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                                                                   EXHIBIT 10.86

                         NOVATION AND TRANSFER AGREEMENT

This Novation and Transfer Agreement ("Agreement"), effective as of January 1,
2003 (the "Effective Date"), is made by and among Platinum Underwriters
Reinsurance, Inc., a Maryland domiciled insurance company ("Platinum"), St. Paul
Fire and Marine Insurance Company, a Minnesota domiciled insurance company ("St.
Paul") and Crusader Insurance Company, a California domiciled insurance company
(the "Company").

WHEREAS, St. Paul and the Company entered into the Casualty Clash Excess of Loss
reinsurance contract, effective from January 1, 2003 through December 31, 2003
and displaying the St. Paul reference number 00004299300 (the "Contract"). A
copy of the Contract or the corresponding slip or binder is attached hereto.

WHEREAS, Platinum has assumed a one hundred percent (100%) quota share of the
liabilities arising under the Contract, pursuant to a 100% Quota Share
Retrocession Agreement, dated as of November 1, 2002, between Platinum and St.
Paul.

WHEREAS, the parties hereto now desire to effect a novation of the Contract by
which Platinum shall be substituted as the reinsurer in place of St. Paul with
respect to the Contract.

WHEREAS, the Company agrees to consent to the substitution of Platinum under the
Contract in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and the terms and
conditions set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

         1.       Defined Terms. For all purposes of this Agreement, capitalized
terms not otherwise defined in this Agreement shall have the meanings given to
them in the Contract.

         2.       St. Paul's Undertaking and Release of the Company. In
consideration of the undertakings given by the Company in Section 5, St. Paul
hereby releases and discharges the Company from all obligations to observe,
discharge and be bound by the Contract.

         3.       Transfer. St. Paul hereby transfers to Platinum all of its
rights, title and interests in, to and under, the Contract and all of its
obligations and liabilities in connection therewith.

         4.       Acceptance by Platinum. In consideration of the undertakings
given by Company in Section 5, Platinum hereby undertakes to observe, perform,
discharge and be bound by the Contract as if it were an original signatory to
the Contract instead of the St. Paul, whether such obligations and liabilities
accrue or arise before, on or after the date hereof.

         5.       Company's Undertaking and Release of St. Paul. In
consideration of the undertakings given by Platinum in Section 4 and St. Paul in
Section 2, the Company hereby:

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         (a) releases and discharges the St. Paul from all obligations to
         observe, perform, discharge and be bound by the Contract as if the St.
         Paul had never been a party to the Contract;

         (b) accepts Platinum's undertaking to observe, perform, and discharge
         and be bound by the Contract (such undertaking being set out in Section
         4); and

         (c) agrees to observe, perform, discharge and be bound by the Contract
         as if Platinum were a party to the Contract instead of the St. Paul,
         whether such obligations and liabilities accrue or arise before, on or
         after the date hereof.

         6.       Indemnification. Notwithstanding anything to the contrary in
this Agreement, Platinum shall indemnify and hold harmless and, at its own
expense, defend Company from and against any and all Losses suffered, incurred
or sustained by Company before, on or after the date hereof in connection with
matters arising or events occurring in relation to the Contract prior to the
date hereof for which the St. Paul would have been liable to Company under the
terms of the Contract.

         7.       Representations and Warranties. St. Paul hereby represents and
warrants to Platinum that it has fully discharged all its duties and obligations
under the Contract

         8.       Covenants. All covenants and undertakings made by the St. Paul
in the Contract shall be binding upon Platinum in all respects as if such
covenants and undertakings were made by Platinum with respect to itself.

         9.       Permissibility of Agreement. Each of St. Paul and Platinum
hereby represents, warrants and covenants to the Company that the execution of
this Agreement has been validly authorized, the obligations imposed on it by the
provisions of this Agreement constitute valid, legally binding and enforceable
obligations on it, shall not constitute a breach or event of default pursuant to
any agreement to which St. Paul or Platinum is a party and shall not constitute
a violation of law in any applicable jurisdiction.

         10.      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their permitted successors
and assigns.

         11.      Headings. The headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

         12.      Execution of this Agreement. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same Agreement. This Agreement may be
executed and delivered by facsimile. Any such facsimile transmission executed by
facsimile by all parties shall constitute the final agreement of the parties and
conclusive proof of such agreement. Any party that shall deliver by facsimile an
executed signature page of this Agreement shall deliver originals of such
executed signature page to each other party within a reasonable time thereafter.

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         13.      Further Assurances. Each of the parties shall from time to
time, on being reasonably requested to do so by the other party to this
Agreement, do such acts and/or execute such documents in a form reasonably
satisfactory to the party concerned as may be necessary to give full effect to
this Agreement and securing to that party the full benefit of the rights, powers
and remedies conferred upon it by this Agreement.

         14.      Entire Agreement. This Agreement may be amended only by
written agreement of the parties. This Agreement supersedes all prior
discussions and written and oral agreements and constitutes the sole and entire
agreement between the parties with respect to the subject matter hereof.

         15.      Governing Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the United States of
America and the State of New York, regardless of the laws that might otherwise
govern under applicable choice-of-law principles. The parties hereby irrevocably
submit to the exclusive jurisdiction of the state and federal courts located in
the County of New York for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The parties
hereby irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.

                                                ST. PAUL FIRE AND MARINE
                                                INSURANCE COMPANY

                                                By /s/ W. Mark Wigmore
                                                   ---------------------
                                                   Name: W. Mark Wigmore
                                                   Title: Senior Vice President

                                                PLATINUM UNDERWRITERS
                                                REINSURANCE, INC.

                                                By /s/ Kevin P. Fry
                                                   ---------------------
                                                   Name: Kevin P. Fry
                                                   Title: Vice President

Consented and agreed to by:

CRUSADER INSURANCE COMPANY

By:      /s/ Cary Cheldin
         -------------------
         Name: Cary Cheldin
         Title: President

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