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                               SERVICES AGREEMENT

        AGREEMENT,   dated  as  of  December  11,  1996,  by  and  between  PXRE
Reinsurance  Company,  a  Connecticut  corporation  ("PXRE")  and  Transnational
Reinsurance Company, a Connecticut corporation ("Transnational").

                              W I T N E S S E T H :

        WHEREAS,  Transnational  will,  after the merger of PXRE Corporation and
Transnational Re Corporation, be a wholly-owned subsidiary of PXRE; and

        WHEREAS, Transnational does not have any employees or facilities and the
parties to this Agreement  believe that the business of  Transnational  would be
more efficiently and economically conducted by PXRE than by Transnational; and

        WHEREAS,  Transnational  desires PXRE to provide, and PXRE has agreed to
provide to Transnational, the services of certain of its personnel, all upon the
terms and conditions contained herein.

        NOW, THEREFORE,  in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:

        1.  Subject  to  the  provisions  of  this  Agreement,   PXRE  shall  be
responsible for supervising and controlling all organizational,  operational and
management  functions  of  Transnational  and its  business,  including  without
limitation, the following:

             (a) the exercise of general and active management of the day-to-day
        operations of Transnational;

             (b) the  transaction of  reinsurance  business,  including  without
        limitation,  (x) the  negotiation  and execution of any and all binders,
        policies,   certificates,   agreements   and  contracts  of  reinsurance
        (including, without limitation,  retrocessional reinsurance) in the name
        of   Transnational,   (y)  the  collection  of  premiums  on  behalf  of
        Transnational and (z) the rejection, adjustment,  settlement and payment
        of claims and settlement of losses;

             (c) the supervision of investment and portfolio management services
        performed by third parties pursuant to investment management agreements;

             (d)  the  maintaining  of  books  and  records  of   Transnational,
        including  adequate  and  correct  accounts  of the assets and  business
        transactions of Transnational; and

                                        


 

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             (e) the preparation  and filing of reports  required to be filed by
        Transnational  with  appropriate  governmental  authorities,   including
        without  limitation,  annual,  quarterly and other periodic filings with
        insurance regulatory authorities and tax returns, and the payment of all
        taxes and other fees which may be due and owing by Transnational.

        2. PXRE shall provide Transnational with the services of such executive,
managerial,  administrative  and other  personnel as may be necessary to conduct
Transnational's operations pursuant to this Agreement.

        3.  PXRE  shall  provide   Transnational   with  such   operational  and
administrative  facilities,  data  processing  equipment  and  services,  office
equipment,  furnishings  and fixtures,  and such other support  assets as may be
necessary or desirable for the operation and  administration of  Transnational's
business pursuant to this Agreement.

        4. PXRE shall have the  authority  to appoint  and  remove,  as it deems
appropriate from time to time, legal counsel, investment advisors,  accountants,
auditors and actuaries of  Transnational  and to determine the  reasonable  fees
payable by  Transnational  to such  persons  for such  services,  subject to the
approval  of the  Board  of  Directors  of  Transnational  with  respect  to the
appointment and removal of independent public accountants and actuaries.

        5. PXRE shall conduct the business of Transnational only in the ordinary
course and in  substantially  the same manner as it conducts  its own  business,
subject to the exercise of its reasonable business judgment.

        6. All costs and expenses incurred by PXRE for the employees, equipment,
facilities and other items provided by PXRE pursuant to this Agreement  shall be
allocated as follows:

             (a)  all  reinsurance   losses,   loss   adjustment   expenses  and
        underwriting expenses of Transnational,  including,  but not limited to,
        all  related  claim  adjustment  services,   commissions  and  brokerage
        expenses,  premiums on ceded  retrocesssions (if any) and all other loss
        adjustments  and  underwriting  expenses to be  reflected  in the annual
        statement to be filed with state insurance regulatory authorities, shall
        be paid by Transnational;

             (b) all  investment  expenses  of  Transnational  shall  be paid by
        Transnational;

             (c) all  out-of-pocket  expenses  incurred  by PXRE for  goods  and
        services from third party vendors or other non-related parties which are
        identifiable to Transnational shall be charged at cost to Transnational;

             (d) all other expenses incurred by PXRE,  including rent, salaries,
        employee   benefits  and  other  general  overhead   expenses  of  PXRE,
        reasonably  and  equitably  determined  by  PXRE to be  attributable  to
        Transnational  for  the  services  and  facilities  provided  by PXRE to
        Transnational  pursuant to this  Agreement,  shall be charged at cost to
        Transnational.

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PXRE's  determination  of charges  hereunder  shall be conclusive as between the
parties,  except that if  Transnational  objects to any such  determination,  it
shall so  advise  PXRE  within  thirty  (30) days of  receipt  of notice of said
determination.  In the event of a disagreement  between the parties as to a fair
basis for allocating  any amounts  payable  hereunder,  the basis for allocation
shall be fairly  fixed by an  independent  public  accounting  firm  selected by
Transnational.  Reimbursement for expenses due under this Agreement shall be due
and payable by Transnational  within fifteen (15) days after request for payment
by PXRE, not less often than quarterly.

        7. This Agreement shall remain in effect unless and until  terminated by
either party giving at least sixty (60) days' prior written  notice to the other
party.

        8. This  Agreement may not be assigned by either party without the prior
written consent of the other party hereto.

        9. Any amendment or  modification of this Agreement shall be in writing,
signed by each of the parties hereto.

        IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be
signed as of the date first above written.

                                      PXRE REINSURANCE COMPANY


                                      By: /s/ Gerald L. Radke
                                         --------------------------------
                                      Name:  Gerald L. Radke
                                      Title: Chairman of the Board, President
                                             and Chief Executive Officer


                                      TRANSNATIONAL REINSURANCE COMPANY


                                      By: /s/ Gerald L. Radke
                                         --------------------------------
                                      Name:  Gerald L. Radke
                                      Title: Chairman of the Board, President
                                             and Chief Executive Officer


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