<PAGE>   1
                                                                   Exhibit 10.10


                              REINSURANCE AGREEMENT

                                     BETWEEN

                     CENTRAL RESERVE LIFE INSURANCE COMPANY
                               17800 Royalton Road
                            Strongsville, Ohio 44136
                 (Referred to in this Agreement as the Company)

                                       AND

                         REASSURANCE COMPANY OF HANNOVER
                       800 N. Magnolia Avenue, Suite 1000
                             ORLANDO, FLORIDA 32803
                (Referred to in this Agreement as the Reinsurer)






                                                                     COINSURANCE
DECEMBER 15, 1997                                                     HA-9704-0M

<PAGE>   2

                                TABLE OF CONTENTS
                                -----------------


<TABLE>
<S>                        <C>
                           Coinsurance

         Article I         Reinsurance Definition

         Article II        Liability

         Article III       Plan and Amount of Reinsurance

         Article IV        Reinsurance Premiums and Payments

         Article V         Claims

         Article VI        General Provisions

         Article VII       Recapture

         Article VIII      Arbitration

         Article IX        Reinsurer's Right of Notice of Unusual Practices

         Article X         Treasury Regulation Section 1.848-2(g)(8) Joint Election

         Article XI        Duration of Agreement

         Article XII       Insolvency

         Article XIII      Representations and Warranties

         Article XIV       Letters of Credit

         Article XV        Execution


         Schedule A        Business Reinsured

         Schedule B        Reinsurance Forms

         Schedule C        Experience Refund Calculation

         Schedule D        Expense Allowances
</TABLE>



                                       (i)

<PAGE>   3

              TREATY SYNOPSIS OF COINSURANCE REINSURANCE AGREEMENT
                                     BETWEEN
                     CENTRAL RESERVE LIFE INSURANCE COMPANY
                                       AND
                         REASSURANCE COMPANY OF HANNOVER


         The Treaty document which follows details a Coinsurance Agreement
between Central Reserve Life Insurance Company (CRLIC) and the Reassurance
Company of Hannover (RCH) to be effective January 1, 1997. The Treaty provides
CRLIC with a $10 million Initial Ceding Allowance on the Company's inforce and
new business written during 1997 under the policy forms outlined in Schedule A
with adjustment to the Settlement Date which will be on or before December 31,
1997. The reinsurance is on a 50/50 quota-share basis on the Company's retained
business with RCH accepting all of the inherent contractual risks on its 50%.
Provisions of the treaty are in conformity with the Life and Health Reinsurance
Model Regulation and provide for the repayment of the Initial Ceding Allowance
out of the statutory profits on the Business Reinsured. Other important aspects
of the Agreement are as follows:

-    The form of the treaty is Quota Share Coinsurance.

-    Accumulated profits in excess of the Initial Ceding Allowance will be
     shared on a 60/40 quota-share basis between CRLIC and RCH once the Initial
     Ceding Allowance is repaid plus 10% interest.

-    The Agreement is drafted to conform to reserve credit regulations:

     (a)  The renewal Expense Allowances are adequate to cover CRLIC's actual
          expenses
     (b)  CRLIC cannot be deprived of surplus or assets except as contemplated
          in the regulations
     (c)  There is no requirement for CRLIC to reimburse RCH for negative
          experience
     (d)  There is no provision for recapture other than as specifically
          outlined in Article VII
     (e)  All forms of contractual risk are permanently transferred
     (f)  Quarterly settlements are required, and ...
     (g)  There are no representations or warranties given concerning the future
          performance of the Business Reinsured.

-    The Ceding Commission will be held in surplus and amortized into income as
     earnings emerge on the Business Reinsured.

-    RCH is an approved reinsurer in Ohio. A letter of credit in the amount
     deemed necessary by parties to this Agreement will be provided to allow
     CRLIC to take credit for statutory reserves in states where RCH is neither
     licensed nor approved.




                                      (ii)


<PAGE>   4





                              COINSURANCE AGREEMENT
                              ---------------------


         This Coinsurance ("Coins") Agreement (the "Agreement") is entered into
as of the date below written by and between the Central Reserve Life Insurance
Company, an Ohio insurer (the "Company"), and Reassurance Company of Hannover, a
Florida reinsurer (the "Reinsurer").

         The Company and the Reinsurer mutually agree to reinsure in accordance
with the terms and conditions set forth hereinafter. This Agreement is solely
between the Company and the Reinsurer, and performance of the obligations of
each party under this Agreement shall be rendered solely to the other party. In
no instance shall anyone other than the Company, or the Reinsurer (and/or their
duly appointed and mutually recognized successors or assigns) have any rights
under this Agreement.

         This Agreement with its attached Schedules shall constitute the Entire
Agreement between the parties with respect to the Business Reinsured thereunder,
and there are no understandings between the parties other than as expressed in
the Agreement. Any change or modification to the Agreement shall be null and
void unless made by an amendment which is signed by both parties.



                                     Page 1



<PAGE>   5


                                    ARTICLE I
                                    ---------

                             REINSURANCE DEFINITION
                             ----------------------



         1.1 BUSINESS REINSURED. The Company agrees to cede to the Reinsurer on
a quota-share basis, and the Reinsurer agrees to assume from the Company, on a
coinsurance basis, 50% of the retained obligations of the Company specified in
Schedule A, except as provided for under Section 1.3 hereof. Under all
circumstances, the Reinsurer's liability hereunder shall not include any amounts
awarded in judgement against the Company, or any other person, firm, corporation
or entity by a court of competent jurisdiction in excess of the policy benefit
losses, whether in the form of punitive damages, attorneys fees, costs of
litigation, or other extra-contractual liability, except as provided for in
Article V.

         The Reinsurer's liability under this Agreement shall be limited to
indemnification of the Company.

         1.2 PAYMENT OF REINSURANCE. The accounting shall be on a calendar
quarter basis for all items. The initial accounting period shall run from the
Effective Date to the end of the first quarter in which the Settlement Date
falls. The initial accounting for the Settlement Date will be based on the
September 30, 1997 financial results on an estimated basis. A true-up of these
amounts, in addition to an adjustment for the fourth quarter will be reflected
in the fourth quarter treaty accounting. The final accounting period shall run
from the end of the preceding calendar quarter until the termination of this
Agreement. Accounting reports shall be submitted to the Reinsurer by the Company
not later than 30 days after the end of each accounting period. Such reports
shall include information on the amount of reinsurance premiums, commissions,
expenses, claims, and any other items required for NAIC statutory accounting on
the policies reinsured for the preceding accounting period. The monthly "premium
and loss" report shall reflect all transactions for the accounting period as
stated above with the exception of reserves. Annual accounting reports necessary
to the filing of the Reinsurer's Annual Statement blank and its Federal Income
Tax return shall be submitted to the Reinsurer by the Company at the request of
the Reinsurer within 30 days after the end of a calendar year. In addition, the
Company shall provide, on a timely basis, an Actuarial Certification of the
liability included herein. This information will be supplied coincident with the
annual accounting information. The Company will also support the cash flow
testing and/or other regulatory requirements inherent in the assumption of these
liabilities by the Reinsurer.

          1.3  OTHER REINSURANCE COVERAGE. If there is applicable reinsurance on
               an excess or other basis coincident with the Business Reinsured
               under this Agreement, the Reinsurer's liability for such amounts
               shall be reduced to the extent of the other benefits provided
               under those agreements.



                                                      ARTICLE I CONTINUES . . .
                                     Page 2
<PAGE>   6

               Termination and/or recapture of any treaty(ies) directly
               impacting this Agreement is subject to mutual agreement prior to
               termination and/or recapture of those treaty(ies). Other
               reinsurance inforce not impacting this Agreement is specifically
               excluded from consideration.




                                                              ..END OF ARTICLE I


                                     Page 3
<PAGE>   7

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

                                    LIABILITY
                                    ---------


         The liability of the Reinsurer on any reinsurance under this Agreement
begins on January 1, 1997, the Effective Date. The liability of the Reinsurer
will continue in accordance with the terms and conditions of this Agreement, and
will end at the same time as that of the Company.



                                                            ...END OF ARTICLE II



                                     Page 4
<PAGE>   8

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

                         PLAN AND AMOUNT OF REINSURANCE
                         ------------------------------


         3.1 The Health business reinsured hereunder shall be on a Coinsurance
basis in a manner consistent with the original policy forms assumed by the
Company. The Reinsurer's amount at risk shall be the amount ceded by the
Company.

         3.2 Reductions and terminations of the Company's policies, riders or
benefits shall reduce or terminate the amount reinsured under this Agreement in
a corresponding amount as of the same date, taking into account any changes in
Other Reinsurance Coverage as called for by pertinent treaty language.

         3.3 Reinstatement by the Company under its regular rules of policies,
riders or benefits which were reduced, terminated or lapsed, shall automatically
reinstate the reinsurance thereon for the amount that would have been in force
if the insurance had not been reduced, terminated or lapsed.









                                                           ...END OF ARTICLE III




                                     Page 5
<PAGE>   9

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

                        REINSURANCE PREMIUMS AND PAYMENTS
                        ---------------------------------


         4.1 INITIAL REINSURANCE TRANSACTION. As a condition precedent to the
Reinsurer's liability hereunder, the Company shall on, or before, December 31,
1997, close on the reinsurance transaction covering the Business Reinsured as
outlined in Schedule A. Effective on or shortly after the day of closing on the
reinsurance transaction contemplated by this Treaty, the Company will transfer a
net amount of assets equal to the difference between 50% of the statutory
reserves and the initial ceding allowance contained in Schedule D.

         4.2 SUBSEQUENT REINSURANCE PREMIUMS. Amounts due subsequent to the
initial reinsurance transaction shall be paid to the Reinsurer when determined
in accordance with Article I paragraph 1.2. If the amount of Net Reinsurance
Premiums set forth on any Statement is a negative amount, the Reinsurer shall
pay to the Company an amount equal to such negative amount within twenty (20)
days after the Reinsurer's receipt from the Company of such a Statement.

         4.3 ASSOCIATED RIDERS. If any riders are reinsured under this
Agreement, premiums and their related commissions will be paid in accordance
with the Company's contractual obligations at the inception of this Agreement.

         4.4 PAYMENTS. The payment of reinsurance premiums by the Company to the
Reinsurer, shall be a condition precedent to the liability of the Reinsurer. The
Reinsurer shall have the right to terminate the reinsurance on risks for which
reinsurance premiums are in default by giving ninety (90) days written notice of
termination to the Company. At the close of the last day of the ninety-day
notice period, all of the Reinsurer's liability for risks subject to the
termination notice, plus for the risk on which premiums went into default during
the ninety-day notice period, shall terminate.

         Notwithstanding termination of reinsurance as provided for by this
provision, the Company shall continue to be liable to the Reinsurer for all
unpaid premiums earned by the Reinsurer under this Agreement (see Section 7.3).

         The Company may reinstate such terminated reinsurance by paying in
full, prior to expiration of the ninety (90) day termination notice, all unpaid
premiums for the reinsurance which was in force prior to its termination. The
effective date of reinstatement shall be the day the Reinsurer receives all
required premiums. However, there shall be no reinstatement on any risk on which
the Company incurred a claim for insurance after the reinsurance terminated.







                                                         ARTICLE IV CONTINUES...


                                     Page 6
<PAGE>   10

4.5      PROCEDURE FOR PAYMENT.

         a)       FIRST YEAR AND RENEWAL BUSINESS. On or before the twentieth
                  (20th) day after the close of each quarter, the Company will
                  submit to the Reinsurer a statement of account, substantially
                  in accordance with Schedule B showing the premium(s) due on
                  reinsurance effected in the preceding month(s) and any other
                  pertinent data mutually agreed upon by the parties hereto. If
                  a statement shows that a net reinsurance balance is due the
                  Reinsurer, the Company will include with the statement a
                  payment for the amount(s) due with interest from the quarter
                  end calendar reporting period at a rate equal to "I" as
                  defined in Schedule C. Likewise, should the statement show a
                  net reinsurance balance due the Company, the Reinsurer shall
                  remit the amount due with interest within fifteen (15) days
                  after receipt of the statement.

         b)       ADJUSTMENTS. If any change is made to the Company's policy
                  and/or rates that affects the reinsurance, the Company will
                  provide written notice, on a form mutually agreed upon, to the
                  Reinsurer. If an adjustment to the premium is to be made, and
                  a refund is due the Company, it will be included as an
                  adjustment, with interest at the Schedule C rate of "I", to
                  the regular quarterly statement prepared for the Reinsurer.
                  Policy fees, if any, are not pro-rated or refunded on
                  termination.

         4.6 PLACING REINSURANCE IN EFFECT. To effect reinsurance with respect
to policies in force on or after the Effective Date of this Agreement but issued
no later than December 31, 1997, the Company shall settle with the Reinsurer on
the date of execution of this Agreement the initial reinsurance premium
described in Section 4.7 hereunder. The portion of the initial premium described
in Paragraph 4.7, Section 1 a) below, shall be paid by transferring assets
acceptable to the Reinsurer. Such assets shall be valued at their market value
as of the Settlement Date, including any accrued interest thereon (the Reinsurer
shall be entitled to all interest received on such assets after the Effective
Date), and shall be equal to the statutory reserves outstanding as of the date
of the transfer. The initial amount due under this Agreement (if the initial
settlement is after the Effective Date) shall include the amounts described in
Paragraph 4.7, Section 2 below, and shall be recognized by offset against the
Initial Ceding Allowance described in Paragraph 4.7, 1 b).

         4.7  PAYMENTS BY THE COMPANY.

                  1)       The initial reinsurance premium payable pursuant to
                           Section 4.6 above (if payable on or after the
                           Effective Date) shall be an amount equal to the net
                           of:

                           a)       the Statutory Reserves as of the Settlement
                                    Date, minus
                           b)       the Initial Ceding Allowance.





                                                         ARTICLE IV CONTINUES...


                                     Page 7
<PAGE>   11

                  2)       The Company also shall pay the Reinsurer as
                           reinsurance premiums the gross premiums plus
                           additional deposits, plus any interest received in
                           cash after the Effective Date on assets transferred
                           in the transaction, net of other reinsurance premiums
                           paid, the Company receives for coverage it provides
                           after the Effective Date of this Agreement with
                           respect to the portion of all policies reinsured
                           hereunder.

         4.8 BENEFITS. The Reinsurer shall reimburse the Company for the gross
amount of all benefits paid by the Company (i.e. without deduction for
reserves), but net of benefits attributable to the portions of the policies
reinsured hereunder which are receivable under other reinsurance agreements.

         4.9 POLICY EXPENSE AND COMMISSION ALLOWANCES. The Reinsurer shall pay
the Company the Initial Ceding Allowance as defined in Schedule D. The Reinsurer
shall also pay its proportionate share of the Overhead Expense Allowances,
Premium Taxes and Commission Allowances as defined in Schedule D.

         4.10 EXPERIENCE REFUND. The Reinsurer shall pay the Company an
experience refund determined in accordance with Schedule C.

         4.11 EXPENSES. The Reinsurer shall bear no part of the expenses
incurred in connection with the policies reinsured hereunder, except as
otherwise provided in Paragraph 4.9.

         4.12  ACCOUNTING FOR AMOUNTS DUE REINSURER OR COMPANY

                  1)       Except as otherwise specifically provided herein, all
                           amounts due to be paid to either the Reinsurer or the
                           Company shall be determined on a net basis as of the
                           last day of each accounting period and shall be due
                           and payable as of such date. If such amounts cannot
                           be determined as of such date on an exact basis, such
                           payments may be paid on an estimated basis within
                           twenty (20) days of the end of the accounting period,
                           if owed by the Company, and within fifteen (15) days
                           after receiving the accounting reflecting the
                           Negative Balance, if owed by the Reinsurer. Any final
                           adjustments are to be made with interest to the
                           affected party within 6 months after the end of such
                           accounting period.

                  2)       Any payment which either the Company or the Reinsurer
                           shall be obligated to pay to the other may be paid
                           net of any amount which is then due and unpaid under
                           this Agreement.








                                                         ARTICLE IV CONTINUES...


                                     Page 8
<PAGE>   12

         4.13 ELECTRONIC DATA TRANSMISSION. If the Company chooses to report its
reinsurance transactions via electronic media, the Company shall consult with
the Reinsurer to determine the appropriate reporting format. Should the Company
subsequently desire to make changes in the data format or the code structure,
the Company shall communicate such changes to the Reinsurer prior to the use of
such changes in reports to the Reinsurer.

         4.14 OTHER ADJUSTMENTS. Other payment adjustments made in the normal
course of business will be shared between the Company and the Reinsurer in
proportion to the amount of liability of each at the time this treaty becomes
effective. Exceptions to normal operating procedures will be discussed with the
Reinsurer prior to any action being taken.



































                                                            ...END OF ARTICLE IV


                                     Page 9
<PAGE>   13

                                    ARTICLE V
                                    ---------

                                     CLAIMS
                                     ------

SETTLEMENT OF CLAIMS
--------------------

         5.1 Except as otherwise specifically set forth herein, the Reinsurer's
liability to the Company for the reinsurance benefits shall follow the Company's
liability for such amounts of benefits under the terms of its policies.

         5.2 The Company shall investigate and settle or defend all claims or
losses. If a contest or compromise results in a reduced claim settlement, then
the Company and the Reinsurer shall participate in proportion to their
respective net liabilities before the reduction.

         The Reinsurer will accept the good faith decision of the Company in
settling the claim and shall pay the reinsurance benefit amounts in effect when
the company settles with the claimant, including a proportionate share of any
interest paid to the claimant subject only to the limitations set forth below.

         If the Company, in good faith, pays benefits for alternative services
or goods in order to reduce long term claim exposure, then the Reinsurer will
participate proportionately in such benefits.

         5.3 The Reinsurer will reimburse the Company for its proportionate
share of legal expenses incurred in the defense of a claim only if the Reinsurer
has been informed in writing in advance, of the Company's intent to incur such
expenses, and the Reinsurer has agreed in writing to participate in such
expenses. If the Company proposes to defend a claim with respect to which the
Reinsurer does not agree to participate in the defense the Reinsurer shall pay
its proportionate share of the loss and the loss adjustment expenses incurred
prior to the Reinsurer's decision not to so participate. Such amounts paid to
the Company shall fully discharge the Reinsurer's obligation hereunder with
respect to such claim.

CONTESTED CLAIMS
----------------

         5.4 The Company will advise the Reinsurer in writing of any potential
litigation involving reinsurance under this Agreement, and will advise the
Reinsurer of its intention to deny a claim or associated claims, or to contest
policies reinsured under this Agreement. If the Reinsurer agrees with the
Company's intentions in writing, then the Reinsurer will, in addition to its
share of the claim(s), pay its proportionate share of the unusual expense of the
contest, including all reasonable legal fees, investigation fees, and extra
contractual obligation damages arising out of the Company's actions with respect
to such claims.






                                                          ARTICLE V CONTINUES...


                                    Page 10
<PAGE>   14

         If the Reinsurer does not concur with the Company's action or inaction,
which has been arrived at in good faith, the Reinsurer will advise the Company
of its own suggested actions or inactions, and if the Company follows such
suggested course of actions or inactions, the Reinsurer shall, in addition to
its share of the claim itself, pay its proportionate share of all reasonable
outside expenses incurred relative to the claim, including all legal fees,
investigation fees, extra contractual damages arising out of the Company's
actions, with respect to such claims. If the Company does not follow the
Reinsurer's suggested actions or inactions, the Reinsurer will pay the Company
its proportionate share of the claim only.

         5.5 The parties recognize that circumstances may arise in which equity
would require them by law to share proportionately in certain assessed damages.
Such circumstances are difficult to define in advance, but generally would be
those situations (ii) in which the Reinsurer was an active party, (ii) in which
the Reinsurer directed, consented to, approved or ratified, the act, omission,
or course of conduct which ultimately resulted in assessment of punitive and/or
exemplary damages, or (iii) in which such acts or omissions were those of the
selling broker. In such situations, the Company and the Reinsurer will share
proportionately in damages so assessed.

         5.6 "Extra Contractual Obligations" shall mean any award made by a
court of competent jurisdiction against the Company, which is not within the
coverage granted by any insurance or reinsurance contract made between the
parties in dispute.

         The Reinsurer shall have no liability with respect to Extra Contractual
Obligations arising from:

         (a)      any assumption of liability of the Company by way of
                  participation in any mutual scheme designed specifically to
                  cover Extra Contractual Obligations; or

         (b)      the fraud of a director, officer, employee, or duly appointed
                  agent of the writing Company acting individually or
                  collectively, or in collusion with an individual or
                  corporation, or with any other organizations or party involved
                  in the presentation, defense or settlement of any claim.

         5.7 "Reserve Strengthening": Should the Company contemplate further
reserve strengthening on inforce and new business effecting the Business
Reinsured prior to December 31, 1997, such reserve strengthening will be deemed
to relate to claims incurred prior to the Effective Date of this Agreement. As
such the additional amount of claim reserve will be segregated and not be made
part of the claim reserve reported and used in the Experience Refund calculation
as set forth in Schedule C. Such amounts will continue to be segregated for all
future reporting. Reserve Strengthening subsequent to January 1, 1998 as it
relates to claims incurred after January 1, 1997 will be discussed with the
Reinsurer prior to its implementation. For purposes of this Agreement, Reserve
Strengthening shall imply the establishment of greater claim reserves, using
different methods than those used in the determination of the September 30,
1997, over the level of claim reserves that would have been established using
consistent methods. If the total claim reserve for the Group A&H line shall
exceed Fifty One Million dollars ($51,000,000) as of December 31, 1997, reserve
strengthening shall be presumed to have occurred but such presumption is subject
to actuarial rebuttal.


                                                              ..END OF ARTICLE V


                                    Page 11
<PAGE>   15

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

                               GENERAL PROVISIONS
                               ------------------


         6.1 COMPANY FORMS AND RATES. The Company shall make available to the
Reinsurer on an as needed basis, a copy of its applications, policy and rider
forms, premium and reserve tables (if any), and any and all other forms or
tables needed for proper handling of reinsurance under this Agreement. It will
advise the Reinsurer of any changes or new forms it may adopt.

         6.2 ADMINISTRATION BY THE COMPANY OF THE BUSINESS REINSURED. In return
for the payment of the Overhead Expense Allowances as set forth in Schedule D,
the Company agrees to perform all usual and customary servicing functions to
include, but not limited to, the following:

         1)       All usual and customary policy related customer services for
                  the insureds, owners, beneficiaries, agents and/or other
                  interested persons; including but not limited to, address
                  changes, beneficiary changes, ownership changes, providing
                  policy related information, reinstatements and providing
                  duplicate policies. All such services provided shall meet or
                  exceed standards of service deemed usual and customary in the
                  insurance industry.

         2)       File maintenance and administration, including systems
                  maintenance and administration.

         3)       Billing and collection of premiums. All premiums collected on
                  behalf of the Business Reinsured shall be held by the Company
                  in a fiduciary capacity.

         4)       Maintenance of the Business Reinsured's financial data in such
                  form, and communicated at such intervals to the Reinsurer, as
                  outlined above (see Article I), so as to allow the Reinsurer
                  to meet any and all reporting requirements it may have.

         5)       Payments of agents' commissions related to the Business
                  Reinsured. The Company shall be financially responsible for
                  all such commissions due on premiums collected after the
                  Effective Date.

         6)       The timely filing of rate increases to maintain the viability
                  of the Business Reinsured. Both the Company and the Reinsurer
                  mutually recognize that rate monitoring and filing for
                  increases, where needed, are essential to maintaining the

                                                         ARTICLE VI CONTINUES...

                                    Page 12
<PAGE>   16

         profitability of the Business Reinsured. The Reinsurer shall have the
         right to request that the Company file for rate increases should the
         aggregate annual statutory loss ratios on the Business Reinsured exceed
         73% in any annual period. If the Company fails to file within 60 days
         of the Reinsurer's request, or fails to diligently pursue the granting
         of such increases with regulatory authorities, the Expense Allowances
         provided for under Schedule D shall be reduced according to the
         provisions of that Treaty Schedule. Such allowance reduction will be
         effective the first calendar quarter after the later of (a) the end of
         such 60 day period, or (b) 30 days after the Reinsurer notifies the
         Company that, in its opinion, such increases are not being diligently
         pursued. If the Company disagrees with the Reinsurer, and the parties
         are unable to amicably resolve their dispute on the handling of the
         actions to be taken, the Company shall be entitled to arbitrate the
         disagreement under Article VIII of the Treaty.

         In the event the Reinsurer considers that the Company has failed to
perform the usual and customary service functions outlined above, or has become
financially impaired to the point that regulatory supervision is imminent
(subject to the provisions below), the Reinsurer may secure other facilities to
perform such functions.

         The Reinsurer shall first provide the Company with written notice of
its intent to find an alternative service facility and its reasons for
requesting such a change. If the Company fails to remedy the situation within
ninety (90) days, then, and only then, shall the Reinsurer have the right to
proceed with the change to an alternate service facility.

         Should such a transfer occur, the Company shall surrender the service
function to the new carrier, or servicing center, and in turn aid in the
effective and efficient conversion of the servicing function to the new
facility. Once effected, the Company shall forfeit all right to future
compensation for such functions.

         6.3 REINSURANCE CONDITIONS. The reinsurance is subject to the same
limitations and conditions as the insurance under the policy or policies assumed
by the Company on which reinsurance is based.

         6.4 ERRORS AND OMISSIONS. It is understood and agreed that if
non-payment of premiums, within the time specified, or failure to comply with
any terms of this contract is shown to be unintentional, and the result of
misunderstanding or oversight on the part of either the Company or the
Reinsurer, both the Company and the Reinsurer shall be restored to the positions
they would have occupied had no such error or oversight occurred upon payment of
the overlooked amount.

         6.5 INSPECTION. The Reinsurer may inspect, at the Home Office of the
Company and at any reasonable time, the original papers and any other books or
documents relating to or affecting the reinsurance under the Reinsurance
Agreement.

                                                         ARTICLE VI CONTINUES...

                                    Page 13
<PAGE>   17

         6.6 OFFSET PROVISION. Any debts or credits liquidated or unliquidated,
in favor of, or against, either the Reinsurer or the Company, with respect to
this Agreement only, shall be set-off, and only the balance shall be allowed or
paid.

         6.7 SEVERABILITY. In the event that any of the provisions herein
contained shall be declared or adjudicated invalid or unenforceable, such
declaration or adjudication shall in no manner affect or impair the validity or
the enforceability of the other and remaining provisions which shall remain in
full force and effect as though such invalid or unenforceable provisions or
clauses had not been herein included or made a part of this Agreement.

         6.8 CURRENCY. The reinsurance premiums and the reinsurance benefits
under this Agreement shall be payable in the lawful money of the United States.

         6.9 INTEREST ON LATE PAYMENTS. Subject to the reporting requirements of
this Agreement, should any payment not be made within the specified period, the
party to whom the payment is owed can elect to charge interest on such payment
at the rate of .75% per month.






                                                            ...END OF ARTICLE VI


                                    Page 14
<PAGE>   18

                                   ARTICLE VII
                                   -----------

                          RECAPTURE AND/OR TERMINATION
                          ----------------------------


         7.1 RECAPTURE. Business reinsured under this Agreement is not eligible
for recapture after twenty four (24) months from the Settlement Date. If the
Company elects to exercise its recapture option during the first twenty four
(24) treaty months, such recapture is subject to the terms and conditions as
outlined in the Experience Refund provisions of Schedule C.

         7.2 OTHER RECAPTURE FOR FAILURE TO MAKE PAYMENT. Upon the failure by
the Reinsurer to pay the Company any Negative Amounts due the Company pursuant
to Section 4.2 hereof, the Company may, at its option and in its sole discretion
recapture the particular Reinsured Policies for which the Reinsurer has failed
to pay such Negative Amounts; provided, however, that the Company's option may
only be exercised by the Company by delivering to the Reinsurer thirty (30) days
prior written notice of the Company's intent to exercise the Company's option
and the Reinsurer shall be entitled to cure such nonpayment of any Negative
Amounts. Regardless of the Company's exercise of the Company's option, the
Reinsurer shall remain liable to the Company for all unpaid Negative Amounts due
to the Company hereunder.

         7.3 PAYMENTS UPON TERMINATION OF REINSURANCE FOR NONPAYMENT.

                  1)       In the event that this Agreement or any portion of
                           the policies reinsured hereunder is terminated for
                           nonpayment by either party to this Agreement,
                           pursuant to any provision hereof, a terminal
                           accounting and settlement shall take place with
                           respect to such terminated reinsurance.

                  2)       The terminal accounting date for any such termination
                           shall be the effective date of a notice of
                           termination given under this Agreement or such other
                           date as shall be mutually agreed to in writing.

                  3)       The terminal accounting period shall be the period
                           commencing on the first day of the calendar quarter
                           in which any termination is effective and ending on
                           the terminal accounting date for such termination.

                  4)       The terminal accounting and settlement shall involve
                           a calculation of the terminal reserve liability then
                           held by the Reinsurer for the portion of the policies
                           reinsured hereunder and a calculation of a terminal
                           experience refund, as described in paragraph 7 below.
                           Each of these items shall be computed only with
                           respect to the portion of the policies reinsured
                           hereunder then being terminated.



                                                        ARTICLE VII CONTINUES...



                                    Page 15
<PAGE>   19

                  5)       The Reinsurer shall pay as an amount allowed on
                           surrender to the Company an amount equal to the
                           reserves on reinsurance hereunder on a coinsurance
                           basis on the day immediately prior to the terminal
                           accounting date with respect to the portion of the
                           reinsurance hereunder then being terminated.

                  6)       The Reinsurer's liability for reserves on a
                           coinsurance basis on the reinsurance being terminated
                           hereunder, shall terminate on the terminal accounting
                           date, and the Reinsurer shall be obligated to pay
                           such amount to the Company net of the amounts due
                           from the experience account.

                  7)       A terminal experience refund shall be computed for
                           the terminal accounting period on the portion of the
                           reinsurance hereunder then being terminated. Such
                           terminal experience refund shall be computed in a
                           manner consistent with Schedule C. If the terminal
                           experience refund is positive, such positive amount
                           shall be paid by the Reinsurer to the Company. If
                           termination for non payment is not due to action or
                           inaction on the part of the Reinsurer, and the
                           terminal experience refund account is negative, the
                           absolute value of such negative amount shall be paid
                           by the Company to the Reinsurer.

                  8)       In the event that subsequent to the terminal
                           accounting and settlement as above provided, an
                           adjustment is made with respect to any amount taken
                           into account pursuant to Schedule C, a supplementary
                           accounting shall take place pursuant to Paragraph 4
                           of this section. Any amount owed to the Reinsurer or
                           the Company by reason of such supplementary
                           accounting shall be paid promptly upon the completion
                           thereof.





                                                           ...END OF ARTICLE VII


                                    Page 16
<PAGE>   20

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

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


         8.1 AGREEMENT. All differences between the Company and the Reinsurer on
which an agreement cannot be reached, will be decided by arbitration. The
arbitrators will determine the interpretation of the Agreement in accordance
with usual business and reinsurance practices, rather than by strict
technicalities.

         8.2 METHOD. Three arbitrators will decide any differences. They must be
active or retired officers of life insurance companies, or reinsurance
companies, employed by other than the two parties to the Agreement, or have been
previously so employed in such a capacity in an insurance or reinsurance
company. In no event may an employee - past or present - of either party or its
affiliates serve as an arbitrator.

         Each party will choose one member of the arbitration panel and, once
selected, these two members will choose the third member. If the two arbitration
panel members chosen fail to agree on the selection of the third member of the
panel, the choice will be left to the American Arbitration Association.

         Each Company will submit its case in writing to the arbitration panel
within one month of the date the panel is finally established, and the parties
to the Agreement are required to make their arbitrator nominee known to the
other party within 30 days of the announced dispute.

         It shall be the function of the arbitration panel to determine
settlement of the differences between the parties based on the evidence
presented, their experience and knowledge of the subject matter, and on the
basis of usual and customary practice rather than to act solely on the basis of
evidence as would be admissible in a court of law. The majority decision of the
panel will be deemed to be the decision of the panel. The Reinsurer and the
Company agree to accept the interpretation of the panel as binding upon both
parties to the Agreement.

         The costs of arbitration will be shared equally by the parties to the
Agreement, unless the arbitrators decide otherwise.

         The arbitration will be held at the times and places agreed upon by the
arbitrators and their decision shall be rendered within 45 days after they are
impanelled.



                                                         ... END OF ARTICLE VIII


                                    Page 17
<PAGE>   21

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

                REINSURER'S RIGHT OF NOTICE OF UNUSUAL PRACTICES
                ------------------------------------------------


         9.1 In providing reinsurance facilities to the Company under this
Agreement, the Reinsurer has granted the Company considerable authority with
respect to binding power, reinstatements, claim settlements, and the general
administration of the reinsurance account. To facilitate transactions, the
Reinsurer has required the minimum amount of information and documentation
possible, reflecting its utmost faith and confidence in the Company. Where the
Company does engage in exceptional or uncustomary practices for the Company, the
Company agrees to advise the Reinsurer in writing, and receive a written
acceptance of, said practices from the Reinsurer before assigning any liability
to the Reinsurer with respect to any Business Reinsured affected by such
practices.







                                                            ...END OF ARTICLE IX



                                    Page 18
<PAGE>   22

                                    ARTICLE X
                                    ---------

            TREASURY REGULATION SECTION 1.848-2(g)(8) JOINT ELECTION
            --------------------------------------------------------


         The Company and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended. This election
shall be effective for the taxable year ended December 31, 1997 and for all
subsequent taxable years for which this Agreement remains in effect unless such
election is terminated by mutual written agreement of the parties hereto with
the consent, if required, of the Commissioner of the Internal Revenue Service.

         10.1. The term "party" will refer to either the Company or the
Reinsurer as appropriate.

         10.2. The terms used in this Article are defined by reference to
Treasury Regulation Section 1.848-2 in effect as of December 29, 1992. The term
"net consideration: will refer to either net consideration as defined in
Treasury Regulation Section 1.848-2(f) or: "gross premium and other
consideration" as defined in Treasury Regulation Section 1.848-2(b) as
appropriate.

         10.3. Both parties agree to identify this Agreement as one for which
the joint election under Treasury Regulation Section 1.848-2(g)(8) has been made
in a schedule attached to their respective federal income tax returns for the
taxable period ended December 31, 1997.

         10.4. The party with the positive net consideration for this Agreement
for each taxable year will capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions limitation of
Section 848(c)(1).

         10.5. Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure consistency
or as otherwise required by the Internal Revenue Service.

         10.6. The Company will submit a schedule to the Reinsurer by May of
each year of its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement signed by
an officer of the Company stating that the Company will report such net
consideration in its tax return for the preceding calendar year.

         10.7. The Reinsurer may contest such calculation by providing an
alternative calculation to the Company in writing within 30 days of the
Reinsurer's receipt of the Company's calculation. If the Reinsurer does not so
notify the Company, the Reinsurer will report the net consideration as
determined by the Company in the Reinsurer's tax return for the previous year.




                                                          ARTICLE X CONTINUES...

                                    Page 19
<PAGE>   23

         10.8. If the Reinsurer contests the Company's calculation of the net
consideration, the parties will act in good faith to reach an agreement as to
the correct amount within thirty (30) days of the date the Reinsurer submits its
alternative calculation. If the Company and the Reinsurer reach agreement on an
amount of net consideration, each party shall report such amount in their
respective tax returns for the previous calendar year.






                                                             ...END OF ARTICLE X



                                    Page 20
<PAGE>   24

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

                              DURATION OF AGREEMENT
                              ---------------------


         This Agreement is unlimited in duration, but may be amended in writing
by the mutual consent of the Company and the Reinsurer if signed by both
parties. Existing reinsurance will remain in force until termination of the
Company's policies on which the reinsurance is based, in accordance with the
terms of this Agreement.

         This Agreement is subject to the provisional approval by the State of
Ohio Department of Insurance.

         At the end of any accounting period, this Agreement shall automatically
terminate if none of the policies hereunder are in force. At such termination, a
final experience refund calculation shall be made; if the result is greater than
zero, the Reinsurer shall pay such amount to the Company, and if the result is
less than zero, no payment shall be made to the Reinsurer.

         The termination of the Agreement or of the reinsurance in effect under
this Agreement, pursuant to any provision hereof, shall not extend to, or affect
any of the rights or obligations of the Company and the Reinsurer applicable to
the period prior to the effective date of such termination. Such right or
obligation shall include, but not be limited to, the payment of any amount owed
by reason of supplementary accounting as set forth in Article VII, Paragraph 8.









                                                           ... END OF ARTICLE XI


                                    Page 21
<PAGE>   25

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

                                   INSOLVENCY
                                   ----------


         12.1 INSOLVENCY OF THE COMPANY.

                  a)       The portion of any risk or obligation assumed by the
                           Reinsurer, when such portion is ascertained, shall be
                           payable on demand of the Company, at the same time as
                           the Company shall pay its net retained portion of
                           such risk or obligation, with reasonable provision
                           for verification before payment, and the reinsurance
                           shall be payable by the Reinsurer, on the basis of
                           the liability of the Company under the contract, or
                           contracts, reinsured without diminution because of
                           the insolvency of the Company.

                  b)       In the event of the insolvency and the appointment of
                           a conservator, liquidator or statutory successor for
                           the Company, such portion shall be payable to such
                           conservator, liquidator, or statutory successor,
                           immediately upon demand, with reasonable provision
                           for verification, on the basis of claims allowed
                           against the insolvent company by any court of
                           competent jurisdiction, or by any conservator,
                           liquidator, or statutory successor of the Company, to
                           allow such claims without diminution because of such
                           insolvency or because such conservator, liquidator,
                           or statutory successor has failed to pay all, or a
                           portion, of any claims.

                  c)       All expenses incurred by the Reinsurer under Section
                           12.1(b) hereof shall be borne and paid by the
                           Company, subject to court approval, as part of the
                           expense of insolvency proceedings, whether
                           liquidation or rehabilitation. Any claim amounts
                           which are reduced as a result of the Reinsurer's
                           action under Section 12.1(a) hereof shall be shared
                           between the Reinsurer and the Company pro-rata.

                  d)       Upon the Company's Insolvency, the Reinsurer, with
                           the consent of the Receiver of the Company, may
                           designate a company acceptable to the Receiver to
                           directly assume the reinsured policies and acquire
                           the Company's rights under this Agreement. The
                           reserve transfer to such company from the Company
                           which is party to this Agreement shall be reduced to
                           reflect an Initial Ceding Allowance on the Company's
                           share determined in a manner consistent with the
                           Initial Ceding Allowance originally provided under
                           this Agreement. The reserve transfer and the
                           Allowance shall be subject to mutual agreement by the
                           Receiver and the Reinsurer.




                                                        ARTICLE XII CONTINUES...


                                    Page 22
<PAGE>   26

         12.2  INSOLVENCY OF REINSURER

                  a)       If the Reinsurer shall, during the term of this
                           Agreement, be unable to pay its debts as they become
                           due, or the amount of its liabilities shall exceed
                           the value of its assets, or the Reinsurer shall
                           otherwise be deemed insolvent, and a liquidator,
                           rehabilitator, receiver or other statutory successor
                           be appointed to the Reinsurer, the Company may draw
                           on the Letter of Credit provided for under Article
                           XIV for any amount due under this Agreement for an
                           amount equal to the statutory reserves on the
                           Business Reinsured less any outstanding LCF as
                           defined in Schedule D.











                                                           ...END OF ARTICLE XII


                                    Page 23
<PAGE>   27

                                  ARTICLE XIII
                                  ------------

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

        THE COMPANY REPRESENTS AND WARRANTS TO THE REINSURER AS FOLLOWS:
        ----------------------------------------------------------------


         13.1 THE MILLIMAN & ROBERTSON REPORT: The Company provided the
Reinsurer with a valuation and appraisal performed by Milliman & Robertson, Inc.
("M&R") which contained all or a portion of the information the Reinsurer relied
upon in evaluating the Business Reinsured. This information was prepared as of
XXXX XX, 1997 for the purpose of preparing the commitment letter issued by the
Reinsurer dated December 4, 1997. The Company represents and warrants that such
current and historical information represented true and correct copies of, or
excerpts from, the Company's books and records.

         Since such dates, there have been no material adverse changes to the
business, financial condition and/or other circumstances of, or involving the
business to be reinsured by the Company which would make such provided
information materially inaccurate. A complete and correct copy of the M&R
Reports have been provided to the Reinsurer.

         13.2 STATUTORY RESERVES: The Statutory Reserves on the Business
Reinsured were approximately $25 million as of September 30, 1997, and this
amount is not anticipated to materially change prior to the Settlement Date.

         13.3 PREMIUM INFORCE: The premium inforce on 50% of the block to be
included in the Business Reinsured was approximately $120 million as of January
1, 1997, and this amount is also not anticipated to materially change prior to
the Settlement Date.








                                                          ...END OF ARTICLE XIII


                                    Page 24
<PAGE>   28

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

                                LETTERS OF CREDIT
                                -----------------


         To the extent that the Reinsurer is not an admitted reinsurer, and in
order for the Company to be able to take credit for statutory reserves for the
portion of policies reinsured hereunder, the Reinsurer hereby agrees to apply
for and secure delivery to the Company a clean, irrevocable, and unconditional
Letter of Credit in an amount at least equal to the Reinsurer's liability under
the coinsurance portion of said Agreement.

         The Letter of Credit shall be in such a form as will comply with
applicable regulations such that the Company would be able to take credit on its
financial statement filed with the appropriate State Insurance Departments for
the Business Reinsured hereunder. The terms and conditions of the Letter of
Credit shall comply with all requirements of said authorities, including but not
limited to, the following:

         The Letter of Credit shall be issued for an initial period of not less
         than one year and shall automatically extend for an additional period
         of at least one year at each and every expiry date, unless and until,
         the Company has received at least 30 days prior notice from the issuing
         bank (at least 60 days prior notice from a confirming bank) by
         certified mail, registered mail, or receipted hand delivery of its
         intention not to extend said Letter of Credit.

         The Company and the Reinsurer agree that the Letters of Credit provided
by the Reinsurer pursuant to the provisions of this Agreement, may be drawn upon
at any time, notwithstanding any other provisions in this Agreement, and shall
be utilized by the Company, or its successors, in interest only for one or more
of the following:

         (i)      to reimburse the Company for the Reinsurer's share of premiums
                  returned to the owners of policies reinsured under this
                  Agreement on account of cancellations of such policies.

         (ii)     to reimburse the Company for the Reinsurer's share of
                  surrenders and benefits or losses paid by the Company under
                  the terms and provisions of the policies reinsured under this
                  Agreement.

         (iii)    to fund an account with the Company in an amount at least
                  equal to the deduction, for reinsurance ceded, from the
                  Company's liabilities for policies ceded under this Agreement.
                  Such amount shall include, but not be limited to, amounts for
                  policy reserves, claims and losses incurred, and unearned
                  premium reserves, and




                                                        ARTICLE XIV CONTINUES...


                                    Page 25
<PAGE>   29

         (iv)     to pay any other amounts the Company claims are due under this
                  Agreement.

         The Company agrees to return to the Reinsurer any amounts withdrawn
from such Letters of Credit which are in excess of the actual amounts required
for (i), (ii) and (iii), or in the case of (iv), above, any amounts that are
subsequently determined not to be due.

         All of the foregoing shall be applied without diminution because of
insolvency on the part of the Company or the Reinsurer.






                                                           ...END OF ARTICLE XIV


                                    Page 26
<PAGE>   30

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

                                    EXECUTION
                                    ---------


         In witness of the above, this Agreement is signed in duplicate at the
dates and places indicated, with an Effective Date of JANUARY 1, 1997.


CENTRAL RESERVE LIFE INSURANCE COMPANY
STRONGSVILLE, OHIO


Date:     December 17, 1997
          ------------------------

By:       Mark W. Grimone
          ------------------------

Title:    Chief Financial Officer
          ------------------------

Witness:  Jennifer Puzi
          ------------------------




REASSURANCE COMPANY OF HANNOVER
ORLANDO, FLORIDA

Date:     December 17, 1997
          ------------------------

By:       Craig M. Baldwin
          ------------------------

Title:    Vice President & Actuary
          ------------------------

Witness:  Jean M. Lay
          ------------------------










                                                          ... END OF ARTICLE XIV



                                    Page 27
<PAGE>   31

                                   SCHEDULE A
                                   ----------

                               BUSINESS REINSURED
                               ------------------


         The Business Reinsured under this Agreement shall be 50% of the
retained portion of the benefits payable on all policies, certificates, riders
and/or supplemental benefits inforce as of the Settlement Date and/or issued and
inforce through December 31, 1997. The policy forms to be included as the
Business Reinsured are as follows:

                     (POLICY FORMS AND PRODUCT DESCRIPTIONS
                         TO BE SUPPLIED BY THE COMPANY)





                                                            ...END OF SCHEDULE A


                                    Page 28
<PAGE>   32

                                   SCHEDULE B
                                   ----------

                                REINSURANCE FORMS
                                -----------------


                                SCHEDULE B/PART A
                                -----------------

                                 POLICY EXHIBIT

                 Reinsured under coinsurance with the Reinsurer

<TABLE>
<CAPTION>
                                                  Number of
                                                  Policies             Benefit
                                                  --------             -------
Amount
------
<S>                                               <C>                  <C>

 1.      Beginning of Period
 2.      Issued - Less other Reinsurance
 3.      Reinsurance Assumed
 4.      Revived
 5.      Increased

 6.      TOTAL

 7.      Health Claims
 8.      Disability Benefits
 9.      Lapses
10.      Decreased
11.      Reinsurance

12.      TOTAL

13.      In Force, End of Period (6) less (12)
</TABLE>













                                                         SCHEDULE B CONTINUES...


                                    Page 29
<PAGE>   33


                                SCHEDULE B/PART B
                                -----------------

                        SUMMARY OF MONETARY TRANSACTIONS


INITIAL ACCOUNTING PERIOD

         1.       DUE REINSURER
                  Initial Reinsurance Premium (to include adjustments for
                  amounts collected and paid from the Effective Date to the
                  Settlement Date)

         2.       DUE REINSURED
                  Initial Ceding Allowance

                  Due REINSURER - 1 less 2

SUBSEQUENT ACCOUNTING PERIODS*

         3.       DUE REINSURER
                  Premiums Paid during the period
                  Less the Experience Refund

         4.       DUE REINSURED
                  Cash Policy Benefits paid net of recoveries from third party
                  reinsurers Reinsurance premiums incurred by the REINSURED to
                  third party reinsurers
                  Commission Allowances Paid
                  Overhead Expense Allowances Paid
                  Premium Taxes Paid

                  Due REINSURER - total of 3 less total of 4

                  *Note that for all reporting periods the Company will also
                  supply the Reinsurer with incurred figures to allow for
                  reconciliation.









                                                            ...END OF SCHEDULE B



                                    Page 30
<PAGE>   34

                                   SCHEDULE C
                                   ----------

                          EXPERIENCE REFUND CALCULATION
                          -----------------------------


         At the end of each quarter, an experience refund will be calculated on
the Business Reinsured. If positive, this experience refund will be payable to
the Company by the Reinsurer. Should the Company elect to exercise its recapture
option during the first twenty four (24) treaty months after the Settlement Date
of the Agreement, the Company shall be liable for repayment of the then
outstanding LBF as defined below, in addition to an amount sufficient to assure
the Reinsurer of a 15% return on its investment from the Effective Date. Such
calculation shall include the provision for target surplus in the amount of 200%
of the Authorized Control Level RBC using the factor agreed to by the Company
and the Reinsurer as appropriate for the Business Reinsured. The formula for the
calculation of the recapture amount will be agreed to by the parties to this
Agreement. In addition, the recapture shall call for a net cash settlement, with
interest at the rate of "I" as defined below, of all outstanding reserve amounts
as of the recapture date.

Define the following for the Business Reinsured:

<TABLE>
<S>      <C>      <C>      <C>
         P        =        Premiums incurred during the quarter, and experience refunds under
                           other reinsurance treaties, net of any reinsurance premiums for the Reinsurer's
                           Share of the Business Reinsured
         I        =        Net Investment income, to be defined as the Reinsurer's net portfolio rate for
                           the quarter prior to the settlement date applied to the total beginning
                           reserves for the Business Reinsured. The Company will provide the Reinsurer
                           with a breakdown of all pertinent reserve elements.
         R        =        Statutory Unearned Premium and Active Life Reserve increase for the quarter
         B        =        Policyholder  Benefits  incurred  during the quarter,  net of any  reinsurance  benefits
                           recovered under other  reinsurance  treaties for the Business  Reinsured (i.e.  incurred
                           benefits = paid + change in aggregate claim reserve)
         A        =        Overhead Expense Allowances incurred during the quarter
         T        =        Premium Taxes
         LBF      =        Loss Brought Forward from prior quarter end
</TABLE>

         (Note: The initial value for LBF will be the Initial Ceding Allowance
         as set forth in Schedule D.)


                                                         SCHEDULE C CONTINUES...


                                    Page 31
<PAGE>   35

Then:

         C        =        Commission allowances incurred during the quarter
         N        =        Net gain during the quarter
                  =        P + I - R - B - C - A - T
         ER       =        Experience Refund for the quarter, defined as:
                  =        60%[N - {1.10 to the .25 power x LBF}] , but not
                           less than zero.
and:

         LCF      =        Loss Carried Forward from current quarter end
                           (= LBF for next quarter), defined as:
                  =        {1.10 to the .25 power x LBF} - N, but not less
                           than zero.







                                                            ...END OF SCHEDULE C


                                    Page 32
<PAGE>   36

                                   SCHEDULE D
                                   ----------

                               EXPENSE ALLOWANCES
                               ------------------


         THE INITIAL CEDING ALLOWANCE shall be $10,000,000.

         THE OVERHEAD EXPENSE ALLOWANCES: In conjunction with the quarterly
accounting, a proportionate share of the following allowances will be credited
to the Company at the start of each quarter in the premium/claim calculation
based on the number of policies and/or certificates inforce and/or applicable
premium paid during the quarter. Such amounts are consistent with those
presented in the M&R report which the Reinsurer relied upon in its evaluation.
The agreed-to, all inclusive Expense Allowance for the calendar year 1997 will
be 22.6%. Subsequent Expense Allowances for the twenty-four months beginning
January 1, 1998 will be 29.6% of premium. This reimbursement will decrease to
27.6% of premium thereafter. The components of this expense reimbursement are as
follows:

         Premium taxes will be reimbursed at 2.5 %
         Managed Care will have a cost factor of 2.6%
         Commissions are reimbursed at a level of 13%
         Overhead Expense Allowance for maintenance will be at 11.5% for 1998
         and 1999, and 9.5% thereafter.

         If after thirty-six (36) treaty months the amount outstanding in the
treaty experience refund account is still greater than zero, RCH's expense
reimbursement for the maintenance component of the Overhead Expense Allowance as
a percentage of premium to CRLIC will decrease by 1% per year effective the
first quarter following the expiration of the thirty-six month period, subject
to a minimum of 7%. Once the Treaty converts to a 60/40 quota share, this
expense percentage then in effect will remain fixed until effective Treaty
termination.













                                                            ...END OF SCHEDULE D


                                    Page 33