<PAGE>

                                                                    EXHIBIT 10.3

                      INVESTMENT ADMINISTRATION AGREEMENT

     THIS INVESTMENT ADMINISTRATION AGREEMENT (this "Agreement"), dated as of
August 13, 1998, is made by and between FAIRFAX FINANCIAL HOLDINGS LIMITED and
CRUM & FORSTER UNDERWRITERS CO. OF OHIO. As used in this Agreement, "we", "us",
and "our" shall refer to CRUM & FORSTER UNDERWRITERS CO. OF OHIO, and "you" and
"your" shall refer to FAIRFAX FINANCIAL HOLDINGS LIMITED.

     In consideration of the mutual promises contained herein, the parties agree
as follows:

     1.    We authorize you to provide, and by signing below you agree to
           provide, the investment administration services set forth in Schedule
           A attached hereto, on our behalf and on the terms and conditions set
           out in this Agreement, subject to such guidelines, procedures and
           limitations as may be duly established and approved by our Board of
           Directors or a duly authorized committee of said Board.

     2.    You shall be entitled to such fees, payable quarterly in arrears, for
           the service provided hereunder, as you may specify from time to time.
           Attached hereto as Schedule B is a copy of your current fee schedule
           and you agree to give us thirty (30) days prior written notice of any
           change in such schedule, which change shall require the approval of
           the Department of Insurance ("Department"). Such fees shall be the
           exclusive fees and charges payable (excluding third party
           disbursements reasonably incurred) for the services provided
           hereunder. As regards third party services, you will charge us only
           the amount of your actual disbursements paid to third parties for
           such services. We will remit payment to you not later than 15 days
           following delivery to us of a report showing the amount due
           hereunder.

     3.    Either party hereto may terminate this Agreement without penalty by
           giving the other party at least thirty (30) days advance written
           notice of its desire to terminate the same.

     4.    This Agreement shall enure to the benefit of and shall be binding
           upon the parties hereto and their respective successors. This
           Agreement may not be assigned by either party.

     5.    You and we each acknowledge that the terms of this Agreement are the
           exclusive and conclusive terms of our mutual agreement with regard to
           the subject matter hereof.

     6.    Any dispute or difference arising with reference to the applicable
           interpretation or effect of this Agreement, or any part thereof,
           shall be referred to a Board of Arbitration (the "Board") of two (2)
           arbitrators and an umpire.

        The members of the Board shall be active or retired disinterested
        officers of insurance or reinsurance companies.

        One arbitrator shall be chosen by the party initiating the arbitration
        and designated in the letter requesting arbitration. The other party
        shall respond, within fifteen (15) days, advising of its arbitrator. The
        umpire shall thereafter be chosen by two (2) arbitrators. In the event
        either party fails to designate its arbitrator as indicated above, the
        other party is hereby authorized and empowered to name the second
        arbitrator, and the party which failed to designate its arbitrator shall
        be deemed to have waived its rights to designate an arbitrator and shall
        not be aggrieved thereby. The two (2) arbitrators shall then have thirty
        (30) days within which to choose an umpire. If they are unable to do so
        within thirty (30) days following their appointment, each arbitrator
        shall nominate three candidates within ten (10) days thereafter, two of
        whom the other shall decline, and the decision shall be made by drawing
        lots. In the event of the death, disability or incapacity of an
        arbitrator or the umpire, a replacement shall be named pursuant to the
        process which resulted in the selection of the arbitrator or umpire to
        be replaced.

        Each party shall submit its case to the Board within one (1) month from
        the date of the appointment of the umpire, but this period of time may
        be extended by unanimous written consent to the Board.
<PAGE>

        The sittings of the Board shall take place in Ohio. The Board shall make
        its decision with regards to the custom and usage of the insurance and
        reinsurance business. The Board is released from all judicial
        formalities and may abstain from the strict rules of law. The written
        decision of a majority of the Board shall be rendered within sixty (60)
        days following the termination of the Board's hearings, unless the
        parties consent to an extension. Such majority decision of the Board
        shall be final and binding upon the parties both as to law and fact, and
        may not be appealed to any court of any jurisdiction. Judgment may be
        entered upon the final decision of the Board in any court of proper
        jurisdiction.

     7.    The provisions in Schedule A and Schedule B attached hereto are
           hereby incorporated into, and form part of, this Agreement.

     8.    This Agreement, including the schedules attached hereto and made a
           part hereof, may only be amended by written agreement signed by the
           parties and approved by the Department.

     9.    Unless otherwise specified herein, all notices, instructions, advices
           or other matters covered or contemplated by this Agreement, shall be
           deemed duly given when received in writing (including by fax or other
           similar form of transmission) by you or us, as applicable, at the
           address or fax number first above written or such other address or
           fax number as shall be specified in a notice similarly given:

           If to us:

           Chief Financial Officer
        Crum & Forster Underwriters Co. of Ohio
        305 Madison Avenue
        Morristown, New Jersey 07960
        Telecopy Number 973/490-6612

           If to you:

           FAIRFAX FINANCIAL HOLDINGS LIMITED
        95 Wellington Street West
        Suite 800
        Toronto, Ontario
        M5J 2N7
        Fax No.: (416) 367-2201

        Any such notice or communication shall be deemed to have been received
        by any such party if delivered, on the date of delivery, or if sent by
        prepaid registered mail on the fourth business day following mailing
        thereof to the party to whom addressed. For such purpose, no day during
        which there shall be a strike or other occurrence interfering with
        normal mail service shall be considered a business day.

     10.   This Agreement shall be governed and construed in accordance with the
           laws of the State of Ohio, our state of domicile. Each of the parties
           hereto submits to the jurisdiction of the state and federal courts of
           the State of New Jersey, in any action or proceeding arising out of
           or relating to this Agreement and all claims in respect of any such
           action or proceeding may be heard or determined in any such court;
           and service of process, notices and demands of such courts may be
           made upon you by personal service to LeBoeuf, Lamb, Greene & MacRae,
           L.L.P., 125 West 55th Street, New York, New York 10019 or by mailing
           copies of such process, notices and demands by certified or
           registered mail to such address (such address being automatically
           changed to the principal office from time to time of LeBoeuf, Lamb
           Greene & MacRae, L.L.P. in New York, New York).

     11.   You and we and the duly authorized representatives of each of us
           shall, at all reasonable times, each be permitted access to all
           relevant books and records of the other pertaining to this Agreement.
           You and your duly authorized representatives shall provide to the
           Department, within fifteen (15) days of any request from the
           Department therefor, copies of all your books and records as they
           pertain to us (or any portion thereof as may be specifically
           requested).
<PAGE>

     IN WITNESS WHEREOF, this Agreement is hereby executed by duly authorized
officers of the parties hereto as of the date first written above.

<Table>
<S>                                            <C>
                                               CRUM & FORSTER UNDERWRITERS CO. OF OHIO

By:  /s/ VALERIE J. GASPARIK                   By:  /s/ ROBERT H. RICH
----------------------------------------           ----------------------------------------
    Valerie J. Gasparik                            Robert H. Rich
--------------------------------------------   --------------------------------------------
Name of Authorized Signatory                   Name of Authorized Signatory

                                               FAIRFAX FINANCIAL HOLDINGS LIMITED
                                               By:  /s/ BRADLEY P. MARTIN
                                                   ----------------------------------------
                                                   Bradley P. Martin
                                               --------------------------------------------
                                               Name of Authorized Signatory
</Table>
<PAGE>

                                   SCHEDULE A
                                    SERVICES

     Tasks underlying the fees to be performed by Fairfax Financial Holdings
Limited are:

MONTHLY

--  computation of all regulatory figures

--  analysis and reconciliation of portfolios

--  yield review

--  computation of market decline tests

--  computation of liquidity analysis

--  analysis of bookvalues, e.g. bond amortizations and investment provisions

--  analysis of gross gain and loss positions

--  cash flow obligations

--  investment review meeting

PERIODIC

--  review and analysis of foreign exchange position

--  placement of foreign exchange contracts, where appropriate

--  discussions with regulators regarding portfolio (positions)

--  reporting to the investment committee

--  reporting to the audit committee

--  general assistance with accounting issues

--  maintaining contact with external auditors

--  such other administrative services as the parties shall mutually agree from
    time to time
<PAGE>

                                   SCHEDULE B
                                  FEE SCHEDULE

     Fees will be calculated at the end of each calendar quarter based upon the
average of the market value of the funds held in the investment account (the
"Account") governed by the terms of the Investment Management Agreement between
Crum & Forster Underwriters Co. of Ohio and Hamblin Wasta Investment Counsel,
Ltd., dated as of August 13, 1998 at the close of business for the three (3)
preceding months. Charges are stated on a calendar year basis.

<Table>
<Caption>
MARKET VALUE                                                    CHARGE
------------                                                    ------
<S>                                                             <C>
On Total Market Value.......................................     .10%
</Table>

     In the event that the day upon which this Agreement is terminated is a day
other than the first day of a calendar quarter, the fees payable for such
quarter shall be pro-rated and shall be determined having regard to the market
value of the Account based upon the most recent financial report which has been
delivered to Crum & Forster Underwriters Co. of Ohio by the Custodian for the
Account.