<PAGE>
 
                                                                    Exhibit 10.1




                                                                  CONFORMED COPY
                                                                  --------------

                          THIRD AMENDMENT AND WAIVER
                          --------------------------


     THIRD AMENDMENT AND WAIVER, dated as of March 16, 1998 (this "Amendment"),
to the Credit Agreement, dated as of December 1, 1995, as amended, among LASALLE
RE HOLDINGS LIMITED, a Bermuda company (the "Borrower"), the several banks and
other financial institutions from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender") and THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative agent for the Lenders
hereunder (the "Credit Agreement").

                                  WITNESSETH:

     WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make,
and have made, certain loans and other extensions of credit to the Borrower; and

     WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Required Lenders have agreed, that certain provisions of the
Credit Agreement be amended in the manner provided for in this Amendment.

     NOW, THEREFORE, the parties hereto hereby agree as follows:

     I.   Defined Terms. Terms defined in the Credit Agreement and used herein
          -------------
shall have the meanings given to them in the Credit Agreement.

     II.  Amendments to Credit Agreement.
          ------------------------------

     1.   Amendment to Subsection 1.1 (a) The definition of "Statutory Capital"
          ---------------------------
set forth in subsection 1.1 of the Credit Agreement is hereby amended by
deleting that definition in its entirety and substituting therefor the
following:

          "Statutory Capital": at any date of determination, (i) the amount set
     forth on line 3 of the Statutory Statement of Capital and Surplus in the
     Annual Return of LaSalle Re (or, if such statement shall be modified, the
     equivalent item on any applicable successor form) or (ii) the amount
     identified as "Statutory Capital" on the Quarterly Certificate of LaSalle
     Re, whichever was most recently delivered to the Administrative Agent and
     the Lenders pursuant to subsection 5.1, plus, to the extent it is excluded
     or deducted in the determination of the amount in clause (i) of this
     definition, the amount of any preferred stock of LaSalle Re (including the
     Preferred Stock, the LaSalle Re Series A Preferred Shares and the LaSalle
     Re Series B Preferred Shares) and (iii) less, an amount equal to the
     outstanding Loans.

     (b)  Subsection 1.1 of the Credit Agreement is hereby further amended by
inserting the following new definitions in their appropriate alphabetical order:

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          "Holdings Series B Preferred Shares": the perpetual preferred shares
     issued pursuant to the Option Agreement, dated July 1, 1997 by the Borrower
     in an aggregate amount not exceeding $100,000,000 on substantially the
     terms and conditions set forth in Annex I-E hereto.

          "LaSalle Re Series B Preferred Shares": the perpetual preferred shares
     that may be issued by LaSalle Re in connection with an investment by the
     Borrower in LaSalle Re of the proceeds of the Holdings Series B Preferred
     Shares in an aggregate amount not exceeding $100,000,000 on substantially
     the terms and conditions set forth in Annex 1-F hereto.

          "Loss Event": any event, development or circumstance that has resulted
     in, or could reasonably be expected to result in, losses to the insurance
     industry in excess of $10 billion, as determined by the Property Claims
     Service Division of the American Insurance Services Group, Inc.

          "Option Agreement": the Catastrophe Equity Securities Issuance Option
     Agreement and any amendments thereto, entered into by the Borrower and the
     Option Writers as of July 1, 1997, under which the Borrower shall have the
     option to require Option Writers to purchase up to 4,000,000 of the
     Holdings Series B Preferred Shares on substantially the terms and
     conditions set forth in Annex I-E hereto.

     2.   Amendment to Subsection 6.1. Subsection 6.1 of the Credit Agreement is
          ---------------------------
hereby amended by deleting in its entirety clause (c) of said subsection and
substituting therefor the following:

          (c)  Maintenance of Statutory Capital. Permit Statutory Capital at the
     end of (1) the 1998 calendar year to be less than $350,000,000 and (2) the
     1999 calendar year to be less than $400,000,000.

     3.   Amendment to Subsection 6.2. Subsection 6.2 of the Credit Agreement is
          ---------------------------
hereby amended by (a) deleting the "and" at the end of clause (v) of said
subsection and substituting a semi-colon therefor and (b) inserting immediately
before the period at the end of such subsection the following:

          (vii)  the issue of the Holdings Series B Preferred Shares in an
     aggregate amount not exceeding $100,000,000; and

          (viii) the issue of the LaSalle Re Series B Preferred Shares in an
     aggregate amount not exceeding $100,000,000.

     4.   Amendment to Subsection 6.7. Subsection 6.7 of the Credit Agreement is
          ---------------------------
hereby amended by (a) deleting in its entirety clause (iii) thereof and
substituting therefor the following:

<PAGE>

          (iii)  the Borrower may make Restricted Payments on the Holdings
     Series A Preferred Shares in amounts sufficient to make scheduled dividend
     payments due thereon, so long as, after giving effect to each such
     Restricted Payment, no Default or Event of Default shall have occurred and
     be continuing; (iv) the Borrower may make Restricted Payments on the
     Holdings Series B Preferred Shares in amounts sufficient to make scheduled
     dividend payments due thereon; (v) the Borrower may make Restricted
     Payments on its common shares so long as, after giving effect to each such
     Restricted Payment, no Default or Event of Default shall have occurred and
     be continuing and such Restricted Payment (together with all other
     Restricted Payments under this clause (v) during any fiscal year of the
     Borrower) shall not exceed 50% of the Consolidated Net Income of the
     Borrower for its immediately preceding fiscal year (such Consolidated Net
     Income being calculated after subtracting (A) any Restricted Payments
     declared and paid by the Borrower pursuant to clause (iii) above in the
     immediately preceding fiscal year, and (B) the greater of any Restricted
     Payments paid pursuant to clause (iv) above in the immediately preceding
     fiscal year and any Restricted Payments paid pursuant to clause (iv) above
     in the current fiscal year); and (v) LaSalle Re may make Restricted
     Payments on the LaSalle Re Series A Preferred Shares, the LaSalle Re Series
     B Preferred Shares and its common shares in amounts sufficient to enable
     the Borrower to make payments pursuant to clauses (iii), (iv) and (v)
     above.

     5.   Amendment to Subsection 6.8. Subsection 6.8 of the Credit Agreement is
          ---------------------------
hereby amended by deleting the amount "$1,000,000" and substituting therefor the
amount "$5,000,000".

     6.   Amendment to Subsection 6.9. Subsection 6.9 of the Credit Agreement is
          ---------------------------
hereby amended by (a) deleting the "and" at the end of clause (vi) thereof and
(b) inserting the following new clause immediately preceding the period at the
end of such subsection:

     and (viii) Investments by the Borrower in the LaSalle Re Series B Preferred
     Shares made prior to June 1, 2000.

     7.   Amendment to Subsection 6.13. Subsection 6.13 of the Credit Agreement
          ----------------------------
is hereby amended by inserting immediately prior to the period at the end of
such subsection the following:

     and LaSalle Re may issue and sell to the Borrower the LaSalle Re Series B
     Preferred Shares.

     8.   Amendment of Subsection 6.14. Subsection 6.14 of the Credit Agreement
          ----------------------------
is hereby amended by adding to clause (iii) of said subsection immediately prior
to the comma at the end thereof the following:

     and the Option Agreement
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     9.   Amendment of Annexes.  Annexes I-E and I-F are hereby added to the 
          --------------------
Credit Agreement in the respective forms thereof set forth on Exhibit A and B 
hereto.

     III. Conditions to Effectiveness.  This Amendment shall become effective on
          ---------------------------
the date (the "Amendment Effective Date") on which the Borrower, the Agent and 
the Required Lenders shall have executed and delivered this Amendment to the 
Agent.

     General
     -------

     1.   Representation and Warranties.  To induce the Agent and the Lenders 
          -----------------------------
parties hereto to enter into this Amendment, the Borrower hereby represents and 
warrants to the Agent and all of the Lenders as of the Amendment Effective Date 
that:

     (a)  Financial Condition.  (1)  The audited consolidated balance sheet of
          -------------------
the Borrower and its consolidated Subsidiaries as of September 30, 1997 and the
related audited consolidated statements of income and of cash flows for the
fiscal year ended on such date, copies of which have heretofore been furnished
to each Lender, are complete and correct and present fairly the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended.

     (2)  The unaudited consolidated balance sheet of the Borrower and its 
consolidated Subsidiaries as at December 31, 1997, and the related unaudited 
consolidated statements of income and of cash flows for the three-month period 
ended on such date, certified by a Responsible Officer, copies of which have 
heretofore been furnished to each Lender, are complete and correct and present 
fairly the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations 
and their consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments).

     (3)  All such financial statements, including the related schedules and 
notes thereto, have been prepared in accordance with GAAP applied consistently 
throughout the periods involved (except as approved by such accountants or 
Responsible Officer, as the case may be, and as disclosed therein).

     (b)  Corporate Power; Authorization; Enforceable Obligations.
          -------------------------------------------------------
               
     (1)  The Borrower has the corporate power and authority, and the legal 
right, to make, deliver this Amendment and to perform the Loan Documents to 
which it is a party, as amended by this Amendment, and has taken all necessary 
corporate action to authorize the execution, delivery and performance of this 
Amendment and the performance of such Loan Documents, as so amended.

     (2)  No consent or authorization of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection
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                                                                               5

with the execution and delivery of this Amendment or with the performance, 
validity or enforceability of the Loan Documents to which it is a party, as 
amended by this Amendment. 

     (3)  This Amendment has been duly executed and delivered on behalf of the 
Borrower.

     (4)  This Amendment and each Loan Document to which it is a party, as 
amended by this Amendment, constitutes a legal, valid and binding obligation of 
the Borrower enforceable against the Borrower in accordance with its terms, 
except as affected by bankruptcy, insolvency, fraudulent conveyance, 
reorganization, moratorium and other similar laws relating to or affecting the 
enforcement of creditors rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good 
faith and fair dealing.

     (c)  No Legal Bar.  The execution, delivery and performance of this 
          ------------
Amendment and the performance of the Loan Documents, as amended by this 
Amendment, will not violate any Requirement of Law or Contractual Obligation of 
the Borrower or of any of its Subsidiaries and will not result in, or require, 
the creation or imposition of any Lien on any of its or their respective 
properties or revenues pursuant to any such Requirement of Law or Contractual 
Obligation.

     (d)  Representations and Warranties.  The representations and warranties
          ------------------------------
made by the Borrower in the Loan Documents are true and correct in all material
respects on and as of the Amendment Effective Date, before and after giving
effect to the effectiveness of this Amendment, as if made on and as of the
Amendment Effective Date, except to the extent such representations and
warranties expressly relate to an earlier date in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.

     2.  Payment of Expenses. The Borrower agrees to pay or reimburse the Agent
         -------------------
for all of its out-of-pocket costs and reasonable expenses incurred in
connection with this Amendment, any other documents prepared in connection
herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent.

     3.  No Other Amendments; Confirmation.  Except as expressly amended, 
         ---------------------------------
modified and supplemented hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.

     4.  Governing Law; Counterparts.  (a) This Amendment and the rights and 
         ---------------------------
obligations of the parties hereto shall be governed by, and construed and 
interpreted in accordance with, the laws of the State of New York.

     (b) This Amendment may be executed by one or more of the parties to this 
Agreement on any number of separate counterparts, and all of said counterparts 
taken together shall be deemed to constitute one and the same instrument.  A set
of the copies of this
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Amendment signed by all the parties shall be lodged with the Borrower and the
Agent. This Amendment may be delivered by facsimile transmission of the relevant
signature pages hereof.
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                                                                               7


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.

                                       LASALLE RE HOLDINGS LIMITED


                                       By: /s/ Andrew Cook
                                           --------------------------------
                                           Title: Chief Financial Officer


                                       THE CHASE MANHATTAN BANK, as
                                       Administrative Agent and as a Lender


                                       By: /s/ Heather Lindstrom
                                           --------------------------------
                                           Title: Vice President


                                       THE FIRST NATIONAL BANK OF CHICAGO


                                       By: /s/ Samuel W. Bridges
                                           --------------------------------
                                           Title: First Vice President


                                       MELLON BANK, N.A.


                                       By: /s/ Karen E. McConomy
                                           --------------------------------
                                           Title: Assistant Vice President


                                       FLEET NATIONAL BANK


                                       By: /s/ Thomas McKinlay
                                           --------------------------------
                                           Title: Senior Vice President


                                       CITIBANK, N.A.


                                       By: /s/ Andrew C. Fowler
                                           --------------------------------
                                           Title: Vice President