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                                                                    Exhibit 10.1

                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                   -----------------------------------------

         THIS AGREEMENT, made and entered into as of October 1, 1999 (the
"Effective Date"), amends and restates the agreement entered into as of October
1, 1998 by and between Guy Hengesbaugh (the "Executive") and LaSalle Re Limited
(the "Company");

                               WITNESSETH THAT:
                               ---------------

         WHEREAS, the parties desire to enter into this Agreement pertaining to
the employment of the Executive by the Company;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Executive and the
Company as follows:

         1. Performance of Services. The Executive's employment with the Company
            ------------------------
shall be subject to the following:

(a)      Subject to the provisions of this Agreement, the Company hereby agrees
         to employ the Executive as the President and Chief Executive Officer of
         the Company and the President and Chief Operating Officer of LaSalle Re
         Holdings Limited (the "Holding Company") during the Agreement Term (as
         defined below), and the Executive hereby agrees to remain in the employ
         of the Company during the Agreement Term.

(b)      During the Agreement Term, while the Executive is employed by the
         Company, the Executive shall devote, subject to paragraph 1(f), his
         full time, energies and talents to performing his duties under this
         Agreement.

(c)      The Executive agrees that he shall perform his duties faithfully and
         efficiently subject to the directions of the Board of Directors of the
         Company (the "Board"). The Executive's duties may include providing
         services for the Company, the Holding Company, and the Subsidiaries (as
         defined below), as determined by the Board; provided that the Executive
         shall not, without his consent, be assigned tasks that would be
         inconsistent with his position at the Company. The Executive will have
         such authority and power as are inherent to the undertakings applicable
         to his position and necessary to carry out his responsibilities and the
         duties required of him hereunder.

(d)      While the Executive is employed by the Company, he shall be subject to
         the duties that reasonably apply to the Company's officers and
         employees (including, without limitation, the duty of loyalty to the
         Company).

(e)      The Company may change the Executive's title and duties in the event of
         reorganization, restructuring, or similar circumstances, except that
         the Executive shall have a senior

                                       1
<PAGE>

         executive position at all times during the Agreement Term while he is
         employed by the Company.

(f)      Notwithstanding the foregoing provisions of this paragraph 1, during
         the Agreement Term, the Executive may devote reasonable time to
         activities other than those required under this Agreement, including
         the supervision of his personal investments, and activities involving
         professional, charitable, educational, religious and similar types of
         organizations, speaking engagements, membership of the boards of
         directors of other organizations, and similar type of activities, to
         the extent that such other activities do not inhibit or prohibit the
         performance of the Executive's duties under this Agreement, or conflict
         in any material way with the business of the Company, the Holding
         Company, or any Subsidiary; provided, however, that except as otherwise
         expressly provided in this Agreement, the Executive shall not serve on
         the board of any business, or hold any position with any business
         without the consent of the Board of the Company.

(g)      The Executive will be required to maintain a residence in Bermuda while
         employed by the Company.

(h)      The Company will use its reasonable best efforts to maintain a Bermuda
         work permit for the Executive. The Executive shall cooperate with the
         Company and the appropriate authorities in maintaining such permit. The
         Executive's employment by the Company is conditioned upon the Company's
         ability to keep current all required work permits, and except as
         provided in this paragraph 1(h), the Company shall have no further
         obligation to the Executive if, after employing its reasonable best
         efforts, it is unable to maintain such permits. If despite the
         Company's best efforts to maintain the Bermuda work permit, the work
         permit is terminated or revoked by the Government of Bermuda through no
         fault of the Executive, then the Executive shall be deemed to have
         received written notice from the Company that his Date of Termination
         is the date on which the termination or revocation of his or her work
         permit is effective, and the Executive shall be entitled to the
         benefits provided for Termination by the Company under Section 3(g). In
         addition, the Company shall reimburse the Executive for reasonable
         costs actually incurred by the Executive and the members of his or her
         immediate family to relocate to the nation in which the Executive
         maintains citizenship; provided, however, that such reimbursement shall
         be made only if such relocation occurs within a reasonable time
         following such Date of Termination. The reasonableness of the cost and
         time of relocation shall be determined by the Board of Directors of the
         Company.


(i)      Subject to the provisions of this Agreement, the Executive shall not be
         required to perform services under this Agreement during any period
         that he is Disabled. The Executive shall be considered "Disabled"
         during any period in which he has a physical or mental disability which
         renders him incapable, after reasonable accommodation, of performing
         his duties under this Agreement. In the event of a dispute as to
         whether the Executive is Disabled, the Company may refer the same to a
         licensed practicing

                                       2
<PAGE>

         physician of the Company's choice, and the Executive agrees to submit
         to such tests and examination as such physician shall deem appropriate.

(j)      The "Agreement Term" shall be the period beginning on the Effective
         Date and ending on the second anniversary of the Effective Date;
         provided, however, that beginning on the Effective Date, such Agreement
         Term shall automatically be renewed daily, such that at any time on or
         after the Effective Date, the remaining term shall equal two years.
         However, such additional day-to-day renewals may be terminated by
         either party be delivering written notice of such termination to the
         other party, in accordance with the requirements of paragraph 18. The
         cessation of the automatic renewals shall be effective on the date such
         written notice is deemed to be given to the other party in accordance
         with paragraph 18, such that the Agreement term shall end on the
         two-year anniversary of the date such written notice is deemed given to
         the other party. For purposes of this Agreement, a Notice of
         Termination, as described in paragraph 3(i), shall be deemed to be a
         notice to terminate day-to-day renewals.

(k)      For purposes of this Agreement, the term "Subsidiary" shall mean any
         company (regardless of whether incorporated) during any period in which
         50% or more of the total combined voting power of all classes of stock
         (or other ownership interest) entitled to vote is owned, directly or
         indirectly, by the Company.

         2. Compensation. Subject to the provisions of this Agreement, during
            ------------
the Agreement Term, while he is employed by the Company, the Company shall
compensate the Executive for the Executive's services as follows:

(a)      Salary. The Executive shall receive, for each 12-consecutive month
         ------
         period beginning on the Effective Date and each anniversary thereof, in
         substantially equal monthly or more frequent installments, an annual
         base salary of $450,000 (the "Salary"); provided that an additional
         amount of $12,500 shall be paid to the Executive in a lump sum as soon
         as practicable following the Effective Date, so that the annual base
         salary of the Executive will have effectively been $450,000 retroactive
         to July 1, 1999. In no event shall the Salary of the Executive be
         reduced to an amount that is less than the amount specified in this
         paragraph (a), or to an amount that is less than the amount that he was
         previously receiving, except to the extent that reductions of the same
         percentage are being made at the same time to the salaries of all other
         Company officers in the corporate office at or above the vice-president
         level, and such Salary shall be restored to its prior level when, and
         to the same extent, as the restoration that applies to the other
         officers.

(b)      Bonus. The Executive shall be entitled to receive bonuses from the
         -----
         Company in accordance with the provisions of Exhibit A, which is
         attached to and forms a part of this Agreement.

(c)      Disability. The Executive shall receive from the Company disability
         ----------
         income replacement coverage which will provide for replacement of
         income at a commercially reasonable rate

                                       3
<PAGE>

         during any period in which the Executive is Disabled if the disability
         arose during the Agreement Term and prior to the Executive's Date of
         Termination. During any period while the Executive is Disabled, and is
         otherwise entitled to receive Salary under this Agreement, any Salary
         payments to the Executive shall be reduced by the amount of any
         benefits paid for the same period of time under the Company's
         disability income replacement coverage.

(d)      Pension. The Company will provide the Executive with a defined
         -------
         contribution savings plan, into which the Company will make a
         contribution for each fiscal year equal to 10% of the Salary paid to
         the Executive for such fiscal year. The plan will also provide that the
         Executive may make annual contributions equal to or less than the
         Company's contribution.

(e)      Automobile. The Company will provide the Executive with an allowance
         ----------
         toward the cost of an automobile in Bermuda, the amount of which will
         be approved by the Compensation Committee. The Company will assume
         responsibility for the cost of insurance, maintenance and similar
         items. The Executive's personal use of the automobile will be
         permitted. This perquisite shall be governed by the rules and
         limitations set down from time to time by the Company.

(f)      Club. The Company will reimburse the Executive for periodic dues for
         ----
         his membership in clubs located in Bermuda in an amount not to exceed
         $2,400 per fiscal year. The Company will not reimburse initiation fees
         for club membership under this Agreement, in light of reimbursements
         made by the Company to the Executive's prior employer with respect to
         initiation fees for club membership for the period during which the
         Executive performed services for the Company but was employed by the
         prior employer.

(g)      Housing/Living Allowance. The Company shall provide the Executive with
         ------------------------
         a housing and living expense allowance at the annual rate of $120,000
         for the Agreement Term, with such allowance to be payable to the
         Executive in monthly instalments.

(h)      Tax, Accounting and Financial Planning. The Company will reimburse the
         --------------------------------------
         Executive for reasonable expenses, not to exceed $5,000 per fiscal
         year, for tax, accounting, and financial planning services.

(i)      Other Benefits. Except as otherwise specifically provided to the
         --------------
         contrary in this Agreement, the Executive shall be provided with the
         welfare benefits and other fringe benefits to the same extent and on
         the same terms as those benefits are provided by the Company from time
         to time to the Company's other senior management employees. However,
         the Company shall not be required to provide a benefit or perquisite
         under this paragraph 2(i) if such benefit or perquisite would duplicate
         (or otherwise be the same type as) a benefit or perquisite specifically
         required to be provided under another provision of this Agreement.

                                       4
<PAGE>

(j)      Expenses. The Company will reimburse the Executive for reasonable
         --------
         expenses for entertainment, traveling, meals, lodging and similar items
         in promoting the Company's business which the Executive documents on a
         form used by the Company to report business expenses.

(k)      Indemnification. The Company shall maintain officers liability
         ---------------
         insurance in commercially reasonable amounts (as reasonably determined
         by the Board), and the Executive shall be covered under such insurance
         to the same extent as other senior management employees of the Company.
         The Executive shall be eligible for indemnification by the Company
         under the Company's bye-laws as currently in effect. The Company agrees
         that it shall not take any action that would impair the Executive's
         rights to indemnification under the Company's bye-laws, as currently in
         effect.

(l)      Holiday/Vacation. The Executive shall be subject to the holiday and
         ----------------
         vacation policy that applies to other senior executives of the Company.

(m)      Dollar Amounts. As used in this Agreement, "dollars" or numbers
         --------------
         preceded by the symbol "$" shall mean amounts in United States Dollars.

         3. Termination. The Executive's employment during the Agreement Term
            -----------
may be terminated by the Company or the Executive without any breach of this
Agreement only under the circumstances described in paragraphs 3(a) through
3(g):

(a)      Death.  The Executive's employment will terminate upon his death.
         -----

(b)      Permanently Disabled. The Company may terminate the Executive's
         --------------------
         employment if he is Permanently Disabled. "Permanently Disabled" means
         that the Executive is eligible for benefits under the Company's
         long-term disability plan.

(c)      Cause. The Company may terminate the Executive's employment at any time
         -----
         for Cause. "Cause" shall mean:

         (i)      the wilful and continued failure by the Executive to
                  substantially perform his duties with the Company (other than
                  any such failure resulting from the Executive's being
                  Disabled), within a reasonable period of time after a written
                  demand for substantial performance is delivered to the
                  Executive by the Board, which demand specifically identifies
                  the manner in which the Board believes that the Executive has
                  not substantially performed his duties;

         (ii)     the wilful engaging by the Executive in conduct which is
                  demonstrably and materially injurious to the Company or the
                  Holding Company, monetarily or otherwise; or

                                       5
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         (iii)    the engaging by the Executive in egregious misconduct
                  involving serious moral turpitude to the extent that, in the
                  reasonable judgment of the Compensation Committee, the
                  Executive's credibility and reputation no longer conform to
                  the standard of the Company's executives.

         For purposes of this Agreement, no act, or failure to act, on the
         Executive's part shall be deemed "wilful" unless done, or omitted to be
         done, by the Executive not in good faith and without reasonable belief
         that the Executive's action or omission was in the best interest of the
         Company or the Holding Company.

(d)      Constructive Discharge. If the Executive (i) provides written notice to
         ----------------------
         the Company of the occurrence of a material breach of this Agreement by
         the Company, which specifically identifies the manner in which the
         Executive believes that the breach has occurred; (ii) the Company fails
         to correct such breach within a reasonable time after such notice; and
         (iii) the Executive resigns within the 60-day period following the
         occurrence of such breach, then the Executive shall be considered to
         have been constructively discharged.

(e)      Resignation by Executive. The Executive may resign for any reason by
         ------------------------
         giving the Company ninety (90) days prior written notice, except the
         Executive will be treated as having resigned under this paragraph 3(e)
         only if he has not been constructively discharged under paragraph 3(d).

(f)      Mutual Agreement. This Agreement may be terminated at any time by the
         ----------------
         mutual agreement of the parties. Any termination of the Executive's
         employment by mutual agreement of the parties will be memorialized by
         an agreement which is reduced in writing and signed by the Executive
         and the Chairman of the Compensation Committee.

(g)      Termination by Company. The Company may terminate the Executive's
         ----------------------
         employment at any time for any reason by giving the Executive prior
         written notice, except the Executive's employment will not be treated
         as having been terminated under this paragraph 3(g) if the termination
         is for reasons of being Permanently Disabled or for Cause.

(h)      Date of Termination. "Date of Termination" means the last day the
         -------------------
         Executive is employed by the Company, provided that the Executive's
         employment is terminated in accordance with the foregoing provisions of
         this paragraph 3.

(i)      Notice of Termination. Any termination of the Executive's employment by
         ---------------------
         the Company or the Executive (other than a termination pursuant to
         paragraph 3(a) or paragraph 3(f)) must be communicated by a written
         Notice of Termination to the other party hereto. For purposes of this
         Agreement, a "Notice of Termination" means a dated notice which
         indicates the specific termination provision in this Agreement relied
         on and which sets forth in reasonable detail the facts and
         circumstances, if any, claimed to

                                       6
<PAGE>

         provide a basis for termination of the Executive's employment under the
         provision so indicated.

         4. Rights Upon Termination. This paragraph 4 describes the payments and
            -----------------------
benefits to be provided to the Executive after his Date of Termination:

(a)      Payment of Previously Earned Amounts. The Executive shall receive
         ------------------------------------
         payment of accrued but unpaid Salary, vacation pay and, if expressly
         provided for in paragraph 4(d), a pro rata portion of his bonus (if
         any), in each case for the period ending with the Executive's Date of
         Termination.

(b)      No Severance Payments. If the Executive's Date of Termination occurs
         ---------------------
         during or after the end of the Agreement Term, or because of (i) the
         Executive's death, (ii) his being Permanently Disabled (paragraph
         3(b)), (iii) his termination for Cause (paragraph 3(c)), or (iv) his
         resignation (paragraph 3(e)), then, except as otherwise expressly
         provided for in this Agreement, no payments shall be due to the
         Executive under this Agreement for periods after the Date of
         Termination.

(c)      Salary Continuation. If the Executive's Date of Termination occurs
         -------------------
         during the Agreement Term because of (i) his discharge by the Company
         for reasons other than Cause (described in paragraph 3(c)), or (ii) his
         constructive discharge (described in paragraph 3(d)), the Executive
         shall continue to receive Salary payments (at the rate in effect on the
         Date of Termination) in monthly or more frequent instalments through
         the earliest of: (i) the last day of the Agreement Term; (ii) the date
         of the Executive's death, or (iii) the date, if any, of the breach by
         the Executive of the non-competition requirements of paragraph 7, the
         confidentiality requirements of paragraph 8 or the non- disparagement
         requirements of paragraph 9.

(d)      Pro rata Bonus. Except as otherwise provided in this paragraph 4(d),
         --------------
         the Executive shall not receive a bonus for the fiscal year in which
         the Executive's Date of Termination occurs. If the Executive's Date of
         Termination occurs during the Agreement Term as a result of (i) the
         Executive's death (ii) his being Permanently Disabled (paragraph 3(b)),
         (iii) his discharge by the Company for reasons other than Cause
         (described in paragraph 3(c)), or (iv) his constructive discharge
         (described in paragraph 3(d)), the Executive shall receive a pro rata
         portion of the bonus which would have been paid pursuant to Exhibit A
         for the fiscal year in which the Executive's Date of Termination
         occurs. Such portion, if any, shall be calculated for the period ending
         on the Date of Termination and shall be paid to the Executive (or his
         estate) within a reasonable period of time after the Company calculates
         the bonus amount, if any, for all employees for the fiscal year.

(e)      Housing/Living Expenses, Medical Benefits. If the Executive is entitled
         -----------------------------------------
         to Salary Continuation payments pursuant to paragraph 4(c), the
         Executive shall receive a housing and living expense allowance
         (described in paragraph 2(g)) and may continue to participate in the
         medical and dental plans in which he participated on the day before his

                                       7
<PAGE>

         Date of Termination through the earlier of: (i) the last day for which
         the Executive receives Salary Continuation payments pursuant to
         paragraph 4(c); or (ii) three (3) months after the Executive's Date of
         Termination. Participation in the medical and dental plans is subject
         to the Executive's payment of the applicable employee portion of the
         monthly premium cost, if any. If the Company ceases offering the
         medical and dental plans in which the Executive participated on the day
         before his Date of Termination to Company employees during this time,
         the Executive may elect to participate in any other medical or dental
         plan offered by the Company to its employees, provided however, that
         the Executive shall be responsible for paying the applicable employee
         portion of the monthly premium cost.

(f)      Other Programs. No benefits shall be payable to the Executive under any
         --------------
         other severance pay arrangement or similar arrangement maintained by
         the Company or any Subsidiary. Except as otherwise expressly provided
         in this Agreement, no other payments or benefits shall be due to the
         Executive following the Date of Termination (except as otherwise
         specifically provided under the terms of an employee benefit plan or
         arrangement).


         5. Duties on Termination. Subject to the provisions of this Agreement,
            ---------------------
during the period beginning on the date of delivery of a Notice of Termination,
and ending on the Date of Termination, the Executive shall continue to perform
his duties as set forth in this Agreement, and shall also perform such services
for the Company and the Holding Company as are necessary and appropriate for a
smooth transition to the Executive's successor, if any. Notwithstanding the
foregoing provisions of this paragraph 5, the Company may suspend the Executive
from performing his duties under this Agreement following the delivery of a
Notice of Termination providing for the Executive's resignation, or delivery by
the Company of a Notice of Termination providing for the Executive's termination
of employment for any reason; provided, however, that during the period of
suspension (which shall end on the Date of Termination), the Executive shall
continue to be treated as employed by the Company for other purposes, and his
rights to compensation or benefits shall not be reduced by reason of the
suspension.

         6. Non-competition. While the Executive is employed by the Company, and
            ---------------
during the Non-Competition Period (as defined below)

         (A)      the Executive agrees that he will not directly or indirectly:

                  (i) perform services in a senior management-related position
                  for a direct competitor of the Company (or any successor
                  corporation into which the Company and Holding Company may be
                  merged or consolidated); for purposes of this paragraph 6, a
                  related position shall include, but not be limited to, a chief
                  executive officer or president;

                                       8
<PAGE>

                  (ii) except in connection with any duties as on officer or
                  employee of the Company or Holding Company (or any successor
                  corporation into which they may be merged or consolidated),
                  solicit, divert or attempt to solicit or divert any party who
                  is, was, or was solicited to become, a customer or of the
                  Company at any time during the Agreement Term, provided that
                  this restriction shall not apply to any activity on behalf of
                  a business that does not actually or potentially compete with
                  the activities of the Company (or any successor corporation
                  into which the Company and Holding Company may be merged or
                  consolidated);

                  (iii) employ, solicit for employment or encourage to leave
                  their employment, in each case, either as an employee, agent
                  or representative, any person who was during the two-year
                  period prior to such employment, solicitation or encouragement
                  or is an officer, employee, agent or representative of the
                  Company (or any successor corporation into which the Company
                  and Holding Company may be merged or consolidated);

         (B)      If at any time any of the provisions of this paragraph 6 shall
                  be determined to be invalid or unenforceable by reason of
                  being vague or unreasonable as to duration, area, scope of
                  activity or otherwise, then this paragraph 6 shall be
                  considered divisible (with the other provisions to remain in
                  full force and effect) and the invalid or unenforceable
                  provisions shall become and be deemed to be immediately
                  amended to include only such time, area, scope of activity and
                  other restrictions, as shall be determined to be reasonable
                  and enforceable by the court or other body having jurisdiction
                  over the matter, and Executive expressly agrees that this
                  Agreement, as so amended, shall be valid and binding as though
                  any invalid or unenforceable provision had not been included
                  herein.

         (C)      For purposes of this paragraph 6, "Non-Competition Period"
                  shall be determined as follows:

                  (i)      If the Executive's Date of Termination occurs under
                           circumstances described in paragraph 3(e) (relating
                           to the Executive's resignation), the Non-Competition
                           Period shall be the period beginning on the Date of
                           Termination, and ending on the twelve-month (12)
                           anniversary of the Date of Termination.

                  (ii)     If the Executive's Date of Termination occurs under
                           circumstances other than those described in paragraph
                           3(e) (relating to the Executive's resignation), the
                           Non-Competition Period shall be the period beginning
                           on the Date of Termination and ending on the last day
                           of the Agreement Term; provided, however, that if the
                           Executive is entitled to salary continuation payments
                           in accordance with

                                       9
<PAGE>

                           paragraph 4(c), and if such salary continuation
                           payments are discontinued prior to the last day of
                           the Agreement Term, then the Non-Competition Period
                           will end on the date that the last salary
                           continuation payment is made to the Executive (unless
                           such discontinuance is as a result of the Executive's
                           breach of this paragraph 6, paragraph 7, or paragraph
                           8).

Nothing in this paragraph 6, paragraph 7 or paragraph 8 shall be construed as
limiting the Executive's duty of loyalty to the Company while he is employed by
the Company or any other duty he may otherwise have to the Company while he is
employed by the Company.

         7. Confidential Information. Except as may be required by the lawful
            ------------------------
order of a court or agency of competent jurisdiction, or except to the extent
that the Executive has express authorization from the Company, the Executive
agrees to keep secret and confidential indefinitely all non-public information
(including, without limitation, information regarding litigation and pending
litigation) concerning the Company, the Holding Company, and the Subsidiaries
which was acquired by or disclosed to the Executive during the course of his
employment with the Company, or during the course of his consultation with the
Company following his termination of employment (regardless of whether
consultation is pursuant to paragraph 9), and not to disclose the same, either
directly or indirectly, to any other person, firm, or business entity, or to use
it in any way. To the extent that the Executive obtains information on behalf of
the Company, the Holding Company, or any of the Subsidiaries that may be subject
to attorney-client privilege as to the Company's attorneys, the Executive shall
take reasonable steps to maintain the confidentiality of such information and to
preserve such privilege. Nothing in the foregoing provisions of this paragraph 7
shall be construed so as to prevent the Executive from using, in connection with
his employment for himself or an employer other than the Company, the Holding
Company, or any of the Subsidiaries, knowledge which was acquired by him during
the course of his employment with the Company, the Holding Company, and the
Subsidiaries, and which is generally known to persons of his experience in other
companies in the same industry.

         8. Non-Disparagement. The Executive agrees that, while he is employed
            -----------------
by the Company, and after his Date of Termination, he shall not make any false,
defamatory or disparaging statements about the Company, the Holding Company, the
Subsidiaries, or the officers or directors of the Company, the Holding Company,
or the Subsidiaries that are reasonably likely to cause material damage to the
Company, the Holding Company, the Subsidiaries, or their officers or directors.
While the Executive is employed by the Company, and after his Date of
Termination, the Company agrees, on behalf of itself, the Holding Company, and
the Subsidiaries, that neither the officers nor the directors of the Company,
the Holding Company, or the Subsidiaries shall make any false, defamatory or
disparaging statements about the Executive that are reasonably likely to cause
material damage to Executive.

         9. Defense of Claims. The Executive agrees that, for the period
            -----------------
beginning the Effective Date, and continuing for a reasonable period after the
Executive's termination of employment

                                       10
<PAGE>

with the Company, the Executive will cooperate with the Company, the Holding
Company and the Subsidiaries in defense of any claims that may be made against
the Company, the Holding Company and the Subsidiaries, and will cooperate with
the Company, the Holding Company or the Subsidiaries in the prosecution of any
claims that may be made by the Company, the Holding Company or the Subsidiaries,
to the extent that such claims may relate to services performed by the Executive
for the Company. The Executive agrees to promptly inform the Company if he
becomes aware of any lawsuits involving such claims that may be filed against
the Company, the Holding Company or the Subsidiaries. The Company agrees to
reimburse the Executive for all of the Executive's reasonable out-of-pocket
expenses associated with such cooperation, including travel expenses. For
periods after the Executive's employment with the Company terminates, the
Company agrees to provide reasonable compensation to the Executive for such
cooperation. The determination of the reasonableness of such compensation shall
take into account information provided to the Company by the Executive or
otherwise known to the Company, which may include, without limitation, (a) the
Executive's rate of compensation at the time he ceased employment with the
Company, and whether he is then receiving other compensation payments from the
Company; (b) the Executive's rate of compensation at the time of such
cooperation; (c) the amount of time required of the Executive for such
cooperation; (d) difficulty of the issues as to which the cooperation is
required; (e) the amount of inconvenience to the Executive resulting from such
cooperation (including consideration of factors such as the amount of travel
required of the Executive, the effect on other commitments of the Executive, and
the amount of advance notice provided to the Executive); and (f) whether such
cooperation would be legally required in the absence of the requirements of this
paragraph 9. The Executive also agrees to promptly inform the Company if he is
asked to assist in any investigation of the Company, the Holding Company or the
Subsidiaries (or their actions) that may relate to services performed by the
Executive for the Company, regardless of whether a lawsuit has then been filed
against the Company, the Holding Company or the Subsidiaries with respect to
such investigation.

         10. Excise Tax Gross-Up. If the Executive becomes entitled to payment
             -------------------
in accordance with paragraph 4, then with respect to such payment under
paragraph 4 (and with respect to any other payment made to the Executive,
including without limitation, the vesting of an option or other cash or non-cash
benefit or property, whether pursuant to the terms of this Agreement or any
other plan, arrangement, or agreement with the Company) (the "Total Payments"),
if such Total Payments are or become subject to the tax imposed by Section 4999
of the United States Internal Revenue Code of 1986, as amended (the "Code") (or
any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company
shall pay to Employee as soon as practicable after such Excise Tax becomes due,
an additional amount (the "Gross-up Payment") (which shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax) such that the net amount retained by Executive,
after reduction for any Excise Tax (including any penalties or interest thereon)
on the Total Payments and after any reduction for any federal, state and local
income or employment tax and Excise Tax on the Gross-up Payment provided for by
this paragraph 10, but before reduction for any federal, state, or local income
or employment tax on the Total Payments, shall be equal to the sum of (a) and
(b), where (a) is the Total Payments, and (b) is an amount equal to the product
of any deductions disallowed for federal, state, or local income tax purposes
because of the inclusion of the Gross-

                                       11
<PAGE>

up Payment in Employee's adjusted gross income multiplied by the highest
applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-up Payment is to be made.

         11. Remedies. The Executive acknowledges that the Company or the
             --------
Holding Company would be irreparably injured by a violation of paragraph 6,
paragraph 7, or paragraph 8, and he agrees that the Company, in addition to any
other remedies available to it for such breach or threatened breach, shall be
entitled to a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining the Executive from any actual or threatened
breach of either paragraph 6, paragraph 7 or paragraph 8. The Company
acknowledges that the Executive would be irreparably injured by a violation of
paragraph 8, and the Company agrees that the Executive, in addition to any other
remedies available to him for such breach or threatened breach, shall be
entitled to a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining the Company from any actual or threatened breach
of paragraph 8. If a bond is required to be posted in order for the Company or
the Executive to secure an injunction or other equitable remedy, the parties
agree that said bond need not be more than a nominal sum.

         12. Nonalienation. The interests of the Executive under this Agreement
             -------------
are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Executive or the Executive's beneficiary.

         13. Amendment. This Agreement may be amended or canceled only by mutual
             ---------
agreement of the parties in writing without the consent of any other person. So
long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.

         14. Applicable Law. The provisions of this Agreement shall be construed
             --------------
in accordance with the laws of Bermuda, without regard to the conflict of law
provisions of any jurisdiction. All disputes shall be arbitrated or litigated
(whichever is applicable) in Bermuda.

         15. Severability. The invalidity or unenforceability of any provision
             ------------
of this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).

         16. Waiver of Breach. No waiver by any party hereto of a breach of any
             ----------------
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time. The failure of any party hereto to take any action by
reason of such breach will not deprive such party of the right to take action at
any time while such breach continues.

                                       12
<PAGE>

         17 Successors. This Agreement shall be binding upon, and inure to the
            ----------
benefit of, the Company and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.

         18 Notices. Notices and all other communications provided for in this
            -------
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid, or sent
by facsimile or prepaid overnight courier to the parties at the addresses set
forth below (or such other addresses as shall be specified by the parties by
like notice). Such notices, demands, claims and other communications shall be
deemed given:

(a)      in the case of delivery by overnight service with guaranteed next day
         delivery, the next day or the day designated for delivery;

(b)      in the case of certified, registered or similar mail delivery, five
         days after deposit in the local mail; or

(c)      in the case of facsimile, the date upon which the transmitting party
         received confirmation of receipt by facsimile, telephone or otherwise;

provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the mail or by overnight service are to be delivered to the
addresses set forth below:

to the Company:

         LaSalle Re Limited
         25 Church Street
         Hamilton HMFX, Bermuda

or to the Executive:

         Guy Hengesbaugh
         25 Church Street
         Hamilton, HMFX, Bermuda

All notices to the Company shall be directed to the attention of the chief
executive officer of the Company, with a copy to the Secretary of the Company.
Each party, by written notice furnished to the other party, may modify the
applicable delivery address, except that notice of change of address shall be
effective only upon receipt.

         19. Arbitration of All Disputes. In the event of any dispute,
             ---------------------------
controversy or claim arising out of or in relation to this Agreement, or the
breach, termination or invalidity thereof, the parties hereto agree to proceed
to arbitration. The number of arbitrators shall be three (3), to be

                                       13
<PAGE>

appointed in the absence of the parties agreement by the Appointment Committee
of the Chartered Institute of Arbitrators Bermuda Branch. The procedure to be
followed shall be that as laid down in the Arbitration Act of 1986. The place of
arbitration shall be Bermuda and the language of the arbitration shall be
English. The decision and award of the arbitral tribunal is final and binding on
the parties. For the avoidance of doubt, the parties agree that judgment may be
entered and any award made by the Tribunal in any Federal Court in the United
States (or any other jurisdiction where a party to this agreement is located).

         20. Survival of Agreement. Except as otherwise expressly provided in
             ---------------------
this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Executive's employment with the Company.

         21. Entire Agreement. Except as otherwise noted herein, this Agreement,
             ----------------
including any Exhibit(s) attached hereto, constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior and contemporaneous agreements, if any, between the parties relating to
the subject matter hereof. The enforceability of this Agreement shall not cease
or otherwise be adversely affected by the termination of the Executive's
employment with the Company.

         22. Acknowledgment by Executive. The Executive represents to the
             ---------------------------
Company that he is knowledgeable and sophisticated as to business matters,
including the subject matter of this Agreement, that he has read this Agreement
and that he understands its terms. The Executive acknowledges that, prior to
assenting to the terms of this Agreement, he has been given a reasonable time to
review it, to consult with counsel of his choice, and to negotiate at arm's-
length with the Company as to the contents. The Executive and the Company agree
that the language used in this Agreement is the language chosen by the parties
to express their mutual intent, and that no rule of strict construction is to be
applied against any party hereto. The Executive represents and warrants that he
is not, and will not become a party to any agreement, contract, arrangement or
understanding, whether of employment or otherwise, that would in any way
restrict or prohibit him from undertaking or performing his duties in accordance
with this Agreement.

         23. Titles and Headings. Titles and headings in this Agreement are for
             -------------------
ease of reference and convenience only, and shall not be construed to affect the
meaning of any provision of this Agreement.

                                       14
<PAGE>

         IN WITNESS THEREOF, the Executive has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
and its corporate seal to be hereunto affixed, all as of the day and year first
above written.



                                         /s/ Guy Hengesbaugh
                                         -------------------------------------
                                         Guy Hengesbaugh


                                         LASALLE RE LIMITED


                                         By: /s/ Clement S. Dwyer, Jr.
                                             ---------------------------------
                                             Clement S. Dwyer, Jr.
                                             Chairman, Compensation Committee

                                       15
<PAGE>

                                   EXHIBIT A
                                   ---------


                               BONUS COMPUTATION
                               -----------------

         A-1. Purpose. This Exhibit A is attached to and forms a part of the
              -------
employment agreement (the "Agreement") between Guy Hengesbaugh (the "Executive")
and LaSalle Re Limited (the "Company"). The purpose of this Exhibit A is to set
forth the terms of the bonus program described in paragraph 2(b) of the
Agreement.

         A-2. Guidelines. The bonus shall be determined in accordance with the
              ----------
following guidelines:

 .        A discretionary bonus may be awarded annually by the Board of the
         Company after considering the recommendation of the Compensation
         Committee of the Company.

 .        A non-discretionary bonus shall be earned and paid annually based upon
         the Company's Return on Equity (defined below) achieved for each fiscal
         year of the Company, while the Executive is employed by the Company.

 .        The non-discretionary annual bonus calculation will be based on the
         Company's Return on Equity earned each year. If the Company's Return on
         Equity for any year exceeds 10%, the bonus will be paid according to
         the following formula:

         .        For each 1% improvement in Return on Equity above 10%, an
                  amount equal to 10.0 % of The Executive's Salary will be paid.

         .        For each 1% improvement in Return on Equity above 22.5%, an
                  amount equal to 15.0 % of The Executive's Salary will be paid.

         .        For Return on Equity results between whole percentages (but
                  above 10%), the percentage of Salary awarded will be increased
                  by interpolation.

         .        The "Return on Equity" for any fiscal year shall be equal to
                  the net income of the Company for the fiscal year, divided by
                  shareholders' equity at the beginning of the period (as
                  determined on the basis of U.S. generally accepted accounting
                  principles). For purposes of this calculation any unrealized
                  appreciation or depreciation of the Company's investments
                  shall be disregarded (both as to the numerator and the
                  denominator). Payments made to CNA Financial Corporation or
                  its affiliates under the Underwriting Support Services
                  Agreement will not reduce net income in determining the Return
                  on Equity.