<PAGE>


                        QUOTA SHARE REINSURANCE AGREEMENT
                        ---------------------------------

                                     BETWEEN

                         PAFCO GENERAL INSURANCE COMPANY
                       (HEREINAFTER CALLED THE "COMPANY")

                                       AND

                    NATIONAL UNION FIRE INSURANCE COMPANY OF
                                 PITTSBURGH, PA.
                      (HEREINAFTER CALLED THE "REINSURER")


                                      INDEX
                                      -----

               ARTICLE                    SUBJECT                          PAGE
               -------                    -------                          ----


                  I     BUSINESS COVERED................................    1.
                 II     TERM AND TERMINATION............................    1.
                III     TERRITORY.......................................    1.
                 IV     QUOTA SHARE PARTICIPATION AND LIMIT.............    1.
                  V     WARRANTY........................................    2.
                 VI     PREMIUM AND COMMISSION..........................    2.
                VII     COMMUTATION.....................................    2.
               VIII     DEFINITIONS.....................................    2.
                 IX     REPORTS AND ACCOUNTING..........................    2.
                  X     EXCLUSIONS......................................    3.
                 XI     ACCESS TO RECORDS...............................    4.
                XII     ARBITRATION.....................................    4.
               XIII     CONFIDENTIALITY.................................    5.
                XIV     ERRORS AND OMISSIONS............................    5.
                 XV     FEDERAL EXCISE TAX..............................    5.
                XVI     FOLLOW THE FORTUNES.............................    5.
               XVII     GOVERNING LAW...................................    5.
              XVIII     INSOLVENCY......................................    6.
                XIX     OFFSET..........................................    7.
                 XX     SEVERABILITY....................................    7.
                XXI     SPECIAL TERMINATION OR SETTLEMENT...............    7.
               XXII     CURRENCY REVALUATION............................    8.

         ATTACHMENTS:
         NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE, (BRMA 35A)







<PAGE>

                        QUOTA SHARE REINSURANCE AGREEMENT

                                     BETWEEN

     SUPERIOR INSURANCE COMPANY AND ITS WHOLLY-OWNED INSURANCE SUBSIDIARIES
                       (HEREINAFTER CALLED THE "COMPANY")

                                       AND

                    NATIONAL UNION FIRE INSURANCE COMPANY OF
                                 PITTSBURGH, PA.
                      (HEREINAFTER CALLED THE "REINSURER")

    ************************************************************************

ARITCLE I                         BUSINESS COVERED
---------                         ----------------

The Reinsurer hereby agrees to reinsure a quota share of policies classified by
the Company as non-standard automobile; both liability and physical damage
(including business assumed that is directly underwritten by the Company)
in-force on January 1, 2000 and effective during the term of this agreement.

ARITCLE II                        TERM AND TERMINATION
----------                        --------------------

This Agreement commences at 12:01 a.m. Eastern Standard Time, January 1, 2000
and shall remain in force until 11:59 p.m. Eastern Standard Time, December 31,
2000. Either party may terminate effective on the first day of any calendar
quarter with 60 days advance written notice. The Reinsurer shall remain liable
for loss under reinsured policies effective prior to the termination date.

ARITCLE III                       TERRITORY
-----------                       ---------

This Agreement covers risks located nationwide, as per the Company's original
Policies.

ARTICLE IV        QUOTA SHARE PARTICIPATION AND LIMIT
----------        -----------------------------------

The aggregate quota share cession shall be at the option of the Company and
subject to a minimum of 20% and a maximum of 75%. However, the maximum cession
will be limited to $11,000,000 per quarter which shall be in addition to the
cession of the in-force business which shall be at the minimum provisional
percent. The provisional quota share percent shall be 20%. In the event this
produces in excess of $11 million for any one quarter, the dollar amount cession
shall be reduced to $11,000,000 dollars for the Company. The quota share percent
applicable for the Company shall be the ratio of the adjusted dollar cession to
the gross subject written premium for the Company in that quarter. This
quarterly limit can be increased by mutual agreement between the Reinsurer and
the Company. The Company shall notify the Reinsurer prior to the last day of the
calendar quarter of the quota share percent.

The Reinsurer's liability for aggregate losses, including allocated loss
adjustment expenses (and unallocated loss adjustment expenses, where applicable
under REPORTS AND ACCOUNTING), shall be limited to 97% of earned premium ceded
for all business effective in all calendar quarters plus the in-force business.
The calculation shall be from inception to date.

ARTICLE V                         WARRANTY
---------                         --------

The Company shall maintain catastrophe and per risk reinsurance limiting the
ceded loss from any one occurrence or for any one risk so as not to exceed
$250,000 or $350,000, respectively, or it shall be so deemed.


                                        1
<PAGE>

ARTICLE VI                        PREMIUM AND COMMISSION
----------                        ----------------------

The Company will pay the Reinsurer a premium equal to the pro rata share of
premium applicable on all policies ceded and the Reinsurer shall allow the
Company a minimum and provisional ceding commission of 18% on such premium. The
ceding commission slides 1 for 1 for each 1.0% decrease in the Loss Ratio below
79% up to a maximum ceding commission of 31% at a 66% loss ratio. This
calculation shall be from inception to date for all business ceded effective in
all calendar quarters plus the in-force business.

ARITCLE VII                       COMMUTATION
-----------                       -----------

The Company may request and the Reinsurer shall grant a commutation of all
liabilities to be effective at the end of any calendar quarter. The Reinsurer
shall pay the Company the outstanding case reserves plus an amount for incurred
but not reported losses as mutually agreed. In the event mutual agreement cannot
be reached, the Reinsurer may appoint an independent actuary to establish the
incurred but not reported losses. The Company shall notify the Reinsurer of such
request within 60 days of the close of the calendar quarter. In such event the
Company shall pay the positive Funds Withheld Balance to the Reinsurer and the
Company shall release the Reinsurer of any and all liabilities.

ARTICLE VIII                      DEFINITIONS
------------                      -----------

Funds Withheld Balance shall mean:

         Previous Funds Withheld Balance,
         plus 97% of ceded written premium,
         minus ceding commission,
         minus ceded paid losses (including allocated loss adjustment expenses),
         minus ceded paid unallocated loss adjustment expenses, if applicable.


Loss Ratio shall mean losses paid and outstanding, including IBNR and allocated
loss adjustment expenses, divided by earned premium.

Premium shall mean the premium charged the insured, net of returned premium,
however, uncollectable premium shall not be deemed a return premium.

Allocated loss adjustment expenses shall be as defined under statutory
accounting practices.

Unallocated loss adjustment expenses shall be as defined under statutory
accounting practices.

ARTICLE IX                        REPORTS AND ACCOUNTING
----------                        ----------------------

Within 45 days after the end of each calendar quarter, the Company shall furnish
an account statement to the Reinsurer, for their share on the Business Covered
including the following:

      6.    Written premiums-credit

      7.    Commission-debit

      8.    Net losses (including allocated loss adjustment expenses) paid by
            the Company - debit

      9.    Reserve for outstanding losses including incurred but not reported
            (including allocated loss adjustment expenses).

      10.   Unearned Premium.

In the event the loss ratio is in excess of 85%, the Reinsurer shall be liable
for unallocated loss adjustment expenses equal to 1% of earned premium for each
Loss Ratio point in excess of 85%, however, not in excess of 6% of earned
premium.


                                        2
<PAGE>

When applicable, the coverage for unallocated loss adjustment expenses
shall be included in the maximum limit of 97% of earned premium ceded referred
to in QUOTA SHARE PARTICIPATION AND LIMIT. The forgoing shall be a combined
account for all business effective in all calendar quarters plus the in-force
business. The Company shall report this information separately for all business
effective in each calendar quarter plus a report for the in-force business.

The Company will pay the Reinsurer 3% of the premium with the balance, if any,
being held in a Funds Withheld Balance for subsequent payment of losses,
commission adjustments and return premiums. Amounts due the Company shall be
withdrawn from the Funds Withheld Balance and if the Funds Withheld Balance is
negative, the Reinsurer shall pay the amount due.


ARTICLE X                         EXCLUSIONS
---------                         ----------
This reinsurance does not apply to the following:

f. Any actual or alleged failure, malfunction or inadequacy of:

      3)    Any of the following, whether belonging to any insured or to others:
            g)    Computer hardware, including microprocessors;
            h)    Computer application software;
            i)    Computer operating systems and related software;
            j)    Computer networks;
            k)    Microprocessors (computer chips) not part of any computer
                  system, or
            l)    Any other computerized or electronic equipment or components;
                  or

      4)    Any other products, an any services, data or functions that directly
            or indirectly use or rely upon, in any manner, any of the terms
            listed in paragraph 2.a. 1);

      due to the inability to correctly recognize, process, distinguish,
      interpret or accept the year 2000 and beyond.

g.    Any advice, consultation, design, evaluation, inspection, installation,
      maintenance, repair, replacement or supervision provided or done by the
      Company or for the Company to determine, rectify or test for, any
      potential or actual problems described in paragraph 2.a.

h.    Any loss or liability accruing to the Company directly or indirectly from
      any insurance written by or through any Pool or Association including
      Pools or Associations in which membership by the Company is required under
      any statutes or regulations(other than assigned risk automobile plans).

i.    Business excluded by the attached Nuclear Incident Exclusion Clauses -
      Liability - Reinsurance.

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

ARTICLE XI                        ACCESS TO RECORDS
----------                        -----------------

The Reinsurer, or its duly authorized representative, shall have free access at
all reasonable times during and after the currency of this agreement, to books
and records maintained by any of the division, department and branch offices of
the Company which are involved in the subject matter of this Agreement and which
pertain to the reinsurance provided hereunder and all claims made in connection
therewith. Notwithstanding the provisions of the preceding sentence, if
undisputed balances due from the Reinsurer under this Agreement have not been
paid for the two most recent reported calendar quarters, the Reinsurer shall not
have access to any of the Company's records relating to this Agreement without
the specific consent of the Company.


                                       3
<PAGE>

ARTICLE XII                       ARBITRATION
-----------                       -----------

A.    All disputes or differences arising out of the interpretation of this
      Agreement shall be submitted to the decision of two arbitrators, one to be
      chosen by each party, and in the event of the arbitrators failing to
      agree, to the decision of an umpire to be chosen by the arbitrators. The
      arbitrators and umpire shall be disinterested active or retired executive
      officials of fire or casualty insurance or reinsurance companies or
      Underwriters at Lloyd's, London. If either of the parties fails to appoint
      an arbitrator within one month after being required by the other party in
      writing to do so, or if the arbitrators fail to appoint an umpire within
      one month of a request in writing by either of them to do so, such
      arbitrator or umpire, as the case may be, shall at the request of either
      party be appointed by a Justice of the Supreme Court of the State of New
      York.

B.    The arbitration proceeding shall take place in New York, New York. The
      applicant shall submit its case within one month after the appointment of
      the court of arbitration, and the respondent shall submit its reply within
      one month after the receipt of the claim. The arbitrators and umpire are
      relieved from all judicial formality and may abstain from following the
      strict rules of law. Punitive damages shall not be awarded by the panel
      against either party which are apart from the punitive damages that may be
      in dispute. They shall settle any dispute under the Agreement according to
      an equitable rather than a strictly legal interpretation of its terms.

C.    Their written decision shall be provided to both parties and shall be
      final and not subject to appeal.

D.    Each party shall bear the expenses of his arbitrator and shall jointly and
      equally share with the other the expenses of the umpire and of the
      arbitration.

E.    This Article shall survive the termination of this Agreement.

ARTICLE XIII                      CONFIDENTIALITY
------------                      ---------------

All terms and conditions of this Agreement and any materials provided in the
course of inspection shall be kept confidential by the Reinsurer as against
third parties, unless the disclosure is required pursuant to process of law or
unless the disclosure is to Reinsurer's retrocessionaires, financial auditors or
governing regulatory bodies. Disclosing or using this information for any
purpose beyond the scope of this Agreement, or beyond the exceptions set forth
above, is expressly forbidden without the prior consent of the Company.

ARTICLE XIV                       ERRORS AND OMISSIONS
-----------                       --------------------

Any inadvertent delay, omission or error shall not relieve either party hereto
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified
immediately upon discovery.

ARTICLE XV                        FEDERAL EXCISE TAX
----------                        ------------------

(Federal Excise Tax applies only to those Retrocessionaires, excepting
Underwriters at Lloyd's London and other Retrocessionaires exempt from Federal
Excise Tax, who are domiciled outside the United States of America.) A. The
Retrocessionaires has agreed to allow for the purpose of paying the Federal
Excise Tax 1% of the premium payable hereon to the extent such premium is
subject to Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the
Retrocessionaires will deduct 1% from the amount of the return and the
Retrocedent or its agent should take steps to recover the Tax from the United
States Government.

ARTICLE XVI                       FOLLOW THE FORTUNES
-----------                       -------------------

C.    The Reinsurer's liability shall attach simultaneously with that of the
      Company and shall be subject in all respects to the same risks, terms,
      conditions, interpretations, waivers, and to the same modification,
      alterations and

                                        4
<PAGE>

      cancellations as the respective insurances (or reinsurances) of the
      Company, the true intent of this Agreement being that the Reinsurer shall,
      in every case to which this Agreement applies, follow the underwriting
      fortunes of the Company.

D.    Nothing shall in any manner create any obligations or establish any rights
      against the Reinsurer in favor of any third parties or any persons not
      parties to this Agreement.

ARTICLE XVII                      GOVERNING LAW
------------                      -------------

This Agreement shall be governed by and construed in accordance with the laws of
the state of New York.





















                                        5
<PAGE>

ARTICLE XVIII                     INSOLVENCY
-------------                     ----------

E.    In the event of insolvency and the appointment of conservator, liquidator,
      or statutory successor of the ceding company, the portion of any risk or
      obligation assumed by the reinsurer shall be payable to the conservator,
      liquidator, or statutory successor of the company having authority to
      allow such claims: without diminution because of that insolvency, or
      because the conservator, liquidator, or statutory successor has failed to
      pay all or a portion of any claims. Payments directly to the ceding
      insurer or to its conservator, liquidator, or statutory successor, except
      where the contract of insurance or reinsurance specifically provides
      another payee of such reinsurance in the event of the insolvency of the
      ceding insurer. The reinsurance contract may provide that the conservator,
      liqudator, or statutory successor of a ceding insurer shall give written
      notice of the pendency of a claim against the ceding insurer indicating
      the policy or bond reinsured, within a reasonable time after such claims
      is filed and the reinsurer may interpose, at its own expense, in the
      proceeding where such claims is to be adjusticated, any defense or
      defenses which it amy deem available to the ceding insurere or its
      conservator, liquidator, or statutory successor. The expense thus incurred
      by the reinsurer shall be payable subject to court approval out of the
      estate of the insolvent ceding insurer as part of the expense of
      conservation or liquidation to the extent of a proportionate share of the
      benefit which may accrue to the ceding insurer in conversation or
      liquidation, solely as result of the defense undertaken by the reinsurer.
      It is agreed, however, that the liquidator, receiver, conservator or
      statutory successor of the Company shall give written notice to the
      Reinsurers of the pendency of a claim against the Company which would
      involve a possible liability on the part of the Reinsurers, indicating the
      policy or bond reinsured, within a reasonable time after such claim is
      filed in the conservation or liquidation proceeding or in the
      receivership. It is further agreed that during the pendency of such claim
      the Reinsurers may investigate such claim and interpose, at their own
      expense, in the proceeding where such claim is to be adjudicated, any
      defense or defenses that they may deem available to the Company or its
      liquidator, receiver, conservator, or statutory successor. The expense
      thus incurred by the Reinsurers shall be chargeable, subject to the
      approval of the Court, against the Company as part of the expense of
      conservation or liquidation to the extent of a pro rata share of the
      benefit which may accrue to the Company solely as a result of the defense
      undertaken by the Reinsurers.

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

G.    The reinsurance shall be payable by the Reinsurers to the Company or to
      its liquidator, receiver, conservator, or statutory successor, except as
      provided by Section 4118(a) (1) (A) and 1114 (c) of the New York Insurance
      Law or except (a) where the Agreement specifically provides another payee
      of such reinsurance in the event of the insolvency of the Company, and (b)
      where the Reinsurers with the consent of the direct insured or insureds
      have voluntarily assumed such policy obligations of the Company as direct
      obligations of the Reinsurers to the payees under such policies and in
      substitution for the obligations of the Company to the payees. Then, and
      in that event only, the Company, with the prior approval of the
      certificate of assumption on New York risks by the Superintendent of
      Insurance of the State of New York, is entirely released from its
      obligation and the Reinsurers pay any loss directly to payees under such
      policy.

H.    Notwithstanding clauses A, B, and C, where the Company is authorized under
      the Insurance Companies Act (Canada) to insure in Canada risks, in the
      event of the insolvency of the Company, reinsurance payable in respect of
      the insurance business in Canada of the Company shall be payable to the
      Chief Agent in Canada of the Company or to the liquidator, receiver,
      conservator or statutory successor appointed in Canada in respect of the
      insurance business in Canada of the Company without diminution because of
      the insolvency of the Company or because the Company or a liquidator,
      receiver, conservator or statutory successor of the Company has failed to
      pay all or any portion of any claim. All other terms and conditions of
      clauses A, B, and C remain in effect and apply to this clause D which
      shall prevail if there is a conflict or inconsistency.

ARTICLE XIX                       OFFSET
-----------                       ------

Each party hereto shall have, and may exercise at any time and from time to
time, the right to offset any undisputed balance or balances, whether on account
of premiums or on account of losses, due from such party to the other (or, if



                                       5
<PAGE>

more than one, any other) party hereto under this Agreement or under any other
reinsurance agreement heretofore or hereafter entered into by and between them,
and may offset the same against any undisputed balance or balances due to the
former from the latter under the same or any other reinsurance agreement between
them, and the party asserting the right of offset shall have and may exercise
such right whether the undisputed balance or balances due to such party from the
other are on account of premiums or on account of losses and regardless of the
capacity, whether as assuming insurer or as ceding insurer, in which each party
acted under the agreement or, if more than one, the different agreements
involved

Where the Company is authorized under the Insurance Companies Act (Canada) to
insure in Canada risks, for the purpose of this Article, the branch of a Company
in Canada shall be considered as a party separate and distinct from the Company
and the right of offset provided for in this Article shall belong to and be
applied against that branch as though it were a separate and distinct party.


ARTICLE XX                        SEVERABILITY
----------                        ------------

If any provision of this Agreement shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any state, such provision shall be
considered void in such state, but this shall not affect the validity or
enforceability of any other provision of this Agreement or the enforceability of
such provision in any other jurisdiction.


ARTICLE XXI                       SPECIAL TERMINATION OR SETTLEMENT
-----------                       ---------------------------------

SECTION I (TERMINATION)
A. Either party may terminate this Agreement immediately in the event that:
      3.    The other party should at any time become insolvent, or suffer any
            impairment of contributed capital, or file a petition in bankruptcy,
            or go into liquidation, rehabilitation, or voluntary supervision, or
            have a receiver appointed, or be acquired or controlled by any other
            insurance company or organization, or
      4.    There is a severance of obstruction of free and unfettered
            communication and/or normal commercial and/or financial intercourse
            between the United States of America and the country in which the
            Reinsurer is incorporated or has its principal office as a result of
            war, currency regulations, or any circumstances arising out of
            political, financial or economic emergency.


B. Either party may terminate this Agreement immediately in the event that:
      3.    Upon application of the NAIC Insurance Regulatory Information System
            (IRIS) tests to the Company's quarterly and annual statement (which
            the Company hereby agrees to furnish the Reinsurer upon request) it
            is found that four (4) or more of the Company's IRIS financial ratio
            values are outside of the usual range established in the IRIS
            system.
      4.    Upon review of the Insurance Solvency International ISI) Performance
            Tests as published with respect to the Company (or upon application
            of such Performance Tests to the Company's annual financial
            statements which the Company hereby agrees to furnish to the
            Reinsurer upon request) it is found that four (4) or more of the
            Company's ratios are outside of normal range (as defined by the ISI
            standard).

Termination under A. or B. shall be automatic. The Reinsurer will specify the
mode of payment, i.e. a run-off basis or a clean-cut basis with portfolio
transfer, if applicable.

SECTION II (SETTLEMENT)
After termination of this Agreement under this or any article, including the
natural expiry of the Agreement, if the Reinsurer has any residual liability to
the Company, the Company will, at the request of the Reinsurer, furnish to the
Reinsurer statements as specified in Section B1., above, and if four or more
values are outside of the usual range established in the IRIS or ISI system (as
applicable in accordance with Section B1., above) the Reinsurer shall have the
option of an immediate commutation in accordance with the commutation article.
In addition to the payments specified in that article the Reinsurer shall return
the unearned premium and the Company will allow a deduction of commission equal
to the average ceding commission on the ceded premium.



                                       7
<PAGE>

ARTICLE XXII                      CURRENCY REVALUATION
------------                      --------------------

It is agreed that underwriting to contractual and/or understanding limits will
be done in terms of United States (U.S.) dollar equivalent on the basis of
exchange rates in effect at the time of inception of new or renewal business or
at the time an addition to an existing risk takes place. In the event there is a
reduction in parity value of the U.S. dollar from that existing at the time the
risk was written which results in the contractual and/or understanding limits
being exceeded, the Company shall be held covered for such excess until next
renewal of the risk, at which time underwriting will then conform to the
contractual and/or understanding U.S. dollar limits in effect at the time.


IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be executed
by their authorized representative.

In:                     this             day of                       2000
    -------------------      -----------        ----------------------

                 SUPERIOR INSURANCE COMPANY AND ITS WHOLLY-OWNED
                             INSURANCE SUBSIDIARIES


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



and in:                this              day of                         2000
        ---------------     ------------        ------------------------

            NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.


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











                                        8