |   |  |   | 5,751,537  |  
|Other comprehensive income                                          |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|Unrealized gain on securities, net of reclassification adjustment   |  |              |        |  |                          |   |          |                  |  |   |                                             |   |  |                         | 3,879,691 |   |                          |   |           |   |  |   | 3,879,691  |  
|Purchase of shares by subsidiary                                    |  |              |        |  |                          |   |          |                  |  |   |                                             |   |  |                         |          |   |                          |   | (236,844   | ) |  |   | (236,844   | )
|Dividends ($0.94 per share)                                         |  |              |        |  |                          |   |          |                  |  |   | (662,249                                     | ) |  |                         |          |   |                          |   |           |   |  |   | (662,249   | )
|                                                                    |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2009                                        |  | $            | 995,253 |  |                          | $ | 6,287,293 |                  |  | $ | 20,846,392                                   |   |  | $                       | 6,611,053 |   |                          | $ | (5,251,612 | ) |  | $ | 29,488,379 |  
|                                                                    |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|Net loss                                                            |  |              |        |  |                          |   |          |                  |  |   | (1,101,793                                   | ) |  |                         |          |   |                          |   |           |   |  |   | (1,101,793 | )
|Other comprehensive losses                                          |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|Unrealized losses on securities, net of reclassification adjustment |  |              |        |  |                          |   |          |                  |  |   |                                             |   |  |                         | (133,500  | ) |                          |   |           |   |  |   | (133,500   | )
|Purchase of shares by subsidiary                                    |  |              |        |  |                          |   |          |                  |  |   |                                             |   |  |                         |          |   |                          |   | (1,406,799 | ) |  |   | (1,406,799 | )
|Dividends ($0.94 per share)                                         |  |              |        |  |                          |   |          |                  |  |   | (647,913                                     | ) |  |                         |          |   |                          |   |           |   |  |   | (647,913   | )
|                                                                    |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2010                                        |  | $            | 995,253 |  |                          | $ | 6,287,293 |                  |  | $ | 19,096,686                                   |   |  | $                       | 6,477,553 |   |                          | $ | (6,658,411 | ) |  | $ | 26,198,374 |  
|                                                                    |  |              |         |  |                          |   |           |                  |  |   |                                              |   |  |                         |           |   |                          |   |            |   |  |   |            |  



See accompanying notes to the
consolidated financial statements.



34



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



CONSOLIDATED STATEMENTS OF CASH FLOWS

years ended December 31, 2010 and 2009

(expressed in U.S. dollars)



|                                                                                     |  |      |            |   |      |   |             |  
|------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                                     |  | 2010 |            |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                 |  |      |            |   |      |   |             |  
|Net (loss) income                                                                    |  | $    | (1,101,793 | ) |      | $ | 5,751,537   |  
|Adjustments to reconcile net (loss) income to net cash used in operating activities: |  |      |            |   |      |   |             |  
|Amortization of net premiums on investments                                          |  |      | 73,996     |   |      |   | 68,510      |  
|Depreciation and amortization on property and equipment                              |  |      | 65,433     |   |      |   |            |  
|Net realized gains on sale of investments                                            |  |      | (2,356,544 | ) |      |   | (2,437,589  | )
|Changes in assets and liabilities:                                                   |  |      |            |   |      |   |             |  
|Assumed reinsurance premiums receivable                                              |  |      | (45,909    | ) |      |   | 500,935     |  
|Funds deposited with a reinsurer                                                     |  |      | 113,382    |   |      |   |            |  
|Accrued investment income                                                            |  |      | (26,375    | ) |      |   | 239,943     |  
|Deferred policy acquisition costs                                                    |  |      | (35,060    | ) |      |   | 1,044,347   |  
|Prepaid expenses and other assets                                                    |  |      | 44,492     |   |      |   | 13,337      |  
|Liability for losses and loss adjustment expenses                                    |  |      | (307,462   | ) |      |   | (22,905,679 | )
|Unearned premiums                                                                    |  |      | 94,756     |   |      |   | (3,619,371  | )
|Assumed reinsurance balance payable                                                  |  |      | (71,932    | ) |      |   |            |  
|Accrued expenses and other liabilities                                               |  |      | 399,090    |   |      |   | 211,176     |  
|                                                                                     |  |      |            |   |      |   |             |  
|Net cash used in operating activities                                                |  |      | (3,153,926 | ) |      |   | (21,132,854 | )
|                                                                                     |  |      |            |   |      |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                 |  |      |            |   |      |   |             |  
|Movement in restricted cash and cash equivalents                                     |  |      | 649,764    |   |      |   | (417,179    | )
|Purchases of property and equipment                                                  |  |      | (681,506   | ) |      |   | (100,157    | )
|Purchases of available-for-sale securities                                           |  |      | (6,724,710 | ) |      |   | (12,498,473 | )
|Proceeds from sales of available-for-sale securities                                 |  |      | 8,438,258  |   |      |   | 34,235,694  |  
|Proceeds from maturities of fixed maturity investments                               |  |      | 1,025,000  |   |      |   | 3,397,484   |  
|                                                                                     |  |      |            |   |      |   |             |  
|Net cash provided by investing activities                                            |  |      | 2,706,806  |   |      |   | 24,617,369  |  
|                                                                                     |  |      |            |   |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                 |  |      |            |   |      |   |             |  
|Dividends paid                                                                       |  |      | (647,913   | ) |      |   | (662,249    | )
|Purchase of shares by subsidiary, net                                                |  |      | (1,406,799 | ) |      |   | (236,844    | )
|                                                                                     |  |      |            |   |      |   |             |  
|Net cash used in financing activities                                                |  |      | (2,054,712 | ) |      |   | (899,093    | )
|                                                                                     |  |      |            |   |      |   |             |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                              |  |      | (2,501,832 | ) |      |   | 2,585,422   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                         |  |      | 3,472,529  |   |      |   | 887,107     |  
|                                                                                     |  |      |            |   |      |   |             |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                               |  | $    | 970,697    |   |      | $ | 3,472,529   |  
|                                                                                     |  |      |            |   |      |   |             |  



See accompanying notes to the
consolidated financial statements.



35



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



1. DESCRIPTION OF BUSINESS



AmerInst Insurance Group, Ltd., (AmerInst or the
Company) was formed under the laws of Bermuda in 1998. The Company, through its wholly-owned subsidiary AmerInst Insurance Company, Ltd. (AMIC Ltd.) and its predecessor AmerInst Insurance Company, Inc. (AIIC
Inc.), were engaged in the reinsurance of claims-made insurance policies of participants in an American Institute of Certified Public Accountants (AICPA) sponsored insurance program that provides accountants professional
liability insurance coverage (AICPA Plan) through December 31, 2008.



The reinsurance activity of AMIC Ltd. depends upon agreements entered into with outside parties.



Entry into Agency Agreement



Effective September 25, 2009, AmerInst Professional Services, Limited (APSL), a Delaware corporation and wholly-owned
subsidiary of AmerInst Mezco, Ltd. (Mezco) which is a wholly-owned subsidiary of AmerInst, entered into an agency agreement (the Agency Agreement) with The North River Insurance Company, United States Fire Insurance Company,
Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, C&F) pursuant to which C&F appointed APSL as its exclusive agent for the
purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants professional liability and lawyers professional liability insurance coverage within the 50 states of the United States
and the District of Columbia. The initial term of the Agency Agreement is for four years with automatic one year renewals.



Entry into Reinsurance Agreement



We conduct our reinsurance business through AMIC Ltd., our subsidiary, which is a registered insurer in Bermuda. On September 25,
2009, AMIC Ltd. entered into a professional liability quota share agreement with C&F (the Reinsurance Agreement) pursuant to which C&F agrees to cede and AMIC Ltd. agrees to accept as reinsurance a fifty percent (50%) quota
share of C&Fs liability under insurance written by APSL on behalf of C&F and classified by C&F as accountants professional liability and lawyers professional liability, subject to AMIC Ltd. surplus limitations. The
initial term of the Reinsurance Agreement is for four years with automatic one year renewals.



Historical Relationship with CNA



Historically, the primary business activity of our wholly owned insurance subsidiary, AMIC Ltd., had been to act as a reinsurer of professional liability insurance policies that were issued under the
Professional Liability Insurance Plan sponsored by the AICPA. The AICPA plan offers professional liability coverage to accounting firms and individual CPAs in all 50 states.



Our reinsurance activity depends upon agreements with outside
parties. AMIG, our predecessor entity, began our reinsurance relationship with CNA in 1993.



On January 5, 2009, AMIC Ltd. received written notice from CNA that CNA did not intend to renew the reinsurance program encompassed by the Reinsurance Treaties. In 2008, the business relationship
with CNA accounted for approximately 95% of AmerInsts net premiums earned.



On May 15, 2009, AMIC Ltd. and CNA entered into a Commutation Agreement whereby, effective January 1, 2009, in exchange for a payment of a portion of the reserves which we had previously set
aside, CNA assumed responsibility for prior years undetermined and unpaid liabilities.



36



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Historical Relationship with CAMICO



From June 1, 2005 through May 31, 2009, we were a
party to a reinsurance contract with CAMICO Mutual Insurance Company (CAMICO), a California-based writer of accountants professional liability business. Effective June 1, 2009, we decided not to renew the CAMICO contract and
permitted the contract to expire pursuant to its terms. In 2008, the business relationship with CAMICO accounted for approximately 5% of AmerInsts net premiums earned. We remain potentially liable for claims related to coverage through
May 31, 2009.



VSC Payment



On July 22, 2009, the Company received a payment of
$500,891 from Virginia Surety Company (VSC) in satisfaction of certain recoveries not previously remitted by VSC under retrocession contracts between the Company and VSC for the years 1989  1993. The $500,891 payment was recorded
as a decrease in losses and loss adjustment expenses in the year ended December 31, 2009. The Company and VSC are in dispute with respect to over $500,000 in additional recoveries, fees and interest, which is currently in arbitration.



Attorneys Professional Liability
Coverage



Effective January 1, 2003, we
entered into a 15% quota share participation of the attorneys professional liability coverage provided by Professionals Direct Insurance Company. This participation terminated on December 31, 2003. We remain potentially liable for claims
related to this period of coverage.



RINITS



AmerInst has filed an application for a U.S. patent on a unique financing concept called RINITS that it has developed to
securitize insurance and reinsurance risk, involving property, casualty, life and health. Such securitization would be by equity and debt financing of Bermuda special purpose companies licensed as reinsurers. It is AmerInsts intention to grant
patent licenses to the special purpose companies and investment banking organizations which will market the securities. In addition to the license royalties, AmerInst would manage the special purpose companies for a fee and at its option could
invest in them as well. However, AmerInst may not be issued a patent, and, even if so, may not be able to license such patent.



AmerInst has entered into confidentiality agreements with several investment banking organizations.



In addition to the patent application, AmerInst has obtained
a trademark under which the concept will be marketed.



2.
SIGNIFICANT ACCOUNTING POLICIES



Basis of
presentation



The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts of AmerInst and its operating wholly-owned subsidiaries, AmerInst Mezco, Ltd.
(Mezco), AMIC Ltd., APSL and AmerInst Investment Company, Ltd. (Investco). Intercompany accounts and transactions have been eliminated on consolidation.



The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial



37



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The major estimates reflected in the Companys
financial statements include but are not limited to the liability for loss and loss adjustment expenses.



Premiums



Premiums assumed are earned on a pro rata basis over the terms of the underlying policies to which they relate. Premiums assumed relating
to the unexpired portion of policies in force at the balance sheet date are recorded as unearned premiums.



Deferred policy acquisition costs



Ceding commissions related to assumed reinsurance agreements are deferred and amortized pro rata over the terms of the underlying policies
to which they relate.



Liability for losses and
loss adjustment expenses



The liability for
unpaid losses and loss adjustment expenses includes case basis estimates of reported losses plus supplemental amounts for projected losses incurred but not reported (IBNR), calculated based upon loss projections utilizing certain actuarial
assumptions and AMIC Ltd.s historical loss experience supplemented with industry data. The aggregate liability for unpaid losses and loss adjustment expenses at year end represents managements best estimate, based upon the available
data, of the amount necessary to cover the ultimate cost of loss, based upon an actuarial analysis prepared by independent actuaries. However, because of the volatility inherent in professional liability coverage, actual loss experience may not
conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Accordingly, the ultimate liability could be significantly in excess of or less than the amount indicated in the financial statements.
As adjustments to these estimates become necessary, such adjustments are reflected in current operations. AMIC Ltd. does not discount its loss reserves for purposes of these financial statements.



The anticipated effect of inflation is implicitly considered
when estimating liabilities for unpaid losses and loss adjustment expenses. Future average severities are projected based on historical trends adjusted for anticipated trends, are monitored based on actual developments and are modified if necessary.



Investments



AmerInst classifies all of its investments as
available-for-sale. Accordingly, AmerInst reports these securities at their estimated fair values with unrealized holding gains and losses being reported as other comprehensive income. Realized gains and losses on sales of investments are accounted
for by specifically identifying the cost and are reflected in the income statement in the period of sale.



Declines in the fair value of investments below cost are evaluated for other than temporary impairment losses. The evaluation for other
than temporary impairment losses is a quantitative and qualitative process which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. The risks and uncertainties
include the Companys intent and ability to hold the security, changes in general economic conditions, the issuers financial condition or near term recovery prospects, and the effects of changes in interest rates. AmerInsts
accounting policy requires that a decline in the value of a security below its cost basis be assessed to determine if the decline is other than temporary. If so, the security is deemed to be impaired and a charge is recorded in net realized losses
equal to the difference between the fair value and the cost basis of the security. The fair value of the impaired investment becomes its new cost basis.



38



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Cash and cash equivalents



For purposes of the statements of cash flows, AmerInst
considers all money market funds and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.



Property and Equipment



Property and equipment, associated with the APSL office, at December 31, 2010 and 2009 at cost, less accumulated depreciation and
amortization, totaled $716,230 and $100,157, respectively as follows:



|                       |  |      |         |  |                                        |   |        |       |  |   |         | 
|---------------------- |  | ---- | ------- |  | -------------------------------------- | - | ------ | ----- |  | - | ------- | 
|                       |  | Cost |         |  | AccumulatedDepreciationandAmortization |   |        | Total | 
|December 31, 2010      |  |      |         |  |                                        |   |        |       |  |   |         | 
|Leasehold improvements |  | $    | 1,865   |  |                                        | $ | 518    |       |  | $ | 1,347   | 
|Furniture and fixtures |  |      | 25,184  |  |                                        |   | 3,272  |       |  |   | 21,912  | 
|Office equipment       |  |      | 18,123  |  |                                        |   | 2,477  |       |  |   | 15,646  | 
|Computer equipment     |  |      | 10,829  |  |                                        |   | 1,537  |       |  |   | 9,292   | 
|Internal use software  |  |      | 725,662 |  |                                        |   | 57,629 |       |  |   | 668,033 | 
|                       |  |      |         |  |                                        |   |        |       |  |   |         | 
|Total                  |  | $    | 781,663 |  |                                        | $ | 65,433 |       |  | $ | 716,230 | 
|                       |  |      |         |  |                                        |   |        |       |  |   |         | 
|                       |  |      |        
|                       |  | Cost |         |  | AccumulatedDepreciationandAmortization |   |        | Total | 
|December 31, 2009      |  |      |         |  |                                        |   |        |       |  |   |         | 
|Furniture and fixtures |  | $    | 20,885  |  |                                        | $ |       |       |  | $ | 20,885  | 
|Office equipment       |  |      | 8,496   |  |                                        |   |       |       |  |   | 8,496   | 
|Internal use software  |  |      | 70,776  |  |                                        |   |       |       |  |   | 70,776  | 
|                       |  |      |         |  |                                        |   |        |       |  |   |         | 
|Total                  |  | $    | 100,157 |  |                                        | $ |       |       |  | $ | 100,157 | 
|                       |  |      |         |  |                                        |   |        |       |  |   |         | 



Property and equipment are
depreciated using the straight-line method with estimated useful lives ranging from 3 to 7 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for normal
maintenance and repairs are expensed as incurred.



Developmental costs for internal use software are capitalized in accordance with the provisions of ASC 350-40, generally, when the
preliminary project stage is completed, management commits to funding and it is probable that the project will be completed and the software will be used to perform the functions intended. Capitalized internal use software costs are amortized on a
straight-line basis over their estimated useful lives, generally for a period not to exceed 5 years.



Income taxes



Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. Management evaluates the reliability of the deferred tax assets
and assesses the need for additional valuation allowance annually.



39



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Net income per common share



Basic earnings per share is determined as net income
available to common shareholders divided by the weighted average number of common shares outstanding for the period. There are no dilutive securities.



New Accounting Pronouncements



Accounting Standards Adopted



In January 2010, the Company adopted the revised guidance issued by the FASB for the disclosures about fair value measurements. The
revised guidance requires additional disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The revised guidance also clarifies
existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The revised guidance was effective for the first reporting period (including interim periods) beginning after
December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which was effective for fiscal years beginning after December 15, 2010, and for interim periods
within those fiscal years. The adoption of the revised guidance did not have an impact on the consolidated financial statements.



On February 24, 2010, the FASB amended its guidance on subsequent events to no longer require companies filing periodic reports with
the Commission to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements in order to alleviate potential conflicts between the FASBs guidance and the SECs filing
requirements. This guidance was effective immediately upon issuance. The adoption of this guidance had no impact on the Companys results of operations or financial condition. While the Companys consolidated financial statements no longer
disclose the date through which it has evaluated subsequent events, it continues to be required to evaluate subsequent events through the date when the Companys financial statements are issued.



The Company has determined that all other recently issued
accounting pronouncements will not have a material impact on its consolidated financial statements, or do not apply to its operations.



3. PLEDGED ASSETS



Pursuant to the reinsurance agreements, AMIC Ltd. is required to provide the ceding companies with collateral to secure its obligations to
them. At December 31, 2010 and 2009 AMIC Ltd. provided CAMICO with a Letter of Credit held by Comerica Bank and National City Bank with supporting investments with a carrying value of $2,713,631 and $3,631,714, respectively. Also, at
December 31, 2010, AMIC Ltd. had provided C&F with a Section 114 Trust, held by Comerica Bank, with restricted cash and cash equivalents and investments with a carrying value of $7,039,652. Additionally, at December 31, 2010 and
2009, $0 and $113,382 was held in deposit pursuant to the 2003 excess reinsurance agreement with PDIC, respectively.



40



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



4. INVESTMENTS



The cost or amortized cost, gross unrealized holding gains
and losses, and estimated fair value of investments in fixed maturity investments, by major security type, and equity securities at December 31, 2010 and 2009 are as follows:



|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|------------------------------------------------ |  | -------------------- | ---------- |  | -------------------- | - | --------- | --------------------- |  | - | ------------------ | - |  | - | ---------- | 
|                                                 |  | Cost orAmortizedCost |            |  | GrossUnrealizedGains |   |           | GrossUnrealizedLosses |  |   | EstimatedFairValue |  
|December 31, 2010                                |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Fixed maturity investments:                      |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|U.S. government agency securities                |  | $                    | 1,931,335  |  |                      | $ | 28,253    |                       |  | $ |                   |   |  | $ | 1,959,588  | 
|Obligations of states and political subdivisions |  |                      | 8,307,102  |  |                      |   | 243,041   |                       |  |   | (84,406            | ) |  |   | 8,465,737  | 
|Corporate debt securities                        |  |                      | 500,828    |  |                      |   | 3,328     |                       |  |   |                   |   |  |   | 504,156    | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total fixed maturity investments                 |  |                      | 10,739,265 |  |                      |   | 274,622   |                       |  |   | (84,406            | ) |  |   | 10,929,481 | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Equity securities *                              |  |                      | 8,342,671  |  |                      |   | 5,802,453 |                       |  |   |                   |   |  |   | 14,145,124 | 
|Hedge fund                                       |  |                      | 1,000,000  |  |                      |   | 484,884   |                       |  |   |                   |   |  |   | 1,484,884  | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total equity securities                          |  |                      | 9,342,671  |  |                      |   | 6,287,337 |                       |  |   |                   |   |  |   | 15,630,008 | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total investments                                |  | $                    | 20,081,936 |  |                      | $ | 6,561,959 |                       |  | $ | (84,406            | ) |  | $ | 26,559,489 | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 



|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|------------------------------------------------ |  | -------------------- | ---------- |  | -------------------- | - | --------- | --------------------- |  | - | ------------------ | - |  | - | ---------- | 
|                                                 |  | Cost orAmortizedCost |            |  | GrossUnrealizedGains |   |           | GrossUnrealizedLosses |  |   | EstimatedFairValue |  
|December 31, 2009                                |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Fixed maturity investments:                      |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|U.S. government agency securities                |  | $                    | 3,025,655  |  |                      | $ | 14,031    |                       |  | $ | (5,781             | ) |  | $ | 3,033,905  | 
|Obligations of states and political subdivisions |  |                      | 5,862,796  |  |                      |   | 159,640   |                       |  |   | (36,361            | ) |  |   | 5,986,075  | 
|Corporate debt securities                        |  |                      | 506,517    |  |                      |   | 21,944    |                       |  |   |                   |   |  |   | 528,461    | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total fixed maturity investments                 |  |                      | 9,394,968  |  |                      |   | 195,615   |                       |  |   | (42,142            | ) |  |   | 9,548,441  | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Equity securities *                              |  |                      | 10,142,968 |  |                      |   | 6,067,843 |                       |  |   |                   |   |  |   | 16,210,811 | 
|Hedge fund                                       |  |                      | 1,000,000  |  |                      |   | 389,737   |                       |  |   |                   |   |  |   | 1,389,737  | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total equity securities                          |  |                      | 11,142,968 |  |                      |   | 6,457,580 |                       |  |   |                   |   |  |   | 17,600,548 | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 
|Total investments                                |  | $                    | 20,537,936 |  |                      | $ | 6,653,195 |                       |  | $ | (42,142            | ) |  | $ | 27,148,989 | 
|                                                 |  |                      |            |  |                      |   |           |                       |  |   |                    |   |  |   |            | 



|* | The Companys equity securities are managed by an external large cap value advisor. Our investment approach is to focus on increasing the fair market value of our
equity securities by investing in companies that may or may not be paying a dividend but whose market values may increase over time. Some of the key factors we consider in a prospective company to invest in include the discount to value and the
quality of the management team.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following tables summarize the Companys fixed maturity and equity securities
in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:



|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|------------------------------------------------ |  | -------------------- | ------- |  | ------------------- | - | ------ | ------------------- |  | - | ---------------- |  |  | ------------------- | ------- | - | ---------------- | - | --------- |  |  | - | ------- | -
|                                                 |  | 12 months or greater |         |  | Less than 12 months |   |        | Total               | 
|                                                 |  | EstimatedFairValue   |         |  | UnrealizedLosses    |   |        | EstimatedFair Value |  |   | UnrealizedLosses |  |  | EstimatedFair Value |         |   | UnrealizedLosses |  
|December 31, 2010                                |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Fixed maturity investments:                      |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|U.S. government agency securities                |  | $                    |        |  |                     | $ |       |                     |  | $ |                 |  |  | $                   |        |   |                  | $ |          |  |  | $ |        |  
|Obligations of states and political subdivisions |  |                      | 497,924 |  |                     |   | (2,445 | )                   |  |   | 1,573,160        |  |  |                     | (81,961 | ) |                  |   | 2,071,084 |  |  |   | (84,406 | )
|Corporate debt securities                        |  |                      |        |  |                     |   |       |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total fixed maturity investments                 |  |                      |        |  |                     |   |       |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Equity securities                                |  |                      |        |  |                     |   |       |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|Hedge fund                                       |  |                      |        |  |                     |   |       |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total equity securities                          |  |                      |        |  |                     |   |       |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total investments                                |  | $                    | 497,924 |  |                     | $ | (2,445 | )                   |  | $ | 1,573,160        |  |  | $                   | (81,961 | ) |                  | $ | 2,071,084 |  |  | $ | (84,406 | )
|                                                 |  |                      |         |  |                     |   |        |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  



As of December 31, 2010,
there were approximately six securities in an unrealized loss position with an estimated fair value of $2,071,084. Of these securities, there is one security that has been in an unrealized loss position for 12 months or greater. As of
December 31, 2010, none of these securities were considered to be other than temporarily impaired. The Company has no intent to sell and it is not more likely than not that the Company will be required to sell these securities before their fair
values recover above the adjusted cost. The unrealized losses from these securities were not a result of credit, collateral or structural issues.



|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|------------------------------------------------ |  | -------------------- | - |  | ------------------- | - | - | ------------------- |  | - | ---------------- |  |  | ------------------- | ------- | - | ---------------- | - | --------- |  |  | - | ------- | -
|                                                 |  | 12 months or greater |   |  | Less than 12 months |   |   | Total               | 
|                                                 |  | EstimatedFair Value  |   |  | UnrealizedLosses    |   |   | EstimatedFair Value |  |   | UnrealizedLosses |  |  | EstimatedFair Value |         |   | UnrealizedLosses |  
|December 31, 2009                                |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Fixed maturity investments:                      |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|U.S. government agency securities                |  | $                    |  |  |                     | $ |  |                     |  | $ | 2,012,739        |  |  | $                   | (36,361 | ) |                  | $ | 2,012,739 |  |  | $ | (36,361 | )
|Obligations of states and political subdivisions |  |                      |  |  |                     |   |  |                     |  |   | 494,219          |  |  |                     | (5,781  | ) |                  |   | 494,219   |  |  |   | (5,781  | )
|Corporate debt securities                        |  |                      |  |  |                     |   |  |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total fixed maturity investments                 |  |                      |  |  |                     |   |  |                     |  |   | 2,506,958        |  |  |                     | (42,142 | ) |                  |   | 2,506,958 |  |  |   | (42,142 | )
|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Equity securities                                |  |                      |  |  |                     |   |  |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|Hedge fund                                       |  |                      |  |  |                     |   |  |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total equity securities                          |  |                      |  |  |                     |   |  |                     |  |   |                 |  |  |                     |        |   |                  |   |          |  |  |   |        |  
|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  
|Total investments                                |  | $                    |  |  |                     | $ |  |                     |  | $ | 2,506,958        |  |  | $                   | (42,142 | ) |                  | $ | 2,506,958 |  |  | $ | (42,142 | )
|                                                 |  |                      |   |  |                     |   |   |                     |  |   |                  |  |  |                     |         |   |                  |   |           |  |  |   |         |  



As of December 31, 2009,
there were approximately six securities in an unrealized loss position with an estimated fair value of $2,506,958. Of these securities, there is no security that has been in an unrealized loss position for 12 months or greater. As of
December 31, 2009, none of these securities were considered to be other than temporarily impaired. The unrealized losses from these securities were not a result of credit, collateral or structural issues.



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The cost or amortized cost and estimated fair value of fixed maturity investments at
December 31, 2010 and 2009 by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.



|                                       |  |               |            |  |                     |   |            | 
|-------------------------------------- |  | ------------- | ---------- |  | ------------------- | - | ---------- | 
|                                       |  | AmortizedCost |            |  | EstimatedFair Value |  
|December 31, 2010                      |  |               |            |  |                     |   |            | 
|Due in one year or less                |  | $             | 1,001,198  |  |                     | $ | 1,002,080  | 
|Due after one year through five years  |  |               | 7,398,409  |  |                     |   | 7,633,631  | 
|Due after five years through ten years |  |               | 2,339,658  |  |                     |   | 2,293,770  | 
|Due after ten years                    |  |               |           |  |                     |   |           | 
|                                       |  |               |            |  |                     |   |            | 
|Total                                  |  | $             | 10,739,265 |  |                     | $ | 10,929,481 | 
|                                       |  |               |            |  |                     |   |            | 
|                                       |  |              
|                                       |  | AmortizedCost |            |  | EstimatedFair Value |  
|December 31, 2009                      |  |               |            |  |                     |   |            | 
|Due in one year or less                |  | $             | 1,025,000  |  |                     | $ | 1,031,788  | 
|Due after one year through five years  |  |               | 7,706,725  |  |                     |   | 7,876,701  | 
|Due after five years through ten years |  |               | 663,243    |  |                     |   | 639,952    | 
|Due after ten years                    |  |               |           |  |                     |   |           | 
|                                       |  |               |            |  |                     |   |            | 
|Total                                  |  | $             | 9,394,968  |  |                     | $ | 9,548,441  | 
|                                       |  |               |            |  |                     |   |            | 



Information on sales and
maturities of investments during the twelve months ended December 31, 2010 and 2009 are as follows:



|                                                             |  |      |           |   |      |   |            |  
|------------------------------------------------------------ |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                             |  | 2010 |           |   | 2009 |  
|Total proceeds on sales of available-for-sale securities     |  | $    | 8,438,258 |   |      | $ | 34,235,694 |  
|Total proceeds from maturities of fixed maturity investments |  |      | 1,025,000 |   |      |   | 3,397,484  |  
|Gross gains on sales                                         |  |      | 3,394,772 |   |      |   | 5,169,129  |  
|Gross losses on sales                                        |  |      | (914,918  | ) |      |   | (1,883,651 | )
|Impairment losses                                            |  |      | (123,310  | ) |      |   | (847,889   | )



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Fair Value of Investments



The following tables show the fair value of the
Companys investments in accordance with ASC 820, Fair Value Measurements and Disclosures as of December 31, 2010 and 2009.



|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|----------------------------------------------- |  | --------------- | ---------- |  | ---------------- | - | ---------- | ----------------------------------------------------------- |  | - | ------------------------------------------- |  |  | --------------------------------------- | ---------- |  |  | - | --------- | 
|                                                |  |                 |            |  |                  |   |            | Fair value measurement using:                               | 
|                                                |  | Carryingamount  |            |  | Total fairvalue  |   |            | Quoted pricesin activemarkets foridentical assets(Level 1)  |  |   | Significant otherobservable inputs(Level 2) |  |  | Significantunobservable inputs(Level 3) |           
|December 31, 2010                               |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|U.S. government agency securities               |  | $               | 1,959,588  |  |                  | $ | 1,959,588  |                                                             |  | $ |                                            |  |  | $                                       | 1,959,588  |  |  | $ |          | 
|Obligations of state and political subdivisions |  |                 | 8,465,737  |  |                  |   | 8,465,737  |                                                             |  |   |                                             |  |  |                                         | 8,465,737  |  |  |   |           | 
|Corporate debt securities                       |  |                 | 504,156    |  |                  |   | 504,156    |                                                             |  |   |                                             |  |  |                                         | 504,156    |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total fixed maturity investments                |  |                 | 10,929,481 |  |                  |   | 10,929,481 |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Equity securities (excluding the hedge fund)    |  |                 | 14,145,124 |  |                  |   | 14,145,124 |                                                             |  |   | 14,145,124                                  |  |  |                                         |            |  |  |   |           | 
|Hedge fund                                      |  |                 | 1,484,884  |  |                  |   | 1,484,884  |                                                             |  |   |                                             |  |  |                                         |            |  |  |   | 1,484,884 | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total equity securities                         |  |                 | 15,630,008 |  |                  |   | 15,630,008 |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total investments                               |  | $               | 26,559,489 |  |                  | $ | 26,559,489 |                                                             |  | $ | 14,145,124                                  |  |  | $                                       | 10,929,481 |  |  | $ | 1,484,884 | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|                                                |  |                 |           
|                                                |  |                 |            |  |                  |   |            | Fair value measurement using:                               | 
|                                                |  | Carrying amount |            |  | Total fair value |   |            | Quoted pricesin activemarkets foridentical assets (Level 1) |  |   | Significant otherobservable inputs(Level 2) |  |  | Significantunobservable inputs(Level 3) |           
|December 31, 2009                               |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|U.S. government agency securities               |  | $               | 3,033,905  |  |                  | $ | 3,033,905  |                                                             |  | $ |                                            |  |  | $                                       | 3,033,905  |  |  | $ |          | 
|Obligations of state and political subdivisions |  |                 | 5,986,075  |  |                  |   | 5,986,075  |                                                             |  |   |                                             |  |  |                                         | 5,986,075  |  |  |   |           | 
|Corporate debt securities                       |  |                 | 528,461    |  |                  |   | 528,461    |                                                             |  |   |                                             |  |  |                                         | 528,461    |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total fixed maturity investments                |  |                 | 9,548,441  |  |                  |   | 9,548,441  |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Equity securities (excluding the hedge fund)    |  |                 | 16,210,811 |  |                  |   | 16,210,811 |                                                             |  |   | 16,210,811                                  |  |  |                                         |            |  |  |   |           | 
|Hedge fund                                      |  |                 | 1,389,737  |  |                  |   | 1,389,737  |                                                             |  |   |                                             |  |  |                                         |            |  |  |   | 1,389,737 | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total equity securities                         |  |                 | 17,600,548 |  |                  |   | 17,600,548 |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 
|Total investments                               |  | $               | 27,148,989 |  |                  | $ | 27,148,989 |                                                             |  | $ | 16,210,811                                  |  |  | $                                       | 9,548,441  |  |  | $ | 1,389,737 | 
|                                                |  |                 |            |  |                  |   |            |                                                             |  |   |                                             |  |  |                                         |            |  |  |   |           | 



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following is a reconciliation of the beginning and ending balance of investments
using significant unobservable inputs (Level 3) for the year ended December 31, 2010 and 2009.



|                                                 |  |      |           |  |      |   |           | 
|------------------------------------------------ |  | ---- | --------- |  | ---- | - | --------- | 
|                                                 |  | 2010 |           |  | 2009 |  
|Balance classified as Level 3, beginning of year |  | $    | 1,389,737 |  |      | $ | 1,152,548 | 
|Total gains or losses included in earnings:      |  |      |          |  |      |   |          | 
|Net realized gains                               |  |      |          |  |      |   |          | 
|Change in fair value of hedge fund investments   |  |      | 95,147    |  |      |   | 237,189   | 
|Purchases or sales                               |  |      |          |  |      |   |          | 
|Transfers in and/or out of Level 3               |  |      |          |  |      |   |          | 
|                                                 |  |      |           |  |      |   |           | 
|Ending balance                                   |  | $    | 1,484,884 |  |      | $ | 1,389,737 | 
|                                                 |  |      |           |  |      |   |           | 



Under existing accounting
principles generally accepted in the United States, we are required to recognize certain assets at their fair value in our consolidated balance sheets. This includes our fixed maturity investments and equity securities. In accordance with the Fair
Value Measurements and Disclosures Topic of the FASB ASC, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair
Value Measurements and Disclosures Topic of the ASC, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are
observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the
hierarchy based on the input that is significant to determining such measurement. The three levels are defined as follows:



| |  |  | Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active
markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in
active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets in markets that are not active and inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.
| | - |  | ----------------------------------------------------------------------------------------------



At each measurement date, we estimate the fair value of the
financial instruments using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or
observable market inputs are not available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of
investments held as of December 31, 2010 and what level within the fair value hierarchy the valuation technique resides.



| |  |  | U.S. government agency securities: Comprised primarily of bonds issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, Federal Farm Credit Bank and the Federal National Mortgage Association. The fair values of U.S. government agency securities are priced using the spread above the risk-free U.S. Treasury yield curve. As the yields for the risk-free U.S.
Treasury yield curve are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker
quotes are not used for fair value pricing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



| |  |  | Obligations of state and political subdivisions: Comprised of fixed income obligations of state and local governmental municipalities. The fair
values of these securities are based on quotes and current market spread relationships, and are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not
used for fair value pricing.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate debt securities: Comprised of bonds issued by corporations. The fair values of these securities are based on quotes and current market
spread relationships, and are included in the Level 2 fair value hierarchy. AmerInst considers that there is a liquid market for the types of securities held. Broker quotes are not used for fair value pricing.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity securities, at fair value: Comprised primarily of investments in the common stock of publicly traded companies. All of the Companys
equities are included in the Level 1 fair value hierarchy. The Company receives prices based on closing exchange prices from independent pricing sources to measure fair values for the equities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hedge fund: Comprised of a hedge fund whose objective is to seek attractive long-term returns with lower volatility by investing in a range of
diversified investment strategies. The fund invests in a diversified pool of hedge fund managers, generally across six different strategies: long/short equities, long/short credit, macro, multi-strategy opportunistic, activist, and portfolio hedge.
The fair value of the hedge fund is based on the net asset value of the fund as reported by the fund manager. The fair value of our hedge fund is included in the Level 3 fair value hierarchy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To validate prices, we complete quantitative analyses to
compare the performance of the overall investment portfolio to the performance of an appropriate benchmark, with significant differences identified and investigated.



There have been no material changes to any of our valuation
techniques from what was used as of December 31, 2009. Since the fair value of a financial instrument is an estimate of what a willing buyer would pay for our asset if we sold it, we will not know the ultimate value of our financial instruments
until they are sold. We believe the valuation techniques utilized provide us with the best estimate of the price that would be received to sell our assets or transfer our liabilities in an orderly transaction between participants at the measurement
date.



Though current market conditions appear to
have improved recently, there is still the potential for further instability which could present additional risks and uncertainties for our business and make it more difficult to value certain of our securities if trading becomes less frequent. As
such, valuations may include assumptions and estimates that may have significant period-to-period changes that could have a material adverse effect on our results of operations or financial condition.



Major categories of net interest and dividend income are
summarized as follows:



|                                                     |  |      |          |   |      |   |          |  
|---------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                     |  | 2010 |          |   | 2009 |  
|Interest earned:                                     |  |      |          |   |      |   |          |  
|Fixed maturity investments                           |  | $    | 339,113  |   |      | $ | 628,724  |  
|Short term investments and cash and cash equivalents |  |      | 1,957    |   |      |   | 5,795    |  
|Dividends earned                                     |  |      | 217,045  |   |      |   | 300,397  |  
|Investment expenses                                  |  |      | (152,905 | ) |      |   | (168,404 | )
|                                                     |  |      |          |   |      |   |          |  
|Net investment income                                |  | $    | 405,210  |   |      | $ | 766,512  |  
|                                                     |  |      |          |   |      |   |          |  



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES



Details of the liability for unpaid losses and loss
adjustment expenses at December 31, 2010 and 2009 are as follows:



|                          |  |      |           |  |      |   |           | 
|------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                          |  | 2010 |           |  | 2009 |  
|Case basis estimates      |  | $    | 523,889   |  |      | $ | 516,478   | 
|Incurred But Not Reported |  |      | 679,127   |  |      |   | 994,000   | 
|                          |  |      |           |  |      |   |           | 
|Totals                    |  | $    | 1,203,016 |  |      | $ | 1,510,478 | 
|                          |  |      |           |  |      |   |           | 



Liability for losses and loss
adjustment expense activity is as follows:



|                            |  |      |           |   |      |   |             |  
|--------------------------- |  | ---- | --------- | - | ---- | - | ----------- | -
|                            |  | 2010 |           |   | 2009 |  
|Liabilitybeginning of year |  | $    | 1,510,478 |   |      | $ | 24,416,157  |  
|                            |  |      |           |   |      |   |             |  
|Incurred related to:        |  |      |           |   |      |   |             |  
|Current year                |  |      | 32,000    |   |      |   |            |  
|Prior years                 |  |      | (5,131    | ) |      |   | (2,924,184  | )
|                            |  |      |           |   |      |   |             |  
|Total incurred              |  |      | 26,869    |   |      |   | (2,924,184  | )
|                            |  |      |           |   |      |   |             |  
|Paid related to:            |  |      |           |   |      |   |             |  
|Current year                |  |      |          |   |      |   |            |  
|Prior years                 |  |      | (334,331  | ) |      |   | (19,981,495 | )
|                            |  |      |           |   |      |   |             |  
|Total paid                  |  |      | (334,331  | ) |      |   | (19,981,495 | )
|                            |  |      |           |   |      |   |             |  
|Liabilityend of year       |  | $    | 1,203,016 |   |      | $ | 1,510,478   |  
|                            |  |      |           |   |      |   |             |  



As a result of the change in
estimates of insured events in prior years and the establishment of current year reserves, the provision for losses and loss expenses increased (decreased) by $26,869 and $(2,924,184) in 2010 and 2009, respectively. The increase in 2010 resulted
from reserves established pursuant to the Reinsurance Agreement offset by favorable development on CAMICO and PDIC. The 2009 decrease related mainly to the positive development recorded as a result of updating the estimated liability for unpaid
losses and loss adjustment expenses on the finalization of the Commutation Agreement with CNA, and the recovery from VSC, as discussed in detail in Note 1.



6. SHAREHOLDERS EQUITY



AmerInst currently does not have a public market for its common stock, but the Company has historically caused Investco to purchase shares
from the Companys shareholders upon their death, disability or retirement from the practice of public accounting. The repurchase price has been equal to the year-end net book value per share for the most recently completed fiscal
year reduced by the amount of any dividends already paid on the repurchased shares during the calendar year of the repurchase and any dividends the shareholder would be entitled to receive on the repurchased shares that have not been
paid. In addition, the BMA has authorized Investco to purchase shares on a negotiated case-by-case basis, and Investco has typically negotiated share repurchases when requested by Company shareholders.



On February 25, 2011, the Board of Directors amended and
restated AmerInsts Statement of Share Ownership Policy to better manage the Companys expenditures from year to year. Under the new policy that became effective immediately, the Company will limit Investcos repurchase of Company
stock to $500,000 per



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AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



calendar year. In addition, Investco will only be authorized to repurchase shares, without Board approval, from shareholders upon their death, disability or retirement from the practice of
public accounting. Except as approved by the Board, negotiated purchases that do not satisfy these criteria will be discontinued for the foreseeable future. At the Board meeting, the Board approved all outstanding requests for repurchase
of shares amounting to $300,359, and for the remainder of 2011, Investco will still be authorized to repurchase shares up to $500,000.



7. PREMIUMS WRITTEN



Premiums written were $251,896 and $(383,926) during 2010 and 2009, respectively. The premiums written during the year ended
December 31, 2010 were attributable to premiums written under the Reinsurance Agreement and to revisions to CAMICO premium estimates for prior years. The negative premium written during the year ended December 31, 2009 resulted from the
Reinsurance Treaties being rescinded and terminated retroactive to their inception and the decision not to renew the CAMICO contract.



8. OPERATING AND MANAGEMENT EXPENSES



The Company expensed operating and management expenses of $4,091,078 and $2,744,039 during 2010 and 2009, respectively. 2010 represented
the first full year of operations for APSL following its entry into the Agency Agreement with C&F effective September 25, 2009 which mainly explains the increase in the expenses incurred during the year as follows (1) salaries and wages
amounting to $1,181,926 paid to APSL employees hired in 2010. In 2009, no payroll costs were incurred since APSL did not have any employees, and (2) increased professional, marketing, consulting and office expenses from $1,236,181 in 2009 to
$1,731,177 in 2010 mainly to develop and grow APSLs new business.



With the exception of APSL, AmerInst, AMIC Ltd., Mezco and Investco have no employees. Their operating activities, as well as certain management functions, are performed by contracted professional service
providers. Cedar Management Limited provides AmerInst and AMIC Ltd. certain management, administrative and operations services under the direction of AmerInsts Board of Directors pursuant to an agreement. The agreement may be terminated by
either party upon not more than 90 days nor less than 60 days prior written notice. Mr. Stuart Grayston, our President, was formally a director and officer of Cedar Management Limited, and Mr. Thomas R. McMahon, our Vice President and Treasurer, is
an officer, director and employee of Cedar Management Limited. The company paid $335,000 and $340,000 in fees during 2010 and 2009, respectively.



Operating and management expenses include compensation paid to members of the Board of Directors and various committees of the Board
totaling $431,809 in 2010 and $533,055 in 2009.



9. TAXATION



Under current Bermuda law, the Company and
its subsidiaries are not required to pay taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the Bermuda government that, in the event of income or capital gains taxes being imposed, the Company will be
exempted from such taxes until the year 2016. However, APSL which is a Delaware corporation domiciled in the State of Illinois is subject to taxation in the United States.



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Deferred income taxes, arising from APSL, reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2010 and 2009, management set up full valuation allowances against the deferred tax
assets as disclosed below since the success of APSL was not certain and therefore, it was more likely than not that a tax benefit would not be realized.



|                                               |  |      |            |   |      |   |          |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | -------- | -
|                                               |  | 2010 |            |   | 2009 |  
|Capitalized start-up expenses                  |  | $    | 286,221    |   |      | $ | 306,666  |  
|Operating loss carryforwards                   |  |      | 1,033,000  |   |      |   |         |  
|                                               |  |      |            |   |      |   |          |  
|Deferred tax assets before valuation allowance |  |      | 1,319,221  |   |      |   | 306,666  |  
|                                               |  |     
|Valuation allowance                            |  |      | (1,319,221 | ) |      |   | (306,666 | )
|                                               |  |      |            |   |      |   |          |  
|                                               |  |     
|Deferred tax assets net of valuation allowance |  | $    |           |   |      | $ |         |  
|                                               |  |      |            |   |      |   |          |  



10. DIVIDEND RESTRICTIONS AND STATUTORY
REQUIREMENTS



AMIC Ltd.s ability to pay
dividends to AmerInst is subject to the provisions of the Bermuda insurance and companies laws and the requirement to provide the ceding companies with collateral. Under the Companies Act, AMIC Ltd. would be prohibited from declaring or paying a
dividend at December 31, 2010 if such payment would reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities, issued share capital, and share premium accounts. As of December 31, 2010, approximately $31
million was available for the declaration of dividends to shareholders. However, due to the requirement to provide the ceding companies with collateral, approximately $21 million was available for the payment of dividends to the shareholders. In
addition, AMIC Ltd. must be able to pay its liabilities as they fall due after the payment of a dividend. Our ability to pay dividends to common shareholders and to pay our operating expenses is dependent on cash dividends from our subsidiaries. The
payment of such dividends by AMIC Ltd., including its subsidiary Investco, to us is also limited under Bermuda law by the Insurance Act and Related Regulations which require that AMIC Ltd. maintain minimum levels of solvency and liquidity.



AmerInsts ability to pay common
shareholders dividends and its operating expenses is dependent on cash dividends from AMIC Ltd. and its other subsidiaries. The payment of such dividends by AMIC Ltd. to AmerInst is limited under Bermuda law by the Bermuda Insurance Act 1978
and Related Regulations, as amended, which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended December 31, 2010 and 2009 these requirements have been met. The minimum required statutory capital and
surplus was $1,000,000 and $1,000,000 and actual statutory capital and surplus was $32,209,291 and $31,177,595 at December 31, 2010 and 2009, respectively. The minimum required level of relevant assets was $9,231,848 and $9,445,328 and actual
relevant assets was $10,869,403 and $9,445,328 at December 31, 2010 and 2009, respectively. Statutory (loss) income for the years ended December 31, 2010 and 2009 was $(294,498) and $6,704,829, respectively.



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



11. UNAUDITED CONDENSED QUARTERLY FINANCIAL DATA



|                                              |  |              |           |   |               |   |           |              |  |   |               |   |  |   |          |  
|--------------------------------------------- |  | ------------ | --------- | - | ------------- | - | --------- | ------------ |  | - | ------------- | - |  | - | -------- | -
|2010                                          |  | FIRSTQUARTER |           |   | SECONDQUARTER |   |           | THIRDQUARTER |  |   | FOURTHQUARTER |  
|Net premiums earned                           |  | $            | 96,410    |   |               | $ | 2,193     |              |  | $ | 29,555        |   |  | $ | 28,982   |  
|Commission income                             |  |              | 1,257     |   |               |   | 11,064    |              |  |   | 29,281        |   |  |   | 43,449   |  
|Net investment income                         |  |              | 77,172    |   |               |   | 117,699   |              |  |   | 70,739        |   |  |   | 139,600  |  
|Net realized gain                             |  |              | 312,368   |   |               |   | 630,843   |              |  |   | 665,369       |   |  |   | 747,964  |  
|                                              |  |              |           |   |               |   |           |              |  |   |               |   |  |   |          |  
|Total revenues                                |  |              | 487,207   |   |               |   | 761,799   |              |  |   | 794,944       |   |  |   | 959,995  |  
|                                              |  |              |           |   |               |   |           |              |  |   |               |   |  |   |          |  
|Net loss                                      |  | $            | (434,829  | ) |               | $ | (347,072  | )            |  | $ | (114,595      | ) |  | $ | (205,297 | )
|Basic and diluted net loss per share          |  | $            | (0.59     | ) |               | $ | (0.47     | )            |  | $ | (0.16         | ) |  | $ | (0.30    | )
|                                              |  |              |           |  
|2009                                          |  | FIRSTQUARTER |           |   | SECONDQUARTER |   |           | THIRDQUARTER |  |   | FOURTHQUARTER |  
|Net premiums earned                           |  | $            | 1,623,652 |   |               | $ | 1,432,223 |              |  | $ | 171,272       |   |  | $ | 8,299    |  
|Net investment income                         |  |              | 391,236   |   |               |   | 216,090   |              |  |   | 64,463        |   |  |   | 94,723   |  
|Net realized (loss) gain                      |  |              | (835,531  | ) |               |   | 919,378   |              |  |   | 1,780,292     |   |  |   | 573,450  |  
|                                              |  |              |           |   |               |   |           |              |  |   |               |   |  |   |          |  
|Total revenues                                |  |              | 1,179,357 |   |               |   | 2,567,691 |              |  |   | 2,016,027     |   |  |   | 676,472  |  
|                                              |  |              |           |   |               |   |           |              |  |   |               |   |  |   |          |  
|Net income (loss)                             |  | $            | 4,291,582 |   |               | $ | 360,897   |              |  | $ | 1,798,424     |   |  | $ | (699,366 | )
|Basic and diluted net income (loss) per share |  | $            | 5.77      |   |               | $ | 0.48      |              |  | $ | 2.43          |   |  | $ | (0.91    | )



12. SEGMENT INFORMATION



AmerInst has two operating segments: 1) reinsurance activity, which also includes investments and other activities, and 2) insurance activity, which offers professional liability solutions to professional
service firms under the Agency Agreement with C&F.



The disclosure of RINITS as a separate operating segment was discontinued in the fourth quarter of 2010 as it no longer met the quantitative thresholds prescribed by ASC 280, Segment
Reporting.



|                          |  |                    |           |  |                  |   |            |       |  |   |            |  
|------------------------- |  | ------------------ | --------- |  | ---------------- | - | ---------- | ----- |  | - | ---------- | -
|                          |  | December 31, 2010  |          
|                          |  | ReinsuranceSegment |           |  | InsuranceSegment |   |            | Total | 
|Revenues                  |  | $                  | 2,918,696 |  |                  | $ | 85,249     |       |  | $ | 3,003,945  |  
|Total losses and expenses |  |                    | 1,452,800 |  |                  |   | 2,652,938  |       |  |   | 4,105,738  |  
|Segment income (loss)     |  | $                  | 1,465,896 |  |                  | $ | (2,567,689 | )     |  | $ | (1,101,793 | )
|Identifiable assets       |  | $                  |          |  |                  | $ | 716,230    |       |  | $ | 716,230    |  



|                          |  |                    |           |   |                  |   |          |       |  |   |           | 
|------------------------- |  | ------------------ | --------- | - | ---------------- | - | -------- | ----- |  | - | --------- | 
|                          |  | December 31, 2009  |          
|                          |  | ReinsuranceSegment |           |   | InsuranceSegment |   |          | Total | 
|Revenues                  |  | $                  | 6,439,547 |   |                  | $ |         |       |  | $ | 6,439,547 | 
|Total losses and expenses |  |                    | (83,078   | ) |                  |   | 771,088  |       |  |   | 688,010   | 
|Segment income (loss)     |  | $                  | 6,522,625 |   |                  | $ | (771,088 | )     |  | $ | 5,751,537 | 
|Identifiable assets       |  | $                  |          |   |                  | $ | 100,157  |       |  | $ | 100,157   | 



The 2009 balances have been recast to reflect the discontinuation of the disclosure of RINITS as a separate operating segment in
2010 and the inclusion of the related balances within the reinsurance segment.



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##### Table of Contents

AMERINST INSURANCE GROUP, LTD.



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



13. STOCK COMPENSATION



AmerInst Professional Services Limited (APSL), a
subsidiary of AmerInst, has entered into employment agreements with four key members of senior management, which grant them phantom shares of the Company. Under these agreements, these employees were initially granted a total of 75,018 phantom
shares of the Company on the date of their employment. The phantom shares are eligible for phantom dividends paid at the same rate as regular dividends on the Companys common shares. The phantom dividends may be used only to purchase
additional phantom shares with the purchase price of such phantom shares being the net book value of the Companys actual common shares as of the end of the previous quarter. During the year ended December 31, 2010, approximately 1,867
phantom shares were granted arising from the dividends declared on the Companys common shares. Approximately 76,885 phantom shares were outstanding at December 31, 2010.



The employees interest in the phantom shares initially
granted as well as any additional shares granted from dividends declared will vest on January 1, 2015. The liability payable to the employees under this phantom share plan is equal to the difference between the value of the phantom shares based
on the net book value of the Companys actual common shares at the end of the previous quarter less the initial value and is payable in cash upon the earlier of the employee attaining 65 years of age or within 60 days of death or permanent
disability, including if such death or permanent disability occurs before January 1, 2015.



The liability relating to these phantom shares is recalculated quarterly based on the net book value of the Companys common shares at the end of each quarter. As a result of the overall decrease in
the book value of the Companys common shares during the year ended December 31, 2010, no liability has been recorded by the Company relating to these phantom shares at December 31, 2010.



14. COMMITMENTS AND CONTINGENCIES



In December 2009, APSL entered into a non-cancellable
operating lease for office space in Lisle, Illinois. The lease is renewable at the option of the lessee under certain conditions. Future lease payments for the years ended December 31 are as follows:



|     |  |   |         | 
|---- |  | - | ------- | 
|2011 |  | $ | 54,043  | 
|2012 |  |   | 55,801  | 
|2013 |  |   | 57,646  | 
|2014 |  |   | 59,568  | 
|2015 |  |   | 15,013  | 
|     |  |   |         | 
|     |  | $ | 242,071 | 
|     |  |   |         | 



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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure



There have been no
changes in, or disagreements with, accountants on accounting and financial disclosure. Our retention of Deloitte & Touche has been ratified by our Audit Committee and our shareholders. There have been no disagreements with
Deloitte & Touche with respect to any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.



Item 9A. Controls and Procedures



Disclosure Controls and Procedures



As of December 31, 2010, we carried out an evaluation
under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to
Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of December 31, 2010, our disclosure controls and procedures were
effective.



Managements Annual Report on Internal Control
Over Financial Reporting



Management of the
Company (together with its consolidated subsidiaries) is responsible for establishing and maintaining adequate internal control over financial reporting. Management conducted an assessment of the effectiveness, as of December 31, 2010, of the
Companys internal control over financial reporting, based on the framework established in Internal Control-Integrated Framework Issued by the Committee Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment
under that framework, management concluded that the Companys internal control over financial reporting was effective at the reasonable level described below as of December 31, 2010.



Our internal control over financial reporting is a process designed by or under the supervision of our
principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that
could have a material effect on our financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.



There has been no change in our internal controls over
financial reporting identified in the evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



This annual report does not include an attestation report of
the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to the permanent
exemption granted to the Company under the existing SEC rules. Consequently, this annual report does not include an attestation report of the Companys registered public accounting firm.



Item 9B. Other Information



None



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##### Table of Contents

PART III



Item 10. Directors, Executive Officers and
Corporate Governance



The information
required by Item 10 of Form 10-K with respect to identification of directors and officers is incorporated by reference from the information contained in the section captioned Election of Directors in the Companys definitive
Proxy Statement for the Annual General Meeting of Shareholders to be held on June 2, 2011 (the Proxy Statement), a copy of which we intend to file with the SEC within 120 days after the end of the year covered by this Annual Report
on Form 10-K. The company has two executive officers, one of which is a director of the Company.



Code of Ethics



We have a Code of Business Conduct and Ethics that applies to all directors, officers and employees, including our principal executive officer and our principal financial officer. You can find our Code of
Business Conduct and Ethics on our internet site, www.amerinst.bm. We will post any amendments to the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the rules of the SEC on our internet site.



Section 16 Compliance



Information appearing under the caption Other
MattersSection 16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement is incorporated herein by reference.



Audit Committee



Information appearing under the captions Election of DirectorsMeetings and Committees of the Board and
Report of the Audit Committee in the Proxy Statement is incorporated herein by reference.



Item 11. Executive Compensation



The information required by Item 11 of the Form 10-K is incorporated by reference from the information contained in the section
captioned Election of DirectorsExecutive and Director Compensation in the Proxy Statement.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|-------- | ----------------------------------------------------------------------------------------------



The information required by Item 12 of Form 10-K is
incorporated by reference from the information contained in the section captioned Other MattersSecurity Ownership of Certain Beneficial Owners and Management in the Proxy Statement.



Item 13. Certain Relationships and Related
Transactions, and Director Independence



The
information required by Item 13 of Form 10-K is incorporated by reference from the information contained in the sections captioned Other MattersCertain Relationships and Related Transactions and Election of
Directors in the Proxy Statement.



Item 14. Principal Accountant Fees and Services



The information required by Item 14 of Form 10-K is incorporated by reference from the information in the
section captioned Appointment of Auditors in the Proxy Statement.



53



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##### Table of Contents

PART IV



Item 15. Exhibits and Financial Statement
Schedules



|(a)(1) | See Index to Financial Statements and Schedules on page 30.
|------ | -----------------------------------------------------------



|(a)(2) | See Index to Financial Statements and Schedules on page 30.
|------ | -----------------------------------------------------------



|(a)(3) | See Index to Exhibits set forth on pages 56  57.
|------ | -------------------------------------------------



|(b) | See Index to Exhibits.
|--- | ----------------------



|(c) | See Index to Financial Statements and Schedules on page 30.
|--- | -----------------------------------------------------------



INVESTMENTSSCHEDULE I



AmerInst Insurance Group, Ltd.



Consolidated Summary of Investments

as of December 31, 2010



|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 
|--------------------------------------------------- |  | -------- | ---------- |  | ---------- | - | ---------- | ---------------------------------------- |  | - | ---------- | 
|Type of investment                                  |  | Cost (1) |            |  | Fair Value |   |            | Amount at whichshown on theBalance Sheet | 
|Fixed maturity investments:                         |  |          |            |  |            |   |            |                                          |  |   |            | 
|Bonds:                                              |  |          |            |  |            |   |            |                                          |  |   |            | 
|U.S government and agencies and authorities         |  | $        | 1,931,335  |  |            | $ | 1,959,588  |                                          |  | $ | 1,959,588  | 
|States, municipalities and political subdivisions   |  |          | 8,307,102  |  |            |   | 8,465,737  |                                          |  |   | 8,465,737  | 
|Corporate debt securities                           |  |          | 500,828    |  |            |   | 504,156    |                                          |  |   | 504,156    | 
|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 
|Total fixed maturities                              |  |          | 10,739,265 |  |            |   | 10,929,481 |                                          |  |   | 10,929,481 | 
|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 
|Equities:                                           |  |          |            |  |            |   |            |                                          |  |   |            | 
|Common stocks:                                      |  |          |            |  |            |   |            |                                          |  |   |            | 
|Bank, trust and insurance companies                 |  |          | 1,308,403  |  |            |   | 2,494,220  |                                          |  |   | 2,494,220  | 
|Hedge fund, industrial, miscellaneous and all other |  |          | 8,034,268  |  |            |   | 13,135,788 |                                          |  |   | 13,135,788 | 
|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 
|Total equity securities                             |  |          | 9,342,671  |  |            |   | 15,630,008 |                                          |  |   | 15,630,008 | 
|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 
|Total investments                                   |  | $        | 20,081,936 |  |            | $ | 26,559,489 |                                          |  | $ | 26,559,489 | 
|                                                    |  |          |            |  |            |   |            |                                          |  |   |            | 



|(1) | Adjusted cost of equity securities, taking into account other than temporary impairment charges, and, as to fixed maturities, original cost reduced by repayments and
adjusted for amortization of premiums or accrual of discounts.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



54



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SIGNATURES



Pursuant to the requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |  |  |                                |  |                                                            
|--------------------- |  |  |  | ------------------------------ |  | -----------------------------------------------------------
|Dated: March 25, 2011 |  |  |  | AMERINST INSURANCE GROUP, LTD.
|                      |  |  | 
|                      |  |  |  | By:                            |  | /S/    STUART H.
GRAYSTON                                  
|                      |  |  |  |                                |  | Stuart H. Grayston, President (Principal Executive Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.



|                                             |  |                                                                        |  |               
|-------------------------------------------- |  | ---------------------------------------------------------------------- |  | --------------
|Name                                         |  | Title                                                                  |  | Date          
|                                             |  |                                                                       
|/S/    STUART H.
GRAYSTON Stuart H. Grayston |  | President and Director
(Principal Executive Officer)                   |  | March 25, 2011
|                                             |  |                                                                       
|/S/ THOMAS R.
MCMAHON Thomas R. McMahon      |  | Vice-President, Treasurer
(Principal Financial and Accounting Officer) |  | March 25, 2011
|                                             |  |                                                                       
|/S/    IRVIN F.
DIAMOND Irvin F. Diamond     |  | Director and Chairman of the Board                                     |  | March 25, 2011
|                                             |  |                                                                       
|/S/    JEROME A.
HARRIS Jerome A. Harris     |  | Director and Vice-Chairman of the Board                                |  | March 25, 2011
|                                             |  |                                                                       
|/S/    JEFFRY I.
GILLMAN Jeffry I. Gillman   |  | Director                                                               |  | March 25, 2011
|                                             |  |                                                                       
|/S/    DAVID R.
KLUNK David R. Klunk         |  | Director                                                               |  | March 25, 2011
|                                             |  |                                                                       
|/S/    THOMAS B.
LILLIE Thomas P. Lillie     |  | Director                                                               |  | March 25, 2011
|                                             |  |                                                                       
|/S/    DAVID N.
THOMPSON David N. Thompson   |  | Director                                                               |  | March 25, 2011



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##### Table of Contents

INDEX TO EXHIBITS



Year ended December 31, 2010



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3(i)           |  | Memorandum of Association of AmerInst Insurance Group Ltd. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|               | 
|3(ii)          |  | Bye-laws of the Company (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|4.1            |  | Section 47 of the Companys Bye-lawsincluded in Exhibit 3(ii) above                                                                                                                                                                                                                                                                                                                                                                                                                            
|               | 
|4.2            |  | Statement of Share Ownership Policy, as Amended (2)                                                                                                                                                                                                                                                                                                                                                                                                                                             
|               | 
|10.1           |  | Reinsurance Treaty between AmerInst Insurance Company, Inc. and Virginia Surety Company, Inc. (3)                                                                                                                                                                                                                                                                                                                                                                                               
|               | 
|10.2           |  | Agreement between Country Club Bank and AIIC (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|10.3           |  | Agreement between Country Club Bank and AmerInst Insurance Group, Inc. (3)                                                                                                                                                                                                                                                                                                                                                                                                                      
|               | 
|10.4           |  | Revised Management Agreement between Vermont Insurance Management, Inc. and AIIC dated May 1, 1997(4), Addenda to Management Agreement dated July 1, 1997 (5), Addenda to
Management Agreement dated July 1, 1998 (6), Management Agreement between USA Offshore Management, Ltd. and AmerInst Insurance Company Ltd. (AMIC Ltd.) dated as of December 2, 1999 (7), and Addenda to Agreement between AmerInst
Insurance Company Ltd. and USA Offshore Management, Ltd. dated June 2, 2000 (7).
|               | 
|10.5           |  | Escrow Agreement among AIIC, United States Fire Insurance Company and Harris Trust and Savings Bank dated March 7, 1995 (8)                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|10.6           |  | Security Trust Agreement among AIIC, Harris Trust and Savings Bank and Virginia Surety Company, Inc. dated March 9, 1995 (9) and Agreement of Resignation, Appointment and
Acceptance by and among AMIC Ltd., Harris Trust and Savings Bank and The Bank of New York dated as of May 8, 2000 (13)                                                                                                                                                                                               
|               | 
|10.7           |  | Investment Advisory Agreement For Discretionary Accounts between Amerinst Insurance Company and Harris Associates L.P. dated as of January 22, 1996, as amended by the Amendment
to Investment Advisory Agreement for Discretionary Accounts dated as of April 2, 1996 (1)                                                                                                                                                                                                                      
|               | 
|10.8           |  | Exchange Agreement between the Company and AMIG, dated as of January 20, 1999 (1)                                                                                                                                                                                                                                                                                                                                                                                                               
|               | 
|10.9           |  | Registrar and Transfer Agent Agreement between the Company and Butterfield Corporate Services Limited dated as of January 1, 2001 (10)                                                                                                                                                                                                                                                                                                                                                          
|               | 
|10.10          |  | Reinsurance Placement Slip between AMIC Ltd. and Professionals Direct Insurance Company effective January 1, 2003 (11)                                                                                                                                                                                                                                                                                                                                                                          
|               | 
|10.11          |  | Director Compensation Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|               | 
|10.12          |  | Management Agreement between USA Risk Group (Bermuda), Ltd., Cedar Management Limited and AMIC Ltd. dated July 1, 2008 (12)                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|10.13          |  | Addenda to Management Agreement between USA Risk Group (Bermuda), Ltd., Cedar Management Limited and AMIC Ltd. effective July 1, 2008 (12)                                                                                                                                                                                                                                                                                                                                                      
|               | 
|10.14          |  | Addendum to Management Agreement between USA Risk Group (Bermuda), Ltd., Cedar Management Limited and AMIC Ltd. effective January 1, 2010 (14)                                                                                                                                                                                                                                                                                                                                                  
|               | 
|10.15          |  | Addendum to Management Agreement between USA Risk Group (Bermuda), Ltd., Cedar Management Limited and AMIC Ltd. effective January 1, 2011                                                                                                                                                                                                                                                                                                                                                       
|               | 
|10.16          |  | Employment Agreement effective November 24, 2009 between AmerInst Professional Services, Limited and F. Kyle Nieman III effective November 24, 2009
(14)                                                                                                                                                                                                                                                                                                                                        



56



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                           
|10.17          |  | Agency Agreement effective September 25, 2009 between AmerInst Professional Services, Limited, The North River Insurance Company, United States Fire Insurance Company,
Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (13)                     
|               | 
|10.18          |  | Professional Liability Quota Share Agreement dated September 25, 2009 between AmerInst Insurance Company, Ltd., The North River Insurance Company, United States Fire Insurance
Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (13)(15)
|               | 
|21             |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                        
|               | 
|31.1           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                              
|               | 
|31.2           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                              
|               | 
|32.1           |  | Certification of Stuart H. Grayston pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          
|               | 
|32.2           |  | Certification of Thomas R. McMahon pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                           



|(1) | Filed with the Companys Registration Statement on Form S-4, Registration No. 333-64929 and incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(2) | Filed with the Companys Current Annual Report on Form 8 dated December 18, 2008 and incorporated herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | Filed with AMIGs Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(4) | Filed with AMIGs Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(5) | Filed with AMIGs Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(6) | Filed with AMIGs Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(7) | Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(8) | Filed with AMIGs Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(9) | Filed with the Companys Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(10) | Filed with the Companys Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(11) | Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and incorporated herein by reference.
|---- | ---------------------------------------------------------------------------------------------------------------------------------

|(12) | Filed with the Companys Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(13) | Filed with the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and incorporated herein by reference.
|---- | -------------------------------------------------------------------------------------------------------------------------------------

|(14) | Filed with the Companys Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated herein by reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(15) | Certain provisions are subject to a Request for Confidential Treatment.
|---- | -----------------------------------------------------------------------



57