<PAGE>

                                                                   EXHIBIT 10.38
 
                  LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL

                          REINSURANCE PLACEMENT SLIP
                          --------------------------

COMPANY:            Continental Casualty Company Illinois

EFFECTIVE:          Losses occurring on original contracts written or renewed
                    with effective dates during the 12 month term beginning
                    January 1, 1998

                    Cessions in force to run off until natural expiry, plus an
                    additional 12 month period should an original contract be
                    renewed at original reinsured's option. In addition,
                    Retrocessionaires will remain liable as respects run-off
                    obligations under each original cession in force at the time
                    of expiration.

                    In the event a Retrocessionaire opts not to continue its
                    participation on the agreement replacing this Agreement, it
                    will remit to the Retrocedent 90% of the Retrocessionaire's
                    share of the positive balance of premium received, less
                    losses paid, and less ceding commission and other
                    commissions paid within 30 days after Agreement expiration.
                    This provision will not apply in the event that this
                    Agreement is not renewed.

BUSINESS
COVERED:            London Market Catastrophe Excess of Loss business, where
                    100% of the layer is written by the Retrocedent and coded
                    Product Type 6308.

EXCLUSIONS:         As per original contracts.

TERRITORY:          Losses wheresoever arising

LIMIT:              LAYER A
                    -------

                    33.33% Quota Share of $20,000,000 (or $6,666,000) of
                    aggregate cover any one occurrence. Subject to a maximum of
                    up to 33.33% of $5,000,000 (or $1,666,500) any one
                    occurrence, any one original reinsured. Minimum net
                    retention of 66.67% of $5,000,000 (or $3,333,500) of all
                    cessions to Agreement.



AR 1846 -- Effective 1/1/98
(Issued 9/16/97) DMH              Page 1 of 7
<PAGE>
 
CONTINENTAL CASUALTY COMPANY                              LMX QUOTA SHARE RETRO



LIMIT:
(CON'T.)                 LAYER B
                         -------

                         33.33% Quota Share of $17,500,00 (or $5,832,750) of
                         aggregate cover any one occurrence. Subject to a
                         maximum of up to 33.33% of $5,000,000 (or $1,666,500)
                         any one occurrence, any one original reinsured. Minimum
                         net retention of 66.67% of $5,000,000 (or $3,333,500)
                         of all cessions to Agreement.

RATE:                    Original Gross Reinsurance Premium less any commissions
                         paid under reinsured original contracts and ceding
                         commission.

CEDING
COMMISSION:              3.0% (FLAT)

WARRANTY:                The Retrocedent and Retrocessionaires hereunder will
                         retain all business subject to this Agreement net and
                         unreinsured in any way, subject to limits in Limit
                         Section.

FUNDING OF RESERVES:     Letters of Credit (Citibank Scheme) as required by
                         Retrocedent, in respect of unearned premium and known
                         outstanding losses reported to Retrocessionaires,
                         excluding losses incurred but not reported to
                         Retrocessionaires, in compliance with
                         statutory/regulatory requirements from non-admitted
                         Retrocessionaires only.

CASH LOSSES:             $250,000 (on a 100% basis).

REPORTS & REMITTANCES:   As attached.

CURRENCY:                All transactions hereunder to be in U.S. Dollars.
                         Losses in other currencies to be converted to U.S.
                         Dollars at the same rates of exchange used by the
                         Retrocedent in its own books.

WORDING:                 As expiring.

AR 1846-98 -- Effective 1/1/98
Issued 9/16/97)                    Page 2 of 7 

                                  

<PAGE>
 
CONTINENTAL CASUALTY COMPANY                            LMX QUOTA SHARE RETRO



GENERAL
CONDITIONS:         Retrocessionaires will be subject to the same terms, rates,
                    and conditions as original and will follow original
                    settlements made by the Retrocedent.

                    Arbitration Clause
                    Inter-Company Pooling Clause
                    Confidentiality Clause (per attached)
                    Salvage and Subrogation Clause
                    Settlements Clause (per attached)
                    Offset Clause (this Agreement only, except that in the event
                      of insolvency, offset will be allowed per applicable 
                      regulation)
                    ECO Clause
                    Delays, Errors, or Ommissions Clause
                    Amendments Clause
                    Access to Records Clause (per attached)
                    Interest Penalty Clause (per attached)
                    Insolvency Clause
                    Arbitration Clause
                    Taxes Clause
                    Federal Excise Tax Clause
                    Service of Suit Clause
                    Aon Re Inc. Intermediary Clause


AR 1846-98 -- Effective 1/1/98
(Issued 9/16/97) DMH              Page 3 of 7
<PAGE>
 
CONTINENTAL CASUALTY COMPANY                               LMX QUOTA SHARE RETRO


We ask that you review the terms and conditions set forth hereinabove. Assuming 
that you find everything to be in order, please indicate your acceptance and 
approval by signing and returning one copy of this Final Placement Slip to Aon 
Re Inc.

                   [LOGO OF LASALLE RE LIMITED APPEARS HERE]


REINSURER: LaSalle Re Limited
           --------------------------------------------------------------

THRU:____________________________________________________________________

SIGNED                                              REFERENCE
LINE:      47.5%                                    NUMBER:  1739/98 
     -------------------------------------------           --------------
               (LAYER A)

SIGNED                                              REFERENCE
LINE:     31.43%                                    NUMBER:  2790/98
     -------------------------------------------           --------------
               (LAYER B)

ACCEPTED &
APPROVED BY:  /s/ Graham Waite                      DATED: 14th November, 1998
            -----------------------------------            -------------------
            Graham Waite - Vice President

(FOR PROCESSING PURPOSES IT IS IMPORTANT THAT YOU PROVIDE YOUR COMPANY'S 
REFERENCE NUMBER FOR THIS PROGRAM.)


AR 1846-98 -- Effective 1/1/98
(Issued 9/16/97) DMH              Page 4 of 7

<PAGE>
 
CONTINENTAL CASUALTY COMPANY                           LMX QUOTA SHARE RETRO

                            REPORTS AND REMITTANCES
                            -----------------------

Within 30 days after the close of each quarter, the Retrocedent shall furnish 
the Retrocessionaires with a report summarizing the gross premium, commission 
allowed on the gross premium, premium ceded less return premium and commission, 
losses paid, loss expenses paid, salvage recovered, and net balance due either 
party. The quarterly report also shall contain a statement showing the total 
reserves for outstanding losses including loss expenses and a list of all 
catastrophic code numbers assigned by the Property Claims Services division of 
the American Insurance Services Group, Inc. for paid and outstanding catastrophe
losses and expenses incurred during the quarter. All amendments or adjustments, 
including reinstatement premium, shall be accounted for on a year-of-account 
basis. Amounts due the Retrocessionaires shall be remitted with said report. 
Amounts due the Retrocedent shall be remitted within 30 days following receipt 
of report.

Within 60 days following the expiration of the Agreement, the Retrocedent shall 
furnish the Retrocessionaires with a report detailing the unearned premium, 
calculated on a monthly pro rata basis, as well as the December 31st state of 
losses. The Retrocedent shall also furnish the Retrocessionaires with any 
additional information they may require to prepare their financial statements.

Should payment due from the Retrocessionaires exceed their share of $250,000, 
the Retrocedent may give the Retrocessionaires notice of payment made or its 
intention to make payment on a certain date. If the Retrocedent has paid the 
loss, payment shall be made by the Retrocessionaires immediately. If the 
Retrocedent intends to pay the loss by a certain date and has submitted a proof 
of loss or similar document, payment shall be due from the Retrocessionaires 24 
hours prior to that date, provided the Retrocessionaires have a period of five 
working days after receipt of said notice to dispatch the payment. Cash loss 
amounts specifically remitted by the Retrocessionaires as set forth herein shall
be credited to their next quarterly account.


                                CONFIDENTIALITY
                                ---------------


It is a condition precedent to any indemnification under this Agreement that the
Retrocedent shall not disclose any details of this Agreement at any time to any 
third party without the approval of the Retrocessionaires. Notwithstanding the 
foregoing, the Retrocedent may disclose details of this Agreement to Names and 
their agents, auditors, accountants, and other third parties as may be required 
in order to comply with law or with the bylaws of Lloyd's, provided that they 
themselves respect the confidentiality of this undertaking.

AR 1846-98 -- Effective 1/1/98
(Issued 9/16/97) DMH              Page 5 of 7
<PAGE>
 
CONTINENTAL CASUALTY COMPANY                               LMX QUOTA SHARE RETRO

                                  SETTLEMENTS
                                  -----------

The Retrocedent shall have the right to settle all claims under its original 
contracts. All settlements, provided they are within the terms of this 
Agreement, shall be unconditionally binding on the Retrocessionaires in 
proportion to their participation in the Agreement, upon provision by the 
Retrocedent of the following: identification of loss including date and 
documented settlement/loss amounts and expenses received by the Retrocedent 
subject to this Agreement.

Inadvertent omission in dispatching the aforementioned documentation will in no 
way affect the obligation of the Retrocessionaires under Retrocedent informs the
Retrocessionaires of such omission promptly upon discovery.

                               ACCESS TO RECORDS
                               -----------------

The Retrocessionaires, or their duly accredited representatives, shall have 
access to the books and records of the Retrocedent on matters reasonably 
relating to this reinsurance at all reasonable times for the purpose of 
obtaining information concerning this Agreement or the subject matter hereof. 
Except as provided in the following sentence, access to premium records is 
restricted to within four years of the expiration of this Agreement. A 
Retrocessionaire shall be permitted access to premium records subsequent to the
aforementioned period only on the condition that either a) there are no balances
payable hereunder by the Retrocessionaire which are overdue as provided in the 
Interest Penalty Article of this Agreement, or b) the Retrocessionaire has 
funded all balances due hereunder in an interest-bearing trust fund or with a 
Letter of Credit as hereinafter provided.

Should the Retrocessionaire choose option b) of the foregoing paragraph, the 
Retrocessionaire agrees to provide the Retrocedent a Trust Agreement established
at Morgan Guaranty Trust Company of New York, New York, or at a mutually agreed 
successor Trustee, or a clean, irrevocable, and evergreen Letter of Credit, 
issued by Morgan Guaranty Trust Company of New York, New York, or by a mutually 
agreed bank, of which the Retrocedent shall be the beneficiary, which shall 
secure in full all balances due from the Retrocessionaire to the Retrocedent 
with respect to this Agreement. Such Trust Agreement and/or Letter of Credit 
shall be established under the laws of the state of New York and shall meet all 
requirements of the state regulatory authorities applicable to the Retrocedent. 
The Retrocessionaire is responsible for all costs associated with providing such
Trust Agreement and/or Letters of Credit as required under this Article.

AR 1846-98 -- Effective 1/1/98
(Issued 9/16/97) DMH               Page 6 of 7

<PAGE>
 
CONTINENTAL CASUALTY COMPANY                               LMX QUOTA SHARE RETRO
 
                               INTEREST PENALTY
                               ----------------

The interest amounts provided for in this Article will apply to the 
Retrocessionaires or to the Retrocedent in the following circumstances:

     A.   Loss payment owed by the Retrocessionaires to the Retrocedent shall
          have a due date to the Retrocedent of 90 calendar days following the
          date of the billing/proof of loss.

     B.   Payment of any premium shall be due to the Retrocessionaires within 90
          calendar days of the date specified in this Agreement. Any premium
          adjustments shall be due by the debtor party within 150 calendar days
          of the expiry of this Agreement.

     C.   Payment on return of premiums, commissions, profit sharing, or any
          amounts not provided in paragraphs A. or B. above, shall have the due 
          date as specified in this Agreement. If no due date is specified, 
          the due date shall be 90 days following the date of billing.

     D.   Failure by the Retrocessionaire or the Retrocedent to comply with
          their respective payment obligations within the time periods as herein
          provided will result in a compound interest penalty payable at a rate
          equal to the 90-day Treasury Bill rate as published in the Money Rate
          Section or any successor section of The Wall Street Journal on the
                                              -----------------------         
          first business day following the date a remittance becomes due, plus
          1% per annum, to be compounded and adjusted quarterly.  Any interest
          which occurs pursuant to this Article shall be calculated by the party
          to which it is owed.  The accumulation of the number of days that any
          payment is past due will stop on the date that the Intermediary, where
          applicable, receives payment.

     E.   The validity of any claim or payment may be contested under the
          provisions of this Agreement. If the debtor party prevails in an
          arbitration or any other proceeding, there shall be no interest
          penalty due. Otherwise, any interest will be calculated and due as
          outlined above.

     F.   If a Retrocessionaire advances payment of any claim it is contesting,
          and prevails in the contest, the Retrocedent shall return such payment
          plus pay interest on same, calculated as per the provisions of this 
          Article.

     G.   Any interest that occurs pursuant to this Article may be waived by the
          party to which it is owed. Further, any interest which is calculated
          pursuant to this Article that is $100 or less shall be waived. Waiver
          of such interest, however, shall not affect the waiving party's rights
          to similar interest for any other failure by the other party to make
          payment when due under this Article.

     H.   Nothing in this Article shall diminish any legal remedies that either
          party may have against the other.

AR 1846-98 -- Effective 1/1/98
(Issues 9/16/97) DMH              Page 7 of 7

<PAGE>
 
             LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
             ----------------------------------------------------


                                                                 ARTICLE   PAGE
                                                                 -------   ----
COVERAGE                                                              I      2
TERM                                                                 II      3
TERRITORY                                                           III      4
EXCLUSIONS                                                           IV      4
DEFINITIONS                                                           V      4
REINSURANCE PREMIUM AND CEDING COMMISSION                            VI      5 
EXTRA CONTRACTUAL OBLIGATIONS                                       VII      6
REPORTS AND REMITTANCES                                            VIII      6
RESERVES AND FUNDING                                                 IX      7
INTEREST PENALTY                                                      X     10
SETTLEMENTS                                                          XI     11
OFFSET                                                              XII     11
SALVAGE AND SUBROGATION                                            XIII     12
WARRANTY                                                            XIV     12
DELAYS, ERRORS, OR OMISSIONS                                         XV     12
AMENDMENTS                                                          XVI     13
ACCESS TO RECORDS                                                  XVII     13
CONFIDENTIALITY                                                   XVIII     14
INSOLVENCY                                                          XIX     14
ARBITRATION                                                          XX     16
TAXES                                                               XXI     18
FEDERAL EXCISE TAX                                                 XXII     18
CURRENCY                                                          XXIII     18
SERVICE OF SUIT                                                    XXIV     19
INTER-COMPANY POOLING ARRANGEMENT                                   XXV     20
INTERMEDIARY                                                       XXVI     21

AR 1846-A-99 -- 1/1/98
(12/11/97)                            1
<PAGE>
 
             LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
             ----------------------------------------------------

     THIS AGREEMENT is made and entered into by and between CONTINENTAL
CASUALTY COMPANY, an Illinois corporation, (hereinafter called the
"Retrocedent") of the one part, and the various Retrocessionaires as identified
by the attached Interests and Liabilities Agreements (hereinafter called the
"Retrocessionaires") of the other part.

     WITNESSETH:

     That in consideration of the mutual covenants hereinafter contained and 
upon the terms and conditions hereinbelow set forth, the parties hereto agree as
follows:

                                   ARTICLE I
                                   ---------

COVERAGE
--------

     The Retrocedent shall cede to the Retrocessionaires, and the
Retrocessionaires shall accept, a 33.33% of $5, 000,000 (i.e, $1,666,500) quota
share participation in respect to all original contracts written or renewed by
the Retrocedent with an effective date during the term of this Agreement and
classified by the Retrocedent as "London Market Catastrophe Excess of Loss
Reinsurance," where 100% of the layer is written by the Retrocedent and coded
Product Type 6308.

     The limit of liability to the Retrocessionaires shall not exceed 33.33% of 
$5,000,000 (i.e., $1,666,500) any one occurrence, any one original reinsured, 
subject to an aggregate limitation of no more than 33.33% of $20,000,000 (i.e., 
$6,666,000) any one occurrence. Should any loss involve this reinsurance, the 
obligation of the Retrocessionaires shall be automatically reinstated as to any 
subsequent loss for the full

AR 1846-A-98 -- 1/1/98
(12/11/97)                             2

<PAGE>
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
     amount of reinsurance as set forth above. The Retrocedent shall retain
     a minimum of 66.67% of $5,000,000 (i.e., $3,333,500) of all cessions 
     to this Agreement net.

          All reinsurance for which the Retrocessionaires shall be obligated by
     virtue of this Agreement shall be subject to the same terms, rates,
     conditions, interpretations, waivers, modifications, and alterations as the
     respective original contracts of the Retrocedent to which this reinsurance 
     applies. Nothing herein shall in any manner create any obligations or 
     establish any rights against the Retrocessionaires in favor of any third 
     parties or any persons not parties to this Agreement except as provided in 
     the Insolvency Article. The Retrocedent shall be the sole judge of what 
     constitutes any one occurrence, any one original reinsured.

                                  ARTICLE II
                                  ----------

     TERM
     ----

          This Agreement shall apply to all losses occurring on original 
     contracts written or renewed with an effective date during the 12-month 
     period commencing January 1, 1998, 12:01 a.m. Standard Time. The 
     Retrocessionaires shall remain liable for all losses under original 
     contracts in force until their expiration or renewal dates, whichever come 
     first, plus an additional 12 month period should an original contract be 
     renewed at an original reinsured's option. In addition, the 
     Retrocessionaires shall remain liable as respects any run-off obligations 
     under the original contracts covered hereunder.

          In the event a Retrocessionaire opts not to continue its participation
     on the agreement replacing this Agreement, the Retrocessionaire shall remit
     to the Retrocedent 90% of the Retrocessionaire's share of the positive 
     balance of premium received, less
    
AR 1846-A-98 -- 1/1/98
(12/11/97)

                                       3

<PAGE>

     losses paid, and less ceding and other commissions within 30 days after the
     termination of the Agreement. This provision shall not apply in the event 
     this Agreement is not renewed.

          Notwithstanding the cancellation of this Agreement as hereinabove
     provided, its provisions shall continue to apply to all unfinished business
     hereunder to the end that all obligations and liabilities incurred by each
     party hereunder prior to such termination shall be fully performed and
     discharged.


                                  ARTICLE III
                                  -----------

     TERRITORY
     ---------

          This Agreement shall apply to losses wheresoever arising.


                                  ARTICLE IV
                                  ----------

     EXCLUSIONS
     ----------

          No indemnity shall be provided hereunder for any liability excluded 
     under the Retrocedent's original contracts.


                                   ARTICLE V
                                   ---------

     DEFINITIONS
     -----------

          "Original contracts" as used in this Agreement shall mean reinsurance 
     treaties, binders, cover notes, slips, policies, contracts, or agreements, 
     whether written or oral.
          
          "Occurrence" as used in this Agreement is defined as on the original 
     contracts covered hereunder.

AR 1846-A-98 -- 1/1/98
(12/11/97)                             4

<PAGE>
 
     "Loss" as used in this Agreement shall mean the amount of any settlement, 
award, or judgment paid by the Retrocedent or for which the Retrocedent has 
become liable to pay after deduction of all recoveries, salvages, subrogations, 
and other reinsurances whether recovered or not. Loss shall not include loss 
expense, unless the original contracts reinsured hereunder define loss as 
including loss expense.

     "Loss expense" as used in this Agreement shall mean all expenses incurred 
by the Retrocedent in the investigation, appraisal, adjustment, litigation 
and/or defense of claims under original contracts reinsured hereunder, including
court costs and interest accrued before and after final judgment, but excluding 
internal office expenses, salaries, and other remuneration of regular employees 
(other than staff field adjusters) of the original reinsureds or the
Retrocedent. The Retrocessionaires shall bear their pro rata shares of all such
loss expense (unless defined as part of loss in reinsured original contracts)
and shall benefit pro rata in all salvages, subrogations, discounts, and other
recoveries.

                                  ARTICLE VI
                                  ----------

REINSURANCE PREMIUM AND CEDING COMMISSION
-----------------------------------------

     The Retrocedent shall cede to the Retrocessionaires their proportionate 
share of the original premium on all contracts written or renewed with an 
effective date on or after the inception of this Agreement for the business
described in the Coverage Article, less the ceding commission set forth below.

     The Retrocessionaires shall allow the Retrocedent a 3% flat ceding 
commission in addition to any commissions being paid under the original 
contracts reinsured hereunder.

AR 1846-A-98 -- 1/1/98
(12/11/97)

                                       5
<PAGE>
 
                                  ARTICLE VII
                                  -----------

EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------

     This Agreement shall protect the Retrocedent, within the limits hereof, 
for liability incurred in accordance with the provisions of the extra 
contractual obligations clauses contained in the original contracts covered 
hereunder.


                                 ARTICLE VIII
                                 ------------

REPORTS AND REMITTANCES
-----------------------

     Within 30 days after the close of each quarter, the Retrocedent shall 
furnish the Retrocessionaires with a report summarizing the gross premium, 
commission allowed on the gross premium, premium ceded less return premium and 
commission, losses paid, loss expenses paid, salvage recovered, and net balance 
due either party. The quarterly report also shall contain a statement showing
the total reserves for outstanding losses including loss expenses and a list of
all catastrophe code numbers assigned by the Property Claim Services division of
American Insurance Services Group, Inc. for paid and outstanding catastrophe
losses and loss expense incurred during the quarter. All amendments or
adjustments, including reinstatement premium, shall be accounted for on a year-
of-account basis. Amounts due the Retrocessionaires shall be remitted with said
report. Amounts due the Retrocedent shall be remitted within 30 days following 
receipt of the report.

     Within 60 days following the expiration of this Agreement, the Retrocedent 
shall furnish the Retrocessionaires with a report detailing the unearned 
premium, calculated on a monthly pro rata basis, as well as the December 31st 
state of losses. The Retrocedent

AR 1846-A-98 -- 1/1/98
(12/11/97)                              6

<PAGE>
 
shall also furnish the Retrocessionaires with any additional information they
may require to prepare their financial statements.

     Should payment due from the Retrocessionaires exceed their share of 
$250,000, the Retrocedent may give the Retrocessionaires notice of payment made 
or its intention to make payment on a certain date. If the Retrocedent has paid 
the loss, payment shall be made by the Retrocessionaires immediately. If the 
Retrocedent intends to pay the loss by a certain date and has submitted a proof 
of loss or similar document, payment shall be due from the Retrocessionaires 24 
hours prior to that date, provided the Retrocessionaires have a period of five 
working days after receipt of said notice to dispatch the payment. Cash loss 
amounts specifically remitted by the Retrocessionaires as set forth herein shall
be credited to their next quarterly account.


                                  ARTICLE IX
                                  ----------

RESERVES AND FUNDING
--------------------

     (This Article is only applicable to those Retrocessionaires who cannot 
     qualify for credit by each governmental authority having jurisdiction over 
     the Retrocedent's reserves.)

     As regards original contracts issued by the Retrocedent coming within the 
scope of this Agreement, the Retrocedent agrees that, when it files with the 
Insurance Department or sets up on its books reserves for known losses that have
been reported to the Retrocessionaires (including loss and loss expense paid by 
the Retrocedent and loss and loss expense reported and outstanding) and/or 
reserves for unearned premium, which it is required by law to set up, it shall 
forward to the Retrocessionaires a statement showing the proportion of such loss
reserves applicable to them. The Retrocessionaires hereby

AR 1846-A98 -- 11/1/98
(12/11/97)
                                       7
<PAGE>
 
agree that they shall fund such reserves by claims advances, Letters of Credit, 
or a combination thereof.  The Retrocessionaires shall have the option of 
determining the method of funding, provided it is acceptable to the Retrocedent 
and the applicable regulatory authorities.

     If the Retrocessionaires' choice of funding is or includes a Letter of 
Credit, the Retrocessionaires hereby agree that they shall apply for and secure 
delivery to the retrocedent of a clean, irrevocable, and unconditional Letter of
Credit, dated on or before December 31 of the year in which the request is made,
and issued by Citibank, N.A., and containing provisions acceptable to the 
insurance regulatory authorities having jurisdiction over the Retrocedent's 
reserves, in an amount equal to the Retrocessionaire's proportion of such 
reserves applicable to them as shown in the statement prepared by the 
Retrocedent.  Under no circumstances shall any amount relating to reserves in 
respect of Incurred But Not Reported losses be included in the amount of the 
Letter of Credit.

     The Letter of Credit shall be issued for a period of not less than one 
year, and shall be automatically extended for one year from its date of 
expiration or any future expiration date unless 30 days prior to any expiration 
date Citibank N.A. notifies the Retrocedent by registered mail that it elects 
not to consider the Letter of Credit extended for any additional period.

     Notwithstanding any other provisions of this Agreement, the Retrocedent or
its court-appointed successor in interest may draw upon the claims advances
and/or Letters of Credit at any time without diminution because of the
insolvency of the Retrocedent or of any Retrocessionaire for one or more of the
following purposes only:

AR 1846-A-98 -- 1/1/98
(12/11/97)                             8
<PAGE>
 
     A.   To reimburse the Retrocedent for the Retrocessionaire's share of 
          unearned premium on original contracts reinsured hereunder or account 
          of cancellations of such original contracts.

     B.   To pay the Retrocessionaires share or to reimburse the Retrocedent for
          the Retrocessionaire's share of any loss reinsured by this Agreement,
          which has not been otherwise paid.

     C.   To make refund of any sum in excess of the actual amount required to
          pay the Retrocessionaire's share of any liability reinsured by this
          Agreement.

     D.   In the event of non-extension of the Letter of Credit as provided for
          above, to establish deposit of the Retrocessionaire's share for
          unearned premium and/or losses, including reserves for incurred but
          not reported losses under this Agreement. Such cash deposit shall be
          held in an interest bearing account separate from the Retrocedent's
          other assets, and interest thereon shall accrue to the benefit of the
          Retrocessionaires.

     Citibank, N.A. shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Retrocedent or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Retrocedent.

     At annual intervals, or more frequently as agreed but never more frequently
than semi-annually, the Retrocedent shall prepare and forward to the 
Retrocessionaires a statement to reflect the Retrocessionaires' share of 
reserves for losses and/or unearned premium. If the statement shows that the 
Restrocessionaires' share of such reserves exceeds the balance available through
claims advances and/or Letters of Credit as of the statement date, the 
Retrocessionaires shall, within 30 days after receipt of notice of such excess,
make an adjustment to increase the amount available. If, however, the statement
shows that the Retrocessionaires' share of such reserves is less than the
balance available through the chosen method of funding as of the statement date,
the Retrocedent shall,

AR 1846-A-98 -- 1/1/98
(12/11/97)
                                       9

<PAGE>
 
within 30 days after receipt of written request from the Retrocessionaires, 
release such excess credit by making the appropriate adjustment.


                                   ARTICLE X
                                   ---------

INTEREST PENALTY
----------------

     The interest amounts provided for in this Article will apply to the 
Retrocessionaires or to the Retrocedent in the following circumstances:

     A.   Loss payments owned by the Retrocessionaires to the Retrocedent shall
          have a due date to the Retrocedent of 90 calendar days following the
          date of the billing/proof of loss.

     B.   Payment of any premium shall be due the Retrocessionaires within 90
          calendar days of the date specified in this Agreement. Any premium
          adjustments will be due by the debtor party within 150 calendar days
          of the expiry of this Agreement.

     C.   Payment on return of premiums, commissions, profit sharing, or any
          amounts not provided in paragraphs A. or B. above, shall have the due
          date as specified in this Agreement. If no due date is specified, the
          due date shall be 90 days following the date of billing.

     D.   Failure by a Retrocessionaire or the Retrocedent to comply with their
          respective payment obligations within the time periods as herein
          provided will result in a compound interest penalty payable at a rate
          equal to the 90-day Treasury Bill rate as published in the Money Rate
          Section or any successor section of The Wall Street Journal on the
                                              -----------------------
          first business day following the date a remittance becomes due, plus
          1% per annum, to be compounded and adjusted quarterly. Any interest
          which occurs pursuant to this Article shall be calculated by the party
          to which it is owed. The accumulation of the number of days that any
          payment is past due will stop on the date that the Intermediary, where
          applicable, receives payment.

     E.   The validity of any claim or payment may be contested under the
          provisions of this Agreement. If the debtor party prevails in an
          arbitration or any other proceeding, there shall be no interest
          penalty due. Otherwise, any interest will be calculated and due as
          outlined above.

     F.   If a Retrocessionaire advances payment of any claim it is contesting,
          and prevails in the contest, the Retrocedent shall return such payment
          plus pay interest on same, calculated as per the provisions of this
          Article.

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                                      10

<PAGE>
 
     G.   Any interest that occurs pursuant to this Article may be waived by the
          party to which it is owed. Further, any interest which is calculated
          pursuant to this Article that is $100 or less shall be waived. Waiver
          of such interest, however, shall not affect the waiving party's rights
          to similar interest for any other failure by the other party to make
          payment when due under this Article.

     H.   Nothing in this Article shall diminish any legal remedies that either
          party may have against the other.


                                  ARTICLE XI
                                  ----------

SETTLEMENTS
-----------

     The Retrocedent shall have the right to settle all claims under its
original contracts. All settlements, provided they are within the terms of this
Agreement, shall be unconditionally binding on the Retrocessionaires in
proportion to their participation in the Agreement, upon provision by the
Retrocedent of the following: identification of loss including date and
documented settlement/loss amounts and expenses received by the Retrocedent
subject to this Agreement.

     Inadvertent omission in dispatching the aforementioned documentation will
in no way affect the obligation of the Retrocessionaires under this Agreement,
provided the Retrocedent informs the Retrocessionaires of such omission promptly
upon discovery.


                                  ARTICLE XII
                                  -----------

OFFSET
------

     The Retrocedent or any Retrocessionaire hereunder shall be entitled to
deduct from amounts due the other party under this Agreement any amounts due
itself from the other party under this Agreement; however, in the event of the
insolvency of any party hereto, offset shall be in accordance with applicable
law.

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<PAGE>
 
                                 ARTICLE XIII
                                 ------------

SALVAGE AND SUBROGATION
-----------------------

     The Retrocessionaires shall be credited with their share of salvage and/or 
subrogation in respect of claims and settlements under this Agreement, less 
their share of recovery expense. Unless the Retrocedent and the 
Retrocessionaires agree to the  contrary, the Retrocedent shall enforce its 
right to salvage and/or subrogation and shall prosecute all claims arising out 
of such right.

                                  ARTICLE XIV
                                  -----------

WARRANTY
--------

     It is hereby warranted that the Retrocedent and the Retrocessionaires 
hereon shall retain all business subject to this Agreement net and unreinsured 
in any way, subject to the limits expressed in the Coverage Article.

                                  ARTICLE XV
                                  ----------

DELAYS, ERRORS, OR  OMISSIONS
-----------------------------

     Inadvertent delays, errors, or omissions made in connection with this 
Agreement shall not relieve either party from any liability which should have 
attached to either party had such delay, error, omission not occurred, provided 
always that such error or omission is rectified immediately upon discovery.

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                                      12
<PAGE>
 
                                  ARTICLE XVI
                                  -----------

AMENDMENTS
----------

     This Agreement may be altered or amended in any of its terms and conditions
by mutual consent of the Retrocedent and the Retrocessionaires by addenda hereto
which will then constitute a part of this Agreement.

                                 ARTICLE XVII
                                 ------------

ACCESS TO RECORDS
-----------------

     The Retrocessionaires, or their duly accredited representatives, shall have
access to the books and records of the Retrocedent on matters reasonably 
relating to this reinsurance at all reasonable times for the purpose of 
obtaining information concerning this Agreement or the subject matter hereof. 
Except as provided in the following sentence, access to premium records is 
restricted to within four years of the expiration of this Agreement. A 
Retrocessionaire shall be permitted access to premium records subsequent to the 
aforementioned period only on the condition that either: a) there are no 
balances payable hereunder by the Retrocessionaire which are overdue as provided
in the Interest Penalty Article of this Agreement, or b) the Retrocessionaire 
has funded all balances due hereunder in an interest-bearing trust fund or with 
a Letter of Credit as hereinafter provided.

     Should a Retrocessionaire choose option b) of the foregoing paragraph, the 
Retrocessionaire agrees to provide the Retrocedent a Trust Agreement established
at Morgan Guaranty Trust Company of New York, New York, or at a mutually agreed 
successor Trustee, or a clean, irrevocable, and evergreen Letter of Credit, 
issued by

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<PAGE>
 
Morgan Guaranty Trust Company of New York, New York, or by a mutually agreed 
bank, of which the Retrocedent shall be the beneficiary, which shall secure in 
full all balances due from the Retrocessionaire to the Retrocedent with respect 
to this Agreement. Such Trust Agreement and/or Letter of Credit shall be 
established under the laws of the state of New York and shall meet all 
requirements of the state regulatory authorities applicable to the Retrocedent. 
The Retrocessionaires is responsible for all costs associated with providing 
such Trust Agreement and/or Letters of Credit as required under this Article.

                                 ARTICLE XVIII
                                 -------------

CONFIDENTIALITY
---------------

     It is a condition precedent to any indemnification under this Agreement 
that the Retrocedent shall not disclose any details of this Agreement at any 
time to any third party without the approval of the Retrocessionaires. 
Notwithstanding the foregoing, the Retrocedent may disclose details of this 
Agreement to Names and their agents, auditors, accountants, and other third 
parties as may be required in order to comply with law or with the bylaws of 
Lloyd's, provided that they themselves respect the confidentiality of this 
undertaking.

                                  ARTICLE XIX
                                  -----------

INSOLVENCY
----------

     In the event of the Retrocedent's insolvency, the reinsurance afforded by 
this Agreement shall be payable by the Retrocessionaires on the basis of the 
Retrocedent's liability under the original contracts reinsured without 
diminution because of the Retrocedent's insolvency or because its liquidator, 
receiver, conservator, or statutory

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<PAGE>
 
successor has failed to pay all or a portion of any claims, subject however to
the right of the Retrocessionaires to offset against such funds due hereunder,
any sums that may be payable to them by said insolvent Retrocedent in accordance
with the Offset Article. The reinsurance shall be payable by the
Retrocessionaires directly to the Retrocedent, its liquidator, receiver,
conservator, or statutory successor except (a) where this Agreement specifically
provides another payee of such reinsurance in the event of the Retrocedent's
insolvency or (b) where the Retrocessionaires, with the consent of the direct
insured or insureds, have assumed such policy obligations of the Retrocedent as
direct obligations of themselves to the payees under such policies in
substitution for the Retrocedent's obligation to such payees.

     The Retrocedent's liquidator, receiver, conservator, or statutory successor
shall give written notice of the pendency of a claim against the Retrocedent
under the original contracts within a reasonable time after such claim is filed
in the insolvency proceeding. During the pendency of such claim, the
Retrocessionaires may investigate said claim and interpose in the proceeding
where the claim is to be adjudicated, at their own expense, any defense that
they may deem available to the Retrocedent, its liquidator, receiver,
conservator, or statutory successor. The expense thus incurred by the
Retrocessionaires shall be chargeable against the Retrocedent, subject to court
approval, as part of the expense of conservation or liquidation to the extent
that such proportionate share of the benefit shall accrue to the Retrocedent
solely as a result of the defense undertaken by the Retrocessionaires. Where two
or more Retrocessionaires are involved in the same claim, and a majority in
interest elect to interpose defense to such claim, the expense shall be


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<PAGE>
 
apportioned in accordance with the terms of this Agreement as though such 
expense had been incurred by the Retrocedent.

          In the event of insolvency of the Retrocedent, the Retrocessionaires 
under this Agreement shall have all rights, as more fully set forth in Section 
173 of Illinois Insurance Code, as amended.

                                  ARTICLE XX
                                  ----------

ARBITRATION
-----------

          In the event of any arbitration between the Retrocedent and its 
reinsureds under the terms of any original contract, the Retrocessionaires agree
unreservedly to abide by the result of such arbitration.

          As a condition precedent to any right of action hereunder, any dispute
arising out of this Agreement, whether arising before or after termination,
shall be submitted to the decision of a board of arbitration composed of two
arbitrators and an umpire, meeting in Chicago, Illinois unless otherwise agreed.

          The members of the board of arbitration shall be active or retired, 
disinterested officials of insurance or reinsurance companies or Underwriters at
Lloyd's, London. Each party shall appoint its arbitrator, and the two 
arbitrators shall choose an umpire before instituting the hearing. If the 
respondent fails to appoint its arbitrator within four weeks after being 
requested to do so by the claimant, the claimant shall also appoint the second 
arbitrator. If the two arbitrators fail to agree upon the appointment of an 
umpire within four weeks after their nominations, they shall request the
American Arbitration Association to appoint an umpire. Both parties shall be
promptly notified, in writing, of the appointment of the umpire.

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                                      16
<PAGE>
 
          The claimant shall submit its initial brief within 20 days from the 
appointment of the umpire. The respondent shall submit its brief within 20 days 
thereafter, and the claimant may submit a reply brief within 10 days after 
filing of the respondent's brief.

          The board shall make its decision with due regard to the custom and
usage of the insurance and reinsurance business. The board shall issue its
decision in writing based upon a hearing in which evidence may be introduced
without following strict rules of evidence but in which cross-examination and
rebuttal shall be allowed. The board shall make its decision within 60 days
following the termination of the hearings unless the parties consent to an
extension. The majority decision of the board shall be final and binding upon
all parties to the proceeding. Judgment may be entered upon the award of the
board in any court having jurisdiction thereof.

          If more than one Retrocessionaire is involved in the same dispute, all
such Retrocessionaires shall constitute and act as one party for purposes of
this Article, and communications shall be made by the Retrocedent to each of the
Retrocessionaires constituting the one party, provided that nothing therein
shall impair the rights of the Retrocessionaires to assert several, rather than
joint, defenses or claims, nor be construed as changing the liability of the
Retrocessionaires under the terms of this Agreement from several to joint.

          Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the umpire. The
remaining costs of the arbitration proceedings shall be allocated by the board.

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<PAGE>
 
                                  ARTICLE XXI
                                  -----------

TAXES
-----

     The Retrocedent shall pay all taxes (except for Federal Excise Tax) on 
premiums reported to the Retrocessionaires on this Agreement.

                                 ARTICLE XXII
                                 ------------

FEDERAL EXCISE TAX
------------------

     (This Article applies to Retrocessionaires domiciled outside the United 
     States of America, excepting Lloyd's London Underwriters and other 
     Retrocessionaires exempt from Federal Excise Tax).

     The Retrocessionaires shall allow for the purpose of paying the Federal 
Excise Tax the applicable percentage of the premium payable hereon (as imposed 
under Section 4371 of the Internal Revenue Service Code) to the extent such 
premium is subject to such tax. In the event of any return of premium, the 
Retrocessionaires shall deduct the applicable percentage of the return premium 
payable hereon and the Retrocedent or its agent shall recover such tax from the 
United States government.

                                 ARTICLE XXIII
                                 -------------

CURRENCY
--------

     The sign "$" in this Agreement refers to United States of America Dollars 
and all payments hereunder shall be made in that currency. All amounts paid or 
received by the Retrocedent in any other currency shall be converted into 
United States of America Dollars at the rate of exchange on the Retrocedent's
books when such payment is made or received.


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                                      18
<PAGE>
 
                                 ARTICLE XXIV
                                 ------------

SERVICE OF SUIT
---------------

     (This Article applies to Retrocessionaires domiciled outside the United 
     States of America and/or unauthorized in any state, territory, or district
     of the United States of America that has jurisdiction over the Retrocedent
     and in which a subject suit has been instituted. This Article is not
     intended to conflict with or override the parties' obligation to arbitrate
     their disputes in accordance with the Arbitration Article.)

     In the event any Retrocessionaire hereon fails to pay any amount or perform
any obligation claimed due hereunder, such Retrocessionaire, at the request of 
the Retrocedent, shall submit to the jurisdiction of any court of competent 
jurisdiction within the United States and shall comply with all requirements 
necessary to give that court jurisdiction. Nothing in this Article constitutes 
or should be understood to constitute a waiver of the Retrocessionaire's right 
to commence an action in any court of competent jurisdiction in the United 
States, to remove an action to a United States District Court, or to seek a 
transfer of a case to another court as permitted by the laws of the United 
States or of any state in the United States.  Service of process in such suit 
may be made upon Mendes and Mount, 750 Seventh Avenue, New York, New York 
10019-6829, or another party specifically designated in the applicable Interests
and Liabilities Agreement attached hereto. In any suit instituted against it 
upon this Agreement, the Retrocessionaire shall abide by the final decision of 
such court or of any appellate court in the event of an appeal.

     The above named are authorized and directed to accept service of process on
behalf of the Retrocessionaire in any such suit and/or upon request of the 
Retrocedent to give a written undertaking to the Retrocedent that they shall 
enter a general appearance on the Retrocessionaire's behalf in the event such a 
suit is instituted.

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                                      19
<PAGE>
 
     Further, pursuant to any statute of any state, territory, or district of 
the United States that makes provisions therefor, the Retrocessionaire hereby 
designates the Superintendent, Commissioner, or Director of Insurance or other 
officer specified for that purpose in the statute (or his successor or 
successors in office) as its true and lawful attorney upon whom may be served 
any lawful process in any action, suit, or proceeding instituted by or on behalf
of the Retrocedent or any beneficiary hereunder arising out of this Agreement, 
and hereby designates above named as the person to whom said officer is 
authorized to mail such process or a true copy thereof.

                                  ARTICLE XXV
                                  -----------

INTER-COMPANY POOLING ARRANGEMENT
---------------------------------

     It is understood and agreed that the Retrocedent has entered into the CNA 
Reinsurance Pooling Agreement whereby it assumes 100% of the liability of the 
other participants in the CNA Reinsurance Pooling Agreement. This present 
Agreement protect such assumed liability and attaches prior to redistribution, 
if any, within the participating companies. Such redistribution shall be 
disregarded for all purposes of this present Agreement. For all purposes of this
Agreement, other member companies of the CNA Reinsurance Pooling Agreement are: 
National Fire Insurance Company of Hartford, American Casualty Company of 
Reading Pennsylvania, Transportation Insurance Company, Transcontinental 
Insurance Company, Valley Forge Insurance Company, CNA Casualty of California, 
CNA Lloyd's of Texas and Columbia Casualty Company.

     It is also understood and agreed that the Retrocedent shall include the 
insurance companies of the Continental Corporation which are affiliated with, 
controlled by or under the common management of CNA.

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<PAGE>
 
     It is further agreed that notice shall be given to the Retrocessionaires 
within 45 days of the acquisition of a company, not previously a participant in 
either of the above-referenced, having in-force business that the Retrocedent 
wishes to have covered by this Agreement. In the event either party hereto 
maintains that the inclusion hereunder of some portion of the in force business
of any such new acquisition calls for alteration in the existing terms of this 
Agreement, and the parties are unable to negotiate terms that are mutually 
acceptable, then that portion of the newly acquired in force business not 
considered mutually acceptable shall be covered for an additional period of 45 
days from the date the dissenting party gives to the other written notice that 
said portion of the newly acquired in force business is unacceptable.


                                 ARTICLE XXVI
                                 ------------

INTERMEDIARY
------------

     Aon Re Inc. is hereby recognized as the Intermediary negotiating this 
Agreement for all business hereunder. All communications (including but not 
limited to notices, statements, premiums, return premiums, commissions, taxes, 
losses, loss adjustment expense, salvages, and loss settlements) relating 
thereto shall be transmitted to the Retrocedent or the Retrocessionaires through
Aon Re Inc., 123 N. Wacker Drive, Chicago, Illinois 60606. Payments by the
Retrocedent to the Intermediary shall be deemed payment to the 
Retrocessionaires. Payment by the Retrocessionaires to the Intermediary shall be
deemed payment to the Retrocedent only to the extent that such payments are 
actually received by the Retrocedent.

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                                      21

<PAGE>
 
                      INTERESTS AND LIABILITIES AGREEMENT
                      attaching to and forming a part of
                          LMX CATASTROPHE QUOTA SHARE
                           RETROCESSIONAL AGREEMENT

                                    between

                         CONTINENTAL CASUALTY COMPANY
                    (hereinafter called the "Retrocedent")

                                      and

                              LASALLE RE LIMITED
            (hereinafter called the "Subscribing Retrocessionaire")

     It is hereby mutually understood and agreed by and between the Retrocedent
and the Subscribing Retrocessionaire that effective 12:01 a.m., Standard Time,
January 1, 1998 to 12:01 a.m., Standard Time, January 1, 1999 the Subscribing
Retrocessionaire's share in the interests and liabilities of the
Retrocessionaires on the attached Agreement will be 47.50%.
                                                    ------

     The share of the Subscribing Retrocessionaire will be separate and apart 
from the shares of the other Retrocessionaires and will not be joint with those 
of the other Retrocessionaires, and the Subscribing Retrocessionaire will in no 
event participate in the interests and liabilities of the other 
Retrocessionaires.

     If the Subscribing Retrocessionaire wishes to designate an alternate party 
to that named in the Service of Suit Article contained in the attached 
Agreement, then service of process will be made upon the party hereinafter 
named:

________________________________________________________________________________

________________________________________________________________________________

     IN WITNESS WHEREOF, the parties hereto have caused this Interests and 
Liabilities Agreement to be executed in duplicate by their duly authorized 
representatives.

Signed at CHICAGO, ILLINOIS

                         CONTINENTAL CASUALTY COMPANY

Signature:   /s/ M. J. Laughlin            Title: Assistant Vice President,
             -------------------------            -------------------------
                                                  CNA Re
                                                  ------
Attest:      /s/ Albert Moy                Date:  2-11-98
             -------------------------            --------------------------

AR 1846-A-98--1/1/98               

                                       1