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                                                                   EXHIBIT 10.16

                          MASTER REPURCHASE AGREEMENT

     Effective as of July 1, 2000 by and between United States Fire Insurance
Company ("U.S. Fire") and Fairfax Financial Holdings Limited ("Fairfax").

     WHEREAS, U.S. Fire, in the normal course of its business, may from time to
time agree to pay claims to policyholders that require it to sell or otherwise
liquidate certain securities or other invested assets in order to raise
sufficient cash to make such payments; and

     WHEREAS, U.S. Fire typically pays policyholder claims prior to receiving
reimbursement for such claims from its reinsurers, requiring U.S. Fire to make
cash payments on claims that can greatly exceed its ultimate net liability for
such claims and creating a timing gap between payments by U.S. Fire and recovery
from its reinsurers; and

     WHEREAS, Fairfax, as the indirect owner of U.S. Fire, has an interest in
maximizing the return on invested assets of U.S. Fire; and

     WHEREAS, Fairfax seeks to assist U.S. Fire in managing its cash flow to
eliminate or minimize investment losses resulting from the sale or liquidation
of securities in order to cover short-term cash requirements.

     NOW, THEREFORE, for due and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

1.   TRANSACTIONS

    From time to time, the parties hereto may enter in to transactions (each a
    "Transaction") in which U.S. Fire agrees to transfer to Fairfax certain
    securities ("Securities") against the transfer of an amount in United States
    dollars equal to the fair market value of such Securities on the date of
    transfer, such amount not to exceed U.S. $25,000,000 singly or, when
    combined with amounts then outstanding from any other Transaction, in the
    aggregate (the "Purchase Price") by Fairfax to U.S. Fire and Fairfax agrees
    to transfer to U.S. Fire such Securities on a date to be agreed by Fairfax
    and U.S. Fire and which shall be on or before December 31 of the year during
    which such transfer is made (the "Repurchase Date"), against the transfer of
    funds by U.S. Fire.

2.   REPURCHASE

    U.S. Fire shall repurchase the Securities from Fairfax on or before the
    Repurchase Date for an amount not to exceed the sum of the Purchase Price
    and the aggregate amount obtained by daily application of the stated
    interest rate of each Security to the Purchase Price paid for such Security
    on a 360 day per year basis for the actual number of days during the period
    commencing on the (and including) the Purchase Date and ending on (but
    excluding) the Repurchase Date.

3.   INCOME PAYMENTS

    U.S. Fire shall be entitled to receive, with respect to any Security at any
    time, an amount equal to any principal thereof and all interest, dividends
    or other distributions thereon ("Income") paid or distributed in respect of
    the Securities that are not otherwise received by U.S. Fire to the full
    extent it would be so entitled if the Securities had not been sold to
    Fairfax. Fairfax shall, as the parties may agree (or, in the absence of any
    such agreement, as Fairfax shall reasonably determine in its discretion), on
    the date such Income is paid or distributed either (i) transfer to or credit
    to the accounts of U.S. Fire such Income with respect to any Securities or
    (ii) with respect to Income paid in cash, apply the Income payment or
    payments to reduce the amount, if any, to be transferred to Fairfax by U.S.
    Fire upon termination of the Transaction.


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4.   SECURITY INTEREST

    Although the parties intend that the Transaction be a sale and purchase and
    not a loan, in the event the Transaction is deemed to be a loan, U.S. Fire
    shall be deemed to have pledged to Fairfax as security for the performance
    by U.S. Fire of its obligations under the Transaction, and shall be deemed
    to have granted to Fairfax a security interest in, all of the Securities and
    all income thereon and other proceeds thereof.

5.   PAYMENT AND TRANSFER

    Unless otherwise mutually agreed, all transfers of funds hereunder shall be
    in immediately available funds. All Securities transferred by one party
    hereto to the other party (i) shall be in suitable form for transfer or
    shall be accompanied by duly executed instruments of transfer or assignment
    in blank and such other documentation as the party receiving possession may
    reasonably request, (ii) shall be transferred on the book-entry system of a
    Federal Reserve Bank, or (iii) shall be transferred by any other method
    mutually acceptable to U.S. Fire and Fairfax.

6.   SEGREGATION OF SECURITIES

    To the extent required by applicable law, all Securities in the possession
    of Fairfax shall be segregated from other securities in its possession and
    shall be identified as subject to this Agreement. Segregation may be
    accomplished by appropriate identification on the books and records of the
    holder, including a financial or securities intermediary or a clearing
    corporation. All of U.S. Fire's interest in the Securities shall pass to
    Fairfax on the Purchase Date and, unless otherwise agreed by Fairfax and
    U.S. Fire, nothing in this Agreement shall preclude Fairfax from engaging in
    repurchase transactions with the Securities or otherwise selling,
    transferring, pledging or hypothecating the Securities, but no such
    transaction shall relieve Fairfax of its obligations to transfer Securities
    to U.S. Fire pursuant to Paragraph 2 hereof, or of Fairfax's obligation to
    credit or pay Income to, or apply Income to the obligations of, U.S. Fire
    pursuant to Paragraph 3 hereof.

7.   NOTICES AND OTHER COMMUNICATIONS

    Any and all notices or other communications hereunder shall be given by mail
    or facsimile as follows:

<Table>
    <S>                                   <C>
    To Fairfax:                           Fairfax Financial Holdings Limited
                                          95 Wellington Street West, Suite 800
                                          Toronto, Ontario, Canada M5J 2N7
                                          Facsimile: 416-367-2201
                                          Attention: Chief Financial Officer
    To U.S. Fire:                         United States Fire Insurance Company
                                          305 Madison Avenue
                                          Morristown, New Jersey 07960
                                          Facsimile: 973-490-6612
                                          Attention: Chief Financial Officer
</Table>

8.   ENTIRE AGREEMENT; SEVERABILITY

    This Agreement shall supersede any existing agreements between the parties
    concerning the subject matter hereof. Each provision and agreement herein
    shall be treated as separate and independent from any other provision or
    agreement herein and shall be enforceable notwithstanding the
    unenforceability of any such other provision or agreement.

9.   GOVERNING LAW

    This Agreement shall be governed by the laws of the State of New York
    without giving effect to the conflict of law principles thereof.

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10. COUNTERPARTS

    This Agreement may be executed in two counterparts, each of which shall be
    deemed an original, but all of which together shall constitute one and the
    same instrument.

<Table>
<S>                                            <C>  <C>
                                               FAIRFAX FINANCIAL HOLDINGS LIMITED


                                               By:  /s/  BRADLEY P. MARTIN
                                                    ------------------------------------------
                                                    Bradley P. Martin
                                                    Title: Vice President


                                               UNITED STATES FIRE INSURANCE COMPANY


                                               By:  /s/  MARY JANE ROBERTSON
                                                    ------------------------------------------
                                                    Mary Jane Robertson
                                                    Title: Executive Vice President,
                                                          CFO and Treasurer


                                               By:  /s/  VALERIE GASPARIK
                                                    ------------------------------------------
                                                    Valerie Gasparik
                                                    Title: Secretary
</Table>

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<PAGE>

                              AMENDMENT NUMBER ONE
                                     TO THE
                          MASTER REPURCHASE AGREEMENT

     This Amendment Number One ("Amendment") to the Master Repurchase Agreement
("Agreement") is entered into as of September 11, 2001, by and between United
States Fire Insurance Company ("U. S. Fire") and Fairfax Financial Holdings
Limited ("Fairfax").

     WHEREAS, U. S. Fire and Fairfax entered into the Agreement effective as of
July 1, 2000;

     WHEREAS, defined terms used herein but not otherwise defined shall have the
meanings set forth in the Agreement;

     NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:

I.   Section 1 of the Agreement is hereby replaced in its entirety with the
     following:

1.   TRANSACTIONS

    From time to time, the parties hereto may enter in to transactions (each a
    "Transaction") in which U.S. Fire agrees to transfer to Fairfax certain
    securities ("Securities") against the transfer of an amount in United States
    dollars equal to the fair market value of such Securities on the date of
    transfer, such amount not to exceed U.S. one hundred million dollars
    ($100,000,000) singly or, when combined with amounts then outstanding from
    any other Transaction, in the aggregate (the "Purchase Price") by Fairfax to
    U.S. Fire and Fairfax agrees to transfer to U.S. Fire such Securities on a
    date to be agreed by Fairfax and U.S. Fire and which shall be on or before
    December 31 of the year during which such transfer is made (the "Repurchase
    Date"), against the transfer of funds by U.S. Fire.

II.  Except as otherwise provided in its Amendment, all of the terms and
     conditions of the Agreement will remain unamended and shall continue to be,
     and shall remain, in full force and effect in accordance with their
     respective terms. In the event of any conflict or inconsistency between the
     Agreement and this Amendment, this Amendment will prevail.

III. This Amendment shall be binding upon and inure to the benefit of the
     parties hereto and their respective successors and assigns.

IV. This Amendment may be executed simultaneously in two or more counterparts,
    each of which shall be deemed to be an original and all of which shall
    constitute together but one and the same instrument.

V.  This Amendment shall be governed by the laws of the State of New York.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.

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<PAGE>

<Table>
<S>                                            <C>  <C>
                                               FAIRFAX FINANCIAL HOLDINGS LIMITED


                                               By:  /s/  BRADLEY P. MARTIN
                                                    ------------------------------------------
                                                    Bradley P. Martin
                                                    Title: Vice President


                                               UNITED STATES FIRE INSURANCE COMPANY


                                               By:  /s/  MARY JANE ROBERTSON
                                                    ------------------------------------------
                                                    Mary Jane Robertson
                                                    Title: Executive Vice President,
                                                          Chief Financial Officer and
                                                    Treasurer


                                               By:  /s/  VALERIE J. GASPARIK
                                                    ------------------------------------------
                                                    Valerie J. Gasparik
                                                    Title: Vice President & Secretary
</Table>

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