<PAGE>
 
                                                                    EXHIBIT 10.7
                                                                    ------------

                                                                  EXECUTION COPY
                                                                  --------------


                    UNDERWRITING SUPPORT SERVICES AGREEMENT

  This Agreement (this "Agreement") is made and entered into as of October 1,
1998 by and among LaSalle Re Limited, an insurance company incorporated and
organized under the laws of Bermuda ("LASALLE"), CNA Re Services Company, a
company incorporated and organized under the laws of the State of Illinois
("CRSC"), and CNA (Bermuda) Services Limited, a company incorporated and
organized under the laws of Bermuda ("CNA BERMUDA").

  WHEREAS, pursuant to that certain Amended and Restated Underwriting Services
Agreement entered into on September 21, 1995 by and between LASALLE and CNA
BERMUDA, as amended by the First Amendment thereto dated as of July 1, 1996
(such Amended and Restated Underwriting Services Agreement as thus amended being
hereinafter referred to as the "Underwriting Services Agreement"), CNA BERMUDA
has provided underwriting and marketing services and has underwritten all
classes of insurance and reinsurance as agent for LASALLE;

  WHEREAS, the parties hereto have agreed that the underwriting and marketing
services heretofore performed by CNA BERMUDA on behalf of LASALLE shall
henceforth be performed by LASALLE directly, with CRSC, through itsself and its
affiliates, providing certain underwriting support services as requested by
LASALLE;

  WHEREAS, the parties hereto also desire to reaffirm the strategic alliance and
community of interest between LASALLE and the CNA Insurance Group ("CNA"), which
has been an important component of LASALLE's success since its formation, and in
light of CNA's desire to continue to provide support and bring business
opportunities to LASALLE in the form of quota share reinsurance business, joint
ventures and otherwise; and

  WHEREAS, the parties hereto accordingly desire to terminate the Underwriting
Services Agreement as hereinafter set forth;

  NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
<PAGE>
 
I.     TERMINATION OF UNDERWRITING SERVICES AGREEMENT.

       The parties agree that the Underwriting Services Agreement shall
       terminate as of the close of business on September 30, 1998, subject to
       the following provisions:

       A.     LASALLE's payment obligations under Section III of the
              Underwriting Services Agreement shall continue, subject to the
              following modifications:

              (1)    For purposes of this Section I(A), the term "Underwriting
                     Year" shall have the meaning set forth in Section III(A)(1)
                     of the Underwriting Services Agreement and the term "1998
                     Underwriting Year" shall mean the Underwriting Year
                     beginning on January 1, 1998 and ending on December 31,
                     1998.

              (2)    No payments shall be due pursuant to Section III(B)(1) of
                     the Underwriting Services Agreement with respect to any
                     gross premium written after September 30, 1998.

              (3)    No payments shall be due pursuant to Section III(B)(2) or
                     Section III(C) of the Underwriting Services Agreement with
                     respect to any Underwriting Year that begins after December
                     31, 1998.

              (4)    All calculations of payments due pursuant to Section
                     III(B)(2) or Section III(C) of the Underwriting Services
                     Agreement with respect to the 1998 Underwriting Year shall
                     be multiplied by .75 in order to take account of the fact
                     that the Underwriting Services Agreement was in effect for
                     only 9 months of the 1998 Underwriting Year.

       B.     The provisions of Section VII(D) of the Underwriting Services
              Agreement shall not be applicable, but the provisions of Section
              VII(E) of the Underwriting Services Agreement shall continue in
              effect until payment in full is made thereunder.

II.    TERM.

       This Agreement shall be effective as of the date hereof (the "Effective
       Date") and shall terminate at the close of business on September 30, 2001
       unless terminated earlier pursuant to Section V hereof.


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<PAGE>
 
III.      DUTIES OF CRSC AND CNA BERMUDA.

       A.     CNA BERMUDA agrees that it shall use its best efforts to
              facilitate a smooth transition in the carrying on of LASALLE's
              underwriting operations, including taking all steps necessary to
              enable all employees of CNA BERMUDA who have performed services
              for LASALLE pursuant to the Underwriting Services Agreement to
              become employees of LASALLE on the Effective Date.

       B.     Beginning on the Effective Date and continuing throughout the term
              of this Agreement, CRSC and CNA BERMUDA (together, the "CNA
              Parties") shall provide such underwriting support services to
              LASALLE as LASALLE may reasonably request.  Underwriting support
              services shall include:

              (1)    assigning underwriting personnel to assist LASALLE's
                     underwriting staff on a temporary basis as reasonably
                     requested by LASALLE;

              (2)    assisting LASALLE with actuarial, financial and statistical
                     analysis and reporting;

              (3)    providing support to LASALLE on data processing and other
                     technical matters;

              (4)    providing LASALLE with access to the CNA Parties'
                     reinsurance underwriting database and technology as
                     pertinent to LASALLE's business;

              (5)    advising LASALLE on insurance industry customs and
                     practices;

              (6)    providing advice to LASALLE's human resources department;
                     and

              (7)    any other services reasonably requested by LASALLE.

       C.     For services rendered hereunder, LASALLE shall pay CNA BERMUDA,
              for each Fiscal Year (as hereinafter defined) that this Agreement
              shall be in effect, an annual retainer of $US 333,333.33.  Such
              retainer shall be paid quarterly in arrears throughout the term of
              this Agreement and shall be credited against CRSC's charges for
              consulting services rendered hereunder (at a competitive
              commercial daily or hourly rate to be agreed to between the
              parties hereto) and CRSC's reasonable associated travel expenses.
              In the event that the foregoing charges and expenses exceed the
              sum of said retainer in any Fiscal Year, LASALLE shall pay CNA
              BERMUDA, within 60

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<PAGE>
 
              days after the end of such Fiscal Year, the total amount of such
              excess.

       D.     The CNA Parties agree to act in good faith and to put forward
              their best efforts to perform their duties hereunder in a
              competent and professional manner.
 
IV.    PROFIT COMMISSION.

       A.     For purposes of this Agreement,

              (1)    "Fiscal Year" shall mean the 12-month period which begins
                     on October 1 of a calendar year and ends on September 30 of
                     the following calendar year.

              (2)    "Net Underwriting Profit" shall mean an amount equal to (i)
                     net earned premiums, less (ii) commissions, brokerage and
                     other acquisition costs, less (iii) excise tax, less (iv)
                     actual administrative expenses, less (v) underwriting
                     expenses (including but not limited to any amounts payable
                     pursuant to Section III(C) hereof, less (vi) actual general
                     corporate expenses of LASALLE, less (vii) incurred losses;
                     in all cases, as determined in accordance with the
                     consolidated financial statements of LaSalle Re Holdings
                     Limited, as filed with the United States Securities and
                     Exchange Commission (the "LaSalle Financial Statements").

              (3)    "Nominal Profit Share Deficit" shall be equal to zero at
                     the inception of this Agreement. Thereafter, for purposes
                     of carrying over to each succeeding Fiscal Year, Nominal
                     Profit Share Deficit shall be the greater of (a) zero and
                     (b) the Nominal Profit Share Deficit at the beginning of
                     the Fiscal Year plus incurred losses for that year minus
                     70% of LASALLE's earned premium for that year.

       B.     In consideration for all the obligations and services to be
              performed by the CNA Parties under this Agreement, LASALLE agrees,
              with respect to each Fiscal Year during the term of this
              Agreement, to pay CNA BERMUDA, if for any Fiscal Year the sum of
              incurred losses and the Nominal Profit Share Deficit at the
              beginning of the Fiscal Year is equal to or less than 70% of
              LASALLE's earned premium, an underwriting profit commission (the
              "Underwriting Profit Commission") equal to 1.67% of the Net
              Underwriting Profit of LASALLE during the period beginning after
              the end of the Fiscal Year for which

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<PAGE>
 
              CNA BERMUDA last received an Underwriting Profit Commission
              pursuant to this Agreement and ending at the end of the Fiscal
              Year for which the calculation is being made.

       C.     Calculations of Net Underwriting Profit, Underwriting Profit
              Commission and Nominal Profit Share Deficit hereunder shall be
              made each year in connection with the LaSalle Financial
              Statements, and payment with respect to Section IV(B) hereof will
              be made within 30 days after completion of such calculation.

V.     TERMINATION.

       A.     For purposes of this Section V, (i) in any reference to CRSC's or
              CNA BERMUDA's termination rights, the term "other party" shall
              mean LASALLE and (ii) in any reference to LASALLE's termination
              rights, the term "other party" shall mean either CRSC or CNA
              BERMUDA.

       B.     For purposes of this Section V,

              (1)    "Change in Control" of an entity (the "Subject Company")
                     shall mean the earlier to occur of (a) the date of a public
                     announcement that a Person or group of affiliated Persons
                     (an "Acquiring Person") has acquired, or has obtained the
                     right to acquire, legal or beneficial ownership of more
                     than 50% of the voting power of the issued and outstanding
                     shares of the Subject Company, (b) the date of any
                     amalgamation, consolidation or merger of the Subject
                     Company with, or the transfer of all or substantially all
                     of the Subject Company's assets to, any Acquiring Person or
                     (c) any reorganization, recapitalization or other
                     transaction as a result of which either (i) 40% or more in
                     value of the Subject Company is beneficially owned,
                     directly or indirectly, by Persons who were not holders of
                     the voting shares of capital stock of the Subject Company
                     immediately prior to such reorganization, recapitalization
                     or other transaction or (ii) those persons who immediately
                     prior to such reorganization, recapitalization or other
                     transaction constituted the board of directors of, as
                     applicable, LaSalle Re Holdings Limited or CNA Financial
                     Corporation cease to consitute a majority of such board of
                     directors.  For purposes hereof, the term "Acquiring
                     Person" shall not include the Subject Company, any of its
                     affiliates or any employee benefit plan

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<PAGE>
 
                     (or related trust) sponsored or maintained by the Subject
                     Company or any of its affiliates.

              (2)    "Early Termination Fee" shall mean an amount equal to the
                     net present value, using a discount rate of 10%, on the
                     date as of which LASALLE elects to terminate this Agreement
                     pursuant to Section V(F) hereof, of a payment on September
                     30, 2001 of an amount equal to the difference between $US
                     4,000,000 and the aggregate of Underwriting Profit
                     Commissions previously paid by LASALLE to CNA BERMUDA
                     pursuant to Section IV(B) hereof.

              (3)    "Person" shall mean any individual, firm, partnership,
                     corporation, limited liability company or other entity, and
                     shall include any successor (by merger or otherwise) of
                     such entity.

       C.     LASALLE, CRSC or CNA BERMUDA may terminate this Agreement
              immediately if the other party (i) is placed in receivership,
              makes an assignment for the benefit of creditors, is placed in a
              proceeding for the purpose of winding up or liquidating its
              business affairs or is the subject of any proceeding based upon
              its insolvency or (ii) loses any license or permit which is then
              required in order to engage in the business contemplated by this
              Agreement.

       D.     LASALLE, CRSC or CNA BERMUDA may terminate this Agreement
              immediately upon written notice based upon (i) fraud upon the
              terminating party by the other party or (ii) a material breach of
              this Agreement by the other party which has not been corrected
              after thirty days' written notice.

       E.     LASALLE, CRSC or CNA BERMUDA may terminate this Agreement upon
              ninety days' written notice to the other party in the event that
              there has been a Change in Control of the other party.

       F.     In the event that there has been a Change in Control of LASALLE,
              LASALLE (or its successor) may terminate this Agreement as of any
              date on which LASALLE pays the Early Termination Fee to CNA
              BERMUDA. Notwithstanding any other provision of this Agreement,
              upon payment of the Early Termination Fee pursuant to this Section
              V(F), LASALLE shall have no further obligation to pay Underwriting
              Profit Commissions pursuant to Section IV(B) hereof.

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<PAGE>
 
       G.     Termination of this Agreement shall not relieve either party of
              its liability for performance under the Agreement to the date of
              termination. Following any termination, the parties will cooperate
              with each other to provide a smooth transition of services and to
              satisfy any reasonable requests for information concerning actions
              taken during the term of this Agreement.

VI.    CONFIDENTIALITY.

       A.     The CNA Parties agree that they will not disclose or use for any
              purpose outside the scope of this Agreement proprietary or
              confidential information provided to it by LASALLE unless and
              until such information (i) becomes public knowledge other than
              through disclosure by either of the CNA Parties or (ii) is
              subpoenaed or otherwise required by an authorized governmental
              authority.  In the event that either of the CNA Parties determines
              that it is required to provide any such information, it shall
              promptly provide notice to LASALLE.

       B.     LASALLE agrees that it will not disclose or use for any purpose
              outside the scope of this Agreement proprietary or confidential
              information provided to it by either of the CNA Parties unless and
              until such information (i) becomes public knowledge other than
              through disclosure by LASALLE or (ii) is subpoenaed or otherwise
              required by an authorized governmental authority.  In the event
              that LASALLE determines that it is required to provide any such
              information, it shall promptly provide notice to the CNA Parties.

       C.     The obligations of the parties hereto under this Section VI shall
              continue after this Agreement terminates.

VII.   INDEPENDENT CONTRACTOR.

              Each of the CNA Parties shall act as an independent contractor.
              Nothing contained herein shall be construed to create the relation
              of partners or employer and employee between LASALLE and either of
              the CNA Parties.

                                 Page 7 of 11
<PAGE>
 
VIII.  NON-EXCLUSIVITY.

              This Agreement shall not in any way prevent the CNA Parties from
              performing for other insurers services of the type described
              herein, provided that the CNA Parties faithfully perform their
              obligations under this Agreement and that the performance of
              services for others does not create any conflict of interest. The
              CNA Parties agree, however, that they shall promptly notify
              LASALLE in writing, as soon as reasonably practicable but in any
              event prior to execution, of any arrangement entered into by
              either of them involving the performance by such party for another
              Bermuda-based insurer of services similar to those to be performed
              by the CNA Parties for LASALLE under this Agreement.

IX.    ASSIGNMENT.

       A.     Except as is otherwise specifically provided hereinabove, LASALLE
              may not assign, pledge, hypothecate, transfer, delegate or
              subcontract this Agreement or any of its rights, benefits or
              obligations hereunder, in whole or in part, whether by operation
              of law or otherwise, without the prior written consent of the CNA
              Parties.

       B.     Except as is otherwise specifically provided hereinabove, neither
              of the CNA Parties may assign, pledge, hypothecate, transfer,
              delegate or subcontract this Agreement or any of its rights,
              benefits or obligations hereunder, in whole or in part, whether by
              operation of law or otherwise, without the prior written consent
              of LASALLE.

X.     SUCCESSORS.

       This Agreement shall be binding upon the successors, legal
       representatives or assigns of the parties hereto.

XI.    NO WAIVER.

       The failure of any party at any time to require another party's strict
       performance of any particular obligation under this Agreement shall not
       affect such party's right to require strict performance of that
       obligation in the future.  Any waiver by any party of any breach of any
       provision hereof shall not be construed as a waiver of any continuing or
       succeeding breach of such provision, or a waiver or modification of the
       provision itself, or a waiver or modification of any other right under
       this Agreement.

XII.   CAPTIONS.

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<PAGE>
 
       The captions of the several sections of this Agreement are inserted
       solely for convenience of reference, and are neither a part of nor
       intended to govern, limit or aid in the construction of any term or
       provision hereof.

XIII.  AMENDMENTS AND CHOICE OF LAW.

       A.     This Agreement may be amended only by an instrument in writing and
              executed by the parties to this Agreement.

       B.     This Agreement shall be construed according to the laws of
              Bermuda.

XIV.   NOTICES.

       Any notice required under this Agreement shall be sent, in writing, by
       certified or registered mail, postage prepaid, return receipt requested,
       by facsimile, by courier service or shall be hand delivered to the
       respective parties as follows:

       If to LASALLE:

       LaSalle Re Limited
       Attention: Victor H. Blake
       25 Church Street
       P.O. Box HM 1502
       Hamilton HM FX, Bermuda

       with a copy to:

       Richard W. Shepro, Esq.
       Mayer, Brown & Platt
       190 South LaSalle Street
       Chicago, Illinois 60603

       If to CRSC:

       CNA Re Services Company
       Attention: William J. Adamson, Jr.
       200 South Wacker Drive, 11th Floor
       Chicago, Illinois 60606

       with a copy to:

       Marvin J. Cashion, Esq.
       Group Vice President & Deputy General Counsel
       CNA
       CNA Plaza
       Chicago, Illinois 60685

                                 Page 9 of 11
<PAGE>
 
       If to CNA BERMUDA:

       CNA (Bermuda) Services Ltd.
       Attention: William J. Adamson, Jr.
       25 Church Street
       P.O. Box HM 1502
       Hamilton HM FX, Bermuda

       with a copy to:

       Marvin J. Cashion, Esq.
       Group Vice President & Deputy General Counsel
       CNA
       CNA Plaza
       Chicago, Illinois 60685

XV.    COMPLETE AGREEMENT.

       This Agreement sets forth the entire agreement and understanding of the
       parties hereto with respect to the subject matter hereof and supersedes
       any and all prior agreements, arrangements and understandings among the
       parties relating to the subject matter hereof.

XVI.   COUNTERPARTS.

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

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<PAGE>
 
       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.



                                   CNA (BERMUDA) SERVICES LIMITED



                                   By: /s/ W. J. Adamson
                                       --------------------------------



                                   CNA RE SERVICES COMPANY



                                   By: /s/ W. J. Adamson
                                   --------------------------------



                                   LASALLE RE LIMITED



                                   By: /s/ Victor H. Blake
                                   --------------------------------


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